1998 Biennial Regulatory ReviewRepeal of Part 62 of the Commission's Rules

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 62

[CC Docket No. 98-185; FCC 98-294]

1998 Biennial Regulatory Review--Repeal of Part 62 of the

Commission's Rules

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: As part of its 1998 biennial review of regulations pursuant to

section 11 of the Communications Act of 1934, as amended (the

Act),1 the Commission initiated a Notice of Proposed Rule

Making (NPRM) seeking comment on whether its rules governing

interlocking directorates should be repealed. The Commission

tentatively concludes that the rules should be repealed. The Commission

also tentatively concludes that it should forbear from applying the

provision of the Act that prohibits any person from holding the

position of officer or director of more than one carrier subject to the

Act without obtaining prior Commission authorization.

\1\ 47 U.S.C. 161.

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DATES: Comments must be received on or before December 14, 1998. Reply

comments must be received on or before January 4, 1999.

ADDRESSES: Magalie Roman Salas, Office of the Secretary, Federal

Communications Commission, 445 12th Street, S.W., Room TW-A325,

Washington, D.C. 20554, with a copy to Jennifer Myers Kashatus of the

Common Carrier Bureau, 2025 M Street, N.W., Room 6120, Washington, D.C.

20554.

FOR FURTHER INFORMATION CONTACT: Jennifer Myers Kashatus, Formal

Complaints and Investigations Branch, Enforcement Division, Common

Carrier Bureau (202) 418-0960.

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

in CC Docket 98-195 [FCC 98-294], adopted on November 3, 1998, and

released on November 17, 1998. The full text of the NPRM is available

for inspection and copying during normal business hours in the FCC

Reference Center, Room 239, 1919 M Street, N.W., Washington, D.C. The

complete text of this decision also may be purchased from the

Commission's duplicating contractor, International Transcription

Services, 1231 20th Street, N.W., Washington, D.C. 20036.

[[Page 68715]]

Background

1. The Commission is initiating this proceeding as part of its 1998

biennial review of regulations pursuant to section 11 of the Act.

Section 11 requires the Commission to conduct a biennial review, in

every even-numbered year beginning in 1998, of ``all regulations . . .

that apply to the operations or activities of any provider of

telecommunications service'' and to ``determine whether any such

regulation is no longer necessary in the public interest as the result

of meaningful economic competition between providers of such service.''

2 Section 11 further requires the Commission to repeal or

modify any regulation it determines is no longer necessary in the

public interest.3 The Commission tentatively concludes that

its rules governing interlocking directorates,4 which

implement section 212 of the Act,5 are no longer necessary

to the public interest, and therefore should be repealed.6

To the extent interlocking directorates could be used to inhibit

competition in communications markets, the Commission believes other

laws, particularly antitrust laws, adequately address the potential for

harm. Accordingly, the Commission proposes to repeal the requirement

that application be made to the Commission ``to hold interlocking

positions with more than one carrier subject to the Act where any

carrier sought to be interlocked'' is defined as a dominant carrier or

a carrier not yet found to be non-dominant.7 The Commission

also proposes to repeal the reporting requirements set forth in its

rules that require that all persons holding ``interlocking positions on

more than one carrier subject to the Act'' such as those between non-

dominant carriers, among others, report such interlocking position to

the Commission within 30 days of assuming such position and that

carriers report any change in status within 30 days of such

change.8 The Commission further proposes to repeal the

requirement that certain carriers obtain authorization to hold

interlocking directorates based on a finding of common

ownership.9 By these proposals, the Commission seeks to

promote competition by eliminating unnecessary regulations that are no

longer in the public interest.

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\2\ 47 U.S.C. 161(a).

\3\ 47 U.S.C. 161(b).

\4\ 47 CFR 62.

\5\ 47 U.S.C. 212.

\6\ 47 U.S.C. 161.

\7\ 47 CFR 62.1(a).

\8\ 47 CFR 62.26.

\9\ 47 CFR 62.12, 62.25.

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2. Further, in the Telecommunications Act of 1996 (``1996 Act''),

Congress sought to establish ``a pro-competitive, de-regulatory

national policy framework'' for the United States telecommunications

industry.10 Integral to achieving this goal, the 1996 Act

requires the Commission to forbear from applying any provision of the

Act, or any regulations, to a telecommunications carrier or

telecommunications service, or class thereof, if the Commission makes

certain specified findings with respect to such provisions or

regulations.11 In the NPRM, the Commission tentatively

concludes that it should forbear from applying section 212 of the

Act,12 which prohibits any person from holding the position

of officer or director of more than one carrier subject to the Act

without obtaining prior Commission authorization.13

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\10\ S. Conf. Rep. No. 104-230, 104th Cong. 1 (1996).

\11\ See section 10, codified at 47 U.S.C. 160, is added to the

Act through section 401 of the 1996 Act.

\12\ 47 U.S.C. 212.

\13\ Id. We note that this notice does not address the remainder

of section 212, which makes it ``unlawful for any officer or

director of any carrier subject to this Act to receive for his own

benefit directly or indirectly, any money or thing of value in

respect of negotiation, hypothecation, or sale of securities issued

or to be issued by such carriers, or to share in any of the proceeds

thereof, or to participate in the making or paying of any dividends

of such carriers from any funds properly included in the capital

account.''

