Federal Register: December 29, 2004 (Volume 69, Number 249)
DOCID: FR Doc 04-28415
FEDERAL COMMUNICATIONS COMMISSION
Federal Communications Commission
CFR Citation: 47 CFR Parts 1, 20, and 43
Docket ID: [WC Docket No. 04-141; FCC 04-266]
NOTICE: RULES
ACTION: Common carrier services:
DOCUMENT ACTION: Final rule.
SUBJECT CATEGORY:
Local Telephone Competition and Broadband Reporting
DATES: The rules in this document contain information collection requirements that have not been approved by OMB. The Federal Communications Commission will publish a document in the Federal Register announcing the effective date.
Compliance date: September 1, 2005. Providers subject to the requirements and regulations adopted herein shall complete and file the amended FCC Form 477 on the compliance date and semiannually thereafter.
DOCUMENT SUMMARY:
In this document, the Federal Communications Commission extends and modifies the FCC Form 477 local competition and broadband data gathering program, established by the Commission's Data Gathering Order published Wednesday, April 12, 2000, 65 FR 19675.
SUMMARY:
Local telephone competition and broadband reporting,
SUPPLEMENTAL INFORMATION
This is a summary of the Commission's Report and Order (Order) in WC Docket No. 04141, adopted on November 9, 2004, and released on November 12, 2004. The full text of this document is available on the Commission's Web site Electronic Comment Filing System and 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 FCC Reference Center, Room CYA257, 445 Twelfth Street, SW., Washington, DC 20554. Alternative formats are available to persons with disabilities by contacting Brian Millin at (202) 4187426 or TTY (202) 4187365. The full text of the NPRM may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc., Room CYB402, 445 Twelfth Street, SW., Washington, DC 20554, telephone (202) 4885300, facsimile (202) 4885563, or through http://www.bcpiweb.com. Paperwork Reduction Act
This Order contains modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104 13. It will be submitted to OMB for review under section 3507(d) of the PRA.
Summary of the Report and Order
1. In this Order, we adopt rules and a standardized form to improve our Form 477 local competition and broadband data gathering program, including extending the program for five years beyond its currently designated sunset in March 2005, eliminating existing reporting thresholds, and gathering more granular data from service providers. The information collected in the Form 477 program helps the Commission and the public understand the extent of local telephone competition and broadband deployment, which is important to the nation's economic, educational, and social wellbeing. The improvements we adopt here, which include some but not all of the modifications proposed in our recent Data Collection NPRM, are necessary to ensure that the Commission can continue to effectively evaluate broadband and local competition developments as they affect all Americans. At the same time, we have acted to minimize, wherever possible, the administrative burdens imposed on reporting entities by the modified Form 477 program.
2. The Data Gathering Order established a reporting program (using the FCC Form 477) to collect basic information about two critical areas of the communications industry: the deployment of broadband services and the development of local telephone service competition. The Commission concluded that collecting this information would materially improve its ability to develop, evaluate, and revise policy in these rapidly changing areas and provide valuable benchmarks for Congress, the Commission, other policy makers, and consumers. Since adoption of the Form 477 in 2000, broadband service providers and local telephone service providers have reported data ten times, and we have issued regular reports based in significant part on this information. In the Data Gathering Order, the Commission adopted a sunset provision pursuant to which the collection program terminates after five years (i.e., in March 2005) unless the Commission acts to extend it.
3. Form 477 includes separate sections on broadband deployment, local telephone service competition, and mobile telephone service provision. In the Data Gathering Order, the Commission required entities to report only when they meet or exceed defined reporting thresholds, and, then, to complete only those portions of the form for which they meet or exceed the reporting thresholds. The Commission required entities that meet a threshold to file data on a stateby state basis. The Commission also required facilitiesbased providers of broadband connections and local exchange carriers (LECs) to report lists of the Zip Codes in which they serve end users, for each state for which they complete a form. In the case of broadband connections, reporting entities include incumbent and competitive LECs, cable companies, operators of terrestrial and satellite wireless facilities, municipalities, and any other facilitiesbased provider of broadband connections to end users.
4. In the Data Collection NPRM, we proposed to: (1) Extend the data collection for an additional five years; (2) modify Form 477 to collect moredetailed information about broadband connection speeds and the localized deployment of broadband technologies; (3) collect information about subscribership to bundled local and interstate long distance telephone services; and (4) eliminate or revise those local telephone service questions that elicit imprecise or infrequently used information. We also invited comment on whether we should eliminate or lower the current reporting thresholds; modify our policies for publishing or sharing Form 477 data; require filers to categorize broadband connections according to the information transfer rates observed by end users; and require filers to report numbers of broadband connections in service by Zip Code or technology, or, alternatively, by Zip Code, technology, and speed.
