1998 Biennial Regulatory ReviewElimination of Part 41 Telegraph and Telephone Franks

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 41

[FCC 98-152]

1998 Biennial Regulatory Review--Elimination of Part 41 Telegraph

and Telephone Franks

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: On July 21, 1998, the Federal Communications Commission

released a Notice of Proposed Rulemaking (NPRM) that proposed to

eliminate, in toto, part 41 (Telephone and Telegraph Franks) of the

Commission's rules. The NPRM, part of the Commission's 1998 biennial

regulatory review, tentatively concludes that the development of

competition among interstate and foreign telecommunications service

providers renders these regulations unnecessary.

DATES: Comments are due on or before August 31, 1998. Reply comments

are due on or before September 10, 1998.

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

the Secretary, Federal Communications Commission, 1919 M Street, NW,

Suite 222, Washington, DC 20554, with a copy to Scott Bergmann of the

Common Carrier Bureau, Federal Communications Commission, 2033 M

Street, NW, Suite 500, Washington, DC 20554. Parties should also file

one copy of any documents filed in this docket with the Commission's

copy contractor, International Transcription Services, Inc. (ITS), 1231

20th St., NW, Washington, DC 20037.

FOR FURTHER INFORMATION CONTACT: Thomas J. Beers, Deputy Chief of the

Industry Analysis Division, Common Carrier Bureau, at (202) 418-0952,

or Scott K. Bergmann, Industry Analysis Division, Common Carrier

Bureau, at (202) 418-7102.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice

of Proposed Rulemaking released July 21, 1998 (FCC 98-152). The full

text of this Notice of Proposed Rulemaking is available for inspection

and copying during normal business hours in the FCC Reference Center,

Room 239, 1919 M Street, Washington, DC 20554. The complete text also

may be purchased from the Commission's copy contractor, International

Transcription Service, Inc. (202) 857-3800, 1231 20th St., NW,

Washington, DC 20036.

Summary of the Notice of Proposed Rulemaking

1. In the Notice of Proposed Rulemaking (NPRM) summarized here, we

propose to eliminate, in toto, part 41 (Telegraph and Telephone Franks)

of the Commission's rules.1 Part 41 governs the issuance of

franks for interstate and foreign telegraph and telephone service by

communications common carriers.2 Part 41 also governs

[[Page 41758]]

the issuance of ``reports of positions of ships at sea furnished to

newspapers of general circulation without charge, or at nominal

charges, as authorized in section 201(b) of the Act.'' 3

Part 41 requires carriers, inter alia, to retain records of these

activities.

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\1\ 47 CFR 41.1 et seq.

\2\ See 47 CFR 41.11. Part 41 was adopted pursuant to section

210(a) of the Communications Act of 1934, as amended. 47 USC 210(a).

In pertinent part, section 210(a) provides:

Nothing in this Act or in any other provision of law shall be

construed to prohibit common carriers from issuing or giving franks

to, exchanging franks with each other for the use of, their

officers, agents, employees, and their families, or subject to such

rules as the Commission may prescribe, from issuing, giving, or

exchanging franks and passes to or with other common carriers not

subject to the provisions of this Act, for the use of their

officers, agents, employees, and their families.

47 USC 210(a). We will refer to the Communications Act of 1934,

as amended, as ``the Communications Act'' or ``the Act.''

\3\ 47 CFR 41.31(c); 47 USC Sec. 201(b).

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2. We undertake this examination of part 41 of our rules pursuant

to our 1998 biennial review of regulations as required by section 11 of

the Communications Act, as amended.4 Section 11 requires us

to review all of our regulations applicable to providers of

telecommunications services and to determine whether any rule is no

longer in the public interest as the result of meaningful economic

competition between providers of telecommunications service. We seek,

consistent with the Telecommunications Act of 1996, to strike a

reasonable balance between our goal of reducing and eliminating

regulatory requirements as competition supplants the need for such

requirements, and our recognition that, until full competition is

realized, certain safeguards may still be necessary. In this case, we

tentatively conclude that the development of competition among

interstate and international telecommunications service providers

renders part 41 unnecessary and we propose to eliminate it.

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\4\ 47 USC 161.

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II. Background

3. Part 41 of the Commission's rules governs the provision of

franks and certain reports by communications common carriers pursuant

to sections 210(a) and 201(b) of the Act. Franks enable authorized

persons to send ``interstate or foreign telephone or telegraph''

messages, free of charge or at reduced rates, over communications

facilities. Section 210 of the Act authorizes communications common

carriers to issue franks and passes to other common carriers, including

other communications common carriers, for the benefit of the officers,

agents, and employees of the common carrier that receives the franks,

and their families. As such, section 210(a) authorizes a per se class

of lawful preferences that otherwise might be prohibited as unlawful

pursuant to the terms of section 202(a).

