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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Section 257 Report to Congress ) ) Identifying and Eliminating ) Market Entry Barriers ) For Entrepreneurs and Other ) Small Businesses ) REPORT Adopted: July 28, 2000 Released: August 10, 2000 By the Commission: Commissioner Furchtgott-Roth approving in part, dissenting in part, and issuing a separate statement. Page I. executive summary . . . . . . . . . . . . . . . . . . . . . . . . 2 II. INTRODUCTION . . . . . .8 A. Section 257 . . . . . . . . . . . . . . . . . . . . . . . . . . 8 B. A REVIEW OF THE 1997 Report . . . . . . . . . . . . . . . . . . 8 III. regulatory initiatives TO REMOVE IMPEDIMENTS IN SPECIFIC SERVICES. . . . . . .11 A. COMMON CARRIER SERVICEs . . . . . . . . . . . . . . . . . . . .11 1. Interconnection and Resale Barriers. . . . . . . . . . . . . 11 2. Information Filing and Accounting Burdens. . . . . . . . . . 13 3. Treatment of Small ILECs Under the Regulatory Flexibility Act. . . . . 15 4. Universal Service. . . . . . . . . . . . . . . . . . . . . . 15 5. Impartial Administration of Telecommunications Numbers . . . . . .16 6. Preemption of Onerous State Requirements . . . . . . . . . . 18 7. Forbearance Authority. . . . . . . . . . . . . . . . . . . . 19 8. Pricing Flexibility. . . . . . . . . . . . . . . . . . . . . 19 9. Customer Proprietary Network Information Requirements. . . . . . .20 10. Provision of Advanced Services . . . . . . . . . . . . . . . 22 11. The E-Rate Program and the Potential for Market Participation. . . . . 22 B. WIRELESS SERVICES . . . . . . . . . . . . . . . . . . . . . . .23 1. Spectrum Assignment Policies . . . . . . . . . . . . . . . . 23 2. Construction Requirements. . . . . . . . . . . . . . . . . . 28 3. Application Processing and Filing. . . . . . . . . . . . . . 30 4. Outreach Efforts . . . . . . . . . . . . . . . . . . . . . . 32 5. Interconnection and Resale . . . . . . . . . . . . . . . . . 34 6. Definition of "Covered SMR". . . . . . . . . . . . . . . . . 36 7. Competitive Bidding Incentives . . . . . . . . . . . . . . . 36 C. CABLE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . .39 1. Deregulation of Small Cable Companies. . . . . . . . . . . . 39 2. Leased Access. . . . . . . . . . . . . . . . . . . . . . . . 40 3. Multiple Dwelling Units. . . . . . . . . . . . . . . . . . . 41 4. Filing and Record Keeping. . . . . . . . . . . . . . . . . . 41 5. Closed Captioning Exemption. . . . . . . . . . . . . . . . . 43 D. MASS MEDIA SERVICES . . . . . . . . . . . . . . . . . . . . . .43 1. Low Power Radio. . . . . . . . . . . . . . . . . . . . . . . 45 2. Local Television Ownership/Radio-Television Cross Ownership. . . . . . 46 3. Class A Television Service . . . . . . . . . . . . . . . . . 47 4. Multichannel Multipoint Distribution Service . . . . . . . . 49 5. Equal Employment Opportunity . . . . . . . . . . . . . . . . 50 E. OTHER SERVICES. . . . . . . . . . . . . . . . . . . . . . . . .52 1. International Bureau . . . . . . . . . . . . . . . . . . . . 52 2. Office of Engineering and Technology . . . . . . . . . . . . 55 3. Enforcement Bureau . . . . . . . . . . . . . . . . . . . . . 59 4. Consumer Information Bureau. . . . . . . . . . . . . . . . . 60 IV. Other Regulatory Initiatives to remove impediments . . . . . . 62 A. Access to the Telecommunications Industry . . . . . . . . . . .62 B. Tribal Initiatives. . . . . . . . . . . . . . . . . . . . . . .62 C. Access to Capital . . . . . . . . . . . . . . . . . . . . . . .63 D. Office of Communications Business Opportunities . . . . . . . .64 E. BIENNIAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . .64 F. REGULATORY FLEXIBILITY ACT AND SMALL BUSINESS ACT INITIATIVES . . . . . .65 G. ELECTRONIC INITIATIVES. . . . . . . . . . . . . . . . . . . . .67 H. advanced telecommunications CAPABILITIES. . . . . . . . . . . .67 V. proposed LEGISLATIVE initiatives to remove impediments. . . . . .68 VI. CONCLUSION . . . . . . 71 I. executive summary 1. This Report is submitted pursuant to Section 257(c) of the Communications Act of 1934, as amended ("Communications Act"). In the past three years, the Commission's efforts on behalf of entrepreneurs and other small businesses reflect conscientious compliance with the four major policies and purposes outlined in the Telecommunications Act of 1996 ("1996 Act"): favoring the development of a diversity of media voices; enabling vigorous economic competition; facilitating the advancement of technology; and promoting the public interest, convenience, and necessity. Section 257 was enacted as part of the 1996 Act. 2. Section 257 required that the Commission complete a proceeding to identify and eliminate "market entry barriers for entrepreneurs and other small businesses" in telecommunications. Pursuant to that mandate, the Commission adopted a report on market entry barriers ("1997 Report") and has undertaken revisions in Commission policy, organizational structure, and administrative requirements in the past three years. Since the 1997 Report on Section 257, the Commission has responded to concerns raised in the 1997 Report that the Commission could lower market entry barriers by streamlining some of its rules and by providing electronic access to Commission information and licensing procedures. The Commission's efforts to increase the availability of regulatory information, facilitate the acquisition of licenses, improve ease of participation in rule- makings, and streamline regulatory procedures and requirements were intended to improve access for entrepreneurs and other small businesses to telecommunications markets. 