Assessment and Collection of Regulatory Fees For Fiscal Year 1997

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[MD Docket No. 96-186; FCC 97-49]

Assessment and Collection of Regulatory Fees For Fiscal Year 1997

AGENCY: Federal Communications Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Commission is proposing to revise 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

[[Page 10794]]

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.

DATES: Comments are due on or before March 25, 1997 and Reply Comments

are due on or before April 4, 1997.

ADDRESSES; Comments and reply comments should be sent to the Office of

the Secretary, Federal Communications Commission, Washington, DC 20554.

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: February 14, 1997; Released: March

5, 1997.

TABLE OF CONTENTS

Paragraph

Topic Nos.

I. Introduction............................................ 1-3

II. Background............................................. 4-7

III. Discussion............................................ 8-51

A. Summary of FY 1997 Fee Methodology.................... 8-12

B. Development of FY 1997 Fees........................... 13-25

1. Adjustment of Payment Units........................... 13

2. Calculation of Revenue Requirements................... 14

3. Calculation of Regulatory Costs....................... 15-16

4. Establishment of 25% Revenue Ceiling.................. 17-18

5. Recalculation Of Fees................................. 19

6. Other Proposed Change--Consolidation of Private

Microwave and Domestic Public Fixed Fee Categories...... 20-24

7. Effect of Revenue Redistributions on Major

Constituencies.......................................... 25

C. Other Issues.......................................... 26-43

1. Commercial AM/FM Radio................................ 26-37

2. Personal Communications Service (PCS)................. 38

3. Commercial Mobile Radio Services (CMRS)............... 39

4. Intelsat & Inmarsat Signatories....................... 40-42

5. Non-Common Carrier International Bearer Circuits...... 43

D. Procedures for Payment of Regulatory Fees............. 44-50

1. Annual Payments of Standard Fees...................... 45

2. Installment Payments for Large Fees................... 46

3. Advance Payments of Small Fees........................ 47

4. Minimum Fee Payment Liability......................... 48

5. Standard Fee Calculations and Payments................ 49-50

E. Schedule of Regulatory Fees........................... 51

IV. Procedural Matters..................................... 52-60

A. Comment Period and Procedures......................... 52

B. Ex Parte Rules........................................ 53

C. Initial Regulatory Flexibility Analysis............... 54

D. Paperwork Reduction Act Compliance.................... 55-58

E. Authority and Further Information..................... 59-60

Attachment A--Initial Regulatory Flexibility Analysis

Attachment B--Sources of Payment Unit Estimates

Attachment C--Calculation of Revenue Requirements

Attachment D--Calculation of Regulatory Costs

Attachment E--Calculation of FY 1997 Regulatory Fees

Attachment F--Schedule of Regulatory Fees

Attachment G--Comparison Between FY 1996 and FY 1997 Fees

Attachment H--Detailed Guidance on Who Must Pay Regulatory Fees

Attachment I--Description of FCC Activities

I. Introduction

1. By this Notice of Proposed Rulemaking, the Commission commences

a 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. Sec. 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. Sec. 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

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 proposing to revise our fees in order to collect the increased

amount that Congress has required that we collect. Additionally, we

propose to amend 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.

Sec. 159(b)(3).

3. In proposing to revise our fees, we 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. The current

Schedule of Regulatory Fees is set forth in sections 1.1152 through

1.1156 of the Commission's rules. 47 CFR Secs. 1.1152 through 1.1156.

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. 47 U.S.C. 159(a). See

Attachment I for a description of feeable activities. 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.

Sec. 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 Reports

and Orders, we amended certain rules governing our regulatory fee

program based upon our experience administering the program in prior

years. See 47 CFR Secs. 1.1151 et seq.

5. As noted above, for FY 1994 we adopted the Schedule of

Regulatory Fees established in Section 9(g) of the Act. For fiscal

years after FY 1994, however, Sections 9(b)(2) and (3), respectively,

provide for ``Mandatory Adjustments'' and ``Permitted Amendments'' to

the Schedule of Regulatory Fees. 47 U.S.C. Sec. 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.

Sec. 159(b)(2).

[[Page 10795]]

6. 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 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.

Sec. 159(b)(3).

7. Section 9(i) requires that we develop accounting systems

necessary to adjust our fees pursuant to changes in the costs of

regulation of the various services subject to a fee and for other

purposes. 47 U.S.C. Sec. 9(i). In this proceeding, we are proposing for

the first time to rely on cost accounting data to identify our

regulatory costs and to develop our FY 1997 fees based upon these

costs. Also, as noted, we are proposing to limit the increase in the

amount of the fee for any service in order to phase in our reliance on

cost-based fees for those services whose proposed revenue requirement

would be more than 25 percent above the revenue requirement which would

have resulted from the ``mandatory adjustments'' to the FY 1996 fees

without incorporation of costs. The methodology we propose enables us

to develop regulatory fees which more closely reflect our costs of

regulating a service and also allows us to make annual revisions to our

fees based to the fullest extent possible, and consistent with the

public interest, on the actual costs of regulating those services

subject to a fee. 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. Sec. 159(b)(4)(B).

III. Discussion

A. Summary of FY 1997 Fee Methodology

8. As noted above, Congress has required that the Commission

recover $152,523,000 for FY 1997 through the collection of regulatory

fees, representing the costs applicable to our enforcement, policy and

rulemaking, international, and user information activities. 47 U.S.C.

Sec. 159(a). Congress' increase does not fall equally on all payers due

to revised payment units and revenue requirement allocations resulting

from the cost accounting system.

9. In developing our proposed FY 1997 fee schedule, we first

estimated payment units 1 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 among all the existing fee categories. We then

adjusted the projected revenue requirements so that they equaled the

actual costs of each service, using data generated by our cost

accounting system, described infra, to ensure that revenues equaled our

regulatory costs for each fee category.

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\1\ 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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10. We next examined the impact of using actual costs to establish

regulatory fees for each class of regulatees to determine whether any

regulatees experienced an unduly large fee increase. We found that, in

many cases, cost-based fees result in fee payments dramatically higher

in FY 1997 than they were in FY 1996. Therefore, rather than proposing

fully cost-based fees for FY 1997, we are proposing 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 volume and the

increase required by Congress. Our proposed methodology would reduce

fees for services whose regulatory costs have declined while increasing

fees for services experiencing higher regulatory costs in order to

begin eliminating disparities disclosed by our cost accounting system

between a service's current costs and fees ascribed to these services

in prior fiscal years.

11. 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. The proposals are

discussed in Paragraphs 20-40 and are factored into our proposed FY

1997 Schedule of Regulatory Fees, set forth in Attachment F.

12. Finally, we have incorporated, as Attachment H, 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 1997.2 In the following paragraphs, we describe in

greater detail our methodology for establishing our FY 1997 regulatory

fees.

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\2\ We also will incorporate a similar Attachment in the Report

and Order concluding this rulemaking. That Attachment will contain

updated information concerning any changes made to the proposed fees

adopted by the Report and Order.

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B. Development of FY 1997 Fees

1. Adjustment of Payment Units

13. 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. Attachment B provides a summary of how revised payment units

were determined for each fee category.3

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\3\ It is important to note also that, due to revised payment

units, Congress' required revenue increase in regulatory fee

payments of approximately 21 percent in FY 1997 will not fall

equally on all payers.

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2. Calculation of Revenue Requirements

14. 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 without any change to the existing Schedule of

Regulatory Fees. The amount of revenue we would collect is

approximately $136.5 million. This amount is approximately $16.0

million less than the amount the Commission is required to collect in

FY 1997. We then adjusted these 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 at the $152,523,000 level required by Congress for FY 1997.

Attachment C provides detailed calculations showing how we determined

the revised revenue amount for each service.

3. Calculation of Regulatory Costs

15. On October 1, 1995, the Commission established, in accordance

with 47 U.S.C. Sec. 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. The Commission's cost accounting system, which is

integrated with our personnel/payroll system to ensure accuracy and

[[Page 10796]]

timeliness of cost information, accumulates both personnel and non-

personnel costs on a service-by-service basis.

16. In order to utilize actual costs for fee development purposes,

we first had to add indirect support costs to the direct costs 4

and then adjust the results to approximate the amount of revenue that

Congress requires us to collect in FY 1997 ($152,523,000).5 Thus,

we adjusted the actual cost data pertaining to regulatory fee

activities recorded for the period October 1, 1995 through September

30, 1996 proportionally among the fee categories so that total costs

approximated $152,523,000. For fee categories where fees are further

differentiated by class or market (e.g., Markets 1-10 under the general

VHF and UHF Commercial Television fee category), we distributed the

costs to the class or market group by maintaining the same ratios

between the classes or market groups as between the fees in the FY 1996

schedule.6 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 for FY 1997.7

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\4\ 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.

\5\ Congress' estimate of costs to be recovered through

regulatory fees is generally determined twelve months before the end

of the fiscal year to which the fees actually apply. As such, year-

end actual activity costs for FY 1996 do not equal exactly the

amount Congress designated for collection for FY 1997.

\6\ While some might argue that the Commission should further

distinguish our work activities by fee category (e.g., television

markets or radio classes), it would not be practical to use small,

time-consuming incremental breakouts of work time.

\7\ For example, under the FM Radio fee classification, the

actual costs attributable to FM radio are $8,452,323. 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 by dividing the smallest of the FY 1996 FM fees into each

of the FY 1996 FM fees to determine the appropriate ratios for

allocation of the revenue requirement.

(a) FY 1996 FM CP fee=$690

FY 1996 FM Classes A, B1, and C3=$830

FY 1996 FM Classes C, C1, C2, and B=$1,250

(b) FM CP ratio is $690 divided by $690=1:1

FM Classes A, B1, and C3 ratio is $830 divided by $690=1:1.2

FM Classes C, C1, C2, and B ratio is $1,250 divided by

$690=1:1.8

(2) Next we add the three ratios and divide the sum into the

total revenue requirement for FM to determine the amount

corresponding to the ratio of 1.

(a) 1+1.2+1.8=4

(b) $8,452,323 divided by 4=$2,113,081

(3) Finally, we determine the fee for each of the three by

multiplying the amount calculated in step (2)(b) by each of the

ratios.

FM CP revenue requirement=1 times $2,113,081=$2,113,081

FM Classes A, B1, and C3 revenue requirement=1.2 times

$2,113,081=$2,535,697

FM Classes C, C1, C2, and B revenue requirement=1.8 times

$2,113,081=$3,803,546

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4. Establishment of 25% Revenue Ceiling

17. Our next step was to determine whether reliance on actual costs

to develop FY 1997 regulatory fees would result in fees which are too

disparate from corresponding FY 1996 fees. As a result of this

analysis, we are proposing to establish a ceiling of 25 percent on the

increase in the revenue requirement of any service over and above the

Congressionally mandated increase in the overall revenue requirement

and the difference in unit counts.8 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 enables us to begin the process of reducing fees for services

with lower costs and increasing fees for services with higher costs in

order to close the gap between actual costs and fees designed to

recover these costs. We are not suggesting that fee increases be

limited to a 25 percent increase over the FY 1996 fees. The 25 percent

increase is 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 may increase more than 25 percent

over FY 1996 fees depending upon the number of payment units.

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\8\ For example, the regulatory cost associated with the

Aviation (Aircraft) service is $933,492. 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

$117,327 in FY 1997, a shortfall of $816,165. Application of the

proposed 25 percent revenue ceiling to this service results in a

capped revenue ceiling of $146,659 ($117,327 x 125%).