5. We have considered the record of this proceeding, including
comment about reporting burdens associated with current Form 477
reporting requirements, potential burdens associated with additional
reporting requirements proposed or otherwise noticed for discussion in
the Data Collection NPRM, and potential burdens associated with
alternatives suggested by the parties, as well as our experience with
the Form 477 to date. As discussed below, in this Order we: (1) Extend the Form 477 program for five years beyond
[[Page 77913]]
its currently designated sunset in March 2005; (2) eliminate reporting
thresholds; and (3) adopt various modifications to the Form 477.
6. FiveYear Extension. We conclude that it is reasonable to extend
the Form 477 program for five years beyond the current March 2005
sunset given our statutory obligations to study and report on the
availability of broadband capability, as well as our continuing
obligations to promote telecommunications services competition
generally. We conclude that extending the Form 477 program for an
additional five years with the modifications discussed below will
materially improve the Commission's ability to develop, evaluate, and
revise policy in the rapidly changing areas of broadband deployment and
local telephone competition, and provide valuable benchmarks for
Congress, the Commission, other policy makers, and consumers. As
discussed in more detail in the following sections and in the Final
Regulatory Flexibility Analysis attached to this Order, we also
conclude that extending the Form 477, as modified, will not impose an
undue burden on the entities that are required to report. In this
regard, we have taken or will take the following steps to reduce
associated burdens: (1) We decline to adopt certain modifications to
the Form 477 proposed in the Data Collection NPRM, including the
proposed requirement that filers categorize broadband connections
according to the information transfer rate (speed) actually observed by
the end user; (2) we eliminate various questions from the wireline
local telephone section of the form; (3) we eliminate the requirement
that filers seeking confidential treatment of Form 477 data prepare and
submit a separate, redacted Form 477; (4) responding to comments submitted by the Office of Advocacy of the Small Business
Administration, we will publish a Small Entity Compliance Guide to
provide a set of userfriendly explanations to direct small entities to
those sections of the Form 477 relevant to their operations.
7. We reject calls for extending the Form 477 program for less than five years because our statutory responsibilities to study and report on broadband deployment and encourage the development of local telephone service competition are ongoing. We find that a fiveyear extension is prudent given continuing and rapidlyevolving developments in broadband and local telephone services markets. Reviewing the adequacy of our form at regular intervals is essential to ensure that it is, in fact, capturing the most relevant and critical information given the dynamic nature of these markets. Accordingly, we affirm our analysis and conclusion in the Data Gathering Order, namely, that a fiveyear program best balances our continuing need to understand evolving market developments against our desire to minimize costs and ensure that adopted regulation does not outlive its usefulness. Moreover, we disagree with comments that the availability of alternative data sources is an adequate substitute for the Form 477. In our experience, most if not all commercially available studies of residential services adoption derive their data in significant part from the Commission's Form 477based public reports. And, no nationwide studies of broadband deployment or of local telephone competition are based on better sources of data for rural and other hardtoserve areas. Voluntary membership surveys conducted by commenters NTCA and OPASTCO, and also by the National Exchange Carrier Association (NECA), provide welcome evidence that the incumbent LECs that respond to the surveys are deploying broadband services to substantialand increasing percentages of their customer base. Entities that choose not to participate in these voluntary surveys may have a different experience. By contrast, surveys such as those about Internet use conducted by the Pew Internet & American Life Project, and the Census Bureau's Current Population Survey, use random samples that are constructed to avoid overlooking particular population groups. To obtain statistically significant results for particular rural populations, however, a large (and therefore expensive) random sample is required. For example, because the random sample (of about 57,000 households) for the Current Population Survey does not oversample households located in rural areas in particular states, the Department of Commerce was able to discuss nationwide differences between rural and urban households in its report, A Nation Online: How Americans Are Expanding Their Use of the Internet (February 2002), but was not able to discuss such differences within particular states. Similarly, the Pew Internet & American Life Project has compared only nationwide differences in Internet use by residents of rural and urban areas on the basis of random samples of about 20,000 Americans age 18 and older.
8. Elimination of Reporting Thresholds. We also modify the Form 477
program to require all facilitiesbased providers of broadband
connections to end users to report broadband data, all local exchange
carriers to report local telephone service data, and all mobile
telephone carriers to report mobile telephone data. In reaching this
conclusion, we note that comments from state agencies, and from some
service providers, generally supported eliminating, or substantially
reducing, the reporting thresholds. As we stated in the Data Collection
NPRM, we believe that the current data collection misses several
hundred small facilitiesbased broadband providers, e.g., rural incumbent LECs, wireless Internet service providers, and
municipalities. Moreover, we agree with those commenters who argue that
it is important to capture a more accurate picture of broadband
deployment and local telephone competition in rural, sparsely populated
areas, which are more likely to be served by small carriers.
