[Federal Register: March 24, 2005 (Volume 70, Number 56)]
[Proposed Rules]               
[Page 15030-15044]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr05-18]                         

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 01-92; FCC 05-33]

 
Developing a Unified Intercarrier Compensation Regime

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: By this document, the Commission seeks comment on plans and 
principles submitted by telecommunications industry groups, and on 
alternative measures, for comprehensive reform of the current 
intercarrier compensation system. The Commission seeks comment on the 
legal issues, network interconnection issues, cost recovery issues and 
implementation issues related to these plans and alternative measures 
in order to transition to a unified intercarrier compensation regime.

DATES: Submit comments on or before May 23, 2005. Submit reply comments 
on or before June 22, 2005.

ADDRESSES: You may submit comments, identified by CC DOCKET NO. 01-92, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 

Follow the instructions for submitting comments.
     Agency Web site: http://www.fcc.gov. Follow the 

instructions for submitting comments on the Electronic Comment Filing 
System (ECFS)/http://www.fcc.gov/cgb/ecfs/..     E-mail: To victoria.goldberg@fcc.gov. Include CC Docket 

01-92 in the subject line of the message.
     Fax: To the attention of Victoria Goldberg at 202-418-
1587. Include CC Docket 01-92 on the cover page.
     Mail: All filings must be addressed to the Commission's 
Secretary, Marlene H. Dortch, Office of the Secretary,

[[Page 15031]]

Federal Communications Commission, 445 12th Street, SW., Washington, DC 
20554. Parties should also send a copy of their filings to Victoria 
Goldberg, Pricing Policy Division, Wireline Competition Bureau, Federal 
Communications Commission, Room 5-A266, 445 12th Street, SW., 
Washington, DC 20554.
     Hand Delivery/Courier: The Commission's contractor, Natek, 
Inc., will receive hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 
110, Washington, DC 20002.

--The filing hours at this location are 8 a.m. to 7 p.m.
--All hand deliveries must be held together with rubber bands or 
fasteners.
--Any envelopes must be disposed of before entering the building.
--Commercial overnight mail (other than U.S. Postal Service Express 
Mail and Priority Mail) must be sent to 9300 East Hampton Drive, 
Capitol Heights, MD 20743.

    Instructions: All submissions received must include the agency name 
and docket number. All comments received will be posted without change 
to http://www.fcc.gov/cgb/ecfs/, including any personal information 

provided. For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the ``Comment 
Filing Procedures'' heading of the SUPPLEMENTARY INFORMATION section of 
this document.

FOR FURTHER INFORMATION CONTACT: Victoria Goldberg, Wireline 
Competition Bureau, Pricing Policy Division, (202) 418-7353.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking in CC Docket No. 01-92, adopted 
on February 10, 2005 and released on March 3, 2005. The complete text 
of this Further Notice of Proposed Rulemaking is available for public 
inspection Monday through Thursday from 8 a.m. to 4:30 p.m. and Friday 
from 8 a.m. to 11:30 a.m. in the Commission's Consumer and Governmental 
Affairs Bureau, Reference Information Center, Room CY-A257, 445 Twelfth 
Street, SW., Washington, DC 20554. The complete text is also available 
on the Commission's Internet site at http://www. fcc.gov. Alternative 

formats are available to persons with disabilities by contacting Brian 
Millin at (202) 418-7426 or TTY (202) 418-7365. The complete text of 
the Further Notice of Proposed Rulemaking (FNPRM) may be purchased from 
the Commission's duplicating contractor, Best Copying and Printing, 
Inc., Room CY-B402, 445 Twelfth Street, SW., Washington, DC 20554, 
telephone (202) 863-2893, facsimile (202) 863-2898, or e-mail at http://www.bcpiweb.com
.


Synopsis of Further Notice of Proposed Rulemaking

    1. In 2001, the Commission issued a Notice of Proposed Rulemaking 
to begin the process of intercarrier compensation reform, In the Matter 
of Developing a Unified Intercarrier Compensation Regime, CC Docket 01-
92, Notice of Proposed Rulemaking, 66 FR 28410, May 23, 2001 
(Intercarrier Compensation NPRM). The Commission received extensive 
comment on the Intercarrier Compensation NPRM including several 
proposals for comprehensive reform of the existing intercarrier 
compensation regime submitted by industry groups. With this FNPRM, the 
Commission continues the process of intercarrier compensation reform by 
seeking comment on the industry proposals, and on other matters raised 
in response to the Intercarrier Compensation NPRM.
    2. The record in this proceeding shows that the three basic 
principles underlying existing intercarrier compensation regimes must 
be re-examined in light of significant market developments since the 
adoption of the access charge and reciprocal compensation rules. First, 
the existing compensation regimes are based on jurisdictional and 
regulatory distinctions that are not tied to economic or technical 
differences between services. These artificial distinctions distort the 
telecommunications markets at the expense of healthy competition. 
Moreover, the availability of bundled service offerings and novel 
services blur the traditional industry and regulatory distinctions that 
serve as the foundation of the current rules. Second, the existing 
compensation regimes are predicated on the recovery of average costs on 
a per-minute basis. Advancements in telecommunications infrastructure 
affect the way carrier costs are incurred and call into question to use 
of per-minute pricing. Third, under the existing regimes, the calling 
party's carrier, whether local exchange carrier (LEC), interexchange 
carrier (IXC), or commercial mobile radio service (CMRS) provider, 
compensates the called party's carrier for terminating the call. 
Developments in the ability of consumers to manage their own 
telecommunications services undermine the premise that the calling 
party is the sole cost causer and should be responsible for all the 
costs of a call. There are a number of additional criteria the 
commission must consider in assessing whether a particular proposal 
will help achieve its policy goals. For example, any proposal for 
reform of compensation mechanisms should address the impact of such 
changes on network interconnection rules. In addition, any reform 
proposal should explain the Commission's legal authority to adopt it.
    3. Acknowledging that significant reform might be needed, the 
Commission requested comment in the Intercarrier Compensation NPRM on 
the appropriate goals of intercarrier compensation regulation in a 
competitive market and discussed specific goals that should be 
considered in evaluating a new regime. Based on the record, the 
Commission agrees with commenters that any new approach should promote 
economic efficiency. Preservation of universal service is another 
priority under the Act and the Commission recognizes that fulfillment 
of this mandate must be a consideration in the development of any 
intercarrier compensation regime. The Commission also agrees that any 
new intercarrier compensation approach must be competitively and 
technologically neutral.
    4. Having concluded that there is an urgent need to reform the 
existing intercarrier compensation rules, the Commission now turns to 
the question of what reforms best serve the goals identified. In the 
Intercarrier Compensation NPRM, the Commission re-evaluated the 
rationale for the traditional calling party network pays (CPNP) regimes 
and identified new approaches to intercarrier compensation, including a 
bill-and-keep approach. Under a bill-and-keep approach, neither of the 
interconnecting networks charges the other network for terminating 
traffic that originates on the other carrier's network.
    5. Attached as an appendix to the FNPRM is an analysis of comments 
filed regarding bill-and-keep in response to the Intercarrier 
Compensation NPRM. The views expressed in this staff analysis do not 
represent the views of, and are not endorsed by, the Commission.
    6. In parallel with the Commission's consideration of the record 
developed in response to the Intercarrier Compensation NPRM, various 
industry groups have been negotiating proposals for comprehensive 
reform of federal and state intercarrier compensation mechanisms. These 
negotiations have resulted in proposals from a number of groups--the 
Intercarrier Compensation Forum (ICF), the Expanded Portland

[[Page 15032]]

Group (EPG), the Alliance for Rational Intercarrier Compensation 
(ARIC), the Cost-Based Intercarrier Compensation Coalition (CBICC), and 
two rural LECs, Home Telephone Company and PBT Telecom (Home/PBT). In 
addition, the Commission discusses a statement of principles submitted 
by CTIA as well as a specific reform proposal filed by Western 
Wireless. The Commission also discusses a proposal by the National 
Association of State Utility Consumer Advocates (NASUCA) that would 
reduce certain intercarrier compensation rates. Moreover, the National 
Association of Regulatory Utility Commissioners (NARUC) has developed a 
set of principles that it believes should guide any consideration of 
intercarrier compensation reform.

