[Federal Register: May 15, 2008 (Volume 73, Number 95)]
[Rules and Regulations]               
[Page 28049-28057]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15my08-16]                         

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WT Docket No. 99-217; FCC 08-87]

 
Competitive Networks, Multiunit Premises

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission adopts rules prohibiting telecommunications 
carriers from entering into contracts that would make them the 
exclusive provider of telecommunications services in residential 
multiple tenant environments (MTEs), e.g., apartment buildings, 
condominiums, and cooperatives. The rules also prohibit 
telecommunications carriers from enforcing existing exclusivity 
contracts.

DATES: Effective July 14, 2008.

FOR FURTHER INFORMATION CONTACT: Jon Reel, Wireline Competition Bureau, 
(202) 418-1580.

SUPPLEMENTARY INFORMATION: In this Order, the Commission removes 
impediments to facilities-based competition to provide voice, video, 
and data services as intended by the Communications Act of 1934, as 
amended (the Act) and Commission precedent. As it did with video 
service providers (see Exclusive Service

[[Page 28050]]

Contracts for Provision of Video Services in Multiple Dwelling Units 
and Other Real Estate Developments, MB Docket No. 07-51, 72 FR 61129-
01, 22 FCC Rcd 20235 (2007) (Video Nonexclusivity Order)), the 
Commission finds that the harm to competition from exclusivity 
agreements outweighs any benefit, and that such contracts are 
inherently unjust and unreasonable. The rule establishes regulatory 
parity between telecommunications carriers and cable television 
operators, which are already banned from entering into or enforcing 
arrangements to be the sole provider of video services in residential 
MTEs. By removing impediments to competition, and by establishing 
regulatory parity among likely competitors, this action should bring 
the benefits of competition, including competition to provide broadband 
Internet access services, to residents of MTEs.
    The Commission will send a copy of this Report and Order in a 
report to be sent to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

Final Paperwork Reduction Act of 1995 Analysis

    This document does not contain new or modified information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified ``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).