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18. An important consideration in proposing the establishment of a

revenue ceiling is the impact on other fee payers. Because the

Commission is required to collect a full $152,523,000 in FY 1997

regulatory fees, the additional revenue ($28,024,533) that would have

been collected from classes of licensees subject to the revenue ceiling

had there been no ceiling, needs to be collected instead from licensees

not subject to the ceiling. This results in a certain amount of

subsidization between fee payer classes.9 We believe, however,

that the public interest is best served by adopting our proposed

revenue ceiling methodology. To do otherwise would subject several

entities to unexpected major increases which would severely impact the

economic well being of certain licensees who will not be able to adjust

their business plans accordingly. Attachment E displays 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 proposed revenue

ceilings.10 We invite comments on our proposed methodology to

incorporate actual costs into the computation of regulatory fees and to

establish the 25% revenue ceiling.

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\9\ Revenues from current fee payers already offset 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.

\10\ 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 the case 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.

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5. Recalculation of Fees

19. Once we determined the amount of fee revenue necessary to

collect from each class of licensee, we divided the revenue requirement

by the number of payment units (and by the license term, if applicable,

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.

6. Other Proposed Change--Consolidation of Private Microwave & Domestic

Public Fixed Fee Categories

20. We examined the results of our calculations made in Paragraphs

15-19

[[Page 10797]]

to determine if further adjustments of the fees and/or changes to

payment procedures were warranted based upon the public interest and

other criteria established in 47 U.S.C. 159(b)(3). As a result of this

review, we are proposing the following change to our Fee Schedule:

21. In our FY 1994, FY 1995 and FY 1996 fee schedules, Private

Microwave licensees were required to pay a ``small'' regulatory fee, in

advance, for the entire license term at the time of application. In

contrast, the Domestic Public Fixed category was considered a ``large''

regulatory fee subject to an annual payment. The domestic public fixed

category is comprised of several commercial microwave services; e.g.,

microwave multiple address, microwave common carrier fixed, microwave

digital electronic message, and microwave local TV transmission.11

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\11\ 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.

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22. Since inception of the regulatory fee program, many parties

holding microwave licenses have expressed confusion concerning which

fee they are required to pay. In order to alleviate this confusion and

because operational and technical characteristics of private microwave

and commercial microwave systems are similar, we are proposing to

combine these two fee categories into a single Microwave category for

FY 1997.

23. Accordingly, we are proposing to adjust the anticipated number

of payment units and combine the revenue requirements for the Private

Microwave and Domestic Public Fixed categories and establish a

``small'' fee, payable in advance for the entire license term, for the

new consolidated Microwave category. The annual regulatory fee for all

microwave licensees would be $10 per license. This new fee was

calculated as follows:

(a) From Attachments C and E:

(1) 5,350 private microwave stations (units) (Revenue requirement =

$523,083)

(2) 18,845 commercial microwave/public fixed stations (units) (Revenue

requirement = $118,026)

(b) Converting from annual payment (``large 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) (($523,083 + $118,026) divided by (5,350 + 1,885)) divided by 10

years = $8.86

(d) Round fee to the nearest $5 = $10 (47 U.S.C Sec. 159(b)(2)).

24. We invite comments on our proposal to combine the Private

Microwave and Domestic Public Fixed (Commercial Microwave) service

categories for regulatory fee purposes into a single Microwave category

and to establish an appropriate ``small'' fee for this single category.

7. Effect of Revenue Redistributions on Major Constituencies

25. The chart below illustrates the relative percentages of the

revenue requirements borne by the major constituencies since inception

of regulatory fees in FY 1994.

Revenue Requirement Percentages by Constituencies

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FY 1994 FY 1995 FY 1996 FY 1997

(Actual) (Actual) (Actual) (Proposed)

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Cable TV Operators (Inc. CARS Licenses)..................... 41.36 24.02 28.19 23.74

Broadcast Licensees......................................... 23.84 13.76 14.77 14.96

Satellite Operators (Inc. Earth Stations)................... 3.32 3.62 4.28 4.28

Common Carriers............................................. 25.01 44.52 45.54 46.27

Wireless Licensees.......................................... 6.47 14.07 7.23 10.75

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Total................................................. 100.00 99.99 100.01 100.00

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C. Other Issues

1. Commercial AM/FM Radio

26. In November 1996 the Commission released a Notice of Inquiry to

determine if, in FY 1997, it is feasible to utilize a methodology based

on market size and class of station to assess annual regulatory fees

upon licensees of commercial AM and FM broadcast radio stations. We

invited interested parties to comment upon a methodology proposed by

the Montana Broadcasters Association (Montana), or to propose any other

methodology for assessing AM and FM fees they believe would serve the

public interest. 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).

27. In establishing our regulatory fee program, we recognized that

Congress had required the Commission to adopt the Schedule of

Regulatory Fees for FY 1994 contained in Section 9(g) of the

Communications Act, as amended. 47 U.S.C. Sec. 159(g). The Schedule

assessed AM and FM radio fees based upon class of station. Thus, each

licensee paid a fee identical to other licensees with the same class of

station, without regard to the size or population of its service area.

See Implementation of Section 9 of the Communications Act, 9 FCC Rcd

5333, 5339 (1994), 59 FR 30984 (June 16, 1994). We declined to consider

any revision to the fee schedule for FY 1994, but we invited interested

parties to propose alternative methodologies for various services

subject to the regulatory fees, including AM and FM radio, for

consideration in our proceeding to adopt the FY 1995 Schedule of

Regulatory Fees. 9 FCC Rcd 5360. Subsequently, in our NPRM proposing

fees for FY 1995, we recognized that ``population density of a [AM or

FM] station's geographic location was also a public interest factor

warranting recognition in the fee schedule.'' Therefore, we proposed

for consideration by interested parties a methodology incorporating

market size in the calculation of AM and FM fees, by assessing higher

fees for radio stations located in Arbitron Rating Co. (Arbitron)

designated markets. We proposed a two-tiered fee schedule with stations

in Arbitron rated markets paying higher fees than the same classes of

stations located in smaller, non-

[[Page 10798]]

Arbitron rated markets. See Notice of Proposed Rulemaking in the

Matter of Assessment and Collection of Regulatory Fees for Fiscal Year

1995, MD Docket No. 95-3, FCC 95-14, released January 12, 1995 at

Paragraph 29. In our Report and Order establishing our FY 1995 fees, we

declined to adopt this proposed method because, after consideration of

the public comments, we found that it did not provide a ``sufficiently

accurate and equitable methodology for determining fees.'' See

Assessment and Collection of Regulatory Fees for Fiscal Year 1995, 10

FCC Rcd 13512, 13531-32 (1996), 60 FR 34004 (June 29, 1995).

28. In our Notice of Proposed Rulemaking to establish regulatory

fees for FY 1996, we stated, with regard to the fees for AM and FM

radio stations, that we ``were particularly interested in a proposal

which would associate population density and service area contours with

license data'' and we again requested interested parties to propose

viable alternative methodologies 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, Montana filed comments proposing an AM and FM fee

structure based on class of station and on market size. We received no

comments addressing Montana's proposal. However, following our own

review of the proposal, we decided not to take any action until we had

an opportunity to evaluate more extensively the impact of Montana's

proposal on AM and FM licensees through a Notice of Inquiry. 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).

29. Montana's proposed methodology utilizes broad groupings of

radio markets determined by Arbitron market size, with the fee for each

market grouping predicated on the ratios that Congress initially

established in Section 9(g) of the Act (47 U.S.C. Sec. 159(g)) for

assessing fees for licensees of television stations serving different

sized markets. Montana proposed four specific radio market

classifications: Markets 1-25; Markets 26-50; Markets 51-100; and

Remaining Markets. Montana's proposal assigned stations to each market

grouping based upon Arbitron television market designations and relied

on an analysis of broadcast markets prepared by Dataworld MediaXpert

Service (``Dataworld''), which grouped radio stations by class of

station within a particular market size. It then calculated the fees

for stations in different markets utilizing the ratios between the fees

for television markets in Section 9(g). Montana argued that its

proposal was more equitable than the groupings based on class of

station relied on by the Commission because, under its proposal,

stations in smaller markets would pay lower fees than stations serving

more populous markets.

30. In order to collect the total aggregate fees to be recovered

from AM and FM radio stations as proposed in the FY 1995 NPRM,

Montana's proposed methodology would have allocated fees among radio

stations as follows:

----------------------------------------------------------------------------------------------------------------

FM Class FM Class

Markets AM Class A AM Class B AM Class C AM Class D I\12\ II\13\

----------------------------------------------------------------------------------------------------------------

1-25.............................. $2,890 $1,710 $645 $815 $2,890 $1,940

26-50............................. 2,040 1,140 455 575 2,040 1,370

51-100............................ 1,360 760 305 385 1,360 910

Remaining......................... 850 475 190 240 850 570

----------------------------------------------------------------------------------------------------------------

\12\ Class I includes FM Classes C, C1, C2 and B.

\13\ Class II includes FM Classes A, B1 and C3.

31. However, subsequent to the filing of Montana's proposal,

Congress increased the aggregate amount of fees to be recovered by the

Commission and amended the Commission's regulatory fee schedule for

television stations to increase the fees paid by licensees in larger

markets and to reduce the fees paid by licensees located in Markets 51-

100 and the Remaining Markets. Public Law 104-134. See Assessment and

Collection of Regulatory Fees for Fiscal Year 1996, supra at Paragraph

14. This substantially changed the ratios between the fees for

television stations in different sized markets used by Montana to

compute its proposed radio fees. Substituting the actual ratios between

the regulatory fees for television stations in different sized markets

for the old ratios utilized in Montana's proposal would have produced

the following radio fees for FY 1996: \14\

---------------------------------------------------------------------------

\14\ By contrast, according to the FY 1996 Schedule of

Regulatory Fees, AM class A stations are assessed a fee of $1,250;

Class B stations $690; Class C stations $280; and Class D stations

$345. Similarly, FM Class C, C1, C2 and B stations (Montana's FM

Class I) are assessed a fee of $1,250; and FM Class A, B1 and C3

stations (Montana's FM Class II) a fee of $830.

----------------------------------------------------------------------------------------------------------------

FM Class FM Class

Markets AM Class A AM Class B AM Class C AM Class D I\15\ II\16\

----------------------------------------------------------------------------------------------------------------

1-25.............................. $11,500 $6,325 $2,575 $3,150 $4,875 $3,250

26-50............................. 6,675 3,675 1,500 1,850 2,850 1,900

51-100............................ 3,550 1,975 800 980 1,525 1,000

Remaining......................... 1,000 555 225 275 430 285

----------------------------------------------------------------------------------------------------------------

\15\ Class I includes FM Classes C, C1, C2 and B.

\16\ Class II includes FM Classes A, B1 and C3.

32. The above fees illustrate the impact of the Montana proposal

when the changes mandated by Congress to the Regulatory Fee Schedule

are considered. We are particularly concerned about the size of the

increases in larger markets which, in addition to having more potential

listeners, have greater concentrations of stations, thereby increasing

the competition for listeners in those markets. Moreover, the accuracy

of both sets of calculations are predicated on assumptions that the

total aggregate amount of fees to be collected remains unchanged, that

the revenue requirement allocated to all broadcast licensees remains

unchanged, and that

[[Page 10799]]

there are no changes in the numbers and classes of licensees subject to

broadcast fees. The calculations presented herein are illustrative

only, because the fees are predicated on assumptions that will not

recur in FY 1997. A change in any or all three of these factors would

result in individual fees different than those illustrated in

Paragraphs 30 and 31.

33. In response to the NOI, the National Association of

Broadcasters (``NAB'') submitted a proposed fee table for AM and FM

radio stations relying on a database prepared by Dataworld. NAB states

that Dataworld developed its database by using the engineering

specifications for every operating AM and FM radio station to calculate

the populations served by those stations using 1990 census information.

