Implementation of the Communications Assistance for Law Enforcement Act

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 97-213; FCC 99-229]

Implementation of the Communications Assistance for Law

Enforcement Act

AGENCY: Federal Communications Commission.

ACTION: Policy statement.

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SUMMARY: This document examines the definition of ``telecommunications

carrier'' set forth in section 102 of the Communications Assistance to

Law Enforcement Act (CALEA), which determines which entities and

services are subject to the assistance capability and other

requirements of CALEA, and discusses how the definition applies to

various types of service providers. It also provides guidance regarding

the factors the Commission will consider in making determinations under

section 109 of CALEA as to whether compliance with CALEA's assistance

capability requirements is ``reasonably achievable'' for particular

carriers, and the showings to be made by entities filing petitions

under section 109.

FOR FURTHER INFORMATION CONTACT: Thomas Wasilewski, 202-418-1310.

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

Report and Order (Second R&O) in CC Docket No. 97-213, FCC 99-229,

adopted August 26, 1999, and released August 31, 1999. The complete

text of the Second R&O is available on the Commission's Internet site,

at www.fcc.gov. It is also available for inspection and copying during

normal business hours in the FCC Reference Information Center,

Courtyard Level, 445 12th Street, S.W., Washington, DC, and may be

purchased from the Commission's copy contractor, International

Transcription Services, Inc., CY-B400, 445 12th Street S.W.,

Washington, DC.

Synopsis of the Report and Order

1. The Commission adopts a Second Report and Order (Second R&O) in

CC Docket No. 97-213, regarding implementation of sections 102 and 109

of the Communications Assistance for Law Enforcement Act, Public Law

103-414, 108 Stat. 4279 (1994) (CALEA). Although the Notice of Proposed

Rule Making (NPRM) in this proceeding (which can be found at 62 FR

63302, Nov. 11, 1997) proposed certain rules, the Second R&O does not

adopt rules regarding sections 102 and 109.

2. Section 102 Issues: CALEA does not modify the existing

surveillance laws. Instead, it requires telecommunications carriers to

ensure that their facilities are capable of providing the surveillance

law enforcement is authorized to conduct. The language and legislative

history of CALEA provide sufficient guidance as to what the term

``telecommunications carrier'' means, such that it can be applied to

particular carriers, their offerings and facilities.

3. Subsections 102(8)(A) and (B) identify what entities are subject

to CALEA: essentially, common carriers offering telecommunications

services for sale to the public. Section 103(a) clarifies that the

assistance capability requirements apply to ``equipment, facilities, or

services that provide a customer or subscriber with the ability to

originate, terminate, or direct communications. * * *'' The House

Report provides further clarification in terms of the functions of

covered services, stating: ``Thus, a carrier providing a customer with

a service or facility that allows the customer to obtain access to a

publicly switched network is responsible for complying with the

capability requirements'' (H.R. Rep. No. 103-827(I), at 26 (1994).) The

House Report also describes CALEA's focus in terms of law enforcement

agencies' traditional surveillance requirements: ``The only entities

required to comply with the [assistance capability] requirements are

telecommunications common carriers, the components of the public

switched network where law enforcement agencies have served most of

their surveillance orders.'' (Id., at 21.) Further, the legislative

history contains examples of the types of service providers subject to

CALEA: ``The definition of `telecommunications carrier' includes such

service providers as local exchange carriers, interexchange carriers,

competitive access providers (CAPs), cellular carriers, providers of

personal communications services (PCS), satellite-based service

providers, cable operators, and electric and other utilities that

provide telecommunications services for hire to the public, and any

other wireline or wireless service for hire to the public.'' (140 Cong.

Rec. H-10779 (daily ed. October 7, 1994) (statement of Rep. Hyde).)

4. The legislative history of CALEA makes clear that the

requirements of CALEA do not necessarily apply to all offerings of a

carrier. The House Report states: ``[C]arriers are required to comply

only with respect to services or facilities that provide a customer or

subscriber with the ability to originate, terminate or direct

communications.'' (H.R. Rep. No. 103-827(I), at 21.) Thus, an entity is

a telecommunications carrier subject to CALEA to the extent it offers,

and with respect to, such services.

5. CALEA also makes clear that its requirements do not apply to

certain entities and services. Subsection 102(8)(C) of the definition

specifically excludes information services, and the legislative history

makes clear that CALEA does not apply to private network services:

[T]elecommunications services that support the transport or

switching of communications for private networks or for the sole

purpose of interconnecting telecommunications carriers * * * need

not meet any wiretap standards. PBXs are excluded. So are automated

teller machine (ATM) networks and other closed networks. Also

excluded from coverage are all information services, such as

Internet service providers or services such as Prodigy and America-

On-Line.

All of these private network systems or information services can

be wiretapped pursuant to court order, and their owners must

cooperate when presented with a wiretap order, but these services

and systems do not have to be designed so as to comply with the

capability requirements.

6. CALEA's definitions of ``telecommunications carrier'' and

``information services'' were not

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modified by the 1996 Act, and the CALEA definitions therefore remain in

force for purposes of CALEA. The pertinent sections of CALEA are not

part of the Communications Act. Further, the 1996 Act expressly

provides that it did not alter existing law by implication, and in the

1996 Act Congress did not repeal or even address the CALEA definitions.

Although in virtually all cases the definitions of the two Acts will

produce the same results, as a matter of law the entities and services

subject to CALEA must be based on the CALEA definition, independently

of their classification for the separate purposes of the Communications

Act.

7. Common Carriers and Utilities. All entities previously

classified as ``common carriers'' are considered telecommunications

carriers for the purposes of CALEA, as are cable operators and electric

and other utilities to the extent they offer telecommunications

services for hire to the public. Such entities offer services (some

subject to CALEA, some not) that use copper-wire, cable, fiber-optic,

and wireless facilities to provide traditional telephone service, data

service, Internet access, cable television, and other services. The

Act's legislative history identifies such entities as subject to CALEA

to the extent that their service offerings satisfy CALEA's description

of covered services. Entities are not subject to CALEA, however, with

respect to services and facilities leased for private networks,

pursuant to the statute. In addition, cable television is an example of

a service not covered by CALEA because it is not a

``telecommunications'' service, even if delivered via the same

transmission facility as other, covered services.

