Implementation of the Rate Integration Requirement of the Communications Act, Petitions for Forbearance

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-61; FCC 98-347]

Implementation of the Rate Integration Requirement of the

Communications Act, Petitions for Forbearance

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: By this Memorandum Opinion and Order (Order), the Commission

reaffirms its earlier determination that the rate integration

requirement of the Communications Act apply to interstate,

interexchange services offered by commercial mobile radio service

(CMRS) providers, and therefore denied the petitions for

reconsideration of that determination. The Commission clarified that

CMRS traffic within a major trading area (MTA)(intra-MTA traffic) is

not ``interexchange'' traffic and thus not subject to the rate

integration requirements of section 254(g). The Commission denied the

petitions seeking forbearance from the application of rate integration

to CMRS providers. This carries out the intent of Congress that

providers of interstate, interexchange services offer such services at

integrated rates.

EFFECTIVE DATE: March 4, 1999.

FOR FURTHER INFORMATION CONTACT: Douglas L. Slotten, Attorney, Common

Carrier Bureau, Competitive Pricing Division, at (202) 418-1572 or via

the Internet at [email protected].

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

Memorandum Opinion and Order in the matter of Implementation of Section

254(g) of the Communications Act of 1934,as Amended, Petitions for

Forbearance, CC Docket No. 96-61, adopted December 31, 1998, and

released December 31, 1998. The complete text of this Order is

available for inspection and copying during normal business hours in

the Commission's Reference Center, Room 239, 1919 M Street N.W.,

Washington, DC. The Order is available through the Internet at http://

www.fcc.gov/Bureaus/Common__ Carrier/orders/1998/fcc98347.wp. The

complete text may be purchased from the Commission's duplicating

contractor, International Transcription Service, Inc. (ITS, Inc.), at

1231 20th Street NW., Washington, DC 20036, (202) 857-3800.

SYNOPSIS OF MEMORANDUM OPINION AND ORDER

I. Introduction

1. We address seven petitions for reconsideration or, in the

alternative, petitions for forbearance, of the Commission's Rate

Integration Reconsideration Order, Policy and Rules Concerning the

Interstate, Interexchange Marketplace, Implementation of Section 254(g)

of the Communications Act of 1934, as amended, CC Docket No. 96-61,

First Memorandum Opinion and Order on Reconsideration, 12 FCC Rcd

11,812 (1997), 62 FR 46447 (September 3, 1997) (Rate Integration

Reconsideration Order), in which the Commission found that the rate

integration requirements of section 254(g) of the Communications Act of

1934, as amended (``Act''), apply to the interstate, interexchange

services of Commercial Mobile Radio Service (``CMRS'') providers. The

petitioners request that the Commission reconsider that determination.

In the alternative, if the Commission finds that section 254(g) applies

to CMRS providers, the petitioners request that the Commission forbear

from applying section 254(g) to the interstate, interexchange services

offered by CMRS providers pursuant to section 10 of the Act.

2. We also state our intent to issue a Further Notice seeking

comment on issues relating to airtime and roaming charges associated

with interstate, interexchange calls for which a separate charge is

stated; wide-area CMRS calling plans; and the affiliation requirements

that should be applicable to services subject to the rate integration

requirement. Pending further rulemaking, we keep in place the Order

adopted by the Commission on October 2, 1997, in which the Commission

stayed the application of the requirement that providers of interstate,

interexchange services integrate rates across affiliates, as well as

application of rate integration requirements with respect to wide-area

rate plans offered by CMRS providers. Policy and Rules Concerning the

Interstate, Interexchange Marketplace, Implementation of Section 254(g)

of the Communications Act of 1934, as amended, CC Docket No. 96-61,

Order, 12 FCC Rcd 15,739 (1997) (Rate Integration Stay Order).

II. Petitions for Reconsideration

3. We decline to reconsider our determination that the rate

integration requirement of section 254(g) applies to CMRS providers.

Section 254(g) requires that ``[a] provider of interstate interexchange

services shall provide its services to subscribers in a state at rates

no higher than provided to subscribers in any other state.'' The

language of section 254(g) on its face unambiguously applies to all

providers of interstate, interexchange services. Thus, section 254 (g)

applies to the interstate, interexchange services offered by CMRS

providers. If Congress had intended to exempt CMRS providers, it

presumably would have done so expressly as it did in other sections of

the Act. Thus, we reaffirm our earlier determinations that the rate

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integration language of section 254(g) applies to all providers of

interstate, interexchange services, including CMRS providers. We

conclude that any reference to the existing rate integration policy by

Congress or by this Commission merely identified the overarching policy

under consideration, and was not intended to exempt from application of

that policy any carrier or class of carriers, as the petitioning

parties suggest.