4. Section 210(a) was adopted as part of the original

Communications Act. As such, its origin was the Interstate Commerce Act

of 1887, as amended.5 By its own terms, section 210(a)

states that the Commission may regulate the issuance of franks by

common carriers subject to the Communications Act (referred to here as

``communications common carriers'') to common carriers not subject to

the Communications Act. In contrast, section 210(a) does not

specifically grant the Commission the authority to regulate the

issuance of franks from communications common carriers to other

communications common carriers or to themselves. In accordance with

section 210(a), the Commission adopted rules, codified in part 41 of

the Code of Federal Regulations, that govern the issuance of franks to

common carriers not subject to the Communications Act, such as

railroads. The rules were adopted and modified in a series of orders

from the late 1930's and have been subject to only minor modifications

since that time. Pursuant to these rules the Commission has capped the

value of individual franks at $50 per year and imposed certain

recordkeeping requirements on carriers issuing franks.

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\5\ 49 USC 10101 et seq., 10722. In an explanatory statement

entered in the Congressional Record, Representative Sam Rayburn

indicated that section 210(a) is ``based upon section 1(7) of the

Interstate Commerce Act.'' 78 Cong. Rec. 10313-10314. Rayburn

further explained that the provision ``carries over existing law

permitting communications companies to exchange franks for messages

and to exchange such franks with railroads for passes.'' Id.

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5. Section 41.31(c) of the Commission's rules implements section

201(b) of the Act allowing, but not requiring, common carriers to

furnish reports of the positions of ships at sea to newspapers of

general circulation. Section 201(b) provides that ``nothing in this Act

or in any other provision of law shall prevent a common carrier subject

to this Act from furnishing reports of positions of ships at sea to

newspapers of general circulation, either at a nominal charge or

without charge, provided the name of such common carrier is displayed

along with such ship position reports.''

III. Discussion

6. As noted, section 11 of the Act directs the Commission to

determine whether any regulation applicable to providers of

telecommunications services ``is no longer necessary in the public

interest as the result of meaningful economic competition between

providers of such service.'' We seek comment as to whether our

regulation of telephone and telegraph franking privileges and certain

reports pursuant to part 41 of the rules continues to be in the public

interest. For the reasons set out in the NPRM and summarized in the

following paragraphs, we tentatively conclude that it does not, and we

seek comment on our analysis and tentative conclusion that we should

eliminate part 41 in its entirety.

7. Section 41.11 states that ``franks valid for interstate and

foreign telegraph or telephone service may be issued or used and free

service may be rendered only in accordance with * * *'' the provisions

of part 41. Section 41.13 nevertheless goes on to exempt certain

carriers, services, and persons from much of this regulation. These

exemptions reflect the limitations imposed on Commission regulation of

common carrier-issued franks and passes by the terms of section 210 of

the Act. Thus, for example, section 210(a) does not, on its face,

authorize the Commission to regulate the issuance of franks by

communications common carriers regulated under the Communications Act

to their own officers, agents, employees, and their families or to

other communications common carriers. Section 41.13(c) of the rules

generally exempts ``free or concession service now or hereafter granted

to officers, agents, or employees of common carriers subject to the

Act, and to their families.''

8. Other sections of part 41 impose specific limitations or

requirements on carriers issuing franks to other carriers not regulated

by the Act, and on persons receiving such franks. Thus, Secs. 41.21 and

41.22, respectively, set a specific monetary limit or cap of $50 on the

value of franks that can be issued to or used by any one person in a

given year and prescribe particular requirements for issued franks.

Section 41.31, inter alia, requires common carriers issuing lawful

franks to maintain records of issued franks. These records must be

maintained in connection with franks regulated pursuant to part 41

(Sec. 41.31(a)) and other franks which are specifically exempted from

regulation pursuant to Sec. 41.13 (Sec. 41.31(b)). In other words,

regardless of whether certain carrier-issued franks are subject to the

substantive limitations imposed by part 41, Sec. 41.31 requires that

communications common carriers maintain specified records for all

issued franks, records which must be produced upon Commission demand.

Finally, Sec. 41.31(c) imposes a recordkeeping requirement on carriers

who provide ``reports of positions of ships at sea to

[[Page 41759]]

newspapers of general circulation, without charge, or at nominal

charges'' pursuant to section 201(b) of the Act.

9. These rules, we tentatively conclude, reflect the regulation--

and, derivatively, the market structure and competitive realities--of a

bygone era and are long overdue for elimination. We believe they impose

unnecessary burdens on competitive carriers operating in current

interstate and international markets. We propose to eliminate these

rules.