9. In reaching our conclusion, we recognize that in the Data Gathering Order the Commission concluded that a reporting threshold for broadband and local competition appropriately balanced its need for an inclusive reporting requirement against the burdens imposed on small entities. At the same time, the Commission stated ``[we] are committed to revising these thresholds (either upward or downward) should it be necessary based either on our experience or on changes in the relevant markets.'' And, the Commission pointed out that ``[by] excluding any providers we necessarily face the possibility of understating the amount of competitive activity and broadband deployment in smaller, rural areas.'' Based on our experience with the Form 477 over the past nearly five years, we now conclude that the current thresholds render impossible a thorough understanding of the dynamics of broadband deployment in states with rural and/or underserved areas. We find that lowering the existing thresholds to some other, more or less arbitrary, number means that certain of these areas will continue to elude our scrutiny. Such a result seems inimical to Congress's charge, in section 706 of the Act, that we make determinations on the ``availability of advanced telecommunications capability to all Americans.'' Thus, we believe that are better equipped to make sound policy determinations affecting the broadband market to the extent we have the most accurate and comprehensive data possible upon which to base our decisions. [[Page 77914]]
10. Similarly, based on our extensive experience in collection local competition data, we now conclude that we must gather an appropriate amount of information about the status of local competition from all areas of the country. We believe that the current 10,000 line reporting threshold significantly understates the amount of local competition in states that include rural and/or other underserved areas. As a result, our understanding of rural and underserved market development is not as precise as it could be. Having more accurate information about competition in rural markets will assist the Commission in its review of portability and eligibility policies. Merely lowering existing thresholds to some arbitrary number does not overcome this problem or mitigate its effects.
11. Moreover, this problem predictably will only get worse as networks continue to evolve, i.e., as network architectures reflect the continued convergence of traditional telephony and broadband. Given such convergence, which was only at its initial stages when we adopted the Data Gathering Order almost five years ago, it becomes essential that our broadband and local competition data collection methodologies are equally comprehensive. We therefore conclude that we should collect local telephone service information on the same comprehensive basis upon which we collect information about broadband connections.
12. We conclude that the benefits to the policy making process that derive from the additional data outweigh the reporting burdens on new Form 477 filers (i.e., entities that would not be required to file Form 477 if we retained the current mandatory reporting thresholds). As we noted in the Data Collection NPRM, the small facilitiesbased broadband providers that currently file Form 477 on a voluntary basis find that only a few questions apply to their situations. Moreover, among the smaller entities that are currently required to report broadband data on Form 477 (i.e., entities that report between 250 and 499 broadband connections in a state), 68 percent reported connections in only one technology category, and 98 percent reported connections in two or fewer technology categories. Accordingly, we conclude that the broadband reporting requirements we adopt here are not overly burdensome for small providers. Similarly, among the smaller incumbent LECs that are currently required to report wireline local telephone data (i.e., carriers that report between 10,000 and 24,999 voicegrade equivalent local exchange lines), 95 percent report only one of the five rows of information that will appear in the modified form. Therefore, we conclude that the local telephone reporting requirements we adopt here are not overly burdensome for small carriers. We also note that, for many new incumbent LEC filers, some answers (e.g., percent of local exchange lines provided over the filer's own local loops) are unlikely to change from filing to filing, and that, more generally, filers will be able to complete their filings more efficiently as they gain experience with the data collection. We conclude that it is not possible to develop an adequately comprehensive picture of broadband deployment and local telephone competition in the United States without including information about the situation in rural, sparsely populated areas. As NECA emphasizes, the more than 1,100 rural carriers that belong to NECA's Traffic Sensitive pool generally serve sparse populations over wide geographical areas frequently fewer than 10 customers per square mile. Therefore, we conclude that the benefits to policy making of developing a more accurate picture of broadband deployment and local telephone competitionincluding in rural, sparsely populated areasoutweigh the costs of reporting that we impose on carriers that have previously been exempt from filing Form 477.
13. We recognize, however, the particular concerns about reporting burden that have been raised by smaller incumbent LECs, and we consequently decide not to pursue at this time certain options about which we requested comment in the Data Collection NPRM. In particular, we decide not to require filers to determine what information transfer rate an end user actually observes on his or her broadband connection, and, as discussed below, we also decide to eliminate from the form several questions about local telephone service.