3. Part III describes pertinent regulatory and other initiatives undertaken by the Commission's bureaus and offices during the three-year period since the 1997 Report. This section discusses initiatives in the common carrier, wireless, cable, mass media, international, and engineering and technology areas that affect the ability of small businesses to enter and participate in the dynamic telecommunications marketplace. 4. In the area of common carrier services, the Commission undertook the following initiatives. · unbundling of network elements; · reducing Commission tariff filing burdens on carriers by streamlining contributor reporting requirements, adopting a single filing location requirement, and coordinating sharing of information submitted on reporting worksheets; · streamlining accounting requirements for mid-sized incumbent local exchange carriers, while excluding small carriers from requirements to submit yearly operating revenue reports and cost allocation manuals; · deregulating and streamlining domestic market entry certification and domestic exit reporting requirements, including automatic approval of applications; · introducing universal service high-cost support portability for non- rural carriers to promote competitive entry in high-cost areas; · promoting participation of new carriers in rural health care services through relaxation of eligible telecommunications carrier requirements; · increasing incentives to target services at unserved Native American communities and increasing telephone service support to low- income Native Americans; · using Section 253 preemption powers to benefit entrance by small businesses into telecommunications markets; · using the 1996 Act's authority to forbear from imposing unnecessary and otherwise burdensome regulatory requirements on small or new carriers that provide new services; and · assessing and promoting the availability of competitive broadband xDSL services to residential and small business customers. 2. In wireless services, the Commission undertook the following initiatives. · allocating spectrum, through competitive bidding rules, to small businesses and rural telephone companies, including businesses owned by members of minority groups or women; · seeking innovative methods to make spectrum available for new services, such as promoting Guard Band Managers and the development of spectrum secondary markets; · targeting incentives to provide services to "unserved" and "underserved" areas, particularly to Native American communities; · easing construction requirements, including certain requirements for small businesses, to create greater flexibility to meet requirements for the licensed wide-area buildout of providers; · streamlining the application for and processing of wireless licenses, the filing of reports and rulemaking comments, and providing public viewing of licensing data; and · enhancing the ability of new and small wireless carriers to interconnect with established providers of services, to partition and disaggregate licenses, and to resell wireless services. 2. In cable services, the Commission undertook the following initiatives. · relieving small cable entities from many regulatory burdens; · enhancing business opportunities for programmers by adopting a formula to calculate maximum levels of compensation for accessing the cable system; · promoting business opportunities for video providers to serve multiple dwelling units through cable systems; · reducing filing and record keeping requirements, and facilitating compliance with cable television rules for small cable entities; and · exempting small cable carriers from the closed captioning requirements. 2. In mass media services, the Commission undertook the following initiatives. · streamlining filing requirements and easing filing of reports through an electronic reporting system; · providing information on how to start a new broadcast station, apply for low power or micro stations, and other important information for new broadcast business opportunities; · authorizing licensing of two new classes of noncommercial low power FM radio stations, with rules to ease record keeping and filing burdens; · revising local television and radio-television cross-ownership rules to enable small stations to combine operations and reduce expenses, thereby perhaps diversifying programming and promoting competition; · modifying television service rules to allow certain low-power television stations to qualify as primary broadcasters (Class A service) and therefore become providers of new services; and · amending multichannel multipoint distribution rules to facilitate the provision of new, enhanced services, including new digital and two- way communications services. 2. In international services, the Commission undertook the following initiatives. · granting earth stations a new authorization to communicate with foreign satellites, thus lowering the cost for earth station owners and establishing procedures that permit routine licensing of earth stations seeking to use satellites; · construing liberally financial qualification requirements to remove barriers limiting smaller and new entity participation in satellite licensed services; · streamlining procedures for licensing applications and reducing paperwork obligations and tariff requirements for non-dominant international carriers; and · coordinating international policy with the International Telecommunications Union to find additional spectrum to use for advanced wireless services, new equipment and software development, and provision of new services. 