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3. This is a permit-but-disclose rule making proceeding. Ex Parte

presentations are permitted, except during the Sunshine Agenda period,

provided that they are disclosed as provided in the Commission's

rules.14

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\14\ 47 CFR 1.1206(a).

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Initial Regulatory Flexibility Analysis

4. As required by the Regulatory Flexibility Act

(RFA),15 the Commission has prepared this Initial Regulatory

Flexibility Analysis (IRFA) of the possible significant economic impact

on small entities by 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.16 In addition, this NPRM and IRFA (or

summaries thereof) will be published in the Federal

Register.17

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\15\ 5 U.S.C. 603. The RFA, see 5 U.S.C. 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).

\16\ See 5 U.S.C. 603(a).

\17\ See id.

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5. Need for, and Objectives of, the Proposed Action: The Commission

undertakes this examination of its rules governing interlocking

directorates as part of its 1998 biennial review of regulations as

required by the Act.18 In addition, the Commission is

issuing this NPRM to review its regulatory regime for interlocking

directorates, and to determine whether in light of section 10 of the

1996 Act, the Commission should forbear from applying such

requirements.

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\18\ 47 U.S.C. 161.

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6. Legal Basis: The NPRM is adopted pursuant to sections 1, 4(i)

and (j), and 11 of the Communications Act of 1934, as amended, 47

U.S.C. 151, 154(i) and 154(j), and 161.

7. Description, potential impact, and number of small entities

affected: The Commission proposes to repeal its rules governing

interlocking directorates. This includes eliminating the post-interlock

filing requirement for non-dominant carriers, many of whom may be small

entities. The Commission also proposes to forbear from enforcing

section 212 of the Act. Forbearance from enforcing these rules will

benefit small entities by reducing the regulatory burden to which small

businesses would otherwise be subject.

8. 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.'' 19 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.20 Under

the Small Business Act, a ``small business concern'' is one that: (1)

is independently owned and operated; (2)

[[Page 68716]]

is not dominant in its field of operation; and (3) meets any additional

criteria established by the Small Business Administration

(SBA).21 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.22 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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\19\ 5 U.S.C. 601(6).

\20\ 5 U.S.C. 601(3) (incorporating by reference the definition

of ``small business concern'' in 5 U.S.C. 632). Pursuant to 5 U.S.C.

601(3), the statutory definition of a small business applies

``unless an agency after consultation with the Office of Advocacy of

the Small Business Administration and after opportunity for public

comment, establishes one or more definitions of such term which are

appropriate to the activities of the agency and publishes such

definition in the Federal Register.''

\21\ 15 U.S.C. 632. See, e.g., Brown Transport Truckload, Inc.

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

\22\ 13 CFR 121.201.

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9. 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).23 According to data in the most recent report, there

are 3,459 interstate carriers.24 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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\23\ 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'').

\24\ Id.

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10. 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, 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.'' 25

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\25\ See 13 CFR 121.201, SIC code 4813. Since the time of the

Commission's 1996 decision, Implementation of the Local Competition

Provisions in the Telecommunications Act of 1996, First Report and

Order, 11 FCC Rcd 15499, 16144-45 (1996), 61 FR 45476 (Aug. 29,

1996), the Commission has consistently addressed in its regulatory

flexibility analyses the impact of its rules on such ILECs.

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11. 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.26 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, 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.'' 27 Additionally, we

note that the number of small entities affected by this proposed rule

change as set forth in this NPRM is less than the total number of

telephone companies as stated herein, because as discussed in the NPRM,

the Commission already has decided to forbear from applying section 212

of the Act with regard to CMRS providers. 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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\26\ 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'').

\27\ 15 U.S.C. 632(a)(1).

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12. 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 1992.28 According to SBA's definition, a

small business telephone company other than a radiotelephone company is

one employing no more than 1,500 persons.29 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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\28\ 1992 Census, supra, at Firm Size 1-123.

\29\ 13 CFR 121.201, Standard Industrial Classification (SIC)

Code 4813.

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13. 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).30 According to our most recent data, 1,371

companies reported that they were engaged in the provision of local

exchange services.31 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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\30\ See 47 CFR 64.601 et seq.

\31\ Telecommunications Industry Revenue at Fig. 2.

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14. 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.32 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

[[Page 68717]]

interexchange 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 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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\32\ 13 CFR 121.210, SIC Code 4813.

\33\ Telecommunications Industry Revenue at Fig. 2.

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15. 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.34 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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\34\ Id.

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16. Pay Telephone Operators. Neither the Commission nor SBA has

developed a definition of small entities specifically applicable to pay

telephone operators. The closest applicable definition under SBA rules

is for telephone communications companies except radiotelephone

(wireless) companies.35 The most reliable source of

information regarding the number of pay telephone operators nationwide

is the data that we collect annually in connection with the TRS

Worksheet. According to our most recent data, 271 companies reported

that they were engaged in the provision of pay telephone

services.36 We do not have information on the number of

carriers that are not independently owned and operated, nor have more

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

greater precision the number of pay telephone operators that would

qualify as small business concerns under SBA's definition.