14. Broadband Data. Based on our review of the record in this proceeding and on our experience with the Form 477, we adopt a number of modifications to the broadband data collected by the Form 477. We conclude that these modifications are necessary to ensure that we have a full picture of developing broadband deployment trends nationwide. First, we modify the Form 477 to require filers to determine what percentage of their broadband or highspeed connections are faster than 200 kbps in both directions, and to categorize these connections into five ``speed tiers'' based on the information transfer rate in the connection's faster direction: (1) Greater than 200 kbps and less than 2.5 megabits per second (mbps); (2) greater than or equal to 2.5 mbps and less than 10 mbps; (3) greater than or equal to 10 mbps and less than 25 mbps; (4) greater than or equal to 25 mbps and less than 100 mbps; and (5) greater than or equal to 100 mbps. Some comments in this proceeding assert that collecting information about connections with very high speeds (e.g., above 10 mbps) would be irrelevant (e.g., because connections operating at such speeds are now not generally available to consumers in the United States). As we noted in the Fourth 706 Report, however, we have observed some service providers offering faster and faster connections, perhaps because they are able to do so at relatively little cost, and thereby differentiate their products from competitors' slower services. As these faster services are introduced, it is vitally important that we understand the evolving dynamics of higher speed broadband availability in order to fulfill our statutory responsibilities to report about whether broadband capability is available to all Americans.
15. We also modify Form 477 to require filers to report symmetric
xDSL broadband connections separately from traditional wireline (such
as Tcarrier) connections, and to separately report broadband
connections delivered over electric power lines. Thus, we require
filers to report broadband connections in the following technology
categories: asymmetric xDSL, symmetric xDSL, traditional wireline (such
as Tcarrier), cable modem, optical carrier (fiber to the end user),
satellite, terrestrial fixed wireless, terrestrial mobile wireless,
electric power line, or ``all other.'' In contrast to asymmetric xDSL, symmetric xDSL is wellsuited to applications, such as
videoconferencing, that require highspeed capacity in the upstream
path as well as the downstream path. When Form 477 was implemented, it
was the Commission's understanding that symmetric xDSL service was
being deployed and marketed principally to businesses, as a substitute
for the more traditional Tcarrier services, and the Commission
therefore specified that symmetric xDSL connections should be reported
along with connections over ``other traditional wireline''
technologies. We now observe that some symmetric xDSL services are
being offered to residential end users. For example, while we note that
information about a broad range of symmetric highspeed xDSL services
appears in marketing materials, such as Web pages, that are directed to business customers, we also observe that some
[[Page 77915]]
relatively low priced symmetric xDSL connections are being advertised
on Web pages identified specifically for residential customers. We
therefore disagree with comments that it is unnecessary or meaningless
to distinguish symmetric xDSL services from traditional wireline
services in the data collection. We also decide to establish electric
power line as a separate broadband technology category to enable us to monitor its deployment specifically.
16. Additionally, we modify Form 477 to require incumbent LECs that
report DSL connections (or whose affiliates report DSL connections) to
report the extent to which DSL connections are available to the
residential end user premises to which the incumbent LEC offers local
telephone service. Similarly, we modify Form 477 to require cable
system operators that report cable modem connections (or whose
affiliates report cable modem connections) to report the extent to
which cable modem connections are available to the residential end user
premises to which the cable system offers cable television service. We adopt these requirements in order to obtain statelevel
``availability'' estimates from the major providers of the broadband
services with the greatest residential acceptance in the United States
to date, to better enable us to monitor the extent to which these
broadband platforms are available to all Americans, and to ascertain
with more precision the pattern of competition between these platforms.
17. In response to commenter concerns, we modify the availability metric that we proposed in the Data Collection NPRM to conform more closely with the systemwide metrics with which cable system operators are generally familiar. By relying as much as possible on such industry practices, we believe that we can collect, in a minimally burdensome manner, moredetailed information about the extent to which the widely deployed and widely utilized cable modem and DSL infrastructures are available to potential residential end users in a minimally burdensome manner. We note that residential broadband connections in service in the United States are primarily cable modem or DSL connections. Because of the relatively small numbers of residential subscribers to broadband services that are provided by means of satellite, fixed wireless, mobile wireless, optical carrier, and other technologies, at this time, we do not require providers of those services to report availability estimates. We may, however, propose to do so in the future if circumstances warrant.
18. We also modify Form 477 to require all filers that report information about wired or fixed wireless broadband connections to end user locations to report technologyspecific lists of the Zip Codes in which at least one such connection is in service. Specifically, we require separate such lists for connections provided by mean of asymmetric xDSL, symmetric xDSL, cable modem, optical carrier (fiber to the end user), satellite, terrestrial fixed wireless, electric power line, and (as a single category) other wireline technologies. With respect to mobile wireless broadband services, which are now beginning to be deployed commercially, we note that the end user of such a service must be within a broadband service coverage area to make use of the service, but may move around within and among coverage areas. Particularly during the initial stages of commercial deployment, moreover, there may be a mismatch between the billing addresses of some earlyadopter subscribers, such as persons who travel frequently on business, and the physical locations where the subscriber can actually use the service. Because of the particular characteristics of mobile services, some have argued that CMRS providers should be completely exempt from reporting broadband data on Form 477. We disagree. Rather, we acknowledge that mobile broadband services differ in particular respects from fixed broadband services and make provision for such differences in this data collection. In particular, we specify that mobile wireless service providers will report the number of subscribers to their mobile wireless broadband services. And, we require, at this time, that filers reporting mobile wireless broadband subscribers on Form 477 also provide a list of Zip Codes that best represent the filer's mobile wireless broadband coverage areas. We observe mobile wireless broadband service providers using Zip Codebased information in their own marketing initiatives, and we conclude that providing such information on Form 477 will not be overly burdensome.