2. The Office of Engineering and Technology undertook the following initiatives. · streamlining and simplifying authorization of equipment and experimental licenses; · promoting new and innovative services by small entities and entrepreneurs in the unlicensed spectrum market, including services that promote application of wireless internet, wireless local area network and ultra-wideband technologies; · supporting the development of dedicated short-range communications systems in the Intelligent Transportation System radio service and fixed wireless access services; and · developing a policy to guide the Commission's future reallocation of spectrum to enable a broad range of new radio services and business opportunities, including software-defined radios. 2. Recently, the Commission created two new bureaus that help facilitate implementation of the Section 257 mandate. Specifically, the new Consumer Information Bureau disseminates to the public, including entrepreneurs and other small businesses, information about Commission rulemakings, policy statements, adjudicative decisions, technical studies, transfers, mergers, and licensing matters. The consolidation of agency- wide consumer information functions provides consumers a one-stop shop for obtaining the information they need to make choices in a robust and competitive marketplace. In addition, the new Enforcement Bureau provides the Commission with a centralized office from which to conduct most of the enforcement and compliance activities of the Commission. The bureau also promotes the rapid processing of formal complaints. Consolidation of enforcement responsibilities allows the Commission to streamline compliance activities and employ innovative means to expedite problem solving among industry participants. 3. Part IV of this Report addresses Commission efforts to: · improve access to telecommunications licenses; · overcome unique obstacles faced by minority- and women-owned small businesses; · institute a regular process to review the agency's regulations and decide whether to retain, modify, or eliminate them through the auspices of the agency-wide Biennial Review; · review the impact of all Commission's rules on small businesses under the Regulatory Flexibility Act and the Small Business Act; · implement a Commission-wide system for electronic filing of applications for licenses, comments on rule-makings, and other submissions to the Commission that are important for participation in the telecommunications market; · sponsor an historic seminar in September 2000 providing valuable information to tribal communities about telecommunications technologies, regulatory framework, available resources, and options for enhancing services to tribal residents; · promote equal employment opportunities in licensed broadcast and cable services; · provide vital information on business opportunities for entrepreneurs and small businesses; · support access to advanced services to facilitate educational opportunities through the Commission's educational universal services program; and · evaluate market entry barriers through sponsored studies. 2. Part V proposes legislative initiatives that either directly lower market entry barriers faced by entrepreneurs and other small businesses seeking to participate in the telecommunications marketplace or enhance the Commission's ability to remove such barriers. III. INTRODUCTION A. Section 257 4. Section 257(c) of the Communications Act requires the Commission to report triennially to Congress on the steps it has taken to eliminate market entry barriers identified in the Commission's proceeding entitled In the Matter of Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses. 5. Section 257 is entitled "Market Entry Barriers Proceeding." Section 257(a), "Elimination of Barriers," requires that, within 15 months after the enactment of the 1996 Act, the Commission complete a proceeding to identify and eliminate "market entry barriers for entrepreneurs and other small businesses" in telecommunications. Section 257(a) focused the proceeding on two areas: (1) "the provision and ownership of telecommunications services and information services"; and (2) "the provision of parts or services to providers of telecommunications services and information services." Pursuant to that mandate, the Commission adopted a report ("1997 Report"). 6. Section 257(b), "National Policy," established guidelines for the Commission's proceeding that resulted in the 1997 Report. Specifically, Section 257(b) instructs the Commission "to promote the policies and purposes of this Act favoring diversity of media voices, vigorous economic competition, technological advancement, and promotion of the public interest, convenience and necessity." 7. Pursuant to Section 257(c), "Periodic Review," the Commission, on the third anniversary of the issuance of the 1997 Report, is required to review and report to Congress on (1) any regulations prescribed to eliminate barriers within its jurisdiction that are identified [in the 1997 Report] and that can be prescribed consistent with the public interest, convenience, and necessity; and (2) the statutory barriers identified [in the 1997 Report] that the Commission recommends be eliminated, consistent with the public interest, convenience and necessity. This Report fulfills this requirement. A. A REVIEW OF THE 1997 Report 3. Pursuant to the requirements of Section 257(a), the Commission, in 1996, initiated a proceeding to identify market entry barriers. In May 1996 a Notice of Inquiry ("NOI") was issued in the proceeding that culminated in the 1997 Report. In the NOI, the Commission made several inquiries of the public, including how to define small businesses; specifics about market entry barriers for small businesses; and whether small businesses owned by women and minorities faced unique market entry barriers. 