Under NAB's proposal, stations with more powerful signals would

generally pay higher fees because they usually serve more people than

stations with weaker signals. NAB maintains that a fee schedule based

on the Dataworld information would equitably allocate fees among all

stations.

34. In support of its proposal, NAB notes that Congress has

recognized the importance of service classes in the fee schedule it

enacted in Section 9(g) of the Act, and that there are significant

differences in the value and revenue potential of stations in different

classes. 47 U.S.C. Sec. 159(g). Thus, NAB contends that radio station

fees should not be calculated on the basis of predicted audience alone.

Moreover, NAB recognizes that Dataworld's data does not reflect

population changes since 1990 and that, in certain instances, there

will be discrepancies between the Dataworld calculations and some

stations' actual engineering characteristics. Thus, NAB proposes fees

based on the estimate of population served and the class of station

rather than strictly on the basis of population served.

35. The proposed NAB fee table includes 24 fee levels for AM and 12

fee levels for FM. NAB's proposed fee table would collect $6,104,196

from FM licensees and $2,235,956 from AM licensees, as follows:

----------------------------------------------------------------------------------------------------------------

Population served AM Class A AM Class B AM Class C AM Class D

----------------------------------------------------------------------------------------------------------------

3,000,000................................................. 1,800 1,300 650 750

----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------

FM Classes

Population served FM classes B, C, C1,

A, B1, C3 C2

------------------------------------------------------------------------

1,750,000................................... 1,650 2,750

------------------------------------------------------------------------

36. While the NAB proposal has merit, further study and refinement

of its methodology is required. First, we note that the NAB proposal

increases fees based on the average increase in the amount that

Congress has required us to collect for FY 1997 without taking into

account our cost of regulation of AM and FM stations as measured by our

cost accounting system. As a result, its proposal would fail to raise

sufficient revenue to cover the pro rata share of the Commission's

revenue requirements for AM and FM radio. Moreover, NAB's proposal does

not disclose the number of stations in each of its payment categories

so that its proposal can be modified to meet our revenue requirements,

there are discrepancies between our estimate of the number of stations

and the number of stations included in Dataworld's database, and it is

not clear whether the Dataworld station count includes government and

non-commercial stations which are exempt from regulatory fee

requirements. In addition, NAB has not presented an explanation or

rationale for its specific fee classifications. Nor is there sufficient

information to permit the Commission to determine how NAB's proposed

fee table can be modified to cover changes in station characteristics

and populations. If we were to adopt NAB's proposal, we would also be

required to develop a methodology for advising each individual station

of its fee based on our estimate of the population in its service area.

37. Thus, while the Montana and NAB proposals hold the promise of a

more equitable fee schedule, there are problems with these proposals

that must be addressed before they can be relied on to develop a

revised fee schedule for AM and FM radio. Therefore, interested parties

are invited to comment not only on both the NAB and Montana proposals,

but also on any alternative methods for assessing radio station fees.

Parties who have filed comments on the NOI need not duplicate them in

this proceeding. Comments are also invited with respect to the revised

schedule for AM and FM radio stations set forth in Attachment F based

on the general methodology for calculating FY 1997 fees.

2. Personal Communications Service (PCS)

38. Our FY 1996 Report and Order deferred assessing a regulatory

fee upon licensees in the Personal Communications Service (``PCS'') in

FY 1996 because the service was in a very early start-up phase. See FY

1996 Report and Order at Appendix F, Paragraph 15. We now believe that

there are sufficient operational PCS systems to justify their inclusion

among those licensees who are assessed fees in the CMRS Mobile Services

and CMRS One-Way Paging fee categories for FY 1997. We have therefore

incorporated fees for PCS in Paragraphs 14 and 15 of Attachment H.

3. Commercial Mobile Radio Services (CMRS)

39. In our FY 1996 Report and Order at Paragraph 22, we discussed a

proposal offered by Destineer, Inc., a PCS licensee, that we establish

a CMRS Messaging Service fee category to

[[Page 10800]]

replace our CMRS One-Way Paging fee category. 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 invite interested parties to file comments

on Destineer's proposal or propose alternative methods to assess CMRS

fees for FY 1997. We are particularly interested in the number of

estimated units associated with an alternative proposal and the impact

the proposed changes would have on projected revenues.

4. Intelsat & Inmarsat Signatories

40. The Commission incurs regulatory costs for satellite policy and

rulemaking, enforcement and user information activities. As directed by

Congress, these costs must be recovered through the collection of

regulatory fees. In accordance with the provisions of Section 9, the

Commission's overall goal is to recover all of the costs associated

with satellite regulatory activities and to distribute these costs

fairly amongst fee payers, taking into account factors reasonably

related to the benefits provided by the payer, and ``other factors we

determine are necessary in the public interest.''

41. In FY 1994 and FY 1995 the Commission recovered satellite

regulatory costs by collecting fees from satellite earth station and

geosynchronous space station regulatees (Part 25) only. Satellite

providers using international bearer circuits to provide service were

assessed a separate fee under the International Bearer Circuits

category in order to recover the regulatory costs associated with

international telecommunications policy and rulemaking, enforcement and

user information activities. The Commission received comments during

both years' regulatory fees proceedings concerning the distribution of

the burden of costs. In an effort to explore alternative methods of fee

collection the Commission conducted focus group sessions in FY 1995

which were attended by satellite industry representatives. One of the

major issues raised was a perceived inequity in the distribution of the

total satellite regulatory fee burden. Commission activities associated

with Intelsat, Inmarsat and the U.S. signatory to both were identified

as areas where space and earth station regulatees were unfairly bearing

the regulatory fee burden.

42. In response to distribution issues raised in the focus group

sessions and comments filed in previous years, we examined satellite

regulatory activities and determined that since the Commission incurs

regulatory costs associated with Signatory-related activities, a

regulatory fee for Signatories was the proper vehicle for recovering

these costs. In its comments on the proposed FY 1996 fees, Comsat

challenged the Commission's proposal regarding the Signatory fee,

contending that it would be unlawful and excessive. Each of these

arguments was discussed in our FY 1996 Report and Order, in which we

adopted the Signatory fee. However, in Paragraph 47 of the FY 1996

Report and Order, we indicated our intent to explore alternative means

of recovering these costs and to seek public comment on such

alternatives. We therefore request interested parties to comment on

alternative methods of collecting costs associated with Signatories. We

request that comments specify whether other regulatees should be

assessed a portion of the fee applicable to the signatory category,

and, if so, the estimated percentage of the fee that should be assessed

upon other regulatees. We are particularly interested in ways to

recover our costs without unfairly burdening other regulatees. If no

specific alternative is identified, we propose to retain the current

Signatory fee category for FY 1997.

5. Non-Common Carrier International Bearer Circuits

43. International bearer circuit fees are currently 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 services. See FY 1996

Report and Order at Paragraph 65. In our FY 1996 Report and Order we

declined to expand collection of international bearer circuit fees to

non-common carriers. As we noted at that time, the Commission is

unable, due to lack of appropriate data, to calculate a fee applicable

to bearer circuits provided directly to end users over non-common

carrier domestic and international facilities. The foregoing situation

has not changed. We, therefore, are proposing to assess the

international bearer circuit fee only on domestic and international

common carriers in FY 1997. However, we invite interested parties to

comment on Comsat's proposal. We are especially interested in

information concerning the number of bearer circuits provided directly

to end users over non-common carrier domestic and international

facilities.

D. Procedures for Payment of Regulatory Fees

44. Generally, we propose to retain 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. Sec. 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.

1. Annual Payments of Standard Fees

45. 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. All standard fees are 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

either in the Report and Order in this proceeding or by public notice

in the Federal Register following the termination of this proceeding.

2. Installment Payments for Large Fees

46. While we are mindful that time constraints may preclude an

opportunity for installment payments, we propose 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. We

propose that regulatees eligible to make installment payments may

submit their required fees in two equal payments (on dates to be

announced) or, in the alternative, in a single payment on the date that

their final installment payment is due. Due to statutory constraints

concerning notification to Congress prior to actual collection of the

fees, however, it is unlikely that there will be sufficient time for

installment payments, and that

[[Page 10801]]

regulatees eligible to make installment payments will be required to

pay these fees on the last date that fee payments may be submitted. The

dates for installment payments, or a single payment, will be announced

either in the Report and Order terminating this proceeding or by public

notice published pursuant to delegated authority in the Federal

Register.

3. Advance Payments of Small Fees

47. 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

decided would be subject to advance payments in our FY 1994 Report and

Order, and to those additional payers set forth herein.17 Payers

of advance fees will 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 for

payment of small fees established in this proceeding will be announced

in our Report and Order terminating this proceeding or by public notice

published pursuant to delegated authority in the Federal Register.

---------------------------------------------------------------------------

\17\ 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. Minimum Fee Payment Liability

48. Regulatees whose total fee liability, including all categories

of fees for which payment is due by an entity, amounts to less than $10

are exempted from fee payment in FY 1997.

5. Standard Fee Calculations and Payment Dates

49. As noted, the time for payment of standard fees and any

installment payments will be published in the Federal Register pursuant

to delegated authority. For licensees, permittees and holders of other

authorizations in the Common Carrier, Mass Media, and Cable Services

whose fees are not based on a subscriber, unit, or circuit count, fees

should be submitted for any authorization held as of October 1, 1996.

October 1 is the date to be used for establishing liability for payment

of standard fees since it is the first day of the federal government's

fiscal year.

50. In the case of 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.18 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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\18\ 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.

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E. Schedule of Regulatory Fees

51. The Commission's proposed Schedule of Regulatory Fees for FY

1997 is contained in Attachment F of this NPRM.

IV. Procedural Matters

A. Comment Period and Procedures

52. Pursuant to procedures set forth in Sections 1.415 and 1.419 of

the Commission's rules, interested parties may file comments on or

before March 25, 1997, and reply comments on or before April 4, 1997.

All relevant comments will be considered by the Commission before final

action is taken in this proceeding. To file formally in this

proceeding, participants must file an original and four copies of all

comments, reply comments and supporting materials. If participants want

each Commissioner to receive a personal copy of their comments, an

original and nine copies must be filed. Comments and reply comments

should be sent to the Office of the Secretary, Federal Communications

Commission, Washington, D.C. 20554. Interested parties, who do not wish

to formally participate in this proceeding, may file informal comments

at the same address. Comments and reply comments will be available for

public inspection during regular business hours in the FCC Reference

Center (Room 239) of the Federal Communications Commission, 1919 M

Street, N.W., Washington, D.C. 20054.

B. Ex Parte Rules

53. This is a non-restricted notice and comment rulemaking

proceeding. Ex parte presentations are permitted, except during the

Sunshine Agenda period, provided they are disclosed pursuant to the

Commission's rules. See 47 CFR Secs. 1.1202, 1.1203 and 1026(a).

C. Initial Regulatory Flexibility Analysis

54. As required by section 603 of the Regulatory Flexibility Act

(Public Law 96-354, 94 Stat. 1165, 5 U.S.C. Sec. 601 et seq. (1981)),

the Commission has prepared an Initial Regulatory Flexibility Analysis

(IRFA) of the expected impact on small entities of the proposals

suggested in this document. The IRFA is set forth in Attachment A.

Written public comments are requested with respect to the IRFA. These

comments must be filed in accordance with the same filing deadlines for

comments on the rest of the NPRM, but they must have a separate and

distinct heading, designating the comments as responses to the IRFA.