19. Finally, we note that various commenters argued that the Commission did not adequately identify and justify the need for the broadband (and local competition) reporting modifications proposed in the Data Collection NPRM. We disagree. In the Data Collection NPRM, we carefully noted justifications for gathering information about broadband deployment and local telephone competition in the Form 477. We also stated that additional information ``would be extremely useful'' in identifying and tracking relevant developments, particularly in rural areas. Moreover, in the context of broadband deployment, we specifically noted ``the emergence of competing platforms to deliver highspeed services, increasing data speeds of services offered, and a steady improvement in massmarket acceptance of services.'' Our discussion of changes to the current Form 477 was clearly tied to these observations, as well as to the Commission's experience with the Form 477. We have carefully reviewed the record developed in response to these proposals, and find that it supports extending the Form 477 program with the modifications adopted in this Order. We also draw attention to the Commission's statements in its most recent Report to Congress, pursuant to section 706 of the 1996 Act, regarding the availability of broadband services in the United States. In that Report, the Commission affirmed the need to track broadband deployment in sparsely served, rural areas, as well as the need to better track the developing consumer appetite for broadband services at speeds well in excess of the Commission's current minimum 200 kbps speed. We find that all of the Form 477 modifications proposed in the Data Collection NPRM and adopted here derive from these two basic concerns, as well as from regulatory mandates imposed by section 706 of the Telecommunications Act of 1996 and, more generally, by the Communications Act.
20. Local Telephone Data. Based on our review of the record in this
proceeding and our experience with the Form 477, we adopt far fewer
modifications to the local telephone data reported on the form. In
fact, we adopt only two. First, we modify Form 477 to require LECs to
report the extent to which they are also the end user's default
interstate long distance carrier. We disagree with those commenters
that argued such information is not relevant for monitoring local
telephone service competition. As we noted in the Data Collection NPRM,
consumers increasingly can choose among telephone service offerings
that permit both local and long distance calling, often for a single
price. Indeed, it appears to us that offering combinations of services
at attractive prices appears to be an important, rapidly evolving way
for providers to compete by providing potential end users more, and
higher value, choices. It is important for us to more precisely understand how such
[[Page 77916]]
bundling affects the overall development of local telephone service competition.
21. Second, we modify Form 477 to require LECs to report their use of UNE loops to serve their own enduser customers separately from their use of UNEPlatform to do so. Because the current form does not require this distinction to be made, we are not able at this time to compare data and thereby evaluate, for accuracy and completeness, the information reported to us about the numbers of UNE loops and UNE Platform provided to unaffiliated carriers. Therefore, we modify the form to require LECs to report the extent to which they provision voicegrade equivalent lines to their own local telephone service customers over their own local loop facilities (or the fixed wireless lastmile equivalent), over UNE loops obtained from an unaffiliated carrier without switching, over UNEPlatform, or by reselling another carrier's services (such as Centrex or special access) or facilities obtained under commercial arrangements.
22. Finally, to simplify the form and thus minimize reporting burdens where possible, we eliminate from the Form 477 several questions about local telephone service that, in our experience, have confused filers or otherwise have provided information of limited usefulness. Specifically, we eliminate current requirements that force LECs to: (1) Estimate the types of customers unaffiliated carriers serve by means of the lines and UNE arrangements the LEC provides; (2) report the extent to which they use local loop facilities they own and UNE loops they obtain from another carrier to provision the services the LEC provides to unaffiliated carriers for resale; and (3) report information related to ``collocation'' arrangements with unaffiliated carriers.
23. We also eliminate the current requirement that LECs report on the Form 477 information about special access circuits that they provide to unaffiliated carriers or to end users. (Filers' use of channelized special access circuits to provide local exchange service to their own end user customers will continue to be reflected in the Form 477 data, however.) The current Form 477 collects information about the number of special access circuits provided to unaffiliated carriers or end users irrespective of the capacity of those circuits (e.g., DS1, DS3, OCn), which seriously limits the usefulness of these data in evaluating the extent of competition. We may, however, consider collecting more precise information about special access services in the future if circumstances warrant. Finally, we decide not to adopt the proposal in the Data Collection NPRM to require mobile telephone carriers to report the extent to which they are the default interstate long distance carrier for the mobile telephone subscribers they report.