8. It is unnecessary to adopt the FBI's recommendation not to use

the adverb ``indiscriminately'' in clarifying the definition of

telecommunications carrier. The FBI is concerned that the inclusion of

this term may allow companies that hold themselves out to serve only

particular groups to undermine CALEA, intentionally or inadvertently,

by creating a loophole that would permit criminals to use

telecommunications providers that do not indiscriminately offer their

services to the public. However, the courts have long held that a

common carrier is one that holds itself out to serve the public

indiscriminately. This does not amount to a threshold test that a

service provider is a common carrier only if it serves all who seek

service. Instead, it is simply a restatement of the proposition that

common carriage status involves offering one's services to the general

public.

9. Commercial Mobile Radio Services (CMRS). CMRS providers are

considered telecommunications carriers for the purposes of CALEA. This

result is required by section 102(8)(B)(i) of CALEA, which states that

the definition of ``telecommunications carrier'' includes ``a person or

entity engaged in providing commercial mobile service (as defined in

section 332(d) of [the Communications Act]).'' Section 332(d) in turn

defines the term ``commercial mobile service'' as ``any mobile service

* * * that is provided for profit and makes interconnected service

available (A) to the public or (B) to such classes of eligible users as

to be effectively available to a substantial portion of the public. * *

*''

10. Certain commenters claim that some entities normally classified

as CMRS should not be considered subject to CALEA because they do not

meet CALEA's definition of telecommunications carrier or are not

technologically capable of CALEA compliance. Examples cited include

providers serving niche business markets with limited interconnect

capability, such as Industrial/Business Radio Services licensees

offering for-profit interconnected service, local interconnected

Specialized Mobile Radio (SMR) providers, and for-profit commercial

interconnected 220 MHz service licensees. To the extent these services

consist of interconnected service offered to the public, however, they

meet the definition of CMRS set forth in section 332(d) and the

entities offering them therefore must be considered telecommunications

carriers subject to CALEA.

11. To the extent ``traditional'' SMR service offers

interconnection, it meets the definition of CMRS and thus is subject to

CALEA, but otherwise not. Similarly, push-to-talk ``dispatch'' service

is subject to CALEA to the extent it is offered in conjunction with

interconnected service, because in such case it is a switched service

functionally equivalent to a combination of speed dialing and

conference calling, but otherwise not. Thus, in any given case, the

services an entity offers would determine its CALEA responsibilities.

12. The Commission recognizes that in certain cases compliance with

the CALEA assistance capability requirements may be economically

burdensome, or even impossible. In these cases, providers are allowed

to seek extensions under section 107(c) of CALEA, or may seek relief

under section 109. The Commission is also prepared to reexamine this

issue once it has gained some experience in applying section 109.

Exempting entire classes of CMRS services is not warranted, however,

absent a more complete record on the resultant impact on operators and

on CALEA objectives.

13. Private Mobile Radio Services (PMRS). PMRS operators are not

telecommunications carriers subject to CALEA when they offer PMRS

services, but the determination of whether a particular mobile service

offering is private or common carrier depends on the nature of the

service and to whom it is offered. Although private and common carrier

services are by definition mutually exclusive, see 47 U.S.C. 332(d)(3),

a given carrier may offer both. Where a PMRS operator uses its

facilities to offer interconnected service for profit to the public, or

a substantial portion of the public, that service qualifies as CMRS,

and thus is subject to CALEA.

14. Resellers. Resellers, as telecommunications carriers under the

terms of section 102, are generally subject to CALEA. However,

resellers' responsibility under CALEA is limited to their own

facilities, and they will therefore not be held responsible for the

CALEA compliance responsibilities of the carrier whose services they

are reselling with respect to the latter's underlying facilities.

Further, because their offerings are limited to essentially private

networks, most PBX providers and many aggregators would fall outside

the scope of CALEA.

15. Pay Telephone Providers. Pay telephone providers are excluded

from the CALEA definition of telecommunications carrier. The CALEA

legislative history states that ``[t]he only entities required to

comply with the functional requirements are telecommunications common

carriers, the components of the public switched network where law

enforcement agencies have always served most of their surveillance

orders.'' (H.R. Rep. No. 103-827(I), at 21.) Moreover, pay telephone

providers do not have the information and the means to effectuate

lawful electronic surveillance, which is maintained by the carriers who

provide switched telephone services to pay telephone providers.

16. Information Services (IS) and Calling Features. Where

facilities are used solely to provide an information service, whether

offered by an exclusively-IS provider or by a common carrier that has

established a dedicated IS system apart from its telecommunications

system, such facilities are not subject to CALEA. Where facilities are

used to provide both telecommunications and information services,

however, such joint-use facilities are subject to CALEA in order

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to ensure the ability to surveil the telecommunications services.

(Moreover, CALEA is technology neutral, and a carrier's choice of

technology when offering common carrier services thus does not change

its obligations under CALEA.) For example, digital subscriber line

(DSL) services are generally offered as tariffed telecommunications

services, and therefore subject to CALEA, even though the DSL offering

often would be used in the provision of information services. On the

other hand, where an entity uses its own wireless or satellite

facilities to distribute an information service only, the mere use of

transmission facilities would not make the offering subject to CALEA as

a telecommunications service.

17. Calling features such as call forwarding (and the corresponding

voice mail feature, call redirection), call waiting, three-way (i.e.,

conference) calling, and speed dialing are considered to be so closely

related to basic service that they are treated as adjuncts to it. See

North American Telecommunications Ass'n, 101 FCC 2d 349 (1985), recon.

denied, 3 FCC Rcd 4385 (1988). They are also like traditional pen

registers and traps and traces in that they relate to the set-up or

routing of telecommunications, rather than its content. Moreover, the

legislative history of CALEA explicitly states that they are covered

services. Accordingly, these specific calling features will be

considered covered by CALEA, whether offered over wireline or wireless

facilities.