10. Early Commission decisions about carrier-issued franks reflect

Commission concerns that franking privileges might be used for

anticompetitive purposes and might be subject to ``excessive use.'' For

example, following an investigation of the telegraph industry initiated

in 1935, i.e., within a year of the enactment of the Communications

Act, the Commission discovered that some telegraph carriers were

issuing franks valued at hundreds of thousands of dollars.6

Assessing this practice, the Commission observed:

\6\ 1935 Telegraph Franks Order, 1 FCC 291, 295-296.

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[W]e are convinced, that the issuance of franks and the giving

away of free service by telegraph companies is used as a competitive

measure; and that, as a competitive measure, it is subject to great

abuse.7

\7\ 1935 Telegraph Franks Order, 1 FCC 291, 295.

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The genesis of part 41 of the rules is this concern with carrier

abuse of franking to achieve competitive advantage. This concern may

very well have been valid in an era when telecommunications service

markets were dominated by carrier monopolists and oligopolists. Indeed,

in such an environment, anticompetitive abuses such as those described

by the Commission in 1935 would eventually have ratepayer consequences

as well. In other words, excessive issuance of franking privileges

might have resulted in costs borne unfairly by ratepayers.

11. We need not, in the NPRM, recite in great detail just how the

Commission's regulation has altered as interstate and international

service competition has developed in the decades since 1935. In summary

form, and driven in large part by technological developments since the

Second World War, the Commission embarked on a course of regulation

that both stimulated and reflected the development of competitive

markets. For example, in a series of orders beginning in 1982, the

Commission has sought to reduce or eliminate various regulatory burdens

imposed on interexchange carriers who have been found to be

nondominant. Such nondominant status has even been awarded to AT&T,

with the result that all domestic interexchange service markets have

now been found to be subject to competition. As a result, the

Commission has stated its belief that market forces will generally

ensure that the rates, practices, and classifications of nondominant

interexchange carriers are just and reasonable and not unjustly or

unreasonably discriminatory. In point of fact, almost all of the

``interstate and foreign telegraph or telephone'' services that are the

subject of part 41 regulation per franks and reports are now provided

in markets that the Commission has found to be competitive.

12. Because our part 41 rules were adopted at a very different time

than the world of today, i.e., a time when firms providing interstate

and foreign services faced a vastly different set of statutory,

regulatory, economic, and operational barriers, we believe that

franking regulation is no longer necessary. We believe that the

discipline of competitive markets exists to restrict almost any

conceivable misuse of the franking privilege, a privilege that is, we

note, guaranteed by statute. It is our belief that most communications

franks issued today are, in fact, concessions issued to the

communications carrier's own employees, officers, or other personnel or

are franks issued to other carriers regulated by the Act. Such franks

are not, pursuant to the language of section 210(a), subject to this

Commission's regulation in any event. We have, nevertheless, in

Sec. 41.31(b) of our rules, imposed carrier recordkeeping requirements

in these cases. Such records are, we tentatively conclude, unnecessary

to prevent anticompetitive conduct which in most, if not all cases,

will be most effectively prevented by the operation of free market

mechanisms. In the event that investigations by this Commission ever

become necessary in such cases, we believe that we have ample authority

under the Act to compel the production of carrier accounting records to

assist such investigations. We further note that, for Class A and Class

B telephone companies, such accounting records are kept pursuant to

Commission rules and are subject at all times to the Commission's right

of inspection. Taking into account all these considerations, we

tentatively conclude that we may eliminate part 41 requirements as they

apply to franks for interstate and international services as issued by

common carriers regulated by the Act to common carriers regulated by

the Act. We seek comment on this tentative conclusion.

13. Concerning section 201(b)-authorized ``reports of positions of

ships at sea,'' we believe it unlikely that carriers would be able to

gain an improper or unlawful competitive advantage were we to lift our

Sec. 43.31(c) recordkeeping requirement. Carriers issuing such reports

exist in markets subject to the same current and developing competitive

pressures described in the NPRM and as summarized supra. We see no

reason to encumber these carriers--carriers who provide a valuable

service specifically authorized by the Act--with special recordkeeping

requirements and we find it unlikely that carriers are likely to abuse

this provision. Accordingly, we tentatively conclude that we should

eliminate Sec. 43.31(c) of the rules, and we seek comment on this

tentative conclusion.

14. In the NPRM, we tentatively conclude that no part 41 regulation

is necessary and we accordingly propose to eliminate part 41, in toto.