24. Other Issues. We will retain our current policies and procedures regarding the confidential treatment of submitted Form 477 data, including the exclusive use of aggregated data in our published reports. Moreover, we have decided not to adopt a different approach with regard to historical data. Almost all commenters supported our current data protection policies, and most argued that even historical data remains competitively sensitive. We believe our current policies and procedures afford more than adequate protection to any entity submitting competitively sensitive information in the Form 477. We will continue, however, our current practice of publishing most of the local telephone information reported by the Bell operating companies after consultation with the individual companies.
25. Because filers submitting Form 477 data routinely assert that some or all such data are competitively sensitive, we see no need to continue to require them to provide a separate, redacted file. Accordingly, we eliminate that requirement. We expect that this action by itself will substantially reduce the reporting burden imposed on a large number of individual filers.
26. We also decide to retain our current policies and procedures regarding the sharing of Form 477 data with state commissions. Such data sharing only occurs where state entities formally declare to us that they are willing and able to treat submitted information subject to restrictions on data release that are at least as stringent as federal requirements. Commenters generally do not oppose continuing datasharing arrangements on these terms.
27. Upon careful consideration of the record in this proceeding, we decline to adopt certain modifications proposed or discussed in the Data Collection NPRM. We decide not to modify Form 477 to require filers to categorize broadband connections according to information transfer rate (speed) that is actually observed by the end user of the broadband connection. The record of this proceeding does not identify a methodology or practice that currently could be applied, consistently and by all types of broadband filers, to measure the information transfer rates actually observed by end users. Moreover, we expect broadband service providers to be mindful of general consumer protection law and to advertise their services with sufficient accuracy to enable end users to select the offeringas distinguished by ``speed tier'' and other featuresthat best fits the end user's needs and budget.
28. We also decide not to require filers to report the number of broadband connections, by technology, in particular Zip Codes, or to report, for each Zip Code, any information about the number of connections provided in various ``speed tiers.'' Rather, by requiring filers to report technologyspecific lists of broadband Zip Codes in the modified Form 477and removing the reporting threshold to require all facilitiesbased broadband providers to reportwe believe we will substantially enhance our ability to monitor the deployment of established and emerging broadband platforms. Moreover, the comments of several broadband providers asserted that developing the software and systems necessary to generate such Zip Codelevel data would impose a large burden on the filer's financial and personnel resources, or would require a number of months to implement. Accordingly, we decline to require broadband providers to report this level of detail at this time. We continue to recognize, however, that the presence of reported subscribers in a Zip Code does not necessarily mean service is available throughout the Zip Code, and we may revisit our decisions about reporting detailed Zip Codelevel data in the future. To this end, we direct the Wireline Competition Bureau to assess more fully the extent to which our Zip Code data adequately reflect the availability of service throughout a Zip Code and to report its conclusions in the next section 706 report.
29. Similarly, we also decide not to adopt at this time any
additional requirements that were not specifically proposed in the Data
Collection NPRM. For example, we decide not to require broadband
providers to report information about the prices at which they offer
broadband services to end users in particular Zip Codes, to require
mobile telephone carriers to estimate the percentage of wireless
subscribers that use their service as a replacement for traditional
landline service, or to require entities to report data according to
city boundaries. We are not convinced at this time that potential
benefits derived from collecting these additional data outweigh their associated costs.
[[Page 77917]]
Procedural Matters
Final Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Data Collection NPRM (Notice). The Commission sought written public comment on the proposals in the Notice, including comment on the IRFA. The comments received are discussed below. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
I. Need for, and Objectives of, the Report and Order
2. The Commission initiated this rulemaking and made specific proposals to improve its Form 477 local competition and broadband data gathering program and to extend the program for five years beyond its currently designated sunset in March 2005. The Commission adopted the Form 477 in the Spring of 2000 to help the Commission and the public understand the extent of local telephone service competition and broadband services deployment, which is important to the nation's economic, educational, and social wellbeing. The decisions reached in this Order will further that goal while minimizing burdens on marketplace competitors and innovators, as well as small businesses. II. Summary of Significant Issues Raised by Public Comments in Response to the IRFA
3. In the IRFA, we stated that we would seek to minimize the burden imposed on smaller entities by establishing requirements for reporting that balanced the needs of the Commission to receive data on the development of local competition and deployment of broadband against the burden such reporting places on smaller entities. In response to the Notice, the Commission received comments from 14 parties and reply comments from 7 parties. In addition, the Office of Advocacy, U.S. Small Business Administration (SBA), Verizon and the Vermont Public Service Department (VPSD) made ex parte presentations. Among those parties, only the SBA, the National Cable Television Association (NCTA), the National Telecommunications Cooperative Association (NTCA), and the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) commented specifically on the IRFA. We note that many other commenters raised issues about the proposed rules and we encourage readers of this FRFA to consult the complete text of this Order, which describes in detail our analysis of commenter proposals.