Synopsis of Report and Order

    1. On October 25, 2000, the Commission issued the Promotion of 
Competitive Networks in Local Telecommunications Markets, First Report 
and Order and Further Notice of Proposed Rulemaking, WT Docket No. 99-
217, 66 FR 2322-01, 15 FCC Rcd 22983 (2000) (Competitive Networks Order 
and Further NPRM) to foster local competition pursuant to the 1996 Act, 
and adopted several measures to ensure that competing 
telecommunications providers are able to provide services in MTEs. Most 
notably for the purposes of this proceeding, that order prohibited 
carriers from entering into contracts that restrict or effectively 
restrict owners and managers of commercial MTEs from permitting access 
by competing carriers. The Commission also sought comment in several 
areas, including whether the prohibition on exclusive access contracts 
in commercial MTEs should be extended to residential settings, and 
whether carriers should be prohibited from enforcing exclusive access 
provisions in existing contracts in either commercial or residential 
MTEs.
    2. On March 28, 2007, the Wireline Competition Bureau released a 
public notice inviting interested parties to update the record 
pertaining to issues raised in the Commission's Competitive Networks 
proceeding in light of marketplace and industry developments. (Parties 
Asked to Refresh Record Regarding Promotion of Competitive Networks in 
Local Telecommunications Markets, WT Docket No. 99-217, CC Docket No. 
96-98, public notice, 22 FCC Rcd 5632 (2007)). Specifically, the notice 
sought updates on the progress of the real estate industry's voluntary 
commitments aimed at improving tenants' access to alternative 
telecommunications carriers, and on intervening industry developments 
such as service bundling and integration.
    3. The Commission concludes that exclusive agreements to provide 
telecommunications services to residential customers in MTEs harm 
competition and consumers without evidence of countervailing benefits, 
and the Commission thus prohibits carriers from entering into or 
enforcing such provisions. This conclusion comports with the 
Commission's decision in the Video Nonexclusivity Order to prohibit 
cable operators and others subject to the relevant statutory provisions 
from executing or enforcing existing video exclusivity provisions in 
contracts to serve residential multiunit premises. In an environment of 
increasingly competitive bundled service offerings, the importance of 
regulatory parity is particularly compelling in the Commission's 
determination to remove this impediment to fair competition. Moreover, 
nothing in the record indicates that the competitive benefits that 
commercial customers enjoy by virtue of the Commission's prior 
prohibition of such contracts in the commercial context should not also 
be extended to residential users.
    4. Scope of Residential MTEs. In the Competitive Networks Order and 
Further NPRM, the Commission prohibited exclusivity provisions with 
respect to the provision of telecommunications services in commercial 
MTEs. As it observed in that order, however, ``some premises are used 
for both commercial and residential purposes.'' That Commission stated 
that in situations ``where a single access agreement covers the entire 
premises, the Commission finds it most consistent with the purposes of 
this rule to determine its status as residential or commercial by 
predominant use.'' The Commission has continued that approach in 
subsequent decisions, for example granting certain section 251(c) 
unbundling relief for fiber deployed to ``predominantly residential'' 
multiunit premises relying on the distinctions drawn in the Competitive 
Networks Order and Further NPRM. Consistent with that precedent, the 
protections against telecommunications exclusivity provisions here 
extend to the tenants in residential MTEs as determined by the MTE's 
predominant use.
    5. As the Commission held in the Competitive Networks Order and 
Further NPRM, the guests of hotels or similar establishments are not 
``tenants'' covered by the exclusivity ban within the meaning of the 
Commission's rules. Similar to the Commission's decision in the video 
context in the Video Nonexclusivity Order, and consistent with prior 
decisions in the telecommunications context, the Commission likewise 
does not find the prohibition adopted here necessary to protect guests 
in ``hotels, or similar establishments,'' since such guests tend to be 
transient users, for whom such a prohibition likely would not bring the 
same competitive benefits. For purposes of protecting consumers in 
residential MTEs, the prohibition on exclusive arrangements for the 
provision of telecommunications services does not extend to guests in 
hotels or similar establishments, as described in the Video 
Nonexclusivity Order at para. 7.
    6. Prohibition on Entering Into and Enforcing Exclusivity. The 
Commission finds that the record leaves no doubt of the existence of 
exclusive arrangements for the provision of telecommunications 
services. These arrangements have the same harmful effects on the 
provision of triple play services and broadband deployment as discussed 
in the Video Nonexclusivity Order, and pose just as much of a barrier 
to competition where they are attached to the provision of 
telecommunications services as they are to the provision of video 
services. Such provisions can ``prohibit or economically discourage 
consumers from seeking alternative service providers'' for 
telecommunications services, thereby limiting consumer choice and 
competition. This not only could adversely affect consumers' rates, but 
also quality, innovation, and network redundancy.
    7. Developments in the markets for telecommunications, video, and 
broadband services over the last several years support the conclusion 
to extend the ban on exclusivity to residential

[[Page 28051]]

