Amendment of Rules and Policies Governing Pole Attachments

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[CS Docket No. 97-98; FCC 97-94]

Amendment of Rules and Policies Governing Pole Attachments

AGENCY: Federal Communications Commission

ACTION: Proposed rule.

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SUMMARY: In 1987, the Commission adopted its current pole attachment

formula for calculating the maximum just and reasonable rates utilities

may charge cable operators for pole attachments. In this Notice of

Proposed Rulemaking, we seek comment as to whether the current pole

attachment formula should be modified or adjusted to eliminate certain

anomalies and rate instabilities particular parties assert have

occurred. Should altering the formula become necessary, we have

tentatively proposed a modification that would improve the formula's

accuracy. In addition, we propose changes to the formula to reflect the

present accounting system that replaced the former rules in 1988.

Finally, we propose a new conduit methodology that will determine the

maximum just and reasonable rates utilities may charge cable operators

and telecommunications service providers for their use of conduit

systems.

DATES: Comments are due on or before May 12, 1997 and Reply Comments

are due on or before June 12, 1997.

ADDRESSES: Office of the Secretary, Federal Communications Commission,

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1919 M Street, N.W., Room 222, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Michael T. McMenamin, Cable Services

Bureau, (202) 418-7200, TTY (202) 418-7172.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's

Notice of Proposed Rulemaking, CS Docket No. 97-98, adopted March 14,

1997 and released March 14, 1997. The full text of this decision is

available for inspection and copying during normal business hours in

the FCC Reference Center (Room 239), 1919 M Street, NW, Washington,

D.C. 20554, and may be purchased from the Commission's copy contractor,

International Transcription Service, (202) 857-3800, 1919 M Street, NW,

Washington, D.C. 20554. For copies in alternative formats, such as

braille, audio cassette, or large print, please contact Sheila Ray at

International Transcription Service.

Synopsis of the Notice of Proposed Rulemaking

1. This Notice of Proposed Rulemaking seeks comment on proposed

modifications to the Commission's rules relating to the maximum just

and reasonable rates utilities may charge for attachments made to a

pole, duct, conduit or right-of-way. These attachments are referred to

as ``pole attachments.'' We believe that a re-evaluation of this

formula may be necessary to improve accuracy in the continued

application of these rules to cable television systems and to

telecommunications carriers pursuant to the Telecommunications Act of

1996, Public Law 104-104, 110 Stat. 56 (1996). We also propose amending

the formula so that it reflects our current accounting rules that apply

to telephone companies. Finally, in this Notice, we propose a conduit

methodology that will determine the maximum just and reasonable rates

utilities may charge cable systems and telecommunications carriers for

their use of conduit systems. The proposed formula would apply to all

telecommunications carriers pending the effectiveness of the new

formula required by the 1996 Act.

2. On August 26, 1994, Southwestern Bell Telephone Company

(``SWB'') filed a Petition for Clarification, or in the Alternative, a

Waiver of our formula for computing maximum reasonable pole attachment

rates. SWB argues that in Oklahoma, the Commission's pole attachment

formula produces a negative net cost of a bare pole and other negative

figures, resulting in negative rates. SWB asserts that these abnormal

results arise as the original costs of the poles are depreciated over

time, particularly since the cost of removing the pole at the end of

its useful life is included in the original cost of the pole. Because

the cost of removal can be high, SWB argues it has resulted in negative

net pole investment for its poles in Oklahoma. SWB proposes to remedy

the rate problem by extracting the cost of removing poles from the

formula for calculating the accumulated depreciation used to determine

pole attachment rates. This would increase the net pole investment SWB

would use in applying the formula, thereby making SWB's pole attachment

rates positive under that formula.

3. Potential Adjustments to the Pole Attachment Formula: As

detailed below, we seek comment on the issues raised by SWB's petition.

We also seek comment on aspects of the current formula that may require

modification.

4. The Commission seeks comment as to whether over time, and with

increased demand, the average pole height has increased to an average

of 40 feet and whether the usable space presumption should also be

changed from 13.5 feet to 11 feet. The Commission recognizes the

National Electric Safety Code requirement that a 40 inch safety space

must exist between electric lines and communication lines. We seek

comment on the premise that the safety space emanates from a utility's

requirement to comply with the NESC and should properly be assigned to

the utility as part of its usable space. We also seek comment on the

premise that the 40 inch safety space emanates from a utility's

requirement to comply with the NESC and should properly be assigned to

the utility as part of its usable space.