4. Over 80 entities filed comments in response to the NOI. The commenters represented virtually every industry and interest group within the field of telecommunications, including individual entrepreneurs, small businesses, large businesses, large communications companies, associations, federal and state government representatives, telecommunications policy groups, women's organizations, and minority interests. Also in conjunction with the NOI, the Office of the General Counsel and the Office of Communications Business Opportunities held a public forum in September 1996. 5. In preparing the 1997 Report, the Commission followed the definition of market entry barriers found in the NOI which included: obstacles that deter individuals from forming small businesses, barriers that impede entry into the telecommunications market by existing small businesses, and obstacles that small telecommunications businesses face in providing service or expanding within the telecommunications industry . . .. Also, the Commission framed its discussion of market entry barriers by referencing the policy objectives set forth in Section 257(b), and described a variety of measures taken to fulfill those policies. 6. First, in furtherance of the policy favoring "vigorous economic competition," the Commission noted that efforts to eliminate market entry barriers must be undertaken in a manner that "facilitates entry by small businesses yet avoids unwarranted regulatory intervention that could distort a competitive marketplace." Thus, by recognizing that economically unjustified intervention might make it difficult to promote vigorous competition, the Commission defined "market entry barrier" to include only those impediments that would "significantly distort competition and harm consumer welfare." 7. Second, to promote the policy of expediting technological advancement, the Commission disseminated information to small entities and entrepreneurs about (1) improving access to Commission decision makers and (2) Commission processes and communications opportunities. The 1997 Report also noted that the Commission had made additional spectrum available to spur technological advancement. 8. Third, to implement the policy of supporting diversity of media voices, the Commission continued its review of ownership rules in broadcast and other contexts, and continued to evaluate issues relating to small businesses owned by women or minorities. 9. Fourth, the Commission stated its belief that it had promoted the public interest, convenience and necessity by combining its Section 257 efforts, i.e. preparation and issuance of the 1997 Report, with its ongoing commitment to enhance opportunities for small business. 10. In addition to the foregoing, the 1997 Report also listed various initiatives that the Commission had undertaken in response to the comments received in the NOI. The Commission adopted many of the principal proposals set forth in the comments received. It also acted on its own initiative to introduce other measures. As described in the 1997 Report, some of the key new measures adopted to implement Section 257 were: (1) using service-specific definitions of small businesses rather than adopting a general definition; (2) planning initiatives that enable small businesses more easily to file comments and otherwise participate in Commission proceedings; (3) requiring the Commission's bureaus and offices to be thorough and timely in preparing, for each rulemaking or policy statement issued to the public, fully detailed statements that explain the impact of the rules on small businesses; (4) instituting rulemaking proceedings intended to ensure effective and prompt enforcement of Communications Act provisions and Commission rules; (5) reducing information-filing and other burdens that created obstacles to entry for small businesses; and (6) ensuring that the Commission fully consider the interests of small telephone carriers in proceedings to determine funding mechanisms for universal service support. 11. Other measures reported in 1997 included: (1) adopting initiatives to facilitate small business participation in spectrum auctions; (2) proposing and adopting policies that permit geographic partitioning and spectrum disaggregation in various wireless communications services; (3) adopting spectrum initiatives to encourage technological innovation by equipment manufacturers and others; (4) speeding resolution of complaints; (5) sponsoring conferences on telecommunications services and related financing options; (6) increasing public access to the Commission by creating accessible, interactive FCC sites on the World Wide Web and by establishing the National Call Center to field inquiries from the public; and (7) making continued efforts to ensure that the Telecommunications Development Fund ("TDF" or "Fund") becomes an effective vehicle for removing financial obstacles to entry. XII. regulatory initiatives TO REMOVE IMPEDIMENTS IN SPECIFIC SERVICES A. COMMON CARRIER SERVICEs 1. Interconnection and Resale Barriers 13. The 1996 Act added Section 251 of the Communications Act. Section 251 of the Communications Act imposes specific obligations on telecommunications carriers designed to promote competition in local exchange markets across the country. Incumbent carrier compliance