18. Other Issues. It is not necessary at this time either to

identify by rule additional classes of entities within CALEA's

definition of telecommunications carrier, pursuant to section

102(8)(B)(ii), or to exempt in the Commission's rules any classes

pursuant to section 102(8)(C)(ii). Moreover, codification in the

Commission's rules of a list of examples would run the risk of being

considered definitive rather than merely illustrative, and such a list

is therefore not adopted.

19. Section 109 Issues: Section 109(b)(1) of CALEA provides that

any interested person may petition the Commission for a determination

regarding whether compliance with the assistance capability

requirements of section 103 of CALEA is ``reasonably achievable'' with

respect to any equipment, facility, or service installed or deployed

after January 1, 1995. Section 109(b) provides that, in making

determinations as to reasonable achievability, ``the Commission shall

determine whether compliance would impose significant difficulty or

expense on the carrier or on the users of the carrier's system and

shall consider the following factors'':

A. The effect on public safety and national security;

B. The effect on rates for basic residential telephone service;

C. The need to protect the privacy and security of communications

not authorized to be intercepted;

D. The need to achieve the capability assistance requirements of

section 103 by cost-effective methods;

E. The effect on the nature and cost of the equipment, facility, or

service at issue;

F. The effect on the operation of the equipment, facility, or

service at issue;

G. The policy of the United States to encourage the provision of

new technologies and services to the public;

H. The financial resources of the telecommunications carrier;

I. The effect on competition in the provision of telecommunications

services;

J. The extent to which the design and development of the equipment,

facility, or service was initiated before January 1, 1995;

K. Such other factors as the Commission determines are appropriate.

20. Some commenters suggested that certain of these factors should

be accorded special significance, while others suggested that

additional factors should be considered. It would be premature at this

point to assign special weight to any one factor generally, or to adopt

additional factors. Legislative history indicates that CALEA ``seeks to

balance three key policies: (1) to preserve a narrowly focused

capability for law enforcement agencies to carry out properly

authorized intercepts; (2) to protect privacy in the face of

increasingly powerful and personally revealing technologies; and (3) to

avoid impeding the development of new communications services and

technologies.'' (H.R. Rep. No. 103-827(I), at 13.) In light of the

overall purpose of CALEA to preserve law enforcement's ability to

conduct surveillance, the Commission must in all cases consider public

safety and, where applicable, national security, in its analysis of

section 109 petitions. At the same time, given the importance Congress

has placed on the privacy and security of communications that are not

the targets of court-ordered surveillance, and the need to ensure that

the development of new technologies and services is not impeded, those

factors involving privacy and innovation are also likely to be

important in many cases. However, the technological diversity of

carrier networks, as well as other carrier characteristics, will, as a

matter of course, mean that certain factors will be more important to

the arguments of certain carriers than others, and that not all of the

factors enumerated in section 109 may be relevant to the analysis of a

given reasonable achievability petition.

21. A central concern to many commenters is the issue of how the

Commission will approach the cost of CALEA compliance when evaluating

section 109 petitions. As a general principle, in making judgments

under section 109, the Commission will look only to the additional cost

incurred in making equipment and facilities CALEA compliant. In many

instances carriers will become CALEA compliant in the course of general

network upgrades, and will recover any additional cost of CALEA

compliance through their normal charges. (If, in particular, law

enforcement and industry reach agreements regarding switch

prioritization that enable the Commission to grant extensions of time

under section 107(c) allowing carriers to make certain equipment CALEA

compliant as part of the normal upgrade cycle, with resulting low

compliance costs, the Commission would expect such compliance generally

to be reasonably achievable. On the other hand, there may be cases in

which law enforcement opposes any extension of time for making

particular equipment CALEA compliant, resulting in substantial

additional costs to a carrier. In those cases, compliance could be

considered not to be reasonably achievable.) The Commission expects

that CALEA solutions that would require a carrier to change vendors in

order to purchase costly new switching equipment, or to replace costly

existing facilities, would generally not be deemed reasonably

achievable. Any petitioner who argues that it is unable to comply with

CALEA for reasons of cost must present quantitative cost information

that is as detailed, accurate and complete as possible, which the

Commission will analyze along with any technological problems related

to the nature of the equipment, facility, or service at issue. Large

carriers with multiple switch types in networks that cover large or

diverse areas may present data on a per-switch basis, in order to

identify compliance problems specific to particular segments of the

carrier's network.

22. In order to distinguish the additional costs of CALEA

compliance from the costs of general network upgrades, costs will be

considered related to CALEA compliance only if

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carriers can show that they would not have been incurred but for the

implementation of CALEA. For instance, costs incurred as an incidental

consequence of CALEA compliance are not directly related to CALEA

compliance and should be excluded from the carrier's showing. Finally,

general overhead costs cannot be allocated to CALEA compliance, only

additional overheads incremental to and resulting from CALEA

compliance.

23. Carrier size and geographic location may be significant

considerations under section 109. However, if law enforcement and the

telecommunications industry agree on a flexible CALEA deployment

schedule that results in an extension of the current compliance

deadline for equipment and facilities in areas that are not high

priorities for law enforcement, it is not likely that many small rural

carriers will need relief under section 109.

24. Implementation of section 109 should seek to minimize any

adverse effects of CALEA compliance on quality of service and

subscriber rates. This approach is consistent with the mandate to the

Commission in section 109(b)(1) to determine ``whether compliance would

impose significant difficulty or expense on the carrier or the users of

the carrier's systems . . . .'' Moreover, the same section directs the

Commission to consider the effect of compliance on rates for ``basic

residential telephone service,'' reflecting a special Congressional

concern about rate impacts for that service. (In addition, under

section 107(b), one of the factors that the Commission is to consider

in establishing technical requirements or standards is minimizing the

cost of compliance on residential ratepayers.) However, the arguments

in this record that CALEA compliance will increase rates, affect

quality of service, make particular technologies and services

unprofitable, prevent the introduction of services to the market, or

price services out of the reach of certain groups of customers, are at

this point inherently speculative. Any such arguments made in

individual petitions under section 109 will be given substantial weight

only to the extent they are made with particularity and are grounded on

specific quantitative data.