MTEs. At the time the Commission issued the Competitive Networks Order 
and Further NPRM, the Commission distinguished between residential and 
commercial tenants because of an inconclusive record about the likely 
competitive effects in residential MTEs, and cited commenter concerns 
that ``in the residential context, potential revenue streams from any 
one building are typically not enough to attract competitive entry 
without exclusive contracts.'' As the Commission has discussed at 
length in the Video Nonexclusivity Order and in other recent orders, 
the dramatic growth of service combinations and the ``triple play'' 
reduces the concern that a sole telecommunications service revenue 
stream is insufficient to generate additional competitive entry, even 
in the residential context. The shift from competition between stand 
alone services to that between service bundles, as well as the 
integration of service providers, supports the removal of obstacles to 
facilities-based entry. Given that the same facilities used to provide 
video and data services often can readily be used to provide telephone 
service, as well, denying such providers the right to do so only serves 
to reduce the entry incentives of competing providers, and thus 
competition, for each of those services.
    8. In addition, section 706 of the Telecommunications Act of 1996 
(1996 Act) and the goal of regulatory parity support this decision. 
When the Commission last addressed this issue in 2000, the Commission 
indicated its hope that the growth of facilities-based competition 
would increase the availability of advanced services. While providers 
have deployed broadband facilities to a tremendous degree since then, 
the Commission believes that its actions here will further promote that 
goal. Because allowing the imposition of restrictions on competitive 
offerings to residents in a multiunit premise would deter competitors 
from offering broadband service in combination with video, voice, or 
other telecommunications services, the Commission also finds that 
prohibiting carriers from entering into exclusivity contracts for the 
provision of telecommunications services furthers section 706's mandate 
to ``encourage the deployment on a reasonable and timely basis of 
advanced telecommunications capability to all Americans'' as a basis 
for expanding the prohibition on contractual exclusivity.
    9. The Commission is not persuaded by arguments that the Commission 
should refrain from taking any action with regard to residential MTEs. 
In response to the issues raised in the Competitive Networks 
proceeding, the real estate industry made a commitment to the 
Commission to develop model contracts and ``best practices'' to 
facilitate negotiations for building access, which include a firm 
policy not to enter into exclusive contracts. While this approach is 
commendable and pro competitive, the Commission does not find on this 
record that the effects of this voluntary commitment are not 
widespread, nor does it find such an unenforceable commitment 
sufficient to ensure the necessary competitive access.
    10. The Commission previously found no evidence of benefits to 
competition or consumer welfare from the use of exclusive contracts in 
commercial settings, and the record in residential settings similarly 
lacks such evidence. Although the data cited in the comments recently 
refreshing the Competitive Networks proceeding are not detailed, that 
does not render the anticompetitive impact of exclusivity provisions 
inconsequential. Qwest reports that it is increasingly encountering 
residential buildings where it is prohibited to sell its voice 
services. Indeed, no party disputes that carriers and MTE 
representatives continue to enter into these contracts, and even in 
arguing against a prohibition, RAA introduces a survey of property 
owners and managers showing that two percent of the respondents admit 
to having at least one exclusive agreement for building access. The 
Commission is mindful of the concerns of some that ``community-based 
arrangements'' allow competitive providers some assurance of a steady 
revenue stream to justify their initial development, but, for the 
reasons described above, the Commission is not persuaded by such 
concerns in the present marketplace environment. Thus, the Commission 
concludes that the perpetuation of exclusivity contracts is not in the 
public interest. Just as the Commission concluded in the context of 
video programming services, the Commission finds that the benefits do 
not outweigh the harms, and it acts accordingly for telecommunications 
services. The exclusive provision of telecommunications services in 
residential MTEs bars competitive and new entry in the 
telecommunications services market and triple play market, and 
discourages the deployment of broadband facilities to the American 
public. This in turn results in higher prices and fewer competitive 
choices for consumers. Such limitations are inconsistent with the pro-
competitive goals of the 1996 Act, and therefore such contracts are 
unjust and unreasonable practices.
    11. The Commission finds that immediately prohibiting the 
enforcement of such provisions is more appropriate than phasing them 
out or waiting until contracts expire and are replaced by contracts 
without exclusivity provisions. The Commission agrees with commenters 
that such approaches would only serve to further delay the entry of 
competition to customers in the buildings at issue. To leave existing 
exclusivity contracts in effect would allow the competitive harms 
identified to continue for some time, even years, and the Commission 
believes it is in the public interest to prohibit such contracts from 
being enforced. Further, to the extent that exclusivity provisions 
prevent incumbent local exchange carriers (LECs) from serving a 
building, they could be at odds with applicable carrier of last resort 
obligations. In addition, nothing in the record suggests that small 
carriers are particularly disadvantaged by exclusivity prohibitions, or 
that the cost/benefit analysis for consumers differs when small 
carriers are involved. Finally, the Commission notes that the validity 
of exclusivity provisions in contracts for the provision of 
telecommunications services to residential MTEs has been subject to 
question for some time. In the Competitive Networks Order and Further 
NPRM, the Commission found such provisions unreasonable in the context 
of commercial MTEs, and sought comment on the propriety of a similar 
prohibition for residential MTEs, including the prohibition on 
enforcement of existing exclusivity provisions. Thus, carriers have 
been on notice for more than seven years that the Commission might 
prohibit both their entering, and enforcement of, such provisions.
    12. As the Commission found in the Competitive Networks Order and 
Further NPRM, it has ample authority to prohibit exclusivity provisions 
in agreements for the provision of telecommunications service to 
residential MTEs. There, the Commission specifically found that 
``exclusive contracts for telecommunications service in commercial 
settings impede the pro-competitive purposes of the 1996 Act and appear 
to confer no substantial countervailing public benefits,'' and thus ``a 
carrier's agreement to such a contract is an unreasonable practice'' 
under section 201(b) of the Communications Act of 1934, as amended 
(Act).