with the obligations set forth in this Section is absolutely necessary for achievement of the pro-competitive goals and policies of the 1996 Act. Section 251 establishes the general interconnection obligations for all telecommunications carriers; delineates further obligations for local exchange carriers ("LECs"); and prescribes additional requirements for incumbent LECs ("ILECs"). Section 252 generally sets forth the procedures that state commissions, ILECs and new entrants must follow to implement the requirements of Section 251 and to establish specific interconnection arrangements. In its 1996 Local Competition Order, the Commission imposed new obligations on telecommunications carriers in order to implement Section 251. The Commission prescribed certain minimum points of interconnection necessary to permit competing carriers to choose the most efficient points at which to interconnect with the ILEC's network. In addition, the Commission prescribed a minimum list of unbundled network elements that ILECs must make available to new entrants, upon request. The Commission expects that these obligations will promote small businesses' entry into the market for competitive local service by removing barriers to interconnection with ILECs' facilities. 14. As stated in the 1997 Report, the Commission continues to ensure carrier compliance with the rights and obligations set forth in Section 251. At the time of the 1997 Report, the Commission's regulations implementing the local interconnection and resale provisions of the 1996 Act had been partially stayed by the United States Court of Appeals for the Eighth Circuit. In particular, the Eighth Circuit questioned the Commission's jurisdiction to impose national pricing rules. In January 1999, however, the Supreme Court reversed that decision and remanded the case to the Eighth Circuit for further proceedings. One of the Commission's rules that the Supreme Court reinstated requires each state commission to deaverage rates for interconnection and unbundled network elements across at least three defined geographic areas within the state to reflect cost differences. As a result of the Eighth Circuit decision, some states had not established deaveraged rates for interconnection and unbundled network elements. Following the Supreme Court's decision, therefore, the Commission stayed the effectiveness of that rule to allow states to bring their rules into compliance. The stay was terminated by its own terms on May 1, 2000. The introduction of deaveraged rates for interconnection and unbundled network elements will make it easier for competitors to enter and serve new markets. 15. The Supreme Court also held in its January 1999 decision that the Commission has general jurisdiction to implement the 1996 Act's local competition provisions, and the Commission's rulemaking authority extends to Sections 251 and 252. The Court also determined that the Commission's rules governing unbundled access are, with the exception of identifying unbundled network elements under Section 251(d)(2), consistent with the 1996 Act. The Court did find, however, that the Commission did not adequately consider the "necessary" and "impair" standards of Section 251(d)(2) when it determined which network elements ILECs are required to unbundle pursuant to Section 251(c)(3). Accordingly, the Court concluded that the Commission's rule, which set forth a list of the minimum network elements that must be unbundled, should be vacated. 16. On September 15, 1999, in response to the Supreme Court's decision, the Commission adopted a Third Report and Order and Fourth Notice of Proposed Rulemaking in the Local Competition docket. The Third Report and Order sets forth a new standard for determining whether ILECs must unbundle network elements. The Third Report and Order also identifies a minimum set of network elements that ILECs must provide to new entrants and other competing carriers under Section 251(c)(3). They include: loops, subloops, network interface devices, circuit switching (except for larger customers in major urban markets), dedicated and shared transport, signaling and call- related databases, and operation support systems. The Fourth Notice of Proposed Rulemaking seeks comments on issues surrounding the ability of carriers to use certain unbundled network elements as a substitute for the ILECs' special access services. Again, the Commission hopes that these new rules will promote small businesses' entry into the market for competitive local service by removing barriers to interconnection with ILECs' facilities. 1. Information Filing and Accounting Burdens 17. Pursuant to the Biennial Review of Commission regulations required by the 1996 Act, the Commission reviewed its tariff filing rules so as to reduce burdens on carriers. In particular, we eliminated the requirement that carriers make their tariffs accessible to the public during normal business hours in favor of less onerous options such as posting rates on an Internet web site. This will make information more readily available to new entities in the marketplace. We also simplified and clarified the requirements for filing tariffs by nondominant carriers so that more options are available without requesting a waiver of the rules. 