5. Poles of 30 feet or less are currently included in the

calculation of cost of bare pole. We seek comment on whether including

these smaller poles in the numerator and denominator of the cost of

bare pole calculation results in a distorted determination of the

actual costs of a bare pole. We also seek comment on this proposal and

whether poles of 30 feet or less lack a sufficient amount of usable

space to accommodate multiple attachments.

6. We seek comment as to the scope of the problem raised in SWB's

petition. For instance, we seek comment on the number of jurisdictions

where accumulated depreciation balances exceed the gross pole

investment. We also seek comment on the rates being charged in such

jurisdictions. When our formula defining the maximum just and

reasonable rate for pole attachments is applied to poles with negative

net asset values, the result is either extremely low pole attachment

rates or negative rates. In this Notice, we suggest that if the

frequency with which this problem occurs does not warrant the proposed

adjustment to the pole attachment formula, then a case-by-case approach

could be used. If commenters agree that the scope of the problem

warrants an adjustment, we propose to do so.

7. This Notice proposes eliminating the anomalous effect by

adjusting the current net investment approach to allow for the

elimination of the net salvage amount (which is typically a negative

amount) from the accumulated depreciation balance for poles at such

time that the net asset value of poles becomes negative. Removal of the

net salvage amount would, for the purpose of pole attachment rate

calculation, restate the accumulated depreciation account to reflect

only the depreciation of the pole investment, and would restore the net

pole investment to a positive balance. The calculation of the

appropriate amounts to recognize the continuing cost of pole ownership

could then be made as currently provided in the formula. Each time a

new rate is to be developed, the pole account should be examined before

the accumulated depreciation balance is adjusted. If there is a

positive balance, no adjustment to the accumulated depreciation account

should be made. Alternatively, if the accumulated depreciation balance

is negative our proposed adjustment should be made. We seek comment on

whether the application of the appropriate factors to the net pole

amount, adjusted as proposed, would provide a fair rate for sharing in

the recovery of continuing expenses associated with pole ownership.

8. Further, in these instances we do not believe that it would be

appropriate to continue to calculate a return on investment that has

been fully recovered. Thus, we propose that the calculation of the

return element should be made separately without removal of net salvage

amounts. The return element would be computed on the basis of the

unadjusted net pole balance and the result added (as a negative amount)

to the carrying charges for administrative, maintenance, and tax

expenses. We believe that the inclusion of this negative return element

is reasonable and appropriate because the utility has, in effect,

already recovered more than the original cost of its pole plant through

depreciation charges. While this ``over-recovery'' is necessary to

defray the costs of disposing of the poles when they are retired from

service, the utility has the use of any over-recovered amounts until

the disposal of the poles actually takes place. We seek comment

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on our tentative conclusion that a utility's pole attachment rates

should reflect this over-recovery, in the form of a negative return

carrying charge. Moreover, we seek comment on our proposal to include

only operating taxes, other than income taxes, in the rate formula.

9. In proposing the use of this adjustment methodology, we are

concerned that because telephone and electric utilities install poles

over time at various original costs and because net salvage estimates

vary over time, the extraction of the net salvage effect from

accumulated depreciation could prove to be difficult. In addition,

current FCC and Federal Energy Regulatory Commission accounting reports

do not provide information with respect to the net salvage effect. We

seek comment on the feasibility of this methodology as proposed.

Additionally, we seek comment on the effectiveness of the methodology

for the development of fair pole attachment rates and on proposed

modifications necessary to make this methodology effective in attaining

this objective. Finally, commenters are requested to provide detailed

assessments of the effects of this methodology on attachment rates.

Based on our initial assessment of this proposed adjustment, we do not

believe that the application of the adjustment where appropriate will

have any significant impact on current pole attachment rates.

10. Alternatively, we seek comment on calculating pole attachment

rates using gross book costs instead of net book costs. Under this

approach the cost of a bare pole and most carrying charges are computed

using gross book costs. Prior to the Amendment of Rules and Policies

Governing the Attachment of Cable Television Hardware to Utility Poles,

Report and Order, 2 FCC Rcd 4387 (1987), recon., 4 FCC Rcd 468 (1989),

the Commission had decided certain cases using gross book costs to

calculate maximum reasonable pole attachment rates. The Commission also

has stated that if both parties to a pole attachment complaint agree,

the pole attachment rates may be computed using gross book costs. The

use of gross book costs appears consistent with the legislative history

supporting Section 224, which indicates that the Commission has

significant discretion in selecting a methodology for determining just

and reasonable pole attachment rates. We seek comment on this

alternative to ensure a complete record on possible changes to the

current formula. We note that because of the way administrative costs

are allocated, the application of gross book costs may produce a

slightly higher rate. We seek comment on whether this assumption is

true and if so what the impact of this change would be.