[[Page 28052]]

    13. The same conclusion is applicable here because just as in the 
commercial MTE context, the prohibition of exclusive contracts in the 
provision of telecommunications services to residential MTEs furthers 
the same policy goals--facilitating competitive entry, lower prices, 
and more broadband deployment. Thus, the Commission finds that a 
carrier's execution or enforcement of such an exclusive access 
provision is an unreasonable practice and implicates the Commission's 
authority under section 201(b) of the Act to prohibit unreasonable 
practices. As with video contracts, the Commission does not limit this 
prohibition to future exclusivity contracts for the provision of 
telecommunications services, but also prohibits the enforcement of such 
existing contracts. In the Competitive Networks Order and Further NPRM, 
the Commission sought comment on whether to prohibit carriers from 
enforcing exclusive access provisions in existing contracts in either 
commercial or residential multiunit premises, including the extent of 
the Commission's authority to do so. The Commission concludes that it 
has such authority, and that it is in the public interest to prohibit 
the enforcement of exclusive contracts for the provision of 
telecommunications services to residential MTEs.
    14. The Commission has authority to ``modify * * * provisions of 
private contracts when necessary to serve the public interest.'' See, 
e.g., Expanded Interconnection with Local Telephone Company Facilities, 
CC Docket No. 91-141, Memorandum Opinion and Order, 9 FCC Rcd 5154, 
5207-10, paras. 197-208 (1994). The Commission has exercised this 
authority previously when private contracts violate sections 201 
through 205 of the Act. As the Commission found in the Competitive 
Networks Order and Further NPRM, the exclusive access provisions at 
issue here ``perpetuate the very `barriers to facilities-based 
competition' that the 1996 Act was designed to eliminate,'' and appear 
to confer no substantial countervailing public benefits. Having for the 
same reasons found such exclusive contracts violate section 201 of the 
Act, and given the adverse competitive effects of such contracts, the 
Commission finds it necessary in the public interest to prohibit 
enforcement of such existing contracts.
    15. In addition, the Commission concludes that its prohibition on 
the enforcement of telecommunications exclusivity contracts here does 
not violate the Fifth Amendment for the same reasons discussed in the 
Video Nonexclusivity Order in the context of video exclusivity 
provisions. In particular, such action is not a per se taking, nor does 
it represent a regulatory taking under the Supreme Court's framework. 
As is true in the video context, the prohibition on exclusivity 
arrangements does not prevent telecommunications carriers from 
utilizing the facilities they own to provide services to MTEs, nor does 
it prohibit other types of arrangements such as exclusive marketing 
arrangements. Exclusive telecommunications contracts have been under 
scrutiny for years, and have been prohibited by the Commission and 
states in certain contexts. To the extent that carriers have used 
exclusivity to obstruct competition, any underlying investment-backed 
expectations are not sufficiently longstanding or pro-competitive in 
nature to warrant immunity from regulation. In addition, the 
prohibition on enforcement of the exclusivity provisions at issue 
substantially advances the government interest in preventing 
unreasonable practices reflected in section 201(b) of the Act, and is 
based on weighing of the relative costs and benefits of such 
provisions. Moreover, the Commission notes that this action applies 
only to carriers seeking to enter or enforce telecommunications 
exclusivity contracts--the Commission is not hereby mandating access to 
residential or other MTEs. Thus, it finds that it has ample authority 
to regulate telecommunications carriers' contractual conduct even 
though it may have a tangential effect on MTE owners.
    16. In sum, the Commission concludes that it has both a sufficient 
policy basis and legal authority to prohibit carriers from entering or 
enforcing exclusivity provisions on contracts to provide 
telecommunications services to residential MTEs. By adopting such a 
prohibition here, it furthers the competitive goals of the 1996 Act, 
and continues efforts to ensure that consumers in MTEs enjoy the 
benefits of increased competition in both telephone and video service 
offerings.

Final Regulatory Flexibility Analysis, WC Docket No. 99-217 
(Competitive Networks)

    17. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Further Notice of Proposed Rulemaking (Further 
NPRM) to this proceeding. The Commission sought written public comment 
on the proposals in the Further NPRM, including comment on the IRFA. 
The Commission received one comment on the IRFA, from the Real Access 
Alliance. This Final Regulatory Flexibility Analysis (FRFA) conforms to 
the RFA.

A. Need for, and Objectives of, the Report and Order

    18. This Report and Order adopts rules and provides guidance to 
implement sections 1, 2(a), 4(i), 4(j), 201, 202, 205, and 405 of the 
Communications Act of 1934, as amended (the Act) and section 706 of the 
Telecommunications Act of 1996. Those sections of the Act authorize the 
Commission to prohibit any telecommunications carrier from enforcing or 
executing contracts with premises owners for provision of 
telecommunications service alone or in combination with other services 
in predominantly residential multiple tenant environments (MTEs). The 
Commission has found that existing and future exclusive contracts 
constitute an unreasonable barrier to entry for competitive entrants 
that would impede competition and accelerated broadband deployment, and 
that they constitute an unfair method of competition. The measures 
adopted in this Report and Order ensure that, in furtherance of the 
Telecommunications Act of 1996, certain contractual exclusivity 
provisions no longer serve as an obstacle to competitive access in the 
telecommunications market.