If any commenters consider that some form of regulation is required to

govern the provision of franks and certain section 201(b) reports, we

encourage them to suggest alternatives that are less burdensome than

those currently set out in part 41. Such commenters, to the extent that

they wish to retain part 41 regulation, should present a cost-benefit

analysis addressing the costs of compliance, including direct costs and

burdens on companies, regulators, customers and taxpayers, as well as

any indirect costs. The statute affords the Commission wide discretion

in determining the contours of the public interest. We also note that

many costs and benefits of regulation may be difficult, if not

impossible to quantify. As a general matter, however, we will not

maintain a regulation pursuant to the section 11 public interest

analysis where we determine that the costs of the regulation exceed the

benefits. We seek comment on this approach. Overall, we seek comment on

any and all analysis and conclusions contained in the NPRM.

IV. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

15. As required by the Regulatory Flexibility Act

(RFA),8 the Commission has prepared an Initial Regulatory

Flexibility Analysis (IRFA), summarized here, of the possible

significant economic impact on small entities by

[[Page 41760]]

the policies and rules proposed in this NPRM. Written public comments

are requested on this IRFA. Comments must be identified as responses to

the IRFA and must be filed by the deadlines for comments on this NPRM

provided above on the first page. The Commission will send a copy of

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

the Small Business Administration.9 In addition, this NPRM

and IRFA (or summaries thereof) will be published in the Federal

Register.10

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\8\ See 5 USC 603. The RFA, see 5 USC 601 et. seq., has been

amended by the Contract With America Advancement Act of 1996, Pub.

L. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is

the Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA).

\9\ See 5 USC 603(a).

\10\ See id.

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16. Need for, and Objectives of, the Proposed Action. The

Commission undertakes this examination of Part 41 11 of its

rules as a part of its 1998 biennial review of regulations as required

by section 11 of the Communications Act, as amended.12 Our

objective is to reduce or eliminate unnecessary or duplicative

regulatory requirements as competition supplants the need for such

requirements, consistent with section 11 of the Communications Act, as

amended,13 and the Telecommunications Act of

1996.14 The NPRM seeks comment as to whether the

Commission's regulation of telephone and telegraph franking privileges

and certain reports concerning ``ships at sea'' pursuant to part 41 of

the rules continues to be in the public interest. The NPRM tentatively

concludes that the development of competition among interstate and

international telecommunications service providers renders Part 41

unnecessary and proposes to eliminate it, in toto.

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\11\ 47 CFR 41.1 et seq.

\12\ 47 USC 161.

\13\ Id.

\14\ Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat.

56 (1996 Act), codified at 47 USC 151 et seq. See Joint Explanatory

Statement of the Committee of Conference, S. Conf. Rep. No. 230,

104th Cong., 2d Sess. 113 (1996) (Joint Explanatory Statement).

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17. Legal Basis. The legal basis for the action as proposed for

this rulemaking is contained in sections 1, 4(i) and (j), 11, 201-205,

210, 218 and 403 of the Communications Act of 1934, as amended, 47 USC

151, 154(i) and (j), 161, 201-205, 210, 218, and 403.

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

Which the Proposed Action May Apply. Part 41 governs the issuance of

franks (authorized pursuant to section 210 of the Act) and certain

reports of ships at sea (authorized pursuant to section 201(b)) by all

common carriers subject to the Communications Act of 1934, as amended.

This NPRM asks commenters to address the extent to which communications

common carriers currently utilize these statutory privileges--the

issuance of franks and reduced cost reports on the positions of ships

at sea--so that the Commission may determine the actual burden imposed

by part 41 on these common carriers. In the absence of a more complete

record, we note that the proposals set forth in this proceeding may

have an economic impact on a substantial number of small telephone

companies, i.e. all common carriers subject to the Act. The economic

impact of these proposals would, of course, be a positive and

beneficial impact, in the form of reduced regulatory burdens and

recordkeeping requirements, for these common carriers.

19. To estimate the number of small entities that would benefit

from this positive economic impact, we first consider the statutory

definition of ``small entity'' under the RFA. The RFA generally defines

``small entity'' as having the same meaning as the term ``small

business,'' ``small organization,'' and ``small governmental

jurisdiction.'' 15 In addition, the term ``small business''

has 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 to its activities.16 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) meets any additional criteria established by the

Small Business Administration (SBA).17 The SBA has defined a

small business for Standard Industrial Classification (SIC) categories

4812 (Radiotelephone Communications) and 4813 (Telephone

Communications, Except Radiotelephone) to be small entities when they

have no more than 1,500 employees.18 We first discuss the

number of small telephone companies falling within these SIC

categories, then attempt to refine further those estimates to

correspond with the categories of telephone companies that are commonly

used under our rules.

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\15\ 5 USC 601(6).