11. Proposed Conduit Methodology. Section 224 provides that total

conduit space and conduit space occupied by a cable operator or

telecommunication provider is based on duct or conduit capacity. In

addition, Section 224 states that: ``a rate is just and reasonable if

it assures a utility the recovery of not less than the additional costs

of providing pole attachments, nor more than an amount determined by

multiplying the percentage of the total usable space, or the percentage

of the total duct or conduit capacity * * *'' The usable space can be

estimated based on the number of ducts or portion of a duct that a

cable occupies. However, we have tentatively concluded that measuring

the actual portion of duct space occupied by a cable would be difficult

and would most likely lead to further disputes between the parties.

Instead of attempting to measure the actual duct space occupied, we

propose to adopt a new half-duct conduit methodology as was recently

done by the Commission in the Memorandum Opinion and Hearing

Designation Order of Multimedia Cablevision, Inc. v. Southwestern Bell

Telephone, 11 FCC Rcd 11202 (September 3, 1996) (``Southwestern

Bell''). In order to apply the half-duct formula, a determination of

the cost per foot of one duct must be made, and then divided by one-

half to produce a ``half-duct convention.'' This determines the maximum

just and reasonable rate per duct foot that can be charged for cable

attachments.

12. We seek comment on the proposed half-duct methodology. The

Commission, in the Southwestern Bell, concluded that the half-duct

methodology is the simplest and most reasonable approximation of the

actual space occupied by an attacher. In addition, the Commission found

that the half-duct methodology is the most straight forward approach to

calculating a conduit attachment fee because it does not require the

parties to prove the actual amount of the duct the cable operator

occupies. We solicit comment on this approach which the Commission

adopted in the Southwestern Bell. We also seek comment on any

additional proposals that would provide a simple and administratively

efficient conduit methodology.

Initial Regulatory Flexibility Analysis

12. As required by Section 603 of the Regulatory Flexibility Act

(RFA), 5 U.S.C. Sec. 603, as amended, 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. Written public comments are requested on the

IRFA. These comments must be filed in accordance with the same filing

deadlines as comments on the rest of the Notice, but they must have a

separate and distinct heading designating them as responses to the

regulatory flexibility analysis. The Secretary shall cause a copy of

this Notice to be sent to the Chief Counsel for Advocacy of the Small

Business Administration (``SBA'') in accordance with Section 603(a) of

the RFA, 5 U.S.C. Sec. 603(a).

13. Need for Action and Objectives of the Proposed Rule. In 1987,

the Commission adopted its current pole attachment formula for

calculating the maximum just and reasonable rates utilities may charge

cable systems for pole attachments. In this Notice, we seek comment as

to whether the current pole attachment formula should be modified or

adjusted to eliminate certain anomalies and rate instabilities

particular parties assert have occurred. We have also tentatively

proposed such possible modifications to the formula, should altering

the formula become necessary, that would improve the accuracy of the

formula. In addition, we propose changes to the formula to reflect the

present Part 32 accounting system that replaced the former Part 31

rules in 1988. Finally, we propose a new conduit methodology that will

determine the maximum just and reasonable rates utilities may charge

cable systems and telecommunications carriers for their attachments to

conduit systems.

14. Legal Basis. The authority for the action as proposed for this

rulemaking is contained in Sections 1, 4(i), 4(j), 224, 303 and 403 of

the Communications Act of 1934, as amended, 47 U.S.C. Secs. 151,

154(i), 154(j), 224, 303 and 403.

15. Description and Estimate of the Number of Small Entities

Impacted. For the purposes of this Notice, the RFA defines a ``small

business'' to be the same as a small business concern under the Small

Business Act, 15 U.S.C. Sec. 632, unless the Commission has developed

one or more definitions that are appropriate to its activities. Under

the Small Business Act, a ``small business concern'' is one that: (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). The SBA has defined a small

business for Standard Industrial Classification (SIC) category 4813

(Telephone Communications,

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except Radiotelephone) to be a small entity when it has fewer than 1500

employees, See 13 CFR Sec. 121.201.