18. The Commission also, in the Streamlined Contributor Reporting Requirements Order, simplified the filing requirements for communications service providers by replacing four different -- but largely duplicative -- forms with one consolidated form, the Telecommunications Reporting Worksheet. In addition to a reduction in the number of forms filed, the Commission, to further ease the burden of filing for these four programs, adopted a single filing location and took additional steps to ensure that the various administrators have the ability to coordinate the sharing of information submitted on the Telecommunications Reporting Worksheet. The adoption of this process resulted in a one-third reduction in time necessary to comply with the filing requirements of these various programs. The Commission believes that this action not only reduces regulatory burdens on small carriers and service providers, but will also reduce the costs to administrators and the public cost of regulation by conserving Commission resources associated with auditing and crosschecking data submissions. 19. In the Accounting Reductions Order and the ARMIS Reporting Reductions Order, the Commission streamlined the accounting requirements for mid-sized ILECs based on the aggregate revenues of the ILEC and any ILEC that it controls, is controlled by, or with which it is under common control. In addition, small carriers (i.e. those with under $112 million in yearly operating revenues) do not file ARMIS reports. 20. Section 64.903 of the Commission's Rules requires ILECs with $112 million or more in annual operating revenues to file cost allocation manuals ("CAMs") setting forth the cost allocation procedures they use to allocate costs between regulated and nonregulated services. Small carriers are exempted from filing CAMs with the Commission. The Commission also adopted rules to streamline the cost allocation regulations by permitting mid-sized ILECs to submit their CAMs based on the Class B system of accounts. Specifically, ILECs with annual revenues in excess of $112 million are eligible for streamlined reporting if the ILEC, together with its ILEC affiliates, had aggregate annual revenues of less than $7 billion. Allowing mid-sized LECs to submit their CAMs based on the Class B system of accounts reduces the reporting burden of the nonregulated activity matrix and the cost apportionment section of the CAM. Carriers required to file CAMs are also required to perform an independent audit of reported cost allocation data. The Commission also allowed mid-sized ILECs to obtain an attestation audit every two years instead of an annual financial statement audit. Such attestation would cover the previous two years. Small carriers are not required to perform audits of cost allocation data, nor are they required to obtain an attestation audit. 21. The Commission also reduced the filing burden on mid-sized ILECs by eliminating the requirement to file 21 tables from the ARMIS 43-02 USOA Report. Mid- sized ILECs are now required to file only six tables in the ARMIS 43-02 Report. In streamlining the accounting and cost allocation rules for mid-sized carriers, the Commission hopes to reduce any unnecessary burdens and remove regulations that are no longer needed to meet regulatory demands. 22. In 1999, the Commission adopted rules under Section 214 that deregulate domestic market entry and streamline domestic exit requirements. Specifically, the rules (1) confer "blanket" certification for new lines of all domestic carriers; (2) exempt line extensions and video programming services from Section 214 in accord with the 1996 Act; and (3) provide that all applications to discontinue domestic service will be automatically granted unless the Commission notifies the applicants otherwise. This action will reduce the burden on small carriers by eliminating, in most instances, the Section 214 authorization process. 1. Treatment of Small ILECs Under the Regulatory Flexibility Act 23. A "small business" under the Regulatory Flexibility Act ("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." In the 1997 Report, the Commission stated that it did not believe that small ILECs qualified as small businesses under the RFA because such businesses appeared to be "dominant in their field of operation due to their current control of bottleneck facilities." We also noted that, since 1996, the Commission had nonetheless addressed in its regulatory flexibility analyses the impact of its rules on such ILECs. During 1999, following a letter on this subject from the Office of Advocacy and a meeting between agency staffs, the Commission decided to revise the language of its decisions to make clear that small ILECs are among the small businesses included in its analyses under the RFA. We also expect that this change will encourage a more consistent focus on small business alternatives when our common carrier proposals are drafted. 1. Universal Service 24. The Commission, through its universal service programs, has taken several steps to eliminate market barriers and promote competition. Specifically, in the 18th Order on Reconsideration, the Commission implemented a new high-cost universal service support mechanism for non-rural carriers. The support provided by this mechanism is portable, i.e., competing carriers are entitled to the same amount of support for serving a customer that the incumbent receives. This portability provision is designed to encourage competitive entry in high-cost areas by lowering the most significant barrier to entry in such areas -- the high cost of providing service. In conjunction with the Federal-State Joint Board on Universal Service, the Commission has also established a Rural Task Force to recommend reforms to the high-cost support mechanism for rural carriers. The Rural Task Force will be guided by the universal service principles in the 1996 Act and the Commission's stated objective that universal service should be portable and competitively neutral. 