Description of Industry Proposals

    7. Intercarrier Compensation Forum (ICF). The ICF is a diverse 
group of nine carriers that represent different segments of the 
telecommunications industry. The ICF has developed a comprehensive plan 
for reforming current network interconnection, intercarrier 
compensation, and universal service rules. With respect to network 
interconnection, the ICF plan establishes default technical and 
financial rules that generally require an originating carrier to 
deliver traffic to the ``Edge'' of a terminating carrier's network. 
With respect to compensation, the ICF plan would reduce per-minute 
termination rates from existing levels to zero over a six-year period. 
Revenue eliminated as a result of the transition to bill-and-keep under 
the ICF plan would be replaced by a combination of end-user charges and 
a new universal service support mechanism.
    8. Expanded Portland Group (EPG). The EPG is a group of small and 
mid-sized rural LECs that came together to develop a proposal distinct 
from a bill-and-keep mechanism. Stage one of the EPG proposal is 
intended to address more immediate issues arising under the current 
regimes, including unidentified or ``phantom'' traffic, the scope of 
the ESP exemption, and the termination of traffic in the absence of 
agreements between carriers. In the second stage of the EPG plan, all 
per-minute rates would be set at the level of interstate access charges 
and a new Access Restructure Charge would be implemented to make up any 
revenue shortfall.
    9. Alliance for Rational Intercarrier Compensation (ARIC)--Fair 
Affordable Comprehensive Telecom Solution (FACTS). ARIC is comprised of 
small telecommunications companies providing service in rural, high-
cost areas. The FACTS plan developed by ARIC calls for a unified per-
minute rate for all types of traffic that would be capped at a level 
based on a carrier's unseparated, interoffice embedded costs. In 
addition to more uniform rates, the FACTS plan calls for local retail 
rate rebalancing to benchmark levels established by state commissions, 
and includes a joint process by which the Commission and the states 
review the procedures and data to determine the appropriate unified 
rates.
    10. Cost-Based Intercarrier Compensation Coalition (CBICC). The 
CBICC is a coalition of competitive LECs. Under the CBICC proposal, 
carriers would adopt a single termination rate in each geographic area 
that would apply to all types of traffic. The rate would be based on 
the incumbent LEC's cost of providing tandem switching, transport, and 
end office switching, calculated using the Commission's total element 
long-run incremental cost (TELRIC) methodology.
    11. Home Telephone Company and PBT Telecom (Home/PBT). Home 
Telephone Company and PBT Telecom are rural LECs that developed an 
alternative proposal to those advanced by the larger groups discussed 
above. Under this proposal, all carriers offering service to customers 
that make telecommunications calls would be required to connect to the 
public switched telephone network (PSTN) and obtain numbers for 
assignment to customers. The plan would replace existing per-minute 
access charges and reciprocal compensation with connection-based 
intercarrier charges.
    12. Western Wireless Proposal. Western Wireless is a wireless 
carrier that has been designated as an eligible telecommunications 
carrier (ETC) in 14 states and the Pine Ridge Indian reservation. On 
December 1, 2004, Western Wireless submitted a reform plan based on a 
unified bill-and-keep system for all forms of traffic. This plan would 
reduce per-minute compensation rates to bill-and-keep in equal steps 
using targeted reductions over a four-year period, with a longer 
transition period for small rural incumbent LECs.
    13. National Association of State Utility Consumer Advocates 
(NASUCA) Principles. NASUCA advocates a minimalist approach that 
addresses the disparity among some existing intercarrier compensation 
rates and reduces certain rate levels over a five-year period. Under 
the NASUCA plan, the Commission would establish a target rate in each 
year of a five-year transition down to a rate of $0.0055 per minute. 
State commissions would be encouraged to match the target rate for 
intrastate rates, but they would retain authority concerning how to 
reach that rate. In addition to its proposal, NASUCA urges the 
Commission to reject efforts to guarantee current revenue streams, such 
as access revenues.
    14. NARUC Principles. In an effort to create a vehicle for 
evaluating the various reform proposals developed by the industry, a 
group of NARUC commissioners and staff developed a set of principles 
addressing the design and functioning of any new intercarrier 
compensation plan, as well as prerequisites for implementation of any 
plan. Among other things, NARUC favors the application of a unified 
regime to all companies that exchange traffic over the Public Switched 
Telephone Network.
    15. CTIA--The Wireless Association (CTIA) Principles. CTIA 
submitted a statement of principles for the Commission to consider as 
part of its review of any proposals to reform intercarrier 
compensation. CTIA supports a bill-and-keep approach to intercarrier 
compensation reform under which carriers would have the flexibility to 
design their rate structures to recover a larger portion of costs from 
end-user customers--while ensuring that end-user rates remain 
affordable. In terms of universal service reform, CTIA supports the 
creation of a single, unified universal service support mechanism that 
calculates support based on the forward-looking economic costs of 
serving customers.
    16. The Commission commends all the industry parties that have been 
involved in the process of developing these proposals for their 
substantial efforts to reach agreement on these complicated issues. The 
Commission also commends the work done by NARUC in developing a set of 
principles that can be used in evaluating these proposals. Many of the 
principles identified by NARUC are consistent with the policy goals the 
Commission has identified above. Given the extensive negotiations that 
formed the basis for some of these proposals, the Commission asks 
parties to comment on whether it is preferable for the Commission to 
adopt a single proposal in its entirety, rather than adopting a 
modified version of any particular proposal or attempting to combine 
different components from individual plans. The Commission seeks 
comment on implementation and transition issues if it were to adopt one 
proposal or combine different components of the plans.

[[Page 15033]]

Legal Issues

    17. As the Commission considers the record developed in response to 
the Intercarrier Compensation NPRM and the specific proposals recently 
filed in this proceeding, it is mindful of its obligation to comply 
with the statutory provisions governing intercarrier compensation, such 
as sections 251(b)(5) and 252(d)(2) of the Telecommunications Act of 
1996, Public Law No. 104-104, 110 Stat. 96 (1996) (codified at 47 
U.S.C. 151 et seq.) (Act). In addition, the Commission recognizes that 
any unified regime requires reform of intrastate access charges, which 
are subject to state jurisdiction. In this section, the Commission asks 
parties to consider these and other legal issues associated with 
comprehensive reform efforts.
    18. Section 252(d)(2) of the Act sets forth an ``additional cost'' 
standard for reciprocal compensation under section 251(b)(5). The 
Commission interpreted the ``additional cost'' standard of section 
252(d)(2) to permit the use of the TELRIC cost standard that was 
established for interconnection and unbundled elements. In this 
section, the Commission solicits comment on whether this standard is, 
or could be, satisfied by the various reform proposals. Additionally, 
if the Commission decides to retain the current TELRIC methodology for 
reciprocal compensation, the Commission asks parties to address whether 
it should define more precisely what costs are traffic-sensitive, and 
thus recoverable through reciprocal compensation charges, and what 
costs are non-traffic-sensitive, and not recoverable through reciprocal 
compensation charges. Also, the Commission invites comment on the 
proposition that digital switching costs no longer vary with minutes of 
use due to increased processor capacity. Additionally, the Commission 
solicits comment on which components of a wireless network should be 
considered traffic sensitive. Once the Commission identifies the 
traffic-sensitive costs, it must determine whether those costs should 
be recovered on a per-minute or flat-rated capacity basis.
    19. The statutory pricing standard for reciprocal compensation 
(``additional cost'') is not the same as the statutory pricing standard 
for unbundled network elements (UNEs) (cost plus a reasonable profit) 
set forth in the Act. The Commission's experience suggests that TELRIC 
is not necessarily consistent with the ``additional cost'' standard. 
Specifically, TELRIC measures the average cost of providing a function, 
which is not necessarily the same as the additional cost of providing 
that function. The Commission solicits comment on whether a true 
incremental cost methodology is more appropriate for establishing 
``additional costs'' under section 252(d)(2).
    20. The Commission seeks comment on whether it could use its 
authority under section 10 of the Act to forbear from certain aspects 
of the compensation requirement of section 251(b)(5) as part of any 
intercarrier compensation reform effort. The Commission assumes that, 
if any forbearance were needed to support a bill-and-keep regime, such 
forbearance would apply only with respect to the compensation 
requirement of section 251(b)(5) and not to the requirement to enter 
into reciprocal arrangements for the transport and termination of 
traffic. The Commission also seeks comment on whether the bar to 
forbearance contained in section 10(d) precludes exercise of 
forbearance in this case. Assuming that it can forbear from imposing 
section 251(b) obligations, the Commission solicits comment on whether 
it also should forbear from enforcing the compensation requirement 
contained in section 271(c)(2)(B)(xiii).
    21. Because access charges for intrastate traffic historically have 
been an area within the exclusive jurisdiction of state commissions, 
any proposal that includes reform of intrastate mechanisms must address 
the Commission's legal authority to implement such reform. Accordingly, 
the Commission seeks comment on alternative legal theories under which 
it could reform intrastate access charges. The Commission also solicits 
comment on whether it should refer any of the issues related to 
intrastate access charges to a Federal-State Joint Board, and whether 
any of the issues addressed in this FNPRM fall within the scope of the 
mandatory referral requirement of section 410(c) of the Act. 
Additionally, the Commission seeks comment on the legal analysis 
presented by the reform proposals concerning the Commission's authority 
over intrastate access reform, and specifically whether the changes 
wrought by the 1996 Act give the Commission the power to assert 
authority over the intrastate charges at issue in this proceeding.
    22. In section 254(g) of the Act, Congress codified the 
Commission's pre-existing geographic rate averaging and rate 
integration policies. The Commission implemented section 254(g) by 
adopting two requirements. First, providers of interexchange 
telecommunications services are required to charge rates in rural and 
high-cost areas that are no higher than the rates they charge in urban 
areas. This is known as the geographic rate averaging rule. Second, 
providers of interexchange telecommunications services are required to 
charge rates in each state that are no higher than those in any other 
state. This is known as the rate integration rule.
    23. Absent some further reform of the access charge regime, the 
Commission is concerned that the rate averaging and rate integration 
requirements eventually will have the effect of discouraging IXCs from 
serving rural areas. These requirements may place IXCs that serve rural 
areas at a competitive disadvantage to those that focus on serving 
urban areas. The Commission asks parties to comment on the relationship 
between the rate averaging and rate integration requirements and the 
access charge reform proposals described above. Do any of the proposals 
ease concerns about the disparate impact of rate averaging and rate 
integration requirements on nationwide IXCs? If not, are there 
additional steps the Commission should take to address these concerns?