4. In its ex parte presentation regarding the IRFA, the VPSD made recommendations to simplify the expanded Form 477 proposed in the Notice. In its ex parte presentation, SBA recommends that the Commission consider less burdensome alternatives for small carriers, such as simplifying the proposed Form 477 or establishing a ``short form or Form 477EZ'' for small carriers previously exempt from reporting. OPASTCO stated that the Commission's estimated time to complete the proposed Form 477 of 15 hours is understated, and that the real number is 23 to 28 hours. NTCA agreed with OPASTCO and urged the Commission to develop a new Form 477 that will reduce the amount of information required from small carriers and take 30 minutes or less to complete. NTCA further stated that the lowering or removing of the current threshold exemption would result in an unwarranted burden on small carriers. NCTA further recommended that the Commission establish a new threshold of ``not lower than 100 broadband lines per state'' to reduce that burden, while at the same time achieving the Commission's objectives.
5. In an effort to balance the needs of the Commission with the costs our data gathering may place on smaller entities, the Commission has taken the suggestions of OPASTCO, NTCA and the SBA and simplified the Form 477 proposed in the Notice. By doing so, we will lessen the burden on all entities required to submit reports. We believe that these modifications satisfy SBA's request that we significantly reduce the burdens for those small entities that must comply. Moreover, we conclude that these modifications will allow the Commission to comply with Congress' charge in section 706 of the 1996 Act to determine whether advanced telecommunications capability, commonly known as ``broadband,'' is being deployed to all Americans. In order to gain the comprehensive understandingas called for in section 706of the broadband market, particularly in rural and innercity areas and among demographic groups that are traditionally underserved, it is necessary to gather data from entities that are most likely to serve these areas and groups, which includes some smaller entities.
6. Among the other actions taken to reduce the overall burden on small entities, we retain the ``decoupled'' feature where the broadband and local competition reporting requirements are separate on the Form 477. Thus, we reduce reporting burdens on traditionally smaller providers by only requiring data that covers services they actually offer.
7. To further reduce the potential burden this data gathering program may place on smaller entities, we retain several of the time saving and burdenreducing features of the original Form 477. Specifically, the report frequency remains semiannual. We still require carriers to report information about broadband connections and local telephone services on a statebystate basis. To supplement this information, we ask providers of broadband connections and local exchange services to provide lists of the Zip Codes in which they serve at least one customer. Finally, we reaffirm that this reporting scheme continues to offer the best balance of our need to achieve geographically disaggregated information while minimizing burdens on all entities, including small entities.
8. Overall, we believe that our approach (e.g., simplifying the
form and retaining the burdenreducing features of the original Form
477) will result in a program that is not overly burdensome on
reporting entities, and thus balances the concerns raised by SBA and
other commenters with the Commission's need to gain a better understanding of developments in these markets.
III. Description and Estimate of the Number of Small Entities To Which Rules Will Apply
9. 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 Small Business Administration (SBA).
10. 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, is the data that
the Commission publishes in its Trends in Telephone Service report. The SBA has developed
[[Page 77918]]
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, we discuss the total estimated numbers of small businesses that might be affected by our actions.
11. We have 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. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, nonRFA contexts.
12. 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 great majority of firms can be considered small.
13. Incumbent Local Exchange Carriers (ILECs). 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, 1,310 carriers reported that they were engaged in the provision of local exchange services. Of these 1,310 carriers, an estimated 1,025 have 1,500 or fewer employees and 285 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.
14. Competitive Local Exchange Carriers (CLECs). 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, 563 companies reported that they were engaged in the provision of either competitive access provider services or 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 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.
15. 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, 281 companies reported that their primary telecommunications service activity was the provision of interexchange services. 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.
16. Cellular Licensees. 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, 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 majority of firms can be considered small.
17. 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 SBAapproved 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 reauctioned 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 reauction, and the 29 winning bidders in the 2001 reauction, 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. Consequently, the Commission estimates that 260 broadband PCS providers are small entities that may be affected by the rules and policies adopted herein.
18. Narrowband Personal Communications Services. To date, two
auctions of narrowband personal communications services (PCS) licenses
have been conducted. For purposes of the two auctions that have already been held, ``small businesses'' were entities
[[Page 77919]]
with average gross revenues for the prior three calendar years of $40
million or less. Through these auctions, the Commission has awarded a
total of 41 licenses, out of which 11 were obtained by small
businesses. To ensure meaningful participation of small business
entities in future auctions, the Commission has adopted a twotiered
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. 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.