\16\ 5 USC 601(3) (incorporating by reference the definition of

``small business concern'' in 5 USC 632). Pursuant to 5 USC 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 in the Federal Register.''

\17\ 15 USC 632. See, e.g., Brown Transport Truckload, Inc. v.

Southern Wipers, Inc., 176 B.R. 82 (N.D. Ga. 1994).

\18\ 13 CFR 121.201.

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20. We expect that the rules in part 41--and the privileges

regulated therein--have only been utilized by a limited class of

entities, specifically the Bell Operating Companies and certain other

providers of local exchange and interexchange telecommunications

services. Nevertheless, given that the language of sections 201(b) and

210(a) speaks broadly of ``common carriers'' we analyze a wide range of

categories in an effort to identify the greatest number of small

entities possible that could be effected by the proposals in this NPRM.

Thus, in some cases below, we expect that not all of the entities

within a given category offer common carrier services, let alone issue

franks or reports of ships at sea pursuant to part 41. In all cases, of

course, entities affected by this proposal would not lose any of their

statutorily-granted rights under sections 201(b) or 210(a) and would

enjoy a positive economic impact from reduced regulation of those

privileges.

21. The most reliable source of information regarding the total

numbers of certain common carrier and related providers nationwide, as

well as the numbers of commercial wireless entities, appears to be data

the Commission publishes annually in its Telecommunications Industry

Revenue report, regarding the Telecommunications Relay Service

(TRS).19 According to data in the most recent report, there

are 3,459 interstate carriers.20 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.

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\19\ FCC, Telecommunications Industry Revenue: TRS Fund

Worksheet Data, Figure 2 (Number of Carriers Paying Into the TRS

Fund by Type of Carrier) (Nov. 1997) (Telecommunications Industry

Revenue).

\20\ Id.

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22. Although some affected incumbent local exchange carriers

(ILECs) may have 1,500 or fewer employees, we do not believe that such

entities should be considered small entities within the meaning of the

RFA because they are either dominant in their field of operations or

are not independently owned and operated, and therefore by definition

not ``small entities'' or ``small business concerns'' under the RFA.

Accordingly, our use of the terms ``small entities'' and ``small

businesses'' does not encompass small ILECs. Out of an abundance of

caution,

[[Page 41761]]

however, for regulatory flexibility analysis purposes, we will

separately consider small ILECs within this analysis and use the term

``small ILECs'' to refer to any ILECs that arguably might be defined by

the SBA as ``small business concerns.'' 21

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\21\ See 13 CFR 121.201, SIC Code 4813.

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23. 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.22 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, 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.'' 23 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 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 NPRM.

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\22\ 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'').

\23\ 15 USC 632(a)(1).

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

definition of small entities for telephone communications companies

other than radiotelephone companies. The Census Bureau reports that,

there were 2,321 such telephone companies in operation for at least one

year at the end of 1992.24 According to SBA's definition, a

small business telephone company other than a radiotelephone company is

one employing no more than 1,500 persons.25 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 and rules recommended for adoption in this NPRM.

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\24\ 1992 Census, supra, at Firm Size 1-123.

\25\ 13 CFR 121.201, Standard Industrial Classification (SIC)

Code 4813.

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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. 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).26 According to our most recent data, 1,371

companies reported that they were engaged in the provision of local

exchange services.27 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 1,371 small entity LECs or small incumbent

LECs that may be affected by the decisions and rules recommended for

adoption in this NPRM.

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\26\ See 47 CFR 64.601 et seq.

\27\ Telecommunications Industry Revenue at Fig. 2.

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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 companies.28 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, 143 companies

reported that they were engaged in the provision of interexchange

services.29 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 143 small entity IXCs that may be affected by the

decisions and rules recommended for adoption in this NPRM.

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\28\ 13 CFR 121.210, SIC Code 4813.

\29\ Telecommunications Industry Revenue at Fig. 2.

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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 companies. 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, 109 companies reported

that they were engaged in the provision of competitive access

services.30 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 109 small entity CAPs that may be affected by the

decisions and rules recommended for adoption in this NPRM.

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\30\ Telecommunications Industry Revenue at Fig. 2.

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28. Operator Service Providers. Neither the Commission nor SBA has

developed a definition of small entities specifically applicable to

providers of operator services. The closest applicable definition under

SBA rules is for telephone communications companies other than

radiotelephone companies. The most reliable source of information

regarding the number of operator service providers 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, 27

companies reported that they were engaged in the provision of operator

services.31 Although it seems certain that some of these

companies 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 operator service providers that would qualify

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

estimate

[[Page 41762]]

that there are fewer than 27 small entity operator service providers

that may be affected by the decisions and rules recommended for

adoption in this NPRM.