Network Interconnection Issues

    24. Under section 251(c)(2)(B), an incumbent LEC must allow a 
requesting telecommunications carrier to interconnect at any 
technically feasible point. The Commission has interpreted this 
provision to mean that competitive LECs have the option to interconnect 
at a single point of interconnection (POI) per local access transport 
area (LATA). In addition, the Commission's rules preclude a LEC from 
charging carriers for traffic that originates on the LEC's network. In 
the Intercarrier Compensation NPRM, the Commission solicited comment on 
whether an incumbent LEC should be obligated to bear its own costs of 
delivering traffic to a single POI when that POI is located outside the 
calling party's local calling area.
    25. In response to the Intercarrier Compensation NPRM, most 
competitive LECs and CMRS providers urge the Commission to maintain the 
single POI per LATA rule. Other commenters suggest that the 
interconnecting carrier selecting the POI be responsible for some 
portion of the transport costs to a POI located outside the local 
calling area, or that the interconnecting carrier establish additional 
POIs once certain criteria are met.
    26. The comments confirm that issues related to the location of the 
POI and the allocation of transport costs are some of the most 
contentious issues in interconnection proceedings. In

[[Page 15034]]

particular, the record suggests that there are a substantial number of 
disputes related to how carriers should allocate interconnection costs, 
particularly when the physical POI is located outside the local calling 
area where the call originates or when carriers are indirectly 
interconnected.
    27. In this FNPRM, the Commission solicits additional comment on 
changes to its network interconnection rules to accompany proposed 
changes to the intercarrier compensation regimes. The Commission asks 
parties to comment on the network interconnection proposals in the 
record and on the ICF's proposed default network interconnection rules. 
The Commission also seeks comment on whether it should consider 
different network interconnection rules for small incumbent LECs or 
rural LECs, and whether changing its pricing methodology for reciprocal 
compensation will have any effect on the incentives of competitive 
carriers, including CMRS providers, to establish multiple POIs. 
Finally, the Commission asks parties to address whether any additional 
rule changes are needed to harmonize the network interconnection rules 
that apply to section 251(b)(5) traffic with the rules that apply to 
access traffic.

Cost Recovery Issues

    28. Many of the reform proposals include mechanisms by which some 
carriers will be permitted to offset revenues previously recovered 
through interstate access charges. Other proposals question the need to 
offset revenues and oppose proposals that include revenue guarantees or 
assumptions concerning revenue neutrality. The Commission solicits 
comment on whether these mechanisms, or something comparable, must be 
adopted if it reduces or eliminates the ability of LECs to impose 
interstate switched access charges on IXCs. The Commission asks parties 
to comment on whether it should rely solely on end-user charges, or 
whether it also should rely on universal service support mechanisms 
(new or existing) to offset revenues no longer recovered through 
interstate access charges.
    29. Additionally, if a cap on federal subscriber charges is needed, 
the Commission asks parties to comment on the level at which the cap 
should be set if the jurisdictionally interstate costs of providing 
switched access no longer are recovered from IXCs through access 
charges. The Commission also asks parties to discuss what type of 
findings it must make before using additional universal service funding 
to offset lost access charge revenues. Commenters should also address 
the competitive neutrality of any new proposed universal service 
mechanism with respect to competitive eligible telecommunications 
carriers, and should comment on alternative approaches that would give 
LECs the opportunity to recover costs previously recovered from IXCs 
through interstate access charges. The Commission also asks parties to 
comment on the impact on consumers of replacing access charges with 
additional subscriber charges and/or universal service support.
    30. As compared to price cap LECs, rate-of-return LECs derive a 
much greater share of their revenue from access charges. Because many 
rate-of-return LECs depend so heavily on access charge revenue, some of 
the proposals submitted in this proceeding include special provisions 
for these carriers. The Commission seeks comment on the extent to which 
it should give rate-of-return LECs the opportunity to offset lost 
access charge revenues with additional universal service funding, 
additional subscriber charges, or some combination of the two. To the 
extent it decides that additional universal service support also is 
necessary, the Commission seeks comment on how much additional support 
it must provide and how such support should be distributed.
    31. If the Commission concludes that additional universal service 
funding is necessary, one possible approach would be to provide such 
funding through the interstate common line support (ICLS) mechanism. 
Under such a methodology, ICLS would be expanded to include not just 
common line costs, but also switching and transport costs. 
Alternatively, the Commission could create a new interstate access 
support mechanism. With respect to any proposed support methodologies, 
commenters should provide a detailed explanation as to how support 
should be calculated and the administrative burdens involved. 
Commenters should also address the competitive neutrality of any new 
proposed universal service mechanisms with respect to competitive 
eligible telecommunications carriers.
    32. If the Commission acts to reduce or eliminate intrastate 
switched access charges, it may be necessary to give price cap and 
rate-of-return LECs the opportunity to offset those revenue losses with 
alternative cost recovery mechanisms. As with interstate access 
charges, the two primary mechanisms for doing this are increased 
subscriber charges and increased universal service funding. The 
Commission asks parties to comment on how these mechanisms should be 
structured to give LECs the opportunity to offset lost intrastate 
access charge revenue. The Commission asks parties to address the same 
questions concerning cost recovery of interstate access charges as they 
relate to intrastate access charges. The Commission also seeks comment 
on whether it should create a federal mechanism to offset any lost 
intrastate revenues, or whether the states should be responsible for 
establishing alternative cost recovery mechanisms for LECs within the 
intrastate jurisdiction.

Implementation Issues

    33. Under the Commission's access charge regime, the rates, terms 
and conditions under which carriers provide interstate access services 
are generally contained in tariffs filed with the Commission. In 
contrast, the exchange of traffic under section 251(b)(5) is governed 
by interconnection agreements. The Commission seeks comment on how to 
reconcile these two approaches if it moves to a unified rate for all 
types of traffic. The Commission asks parties to identify any unique 
obstacles that may arise for rate-of-return LECs in connection with a 
regime based solely on agreements and to propose solutions to overcome 
those obstacles.
    34. Given the substantial changes that are possible in this 
rulemaking, the Commission seeks comment on what type of transition 
would be needed for a new regime. Parties also should address whether 
there are any adverse consequences associated with transitioning rate-
of-return LECs toward a new unified regime at a slower pace than price 
cap LECs.
    35. Additionally, if the Commission moves to reduce, and possibly 
eliminate, the imposition of access charges by rate-of-return LECs, is 
there any reason for states to prohibit them from providing toll 
services? Parties should discuss the benefits that might accrue to 
rural customers if all rate-of-return LECs were permitted to provide 
interexchange services.

Transit Service Issues

    36. Transiting occurs when two carriers that are not directly 
interconnected exchange non-access traffic by routing the traffic 
through an intermediary carrier's network. Typically, the intermediary 
carrier is an incumbent LEC and the transited traffic is routed from 
the originating carrier through the incumbent LEC's tandem switch to 
the terminating carrier. Although many incumbent LECs, mostly Bell 
Operating Companies (BOCs),

[[Page 15035]]

currently provide transit service pursuant to interconnection 
agreements, the Commission has not had occasion to determine whether 
carriers have a duty to provide transit service. In the Intercarrier 
Compensation NPRM, the Commission sought comment on issues that arise 
under the current intercarrier compensation rules when calls involve a 
transit service provider, and how a bill-and-keep regime might affect 
such calls. In this section, the Commission solicits further comment on 
whether there is a statutory obligation to provide transit services 
under the Act, and, if so, what rules the Commission should adopt to 
advance the goals of the Act.
    37. The Commission seeks comment on its legal authority to impose 
transiting obligations. Assuming that it has the necessary legal 
authority, the Commission solicits comment on whether it should 
exercise that authority to require the provision of transit service. If 
rules regarding transit service are warranted, the Commission seeks 
comment on the scope of such regulation. The Commission also seeks 
comment on the need for rules governing the terms and conditions for 
transit service offerings. Further, if the Commission determines that 
rules governing transit service are warranted, it seeks additional 
comment on the appropriate pricing methodology, if any, for transit 
service.
    38. Finally, the Commission recognizes that the ability of the 
originating and terminating carriers to determine the appropriate 
amount and direction of payments depends, in part, on the billing 
records generated by the transit service provider. Thus, the Commission 
asks carriers to comment on whether the current rules and industry 
standards create billing records sufficiently detailed to permit the 
originating and terminating carriers to determine the appropriate 
compensation due.

CMRS Issues

    39. The Commission has previously stated that traffic to or from a 
CMRS network that originates and terminates within the same Major 
Trading Area (MTA) is subject to reciprocal compensation obligations 
under section 251(b)(5), rather than interstate or intrastate access 
charges. Implementation of the Local Competition Provisions in the 
Telecommunications Act of 1996 and Interconnection between Local 
Exchange Carriers and Commercial Mobile Radio Service Providers, CC 
Docket Nos. 96-98 and 95-185, First Report and Order, 61 FR 45467, 
August 8, 1996. The Commission reasoned that, because wireless license 
territories are federally authorized and vary in size, the largest FCC-
authorized wireless license territory, i.e., the MTA, would be the most 
appropriate local service area for CMRS traffic for purposes of 
reciprocal compensation under section 251(b)(5).
    40. Given the goal of moving toward a more unified regime, the 
Commission seeks comment on whether it should eliminate the intraMTA 
rule. The Commission further invites commenters to discuss how parties 
should determine which LEC-CMRS calls are subject to reciprocal 
compensation in the absence of the intraMTA rule.