4. Because the language of the statute is unambiguous and plainly

applies to CMRS providers, we need not examine the legislative history

of section 254(g). Assuming, arguendo, some ambiguity in the statutory

language, thus requiring an examination of the legislative history, we

find nothing in that legislative history that unambiguously indicates

that CMRS providers are exempted from section 254(g). The language

referenced by the CMRS providers could readily be read as identifying

the policy to be applied to all providers of interstate, interexchange

services as reasonably as it could be read to suggest the codification

of rate integration as applied to the wireline industry.

5. Similarly, we reject the argument raised by AirTouch that

Congress did not intend rate integration to apply to CMRS providers

because rate integration is unnecessary to achieve the policy goals

underlying section 254(g). AirTouch states that rate integration is

designed to enable subscribers in rural and offshore areas to obtain

some of the benefits of rate decreases created by competitive pressures

on access charges and long-distance rates in more urban areas, and to

protect customers in those areas from bearing the full burden of higher

local exchange costs. AirTouch appears to conflate rate integration

with rate averaging. Rate averaging, which is also required by section

254(g), does have the described effect of protecting customers in high

cost local exchange areas from bearing the full burden of those costs.

Rate integration, on the other hand, generally focuses on the distance-

sensitive aspects of the rate structures for interexchange services. It

protects noncontiguous parts of the United States, such as Alaska and

Hawaii, from being discriminated against because they are not part of

the contiguous 48 states. AirTouch's focus on exchange cost differences

is, therefore, misplaced and we disagree with its interpretation of the

statute.

6. Although CMRS providers may be characterized as providers of

exchange and exchange access services, that characterization does not

preclude a finding that some of a CMRS provider's service offerings are

interstate, interexchange services. While CMRS providers do not pay

access charges for originating or terminating local exchange calls,

CMRS providers do pay access charges when an interexchange call

originates or terminates on landline facilities. Similarly, that, in

some instances, CMRS providers are regulated in a manner different from

other carriers, does not compel a conclusion that the interstate,

interexchange services of CMRS providers are not subject to the rate

integration requirements of section 254(g).

7. We also reject the argument that applying section 254(g) to CMRS

providers is inconsistent with section 332 of the Act because it

allegedly undermines the distinct deregulatory paradigm applicable to

CMRS providers. Bell Atlantic Mobile asserts that the price regulation

required by section 254(g) is precisely that which the Commission and

Congress have deemed unnecessary and harmful to the public interest in

the CMRS context. Section 332(c), however, expressly provides that

sections 201 and 202 of the Act shall continue to apply to CMRS

providers. Section 201(b) requires just and reasonable rates and 202(a)

prohibits rates that are unreasonably discriminatory. These

requirements necessarily imply some degree of regulatory concern with

prices; section 332 cannot, therefore, be read to bar every form of

oversight over CMRS rates. Furthermore, the rate integration policy

codified in section 254(g) derived from section 202(a) the requirement

that rates not be unreasonably discriminatory. Finally, we note that

other provisions of Title II of the Act apply to CMRS providers. For

example, the interconnection requirements of section 251(a) clearly

apply to CMRS providers; CMRS providers are as capable as any other

carrier of invoking the protections of section 253; and, CMRS providers

are among the providers of interstate services who are required to make

universal service contributions pursuant to section 254(d). Thus, we

conclude that the application of section 254(g) to CMRS providers is

not inconsistent with section 332.

8. We find unpersuasive the argument that, because we held that

CMRS rates did not have to be integrated with the rates of affiliated

long-distance providers, we did not intend rate integration to apply to

CMRS providers. Rather, that decision addresses the issue of how rate

integration should be applied to different interstate, interexchange

services, and was consistent with the long-standing Commission practice

of applying rate integration on a service-by-service basis. That

decision does not address the question of whether rate integration

should apply to CMRS providers at all. Similarly, CMRS providers'

exemption from the equal access requirements applicable to incumbent

LECs does not, as some CMRS providers suggest, address whether CMRS

providers provide interstate, interexchange services and thus whether

rate integration should apply to CMRS providers.

9. Several petitioners allege that the Commission gave inadequate

notice to permit application of section 254(g) to CMRS providers. As we

stated in the Rate Integration Stay Order, we do not agree that

inadequate notice was given to hold that the rate integration

requirements of section 254(g) apply to CMRS providers. The language of

section 254(g) applies to providers of interexchange telecommunications

services with no exceptions enumerated. Elsewhere in the Act, as we

noted above, when Congress wanted to exempt CMRS providers from a

requirement of the Act, it did so expressly. The words of the statute

clearly encompass CMRS providers and legally obligate them to integrate

their interstate, interexchange services. Our rule, implementing

section 254(g), merely reiterated the precise terms of the statute.