The Secretary shall send a copy of this NPRM, including the IRFA, to

the Chief Counsel for Advocacy of the Small Business Administration in

accordance with section 603(a) of the Regulatory Flexibility Act.

D. Paperwork Reduction Act Compliance

55. The Federal Communications Commission, as part of its

continuing effort to reduce paperwork burden, invites the general

public and other Federal agencies to take this opportunity to comment

on the following proposed and/or continuing information collections, as

required by the Paperwork Reduction Act of 1995, Public Law 104-13.

Comments are requested concerning (a) whether the proposed collection

of information is necessary for the proper performance of the functions

of the Commission, including whether the information shall have

practical utility; (b) the accuracy of the Commission's burden

estimates; (c) ways to enhance the quality, utility, and clarity of the

information collected, and (d) ways to minimize the burden of the

collection of information on the respondents, including the use of

[[Page 10802]]

automated collection techniques or other forms of information

technology.

56. Written comments should be submitted on or before May 9, 1997.

If you anticipate that you will be submitting comments, but find it

difficult to do so within the period of time allowed by this notice,

you should advise the contact listed below as soon as possible.

57. Direct all comments to Dorothy Conway, Federal Communications

Commission, Room 234, 1919 M St. NW., Washington, DC 20554 or via

internet to [email protected], and Timothy Fain, OMB Desk Officer, 10236

NEOB, 725 17th St. NW., Washington, DC 20503 or via internet to

[email protected].

58. For Further Information Contact: For additional information or

copies of the information collections, contact Dorothy Conway at 202-

418-0217 or via internet at [email protected].

OMB Approval Number: (Number should be included if it is a revision

to an existing collection).

Title:

Form No.:

Type of Review: (i.e. new collection, revision of existing

collection)

Respondents:

Number of Respondents:

Estimated Time Per Response:

Total Annual Burden:

Needs and Uses: (Brief description of how the information will be

used)

E. Authority and Further Information

59. Authority for this proceeding is contained in sections 4(i) and

(j), 9, and 303(r) of the Communications Act of 1934 as amended, 47

U.S.C. Secs. 154(1) and (j) and 159 and 303(r).

60. 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 procedures, Communications common

carriers, Penalties, Radio, Telecommunications, Television.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Attachment A--Initial Regulatory Flexibility Analysis

1. As required by the Regulatory Flexibility Act (RFA),19 as

amended by the Contract with America Advancement Act (CWAAA), Public

Law 104-121, 110 Stat. 847 (1996),20 the Commission has prepared

an Initial Regulatory Flexibility Analysis (IRFA) of the expected

significant economic impact on small entities by the policies and rules

proposed in this Notice of Proposed Rulemaking In the Matter of

Assessment and Collection of Regulatory Fees for Fiscal Year 1997.

Written public comments are requested on the IRFA. Comments must be

identified as responses to the IRFA and must be filed by the deadlines

for comments on the NPRM provided above in Paragraph 53.

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\19\ 5 U.S.C. Sec. 603.

\20\ Title II of the CWAAA is ``The Small Business Regulatory

Enforcement Fairness Act of 1996'' (SBREFA), codified at 5 U.S.C.

Sec. 601 et seq.

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I. Need for and Objectives of the Proposed Rule

2. This rulemaking proceeding is initiated to obtain comments

concerning the Commission's proposed amendment of its Schedule of

Regulatory Fees 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 proposed revised

regulatory fees, as contained in the attached Schedule of Regulatory

Fees, in the most efficient manner possible and without undue burden to

the public.

II. Legal Basis

3. The proposed action is authorized under Sections (4)(i) and (j),

9 and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.

Secs. 154(i) and (j), 159, and 303(r).

III. Description and Estimate of the Number of Small Entities to

Which the Proposed Rule Will Apply

4. The RFA generally defines ``small entity'' as having the same

meaning as the terms ``small business,'' ``small organization,'' and

``small governmental jurisdiction'' and ``the same meaning as the term

`small business concern' under the Small Business Act unless the

Commission has developed one or more definitions that are appropriate

for its activities.21 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).22 The Small Business

Enforcement Fairness Act of 1996 (SBREFA) provision of the RFA also

applies to nonprofit organizations and to governmental organizations

such as governments of cities, counties, towns, townships, villages,

school districts, or special districts with populations of less than

50,000.23 There are 85,006 governmental entities in the United

States.24 5 U.S.C. Sec. 601(3) (incorporating by reference the

definition of ``small business concern'' in 15 U.S.C. Sec. 632).

Pursuant to 5 U.S.C. Sec. 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.''

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\21\ 5 U.S.C. Sec. 601(3) (incorporating by reference the

definition of ``small business concern'' in 15 U.S.C. Sec. 632).

Pursuant to 5 U.S.C. Sec. 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.''

\22\ Small Business Act, 15 U.S.C. Sec. 632 (1996).

\23\ 5 U.S.C. Sec. 601(5).

\24\ United States Dept. of Commerce, Bureau of the Census, 1992

Census of Governments (1992 Census).

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Cable Services or Systems

5. 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.25 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.26

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\25\ 13 CFR Sec. 121.201, SIC 4841.

\26\ 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).

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6. 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.27 Based on our most recent

information, we estimate that there were 1,439 cable operators that

qualified as

[[Page 10803]]

small cable system operators at the end of 1995.28 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.

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\27\ 47 CFR Sec. 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).

\28\ Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29,

1996 (based on figures for December 30, 1995).

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7. 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.'' 29 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.30 Based on available data, we find that the number

of cable operators serving 617,000 subscribers or less totals

1,450.31 We do not request nor do we collect information

concerning whether cable system operators are affiliated with entities

whose gross annual revenues exceed $250,000,000,32 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

65,000,000 subcribers, and we have based our fee revenue estimates on

that figure.

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\29\ 47 U.S.C. Sec. 543(m)(2).

\30\ 47 CFR Sec. 76.1403(b).

\31\ Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29,

1996 (based on figures for Dec. 30, 1995).

\32\ 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 section 76.1403(b) of the Commission's rules. See 47 CFR

Sec. 76.1403(d).

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8. 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),33 multipoint distribution systems (MDS),34 satellite

master antenna systems (SMATV), and subscription television services.

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\33\ Direct Broadcast Services (DBS) are discussed in depth with

the international services infra.

\34\ Multipoint Distribution Services (MDS) are discussed in

depth with the mass media services infra.

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Common Carrier Services and Related Entities

9. 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.

10. 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.35 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.

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\35\ 13 CFR Sec. 121.201.

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11. 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 entitiy'' and ``small business

concerns.'' \36\ 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.'' \37\

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\36\ 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.

\37\ See id.

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12. 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.\38\ 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.'' \39\ 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.

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\38\ 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).

\39\ 15 U.S.C. Sec. 632(a)(1).

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13. 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.\40\ According to the SBA's

definition, a small business telephone company other than a

radiotelephone company is one employing fewer than 1,500 persons.\41\

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

[[Page 10804]]

communications companies other than radiotelephone companies.

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\40\ 1992 Census, supra, at Firm Size 1-123.

\41\ 13 CFR Sec. 121.201, SIC Code 4812.

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14. 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.\42\ 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.\43\ 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.

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\42\ 13 CFR Sec. 121.201, SIC Code 4813.

\43\ 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).

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15. 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.\44\ 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.\45\

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.

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\44\ 13 CFR Sec. 121.201, SIC 4813.

\45\ TRS Worksheet.

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16. 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.\46\ 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.\47\ 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 CAPs that would qualify

as small business concerns under the SBA's definition. Consequently, we

estimate that there are fewer than 57 small CAPs.

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\46\ 13 CFR Sec. 121.201, SIC 4813.

\47\ TRS Worksheet.

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17. 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.\48\ 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.\49\ 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.

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\48\ 13 CFR Sec. 121.201, SIC 4813.

\49\ Id.

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18. 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.\50\ 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.\51\ 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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\50\ 13 CFR Sec. 121.201, SIC 4813.

\51\ TRS Worksheet.

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19. 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.\52\ 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.\53\

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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\52\ 13 CFR Sec. 121.201, SIC 4813.

\53\ TRS Worksheet.

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20. 800 Subscribers.\54\ 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.\55\ 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

[[Page 10805]]

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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\54\ We include all toll-free number subscribers in this

category, including 888 numbers.

\55\ Federal Communications Commission, CCB, Industry Analysis

Division, FCC Releases, Study on Telephone Trends, Tbl. 20 (May 16,

1996).

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International Services

21. 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.\56\ 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.\57\ The Census report does not provide more

precise data.

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\56\ 13 CFR Sec. 120.121, SIC Code 4899.

\57\ 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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22. 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.

23. 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.

24. 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.

25. 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.

26. 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 the number of VSAT systems that would

constitute a small business under the SBA definition.

27. 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.

28. 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.

29. 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.

30. 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.

31. 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. 58 As of December 1996, 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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\58\ 13 CFR 121.201, SIC 4841.

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Mass Media Services

32. Commercial Radio and Television Services. The proposed rules

and policies will apply to television broadcasting licensees and radio

broadcasting licensees. 59 The SBA defines a television

broadcasting station that has $10.5 million or less in annual receipts

as a small business. 60 Television broadcasting stations consist

of establishments primarily engaged in broadcasting visual programs by

television to the public, except cable and other pay television

services. 61 Included in this industry are

[[Page 10806]]

commercial, religious, educational, and other television stations.

62 Also included are establishments primarily engaged in

television broadcasting and which produce taped television program

materials. 63 Separate establishments primarily engaged in

producing taped television program materials are classified under

another SIC number. 64 There were 1,509 television stations

operating in the nation in 1992. 65 That number has remained

fairly constant as indicated by the approximately 1,550 operating

television broadcasting stations in the nation as of August, 1996.

66 For 1992, 67 the number of television stations that

produced less than $10.0 million in revenue was 1,155 establishments.

68 Only commercial stations are subject to regulatory fees.

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\59\ 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.

\60\ 13 CFR 121.201, SIC 4833.

\61\ 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).

\62\ 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.

\63\ 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).

\64\ Id. SIC 7812 (Motion Picture and Video Tape Production);

SIC 7922 (Theatrical Producers and Miscellaneous Theatrical

Services) (producers of live radio and television programs).

\65\ FCC News Release No. 31327, January 13, 1993; Economics and

Statistics Administration, Bureau of Census, U.S. Department of

Commerce.

\66\ FCC News Release No. 64958, September 6, 1996.

\67\ Census for Communications' establishments are performed

every five years ending with a ``2'' or ``7''. See Economics and

Statistics Administration, Bureau of Census, U.S. Department of

Commerce.

\68\ The amount of $10 million was used to estimate the number

of small business establishments because the relevant Census

categories stopped at $9,999,999 and began at $10,000,000. No

category for $10.5 million existed. Thus, the number is as accurate

as it is possible to calculate with the available information.

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33. Additionally, the Small Business Administration defines a radio

broadcasting station that has $5 million or less in annual receipts as

a small business. 69 A radio broadcasting station is an

establishment primarily engaged in broadcasting aural programs by radio

to the public. 70 Included in this industry are commercial,

religious, educational, and other radio stations. 71 Radio

broadcasting stations which primarily are engaged in radio broadcasting

and which produce radio program materials are similarly included.

72 However, radio stations which are separate establishments and

are primarily engaged in producing radio program material are

classified under another SIC number. 73 The 1992 Census indicates

that 96 percent (5,861 of 6,127) radio station establishments produced

less than $5 million in revenue in 1992. 74 Official Commission

records indicate that 11,334 individual radio stations were operating

in 1992. 75 As of August 1996, official Commission records

indicate that 12,088 radio stations were operating. 76 Only

commercial stations are subject to regulatory fees.