CMRS Issues

    41. CMRS providers typically interconnect indirectly with smaller 
LECs via a BOC tandem. While many CMRS providers express willingness to 
enter into compensation agreements, they also assert that the cost of 
engaging in a negotiation and arbitration process with small incumbent 
LECs is often prohibitive due to the small amount of traffic at issue 
in each individual negotiation. The Commission seeks comment on what 
measures it might adopt to reduce the costs associated with 
establishing compensation arrangements.
    42. It is standard industry practice for telecommunications 
carriers to compare the NPA/NXX codes of the calling and called party 
to determine the proper rating of a call. It may be possible for an 
originating LEC to change its switch translations so that a call to an 
NPA/NXX assigned to a rate center that is local to the originating rate 
center must be dialed on a 1+ basis and rated as a toll call, rather 
than a local call. A LEC may have the incentive to engage in this 
practice for a variety of reasons, including increased access revenue, 
reduced reciprocal compensation payments, and less significant 
transport obligations. Alternatively, LECs may engage in such practices 
pursuant to a state requirement.
    43. The Commission seeks comment on whether it should modify any 
part of the existing rating obligations of carriers. Are there any 
rating issues unique to CMRS providers or is this a concern for other 
types of competitive carriers? The Commission recognizes that attempts 
to address some of the rating issues may raise the question of whether 
preemption of state commission jurisdiction over the retail rating of 
intrastate calls and the definition of local calling areas is 
necessary. Parties supporting preemption should comment on the source 
of the Commission's authority to preempt and the reasons why preemption 
of retail rating is warranted in this context.

Supplemental Initial Regulatory Flexibility Analysis

    44. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Intercarrier Compensation NPRM. The Commission 
sought written public comment on reforming the existing intercarrier 
compensation regime, on alternate approaches to reforming that regime, 
on whether those alternate approaches will encourage efficient use of 
and investment in the telecommunications network, on whether they will 
solve interconnection problems, and on the extent to which they are 
administratively feasible. The Intercarrier Compensation NPRM also 
sought comment on the IRFA. The Commission received extensive comment 
in response to the Intercarrier Compensation NPRM, including several 
comments addressing the IRFA directly.
    45. With this FNPRM, the Commission continues the process of 
intercarrier compensation reform. The Commission has prepared this 
present Supplemental Initial Regulatory Flexibility Analysis 
(Supplemental IRFA) of the possible significant economic impact on a 
substantial number of small entities by the policies and rules proposed 
in this FNPRM. This Supplemental IRFA conforms to the RFA. Written 
public comments are requested on this Supplemental IRFA. Comments must 
be identified as responses to the Supplemental IRFA and must be filed 
by the deadlines for comments established in the FNPRM. To the extent 
that any statement in this Supplemental IRFA is perceived as creating 
ambiguity with respect to Commission rules or statements made in 
sections of this FNPRM that precede this Supplemental IRFA, the rules 
and statements set forth in those preceding sections are controlling. 
The Commission will send a copy of this entire FNPRM, including this 
Supplemental IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the FNPRM and the 
Supplemental IRFA (or summaries thereof) will be published in the 
Federal Register.

Need for, and Objectives of, the Proposed Rules

    46. The Commission's goal in this proceeding is to reform the 
current intercarrier compensation regimes and create a more uniform 
regime that

[[Page 15036]]

promotes efficient facilities-based competition in the marketplace. As 
discussed above, the Commission believes that this goal will be served 
by creating a technologically and competitively neutral intercarrier 
compensation regime that is consistent with network developments. It is 
also critical that this regime be implemented in a manner that will 
provide regulatory certainty, limit the need for regulatory 
intervention, and preserve universal service.
    47. The current intercarrier compensation system is governed by a 
complex set of federal and state rules. This system applies different 
cost methodologies to similar services based on traditional regulatory 
distinctions that may have no bearing on the cost of providing service, 
are not tied to economic or technical differences between services, and 
are increasingly difficult to maintain. These regulatory distinctions 
provide an opportunity for regulatory arbitrage activities, and distort 
the telecommunications markets at the expense of healthy competition.
    48. The current intercarrier compensation system also does not take 
into account recent developments in service offerings, including 
bundled local and long distance services, and voice over Internet 
Protocol (VoIP) services. These developments blur traditional industry 
and regulatory distinctions among various types of services and service 
providers, making it increasingly difficult to enforce the existing 
regulatory regimes. Additionally, the current intercarrier compensation 
system does not account for recent developments in telecommunications 
infrastructure. The existing intercarrier compensation regimes are 
based largely on the recovery of switching costs through per-minute 
charges. As a result of developments in telecommunications 
infrastructure, it appears that most network costs, including switching 
costs, result from connections to the network rather than usage of the 
network itself. Finally, developments in consumer control over 
telecommunications services bring into question the assumption that 
calling parties receive 100 percent of the benefits from a telephone 
call, a fundamental premise of the current intercarrier compensation 
regimes.
    49. The Commission received several intercarrier compensation 
reform proposals in response to the NPRM. In this FNPRM, the Commission 
seeks comment on numerous legal issues it must consider as part of 
intercarrier compensation reform, whether it adopts one of these 
proposals or develops a separate approach. Specifically, the Commission 
seeks comment on whether the cost standards proposed satisfy the 
requirements of the Act, on the possible exercise of its forbearance 
authority, and on the appropriate role of state regulation in the 
intercarrier compensation reform process. The Commission also seeks 
comment on proposed changes to current interconnection rules.
    50. Further, the Commission seeks comment on its obligation to 
provide cost-recovery mechanisms, the need, if any, for new cost-
recovery mechanisms, the appropriate level of different types of cost 
recovery mechanisms including end-user charges and universal service, 
and on the impact of replacing access charges with other types of cost 
recovery mechanisms. The Commission also seeks comment on whether price 
cap and rate-of-return LECs must be treated equally with regard to cost 
recovery mechanisms, whether such treatment would be competitively 
neutral, and the appropriate role for state cost recovery mechanisms. 
Additionally, the Commission seeks comment on how best to transition 
from the current regime to unified intercarrier compensation regime. 
Finally, the Commission seeks comment on additional issues stemming 
from intercarrier compensation reform including transit service 
obligations, the appropriate treatment of intraMTA CMRS traffic, 
interconnection agreement negotiation obligations, and routing and 
rating of CMRS calls.

Legal Basis

    51. The legal basis for any action that may be taken pursuant to 
this FNPRM is contained in sections 1-5, 7, 10, 201-05, 207-09, 214, 
218-20, 225-27, 251-54, 256, 271, 303, 332, 403, 405, 502 and 503 of 
the Communications Act of 1934, as amended, 47 U.S.C. 151-55, 157, 160, 
201-05, 207-09, 214, 218-20, 225-27, 251-54, 256, 271, 303, 332, 403, 
405, 502, and 503 and sections 1.1, 1.421 of the Commission's rules, 47 
CFR 1.1, 1.421.

Description and Estimate of the Number of Small Entities To Which the 
Proposed Rules Will Apply

    52. 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 rules adopted herein. 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 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). 5 U.S.C. 632.
    53. In this section, the Commission further describes and estimates 
the number of small entity licensees and regulatees that may also be 
indirectly affected by rules adopted pursuant to this FNPRM. The most 
reliable source of information regarding the total numbers of certain 
common carrier and related providers nationwide, as well as the number 
of commercial wireless entities, appears to be the data that the 
Commission publishes in its Trends in Telephone Service report. The SBA 
has developed small business size standards for wireline and wireless 
small businesses within the three commercial census categories of Wired 
Telecommunications Carriers, Paging, and Cellular and Other Wireless 
Telecommunications. Under these categories, a business is small if it 
has 1,500 or fewer employees. Below, using the above size standards and 
others, the Commission discusses the total estimated numbers of small 
businesses that might be affected by its actions.
    54. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 1997, there were 2,225 firms in 
this category, total, that operated for the entire year. Of this total, 
2,201 firms had employment of 999 or fewer employees, and an additional 
24 firms had employment of 1,000 employees or more. Thus, under this 
size standard, the majority of firms can be considered small.
    55. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to local exchange services. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 1,310 carriers reported that they were 
incumbent local exchange service providers. Of these 1,310 carriers, an 
estimated 1,025 have 1,500 or fewer employees and 285 have more than 
1,500 employees. In addition, according to Commission data, 563 
companies reported that they were engaged in the provision of either 
competitive access provider services or