A. Utilities

16. Total Number of Utilities Affected. The decisions and rules

adopted herein may have a significant effect on a substantial number of

utility companies. Section 224 of the Statue defines a ``utility'' as

``any person who is a local exchange carrier or an electric, gas,

water, steam, or other public utility, and who owns or controls poles,

ducts, conduits, or rights-of-way used, in whole or in part, for any

wire communications. Such term does not include any railroad, any

person who is cooperatively organized, or any person owned by the

Federal Government or any State.'' The SBA has provided the Commission

with a list of utility firms which may be effected by this rulemaking.

Based upon the SBA's list, the Commission seeks comment as to whether

all of the following utility firms are relevant to Section 224.

1. Electric Utilities (SIC 4911, 4931 & 4939)

17. Electric Services. The SBA has developed a definition for small

electric utility firms. The Census Bureau reports that a total of 1,379

electric utilities were in operation for at least one year at the end

of 1992. According to SBA, a small electric utility is an entity whose

gross revenues did not exceed five million dollars in 1992. The Census

Bureau reported that 447 of the 1,379 firms listed had total revenues

below five million dollars. Electric and Other Services Combined. The

SBA has classified this entity as a utility whose business is primarily

electric, less than 95%, in combination with some other type of

service. The Census Bureau reports that a total of 135 such firms were

in operation for at least one year at the end of 1992. The SBA's

definition of a small electric and other services combined utility is a

firm whose gross revenues did not exceed five million dollars in 1992.

The Census Bureau reported that 45 of the 135 firms listed had total

revenues below five million dollars. Combination Utilities, Not

Elsewhere Classified. The SBA defines this utility has providing a

combination of electric, gas, and other services which are not

otherwise classified. The Census Bureau reports that a total of 79 such

utilities were in operation for at least one year at the end of 1992.

According to SBA's definition, a small combination utility is a firm

whose gross revenues did not exceed five million dollars in 1992. The

Census Bureau reported that 63 of the 79 firms listed had total

revenues below five million dollars.

2. Gas Production and Distribution (SIC 4922, 4923, 4924, 4925 & 4932)

18. Natural Gas Transmission. The SBA's definition of a small

natural gas transmitter is an entity who is engaged in the transmission

and storage of natural gas. The Census Bureau reports that a total of

144 such firms were in operation for at least one year at the end of

1992. According to SBA's definition, a small natural gas transmitter is

an entity whose gross revenues did not exceed five million dollars in

1992. The Census Bureau reported that 70 of the 144 firms listed had

total revenues below five million dollars. Natural Gas Transmission and

Distribution. The SBA has classified this entity as a utility who

transmits and distributes natural gas for sale. The Census Bureau

reports that a total of 126 such entities were in operation for at

least one year at the end of 1992. The SBA's definition of a small

natural gas transmitter and distributer is a firm whose gross revenues

did not exceed five million dollars. The Census Bureau reported that 43

of the 126 firms listed had total revenues below five million dollars.

Natural Gas Distribution. The SBA defines a natural gas distributor as

an entity that distributes natural gas for sale. The Census Bureau

reports that a total of 478 such firms were in operation for at least

one year at the end of 1992. According to the SBA, a small natural gas

distributor is an entity whose gross revenues did not exceed five

million dollars in 1992. The Census Bureau reported that 267 of the 478

firms listed had total revenues below five million dollars. Mixed,

Manufactured, or Liquefied Petroleum Gas Production and/or

Distribution. The SBA has classified this entity as a utility who

engages in the manufacturing and/or distribution of the sale of gas.

These mixtures may include natural gas. The Census Bureau reports that

a total of 43 such firms were in operation for at least one year at the

end of 1992. The SBA's definition of a small mixed, manufactured or

liquefied petroleum gas producer or distributor is a firm whose gross

revenues did not exceed five million dollars in 1992. The Census Bureau

reported that 31 of the 43 firms listed had total revenues below five

million dollars. Gas and Other Services Combined. The SBA has

classified this entity as a gas company whose business is less than 95%

gas, in combination with other services. The Census Bureau reports that

a total of 43 such firms were in operation for at least one year at the

end of 1992. According to the SBA, a small gas and other services

combined utility is a firm whose gross revenues did not exceed five

million dollars in 1992. The Census Bureau reported that 24 of the 43

firms listed had total revenues below five million dollars.