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\69\ 13 CFR 121.201, SIC 4832.

\70\ Economics and Statistics Administration, Bureau of Census,

U.S. Department of Commerce.

\71\ Id.

\72\ Id.

\73\ Id.

\74\ The Census Bureau counts radio stations located at the same

facility as one establishment. Therefore, each co-located AM/FM

combination counts as one establishment.

\75\ FCC News Release No. 31327, January 13, 1993.

\76\ FCC News Release No. 64958, September 6, 1996.

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34. Thus, the NPRM adopted today will affect approximately 1,550

full power television stations; approximately 1,194 of those stations

are considered small businesses, 77 and 12,088 full power radio

stations, approximately 11,605 of which are small businesses. 78

These estimates may overstate the number of small entities since the

revenue figures on which they are based do not include or aggregate

revenues from non-television or non-radio affiliated companies. There

are also 1,954 low power television stations (LPTV). 79 Given the

nature of this service, we will presume that all LPTV licensees qualify

as small entities under the SBA definition.

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\77\ We use the 77 percent figure of TV stations operating at

less than $10 million for 1992 and apply it to the 1996 total of

1550 TV stations to arrive at 1,194 stations categorized as small

businesses.

\78\ We use the 96% figure of radio station establishments with

less than $5 million revenue from the Census data and apply it to

the 12,088 individual station count to arrive at 11,605 individual

stations as small businesses.

\79\ FCC News Release, Broadcast Station Totals as of December

31, 1996, No. 71831, January 21, 1997.

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Alternative Classification of Small Stations

35. An alternative way to classify small radio and television

stations is the number of employees. The Commission currently applies a

standard based on the number of employees in administering its Equal

Employment Opportunity Rule (EEO) for broadcasting.80 Thus, radio

or television stations with fewer than five full-time employees are

exempted from certain EEO reporting and record keeping

requirements.81 We estimate that the total number of broadcast

stations with 4 or fewer employees is approximately 4,239.82

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\80\ The Commission's definition of a small broadcast station

for purposes of applying its EEO rules was adopted prior to the

requirement of approval by the SBA pursuant to Section 3(a) of the

Small Business Act, 15 U.S.C. Sec. 632 (a), as amended by Section

222 of the Small Business Credit and Business Opportunity

Enhancement Act of 1992, Public Law 102-366, Sec. 222(b)(1), 106

Stat. 999 (1992), as further amended by the Small Business

Administration Reauthorization and Amendments Act of 1994, Public

Law 103-403, Sec. 301, 108 Stat. 4187 (1994). However, this

definition was adopted after the public notice and the opportunity

for comment. See Report and Order in Docket No. 18244, 23 FCC 2d 430

(1970), 35 FR 8925 (June 6, 1970).

\81\See, e.g., 47 CFR Sec. 73.3612 (Requirement to file annual

employment reports on Form 395 applies to licensees with five or

more full-time employees); First Report and Order in Docket No.

21474 (Amendment of Broadcast Equal Employment Opportunity Rules and

FCC Form 395), 70 FCC 2d 1466 (1979), 50 FR 50329 (December 10,

1985). The Commission is currently considering how to decrease the

administrative burdens imposed by the EEO rule on small stations

while maintaining the effectiveness of our broadcast EEO

enforcement. Order and Notice of Proposed Rule Making in MM Docket

No. 96-16 (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). One option under

consideration is whether to define a small station for purposes of

affording such relief as one with ten or fewer full-time employees.

\82\ Compilation of 1994 Broadcast Station Annual Employment

Reports (FCC Form 395B), Equal Opportunity Employment Branch, Mass

Media Bureau, FCC.

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Auxiliary, Special Broadcast and Other Program Distribution Services

36. This service involves a variety of transmitters, generally used

to relay broadcast programming to the public (through translator and

booster stations) or within the program distribution chain (from a

remote news gathering unit back to the station). The Commission has not

developed a definition of small entities applicable to broadcast

auxiliary licensees. Therefore, the applicable definition of small

entity is the definition under the Small Business Administration (SBA)

rules applicable to radio broadcasting stations (SIC 4832) and

television broadcasting stations (SIC 4833).

37. There are currently 2,720 FM translators and boosters, 4,952 TV

translators.83 The FCC does not collect financial information on

any broadcast facility and the Department of Commerce does not collect

financial information on these auxiliary broadcast facilities. We

believe, however, that most, if not all, of these auxiliary facilities

could be classified as small

[[Page 10807]]

businesses by themselves. We also recognize that most translators and

boosters are owned by a parent station which, in some cases, would be

covered by the revenue definition of small business entity discussed

above. These stations would likely have annual revenues that exceed the

SBA maximum to be designated as a small business (either $5 million for

a radio station or $10.5 million for a TV station). Furthermore, they

do not meet the Small Business Act's definition of a ``small business

concern'' because they are not independently owned and operated.84

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\83\ FCC News Release, Broadcast Station Totals as of December

31, 1996, No. 71831, January 21, 1997.

\84\ 15 U.S.C. Sec. 632.

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38. Multipoint Distribution Service (MDS). This service involves a

variety of transmitters, which are used to relay programming to the

home or office, similar to that provided by cable television

systems.85 In connection with the 1996 MDS auction the Commission

defined small businesses as entities who had annual average gross

revenues for the three preceding years not in excess of $40

million.86 This definition of a small entity in the context of MDS

auctions has been approved by the SBA.87 These stations were

licensed prior to implementation of Section 309(j) of the Act. Licenses

for new MDS facilities are now awarded to auction winners in Basic

Trading Areas (BTAs) and BTA-like areas.88 The MDS auctions

resulted in 67 successful bidders obtaining licensing opportunities for

493 BTAs. Of the 67 auction winners, 61 meet the definition of a small

business. There are 1,573 previously authorized and proposed MDS

stations currently licensed. Thus, we conclude that there are 1,634 MDS

providers that are small businesses as deemed by the SBA and the

Commission's auction rules. It is estimated, however, that only 1,145

MDS licensees are subject to regulatory fees and the number which are

small businesses is unknown.

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\85\ For purposes of this item, MDS also includes single channel

Multipoint Distribution Service (MDS) and Multipoint Distribution

Service (MMDS) application and authorizations collectively.

\86\ See 47 CFR Sec. 1.2110 (a)(1).

\87\ Amendment of Parts 21 and 74 of the Commission's Rules with

Regard to Filing Procedures in the Multipoint Distribution Service

and in the Instructional Television Fixed Service and Implementation

of Section 309(j) of the Communications Act--Competitive Bidding, 10

FCC Rcd 9589 (1995), 60 FR 36524 (July 17, 1995).

\88\ Id. A Basic Trading Area (BTA) is the geographic area by

which the Multipoint Distribution Service is licensed. See Rand

McNally 1992 Commercial Atlas and Marketing Guide, 123rd Edition,

pp. 36-39.

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Wireless and Commercial Mobile Services

39. Cellular Licensees. Neither the Commission nor the SBA has

developed a definition of small entities applicable to cellular

licensees. The closest applicable definition of small entity is the

definition under the SBA rules applicable to radiotelephone (wireless)

companies (SIC 4812). The most reliable source of information regarding

the number of cellular services carriers nationwide of which we are

aware appears to be the data that the Commission collects annually in

connection with the TRS Worksheet.89 According to the most recent

data, 792 companies reported that they were engaged in the provision of

cellular services.90 Although it seems certain that some of these

carriers are not independently owned and operated, or have more than

1,500 employees, we are unable at this time to estimate with greater

precision the number of cellular services carriers that would qualify

as small business concerns under the SBA's definition. Consequently, we

estimate that there are fewer than 792 small cellular service carriers.

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\89\ Federal Communications Commission. CCB industry Analysis

Division, Telecommunication Industry Revenue: TRS Worksheet Data,

Tbl. 1 (Average Total Telecommunication Revenue Reported by Class of

Carrier) (December 1996) (TRS Worksheet).

\90\ Id.

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40. 220 MHz Radio Services. Since the Commission has not yet

defined a small business with respect to 220 MHz radio services, we

will utilize the SBA's definition applicable to radiotelephone

companies--i.e., an entity employing less than 1,500 persons.91

With respect to the 220 MHz services, the Commission has proposed a

two-tiered definition of small business for purposes of auctions: (1)

For Economic Area (EA) licensees,92 a firm with average annual

gross revenues of not more than $6 million for the preceding three

years; and (2) for regional and nationwide licensees, a firm with

average annual gross revenues of not more than $15 million for the

preceding three years.93 Since this definition has not yet been

approved by the SBA, we will utilize the SBA's definition applicable to

radiotelephone companies. Given the fact that nearly all radiotelephone

companies employ fewer than 1,500 employees,94 with respect to the

approximately 3,800 incumbent licensees in this service, we will

consider them as small businesses under the SBA definition.

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\91\ 13 CFR Sec. 121.201, SIC 4812.

\92\ Economic Area (EA) licenses refer to the 60 channels in the

172 geographic areas as defined by the Bureau of Economic Analysis,

Department of Commerce. See Amendment of Part 90 of the Commission's

Rules to Provide for the Use of the 220-222 MHz Band by the Private

Land Mobile Radio Service, Second Memorandum Opinion and Order and

Third Notice of Proposed Rule Making, GN Docket 93-252, 10 FCC Rcd

6880 (1995), 60 FR 26861 (May 19, 1995).

\93\ Id.

\94\ See U.S. Bureau of the Census, U.S. Department of Commerce,

1992 Census of Transportation, Communications, and Utilities, UC92-

S-1, Subject Series, Establishment and Firm Size, Tbl. 5, Employment

Size of Firms; 1992, SIC 4812 (issued May 1995).

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41. Private and Common Carrier Paging. The Commission has proposed

a two-tier definition of small businesses in the context of auctioning

licenses in the Common Carrier Paging and exclusive Private Carrier

Paging services. Under the proposal, a small business will be defined

as either (1) an entity that, together with its affiliates and

controlling principals, has average gross revenues for the three

preceding years of not more than $3 million, or (2) an entity that,

together with affiliates and controlling principals, has average gross

revenues for the three preceding calendar years of not more than $15

million. Since the SBA has not yet approved this definition for paging

services, we will utilize the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing fewer than 1,500

persons.95 At present, there are approximately 24,000 Private

Paging licensees and 74,000 Common Carrier Paging licensees. We

estimate that the majority of private and common carrier paging

providers would qualify as small businesses under the SBA definition.

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\95\ 13 CFR Sec. 121.201, SIC 4812.

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42. Mobile Service Carriers. Neither the Commission nor the SBA has

developed a definition of small entities specifically applicable to

mobile service carriers, such as paging companies. The closest

applicable definition under the SBA rules is for radiotelephone

(wireless) companies. The most reliable source of information regarding

the number of mobile service carriers nationwide of which we are aware

appears to be the data that the Commission collects annually in

connection with the TRS Worksheet. According to the most recent data,

117 companies reported that they were engaged in the provision of

mobile services.96 Although it seems certain that some of these

carriers are not independently owned and operated, or have more than

1,500 employees, we are unable at this time to estimate with greater

precision the number of mobile service carriers that would qualify

under the SBA's definition.

[[Page 10808]]

Consequently, we estimate that there are fewer than 117 small entity

mobile service carriers.

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\96\ Id.