[[Page 15037]]

competitive local exchange carrier services. Of these 563 companies, an 
estimated 472 have 1,500 or fewer employees and 91 have more than 1,500 
employees. In addition, 37 carriers reported that they were ``Other 
Local Exchange Carriers.'' Of the 37 ``Other Local Exchange Carriers,'' 
an estimated 36 have 1,500 or fewer employees and one has more than 
1,500 employees. Consequently, the Commission estimates that most 
providers of local exchange service, competitive local exchange 
service, competitive access providers, and ``Other Local Exchange 
Carriers'' are small entities that may be affected by the rules and 
policies adopted herein.
    56. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to interexchange services. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 281 companies reported that they were 
interexchange carriers. Of these 281 companies, an estimated 254 have 
1,500 or fewer employees and 27 have more than 1,500 employees. 
Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by the rules and policies adopted herein.
    57. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 1997, there were 2,225 firms in 
this category, total, that operated for the entire year. Of this total, 
2,201 firms had employment of 999 or fewer employees, and an additional 
24 firms had employment of 1,000 employees or more. Thus, under this 
size standard, the majority of firms can be considered small.
    58. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to incumbent local exchange 
services. The closest applicable size standard under SBA rules is for 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,337 carriers reported that they were engaged in the 
provision of local exchange services. Of these 1,337 carriers, an 
estimated 1,032 have 1,500 or fewer employees and 305 have more than 
1,500 employees. Consequently, the Commission estimates that most 
providers of incumbent local exchange service are small businesses that 
may be affected by the rules and policies adopted herein.
    59. Competitive Local Exchange Carriers (CLECs), Competitive Access 
Providers (CAPs), and ``Other Local Exchange Carriers.'' Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to providers of competitive exchange 
services or to competitive access providers or to ``Other Local 
Exchange Carriers,'' all of which are discrete categories under which 
TRS data are collected. The closest applicable size standard under SBA 
rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 609 companies reported that they were 
engaged in the provision of either competitive access provider services 
or competitive local exchange carrier services. Of these 609 companies, 
an estimated 458 have 1,500 or fewer employees and 151 have more than 
1,500 employees. In addition, 35 carriers reported that they were 
``Other Local Service Providers.'' Of the 35 ``Other Local Service 
Providers,'' an estimated 34 have 1,500 or fewer employees and one has 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of competitive local exchange service, competitive 
access providers, and ``Other Local Exchange Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    60. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to interexchange services. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 261 companies reported 
that their primary telecommunications service activity was the 
provision of interexchange services. Of these 261 companies, an 
estimated 223 have 1,500 or fewer employees and 38 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by the rules and policies adopted herein.
    61. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a size standard for small businesses specifically 
applicable to operator service providers. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 23 companies reported 
that they were engaged in the provision of operator services. Of these 
23 companies, an estimated 22 have 1,500 or fewer employees and one has 
more than 1,500 employees. Consequently, the Commission estimates that 
the majority of operator service providers are small entities that may 
be affected by the rules and policies adopted herein.
    62. Payphone Service Providers (PSPs). Neither the Commission nor 
the SBA has developed a size standard for small businesses specifically 
applicable to payphone service providers. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 761 companies reported 
that they were engaged in the provision of payphone services. Of these 
761 companies, an estimated 757 have 1,500 or fewer employees and four 
have more than 1,500 employees. Consequently, the Commission estimates 
that the majority of payphone service providers are small entities that 
may be affected by the rules and policies adopted herein.
    63. Prepaid Calling Card Providers. The SBA has developed a size 
standard for a small business within the category of Telecommunications 
Resellers. Under that SBA size standard, such a business is small if it 
has 1,500 or fewer employees. According to Commission data, 37 
companies reported that they were engaged in the provision of prepaid 
calling cards. Of these 37 companies, an estimated 36 have 1,500 or 
fewer employees and one has more than 1,500 employees. Consequently, 
the Commission estimates that the majority of prepaid calling card 
providers are small entities that may be affected by the rules and 
policies adopted herein.
    64. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 133 carriers have reported 
that they are engaged in the provision of local resale services. Of 
these, an estimated 127 have 1,500 or fewer employees and six

[[Page 15038]]

have more than 1,500 employees. Consequently, the Commission estimates 
that the majority of local resellers are small entities that may be 
affected by its action.
    65. Toll Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 625 carriers have reported 
that they are engaged in the provision of toll resale services. Of 
these, an estimated 590 have 1,500 or fewer employees and 35 have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities that may be affected by 
its action.
    66. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to ``Other Toll Carriers.'' This category includes toll carriers that 
do not fall within the categories of interexchange carriers, operator 
service providers, prepaid calling card providers, satellite service 
carriers, or toll resellers. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission's data, 92 companies reported that their 
primary telecommunications service activity was the provision of other 
toll carriage. Of these 92 companies, an estimated 82 have 1,500 or 
fewer employees and ten have more than 1,500 employees. Consequently, 
the Commission estimates that most ``Other Toll Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    67. Paging. The SBA has developed a small business size standard 
for Paging, which consists of all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 1997, in this category 
there was a total of 1,320 firms that operated for the entire year. Of 
this total, 1,303 firms had employment of 999 or fewer employees, and 
an additional seventeen firms had employment of 1,000 employees or 
more. Thus, under this size standard, the majority of firms can be 
considered small.
    68. Cellular and Other Wireless Telecommunications. The SBA has 
developed a small business size standard for Cellular and Other 
Wireless Telecommunication, which consists of all such firms having 
1,500 or fewer employees. According to Census Bureau data for 1997, in 
this category there was a total of 977 firms that operated for the 
entire year. Of this total, 965 firms had employment of 999 or fewer 
employees, and an additional twelve firms had employment of 1,000 
employees or more. Thus, under this size standard, the majority of 
firms can be considered small.
    69. Broadband Personal Communications Service. The broadband 
Personal Communications Service (PCS) spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years.'' These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved small business size standards 
bid successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 small and very small business bidders won approximately 40 
percent of the 1,479 licenses for Blocks D, E, and F. On March 23, 
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses. 
There were 48 small business winning bidders. On January 26, 2001, the 
Commission completed the auction of 422 C and F Broadband PCS licenses 
in Auction No. 35. Of the 35 winning bidders in this auction, 29 
qualified as ``small'' or ``very small'' businesses. Based on this 
information, the Commission concludes that the number of small 
broadband PCS licenses will include the 90 winning C Block bidders, the 
93 qualifying bidders in the D, E, and F Block auctions, the 48 winning 
bidders in the 1999 re-auction, and the 29 winning bidders in the 2001 
re-auction, for a total of 260 small entity broadband PCS providers, as 
defined by the SBA small business size standards and the Commission's 
auction rules. The Commission notes that, as a general matter, the 
number of winning bidders that qualify as small businesses at the close 
of an auction does not necessarily represent the number of small 
businesses currently in service. Also, the Commission does not 
generally track subsequent business size unless, in the context of 
assignments or transfers, unjust enrichment issues are implicated.
    70. Narrowband Personal Communications Services. The Commission has 
adopted a two-tiered small business size standard in the Narrowband PCS 
Second Report and Order, 65 FR 35875, June 6, 2000. A ``small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $40 million. A ``very small business'' is an entity that, 
together with affiliates and controlling interests, has average gross 
revenues for the three preceding years of not more than $15 million. 
The SBA has approved these small business size standards. In the 
future, the Commission will auction 459 licenses to serve Metropolitan 
Trading Areas (MTAs) and 408 response channel licenses. There is also 
one megahertz of narrowband PCS spectrum that has been held in reserve 
and that the Commission has not yet decided to release for licensing. 
The Commission cannot predict accurately the number of licenses that 
will be awarded to small entities in future actions. However, four of 
the 16 winning bidders in the two previous narrowband PCS auctions were 
small businesses, as that term was defined under the Commission's 
rules. The Commission assumes, for purposes of this analysis, that a 
large portion of the remaining narrowband PCS licenses will be awarded 
to small entities. The Commission also assumes that at least some small 
businesses will acquire narrowband PCS licenses by means of the 
Commission's partitioning and disaggregation rules.
    71. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
small business size standard for small entities specifically applicable 
to such incumbent 220 MHz Phase I licensees. To estimate the number of 
such licensees that are small businesses, the Commission applies the 
small business size standard under the SBA rules applicable to 
``Cellular and Other Wireless Telecommunications'' companies. This 
standard provides that such a company is small if it employs no more 
than 1,500 persons. According to Census Bureau data for 1997, there 
were 977 firms in this category, total, that operated for the entire 
year. Of this total, 965 firms had employment of 999 or fewer 
employees, and an additional

[[Page 15039]]