3. Water Supply (SIC 4941)

19. Water Supply. The SBA defines a water utility as a firm who

distributes and sells water for domestic, commercial and industrial

use. The Census Bureau reports that a total of 3,169 water utilities

were in operation for at least one year at the end of 1992. According

to SBA's definition, a small water utility is a firm whose gross

revenues did not exceed five million dollars in 1992. The Census Bureau

reported that 3,065 of the 3,169 firms listed had total revenues below

five million dollars.

4. Sanitary Systems (SIC 4952, 4953 & 4959)

20. Sewerage Systems. The SBA defines a sewage firm as a utility

whose business is the collection and disposal of waste using sewage

systems. The Census Bureau reports that a total of 410 such firms were

in operation for at least one year at the end of 1992. According to

SBA's definition, a small sewerage system is a firm whose gross

revenues did not exceed five million dollars. The Census Bureau

reported that 369 of the 410 firms listed had total revenues below five

million dollars. Refuse Systems. The SBA defines a firm in the business

of refuse as an establishment whose business is the collection and

disposal of refuse ``by processing or destruction or in the operation

of incinerators, waste treatment plants, landfills, or other sites for

disposal of such materials.'' The Census Bureau reports that a total of

2,287 such firms were in operation for at least one year at the end of

1992. According to SBA's definition, a small refuse system is a firm

whose gross revenues did not exceed six million dollars. The Census

Bureau reported that 1,908 of the 2,287 firms listed had total revenues

below six million dollars. Sanitary Services, Not Elsewhere Classified.

The SBA defines these firms as engaged in sanitary services. The Census

Bureau reports that a total of 1,214 such firms were in operation for

at least one year at the end of 1992. According to SBA's definition, a

small sanitary service firms gross revenues did not exceed five million

dollars. The Census Bureau reported that 1,173 of the 1,214 firms

listed had total revenues below five million dollars.

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5. Steam and Air Conditioning Supply (SIC 4961)

21. Steam and Air Conditioning Supply. The SBA defines a steam and

air conditioning supply utility as a firm who produces and/or sells

steam and heated or cooled air. The Census Bureau reports that a total

of 55 such firms were in operation for at least one year at the end of

1992. According to SBA's definition, a steam and air conditioning

supply utility is a firm whose gross revenues did not exceed nine

million dollars. The Census Bureau reported that 30 of the 55 firms

listed had total revenues below nine million dollars.

6. Irrigation Systems (SIC 4971)

22. Irrigation Systems. The SBA defines irrigation systems as firms

who operate water supply systems for the purpose of irrigation. The

Census Bureau reports that a total of 297 firms were in operation for

at least one year at the end of 1992. According to SBA's definition, an

irrigation service is a firm whose gross revenues did not exceed five

million dollars. The Census Bureau reported that 286 of the 297 firms

listed had total revenues below five million dollars.

B. Telephone Companies (SIC 4813)

23. Total Number of Telephone Companies Affected. Many of the

decisions and rules adopted herein may have a significant effect on a

substantial number of small telephone companies. 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, See 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).

This number contains a variety of different categories of carriers,

including local exchange carriers (LECs), interexchange carriers,

competitive access providers, cellular carriers, mobile service

carriers, operator service providers, pay telephone operators, PCS

providers, covered SMR 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'', See 15 U.S.C. Sec. 632(a)(1). It seems reasonable

to conclude, therefore, that fewer than 3,497 telephone service firms

are small entity telephone service firms or small incumbent LECs that

may be affected by this Notice. Below, we estimate the potential number

of small entity telephone service firms or small incumbent LEC's that

may be affected by this service category.

24. Wireline Carriers and Service Providers. SBA has developed a

definition of small entities for telephone communications companies

other than 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. According to SBA's

definition, a small business telephone company other than a

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

but 26 of the 2,321 non-radiotelephone companies listed by the Census

Bureau were reported to have fewer than 1,000 employees. Thus, even if

all 26 of those companies had more than 1,500 employees, there would

still be 2,295 non-radiotelephone companies that might qualify as small

entities or small incumbent LECs. Although it seems certain that some

of these carriers are not independently owned and operated, we 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 SBA's definition. Consequently, we estimate

that there are fewer than 2,295 small entity telephone communications

companies other than radiotelephone companies that may be affected by

the decisions or rules that come about from this Notice.