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43. Broadband Personal Communications Service (PCS). The broadband

PCS spectrum is divided into six frequency blocks designated A through

F and the Commission has held auctions for each block. The Commission

defined ``small entity'' for Blocks C and F as an entity that has

average gross revenues of less than $40 million in the three previous

calendar years.97 For Block F, an additional classification for

``very small business'' was added and is defined as an entity that,

together with their affiliates, has average gross revenues of not more

than $15 million for the preceding three calendar years.98 These

regulations defining ``small entity'' in the context of broadband PCS

auctions have been approved by the SBA. No small businesses within the

SBA-approved definition bid successfully for licenses in Blocks A and

B. There were 90 winning bidders that qualified as small entities in

the Block C auctions. A total of 93 small and very small business

bidders won approximately 40% of the 1,479 licenses for Blocks D, E,

and F.99 However, licenses for blocks C through F have not been

awarded fully, therefore there are few, if any, small businesses

currently providing PCS services. Based on this information, we

conclude that the number of small broadband PCS licensees will include

the 90 winning C Block bidders and the 93 qualifying bidders in the D,

E, and F blocks, for a total of 183 small PCS providers as defined by

the SBA and the Commission's auction rules.

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\97\ See Amendment of Parts 20 and 24 of the Commission's

Rules--Broadband PCS Competitive Bidding and the Commercial Mobile

Radio Service Spectrum Cap, Report and Order, FCC 96-278, WT Docket

No. 96-59, paras. 57-60 (released June 24, 1996), 61 FR 33859 (July

1, 1996); see also 47 CFR Sec. 24.720(b).

\98\ See Amendment of Parts 20 and 24 of the Commission's

Rules--Broadband PCS Competitive Bidding and the Commerical Mobile

Radio Service Spectrum Cap, Report and Order, FCC 96-278, WT Docket

No. 96-59, para. 60 (1996), 61 FR 33859 (July 1, 1996).

\99\ FCC News, Broadband PCS, D, E and F Block Auction Closes,

No. 71744 (released January 14, 1997).

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44. Narrowband PCS. The Commission has auctioned nationwide and

regional licenses for narrowband PCS. There are 11 nationwide and 30

regional licensees for narrowband PCS. The Commission does not have

sufficient information to determine whether any of these licensees are

small businesses within the SBA-approved definition. At present, there

have been no auctions held for the major trading area (MTA) and basic

trading area (BTA) narrowband PCS licenses. The Commission anticipates

a total of 561 MTA licenses and 2,958 BTA licenses will be awarded in

the auctions. Those auctions, however, have not yet been scheduled.

Given the facts that nearly all radiotelephone companies have fewer

than 1,500 employees and that no reliable estimate of the number of

prospective MTA and BTA narrowband licensees can be made, we assume,

that all of the licenses will be awarded to small entities, as that

term is defined by the SBA.

45. Rural Radiotelephone Service. The Commission has not adopted a

definition of small business specific to the Rural Radiotelephone

Service, which is defined in Section 22.99 of the Commission's

Rules.100 A significant subset of the Rural Radiotelephone Service

is BETRS, or Basic Exchange Telephone Radio Systems (the parameters of

which are defined in Sections 22.757 and 22.759 of the Commission's

Rules). Accordingly, we will use the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing fewer than 1,500

persons. There are approximately 1,000 licensees in the Rural

Radiotelephone Service, and we estimate that almost all of them qualify

as small under the SBA's definition of a small business.101

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\100\ 47 CFR Sec. 22.9.

\101\ 13 CFR Sec. 121.201, SIC 4812.

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46. Air-Ground Radiotelephone Service. The Commission has not

adopted a definition of small business specific to the Air-Ground

Radiotelephone Service, which is defined in Section 22.99 of the

Commission's Rules.102 Accordingly, we will use the SBA's

definition applicable to radiotelephone companies, i.e., an entity

employing fewer than 1,500 persons.103 There are approximately 100

licensees in the Air-Ground Radiotelephone Service, and we estimate

that almost all of them qualify as small under the SBA definition.

---------------------------------------------------------------------------

\102\ Id.

\103\ Id.

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47. Specialized Mobile Radio Licensees (SMR). Pursuant to 47 CFR

Sec. 90.814(b)(1), the Commission awards bidding credits in auctions

for geographic area 800 MHz and 900 MHz Specialized Mobile Radio (SMR)

licenses to firms that had revenues of less than $15 million in each of

the three previous calendar years. This regulation defining ``small

entity'' in the context of 800 MHz and 900 MHz SMR has been approved by

the SBA.104

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\104\ See Amendment of Parts 2 and 90 of the Commission's Rules

to Provide for the Use of 200 Channels Outside the Designated Filing

Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the

Specialized Mobile Radio Pool, PR Docket No. 89-583, Second Order on

Reconsideration and Seventh Report and Order, 11 FCC Rcd 2639, 2693-

702 (1995), 60 FR 48913 (September 21, 1995); Amendment of Part 90

of the Commission's Rules to Facilitate Future Development of SMR

Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, First

Report and Order, Eighth Report and Order, and Second Further Notice

of Proposed Rule Making, 11 FCC Rcd 1463 (1995), 61 FR 6212

(February 16, 1996).

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48. The proposed fees in the NPRM applies to SMR providers in the

800 MHz and 900 MHz bands that either hold geographic area licenses or

have obtained extended implementation authorizations. We do not know

how many firms provide 800 MHz or 900 MHz geographic area SMR service

pursuant to extended implementation authorizations, nor how many of

these providers have annual revenues of less than $15 million. We do

know that one of these firms has over $15 million in revenues. We

assume that all of the remaining existing extended implementation

authorizations are held by small entities, as that term is defined by

the SBA.

49. The Commission recently held auctions for geographic area

licenses in the 900 MHz SMR band. There were 60 winning bidders who

qualified as small entities in the 900 MHz auction. Based on this

information, we conclude that the number of geographic area SMR

licensees affected includes these 60 small entities.

50. Private Land Mobile Radio Licensees (PLMR). These radios are

used by companies of all sizes operating in all U.S. business

categories. Because of the vast array of PLMR users, the Commission has

not developed nor would it be possible to develop a definition of small

entities specifically applicable to PLMR users. For the purpose of

determining whether a licensee is a small business as defined by the

SBA, each licensee would need to be evaluated within its own business

area.

51. The Commission is unable at this time to estimate the number of

small businesses which could be impacted by the rules. However, the

Commission's 1994 Annual Report on PLMRs 105 indicates that at the

end of fiscal year 1994 there were 1,087,267 licensees operating

12,481,989 transmitters in the PLMR bands below 512 MHz. Further,

because any entity engaged in a commercial activity is eligible to hold

a PLMR license, these rules could potentially impact every small

business in the U.S.

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\105\ Federal Communications Commission, 60th Annual Report,

Fiscal Year 1994 at 116.

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[[Page 10809]]

52. Amateur Radio Service. We estimate that 10,000 applicants will

apply for vanity call signs in FY 1997. All are presumed to be

individuals. All other amateur licensees are exempt from payment of

regulatory fees.

53. Aviation and Marine Radio Service. Small businesses in the

aviation and marine radio services use a marine very high frequency

(VHF) radio, any type of emergency position indicating radio beacon

(EPIRB), and/or radar, a VHF aircraft radio, and/or any type of

emergency locator transmitter (ELT). The Commission has not developed a

definition of small entities specifically applicable to these small

businesses. Therefore, the applicable definition of small entity is the

definition under the Small Business Administration rules applicable to

water transportation and transportation by air. This definition

provides that a small entity is any entity employing less than 500

persons for water transportation, and 1,500 for transportation by

air.106 The Commission is unable at this time to make a meaningful

estimate of the number of potential small businesses.

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\106\ See 13 CFR Sec. 121.201, SIC Major Group Code 44--Water

Transportation (4491, 4492, 4493, 4499) and 45--Transportation by

Air (4522, 4581).

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54. Most applicants for individual recreational licenses are

individuals. Approximately 581,000 ship station licensees and 131,000

aircraft station licensees operate domestically and are not subject to

the radio carriage requirements of any statute or treaty. Therefore,

for purposes of our evaluations and conclusions in this FRFA, we

estimate that there may be at least 712,000 potential licensees which

are small businesses, as that term is defined by the SBA. We estimate,

however, that only 22,250 will be subject to FY 1997 regulatory fees.

55. Microwave Video Services. Microwave services includes common

carrier,107 private operational fixed,108 and broadcast

auxiliary radio services.109 At present, there are 22,015 common

carrier licensees, approximately 61,670 private operational fixed

licensees and broadcast auxiliary radio licensees in the microwave

services. Inasmuch as the Commission has not yet defined a small

business with respect to microwave services, we will utilize the SBA's

definition applicable to radiotelephone companies--i.e., an entity with

less than 1,500 persons.110 As for estimates regarding small

businesses within the broadcast service, we rely on our estimates as

discussed under mass media services. Although some of these companies

may have more than 1,500 employees, we are unable at this time to

estimate with greater precision the number of microwave service

providers other than broadcast licensees that would qualify under the

SBA's definition.

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\107\ 47 CFR Sec. 101 et seq (formerly part 21 of the

Commission's rules).

\108\ Persons eligible under Parts 80 and 90 of the Commission's

rules can use private Operational Fixed Microwave services. See 47

CFR Secs. 80 et seq, 90 et seq. Stations in this service are called

operational-fixed to distinguish them from common carrier and public

fixed stations. Only the licensee may use an operational-fixed

station, and only for communications related to the licensee's

commercial, industrial, or safety operations.

\109\ Broadcast Auxiliary Microwave Service is governed by Part

74 of Title 47 of the Commission's rules. See 47 CFR Sec. 74 et seq.

Available to licensees of broadcast stations and to broadcast and

cable network entities, broadcast auxiliary microwave stations are

used for relaying broadcast television signals from the studio to

the transmitter, or between two points, such as a main studio and an

auxiliary studio. The broadcast auxiliary microwave services also

include mobile TV pickups which relay signals from a remote location

back to the studio.

\110\ 13 CFR Sec. 121.201, SIC 4812.

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56. Public Safety Radio Services. Public Safety radio services

include police, fire, local government, forestry conservation, highway

maintenance, and emergency medical services.111 There are a total

of approximately 127,540 licensees within these services. Governmental

entities as well as private businesses comprise the licensees for these

services. As we indicated in the introductory paragraph, all

governmental entities with populations of less than 50,000 fall within

the definition of a small business.112 There are approximately

37,566 governmental entities with populations of less than

50,000.113 All of these licensees are exempt from payment of

regulatory fees.

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\111\ With the exception of the special emergency service, these

services are governed by subpart B of Part 90 of the Commission's

rules. 47 CFR Secs. 90.15 through 90.27. The police service includes

26,608 licensees that serve state, county, and municipal enforcement

through telephony (voice), telegraphy (code) and teletype and

facsimile (printed material). The fire radio service includes 22,677

licensees comprised of private volunteer or professional fire

companies as well as units under governmental control. The local

government service that is presently comprised of 40,512 licensees

that are state, county, or municipal entities that use the radio for

official purposes not covered by other public safety services. There

are 7,325 licensees within the forestry service which is comprised

of licensees from state departments of conservation and private

forest organizations who set up communications networks among fire

lookout towers and ground crews. The 9,480 state and local

governments are licensed to highway maintenance service provide

emergency and routine communications to aid other public safety

services to keep main roads safe for vehicular traffic. The 1,460

licensees in the Emergency Medical Radio Service (EMRS) use the 39

channels allocated to this service for emergency medical service

communication related to the actual delivery of emergency medical

treatment. 47 CFR Sec. Sec. 90.15 through 90.27. The 19,478

licensees in the special emergency service include medical services,

rescue organizations, veterinarians, handicapped persons, disaster

relief organizations, school buses, beach patrols, establishments in

isolated areas, communications standby facilities, and emergency

repair of public communications facilities. 47 CFR Secs. 90.33

through 90.55.