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

    19. Only one commenter, RAA, submitted a comment that specifically 
responded to the IRFA. RAA asserts that the IRFA was defective because 
it did not address the effects of possible outcomes on apartment 
building owners.
    20. We disagree with RAA's assertion. In fact, the IRFA discussed 
apartment building owners specifically in paragraph 15. Moreover, an 
IRFA need only address the concerns of entities directly regulated by 
the Commission. The Commission does not directly regulate apartment 
building operators. Accordingly, even if the IRFA had not addressed the 
concerns of apartment building owners, it would not be defective. When 
an agency finds that there is no direct impact on a substantial number 
of small entities that are subject to the requirements of the rule, 
then no discussion of alternatives, less costly than the proposed rule, 
is required.

[[Page 28053]]

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

    21. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the 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 which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.
    22. The rules and guidance adopted by this Report and Order will 
ease the entry of providers of telecommunications services, including 
those providing the ``triple play'' of voice, video, and broadband 
Internet access service. The Commission has determined that the group 
of small entities directly affected by the rules adopted herein 
consists of wireline and wireless telecommunications carriers. 
Therefore, in the Report and Order, the Commission considers the impact 
of the rules on carriers. A description of such small entities, as well 
as an estimate of the number of such small entities, is provided below.
    23. Small Businesses. Nationwide, there are a total of 
approximately 22.4 million small businesses according to SBA data.
    24. Small Organizations. Nationwide, there are approximately 1.6 
million small organizations. Small Governmental Jurisdictions. The term 
``small governmental jurisdiction'' is defined generally as 
``governments of cities, towns, townships, villages, school districts, 
or special districts, with a population of less than fifty thousand.'' 
Census Bureau data for 2002 indicate that there were 87,525 local 
governmental jurisdictions in the United States. The Commission 
estimates that, of this total, 84,377 entities were ``small 
governmental jurisdictions.'' Thus, the Commission estimates that most 
governmental jurisdictions are small.
1. Wireline Carriers and Service Providers
    25. The Commission has included small incumbent local exchange 
carriers (LECs) in this present RFA analysis. As noted above, a ``small 
business'' under the RFA is one that, inter alia, meets the pertinent 
small business size standard (e.g., a telephone communications business 
having 1,500 or fewer employees) and ``is not dominant in its field of 
operation.'' The SBA's Office of Advocacy contends that, for RFA 
purposes, small incumbent LECs are not dominant in their field of 
operation because any such dominance is not ``national'' in scope. The 
Commission has therefore included small incumbent LECs in this RFA 
analysis, although the Commission emphasizes that this RFA action has 
no effect on Commission analyses and determinations in other, non-RFA 
contexts.
    26. Incumbent LECs. Neither the Commission nor the SBA has 
developed a small business size standard specifically for incumbent 
LECs. The appropriate size standard under SBA rules is for the category 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,303 carriers have reported that they are engaged in 
the provision of incumbent local exchange services. Of these 1,303 
carriers, an estimated 1,020 have 1,500 or fewer employees and 283 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 Commission's action.
    27. Competitive LECs, Competitive Access Providers (CAPs), 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers.'' Neither the Commission nor the SBA has developed a small 
business size standard specifically for these service providers. The 
appropriate size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. According to Commission 
data, 859 carriers have reported that they are engaged in the provision 
of either competitive access provider services or competitive LEC 
services. Of these 859 carriers, an estimated 741 have 1,500 or fewer 
employees and 118 have more than 1,500 employees. In addition, 16 
carriers have reported that they are ``Shared-Tenant Service 
Providers,'' and all 16 are estimated to have 1,500 or fewer employees. 
In addition, 44 carriers have reported that they are ``Other Local 
Service Providers.'' Of the 44, an estimated 43 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, ``Shared-Tenant Service 
Providers,'' and ``Other Local Service Providers'' are small entities.
    28. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
providers of interexchange services. The appropriate size standard 
under SBA rules is for the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 330 carriers have 
reported that they are engaged in the provision of interexchange 
service. Of these, an estimated 309 have 1,500 or fewer employees and 
21 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of IXCs are small entities that may be 
affected by the Commission's action.
2. Wireless Telecommunications Service Providers
    29. Below, for those services subject to auctions, 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.
    30. Wireless Service Providers. The SBA has developed a small 
business size standard for wireless firms within the two broad economic 
census categories of ``Paging'' and ``Cellular and Other Wireless 
Telecommunications.'' Under both SBA categories, a wireless business is 
small if it has 1,500 or fewer employees. For the census category of 
Paging, Census Bureau data for 2002 show that there were 807 firms in 
this category that operated for the entire year. Of this total, 804 
firms had employment of 999 or fewer employees, and three firms had 
employment of 1,000 employees or more. Thus, under this category and 
associated small business size standard, the majority of firms can be 
considered small. For the census category of Cellular and Other 
Wireless Telecommunications, Census Bureau data for 2002 show that 
there were 1,397 firms in this category that operated for the entire 
year. Of this total, 1,378 firms had employment of 999 or fewer 
employees, and 19 firms had employment of 1,000 employees or more. 
Thus, under this second category and size standard, the majority of 
firms can, again, be considered small.
    31. Cellular Licensees. The SBA has developed a small business size 
standard for wireless firms within the