19. 220 MHz Radio ServicePhase 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, we apply 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 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.
20. 220 MHz Radio ServicePhase 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, we 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 differentsized 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. Thirtynine 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.
21. Fixed Microwave Services. Fixed microwave services include common carrier, private operationalfixed, and broadcast auxiliary radio services. At present, there are approximately 22,015 common carrier fixed licensees and 61,670 private operationalfixed 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 are 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. We noted, however, that the common carrier microwave fixed licensee category includes some large entities.
22. 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. We are 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.
23. 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. We conclude that the number of geographic area WCS licensees affected by this analysis includes these eight entities.
24. Satellite Services. The SBA has developed a small business size
standard for Satellite Telecommunications, which consists of all such
firms having $12.5 million or less in annual receipts. According to
Census Bureau data for 1997, in this category there was a total of 324 firms
[[Page 77920]]
that operated for the entire year. Of this total, 273 firms had annual
receipts of under $10 million, and an additional twentyfour firms had
receipts of $10 million to $24,999,999. Thus, under this size standard, the majority of firms can be considered small.
25. In addition to the estimates provided above, we consider certain additional entities that may be affected by the data collection from broadband service providers. Because section 706 requires us to monitor the deployment of broadband regardless of technology or transmission media employed, we anticipate that some broadband service providers will not provide telephone service. Accordingly, we describe below other types of firms that may provide broadband services, including cable companies, MDS providers, and utilities, among others.
26. Cable Television Relay Service. This service includes transmitters generally used to relay cable programming within cable television system distribution systems. The SBA has defined a small business size standard for Cable and other Program Distribution, consisting of all such companies having annual receipts of no more than $12.5 million. According to Census Bureau data for 1997, there were 1,311 firms in the industry category Cable and Other Program Distribution, total, that operated for the entire year. Of this total, 1,180 firms had annual receipts of $10 million or less, and an additional 52 firms had receipts of $10 million or more but less than $25 million. Thus, under this standard, we estimate that the majority of providers in this service category are small businesses.
27. Cable System Operators (Rate Regulation Standard). The Commission has developed, with SBA approval, its own definition of a small cable system operator for purposes of rate regulation. Under the Commission's rules, a ``small cable company'' is one serving fewer than 400,000 subscribers nationwide. Based on our most recent information, we estimate that there were 1,439 cable operators that qualified as small cable companies at the end of 1995. Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. The Commission's rules define a ``small system,'' for purposes of rate regulation, as a cable system with 15,000 or fewer subscribers. The Commission does not request nor does the Commission collect information concerning cable systems serving 15,000 or fewer subscribers, and thus is unable to estimate, at this time, the number of small cable systems nationwide.
28. Cable System Operators (Telecom Act Standard). The Communications Act, as amended, also contains a size standard for a small cable system operator, which is ``a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.'' The Commission has determined that there are 68,500,000 subscribers in the United States. Therefore, an operator serving fewer than 685,000 subscribers shall be deemed a small operator if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 685,000 subscribers or less totals approximately 1,450. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act.
29. Multipoint Distribution Service, Multichannel Multipoint Distribution Service, and ITFS. Multichannel Multipoint Distribution Service (MMDS) systems, often referred to as ``wireless cable,'' transmit video programming to subscribers using the microwave frequencies of the Multipoint Distribution Service (MDS) and Instructional Television Fixed Service (ITFS). In connection with the 1996 MDS auction, the Commission established a small business size standard as an entity that had annual average gross revenues of less than $40 million in the previous three calendar years. The MDS auctions resulted in 67 successful bidders obtaining licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 auction winners, 61 met the definition of a small business. MDS also includes licensees of stations authorized prior to the auction. In addition, the SBA has developed a small business size standard for Cable and Other Program Distribution, which includes all such companies generating $12.5 million or less in annual receipts. 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, we estimate that the majority of providers in this service category are small businesses that may be affected by the rules and policies adopted herein. This SBA small business size standard also appears applicable to ITFS. There are presently 2,032 ITFS licensees. All but 100 of these licenses are held by educational institutions. Educational institutions are included in this analysis as small entities. Thus, we tentatively conclude that at least 1,932 licensees are small businesses.
30. Local Multipoint Distribution Service. Local Multipoint Distribution Service (LMDS) is a fixed broadband pointtomultipoint microwave service that provides for twoway 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 l
FOR FURTHER INFORMATION CONTACT
Ellen Burton, Assistant Chief, James Eisner, Senior Economist, or Thomas J. Beers, Deputy Chief, Industry Analysis and Technology Division, Wireline Competition Bureau, at (202) 4180940. For additional information concerning the information collection(s) contained in this document, contact Judith B. Herman at (202) 4180214, or via the Internet at JudithB.Herman@fcc.gov.