Further, we note that in Policy and Rules Concerning the Interstate,

Interexchange Marketplace, Notice of Proposed Rulemaking, CC Docket No.

96-61, 11 FCC Rcd 7141 (1996), 61 FR 14717 (April 3, 1996), we stated

that an interexchange call includes all means of connecting two points,

``wireline or wireless.'' Specific notice of our intent to apply the

plain language of the statute was not required. We, therefore, find no

relevant lack of notice regarding the application of rate integration

requirements to providers of CMRS services.

10. Our conclusion that adequate notice was given of the

application of section 254(g) to CMRS providers is not altered by the

fact that no party commented on the application of rate integration to

CMRS providers. As noted above, section 254(g), by its own terms,

applies to providers of interexchange services. CMRS providers,

therefore, should have been on notice that the rulemaking proceeding

could affect their interests. Although rate integration had not

previously been applied to CMRS providers, the CMRS industry had been

subject to the rate regulation of section 202(a) of the Act and, thus,

the industry should have been alert to the broad scope of section

254(g), which has its origins in section 202(a).

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Moreover, section 254(g) was enacted as part of the 1996 Act;

therefore, the application of that section to the CMRS industry does

not represent a change in Commission policy requiring more specific

notice. Finally, we conclude that because we only codified the language

of section 254(g), we find no issue concerning the adequacy of the

record to support adoption of the rule.

11. In any event, we find that the present reconsideration record

supports the conclusion that section 254(g) applies to CMRS providers.

We note that we stayed application of the affiliation requirement and

application of rate integration to wide-area plans, the two cases in

which we believe we would benefit from a fuller record. We continue to

believe a fuller record on these two issues would be beneficial and,

therefore, will seek further comment on those issues to develop a

better record in a separate proceeding.

12. AirTouch notes that CMRS carriers are not mentioned in the

regulatory flexibility analysis assessing the administrative burden of

regulations on industry, and asserts that this reflects a lack of

intent that section 254(g) be applied to CMRS providers. While the

Final Regulatory Flexibility Act analysis in the Rate Integration

Order, Policy and Rules Concerning the Interstate, Interexchange

Marketplace, Implementation of Section 254(g) of the Communications Act

of 1934, as amended, CC Docket No. 96-61, Report and Order, 11 FCC Rcd

9564 (1996), 61 FR 42558 (August 16, 1996) (Rate Integration Order),

did not assess the administrative burden of regulations on CMRS

providers, as AirTouch indicates, the omission does not evidence a lack

of intent to apply section 254(g) to CMRS providers. We have prepared a

Supplemental Final Regulatory Flexibility Act analysis to redress our

inadvertent oversight. No party has claimed that the omission caused

material harm. Indeed, in the Rate Integration Stay Order, we stayed

application of the rate integration requirement to wide-area plans and

across affiliates. Accordingly, those requirements had no impact on

small entities.

13. We conclude that treating intra-MTA (major trading area) calls

as not being subject to rate integration is consistent with the

definition of ``telephone exchange service.'' The Act defines

``telephone exchange service'' as ``service within a telephone

exchange, or within a connected system of telephone exchanges within

the same exchange area * * * and which is covered by the exchange

service charge, or * * * comparable service provided through a system

of switches, transmission equipment, or other facilities (or

combination thereof) by which a subscriber can originate and terminate

a telecommunications service.'' 47 U.S.C. 153(47). In Implementation of

the Local Competition Provisions of the Telecommunications Act of 1996,

CC Docket No. 96-98, First Report and Order, 11 FCC Rcd 15499, 15998-

16000 (1996), 61 FR 45476 (August 29, 1996) (Local Competition Order),

Order on Reconsideration, 11 FCC Rcd 13042 (1996), 61 FR 52706 (October

8, 1998), vacated in part sub nom. Iowa Utils. Bd. v. FCC, 120 F.3d 753

(8th Cir. 1997), cert. granted sub nom. AT&T Corp. v. Iowa Utils. Bd.,

118 S.Ct. 879 (1998), we concluded that cellular, broadband PCS, and

covered SMR providers fall within at least the second part of this

definition because they provide ``comparable service'' to telephone

exchange service. Our determination was based on the finding that, as a

general matter, CMRS carriers provide local, two-way switched voice

service as a principal part of their business. Cellular and PCS

providers, however, are not LECs, as that term is defined in section

3(26) of the Act. Treating intra-MTA CMRS calls as local also is

consistent with our conclusion in the Local Competition Order, 11 FCC

Rcd 16,014, that MTAs defined the area in which reciprocal compensation

applies to interconnections between incumbent LECs and CMRS providers.