[[Page 28054]]

broad economic census category ``Cellular and Other Wireless 
Telecommunications.'' Under this SBA category, a wireless business is 
small if it has 1,500 or fewer employees. For the census category of 
Cellular and Other Wireless Telecommunications, Census Bureau data for 
2002 show that there were 1,397 firms in this category that operated 
for the entire year. Of this total, 1,378 firms had employment of 999 
or fewer employees, and 19 firms had employment of 1,000 employees or 
more. Thus, under this category and size standard, the majority of 
firms can be considered small. Also, according to Commission data, 437 
carriers reported that they were engaged in the provision of cellular 
service, Personal Communications Service (PCS), or Specialized Mobile 
Radio (SMR) Telephony services, which are placed together in the data. 
The Commission has estimated that 260 of these are small under the SBA 
small business size standard.
    32. Paging. The SBA has developed a small business size standard 
for the broad economic census category of ``Paging.'' Under this 
category, the SBA deems a wireless business to be small if it has 1,500 
or fewer employees. Census Bureau data for 2002 show that there were 
807 firms in this category that operated for the entire year. Of this 
total, 804 firms had employment of 999 or fewer employees, and three 
firms had employment of 1,000 employees or more. In addition, according 
to Commission data, 365 carriers have reported that they are engaged in 
the provision of ``Paging and Messaging Service.'' Of this total, the 
Commission estimates that 360 have 1,500 or fewer employees, and five 
have more than 1,500 employees. Thus, in this category the majority of 
firms can be considered small.
    33. We also note that, in the Paging Second Report and Order, the 
Commission adopted a size standard for ``small businesses'' for 
purposes of determining their eligibility for special provisions such 
as bidding credits and installment payments. In this context, 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. The SBA has approved this 
definition. An auction of Metropolitan Economic Area (MEA) licenses 
commenced on February 24, 2000, and closed on March 2, 2000. Of the 
2,499 licenses auctioned, 985 were sold. Fifty-seven companies claiming 
small business status won 440 licenses. An auction of MEA and Economic 
Area (EA) licenses commenced on October 30, 2001, and closed on 
December 5, 2001. Of the 15,514 licenses auctioned, 5,323 were sold. 
One hundred thirty-two companies claiming small business status 
purchased 3,724 licenses. A third auction, consisting of 8,874 licenses 
in each of 175 EAs and 1,328 licenses in all but three of the 51 MEAs 
commenced on May 13, 2003, and closed on May 28, 2003. Seventy-seven 
bidders claiming small or very small business status won 2,093 
licenses. The Commission also notes that, currently, there are 
approximately 74,000 Common Carrier Paging licenses.
    34. 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 or less for each 
of the three preceding years, and a ``very small business'' is an 
entity with average gross revenues of $15 million or less 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.
    35. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services (PCS), and specialized mobile radio 
(SMR) telephony carriers. As noted earlier, the SBA has developed a 
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. 
According to Commission data, 432 carriers reported that they were 
engaged in the provision of wireless telephony. The Commission has 
estimated that 221 of these are small under the SBA small business size 
standard.
    36. 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. Subsequent events, 
concerning Auction 35, including judicial and agency determinations, 
resulted in a total of 163 C and F Block licenses being available for 
grant.
    37. Narrowband Personal Communications Services. The Commission 
held an auction for Narrowband PCS licenses that commenced on July 25, 
1994, and closed on July 29, 1994. A second auction commenced on 
October 26, 1994 and closed on November 8, 1994. For purposes of the 
first two Narrowband PCS auctions, ``small businesses'' were entities 
with average gross revenues for the prior three calendar years of $40 
million or less. Through these auctions, the Commission awarded a total 
of 41 licenses, 11 of which were obtained by four small businesses. To 
ensure meaningful participation by small business entities in future 
auctions, the Commission adopted a two-tiered small business size 
standard in the Narrowband PCS Second Report and Order. 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. A third 
auction commenced on October 3, 2001 and closed on October 16, 2001. 
Here, five bidders won 317 (Metropolitan Trading Areas and nationwide) 
licenses. Three of these claimed status as a small or very small entity 
and won 311 licenses.