25. The Commission may consider the financial resources of

individual telecommunications carriers under section 109(b)(1)(H), and

industrywide competitive pressures under section 109(b)(1)(I), in

evaluating section 109 petitions. Requests for relief based on such

factors must be supported by carrier- or industry-specific facts,

including quantitative data. Special consideration for a new market

entrant would not necessarily be tantamount to an unfair subsidy.

26. Any petitioner who seeks relief under section 109 on the basis

of the delay in the adoption of assistance capability standards must

present carrier- or equipment-specific facts demonstrating that such

delay actually has made CALEA compliance infeasible. Claims alleging a

lack of CALEA-compliant software and hardware on the market will be

taken into consideration in the evaluation of section 109 petitions,

but only if raised with sufficient specificity and supported with a

particularized showing. Law enforcement need not demonstrate that

equipment or facilities have been used for criminal activity in cases

where reasonable achievability petitions are filed before CALEA-

compliant hardware or software is available. With respect to the FBI's

delay in issuing capacity requirements, there has now been ample time

for industry to evaluate these requirements, and the Commission does

not expect to grant section 109 petitions on the basis of the timing of

the issuance of the requirements.

27. Pursuant to section 109(b)(1)(J), the extent to which the

design and development of equipment was initiated before January 1,

1995, will be considered to the extent appropriate in the Commission's

examination of section 109 petitions. In commenting on section

109(b)(1)(J), certain parties argue as well that the definition of

``installed or deployed'' adopted by the FBI as part of its cost

recovery rules is excessively narrow in restricting its application to

equipment, facilities, and services ``operable and available for use''

by a carrier's customers by January 1, 1995. (The FBI's final cost

recovery rules are set forth at 28 CFR 100.9-100.21. The FBI's

definition in its rules of ``installed or deployed'' is found at 28 CFR

100.10.) Under section 109(e) of CALEA, the Attorney General is vested

with the responsibility for establishing cost control regulations

governing the Federal Government's payment of costs associated with

bringing equipment installed or deployed on or before January 1, 1995,

into compliance with CALEA. The Commission is assigned only a

consultatory role with respect to such cost control regulations. 47

U.S.C. 1008(e)(2).

Thus, it is not within the Commission's authority to adopt rules

defining ``installed or deployed.''

28. Equipment manufacturers and their associations are interested

parties to this proceeding, and therefore will be allowed to file

section 109 petitions. The filing of a section 109 petition will not

automatically toll the CALEA compliance deadline; such tolling would be

tantamount to an automatic extension of the deadline, which may not be

appropriate in all cases.

29. In light of industry's significant role in developing the

assistance capability standards of CALEA, section 109 is to be reserved

for the examination of specific carrier compliance problems, and is not

to be used as a vehicle for rearguing the standards that have been

established for compliance with section 103.

30. Some carriers may file petitions under section 107(c) for

extensions of time to comply with CALEA, which the Commission may grant

if it ``determines that compliance with the assistance capability

requirements under section 103 is not reasonably achievable through

application of technology available within the compliance period.'' To

the extent the Commission finds it appropriate to grant extensions of

time under section 107(c), it may be necessary to provide relief under

section 109 only in unusual cases.

31. Procedural matters. This action is taken pursuant to sections

1, 2, 4(i), 201(a), 229, 301, 303 and 332(c) of the Communications Act

of 1934, 47 U.S.C. 151, 152, 154(i), 201(a), 229, 301, 303,

332(c)(1)(B).

32. Ordering clauses. Accordingly, IT IS ORDERED that the

Regulatory Flexibility Analysis, as required by Section 604 of the

Regulatory Flexibility Act and as set forth below, is adopted.

33. It is Further Ordered that the Commission's Office of Public

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

SECOND REPORT AND ORDER, including the Final Regulatory Flexibility

Analysis, to the Chief Counsel for Advocacy of the Small Business

Administration.

Final Regulatory Flexibility Analysis

34. As required by the Regulatory Flexibility Act (RFA),\1\ an

Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the

Notice of Proposed Rulemaking in this proceeding.\2\ The Commission

sought written public comment on the proposals in the NPRM, including

the IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to

the RFA.\3\

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\1\ See 5 U.S.C. 603. The RFA, 5 U.S.C. 601 et seq., has been

amended by the Contract with America Advancement Act, Public Law

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

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).

\2\ 62 FR 63302, Nov. 11, 1997, 13 FCC Rcd 3149, 3184-94 (1997)

(NPRM).

\3\ See 5 U.S.C. 604.

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35. Need for and Purpose of this Action. In the Second R&O, the

Commission, in compliance with 47 U.S.C. 229, promulgates policies

implementing the Communications Assistance for Law Enforcement Act.\4\

In enacting CALEA, Congress sought to ``make clear a telecommunications

carrier's duty to cooperate in the interception of communications for

law enforcement purposes * * *'' \5\ The Second R&O addresses in

particular certain issues relevant to sections 102 and 109 of CALEA:

(1) the definition of ``telecommunications carrier'' set forth in

section 102, which determines which entities and services are subject

to the assistance capability and other requirements of CALEA; and (2)

the factors the Commission will consider in making determinations under

section 109 of the Act as to whether compliance with CALEA is

reasonably achievable for particular carriers.

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\4\ Public Law 103-414, 108 Stat. 4279 (1994) (codified as

amended in sections of 18 U.S.C. and 47 U.S.C.).

\5\ CALEA, supra, at preamble.

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36. The policies adopted in the Second R&O implement Congress's

goal of ensuring that telecommunications carriers support the lawful

electronic surveillance needs of law enforcement agencies as

telecommunications technologies evolve. These policies promote the

three key policies Congress sought to balance in enacting CALEA: ``(1)

to preserve a narrowly focused capability for law enforcement agencies

to carry out properly authorized intercepts; (2) to protect privacy in

the face of increasingly powerful and personally revealing

technologies; and (3) to avoid impeding the development of new

communications services and technologies.'' \6\

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\6\ H.R. Rep. 103-827(I), at 16 (1994).