Because of the mobility of CMRS customers, the MTA, rather than a

smaller area, such as the CMRS provider's license area or a wireline

exchange area, reflects the minimum area in which customers may be

expected to travel and within which they would expect not to pay toll

charges. Pursuant to this approach, calls within an MTA that would be

interstate will not be treated as interexchange.

14. We provide two further clarifications that follow from the

finding that traffic that originates and terminates within an MTA does

not constitute interexchange service. First, we clarify that when a

customer is roaming, a call within the MTA of the roamed upon CMRS

provider is not ``interexchange.'' This clarification ensures that

intra-MTA calls are not ``interexchange'' service, thus triggering rate

integration, regardless of the location of the customer. Second, we

clarify that when a CMRS provider performs only an exchange access

function, and an unaffiliated interexchange carrier transports and

bills for the call to a destination in a different state outside the

MTA, that exchange access function is not ``interstate, interexchange''

for purposes of section 254(g). We conclude that this clarification is

necessary to ensure that our treatment here is akin to our treatment of

incumbent LEC access charges, which are not required to be integrated.

15. Several CMRS providers seek clarification or reconsideration of

the application of rate integration to roaming and airtime charges. We

plan to seek additional comment on these issues in a Further Notice.

Two additional sets of issues remain: (1) The treatment of wide-area

calling plans; and, (2) the affiliation requirements applicable to CMRS

providers for purposes of determining compliance with rate integration.

We will resolve these issues on the basis of the more complete record

developed in response to the Further Notice.

III. Petitions for Forbearance

16. The petitions for forbearance generally request that we forbear

from applying the rate integration provisions of section 254(g) to

interstate, interexchange services offered by CMRS providers, if the

Commission concludes that section 254(g) applies to those services.

Section 10(a) of the Act sets forth a three-part standard to be applied

in addressing petitions for forbearance: a carrier may petition the

Commission for forbearance from any statutory provision or regulation,

and the Commission shall grant such petition if it determines that: (1)

Enforcement of the requirement is not necessary to ensure that rates

are just and reasonable, and are not unjustly and unreasonably

discriminatory; (2) the regulation is not necessary to protect

consumers; and (3) forbearance is consistent with the public interest.

Section 10(b) further provides that the Commission ``shall consider

whether forbearance from enforcing the regulation will promote

competitive market conditions, including the extent to which such

forbearance will enhance competition among providers of

telecommunications services.'' As fully discussed below, we conclude

that the petitioners have not met the standard for the grant of

forbearance and, for this reason, we must deny their petitions.

17. We conclude that the petitioners have not met their burden with

respect to the first and second prongs of the forbearance standard. We

are concerned that, without rate integration, CMRS providers would,

when consistent with their economic interests, discriminate against the

offshore points. Our concerns are not eliminated by the CMRS providers'

claims that CMRS rates are falling, or that PCS rates are

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lower than cellular rates. Similarly, CMRS providers' few cited

anecdotal instances of the offering of rates that comply with the rate

integration requirement of section 254(g) do not ensure that such rates

will be offered by all CMRS providers in the future. Moreover, although

CMRS providers contend generally that rate integration would interfere

with competition, resulting in less consumer choice, we find no

specific persuasive arguments on this record to support those

contentions.

18. Specifically, we find that the petitioners have not shown that,

in the absence of rate integration, CMRS rates will be just and

reasonable and not unjustly or unreasonably discriminatory. Indeed, we

conclude that rate integration is necessary to ensure that

nondiscriminatory charges and practices are offered with respect to

CMRS services to and from the offshore points. Moreover, as noted by

Alaska, even if rate integrated service plans are available in all

parts of the United States, nothing in the record suggests that the

existence of the rate integration requirement is not a significant

cause of that condition. We also agree that there is no evidence to

show that rate integration is not necessary for the protection of

consumers. Alaska notes, for example, that Bell Atlantic Mobile's

argument that consumers benefit from its plan offering one long-

distance rate is misplaced because Bell Atlantic Mobile does not offer

service to subscribers in Alaska and Hawaii. Thus, although the cost to

a Bell Atlantic Mobile customer calling Alaska or Hawaii might be the

same as the cost of a call elsewhere in the continental United States,

that fact does not protect the interests of consumers in Alaska or

Hawaii because they generally would not be paying the long distance

charges.