[[Page 28055]]

    38. 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 
category provides that a small business is a wireless company employing 
no more than 1,500 persons. For the census category Cellular and Other 
Wireless Telecommunications, Census Bureau data for 1997 show that 
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 12 firms had employment of 1,000 employees 
or more. Thus, under this second category and size standard, the 
majority of firms can, again, be considered small. Assuming 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. In addition, 
limited preliminary census data for 2002 indicate that the total number 
of cellular and other wireless telecommunications carriers increased 
approximately 321 percent from 1997 to 2002.
    39. 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. The 220 MHz Third 
Report and Order 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.
    40. 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 800 MHz and 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, respectively. 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.
    41. 700 MHz Guard Band Licensees. The 700 MHz Guard Band Order 
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.
    42. 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.
    43. Wireless Cable Systems. Wireless cable systems use 2 GHz band 
frequencies of the Broadband Radio Service (``BRS''), formerly 
Multipoint Distribution Service (``MDS''), and the Educational 
Broadband Service (``EBS''), formerly Instructional Television Fixed 
Service (``ITFS''), to transmit video programming and provide broadband 
services to residential subscribers. These services were originally 
designed for the delivery of multichannel video programming, similar to 
that of traditional cable systems, but over the past several years 
licensees have focused their operations instead on providing two-way 
high-speed Internet access services. The Commission estimates that the 
number of wireless cable subscribers is approximately 100,000, as of 
March 2005. Local Multipoint Distribution Service (``LMDS'') is a fixed 
broadband point-to-multipoint microwave service that provides for two-
way video telecommunications. As described below, the SBA small 
business size standard for the broad census category

[[Page 28056]]

of Cable and Other Program Distribution, which consists of such 
entities generating $13.5 million or less in annual receipts, appears 
applicable to MDS, ITFS and LMDS. Other standards also apply, as 
described.
    44. The Commission has defined small MDS (now BRS) and LMDS 
entities in the context of Commission license auctions. In the 1996 MDS 
auction, the Commission defined a small business as an entity that had 
annual average gross revenues of less than $40 million in the previous 
three calendar years. This definition of a small entity in the context 
of MDS auctions has been approved by the SBA. In the MDS auction, 67 
bidders won 493 licenses. Of the 67 auction winners, 61 claimed status 
as a small business. At this time, the Commission estimates that of the 
61 small business MDS auction winners, 48 remain small business 
licensees. In addition to the 48 small businesses that hold BTA 
authorizations, there are approximately 392 incumbent MDS licensees 
that have gross revenues that are not more than $40 million and are 
thus considered small entities. MDS licensees and wireless cable 
operators that did not receive their licenses as a result of the MDS 
auction fall under the SBA small business size standard for Cable and 
Other Program Distribution. Information available to us indicates that 
there are approximately 850 of these licensees and operators that do 
not generate revenue in excess of $13.5 million annually. Therefore, 
the Commission estimates that there are approximately 850 small entity 
MDS (or BRS) providers, as defined by the SBA and the Commission's 
auction rules.
    45. Educational institutions are included in this analysis as small 
entities; however, the Commission has not created a specific small 
business size standard for ITFS (now EBS). The Commission estimates 
that there are currently 2,032 ITFS (or EBS) licensees, and all but 100 
of the licenses are held by educational institutions. Thus, the 
Commission estimates that at least 1,932 ITFS licensees are small 
entities.
    46. In the 1998 and 1999 LMDS auctions, the Commission defined a 
small business as an entity that has annual average gross revenues of 
less than $40 million in the previous three calendar years. Moreover, 
the Commission added an additional classification for a ``very small 
business,'' which was defined as an entity that had annual average 
gross revenues of less than $15 million in the previous three calendar 
years. These definitions of ``small business'' and ``very small 
business'' in the context of the LMDS auctions have been approved by 
the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of 
the 104 auction winners, 93 claimed status as small or very small 
businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based 
on this information, the Commission believes that the number of small 
LMDS licenses will include 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 as defined by the SBA and the Commission's 
auction rules.
    47. 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 LMDS licenses began on February 18, 1998 and 
closed on March 25, 1998. The Commission established a small business 
size standard for LMDS licensees 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 concludes 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.
    48. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) 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 more than a $6 million net worth and, after federal 
income taxes (excluding any carryover losses), has no more than $2 
million in annual profits each year for the previous two years. The 
218-219 MHz Report and Order and Memorandum Opinion and Order 
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 Commission cannot 
estimate, however, the number of licenses that will be won by entities 
qualifying as small or very small businesses under the rules in future 
auctions of 218-219 MHz spectrum.
    49. 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, total, 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.
    50. 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.