12 firms had employment of 1,000 employees or more. If this general 
ratio continues in the context of Phase I 220 MHz licensees, the 
Commission estimates that nearly all such licensees are small 
businesses under the SBA's small business size standard.
    72. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
a new service, and is subject to spectrum auctions. In the 220 MHz 
Third Report and Order, 62 FR 15978, April 3, 1997, the Commission 
adopted a small business size standard for ``small'' and ``very small'' 
businesses for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. This small 
business size standard indicates that a ``small business'' is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $15 million for the preceding 
three years. A ``very small business'' is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that do not exceed $3 million for the preceding three years. The SBA 
has approved these small business size standards. Auctions of Phase II 
licenses commenced on September 15, 1998, and closed on October 22, 
1998. In the first auction, 908 licenses were auctioned in three 
different-sized geographic areas: three nationwide licenses, 30 
Regional Economic Area Group (EAG) Licenses, and 875 Economic Area (EA) 
Licenses. Of the 908 licenses auctioned, 693 were sold. Thirty-nine 
small businesses won licenses in the first 220 MHz auction. The second 
auction included 225 licenses: 216 EA licenses and 9 EAG licenses. 
Fourteen companies claiming small business status won 158 licenses.
    73. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. The 
Commission awards ``small entity'' and ``very small entity'' bidding 
credits in auctions for Specialized Mobile Radio (SMR) geographic area 
licenses in the 900 MHz bands to firms that had revenues of no more 
than $15 million in each of the three previous calendar years, or that 
had revenues of no more than $3 million in each of the previous 
calendar years. The SBA has approved these size standards. The 
Commission awards ``small entity'' and ``very small entity'' bidding 
credits in auctions for Specialized Mobile Radio (SMR) geographic area 
licenses in the 800 MHz bands to firms that had revenues of no more 
than $40 million in each of the three previous calendar years, or that 
had revenues of no more than $15 million in each of the previous 
calendar years. These bidding credits apply to SMR providers in the 800 
MHz and 900 MHz bands that either hold geographic area licenses or have 
obtained extended implementation authorizations. The Commission does 
not know how many firms provide 800 MHz or 900 MHz geographic area SMR 
service pursuant to extended implementation authorizations, nor how 
many of these providers have annual revenues of no more than $15 
million. One firm has over $15 million in revenues. The Commission 
assumes, for purposes here, that all of the remaining existing extended 
implementation authorizations are held by small entities, as that term 
is defined by the SBA. The Commission has held auctions for geographic 
area licenses in the 800 MHz and 900 MHz SMR bands. There were 60 
winning bidders that qualified as small or very small entities in the 
900 MHz SMR auctions. Of the 1,020 licenses won in the 900 MHz auction, 
bidders qualifying as small or very small entities won 263 licenses. In 
the 800 MHz auction, 38 of the 524 licenses won were won by small and 
very small entities. The Commission notes that, as a general matter, 
the number of winning bidders that qualify as small businesses at the 
close of an auction does not necessarily represent the number of small 
businesses currently in service. Also, the Commission does not 
generally track subsequent business size unless, in the context of 
assignments or transfers, unjust enrichment issues are implicated.
    74. Private and Common Carrier Paging. In the Paging Third Report 
and Order, 62 FR 16004, April 3, 1997, the Commission developed a small 
business size standard for ``small businesses'' and ``very small 
businesses'' for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. A ``small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. Additionally, a ``very small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $3 million for the preceding three years. The SBA has approved 
these size standards. An auction of Metropolitan Economic Area licenses 
commenced on February 24, 2000, and closed on March 2, 2000. Of the 985 
licenses auctioned, 440 were sold. Fifty-seven companies claiming small 
business status won. At present, there are approximately 24,000 
Private-Paging site-specific licenses and 74,000 Common Carrier Paging 
licenses. According to the most recent Trends in Telephone Service, 471 
carriers reported that they were engaged in the provision of either 
paging and messaging services or other mobile services. Of those, the 
Commission estimates that 450 are small, under the SBA business size 
standard specifying that firms are small if they have 1,500 or fewer 
employees.
    75. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order, 
65 FR 3139, January 20, 2000, the Commission adopted a small business 
size standard for ``small businesses'' and ``very small businesses'' 
for purposes of determining their eligibility for special provisions 
such as bidding credits and installment payments. A ``small business'' 
as an entity that, together with its affiliates and controlling 
principals, has average gross revenues not exceeding $15 million for 
the preceding three years. Additionally, a ``very small business'' is 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues that are not more than $3 
million for the preceding three years. An auction of 52 Major Economic 
Area (MEA) licenses commenced on September 6, 2000, and closed on 
September 21, 2000. Of the 104 licenses auctioned, 96 licenses were 
sold to nine bidders. Five of these bidders were small businesses that 
won a total of 26 licenses. A second auction of 700 MHz Guard Band 
licenses commenced on February 13, 2001 and closed on February 21, 
2001. All eight of the licenses auctioned were sold to three bidders. 
One of these bidders was a small business that won a total of two 
licenses.
    76. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio System (BETRS). The Commission uses 
the SBA's small business size standard applicable to ``Cellular and 
Other Wireless Telecommunications,'' i.e., an entity employing no more 
than 1,500 persons. There are approximately 1,000 licensees in the 
Rural Radiotelephone Service, and the Commission estimates that there 
are 1,000 or fewer small entity licensees in the Rural Radiotelephone 
Service that may be affected by the rules and policies adopted herein.
    77. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. The Commission will use SBA's small

[[Page 15040]]

business size standard applicable to ``Cellular and Other Wireless 
Telecommunications,'' i.e., an entity employing no more than 1,500 
persons. There are approximately 100 licensees in the Air-Ground 
Radiotelephone Service, and the Commission estimates that almost all of 
them qualify as small under the SBA small business size standard.
    78. Aviation and Marine Radio Services. Small businesses in the 
aviation and marine radio services use a very high frequency (VHF) 
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator 
transmitter. The Commission has not developed a small business size 
standard specifically applicable to these small businesses. For 
purposes of this analysis, the Commission uses the SBA small business 
size standard for the category ``Cellular and Other 
Telecommunications,'' which is 1,500 or fewer employees. Most 
applicants for recreational licenses are individuals. Approximately 
581,000 ship station licensees and 131,000 aircraft station licensees 
operate domestically and are not subject to the radio carriage 
requirements of any statute or treaty. For purposes of evaluations in 
this analysis, the Commission estimates that there are up to 
approximately 712,000 licensees that are small businesses (or 
individuals) under the SBA standard. In addition, between December 3, 
1998 and December 14, 1998, the Commission held an auction of 42 VHF 
Public Coast licenses in the 157.1875-157.4500 MHz (ship transmit) and 
161.775-162.0125 MHz (coast transmit) bands. For purposes of the 
auction, the Commission defined a ``small'' business as an entity that, 
together with controlling interests and affiliates, has average gross 
revenues for the preceding three years not to exceed $15 million 
dollars. In addition, a ``very small'' business is one that, together 
with controlling interests and affiliates, has average gross revenues 
for the preceding three years not to exceed $3 million dollars. There 
are approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the above special small business size standards.
    79. Fixed Microwave Services. Fixed microwave services include 
common carrier, private operational-fixed, and broadcast auxiliary 
radio services. At present, there are approximately 22,015 common 
carrier fixed licensees and 61,670 private operational-fixed licensees 
and broadcast auxiliary radio licensees in the microwave services. The 
Commission has not created a size standard for a small business 
specifically with respect to fixed microwave services. For purposes of 
this analysis, the Commission uses the SBA small business size standard 
for the category ``Cellular and Other Telecommunications,'' which is 
1,500 or fewer employees. The Commission does not have data specifying 
the number of these licensees that have more than 1,500 employees, and 
thus is unable at this time to estimate with greater precision the 
number of fixed microwave service licensees that would qualify as small 
business concerns under the SBA's small business size standard. 
Consequently, the Commission estimates that there are up to 22,015 
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the 
microwave services that may be small and may be affected by the rules 
and policies adopted herein. The Commission noted, however, that the 
common carrier microwave fixed licensee category includes some large 
entities.
    80. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for 
television broadcasting in the coastal areas of states bordering the 
Gulf of Mexico. There are presently approximately 55 licensees in this 
service. The Commission is unable to estimate at this time the number 
of licensees that would qualify as small under the SBA's small business 
size standard for ``Cellular and Other Wireless Telecommunications'' 
services. Under that SBA small business size standard, a business is 
small if it has 1,500 or fewer employees.
    81. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission established small business size standards for the 
wireless communications services (WCS) auction. A ``small business'' is 
an entity with average gross revenues of $40 million for each of the 
three preceding years, and a ``very small business'' is an entity with 
average gross revenues of $15 million for each of the three preceding 
years. The SBA has approved these small business size standards. 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. The Commission concludes that the number of 
geographic area WCS licensees affected by this analysis includes these 
eight entities.
    82. 39 GHz Service. The Commission created a special small business 
size standard for 39 GHz licenses--an entity that has average gross 
revenues of $40 million or less in the three previous calendar years. 
An additional size standard for ``very small business'' is: an entity 
that, together with affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards. The auction of the 2,173 
39 GHz licenses began on April 12, 2000 and closed on May 8, 2000. The 
18 bidders who claimed small business status won 849 licenses. 
Consequently, the Commission estimates that 18 or fewer 39 GHz 
licensees are small entities that may be affected by the rules and 
policies adopted herein.
    83. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The auction of the 1,030 Local Multipoint Distribution Service (LMDS) 
licenses began on February 18, 1998 and closed on March 25, 1998. The 
Commission established a small business size standard for LMDS licenses 
as an entity that has average gross revenues of less than $40 million 
in the three previous calendar years. An additional small business size 
standard for ``very small business'' was added as an entity that, 
together with its affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards in the context of LMDS 
auctions. There were 93 winning bidders that qualified as small 
entities in the LMDS auctions. A total of 93 small and very small 
business bidders won approximately 277 A Block licenses and 387 B Block 
licenses. On March 27, 1999, the Commission re-auctioned 161 licenses; 
there were 40 winning bidders. Based on this information, the 
Commission concluded that the number of small LMDS licenses consists of 
the 93 winning bidders in the first auction and the 40 winning bidders 
in the re-auction, for a total of 133 small entity LMDS providers.
    84. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no