19. We also agree with Hawaii and Alaska that a broad grant of

forbearance would not be consistent with the public interest, as

required by the third prong of the forbearance standard. The public

interest here, as reflected by the inclusion of CMRS providers in

section 254(g), is the integration of offshore points into the

interexchange rate patterns of CMRS services to prevent discrimination

against those locations. Therefore, in order to satisfy the public

interest, CMRS providers must explain how the benefits of section

254(g) can be attained if we forbear from applying the rate integration

requirement of section 254(g) to the interstate, interexchange services

of CMRS providers. We conclude that the petitioners have not made the

required demonstration.

20. The argument against forbearance is particularly compelling

with respect to separately-stated long distance charges. Many CMRS

providers offer service plans that include a toll charge assessed for a

long-distance call that is separate from the airtime charge. When the

CMRS provider provides the link to the distant location, either through

its own facilities or through the resale of a long-distance provider's

service, and bills separately for that service, we find that the CMRS

provider is providing an interexchange service. If that call terminates

in a state different from the state in which the call originates, the

service is an interstate, interexchange service covered by the rate

integration requirement of section 254(g).

21. We conclude that it would not be consistent with just and

reasonable rates, the protection of consumers, and the public interest

to forbear from applying the rate integration requirement of section

254(g) to separately-stated toll charges for interstate, interexchange

services provided by CMRS providers. For separately stated CMRS toll

charges, we do not see how the policy considerations regarding rate

integration differ materially from those in the non-CMRS context.

Applying rate integration of separately-stated toll charges appears to

be at the heart of the congressional policy of section 254(g)), which

was enacted despite the existence of multiple interexchange carriers.

22. Pursuant to section 10(b), we also have considered whether

forbearance from enforcing the rate integration requirement of section

254(g) will promote competitive market conditions. Although CMRS

providers contend that rate integration would interfere with

competition, we find no persuasive record evidence to support that

contention or, conversely, that competitive conditions will be promoted

in the absence of rate integration. Moreover, we agree that forbearance

from rate integration cannot be justified on competitive conditions

alone. Hawaii correctly notes we have previously rejected this

argument. Prior to the enactment of section 254(g), we already had

determined that all IXCs were non-dominant in the domestic market and

had found that most major segments of the interexchange market were

subject to substantial competition. Nothing suggests that Congress was

unaware of the state of competition in the interexchange market in

enacting section 254(g). Indeed, we find that Congress's enactment of

section 254(g), even after the Commission's determination that major

segments of the interexchange market were subject to substantial

competition, establishes the importance Congress placed on a nationwide

policy of rate integration that was applicable to all providers of

interstate, interexchange services.

23. Contrary to the assertions of several CMRS providers, our

finding in Implementation of Sections 3(n) and 332 of the

Communications Act, Regulatory Treatment of Mobile Services, Second

Report and Order, GN Docket No. 93-252, 9 FCC Rcd 1411 (1994), 59 FR

18493 (April 14, 1994) (CMRS Forbearance Order), that there was

sufficient competition in the CMRS market to justify forbearance from,

inter alia, the tariffing requirements of section 203-205, do not

require forbearance with respect to section 254(g). The CMRS

Forbearance Order, adopted pursuant to section 332, primarily addressed

the tariff filing requirement and its competitive implications. The

rate integration requirement of section 254(g) creates a substantive

pricing requirement which raises different competitive considerations

than do tariff requirements. Moreover, section 332(c), by its terms,

prohibits forbearance from application of section 202(a) to the CMRS

industry. We note that 254(g) has its origins in section 202(a).

Accordingly, we find that our forbearance in the tariffing context has

no relevance to the question of forbearance here.

24. In sum, we conclude that the petitioners have not demonstrated

that forbearance from applying the rate integration requirements of

section 254(g) is consistent with just and reasonable or not unjustly

or unreasonably discriminatory rates in the CMRS context, the

protection of consumers, and the public interest. Similarly, we have

not found that forbearance from enforcing the rate integration

requirement of section 254(g) would promote competitive market

conditions. Accordingly, we cannot grant the forbearance requests. In a

separate proceeding, we will seek further comment on ways in which the

rate integration requirement of section 254(g) should be applied to

CMRS offerings. The expanded record evidence about the nature of CMRS

services and the ownership arrangements within the industry will permit

us to more fully evaluate rate integration in the CMRS context, develop

rules specific to CMRS services, or, if appropriate, forbear in some

instances.