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\31\ Telecommunications Industry Revenue at Fig. 2.

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29. 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.32 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, 339 companies reported

that they were engaged in the resale of telephone

services.33 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 339 small entity resellers that may be affected by the

decisions and rules recommended for adoption in this NPRM.

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\32\ 13 CFR 121.210, SIC Code 4813.

\33\ Telecommunications Industry Revenue at Fig. 2.

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30. Wireless (Radiotelephone) Carriers. 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 1992.34

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

is one employing no more than 1,500 persons.35 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 are 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 the decisions and rules recommended

for adoption in this NPRM.

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\34\ 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'').

\35\ 13 CFR 121.201, SIC Code 4812.

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31. Cellular and Mobile Service Carriers. In an effort to further

refine our calculation of the number of radiotelephone companies

affected by the rules adopted herein, we consider the categories of

radiotelephone carriers, Cellular Service Carriers and Mobile Service

Carriers. Neither the Commission nor the SBA has developed a definition

of small entities specifically applicable to Cellular Service Carriers

and to Mobile Service Carriers. The closest applicable definition under

SBA rules for both services is for telephone companies other than

radiotelephone (wireless) companies.36 The most reliable

source of information regarding the number of Cellular Service Carriers

and 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, 804 companies reported that they are

engaged in the provision of cellular services and 117 companies

reported that they are engaged in the provision of mobile

services.37 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 and Mobile Service

Carriers that would qualify as small business concerns under SBA's

definition. Consequently, we estimate that there are fewer than 804

small entity Cellular Service Carriers and fewer than 138 small entity

Mobile Service Carriers that might be affected by the decisions and

rules recommended for adoption in this NPRM.

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\36\ Id.

\37\ Telecommunications Industry Revenue at Fig. 2.

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32. Broadband PCS Licensees. 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.

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 (June 24, 1996), 61 FR 33859 (July 1, 1996); see also 47

CFR 24.720(b). For Block F, an additional classification for ``very

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

with its affiliates, has average gross revenues of not more than $15

million for the preceding three calendar years.38 These

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

auctions have been approved by SBA.39 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. 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 licenses 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 Commissioner's auction rules.

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\38\ Id., at para. 60.

\39\ 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).

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33. SMR Licensees. Pursuant to 47 CFR 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.

The definition of a ``small entity'' in the context of 800 MHz SMR has

been approved by the SBA,40 and approval for the 900 MHz SMR

definition has been sought. The rules proposed in this NPRM 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

[[Page 41763]]

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

We assume, for purposes of this IRFA, that all of the extended

implementation authorizations may be held by small entities, that may

be affected by the decisions and rules recommended for adoption in this

NPRM.

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\40\ 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).

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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 that may be affected by the decisions and rules proposed in

this NPRM 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.

The Commission, however, 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 IRFA, that all of the licenses

may be awarded to small entities who may be affected by the decisions

recommended for adoption in this NPRM.

35. 220 MHz Radio Services. Because the Commission has not yet

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

utilize the SBA definition applicable to radiotelephone companies,

i.e., an entity employing no more than 1,500 persons.41 With

respect to 220 MHz services, the Commission has proposed a two-tiered

definition of small business for purposes of auctions: (1) For Economic

Area (EA) licensees, 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. Given that

nearly all radiotelephone companies under the SBA definition employ no

more than 1,500 employees (as noted supra), we will consider the

approximately 1,500 incumbent licensees in this service as small

businesses under the SBA definition.

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\41\ 13 CFR 121.201, SIC Code 4812.

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36. 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.42 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. Because 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 no more than 1,500

persons.43 At present, there are approximately 24,000

Private Paging licenses and 74,000 Common Carrier Paging licenses.

According to the most recent Telecommunications Industry Revenue data,

172 carriers reported that they were engaged in the provision of either

paging or ``other mobile'' services, which are placed together in the

data.44 We do not have data specifying the number of these

carriers that are not independently owned and operated or have more

than 1,500 employees, and thus are unable at this time to estimate with

greater precision the number of paging carriers that would qualify as

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

estimate that there are fewer than 172 small paging carriers that may

be affected by the proposed rules, if adopted. We estimate that the

majority of private and common carrier paging providers would qualify

as small entities under the SBA definition.

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\42\ See 47 CFR 20.9(a)(1) (noting that private paging services

may be treated as common carriage services).

\43\ 13 CFR 121.201, SIC Code 4812.

\44\ Telecommunications Industry Revenue at Figure 2.