[[Page 15041]]

more than a $6 million net worth and, after federal income taxes 
(excluding any carry over losses), has no more than $2 million in 
annual profits each year for the previous two years. In the 218-219 MHz 
Report and Order and Memorandum Opinion and Order, 64 FR 59656, 
November 3, 1999, the Commission established a small business size 
standard for a ``small business'' as an entity that, together with its 
affiliates and persons or entities that hold interests in such an 
entity and their affiliates, has average annual gross revenues not to 
exceed $15 million for the preceding three years. A ``very small 
business'' is defined as an entity that, together with its affiliates 
and persons or entities that hold interests in such an entity and its 
affiliates, has average annual gross revenues not to exceed $3 million 
for the preceding three years. The SBA has approved these size 
standards. The Commission cannot estimate, however, the number of 
licenses that will be won by entities qualifying as small or very small 
businesses under its rules in future auctions of 218-219 MHz spectrum.
    85. 24 GHz--Incumbent Licensees. This analysis may affect incumbent 
licensees who were relocated to the 24 GHz band from the 18 GHz band, 
and applicants who wish to provide services in the 24 GHz band. The 
applicable SBA small business size standard is that of ``Cellular and 
Other Wireless Telecommunications'' companies. This category provides 
that such a company is small if it employs no more than 1,500 persons. 
According to Census Bureau data for 1997, there were 977 firms in this 
category that operated for the entire year. Of this total, 965 firms 
had employment of 999 or fewer employees, and an additional 12 firms 
had employment of 1,000 employees or more. Thus, under this size 
standard, the great majority of firms can be considered small. These 
broader census data notwithstanding, the Commission believes that there 
are only two licensees in the 24 GHz band that were relocated from the 
18 GHz band, Teligent and TRW, Inc. It is the Commission's 
understanding that Teligent and its related companies have less than 
1,500 employees, though this may change in the future. TRW is not a 
small entity. Thus, only one incumbent licensee in the 24 GHz band is a 
small business entity.
    86. 24 GHz--Future Licensees. With respect to new applicants in the 
24 GHz band, the small business size standard for ``small business'' is 
an entity that, together with controlling interests and affiliates, has 
average annual gross revenues for the three preceding years not in 
excess of $15 million. ``Very small business'' in the 24 GHz band is an 
entity that, together with controlling interests and affiliates, has 
average gross revenues not exceeding $3 million for the preceding three 
years. The SBA has approved these small business size standards. These 
size standards will apply to the future auction, if held.
    87. Satellite Service Carriers. The SBA has developed a size 
standard for small businesses within the category of Satellite 
Telecommunications. Under that SBA size standard, such a business is 
small if it has 1,500 or fewer employees. According to Commission data, 
31 carriers reported that they were engaged in the provision of 
satellite services. Of these 31 carriers, an estimated 25 have 1,500 or 
fewer employees and six, alone or in combination with affiliates, have 
more than 1,500 employees. Consequently, the Commission estimates that 
there are 31 or fewer satellite service carriers which are small 
businesses that may be affected by the rules and policies proposed 
herein.
    88. Cable and Other Program Distribution. This category includes 
cable systems operators, closed circuit television services, direct 
broadcast satellite services, multipoint distribution systems, 
satellite master antenna systems, and subscription television services. 
The SBA has developed small business size standard for this census 
category, which includes all such companies generating $12.5 million or 
less in revenue annually. According to Census Bureau data for 1997, 
there were a total of 1,311 firms in this category, total, that had 
operated for the entire year. Of this total, 1,180 firms had annual 
receipts of under $10 million and an additional 52 firms had receipts 
of $10 million or more but less than $25 million. Consequently, the 
Commission estimates that the majority of providers in this service 
category are small businesses that may be affected by the rules and 
policies adopted herein.
    89. Internet Service Providers. The SBA has developed a small 
business size standard for Internet Service Providers (ISPs). ISPs 
``provide clients access to the Internet and generally provide related 
services such as web hosting, web page designing, and hardware or 
software consulting related to Internet connectivity.'' Under the SBA 
size standard, such a business is small if it has average annual 
receipts of $21 million or less. According to Census Bureau data for 
1997, there were 2,751 firms in this category that operated for the 
entire year. Of these, 2,659 firms had annual receipts of under $10 
million, and an additional 67 firms had receipts of between $10 million 
and $24,999,999. Consequently, the Commission estimates that the 
majority of these firms are small entities that may be affected by its 
action.
    90. All Other Information Services. This industry comprises 
establishments primarily engaged in providing other information 
services (except new syndicates and libraries and archives). The 
Commission notes that, in this FNPRM, it has described activities such 
as e-mail, online gaming, web browsing, video conferencing, instant 
messaging, and other, similar IP-enabled services. The SBA has 
developed a small business size standard for this category; that size 
standard is $6 million or less in average annual receipts. According to 
Census Bureau data for 1997, there were 195 firms in this category that 
operated for the entire year. Of these, 172 had annual receipts of 
under $5 million, and an additional nine firms had receipts of between 
$5 million and $9,999,999. Consequently, the Commission estimates that 
the majority of these firms are small entities that may be affected by 
its action.

Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements for Small Entities

    91. This supplemental IRFA seeks comment on several rule changes 
and intercarrier compensation reform proposals under consideration that 
may affect reporting, recordkeeping and other compliance requirements 
for small entities. The types of rule changes under consideration are 
described below.
    92. Any intercarrier compensation reform measures that achieve the 
Commission's goal of moving toward a more unified regime will relieve 
small entities of some administrative, recordkeeping, and other 
compliance requirements, but may also create new burdens. As discussed 
within this FNPRM, the Commission is considering, and seeks comment on, 
several options for moving to a unified intercarrier compensation 
regime. Each of these options relieves certain compliance burdens that 
exist under the current system, but no option under consideration would 
be burden-free. Consequently, in this Supplemental IRFA the Commission 
seeks comment on burdens to small entities associated with each reform 
proposal under consideration.
    93. Small entities face significant recordkeeping and compliance 
burdens under the current intercarrier compensation system, including 
determining the appropriate regulatory category for all traffic they 
send or receive, measuring the quantity of each

[[Page 15042]]

type of traffic, and maintaining administrative systems and processes 
for intercarrier payments. Additionally, small entities must devote 
considerable resources to resolving disputes arising due to ambiguities 
in the rules defining the current intercarrier compensation regimes. A 
unified intercarrier compensation system with clear rules would reduce 
the need for small entities to devote resources to these tasks.

Bill-and-Keep

    94. Some of the intercarrier compensation reform proposals received 
in this proceeding are based on a bill-and-keep approach. Under a bill-
and-keep approach, carriers would look to their own customers, rather 
than to other carriers, to recover costs. Carriers, including small 
entities, might have to modify their systems and processes to reflect 
this change in cost recovery. These modifications may present a 
compliance burden to small entities. Any compliance burden, however, 
may be outweighed by the reduction in burdens associated with the 
elimination of intercarrier charges. Additionally, carriers, including 
small entities, already have systems and processes designed to bill 
customers with which they have a retail relationship. While these 
systems and processes may have to be modified, these modifications 
should be similar to those that occur in the normal course of business 
already.
    95. If a bill-and-keep approach were adopted, the current network 
interconnection rules may have to be revised or replaced. Carriers 
would have to ensure that their agreements or arrangements with other 
carriers comply with any new network interconnection rules. Complying 
with any new or modified interconnection rules may impose a compliance 
burden on all carriers, including small entities. This burden may be 
offset by streamlined operation under new interconnection rules that 
resolve or eliminate the potential for the types of interconnection 
disputes that arise under the current rules.
    96. The bill-and-keep plans under consideration include new 
universal service mechanisms. Under these plans, carriers will have to 
determine their costs and demonstrate a shortfall between their costs 
and revenues in order to qualify for funding from cost recovery 
mechanisms. Further, some types of carriers, including small entities, 
may not be eligible for some of the cost recovery mechanisms included 
in some of the plans. Determining costs, determining eligibility under 
any new universal service plan, and administration related to any new 
universal service plan may represent significant burdens to small 
entities under a bill-and-keep plan.

Unified Calling Party Network Pays (CPNP)

    97. The Commission is considering several unified CPNP plans 
submitted by industry groups comprised of small and medium sized rural 
LECs and CLECs. Although these proposals are designed to reduce the 
overall compliance burdens associated with each compensation regime by 
applying the same rate to all types of traffic, they may cause certain 
specific compliance burdens to increase.
    98. Under any CPNP approach, carriers would continue to look to 
other carriers to recover a portion of their costs, and would have to 
maintain systems and processes to bill other carriers for these new 
charges. The cost standard that would be used to determine the rates 
varies with each plan. Under plans that apply a TELRIC or embedded cost 
methodology, carriers may need to perform cost studies using a 
methodology they have not previously used. Such cost calculations 
potentially represent a significant compliance and recordkeeping burden 
for small entities. Moreover, some of the unified CPNP plans under 
consideration in this proceeding propose rates that would vary by 
carrier and/or by state. If such plans were adopted, carriers would 
have to design and implement administrative systems that track the 
origin and destination of traffic and account for differing state or 
carrier rates. Developing and implementing such administrative systems 
may present a significant compliance burden for small entities.
    99. The FNPRM seeks comment on the need for new or revised network 
interconnection rules. Some of the CPNP plans submitted for 
consideration in this proceeding retain the current network 
interconnection rules. Varying and inconsistent interpretations of 
these interconnection rules have led to numerous disputes and 
uncertainty about how the rules are to be applied. A CPNP plan that 
retains the current network interconnection rules will inherit this 
uncertainty surrounding the existing rules. Any changes in such rules 
also could result in new burdens for some carriers.
    100. Adoption of a unified CPNP plan may necessitate changes in 
interconnection agreements. Interconnection agreements may be premised 
on rates that would be modified under a unified CPNP plan. Similarly, 
any change in interconnection rules could lead to renegotiation of 
agreements. Carriers, including small entities, would likely seek to 
renegotiate their existing interconnection agreements as a result of 
any new regime. Renegotiation of existing interconnection agreements 
may present a significant burden to small entities under a CPNP 
approach.
    101. Each of the unified CPNP plans under consideration assumes 
revenue neutrality for incumbent LECs with significant funding coming 
from universal service mechanisms. Some of the plans also include new 
universal service mechanisms. Under some plans, carriers will have to 
determine their costs and demonstrate a shortfall between their costs 
and revenues in order to qualify for funding from cost recovery 
mechanisms. Further, some types of carriers, including small entities, 
may not be eligible for some of the cost recovery mechanisms included 
in some of the plans. Determining costs, determining eligibility under 
any new universal service plan, and administration related to any new 
universal service plan may represent significant burdens to small 
entities under a unified CPNP plan.