25. Local Exchange Carriers. Neither the Commission nor SBA has

developed a definition of small providers of local exchange services

(LECs). The closest applicable definition under SBA rules is for

telephone communications companies other than radiotelephone (wireless)

companies (SIC 4813). The most reliable source of information regarding

the number of LECs nationwide of which we are aware appears to be the

data that we collect annually in connection with the Telecommunications

Relay Service (TRS). According to our most recent data, 1,347 companies

reported that they were engaged in the provision of local exchange

services, See Federal Communications Commission, CCB, Industry Analysis

Division, Telecommunications Industry Revenue: TRS Fund Worksheet Data,

Tbl. 21 (Average Total Telecommunications Revenue Reported by Class of

Carrier) (Feb. 1996) (TRS Worksheet). 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 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 that may be

affected by this Notice.

26. Interexchange Carriers. Neither the Commission nor SBA has

developed a definition of small entities specifically applicable to

providers of interexchange services (IXCs). The closest applicable

definition under SBA rules is for telephone communications companies

other than radiotelephone (wireless) companies (SIC 4813). The most

reliable source of information regarding the number of IXCs nationwide

of which we are aware appears to be the data that we collect annually

in connection with TRS. According to our most recent data, 97 companies

reported that they were engaged in the provision of interexchange

services. 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 IXCs that would qualify as small business concerns under SBA's

definition. Consequently, we estimate that there are fewer than 97

small entity IXCs that may be affected by the decisions and rules

adopted in this Notice.

27. Competitive Access Providers. Neither the Commission nor SBA

has developed a definition of small entities specifically applicable to

providers of competitive access services (CAPs). The closest applicable

definition under SBA rules is for telephone communications companies

other than radiotelephone (wireless) companies (SIC 4813). The most

reliable source of information regarding the number of CAPs nationwide

of which we are aware appears to be the data that we collect annually

in connection with the TRS. According to our most recent data, 30

companies reported that they were engaged in the provision of

competitive access services. 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 CAPs that would qualify as small

business concerns under SBA's definition. Consequently, we estimate

that there are fewer than 30 small entity CAPs that may be affected by

the decisions and rules adopted in this Notice.

28. Wireless (Radiotelephone) Carriers. Although wireless carriers

have not historically affixed their equipment to utility poles,

pursuant to the terms of the 1996 Act, such entities are entitled to do

so with rates

[[Page 18079]]

consistent with the Commission's rules discussed herein. SBA has

developed a definition of small entities for radiotelephone (wireless)

companies. The Census Bureau reports that there were 1,176 such

companies in operation for at least one year at the end of 1992.

According to SBA's definition, a small business radiotelephone company

is one employing fewer than 1,500 persons. The Census Bureau also

reported that 1,164 of those radiotelephone companies had fewer than

1,000 employees. Thus, even if all of the remaining 12 companies had

more than 1,500 employees, there would still be 1,164 radiotelephone

companies that might qualify as small entities if they are

independently owned and operated. Although it seems certain that some

of these carriers are not independently owned and operated, we are

unable at this time to estimate with greater precision the number of

radiotelephone carriers and service providers that would qualify as

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

estimate that there are fewer than 1,164 small entity radiotelephone

companies that may be affected by this Notice.

29. Cellular Service Carriers. Neither the Commission nor SBA has

developed a definition of small entities specifically applicable to

providers of cellular services. The closest applicable definition under

SBA rules is for telephone communications companies other than

radiotelephone (wireless) companies (SIC 4813). The most reliable

source of information regarding the number of cellular service carriers

nationwide of which we are aware appears to be the data that we collect

annually in connection with the TRS. According to our most recent data,

789 companies reported that they were engaged in the provision of

cellular services. 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 service carriers that would qualify as

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

estimate that there are fewer than 789 small entity cellular service

carriers that may be affected by the decisions and rules adopted in

this Notice.

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

developed a definition of small entities specifically applicable to

mobile service carriers, such as paging companies. The closest

applicable definition under SBA rules is for telephone communications

companies other than 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

we collect annually in connection with the TRS. According to our most

recent data, 117 companies reported that they were engaged in the

provision of mobile services. 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 SBA's definition. Consequently, we estimate that there

are fewer than 117 small entity mobile service carriers that may be

affected by the decisions and rules adopted in this Notice.