25. In the 14th Order on Reconsideration, the Commission determined that a broader group of telecommunications carriers, not just eligible telecommunications carriers, as defined by  214(e), may participate in the Commission's rural health care support mechanism. This should give rural health care providers greater choice among service providers. 26. The Commission has also undertaken initiatives to remove barriers to entry for carriers serving unserved, underserved, tribal, and insular areas. In a Twelfth Report and Order, Memorandum Opinion and Order, and Second Further Notice of Proposed Rulemaking adopted June 8, 2000, the Commission adopted various ways to increase the telephone penetration rate in tribal areas by expanding or modifying our universal service programs. Additionally, in an Order released in December 1999, the Common Carrier Bureau waived certain rules to allow tribal carriers to derive greater benefit from the federal Lifeline support program. 1. Impartial Administration of Telecommunications Numbers 27. The Commission has promulgated rules to implement Section 251(e)(1), which requires the Commission to create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis. Commission rules requiring the impartial administration of numbering resources assures that small carriers, to the same extent as large carriers, are able to access numbering resources in a timely manner in order to offer communications services to their customers. The rules provide, in part, that if the Commission delegates to the states or to other entities any portion of its authority over telecommunications numbering, those states or entities must perform their delegated functions in a manner consistent with certain guidelines, which require that the numbering administration: (1) facilitate entry into the telecommunications marketplace by making telecommunications numbering resources available on an efficient, timely basis to telecommunications carriers; (2) not unduly favor or disfavor any particular industry segment or group of telecommunications consumers; and (3) not unduly favor one telecommunications technology over another. 28. To ensure the impartial administration of numbering resources, the rules further provide that: (1) the North American Numbering Plan Administrator ("NANPA") may not be an affiliate of any telecommunications service provider; (2) the NANPA or its affiliate may not issue a majority of its debt to, nor derive a majority of its revenues from, any telecommunications service provider; and (3) notwithstanding (1) and (2), the NANPA may or may not be determined to be subject to undue influence by parties with a vested interest in the outcome of numbering administration activities. Previously, the ILEC within each geographic area performed central office ("CO") code administration. In response to a request by the Commission to the North American Numbering Council ("NANC") to recommend a neutral entity to serve as the NANPA, the NANC selected Lockheed Martin IMS. In October 1997, the Commission affirmed the selection of Lockheed Martin IMS as the new NANPA, noting that it would perform the numbering administration functions previously performed by Bellcore, as well as area code relief planning and CO code administration. In November 1999, the Commission approved the transfer of the NANPA functions to NeuStar for the remainder of the current NANPA appointment term, finding that NeuStar was in compliance with the neutrality criteria. 29. Recently, the Commission took steps to optimize the use of numbering resources through various administrative and regulatory efforts. In seeking to establish a uniform national strategy for numbering resource optimization, the Commission had the goal of, among other things, ensuring that all carriers -- including new entrants and small carriers -- have the numbering resources they need to compete in the rapidly growing telecommunications marketplace. In the Numbering Resources Optimization Report and Order, the Commission adopted several technical measures and reporting requirements designed to make more efficient use of, and make carriers more accountable for, telecommunications numbering resources. We note, however, that the Commission took steps to reduce the reporting requirement for certain small, rural carriers by allowing them to report required telephone number utilization data at a less granular level than other carriers will. The Commission will continue to seek additional ways to optimize number utilization to ensure that no carrier is barred from entry into telecommunications markets because of the unavailability of numbering resources. 1. Preemption of Onerous State Requirements 30. The 1996 Act created Section 253 of the Communications Act, which expressly empowers the Commission to preempt state and local laws under certain specified conditions. Section 253(a) sets forth a general proscription of any state or local legal requirement that "prohibit[s] or ha[s] the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." Under Section 253(d), if after notice and an opportunity for public comment, the Commission finds that a state or local statute, regulation, or legal requirement falls within the proscription of Section 253(a) and outside the shelter of Section 253(b) or (c), the Commission must "preempt enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency." 31. Below we give examples of the Commission's use of its preemption power to benefit small businesses entering into telecommunications markets. The Commission stands ready to