\112\ 5 U.S.C. Sec. 601(5).

\113\ United States Dept. of Commerce, Bureau of the Census,

1992 Census of Governments (1992 Census).

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57. Personal Radio Services. Personal radio services provide short-

range, low power radio for personal communications, radio signalling

and business communications not provided for in other services. These

services include citizen band (CB) radio service, general mobile radio

service (GMRS), radio control radio service, and family radio service

(FRS).114 Inasmuch as the CB, GMRS, and FRS licensees are

individuals, no small business definition applies for these services.

We are unable at this time to estimate the number of licensees that

would qualify as small under the SBA's definition, however, only GMRS

licensees are subject to regulatory fees.

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\114\ Licensees in the Citizens Band (CB) Radio Service, General

Mobile Radio Service (GMRS), Radio Control (R/C) Radio Service and

Family Radio Service (FRS) are governed by subpart D, subpart A,

subpart C, and subpart B, respectively, of Part 95 of the

Commission's rules. 47 CFR Secs. 95.401 through 95.428; Secs. 95.1

through 95.181; Secs. 95.201 through 95.225; 47 CFR Secs. 95.191

through 95.194.

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58. Offshore Radiotelephone Service. This service operates on

several UHF TV broadcast channels that are not used for TV broadcasting

in the coastal area of the states bordering the Gulf of Mexico.115

At present, there are approximately 55 licensees in this service. We

are unable at this time to estimate the number of licensees that would

qualify as small under the SBA's definition.

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\115\ These licensees are governed by subpart I of part 22 of

the Commission's rules. 47 CFR Sec. 22.1001 through 22.1037.

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IV. Description of Projected Reporting, Recordkeeping and Other

Compliance Requirements

59. With certain exceptions, the Commission's Schedule of

Regulatory Fees applies to all Commission licensees and regulatees.

Most licensees will be required to count the number of licenses or call

signs authorized, complete and submit an FCC Form 159, ``FCC Remittance

Advice,'' and pay a regulatory fee based on the number of licenses or

call signs.116 Interstate

[[Page 10810]]

telephone service providers must compute their annual regulatory fee

based on their adjusted gross interstate revenue using information they

already supply to the Commission in compliance with the TRS Fund, and

they must complete and submit the FCC Form 159. Compliance with the fee

schedule will require some licensees to tabulate the number of units

(e.g., cellular telephones, pagers, cable TV subscribers) they have in

service, complete and submit an FCC Form 159. Licensees ordinarily will

keep a list of the number of units they have in service as part of

their normal business practices. No additional outside professional

skills are required to complete the FCC Form 159, and it can be

completed by the employees responsible for an entity's business

records.

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\116\ The following categories are exempt from the Commission's

Schedule of Regulatory Fees: Amateur radio licensees (except

applicants for vanity call signs) and operators in other non-

licensed services (e.g., Personal Radio, part 15, ship and

aircraft). Governments and non-profit (exempt under Section 501(c)

of the Internal Revenue Code) entities are exempt from payment of

regulatory fees and need not submit payment. Non-commercial

educational broadcast licensees are exempt from regulatory fees as

are licensees of auxiliary broadcast services such as low power

auxiliary stations, television auxiliary service stations, remote

pickup stations and aural broadcast auxiliary stations where such

licenses are used in conjunction with commonly owned non-commercial

educational stations. Emergency Alert System licenses for auxiliary

service facilities are also exempt as are instructional television

fixed service licensees. Regulatory fees are automatically waived

for the licensee of any translator station that: (1) is not licensed

to, in whole or in part, and does not have common ownership with,

the licensee of a commercial broadcast station; (2) does not derive

income from advertising; and (3) is dependent on subscriptions or

contributions from members of the community served for support.

Receive only earth station permittees are exempt from payment of

regulatory fees. A regulatee will be relieved of its fee payment

requirement if its total fee due, including all categories of fees

for which payment is due by the entity, amounts to less than $10.

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60. Each licensee must submit the FCC Form 159 to the Commission's

lockbox bank after computing the number of units subject to the fee. As

an option, licensees are permitted to file electronically or on

computer diskette to minimize the burden of submitting multiple copies

of the FCC Form 159. Although not mandatory, the latter procedure may

require additional technical skills. Licensees who pay small fees in

advance supply fee information as part of their application and do not

need to use the FCC Form 159.

61. Licensees and regulatees are advised that failure to submit the

required regulatory fee in a timely manner will subject the licensee or

regulatee to a late payment fee of an additional 25% in addition to the

required fee.117 Until payment is received, no new or pending

applications will be processed, and existing authorizations may be

subject to rescission.118 Further, in accordance with the Debt

Collection Improvement Act of 1996, federal agencies may bar a person

or entity from obtaining a federal loan or loan insurance guarantees if

that person or entity fails to pay a delinquent debt owed to any

federal agency.119 Thus, debts owed to the Commission may result

in a person or entity being denied a federal loan or loan guarantee

pending before another federal agency until such obligations are

paid.120

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\117\ 47 U.S.C. Sec. 1.1164(a).

\118\ 47 U.S.C. Sec. 1.1164(c).

\119\ Public Law 104-134, 110 Stat. 1321 (1996).

\120\ 31 U.S.C. Sec. 7701(c)(2)(B).

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62. The Commission's rules currently make provision for relief in

exceptional circumstances. Persons or entities that believe they have

been placed in the wrong regulatory fee category or are experiencing

extraordinary and compelling financial hardship, upon a showing that

such circumstances override the public interest in reimbursing the

Commission for its regulatory costs, may request a waiver, reduction or

deferment of payment of the regulatory fee.121 However, timely

submission of the required regulatory fee must accompany requests for

waivers or reductions. This will avoid any late payment penalty if the

request is denied. The fee will be refunded if the request is granted.

In exceptional and compelling instances (where payment of the

regulatory fee along with the waiver or reduction request could result

in reduction of service to a community or other financial hardship to

the licensee), the Commission will accept a petition to defer payment

along with a waiver or reduction request.

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\121\ 47 U.S.C. Sec. 1.1166.

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V. Significant Alternatives To Proposed Rule Which Minimize

Significant Economic Impact on Small Entities and Accomplish Stated

Objectives

63. The Omnibus Consolidated Appropriation Act, Public Law 104-208,

requires the Commission 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. Sec. 159 (a). We

seek comment on the proposed methodology for implementing these

statutory requirements and any other potential impact of these

proposals on small business entities.

64. With the introduction of actual cost accounting data for

computation of regulatory fees, we found that some fees which were very

small in previous years would have increased dramatically. The

methodology proposed in this NPRM minimizes this impact by limiting the

amount of increase and shifting costs to other services which, for the

most part, are larger entities. We seek comment on this proposal.

65. Conversely, we have found that our costs for regulating

commercial microwave (domestic public fixed) services are significantly

lower than previously thought. We are, therefore, proposing to

eliminate the annual ``large'' regulatory fee for domestic public fixed

services and combining this fee category with the private microwave

service with a single ``microwave'' designation. The impact on domestic

public fixed licensees will be a reduction of the fee to a ``small'' up

front payment for the entire license term applied only to new,

modification and renewal applicants. Current domestic public fixed

licensees would be exempt from payment of a regulatory fee until such

time as they apply for a modification or renewal of their license.

66. This item also solicits alternative methodologies for assessing

fees to recover the regulatory costs attributable to AM and FM radio

stations. The radio industry has requested relief for small stations,

and we currently have received two alternative proposals which are

being evaluated. One would segment licensees by Arbitron radio markets

in addition to station class.122 The other proposal would segment

licensees by service area population in addition to station

class.123 The impact of adoption of either alternative proposal is

unknown at this time, although either proposal could be expected to

result in lower fees for smaller, less powerful stations relative to

larger, more powerful stations in the same radio market; or stations

potentially serving a larger population. We seek comment on these

alternative proposals and the impact they may have on small entities.

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\122\ See discussion of Montana Broadcasters Association

Comments at NPRM paragraphs 29-32 supra.

\123\ See discussion of NAB Comments at NPRM paragraphs 33-36

supra.

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67. Several categories of licensees and regulatees are exempt from

payment of regulatory fees. See Footnote 3 supra.

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

Proposed Rule

68. None.

Attachment B--Sources of Payment Unit Estimates for FY 1997

In order to calculate individual service fees for FY 1997, we

adjusted FY 1996 payment units for each service to

[[Page 10811]]

more accurately reflect expected FY 1997 payment liabilities. We

obtained our updated estimates through a variety of means. For example,

we used Commission licensee data bases, actual prior year payment

records and industry and trade association projections when available.

We tried to obtain verification for these estimates from multiple

sources and, in all cases, we compared FY 1997 estimates with actual FY

1996 payment units to ensure that our revised estimates were

reasonable. Where it made sense, we adjusted and/or rounded our final

estimates to take into consideration the fact that certain variables

that impact on the number of payment units cannot yet be estimated

exactly. These include an unknown number of waivers and/or exemptions

that may occur in FY 1997 and the fact that, in many services, the

number of actual licensees or station operators fluctuates from time to

time due to economic, technical or other reasons. Therefore, when we

note, for example, that our estimated FY 1997 payment units are based

on FY 1996 actual payment units, it does not necessarily mean that our

FY 1997 projection is exactly the same number as FY 1996. It means that

we have either rounded the FY 1997 number or adjusted it slightly to

account for these variables.

----------------------------------------------------------------------------------------------------------------

Fee category Sources of payment unit estimates

----------------------------------------------------------------------------------------------------------------

Land Mobile (All), Microwave, IVDS \124\, Based on Wireless Telecommunications Bureau (WTB) projections of new

Marine (Ship & Coast), Aviation applications and renewals taking into consideration existing

(Aircraft & Ground), GMRS, Amateur Commission licensee data bases. Aviation (Aircraft) and Marine

Vanity Call Signs, Domestic Public Fixed. (Ship) estimates have been adjusted to take into consideration

proposals to license portions of these services on a voluntary

basis.

CMRS Mobile Services (incl. Cellular/ Based on actual FY 1996 payment units adjusted to take into

Public Mobile Radio Services and Two Way consideration industry estimates of growth between FY 1996 and FY

Paging Services) \125\. 1997 and Wireless Telecommunications Bureau projections of new

applications and average number of mobile units associated with each

application.

CMRS One Way Paging Services............. Based on industry estimates of the number of pager units in

operation.

AM/FM Radio Stations..................... Based on actual FY 1996 payment units.

UHF/VHF Television Stations.............. Based on actual FY 1996 payment units.

AM/FM/TV Construction Permits............ Based on actual FY 1996 payment units.

LPTV, Translators and Boosters........... Based on actual FY 1996 payment units.

Auxiliaries.............................. Based on actual FY 1996 payment units.

MDS/MMDS................................. Based on actual FY 1996 payment units.

Cable Antenna Relay Service (CARS)....... Based on actual FY 1996 payment units.

Cable Television System Subscribers...... Based on Cable Services Bureau and industry estimates of

subscribership.

IXCs/LECs,CAPs, Other Service Providers.. Based on actual FY 1996 interstate revenues associated with

contributions to the Telecommunications Relay System (TRS) Fund,

adjusted to take into consideration FY 1997 revenue growth in this

industry as estimated by the Common Carrier Bureau.

Earth Stations........................... Based on actual FY 1996 payment units.

Space Stations & LEOs.................... Based on International Bureau licensee data bases.

International Bearer Circuits............ Based on International Bureau estimate.

International HF Broadcast Stations, Based on actual FY 1996 payment units.

International Public Fixed Radio Service.