31. Broadband PCS Licensees. The broadband PCS spectrum is divided

into six frequency blocks designated A through F. As set forth in 47

CFR Sec. 24.720(b), the Commission has defined ``small entity'' in the

auctions for Blocks C and F as a firm that had average gross revenues

of less than $40 million in the three previous calendar years. Our

definition of a ``small entity'' in the context of broadband PCS

auctions has been approved by SBA, See Implementation of Section 309(j)

of the Communications Act--Competitive Bidding, PP Docket No. 93-253,

Fifth Report and Order, 9 FCC Rcd 5532, 5581-84 (1994).

The Commission has auctioned broadband PCS licenses in Blocks A, B,

and C. We do not have sufficient data to determine how many small

businesses bid successfully for licenses in Blocks A and B. There were

90 winning bidders that qualified as small entities in the Block C

auction. Based on this information, we conclude that the number of

broadband PCS licensees affected by the decisions in this Notice

includes, at a minimum, the 90 winning bidders that qualified as small

entities in the Block C broadband PCS auction.

32. At present, no licenses have been awarded for Blocks D, E, and

F of broadband PCS spectrum. Therefore, there are no small businesses

currently providing these services. However, a total of 1,479 licenses

will be awarded in the D, E, and F Block broadband PCS auctions, which

are scheduled to begin on August 26, 1996. Of the 153 qualified bidders

for the D,E, and F Block PCS auctions, 105 were small businesses, See

Auction of Broadband Personal Communications Services (D, E and F

blocks), Public Notice, DA 96-1400 (rel. August 20, 1996). Eligibility

for the 493 F Block licenses is limited to entrepreneurs with average

gross revenues of less than $125 million, See Amendment of Parts 20 and

24 of the Commission's Rules--Broadband PCS Competitive Bidding and the

Commercial Mobile Radio Service Spectrum Cap, WT Docket No. 96-59,

Amendment of the Commission's Cellular/PCS Cross-Ownership Rule, Report

and Order, GN Docket No. 90-314, FCC 96-278 ( June 24, 1996). We cannot

estimate, however, the number of these licenses that will be won by

small entities under our definition, nor how many small entities will

win D or E Block licenses. Given that nearly all radiotelephone

companies have fewer than 1,000 employees and that no reliable estimate

of the number of prospective D, E, and F Block licensees can be made,

we assume for purposes of this FRFA, that all of the licenses in the D,

E, and F Block Broadband PCS auctions may be awarded to small entities

under our rules, which may be affected by the decisions and rules

adopted in this Notice.

33. SMR Licensees. Pursuant to 47 CFR Sec. 90.814(b)(1), the

Commission has defined ``small entity'' in auctions for geographic area

800 MHz and 900 MHz SMR licenses as a firm that had average annual

gross revenues of less than $15 million in the three previous calendar

years. This definition of a ``small entity'' in the context of 800 MHz

and 900 MHz SMR has been approved by the SBA, 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); 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

Rulemaking, 11 FCC Rcd 1463 (1995). The rules adopted in this Order may

apply 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 assume, for purposes of this FRFA, that all

of the extended implementation authorizations may be held by small

[[Page 18080]]

entities, which may be affected by the decisions and rules adopted in

this Notice.

34. 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 by the rule adopted in this Order includes these 60

small entities. No auctions have been held for 800 MHz geographic area

SMR licenses. Therefore, no small entities currently hold these

licenses. A total of 525 licenses will be awarded for the upper 200

channels in the 800 MHz geographic area SMR auction. However, the

Commission has not yet determined how many licenses will be awarded for

the lower 230 channels in the 800 MHz geographic area SMR auction.

There is no basis, moreover, on which to estimate how many small

entities will win these licenses. Given that nearly all radiotelephone

companies have fewer than 1,000 employees and that no reliable estimate

of the number of prospective 800 MHz licensees can be made, we assume,

for purposes of this FRFA, that all of the licenses may be awarded to

small entities who, thus, may be affected by the decisions in this

Notice.

35. Resellers. Neither the Commission nor SBA has developed a

definition of small entities specifically applicable to resellers. The

closest applicable definition under SBA rules is for all telephone

communications companies (SIC 4812 and 4813). The most reliable source

of information regarding the number of resellers nationwide of which we

are aware appears to be the data that we collect annually in connection

with the TRS. According to our most recent data, 206 companies reported

that they were engaged in the resale of telephone services. 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 resellers that

would qualify as small business concerns under SBA's definition.

Consequently, we estimate that there are fewer than 206 small entity

resellers that may be affected by the decisions and rules adopted in

this Notice.