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37. Summary of the Issues Raised by Public Comments Made in

Response to the IRFA. In the NPRM, the Commission asked for comments

that specifically addressed issues raised in the IRFA.\7\ The IRFA

focused on proposed reporting, recordkeeping and other compliance

requirements relating primarily to sections 105 and 107 of CALEA. These

matters lie outside the immediate scope of the Second R&O, which is

limited to clarifying what entities, services, and facilities are

subject to CALEA (pursuant to section 102) and examining the factors

the Commission will consider when determining if compliance with

CALEA's assistance capability requirements is reasonably achievable

(pursuant to section 109). No party filed comments directly responding

to the IRFA that addressed issues dealt with in the Second R&O. Many

parties, however, submitted comments on the Commission's proposals

affecting small businesses set forth in the NPRM. These included

requests that we exempt certain categories of telecommunications

carriers from the assistance capability requirements, based on their

limited operations or the burden of implementing the facility changes

necessary to meet the requirements, and that in considering whether

compliance is reasonably achievable, we attach special significance to

the economic impact on ``smaller carrier[s].'' We summarize our action

on these comments below.

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\7\ NPRM at pars. 54-76.

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

Which the Actions Taken May Apply. 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 action taken.\8\ The RFA

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

as the terms ``small business,'' ``small organization,'' and ``small

governmental jurisdiction.'' \9\ In addition, the term ``small

business'' has the same meaning as the term ``mall business concern''

under the Small Business Act.\10\ A small business concern is one that:

(1) is independently owned and operated; (2) is not dominant in its

field of operation; and (3) satisfies any additional criteria

established by the Small Business Administration (SBA).\11\ A small

organization is generally ``any not-for-profit enterprise which is

independently owned and operated and is not dominant in its field.''

\12\ Nationwide, as of 1992, there were approximately 275,801 small

organizations.\13\ And finally, ``small governmental jurisdiction''

generally means ``governments of cities, counties, towns, townships,

villages, school districts, or special districts, with a population of

less than 50,000.'' \14\ As of 1992, there were approximately 85,006

such jurisdictions in the United States.\15\ This number includes

38,978 counties, cities, and towns; of these, 37,566, or 96 percent,

have populations of fewer than 50,000.\16\ The United States Bureau of

the Census (Census Bureau) estimates that this ratio is approximately

accurate for all governmental entities. Thus, of the 85,006

governmental entities, we estimate that 81,600 (91 percent) are small

entities. Below, we further describe and estimate the number of small

business concerns that may be affected by the actions taken in this

Second Report and Order.

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\8\ 5 U.S.C. 603(b)(3).

\9\ 5 U.S.C. 601(6).

\10\ 10 U.S.C. 601(3) (incorporating by reference the definition

of ``small business concern'' in 15 U.S. 632). Pursuant to the RFA,

the statutory definition of a small business applies ``unless an

agency, after consultation with the Office of Advocacy of the Small

Business Administration and after opportunity for public comment,

establishes one or more definitions of such term which are

appropriate to the activities of the agency and publishes such

definition(s) in the Federal Register.'' 5 U.S.C. 601(3).

\11\ Small Business Act, 15 U.S.C. 632.

\12\ 5 U.S.C. 601(4).

\13\ 1992 Economic Census, Bureau of the Census, U.S. Dept. of

Commerce, Table 6 (special tabulation of data under contract to

Office of Advocacy of the U.S. Small Administration).

\14\ 5 U.S.C. 601(5).

\15\ 1992 Census of Governments, Bureau of the Census, U.S.

Dept. of Commerce.

\16\ Id.

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39. As noted, 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 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

telecommunications entities falling within these SIC categories, then

attempt to refine further those estimates to correspond with the

categories of telecommunications companies that are commonly used under

our rules.

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\17\ 15 U.S.C. 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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40. Total Number of Telecommunications Entities Affected. 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.\19\ This number contains a variety of different

categories of entities, 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

[[Page 55169]]

operated.'' \20\ 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 the actions taken in the Second R&O.

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\19\ 1992 Census of Transportation, Communications, and

Utilities: Establishment and Firm Size, Bureau of the Census, U.S.

Dept. of Commerce, at Firm Size 1-123 (1995) (1992 Census).

\20\ 15 U.S.C. 632(a)(1).

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41. The most reliable source of current information regarding the

total numbers of common carrier and related providers nationwide,

including the numbers of commercial wireless entities, appears to be

data the Commission publishes annually in its ``Carrier Locator''

report, derived from filings made in connection with the

Telecommunications Relay Service (TRS).\21\ According to data in the

most recent report, there are 3,604 interstate carriers.\22\ These

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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\21\ Carrier Locator: Interstate Service Providers, Fig. 1 (Jan.

1999) (Carrier Locator). See also 47 CFR 64.601-608.

\22\ Carrier Locator at Fig. 1.

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42. We have included small incumbent local exchange carriers (LECs)

in this RFA analysis. As noted above, a ``small business'' under the

RFA is one that, inter alia, meets the pertinent small business size

standard (e.g., a telephone communications business having 1,500 or

fewer employees), and ``is not dominant in its field of operation.''

\23\ The SBA's Office of Advocacy contends that, for RFA purposes,

small incumbent LECs are not dominant in their field of operation

because any such dominance is not ``national'' in scope.\24\ We have

therefore included small incumbent LECs in this RFA analysis, although

we emphasize that this RFA action has no effect on FCC analyses and

determinations in other, non-RFA contexts.

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\23\ 5 U.S.C. 601 (3).

\24\ Letter from Jere W. Glover, Chief Counsel for Advocacy,

SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small

Business Act contains a definition of ``small business concern,''

which the RFA incorporates into its own definition of ``small

business.'' See 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C.

601(3) (RFA). SBA regulations interpret ``small business concern''

to include the concept of dominance on a national basis. 13 CFR

121.102(b). Since 1996, out of an abundance of caution, the

Commission has included small incumbent LECs in its regulatory

flexibility analyses. Implementation of the Local Competition

Provisions of the Telecommunications Act of 1996, CC Docket, 96-98,

First Report and Order, 61 FR 45475, Aug. 29, 1996, 11 FCC Rcd

15499, 16144-45 (1996).