25. The forbearance petitions generally sought forbearance from the

application of rate integration to all interstate, interexchange

services

[[Page 5003]]

offered by CMRS providers. In addition, several CMRS providers argue

that, if we do not forbear totally from applying rate integration to

interstate, interexchange offerings of CMRS providers, we should apply

rate integration only to services for which the long-distance charges

are separately billed. We conclude that the present record does not

establish that the forbearance standard of section 10 of the Act has

been met with respect to this matter. For example, the record does not

establish that forbearance would be consistent with the public

interest. In addition, the record does not provide sufficient

information to determine whether certain types of airtime or roaming

charges, or some wide-area calling plans, fall within the definition of

interexchange services to which rate integration would apply; and, how

different affiliation requirements would affect the CMRS industry. We

seek comment on these issues in a separate rulemaking proceeding that

will permit us to develop rules specific to CMRS services. Accordingly,

we deny the remaining requests of the petitions for forbearance as

inconsistent with just and reasonable rates or not unjustly or

reasonably discriminatory rates; the protection of consumers; and the

public interest.

IV. Ordering Clauses

26. Accordingly, It is ordered, that the Petitions for

Reconsideration filed by AirTouch Communications, Cellular

Telecommunications Industry Association, PrimeCo Personal

Communications, L.P., Personal Communications Industry Association,

Telephone and Data Systems, Inc., BellSouth Corporation, and Bell

Atlantic Mobile, Inc. Are denied to the extent indicated herein.

27. It is further ordered that the Petitions for Forbearance filed

by AirTouch Communications, Cellular Telecommunications Industry

Association, PrimeCo Personal Communications, L.P., Personal

Communications Industry Association, Telephone and Data Systems, Inc.,

BellSouth Corporation, and Bell Atlantic Mobile, Inc. Are denied.

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

Affairs, Reference Operations Division, SHALL SEND a copy of this

Memorandum Opinion and Order, including the Supplemental Final

Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of

the Small Business Administration.

List of Subjects in 47 CFR Part 64

Communications common carriers.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Supplemental Final Regulatory Flexibility Act Analysis

29. As required by the Regulatory Flexibility Act (RFA), the

Commission incorporated an Initial Regulatory Flexibility Analysis

(IRFA) in the Rate Integration and Rate Averaging Notice in this

docket. The Commission sought written public comment on the proposals

in the Rate Integration and Rate Averaging Notice, including comment on

the IRFA. The Commission prepared a Final Regulatory Flexibility

Analysis (FRFA) of the possible significant economic impact the Rate

Integration Order might have on small entities. The FRFA did not,

however, analyze the possible significant economic impact the Rate

Integration Order might have on CMRS providers that were small

entities. The Commission has prepared this supplemental FRFA of the

possible significant economic impact the Rate Integration Order might

have on CMRS providers that are small entities, in conformance with the

RFA.

A. Need for and Objectives of Rules

30. In the 1996 Act, Congress directed the Commission to develop

rules implementing the provisions of section 254(g) within six months

of its enactment. The Commission adopted rules implementing the

provisions of section 254(g) in the Rate Integration Order. The

objective of these rules is to incorporate the policies of geographic

rate averaging and rate integration of interexchange services in order

to ensure that subscribers in rural and high cost areas throughout the

Nation are able to continue to receive both intrastate and interstate

interexchange services at rates no higher than those paid by urban

subscribers.

B. Summary of Significant Issues Raised by the Public Comments to the

IRFA

31. The IRFA solicited comment on alternatives to our proposed

rules that would minimize the impact on small entities consistent with

the objectives of this proceeding. No comments were submitted directly

in response to the IRFA. We have, however, kept small entities in mind

as we considered the more general comments filed in this proceeding, as

discussed below.

C. Description and Estimate of Number of Small Entities to Which the

Rules Will Apply

32. The RFA directs agencies to provide a description of and, where

feasible, an estimate of the number of small entities that may be

affected by the proposed rules, if adopted. The RFA generally defines

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

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

jurisdiction.'' In addition, the term ``small business'' has the same

meaning as the term ``small business concern'' under the Small Business

Act. A small business concern is one which: (1) Is independently owned

and operated; (2) is not dominant in its field of operation; and (3)

satisfies any additional criteria established by the Small Business

Administration (SBA).

(a) Cellular Radio Telephone Service

33. The Commission has not developed a definition of small entities

applicable to cellular licensees. Therefore, the applicable definition

of small entity is the definition under the SBA rules applicable to

radiotelephone companies. This definition provides that a small entity

is a radiotelephone company employing no more than 1,500 persons.

According to the 1992 census, which is the most recent information

available, only 12 radiotelephone firms out of a total of 1,178 such

firms which operated during 1992 had 1,000 or more employees.

Therefore, even if all 12 of these large firms were cellular telephone

companies, all of the remainder were small businesses under the SBA's

definition. We assume that, for purposes of our evaluations and

conclusions in this Supplemental FRFA, all of the current cellular

licensees are small entities, as that term is defined by the SBA.