Other Issues

    102. In this FNPRM, the Commission seeks comment on several issues 
related to transit service. If, as a result of this FNPRM, new rules 
related to transit service come into existence, these rules may impose 
burdens on some entities. Rules imposing transit service obligations 
would likely have no significant impact on ILECs already providing, or 
carriers already using transit service. For carriers that would be 
affected, the burdens may include determining the price of transit 
service purchased or provided, and developing additional administrative 
capabilities to account for providing or receiving transit service.
    103. The Commission also seeks comment regarding possible changes 
to the intraMTA rule, negotiation of CMRS interconnection agreements, 
and rating of CMRS traffic, as discussed in this FNPRM. If the 
Commission changes the intraMTA rule, or otherwise changes parties' 
obligations, the new rules will likely relieve some burdens, including 
lowering the level of resources carriers must devote to resolving 
disputes arising from ambiguities in the current rules. Carriers may 
also experience burdens associated with bringing operations and 
interconnection agreements into compliance with the new rules.

[[Page 15043]]

Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered

    104. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    105. In this FNPRM, the Commission seeks comments on a variety of 
intercarrier compensation reform plans submitted in the record in this 
proceeding, as well as on other issues related to reform of the 
existing intercarrier compensation system. The Commission is aware that 
some of the proposals under consideration may create burdens for small 
entities. Consequently, the Commission seeks comments on alternatives 
that will minimize burdens, discussed below.
    106. Several commenters have expressed a preference for maintaining 
a CPNP regime, and have submitted plans to replace or reform the 
current intercarrier compensation system with a more unified CPNP 
approach. For instance, the ARIC plan includes a single rate based on 
embedded costs for each carrier. The EPG plan uses current interstate 
access rates as a cost standard. The CBICC plan uses the TELRIC costs 
of ILEC tandem switching to determine the intercarrier compensation 
rate. The Commission seeks comment on the economic impact on small 
entities of these plans relative to other plans contained in the 
record, and to a bill-and-keep approach.
    107. One non-unified option under consideration for intercarrier 
compensation system reform is to maintain a CPNP based system without 
immediately adopting a unified approach. For instance, NASUCA 
recommends a plan that reduces intrastate access charges over a five-
year transition period, and then moves to more unified rates.
    108. Another non-unified approach the Commission is considering 
includes use of an incremental cost methodology to meet the section 
252(d) ``additional cost'' standard for reciprocal compensation. The 
Commission seeks comment on the economic impact of such a plan relative 
to other plans contained in the record, and to a bill-and-keep 
approach.
    109. Throughout this proceeding, the Commission has recognized the 
unique needs and interests of small entities. In this FNPRM the 
Commission seeks comment on several issues and measures under 
consideration that are uniquely applicable to small entities. 
Specifically, the Commission seeks comment on whether any intercarrier 
compensation reform measures adopted should be revenue neutral. The 
Commission also seeks comment on the impact of reduced intercarrier 
revenues to small entities in the event that a bill-and-keep approach 
is adopted.
    110. The Commission also seeks comment on whether separate network 
interconnection rules are necessary or appropriate for small entities, 
such as rate-of-return carriers. Parties responding to this 
supplemental IRFA supporting such an approach should explain how 
separate rules would be structured, and what criteria would be used to 
determine whether an entity qualified to use the separate rules.
    111. Additionally, the Commission seeks comment on whether separate 
cost recovery mechanisms unique to small entities are necessary or 
appropriate. Parties responding to this Supplemental IRFA in support of 
separate cost recovery mechanisms for small entities should explain how 
the separate cost recovery mechanisms would operate, how they would be 
funded, and what criteria would be used to determine what entities 
qualify for funding from the separate mechanisms. Further, the 
Commission seeks comment on the feasibility of retaining an 
intercarrier compensation mechanism for small entities only, while 
moving to another system (e.g. bill-and-keep) for all other entities. 
Parties advocating this approach should explain how a system of 
intercarrier payments available only to small entities would be 
integrated with another intercarrier compensation mechanism, such as a 
bill-and-keep system, that is in place for other carriers.
    112. Finally, the Commission seeks comment on whether separate 
consideration for small entities is necessary or appropriate for each 
of the following issues previously discussed in this FNPRM: The 
potential impact of rules imposing transit service obligations; the 
potential impact of rules related to negotiation of CMRS 
interconnection; and the potential impact of rules related to rating 
and routing of CMRS traffic.

Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    113. Implementation of any of the rule changes the Commission is 
considering in this FNPRM may require extensive modifications to 
existing Federal Rules. The need for modifications does not necessarily 
mean that the new rules duplicate, overlap, or conflict with existing 
rules. Rather, amendments to the existing rules would be necessary to 
codify the policies the Commission adopts. The sections of the 
Commission's rules that would likely have to be amended include, 
without limitation, the following: Part 32: Uniform System of Accounts 
for Telecommunications Companies; Part 36: Jurisdictional Separations 
Procedures; Standard Procedures for Separating Telecommunications 
Property Costs, Revenues, Expenses, Taxes, and Reserves for 
Telecommunications Companies; Part 51: Interconnection; Part 54: 
Universal Service; Part 61: Tariffs; and Part 69: Access Charges.

Comment Filing Procedures

    114. Pursuant to sections 1.415 and 1.419 of the Commission's 
rules, interested parties may file comments by May 23, 2005 and reply 
comments by June 22, 2005. Comments may be filed using the Commission's 
Electronic Comment Filing System (ECFS) or by filing paper copies. 
Comments filed through the ECFS can be sent as an electronic file via 
the Internet to http://www.fcc.gov/cgb/ecfs/. Generally, only one copy 

of an electronic submission must be filed. If multiple docket or 
rulemaking numbers appear in the caption of the proceeding, commenters 
must transmit one electronic copy of the comments to each docket or 
rulemaking number referenced in the caption. In completing the 
transmittal screen, commenters should include their full name, U.S. 
Postal Service mailing address, and the applicable docket or rulemaking 
number, in this case, CC Docket No. 01-92. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and 
should include the following words in the body of the message, ``get 
form.'' A sample form and directions will be sent in reply. Parties who 
choose to file by paper must file an original and four copies of each 
filing. If more than one docket or rulemaking number appears in the 
caption of this proceeding, commenters must submit two additional

[[Page 15044]]

copies for each additional docket or rulemaking number.
    115. Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although the Commission continues to experience 
delays in receiving U.S. Postal Service mail). Parties are strongly 
encouraged to file comments electronically using the Commission's ECFS.
    116. The Commission's contractor, Natek, Inc., will receive hand-
delivered or messenger-delivered paper filings for the Commission's 
Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 
20002.

--The filing hours at this location are 8 a.m. to 7 p.m.
--All hand deliveries must be held together with rubber bands or 
fasteners.
--Any envelopes must be disposed of before entering the building.
--Commercial overnight mail (other than U.S. Postal Service Express 
Mail and Priority Mail) must be sent to 9300 East Hampton Drive, 
Capitol Heights, MD 20743.
--U.S. Postal Service first-class mail, Express Mail, and Priority Mail 
should be addressed to 445 12th Street, SW., Washington, DC 20554.

    117. All filings must be addressed to the Commission's Secretary, 
Marlene H. Dortch, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, SW., Washington, DC 20554. Parties should 
also send a copy of their filings to Victoria Goldberg, Pricing Policy 
Division, Wireline Competition Bureau, Federal Communications 
Commission, Room 5-A266, 445 12th Street, SW., Washington, DC 20554, or 
by e-mail to victoria.goldberg@fcc.gov. Parties shall also serve one 
copy with the Commission's copy contractor, Best Copy and Printing, 
Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554, (202) 488-5300, or via e-mail to fcc@bcpiweb.com.
    118. Documents in CC Docket No. 01-92 are available for public 
inspection and copying during business hours at the FCC Reference 
Information Center, Portals II, 445 12th St. SW., Room CY-A257, 
Washington, DC 20554. The documents may also be purchased from BCPI, 
telephone (202) 488-5300, facsimile (202) 488-5563, TTY (202) 488-5562, 
e-mail fcc@bcpiweb.com.

Initial Paperwork Reduction Act Analysis

    119. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any 
proposed ``information collection burden for small business concerns 
with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

Ordering Clauses

    120. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1-5, 7, 10, 201-05, 207-09, 214, 218-20, 225-27, 
251-54, 256, 271, 303, 332, 403, 405, 502 and 503 of the Communications 
Act of 1934, as amended, 47 U.S.C. 151-155, 157, 160, 201-05, 207-09, 
214, 218-20, 225-27, 251-54, 256, 271, 303, 332, 403, 405, 502, and 503 
and sections 1.1, 1.421 of the Commission's rules, 47 CFR 1.1, 1.421, 
notice is hereby given of the rulemaking and comment is sought on those 
issues.
    121. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Further Notice of Proposed Rulemaking, including the 
Supplemental Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 05-5859 Filed 3-23-05; 8:45 am]

BILLING CODE 6712-01-P