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37. 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 for radiotelephone

companies. 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 by auction. Such auctions have not

yet been scheduled, however. Given that nearly all radiotelephone

companies have no more than 1,500 employees and that no reliable

estimate of the number of prospective MTA and BTA narrowband licensees

can be made, we assume, for purposes of this IRFA, that all of the

licenses will be awarded to small entities, as that term is defined by

the SBA.

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

definition of small entity specific to the Rural Radiotelephone

Service.45 A significant subset of the Rural Radiotelephone

Service is the Basic Exchange Telephone Radio Systems

(BETRS).46 We will use the SBA's definition applicable to

radiotelephone companies, i.e., an entity employing no more than 1,500

persons.47 There are approximately 1,000 licensees in the

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

qualify as small entities under the SBA's definition.

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\45\ The service is defined in Sec. 22.99 of the Commission's

rules, 47 CFR 22.99.

\46\ BETRS is defined in Secs. 22.757 and 22.759 of the

Commission's rules, 47 CFR 22.757, 22.759.

\47\ 13 CFR 121.201, SIC Code 4812.

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

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

Radiotelephone Service.48 Accordingly, we will use the SBA's

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

employing no more than 1,500 persons.49 There are

approximately 100 licensees in the Air Ground Radiotelephone Service,

and we estimate that almost all of them qualify as small entities under

the SBA definition.

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\48\ The service is defined in section 22.99 of the Commission's

rules, 47 CFR 22.99.

\49\ 13 CFR 121.201, SIC Code 4812.

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40. Private Land Mobile Radio (PLMR). PLMR systems serve an

essential role in a range of industrial, business, land transportation,

and public safety activities.50 These radios are used by

companies of all sizes operating in all U.S. business categories. The

Commission has not developed a definition of small entity specifically

applicable to PLMR licensees due to the vast array of PLMR users. For

the purpose of determining whether a licensee is a small business as

defined by the SBA, each licensee would need

[[Page 41764]]

to be evaluated within its own business area.

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\50\ See 47 CFR 20.9(a)(2) (noting that certain Industrial/

Business Pool service may be treated as common carriage service).

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

of, if any, small businesses which could be impacted by the rules.

However, the Commission's 1994 Annual Report on PLMRs 51

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. Because any entity engaged in a commercial activity is eligible to

hold a PLMR license, the proposed rules in this context could

potentially impact every small business in the United States.

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\51\ Federal Communications Commission, 60th Annual Report,

Fiscal Year 1994, at 116.

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42. Fixed Microwave Services. Microwave services include common

carrier,52 private-operational fixed,53 and

broadcast auxiliary radio services.54 At present, there are

approximately 22,015 common carrier fixed licensees in the microwave

services. The Commission has not yet defined a small business with

respect to microwave services. For purposes of this IRFA, we will

utilize the SBA's definition applicable to radiotelephone companies--

i.e., an entity with no more than 1,500 persons.55 We

estimate, for this purpose, that all of the Fixed Microwave licensees

(excluding broadcast auxiliary licensees) would qualify as small

entities under the SBA definition for radiotelephone companies.

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\52\ 47 CFR 101 et seq. (formerly, part 21 of the Commission's

rules).

\53\ Persons eligible under parts 80 and 90 of the Commission's

rules can use Private Operational-Fixed Microwave services. See 47

CFR parts 80 and 90. Stations in this service are called

operational-fixed to distinguish them from common carrier and public

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

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

commercial, industrial, or safety operations.

\54\ Auxiliary Microwave Service is governed by part 74 of Title

47 of the Commission's rules. See 47 CFR 74 et seq. Available to

licensees of broadcast stations and to broadcast and cable network

entities, broadcast auxiliary microwave stations are used for

relaying broadcast television signals from the studio to the

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

auxiliary studio. The service also includes mobile TV pickups, which

relay signals from a remote location back to the studio.

\55\ 13 CFR 121.201, SIC Code 4812.

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43. Offshore Radiotelephone Service. This service operates on

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

in the coastal area of the states bordering the Gulf of

Mexico.56 At present, there are approximately 55 licensees

in this service. We are unable at this time to estimate the number of

licensees that would qualify as small entities under the SBA's

definition for radiotelephone communications.

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\56\ This service is governed by subpart I of part 22 of the

Commission's rules. See 47 CFR 22.1001-22.1037.

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44. Wireless Communications Services. This service can be used for

fixed, mobile, radiolocation and digital audio broadcasting satellite

uses. The Commission defined ``small business'' for the wireless

communications services (WCS) auction as an entity with average gross

revenues of $40 million for each of the three preceding years, and a

``very small business'' as an entity with average gross revenues of $15

million for each of the three preceding years. The Commission auctioned

geographic area licenses in the WCS service. In the auction, there were

seven winning bidders that qualified as very small business entities,

and one that qualified as a small business entity. We conclude that the

number of geographic area WCS licensees affected includes these eight

entities.