C. Cable System Operators (SIC 4841)

36. Cable Systems: SBA has developed a definition of small entities

for cable and other pay television services, which includes all such

companies generating less than $11 million in revenue annually. 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 1,323 such cable

and other pay television services generating less than $11 million in

revenue that were in operation for at least one year at the end of

1992.

37. 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, See 47 CFR. Sec. 76.901(e). Based

on our most recent information, we estimate that there were 1,439 cable

systems that qualified as small cable system operators at the end of

1995, See Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996

(based on figures for Dec. 30, 1995). 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 systems. Consequently, we estimate that there are

fewer than 1,439 small entity cable system operators that may be

affected by the decisions and rules proposed in this Notice.

38. 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'', See 47 U.S.C. Sec. 543(m)(2). 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, See 47 CFR

Sec. 76.1403(b). Based on available data, we find that the number of

cable systems serving 617,000 subscribers or less totals 1,450.

Although it seems certain that some of these cable system operators are

affiliated with entities whose gross annual revenues exceed

$250,000,000, we are unable at this time to estimate with greater

precision the number of cable system operators that would qualify as

small cable systems under the definition in the Communications Act.

39. Municipalities: The term ``small governmental jurisdiction'' is

defined as ``governments of * * * districts, with a population of less

than fifty thousand'', See 5 U.S.C. Sec. 601(5). There are 85,006

governmental entities in the United States. This number includes such

entities as states, counties, cities, utility districts and school

districts. We note that Section 224 of the Act specifically excludes

any utility which is cooperatively organized, or any person owned by

the Federal Government or any State. For this reason, we believe that

Section 224 will have minimal if any affect upon small municipalities.

Further, there are 18 States and the District of Columbia that regulate

pole attachments pursuant to Section 224(c)(1). Of the 85,006

governmental entities, 38,978 are counties, cities and towns. The

remainder are primarily utility districts, school districts, and

states. Of the 38,978 counties, cities and towns, 37,566 or 96%, have

populations of fewer than 50,000.

40. Reporting, Recordkeeping, and other Compliance Requirements:

The rules proposed in this Notice may require a change in certain

record keeping requirements to reflect modification of Part 31 to Part

32 accounting, as well as maintaining specific records if adjustments

proposed are used by the pole owner for the development of attachment

rates. We seek comment on this tentative conclusion. In addition, as

proposed in this Notice, a pole owner may have to adjust his pole and

conduit attachment rates.

41. Significant Alternatives Which Minimize the Impact on Small

Entities and which are Consistent with State Objectives: The first

possible option is to keep the rules in their current form, for which

we have sought comment. The alternative would be to adjudicate

anomalies resulting from the current pole attachment formula on a case-

by-case basis, thereby minimizing impact on all interested parties. In

addition, with respect to conduit methodology, we have proposed a

methodology that relies on a rebuttable presumption that an attachment

occupies one half of a duct space. This rebuttable presumption can be

used by small entities to minimize the detail required to establish

certain rates for use of conduit. If such methodology was more

burdensome to a small entity, such entity could use its actual records

for establishing the appropriate rate. We seek comment on these

methodologies and any other potential impact of these proposals on

small business entities. Finally, the Notice seeks to further minimize

[[Page 18081]]

burdens on small entities in conformance with the 1996 Act.

42. Federal Rules which Overlap, Duplicate, or Conflict with the

Commission's Proposal: None.

Ordering Clauses

43. It is ordered that pursuant to Sections 1, 4(i), 4(j), 224, 303

and 403 of the Communications Act of 1934, as amended, 47 U.S.C.

Secs. 151, 154(i), 154(j), 224, 303 and 403, Notice is hereby given of

the proposals described in this Notice of Proposed Rulemaking.

44. It is further ordered pursuant to Sections 4(i), 4(j), and 224

of the Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i),

154(j), and 224, that the Petition for Clarification, or in the

Alternative, a Waiver of Southwestern Bell Telephone Company is

dismissed.

45. It is further ordered that the Secretary shall send a copy of

this Notice, including the IRFA, to the Chief Counsel for Advocacy of

the Small Business Administration in accordance with paragraph 603(a)

of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5

U.S.C. 601, et seq. (1981).

List of Subjects in 47 CFR Part 1

Administrative practice and procedures, Communications common

carriers, Investigations, Lawyers, Penalties, Reporting and

recordkeeping requirements, Telecommunications.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-9515 Filed 4-11-97; 8:45 am]

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