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43. Wireline Carriers and Service Providers (SIC 4813). The Census

Bureau reports that there were 2,321 telephone communications companies

other than radiotelephone companies in operation for at least one year

at the end of 1992.\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 actions taken in

the Second R&O.

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\25\ 1992 Census, supra, at Firm Size 1-123.

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44. Local Exchange Carriers, Interexchange Carriers, Competitive

Access Providers, and Resellers. Neither the Commission nor SBA has

developed a definition of small LECs, interexchange carriers (IXCs),

competitive access providers (CAPs), or resellers. The closest

applicable definition for these carrier-types under SBA rules is for

telephone communications companies other than radiotelephone (wireless)

companies.\26\ The most reliable source of information regarding the

number of these carriers nationwide of which we are aware appears to be

the data that we collect annually in connection with the TRS.\27\

According to our most recent data, there are 1,410 LECs, 151 IXCs, 129

CAPs, and 351 resellers.\28\ 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 these carriers that would qualify as

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

estimate that there are fewer than 1,410 small entity LECs or small

incumbent LECs, 151 IXCs, 129 CAPs, and 351 resellers that may be

affected by the actions taken in the Second R&O.

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\26\ 13 CFR 121.210, SIC Code 4813.

\27\ See 47 CFR 64.601 et seq.; Carrier Locator at Fig. 1.

\28\ Carrier Locator at Fig. 1. The total for resellers includes

both toll resellers and local resellers. The TRS category for CAPs

also includes competitive local exchange carriers (CLECs) (total of

129 for both).

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45. Wireless Carriers (SIC 4812). The Census Bureau reports that

there were 1,176 radiotelephone (wireless) companies in operation for

at least one year at the end of 1992, of which 1,164 had fewer than

1,000 employees.\29\ 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 actions taken in the Second R&O.

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

\29\ 1992 Census, supra, at Firm Size 1-123.

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

46. Cellular, PCS, SMR and Other Mobile Service Providers. In an

effort to further refine our calculation of the number of

radiotelephone companies that may be affected by the actions taken in

the Second R&O, we consider the data that we collect annually in

connection with the TRS for the subcategories Wireless Telephony (which

includes PCS, Cellular, and SMR) and Other Mobile Service Providers.

Neither the Commission nor the SBA has developed a definition of small

entities specifically applicable to these broad subcategories, so we

will utilize the closest applicable definition under SBA rules, which

is for radiotelephone communications companies.\30\ According to our

most recent TRS data, 732 companies reported that they are engaged in

the provision of Wireless Telephony services and 23 companies reported

that they are engaged in the provision of Other Mobile 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 Wireless Telephony Providers and Other Mobile Service Providers,

except as described below, that would qualify as small business

[[Page 55170]]

concerns under SBA's definition. Consequently, we estimate that there

are fewer than 732 small entity Wireless Telephony Providers and fewer

than 23 small entity Other Mobile Service Providers that might be

affected by the actions taken in the Second R&O.

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\30\ Id. To the extent that the Commission has adopted

definitions for small entities in connection with the auction of

particular wireless licenses, we discuss those definitions below.

\31\ Carrier Locator at Fig. 1.

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47. 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

business'' for Blocks C and F as an entity that has average gross

revenues of not more than $40 million in the three previous calendar

years.\32\ These regulations defining ``small business'' in the context

of broadband PCS auctions have been approved by SBA.\33\ No small

businesses within the SBA-approved definition bid successfully for

licenses in Blocks A and B. There have been 237 winning bidders that

qualified as small entities in the four auctions that have been held

for licenses in Blocks C, D, E and F, all of which may be affected by

the actions taken in the Second R&O.

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\32\ 47 CFR 24.720(b)(1).

\33\ Implementation of Section 309(j) of the Communications

Act--Competitive Bidding, PP Docket No. 93-253, Fifth Report and

Order, 59 FR 37566, July 22, 1994, 9 FCC Rcd 5532, 5581-84 (1994).

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

48. SMR Licensees. The Commission has defined ``small business'' in

auctions for geographic area SMR licenses as a firm that had average

annual gross revenues of not more than $15 million in the three

previous calendar years, and the SBA has approved this definition.\34\

The actions taken in the Second R&O may apply to SMR providers that

either acquired geographic area licenses through auction or held

licenses before the auctions. We do not have data reflecting the total

number of firms holding pre-auction licenses, nor how many of these

providers have annual revenues of less than $15 million. Consequently,

for purposes of this FRFA, we estimate that all of the pre-auction SMR

authorizations may be held by small entities, some of which may be

affected by the actions taken in the Second R&O.

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\34\ 47 CFR 90.1814(b)(1) and 90.912(b)(1). 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, 60 FR 48913,, Sept. 21, 1995, 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,

61 FR 6212, Feb. 16, 1996, 11 FCC Rcd 1463 (1995).

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49. The Commission has held two auctions for geographic area SMR

licenses. Sixty winning bidders in the 900 MHz auction qualified as

small entities, and 38 in the 800 MHz auction. Based on this

information, we estimate that the number of geographic area SMR

licensees that may be affected by the actions taken in the Second R&O

includes these 98 small entities. An additional 230 channels in the

lower portion of the 800 MHz SMR band will be made available in a

future auction. However, the Commission has not yet determined how many

licenses will be offered, and thus at this time there is no basis on

which to estimate how many small entities may 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 estimate, for purposes of this FRFA,

that all of the licenses may be awarded to small entities, some of

which may be affected by the actions taken in the Second R&O.