[[Page 28057]]

D. Description of Projected Reporting, Record Keeping and Other 
Compliance Requirements

    51. The rule adopted in the Report and Order will require no 
additional reporting, record keeping, and other compliance 
requirements.

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

    52. 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.
    53. Because the Report and Order imposes no compliance or reporting 
requirements on any entity, only the last of the foregoing alternatives 
is material. The Report and Order takes note in paragraph 13 above that 
nothing in the record suggests that small carriers are particularly 
disadvantaged by exclusivity prohibitions, or that the cost/benefit 
analysis for consumers differs when small carriers are involved.

F. Report to Congress

    54. The Commission will send a copy of the Order, including this 
FRFA, in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act. A copy 
of the Order and FRFA (or summaries thereof) will also be published in 
the Federal Register.

Final Paperwork Reduction Act of 1995 Analysis

    This document does not contain new or modified information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified ``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).

Congressional Review Act

    The Commission will send a copy of this Report and Order and Order 
on Remand in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).

Ordering Clauses

    55. Accordingly, It is ordered, pursuant to sections 1, 2(a), 4(j), 
4(i), 201, 202, 205, and 405 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152(a), 154(i), 154(j), 201, 202, 205, and 405, 
and pursuant to section 706 of the Telecommunications Act of 1996, 47 
U.S.C. 157 nt., that the Report and Order in WT Docket No. 99-217 is 
adopted, and that Part 64 of the Commission's Rules, 47 CFR part 64, is 
amended as set forth in Appendix B of the order. It is the Commission's 
intention in adopting these rule changes that, if any provision of the 
rules is held invalid by any court of competent jurisdiction, the 
remaining provisions shall remain in effect to the fullest extent 
permitted by law.
    56. It is further ordered that the rules and the requirements of 
this Report and Order shall become effective July 14, 2008.
    57. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 64

    Communications common carriers, telecommunications, telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
1. The authority citation for part 64 continues to read as follows:

    Authority: 47 U.S.C. 151, 152(a), 154(i), 154(j), 201, 202, 205, 
405, and 157 nt.


0
2. Section 64.2500 is revised to read as follows:


Sec.  64.2500  Prohibited agreements.

    (a) No common carrier shall enter into any contract, written or 
oral, that would in any way restrict the right of any commercial 
multiunit premises owner, or any agent or representative thereof, to 
permit any other common carrier to access and serve commercial tenants 
on that premises.
    (b) No common carrier shall enter into or enforce any contract, 
written or oral, that would in any way restrict the right of any 
residential multiunit premises owner, or any agent or representative 
thereof, to permit any other common carrier to access and serve 
residential tenants on that premises.


0
2. Section 64.2501 is revised to read as follows:


Sec.  64.2501  Scope of limitation.

    For the purposes of this subpart, a multiunit premises is any 
contiguous area under common ownership or control that contains two or 
more distinct units. A commercial multiunit premises is any multiunit 
premises that is predominantly used for non-residential purposes, 
including for-profit, non-profit, and governmental uses. A residential 
multiunit premises is any multiunit premises that is predominantly used 
for residential purposes.

 [FR Doc. E8-10764 Filed 5-14-08; 8:45 am]

BILLING CODE 6712-01-P