----------------------------------------------------------------------------------------------------------------

\124\ The Wireless Telecommunications Bureau's staff advises that they do not anticipate receiving any

applications for IVDS in FY 1997. Therefore, since there is no volume, there will be no regulatory fee in the

IVDS category for FY 1997.

\125\ Licensees in the PMRS were given until August of 1996 to decide whether to convert to CMRS. For FY 1997,

we anticipate a substantial increase in the volume of licensees in the CMRS categories and a corresponding

decrease in the number of licensees remaining in the PMRS category.

BILLING CODE 6712-01-P

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BILLING CODE 6712-01-C

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Attachment F--FY 1997 Schedule of Regulatory Fees

------------------------------------------------------------------------

Annual

Fee category regulatory fee

------------------------------------------------------------------------

PMRS (per license) (Formerly Land Mobile--Exclusive Use

at 220-222 MHz, above 470 MHz, Base Station and SMRS)

(47 CFR Part 90)....................................... 10

Microwave (per license) (47 CFR Part 101)............... 10

Interactive Video Data Service (per license) (47 CFR

Part 95)............................................... (\1\)

Marine (Ship) (per station) (47 CFR Part 80)............ 5

Marine (Coast) (per license) (47 CFR Part 80)........... 5

General Mobile Radio Service (per license) (47 CFR Part

95).................................................... 5

Land Mobile (per license) (all stations not covered by

PMRS and CMRS)......................................... 5

Aviation (Aircraft) (per station) (47 CFR Part 87)...... 5

Aviation (Ground) (per license) (47 CFR Part 87)........ 5

Amateur Vanity Call Signs (per call sign) (47 CFR Part

97).................................................... 5

CMRS Mobile Services (per unit) (47 CFR Parts 20, 22,

24, 80 and 90)......................................... .24

CMRS One-Way Paging (per unit) (47 CFR Parts 20, 22 and

90).................................................... .03

Multipoint Distribution Services (per call sign) (47 CFR

Part 21)............................................... 215

AM Radio (47 CFR Part 73):

Class A............................................. 1,750

Class B............................................. 965

Class C............................................. 390

Class D............................................. 480

Construction Permits................................ 195

FM Radio (47 CFR Part 73):

Classes C, C1, C2, B................................ 1,750

Classes A, B1, C3................................... 1,050

Construction Permits................................ 965

TV (47 CFR Part 73) VHF Commercial:

Markets 1-10........................................ 44,700

Markets 11-25....................................... 30,500

Markets 26-50....................................... 16,350

Markets 51-100...................................... 4,925

Remaining Markets................................... 835

Construction Permits................................ 7,750

TV (47 CFR Part 73) UHF Commercial:

Markets 1-10........................................ 18,875

Markets 11-25....................................... 15,625

Markets 26-50....................................... 8,250

Markets 51-100...................................... 2,875

Remaining Markets................................... 815

Construction Permits................................ 5,950

Satellite Television Stations (All Markets)............. 975

Construction Permits--Satellite Television Stations..... 350

Low Power TV, TV/FM Translators & Boosters (47 CFR Part

74).................................................... 225

Broadcast Auxiliary (47 CFR Part 74).................... 25

Cable Antenna Relay Service (47 CFR Part 78)............ 65

Cable Television Systems (per subscriber) (47 CFR Part

76).................................................... .55

Interstate Telephone Service Providers (per revenue

dollar)................................................ .00119

Earth Stations (47 CFR Part 25)......................... 515

Space Stations (per operational station in

geosynchronous orbit) (47 CFR Part 25) also includes

Direct Broadcast Satellite Service (per operational

station) (47 CFR Part 100)............................. 98,575

Low Earth Orbit Satellite (per operational system) (47

CFR Part 25)........................................... 136,500

INMARSAT/INTELSAT Signatory (per signatory)............. 326,025

International Circuits (per active 64KB circuit)........ 5

International Public Fixed (per call sign) (47 CFR Part

23).................................................... 315

International (HF) Broadcast (47 CFR Part 73)........... 390

------------------------------------------------------------------------

\1\ No fee.

Attachment G--Comparison Between FY 1996 and FY 1997 Proposed

Regulatory Fees

------------------------------------------------------------------------

Annual

Fee category regulatory fee NPRM proposed

FY 1996 fee FY 1997

------------------------------------------------------------------------

PMRS (per license) (Formerly Land Mobile-

Exclusive Use at 220-222 Mhz, above 470

Mhz, Base Station and SMRS) (47 CFR

Part 90)............................... 7 10

Microwave (per license) (47 CFR Part

101)................................... 7 10

Interactive Video Data Service (per

license) (47 CFR Part 95).............. 7 (\1\)

[[Page 10816]]

Marine (Ship) (per station) (47 CFR Part

80).................................... 3 5

Marine (Coast) (per license) (47 CFR

Part 80)............................... 3 5

General Mobile Radio Service (per

license) (47 CFR Part 95).............. 3 5

Land Mobile (per license) (all stations

not covered by PMRS and CMRS).......... 3 5

Aviation (Aircraft) (per station) (47

CFR Part 87)........................... 3 5

Aviation (Ground) (per license) (47 CFR

Part 87)............................... 3 5

Amateur Vanity Call Signs (per call

sign) (47 CFR Part 97)................. 3 5

CMRS Mobile Services (per unit) (47 CFR

Parts 20, 22, 24, 80 and 90)........... .17 .24

CMRS One-Way Paging (per unit) (47 CFR

Parts 20, 22, and 90).................. .02 .03

Domestic Public Fixed Radio............. 155 (\2\)

Multipoint Distribution Services (per

call sign) (47 CFR Part 21)............ 155 215

AM Radio (47 CFR Part 73):

Class A............................. 1,250 1,750

Class B............................. 690 965

Class C............................. 280 390

Class D............................. 345 480

Construction Permits................ 140 195

FM Radio (47 CFR Part 73):

Classes C, C1, C2, B................ 1,250 1,750

Classes A, B1, C3................... 830 1,050

Construction Permits................ 690 965

TV (47 CFR Part 73) VHF Commercial:

Markets 1-10........................ 32,000 44,700

Markets 11-25....................... 26,000 30,500

Markets 26-50....................... 17,000 16,350

Markets 51-100...................... 9,000 4,925

Remaining Markets................... 2,500 835

Construction Permits................ 5,550 7,750

TV (47 CFR Part 73) UHF Commercial:

Markets 1-10........................ 25,000 18,875

Markets 11-25....................... 20,000 15,625

Markets 26-50....................... 13,000 8,250

Markets 51-100...................... 7,000 2,875

Remaining Markets................... 2,000 815

Construction Permits................ 4,425 5,950

Satellite Television Stations (All

Markets)............................... 690 975

Construction Permits--Satellite

Television Stations.................... 250 350

Low Power TV, TV/FM Translators &

Boosters (47 CFR Part 74).............. 190 225

Broadcast Auxiliary (47 CFR Part 74).... 35 25

Cable Antenna Relay Service (47 CFR Part

78).................................... 35 65

Earth Stations (47 CFR Part 25)......... 370 515

Cable Television Systems (per

subscriber) (47 CFR Part 76)........... .55 .55

Interstate Telephone Service Providers

(per revenue dollar)................... .00098 .00119

Space Stations (per operational station

in geosynchronous orbit) (47 CFR Part

25) also includes Direct Broadcast

Satellite Service (per operational

station) (47 CFR Part 100)............. 70,575 98,575

Low Earth Orbit Satellite (per

operational system) (47 CFR Part 25)... 97,725 136,500

INMARSAT/INTELSAT Signatory (per

signatory)............................. 233,425 326,025

International Circuits (per active 64KB

circuit)............................... 4 5

International Public Fixed (per call

sign) (47 CFR Part 23)................. 225 315

International (HF) Broadcast (47 CFR

Part 73)............................... 280 390

------------------------------------------------------------------------

\1\ No fee.

\2\ See microwave.

Attachment H--Detailed Guidance on Who Must Pay Regulatory Fees

1. The guidelines below provide an explanation of regulatory fee

categories established by the Schedule of Regulatory Fees in section 9

(g) of the Communications Act, 47 U.S.C. Sec. 159(g) as modified in the

instant Report and Order. Where regulatory fee categories need

interpretation or clarification, we have relied on the legislative

history of section 9, our own experience in establishing and regulating

the Schedule of Regulatory Fees for Fiscal Years (FY) 1994 and 1995 and

the services subject to the fee schedule, and the comments of the

parties in our proceeding to adopt fees for FY 1995. The categories and

amounts set out in the schedule have been modified to reflect changes

in the number of payment units, additions and changes in the services

subject to the fee requirement and the benefits derived from the

Commission's regulatory activities, and to simplify the structure of

the schedule. The schedule may be similarly modified or adjusted in

future years to reflect changes in the Commission's budget and in the

services regulated by the Commission. See 47 U.S.C. Sec. 159(b)(2),

(3).

2. Exemptions. Governments and nonprofit entities are exempt from

paying regulatory fees and should not submit payment. A nonprofit

entity may be asked to submit a current IRS Determination Letter

documenting that it is exempt from taxes under Section 501 of the

Internal Revenue Code or the certification of a governmental authority

attesting to its nonprofit status. The governmental exemption applies

even where the government-owned or community-owned facility is in

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competition with a commercial operation. Other specific exemptions are

discussed below in the descriptions of other particular service

categories.

1. Private Wireless Radio Services

3. Two levels of statutory fees were established for the Private

Wireless Radio Services--exclusive use services and shared use

services. Thus, licensees who generally receive a higher quality

communication channel due to exclusive or lightly shared frequency

assignments will pay a higher fee than those who share marginal quality

assignments. This dichotomy is consistent with the directive of Section

9, that the regulatory fees reflect the benefits provided to the

licensees. See 47 U.S.C. Sec. 159(b)(1)(A). In addition, because of the

generally small amount of the fees assessed against Private Wireless

Radio Service licensees, applicants for new licenses and reinstatements

and for renewal of existing licenses are required to pay a regulatory

fee covering the entire license term, with only a percentage of all

licensees paying a regulatory fee in any one year. Applications for

modification or assignment of existing authorizations do not require

the payment of regulatory fees. The expiration date of those

authorizations will reflect only the unexpired term of the underlying

license rather than a new license term.

a. Exclusive Use Services

4. Private Mobile Radio Services (PMRS) (Formerly Land Mobile

Services): Regulatees in this category include those authorized under

Part 90 of the Commission's Rules to provide limited access Wireless

Radio service that allows high quality voice or digital communications

between vehicles or to fixed stations to further the business

activities of the licensee. These services, using the 220-222 MHz band

and frequencies at 470 MHz and above, may be offered on a private

carrier basis in the Specialized Mobile Radio Services (SMRS).126

For FY 1997, we are proposing that PMRS licensees will pay a $10 annual

regulatory fee per license, payable for an entire five or ten year

license term at the time of application for a new, renewal, or

reinstatement license.127 The total regulatory fee due is either

$50 for a license with a five year term or $100 for a license with a 10

year term.

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\126\ This category only applies to licensees of shared-use

private 220-222 MHz and 470 MHz and above in the Specialized Mobile

Radio (SMR) service who have elected not to change to the Commercial

Mobile Radio Service (CMRS). Those who have elected to change to the

CMRS are referred to paragraph 14 of this Attachment.

\127\ Although this fee category includes licenses with ten-year

terms, the estimated volume of ten-year license applications in FY

1997 is less than one-tenth of one percent and, therefore, is

statistically insignificant.

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5. Microwave Services: These services include private and

commercial microwave systems and private and commercial carrier systems

au

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