Consequently, we estimate that there are fewer than 271 small pay

telephone operators.

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\35\ 13 CFR 121.201, SIC Code 4813.

\36\ TRS Worksheet.

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17. 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.37 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 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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\37\ Telecommunications Industry Revenue at Fig. 2.

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18. 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.38 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.39 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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\38\ 13 CFR 121.210, SIC Code 4813.

\39\ Telecommunications Industry Revenue at Fig. 2.

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19. Private Paging. At present, there are approximately 24,000

Private Paging licenses. 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. We estimate that

the majority of private paging providers would qualify as small

entities under the SBA definition. We note that private paging does not

include common carrier paging, for which the Commission has adopted

auction rules and has proposed to SBA a special small business size

standard definition.

20. 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 1992.40

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

is one employing no more than 1,500 persons.41 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 the decisions and rules recommended

for adoption in this NPRM.

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

\41\ 13 CFR 121.201, SIC Code 4812.

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21. Recording, record keeping, and other compliance requirements:

No additional paperwork will be required by the proposals set forth in

this proceeding. This proceeding proposes to eliminate filing

requirements set forth for interlocking directorates in the

Commission's rules.

22. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered: The impact of this

[[Page 68718]]

proceeding should be beneficial to small businesses because the

proposals set out in this NPRM would reduce the reporting or

recordkeeping requirements on all communications common carriers. In

this NPRM, the Commission seeks comment on whether any level of

regulation currently within its interlocking directorates rules should

be retained. The Commission also seeks comment on whether we should

forbear from section 212 of the Act. The Commission expects that this

revision will benefit all entities subject to the rule, including small

entities.

23. Federal Rules that overlap, duplicate, or conflict with this

rule: No federal rules overlap, duplicate, or conflict with this rule

directly. As described above, however, we expect that the Clayton Act

will protect against certain types of conduct that would tend to

decrease competition.

Comment Filing Procedures

24. Pursuant to applicable procedures set forth in sections 1.415

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

parties may file comments on or before December 14, 1998, and reply

comments on or before January 4, 1999. Comments may be filed using the

Commission's Electronic Comment Filing System (ECFS) or by filing paper

copies. See Electronic Filing of Documents in Rulemaking Proceedings,

63 FR 24121 (1998).

25. Comments filed through the ECFS can be sent as an electronic

file via the Internet to http://www.fcc.gov/e-file/ecfs.html>.

Generally, only one copy of an electronic submission must be filed. In

completing the transmittal screen, commenters should include their full

name, Postal Service mailing address, and the applicable docket or

rulemaking number. Parties may also submit an electronic comment by

Internet e-mail. To get filing instructions for e-mail comments,

commenters should send an e-mail to [email protected], and should include

the following words in the body of the message, ``get form .'' A sample form and directions will be sent in reply.

26. To file formally in this proceeding, you must file an original

and four copies of all comments, reply comments, and supporting

comments. All filings must be sent to the Commission's Secretary,

Magalie Roman Salas, Office of the Secretary, Federal Communications

Commission, 445 12th Street, S.W., Room TW-A325, Washington, D.C.

20554, with a copy to Jennifer Myers Kashatus of the Common Carrier

Bureau, 2025 M Street, N.W., Room 6120, Washington, D.C. 20554.

27. Parties who choose to file by paper should also submit their

comments on diskette. These diskettes should be submitted to: Jennifer

Myers Kashatus, Common Carrier Bureau, 2025 M Street, N.W., Room 6120,

Washington, D.C. 20554. Such a submission should be on a 3.5 inch

diskette formatted in an IBM compatible format using WordPerfect 5.1

for Windows or compatible software. The diskette should be accompanied

by a cover letter and should be submitted in ``read only'' mode. The

diskette should be clearly labelled with the commenter's name,

proceeding (Docket No. 98-195), type of pleading (comment or reply

comment), date of submission, and the name of the electronic file on

the diskette. The label also should include the following phrase ``Disk

Copy--Not an Original.'' Each diskette should contain only one party's

pleadings, preferably in a single electronic file. In addition,

commenters must send diskette copies to the Commission's copy

contractor, International Transcription Service, Inc., 1231 20th

Street, N.W., Washington, D.C. 20037.

28. Accordingly, it is ordered that pursuant to sections 1, 4, 10,

11, and 212 of the Communications Act of 1934, as amended, 47 U.S.C.

151, 154, 160, 161, and 212, a Notice of Proposed Rule Making is hereby

adopted.

29. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Notice of Proposed Rule Making, including the Initial Regulatory

Flexibility Analysis, to the Chief Counsel for the Advocacy of the

Small Business Administration.

List of Subjects in 47 CFR Part 62

Antitrust, Communications Common carriers, radio, reporting and

recordkeeping requirements, telegraph, and telephone.

Federal Communications Commission.

Shirley S. Suggs,

Chief, Publications Branch.

[FR Doc. 98-33115 Filed 12-11-98; 8:45 am]

BILLING CODE 6712-01-P