Although there are 1,758 cellular licenses, we do not know the number

of cellular licensees, since a cellular licensee may own several

licenses.

(b) Broadband Personal Communications Service

34. The broadband PCS spectrum is divided into six frequency blocks

designated A through F. Pursuant to Sec. 24.720(b) of the Commission's

Rules, the Commission has defined ``small entity'' for Block C and

Block F licensees as firms that had average gross revenues of less than

$40 million in the three previous calendar years. This regulation

defining ``small entity'' in the context of broadband PCS auctions has

been approved by the SBA.

35. The Commission has auctioned broadband PCS licenses in all of

its spectrum blocks A through F. We do not have sufficient data to

determine how many small businesses under the Commission's definition

bid successfully for licenses in Blocks A and B. As of now, there are

90 non-defaulting winning bidders that qualify as small entities in the

Block C auction

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and 93 non-defaulting winning bidders that qualify as small entities in

the D, E, and F Block auctions. Based on this information, we conclude

that the number of broadband PCS licensees that would be affected by

the evaluations and conclusions in this Supplemental FRFA includes the

183 non-defaulting winning bidders that qualify as small entities in

the C, D, E, and F Block broadband PCS auctions.

(c) Specialized Mobile Radio

36. Pursuant to Section 90.814(b)(1) of the Commission's Rules, the

Commission has defined ``small entity'' for geographic area 800 MHz and

900 MHz SMR licenses as firms that had average gross revenues of no

more than $15 million in the three previous calendar years. This

regulation defining ``small entity'' in the context of 800 MHz and 900

MHz SMR has been approved by the SBA.

37. The section 254(g) requirements apply to SMR providers in the

800 MHz and 900 MHz bands. We do not know how many firms provide 800

MHz or 900 MHz geographic area SMR service, nor how many of these

providers have annual revenues no more than $15 million.

38. 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 under the Commission's definition in the

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

of geographic area SMR licensees affected by section 254(g) includes

these 60 small entities.

39. A total of 525 licenses were auctioned for the upper 200

channels in the 800 MHz geographic area SMR auction. There were 62

qualifying bidders, of which 52 were small businesses. The Commission

has not yet determined how many licenses will be awarded for the lower

230 channels in the 800 MHz geographic area SMR auction. There is no

basis to estimate, moreover, how many small entities within the SBA's

definition will win these lower channel licenses. Given the facts that

nearly all radiotelephone companies have fewer than 1,000 employees and

that no reliable estimate of the number of prospective 800 MHz SMR

licensees can be made, we assume, for purposes of our evaluations and

conclusions in this Supplemental FRFA, that all of the licenses for the

lower 230 channels will be awarded to small entities, as that term is

defined by the SBA.

(d) 220 MHz Service

The Commission has classified providers of 220 MHz service into

Phase I and Phase II licensees. There are approximately 2,800 non-

nationwide Phase I licensees and 4 nationwide licensees currently

authorized to operate in the 220 MHz band. The Commission recently

conducted the Phase II auction. There were 54 qualified bidders, of

which 47 were small businesses.

41. At this time, however, there is no basis upon which to estimate

definitively the number of phase I 220 MHz service licensees that are

small businesses. To estimate the number of such entities that are

small businesses, we apply the definition of a small entity under SBA

rules applicable to radiotelephone companies. This definition provides

that a small entity is a radiotelephone company employing no more than

1,500 persons. According to the 1992 Census, which is the most recent

information available, only 12 out of a total 1,178 radiotelephone

firms which operated during 1992 had 1,000 or more employees--and these

may or may not be small entities, depending on whether they employed

more or less than 1,500 employees. But 1,166 radiotelephone firms had

fewer than 1,000 employees and therefore, under the SBA definition, are

small entities. However, we do not know how many of these 1,166 firms

are likely to be involved in the phase I 220 MHz service.

(e) Mobile Satellite Services (MSS)

42. The Commission has not developed a definition of small entities

applicable to licensees in the international services. Therefore, the

applicable definition of small entity is the definition under the SBA

rules applicable to Communications Services, Not Elsewhere Classified

(NEC). This definition provides that a small entity is expressed as one

with $11.0 million or less in annual receipts. According to the Census

Bureau, there were a total of 848 communications services, NEC in

operation in 1992, and a total of 775 had annual receipts of less than

$9.999 million.