45. Description of Proposed Reporting, Recordkeeping, and Other

Compliance Requirements. The proposals under consideration in the NPRM

would reduce the reporting and recordkeeping requirements on common

carriers regulated under the Communications Act. Part 41 imposes

specific limitations or requirements on carriers issuing franks to

other carriers not regulated by the Act, and on persons receiving such

franks.57 For example, Sec. 41.31(a) and (b), inter alia,

require common carriers issuing lawful franks to maintain records of

issued franks. Similarly, Sec. 41.31(c) imposes a recordkeeping

requirement on carriers who provide ``reports of positions of ships at

sea to newspapers of general circulation, without charge, or at nominal

charges'' pursuant to section 201(b) of the Act.58 The NPRM

proposes to eliminate part 41 which should provide a positive economic

impact on affected companies, including small entities.

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\57\ See, e.g., 47 CFR 41.21, 41.22, 41.31, 41.32.

\58\ 47 CFR 41.31(c) and citing 47 USC 201(b).

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46. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered. The impact of this

proceeding should be beneficial to small businesses because the

proposals set out in the NPRM would reduce the reporting or

recordkeeping requirements on all communications common carriers. As

noted in the NPRM,59 we seek comment on whether any level of

regulation currently within Part 41 should be retained.

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\59\ See supra, para. 20.

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47. Federal Rules that May Duplicate, Overlap, or Conflict With the

Proposed Rule. None.

B. Ex Parte Presentations

48. This proceeding will be treated as a ``permit-but-disclose''

proceedings subject to the ``permit-but-disclose'' requirements under

Sec. 1.1206 of the Commission's rules, as revised.60

Additional rules pertaining to oral and written presentations are set

forth in Sec. 1.1206.61

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\60\ 47 CFR 1.1206.

\61\ Id.

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C. Comment Filing Procedures

49. General. Pursuant to applicable procedures set forth in

Secs. 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419,

interested parties shall file comments not later than August 31, 1998,

and reply comments not later than September 10, 1998. To file formally

in this proceeding, you must file an original and six copies of all

comments, reply comments, and supporting comments. If you want each

Commissioner to receive a personal copy of your comments, you must file

an original and twelve copies. Comments and reply comments should be

sent to the Secretary, Federal Communications Commission, 1919 M

Street, NW, Room 222, Washington, DC 20554, with copies to: Thomas J.

Beers, Common Carrier Bureau, Industry Analysis Division, 2033 M

Street, NW, Room 500, Washington, DC 20554; Scott K. Bergmann, Common

Carrier Bureau, Industry Analysis Division, 2033 M Street, NW, Room

500, Washington, DC 20554. Parties should file one copy of any

documents filed in this docket with the Commission's copy contractor,

International Transcription Services, Inc., 1231 20th St., NW,

Washington, DC 20037. Comments and reply comments will be available for

public inspection during regular business hours in the FCC Reference

Center, 1919 M Street, NW, Room 239, Washington, DC 20554.

50. Other requirements. Comments and reply comments must also

comply with Sec. 1.49 and all other applicable sections of the

Commission's rules.62 We also direct all interested parties

to include the name of the filing party and the date of the filing on

each page of their comments and reply comments.

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\62\ See 47 CFR 1.49.

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51. Commenters may also file informal comments or an exact copy of

formal comments electronically via the Internet at: http://

dettifoss.fcc.gov:8080/cgi-bin/ws.exe/beta/ecfs/upload.hts>. Only one

copy of electronically filed comments must be

[[Page 41765]]

submitted. Commenters must note on the subject line whether an

electronic submission is an exact copy of formal comments. Commenters

also must include their full name and U.S. Postal Service mailing

address in their submissions. Further information on the process of

submitting comments electronically is available at that location and at

http://www.fcc.gov/e-file>.

52. Parties are also asked to submit comments and reply comments on

diskette. Such diskette submissions would be in addition to and not a

substitute for the formal filing requirements addressed above. Parties

submitting diskettes should submit them to: Ms. Terry Conway, Common

Carrier Bureau, Industry Analysis Division, 2033 M Street, NW, Room

500, Washington, DC 20554. Such diskettes should be on a 3.5 inch

diskette formatted in an IBM compatible format using WordPerfect 5.1

for Windows software. The diskette should be submitted in ``read only''

mode. The diskette should be clearly labeled with the party's name,

proceeding, type of pleading (comment or reply comments) and date of

submission. The diskette should be accompanied by a cover letter.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-20819 Filed 8-4-98; 8:45 am]

BILLING CODE 6712-01-P