# Assessment and Collection of Regulatory Fees For Fiscal Year 1997

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URL: https://www.frixlaw.com/law-library/documents/fr%3A97-5744

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** March 10, 1997
- **Citation:** 62 FR 10793

## Text

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
----------------------------------------------------------------------------------------------------------------
FY 1994 FY 1995 FY 1996 FY 1997
(Actual) (Actual) (Actual) (Proposed)
----------------------------------------------------------------------------------------------------------------
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
---------------------------------------------------
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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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.''
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

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

\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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\35\ 13 CFR Sec. 121.201.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\44\ 13 CFR Sec. 121.201, SIC 4813.
\45\ TRS Worksheet.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\46\ 13 CFR Sec. 121.201, SIC 4813.
\47\ TRS Worksheet.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\48\ 13 CFR Sec. 121.201, SIC 4813.
\49\ Id.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\50\ 13 CFR Sec. 121.201, SIC 4813.
\51\ TRS Worksheet.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\52\ 13 CFR Sec. 121.201, SIC 4813.
\53\ TRS Worksheet.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

\58\ 13 CFR 121.201, SIC 4841.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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.
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\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 tran

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-5744. Public record. Not legal advice.