43. Mobile Satellite Services or Mobile Satellite Earth Stations

are intended to be used while in motion or during halts at unspecified

points. These stations operate as part of a network that includes a

fixed hub or stations. The stations that are capable of transmitting

while a platform is moving are included under Section 20.7(c) of the

Commission's Rules as mobile services within the meaning of Sections

3(27) and 332 of the Communications Act. Those MSS services are treated

as CMRS if they connect to the Public Switched Network (PSN) and also

satisfy other criteria of Section 332. Facilities provided through a

transportable platform that cannot move when the communications service

is offered are excluded from Section 20.7(c).

44. The MSS networks may provide a variety of land, maritime and

aeronautical voice and data services. There are eight mobile satellite

licensees. At this time, we are unable to make a precise estimate of

the number of small businesses that are mobile satellite earth station

licensees.

(f) Paging Service

45. The Commission has adopted a two-tier definition of small

businesses in the context of auctioning licenses in the paging service.

A small business is 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. The SBA has approved this

definition for paging companies.

46. The Commission estimates that the total current number of

paging carriers is approximately 600. In addition, the Commission

anticipates that a total of 16,630 non-nationwide geographic area

licenses will be granted or auctioned. The geographic area licenses

will consist of 2,550 Major Trading Area (MTA) licenses and 14,080

Economic Area (EA) licenses. In addition to the 47 Rand McNally MTAs,

the Commission is licensing Alaska as a separate MTA and adding three

MTAs for the U.S. territories, for a total of 51 MTAs. No auctions of

paging licenses have been held yet, and there is no basis to determine

the number of licenses that will be awarded to small entities. Given

the fact that no reliable estimate of the number of paging licensees

can be made, we assume, for purposes of this Supplemental FRFA, that

all of the current licensees and the 16,630 geographic area paging

licensees either are or will consist of small entities, as that term is

defined by the SBA.

(g) Narrowband PCS

47. The Commission has auctioned nationwide and regional licenses

for narrowband PCS. The Commission does not have sufficient information

to determine whether any of these licensees are small businesses within

the SBA-approved definition. At present, there have been no auctions

held for the MTA and Basic Trading Area (BTA) narrowband PCS licenses.

The Commission anticipates a total of 561 MTA licensees and 2,958 BTA

licensees will be awarded in the auctions. Those auctions, however,

have

[[Page 5005]]

not yet been scheduled. Given that nearly all radiotelephone companies

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

number of prospective MTA and BTA narrowband licensees can be made, we

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

that term is defined by the SBA.

(h) Air-Ground Radiotelephone Service

48. The Commission has not adopted a definition of small business

specific to the Air-Ground Radiotelephone Service, which is defined in

Section 22.99 of the Commission's rules. Accordingly, we will use the

SBA's definition applicable to radiotelephone companies, i.e., an

entity employing no more than 1,500 persons. There are approximately

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

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

D. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements

49. In the Rate Integration Order, and the Rate Integration

Reconsideration Order, we determined that section 254(g) applied to

interstate, interexchange services offered by CMRS providers. We expect

that those orders impose no significant new reporting or recordkeeping

requirements on CMRS providers. Those orders, however, require CMRS

providers to comply with the rate averaging and rate integration

requirement of section 254(g) in their service offerings. CMRS

providers, however, do not file tariffs except on some international

routes.

E. Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

50. Section 254(g) reflects a congressional determination that the

country's higher-cost, lower-volume markets should share in the

technological advances and increased competition characteristic of the

nation's telecommunications industry as a whole, and that interexchange

rates should be provided throughout the nation on a geographically

averaged and rate-integrated basis. We have decided that the statutory

objectives of section 254(g) require us to apply our rules to all

providers of interexchange service, including small ones. We have

chosen, however, to allow carriers to offer private line service and

temporary promotions on a de-averaged basis. In so doing, we have

minimized the impact our rules might otherwise have had, and enable

carriers to use such devices to enter new markets.

51. In addition, the Commission considered reducing the burdens on

small carriers by exempting them from compliance through forbearance.

However, we do not believe that forbearing at this time would be

consistent with the Congressional goals that underlie Section 254(g).

We could also have reduced burdens on small carriers by establishing

cost-support mechanisms. However, the present record does not justify

any such cost-support mechanisms. Accordingly, we decline to adopt

these alternative measures for small carriers.

F. Report to Congress

52. The Commission will send a copy of this order, including the

supplemental FRFA, in a report to be sent to Congress pursuant to the

Small Business Regulatory Enforcement Fairness Act of 1996. A summary

of this Memorandum Opinion and Order and this Supplemental FRFA will

also be published in the Federal Register, and will be sent to the

Chief Counsel for Advocacy of the Small Business Administration.

[FR Doc. 99-2407 Filed 2-1-99; 8:45 am]

BILLING CODE 5712-01-P