50. 220 MHz Radio Service. The 220 MHz service has both Phase I and

Phase II licenses. There are approximately 1,515 Phase I non-nationwide

licensees and four nationwide licensees currently authorized to operate

in the 220 MHz band. The Commission has not developed a definition of

small entities specifically applicable to such incumbent 220 MHz Phase

I licensees. To estimate the number of such licensees that are small

businesses, we apply the definition under the SBA rules applicable to

radiotelephone communications companies.35 According to the

Census Bureau, only 12 radiotelephone firms out of a total of 1,176

such firms which operated during 1992 had 1,000 or more

employees.36 Therefore, if this general ratio continues to

1999 in the context of Phase I 220 MHz licensees, we estimate that

nearly all such licensees are small businesses under the SBA's

definition.

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\35\ See supra par. 40.

\36\ 1992 Census, supra, UC92-S-1, Subject Series, Establishment

and Firm Size, Table 5, Employment Size of Firms; 1992, SIC code

4812 (issued May 1995).

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51. The Phase II 220 MHz service is a new service, and is subject

to spectrum auctions. In the 220 MHz Third Report and Order we adopted

criteria for defining small businesses for purposes of determining

their eligibility for special provisions such as bidding credits.\37\

We have defined a small business as an entity that has average gross

revenues not exceeding $15 million for the preceding three years.\38\

The Commission has held two auctions for Phase II 220 MHz licenses, and

in them 53 entities that qualified as small or very small entities were

winning bidders.

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\37\ 220 MHz Third Report and Order, PR Docket No. 89-552, 62 FR

16004, Apr. 3, 1997, 12 FCC Rcd 10943, 11068-70, pars. 291-295

(1997). The SBA has approved these definitions. See Letter from A.

Alvarez, Administrator, SBA, to D. Phythyon, Chief, Wireless

Telecommunications Bureau, FCC (Jan. 6, 1988).

\38\ 47 CFR 90.1021(b) See also 220 MHz Third Report and Order,

supra, 12 FCC Rcd at 11068-69, par. 291.

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52. Paging. The Wireless Telecommunications Bureau has announced a

series of auctions of paging licenses, offering a total of 16,630 non-

nationwide geographic area licenses.\39\ The first auction will

commence on February 24, 2000, and will consist of 2,499 licenses.\40\

For purposes of these auctions, a small business is defined as 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.\41\ Given

the fact that nearly all radiotelephone companies had fewer than 1,000

employees, and that no reasonable estimate of the number of prospective

paging licensees could be made, the Commission has assumed, for

purposes of the evaluations and conclusions in the FRFA, that all the

auctioned 16,630 geographic area licenses would be awarded to small

entities.\42\

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\39\ See Future Development of Paging Systems, Second Report and

Order and Further Notice of Proposed Rulemaking, WT Docket 96-18, 62

FR 11616, Mar. 12 1997, 12 FCC Rcd 2732, 2863 (1997).

\40\ Public Notice, ``Auction of 929 and 91 MHz Paging Service

Spectrum,'' Report No. AUC-99-26-B, DA No. 99-1591, 64 FR 48623,

September 7, 1999 (Wireless Telecom. Bur. Aug. 12 1999).

\41\ See Letter from A. Alvarez, Administrator, SBA, to A.J.

Zoslov, Chief, Auctions Division, Wireless Telecommunications

Bureau, FCC (Dec. 2, 1998).

\42\ See Future Development of Paging Systems, Second Report and

Order and Further Notice of Proposed Rulemaking, WT Docket 96-18, 62

FR 11615, March 12, 1997, 12 FCC Rcd 2732, 2863-64 (1997).

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53. In addition, our Third CMRS Competition Report estimated that

as of January 1998, there were more than 600 paging companies in the

United States.\43\ The Third CMRS Competition Report also indicated

that at least ten of the top twelve publicly held paging companies had

average gross revenues in excess of $15 million for the three

[[Page 55171]]

years preceding 1998.\44\ Data obtained from publicly available company

documents and SEC filings indicate that this is also true for the three

years preceding 1999.

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\43\ Implementation of Section 6002(b) of the Omnibus Budget

Reconciliation Act of 1993, Annual Report and Analysis of

Competitive Market Conditions With Respect to Commercial Mobile

Services, Third Report, FCC 98-9, 63 FR 11612, March 10, 1998, at 40

(June 11, 1998) (Third CMRS Competition Report).

\44\ See Third CMRS Competition Report, App. C at 5.

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54. Narrowband PCS. The Commission has auctioned 11 nationwide and

30 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 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 FRFA, that all of the

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

the SBA.

55. 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

consists of 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 47 CFR 22.99.

\46\ BETRS are defined in 47 CFR 22.757, 22.759.

\47\ See supra par. 40.

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

56. 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 47 CFR 22.99.

\49\ 13 CFR 121.201, SIC Code 4812.

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57. Offshore Radiotelephone Service. This service operates on

several UHF television broadcast channels that are not used for TV

broadcasting in the coastal area of the states bordering the Gulf of

Mexico.\50\ 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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\50\ This service is governed by Subpart I or Part 22 of the

Commission's Ruled. See 47 CFR 22.1001-.1037.

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58. Wireless Communications Services (WCS). This service can be

used for fixed, mobile, radio location and digital audio broadcasting

satellite uses. The Commission defined ``small business'' for the WCS

auction as an entity with average gross revenues that are not more than

$40 million for each of the three preceding years, and a ``very small

business'' as an entity with average gross revenues that are not more

than $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 that may be

affected by the actions taken in the Second R&O includes these eight

entities.

59. Cable Services or Systems. The SBA has developed a definition

of small entities for cable and other pay television services, which

includes all such companies generating $11 million or less in revenue

annually.\51\ This definition includes cable systems operators, closed

circuit television services, direct broadcast satellite services,

multipoint distribution systems, satellite master antenna systems and

subscription television services. According to the Census Bureau data

from 1992, there were 1,788 total cable and other pay television

services and 1,423 had less than $11 million in revenue.\52\

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\51\ 13 CFR 121.201, SIC 4841.

\52\ 1992 Economic Census Industry and Enterprise Receipts Size

Report, Table 2D, SIC code 4841 (U.S. Bureau of Census data under

contract to the Office of Advocacy of the U.S. Small Business

Administration).

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60. The Commission has developed its own definition of a small

cable system operator for the purposes of rate regulation. Under the

Commission's rules, a ``small cable company'' is one serving fewer than

400,000 subscribers nationwide.\53\ Based on our most recent

information, we estimate that there were 1,439 cable operators that

qualified as small cable system operators at the end of 1995.\54\ Since

then, some of those companies may have grown to serve over 400,000

subscribers, and others may have been involved in transactions that

caused them to be combined with other cable operators. Consequently, we

estimate that there are fewer than 1,439 small entity cable system

operators.

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\53\ 47 CFR 76.901(e). The Commission developed this definition

based on its determination that a small cable operator is one with

annual revenues of $100 million or less. Implementation of Sections

of the 1992 Cable Act: Regulation, Sixth Report and Order and

Eleventh Order on Reconsideration, 60 FR 10534, February 27, 1995,

10 FCC Rcd 7393 (1995).

\54\ Paul Kagan Associates, Inc., ``Cable TV Investor,'' Feb.

29, 1996 (based on figures for December 30, 1995).

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61. The Communications Act also contains a definition of a small

cable system operator, which is ``a cable operator that, directly or

through an affiliate, serves in the aggregate fewer than 1 percent of

all subscribers in the United States and is not affiliated with any

entity or entities whose gross annual revenues in the aggregate exceed

$250,000,000.\55\ The Commission has determined that there are

66,000,000 subscribers in the United States. Therefore, we found that

an operator serving fewer than 660,000 subscribers shall be deemed a

small operator, if its annual revenues, when combined with the total

annual revenues of all of its affiliates, do not exceed $250 million in

the aggregate.\56\ Based on available data, we find that the number of

cable operators serving 660,000 subscribers or less totals 1,450.\57\

We do not request nor do we collect information concerning whether

cable system operators are affiliated with entities whose gross annual

revenues exceed $250,000,000,\58\ and thus are unable at this time to

estimate with greater precision the number of cable system operators

that would qualify as small cable operators under the definition in the

Communications Act. It should be further noted that recent industry

estimates project that there will be a total of 66,000,000 subscribers.

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\55\ 47 U.S.C. 543 (m)(2).

\56\ 47 U.S.C. 76.1403(b).

\57\ Paul Kagan Associates, Inc., ``Feb. 29, 1996 (based on

figures for Dec. 30, 1995).

\58\ We do receive such information on a case-by-case basis only

if a cable operator appeals a local franchise authority's finding

that the operator does not qualify as a small cable operator

pursuant to section 76.1403(b) of the Commission's rules. See 47 CFR

76.1403(d).

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62. Description of Projected Reporting, Recordkeeping and Other

Compliance Requirements. In the

[[Page 55172]]

Second R&O we affirm our proposals in the NPRM to clarify what

entities, services, and facilities are subject to CALEA.\59\ In

addition, we provide guidance regarding the factors the Commission will

consider when determining under section 109 of CALEA if compliance with

the assistance capability requirements of the Act is reasonably

achievable, as well as the showings that entities filing petitions

under section 109 will be expected to make.\60\ These actions impose no

reporting, recordkeeping or other compliance requirements beyond those

imposed by CALEA itself.

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\59\ Second Report and Order, pars. 6-28.

\60\ Id. pars. 29-45.

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63. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered. We have largely

adopted the tentative conclusions of the NPRM as to what entities are

and are not subject to the assistance capability requirements. Although

section 102(8)(B)(ii) of CALEA gives us the discretion, we have decided

not to exempt any categories in our rules. We have resolved the concern

mentioned most frequently in the comments' regarding the dispatch

service of ``traditional'' SMR operators--by finding such operations to

be outside CALEA's definition of ``telecommunications carrier'' insofar

as the service is not interconnected with the public switched network.

We have considered AMTA's argument that CMRS providers serving niche

business markets with limited interconnect capability are not

technologically capable of CALEA compliance, but we have found that to

the extent their services meet the definition of CMRS set forth in

section 332(d) of the Communications Act, such entities must be

considered subject to CALEA. In response to those commenters who argue

that a private mobile radio service (PMRS) operator cannot be subject

to CALEA for any reason, we have found that where a PMRS operator uses

its facilities to offer a service that qualifies as CMRS, that service

is subject to CALEA.

64. We recognize that compliance with the assistance capability

requirements may be economically burdensome for some entities. CALEA

provides two mechanisms through which carriers may seek relief: they

may petition the Commission for an extension of the compliance date

under section 107(c), and they may petition the Commission for a

determination that compliance is not reasonably achievable under

section 109(b). We believe these mechanisms provide the best approach

to avoiding undue burdens on small entities, without undercutting the

objectives of CALEA.\61\ We are also prepared to reexamine whether any

categories of service providers should be exempted, once we have gained

some experience in applying section 109.

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\61\ See id., pars. 36-45.

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65. We have decided that in determining whether compliance with the

assistance capability requirements is reasonably achievable, we will

not at this time accord special significance to any particular factor

enumerated in section 109 and we will not adopt any additional factors.

As we note in the Second R&O, ``the technological diversity of carrier

networks, as well as other carrier characteristics, will, as a matter

of course, mean that certain factors will be more important to the

arguments of certain carriers than others, and not all of the factors

enumerated in section 109 may be relevant to the analysis of a given

reasonable achievability petition.'' \62\ We recognize, however, that

carrier size may be a significant consideration in particular cases,

and we reject AT&T's assertion that special consideration for a new

market entrant could be tantamount to an unfair subsidy.

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\62\ Id., par. 37.

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66. Report to Congress. The Commission shall send a copy of the

Second R&O, including this FRFA, in a report to Congress pursuant to

the Small Business Regulatory Enforcement Fairness Act of 1996.\63\ In

addition, the Commission shall send a copy of the Second R&O, including

this FRFA, to the Chief Counsel for Advocacy of the Small Business

Administration. A copy of the Second R&O and FRFA (or summaries

thereof) will also be published in the Federal Register.

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\63\ See 5 U.S.D. 801 (a)(1)(A).

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 99-26594 Filed 10-8-99; 8:45 am]

BILLING CODE 6712-01-P