enforce the general prohibition set forth in Section 253 of the 1996 Act. Since issuance of the 1997 Report, the Commission has issued orders preempting a number of state and local legal requirements, which it found violated Section 253. For example, in the Silver Star Preemption Order, released on September 24, 1997, the Commission granted a LEC's petition for preemption of the enforcement of (i) a provision of the Wyoming Telecommunications Act of 1995 that gives ILECs serving fewer than 30,000 access lines veto power over the certificate applications of potential competitors, and (ii) a decision of the Wyoming Public Service Commission enforcing that provision of the Wyoming statute. In the Hyperion Preemption Order, released on May 27, 1999, the Commission granted a petition for preemption filed by Hyperion of Tennessee, L.P. ("Hyperion"). Hyperion had asked the Commission to issue an order preempting a decision by the Tennessee Regulatory Authority denying Hyperion's application for a Certificate of Public Convenience and Necessity to provide service in an area of Tennessee served by a carrier with less than 100,000 access lines within the state and a related provision of the Tennessee Code. 32. Finally, in an order released December 23, 1999 (the "Arkansas Preemption Order"), the Commission preempted three provisions of the Arkansas Telecommunications Regulatory Reform Act of 1997, concluding that they unlawfully erect barriers to entry into local telephone service markets in Arkansas. First, the Arkansas Preemption Order preempted a Section of the Arkansas Act that permitted an incumbent company to make bundled retail service offerings unavailable to competing carriers at wholesale rates. The Commission concluded that this provision conflicted with the rules governing resale in the 1996 Act. The Commission also preempted a provision that concerned the standards that the Arkansas Public Service Commission used to review local telephone companies' interconnection arrangements with competitive carriers. Third, the Commission preempted a provision that appeared to be designed to shield rural telephone companies from entry by competitors. 1. Forbearance Authority 33. The Commission has exercised the forbearance authority granted by the 1996 Act to eliminate or reduce burdens imposed by our regulations. For example, in response to a petition for forbearance filed by an organization of mid-sized ILECs that serve fewer than two percent of the nation's access lines, we granted forbearance from our Part 69 rules to allow these carriers to introduce new services without first requesting a waiver. This allows these carriers to introduce new services used by small businesses and consumers more quickly and enhances competition among providers of telecommunications services. 34. In addition, the Commission remains committed to eliminating or streamlining tariff filing and other reporting requirements applicable to entities providing common carrier services. Such streamlining is particularly helpful to small businesses, as it may cut back on the number of person-hours that such entities must devote to filing tariffs. As we noted in the 1997 Report, the Commission's order eliminating tariff filing requirements for interstate, domestic, interexchange services offered by nondominant interexchange carriers was stayed by the United States Court of Appeals for the D.C. Circuit. Recently, that court affirmed the Commission's decision prohibiting non-dominant long distance companies from filing tariffs to offer their interstate services, subject to a transition period, and subject to certain mass-marketing arrangements, dial-around services, casual calling rates, and rates applied to new customers until an account can be established. The court's decision vindicates an effort by the Commission to remove tariffing from its regulation of non-dominant long distance carriers. 1. Pricing Flexibility 35. The Commission adopted an order establishing a framework to grant ILECs progressively greater flexibility in the pricing of interstate access services as competition develops for these services. By allowing ILECs to introduce new interstate access services on a streamlined basis, without prior approval or cost support, for example, we made it easier for the LECs, both small and large, to respond to the needs of both customers and competitors that purchase these services. 1. Customer Proprietary Network Information Requirements 36. The 1996 Act created Section 222 of the Communications Act, which establishes Consumer Proprietary Network Information ("CPNI") requirements that apply to all telecommunications carriers. The Commission had previously defined CPNI to encompass any information about customers' basic network services and the customers' use of those services. This encompassed information that a telephone company possesses because it provides those network services. Under Section 222, all telecommunications carriers are subject to CPNI requirements. Absent customer approval or a legal requirement, telecommunications carriers may use or disclose individually identifiable CPNI only in the provision of the telecommunications service from which such information is derived, or in the provision of services necessary to or used in the provision of such telecommunications services, such as directory publishing. Telecommunications carriers must disclose CPNI to any person upon the customer's affirmative written request. 37. Although challenges to portions of the Commission's CPNI rules have been sustained by the Tenth Circuit Court of Appeals, the Commission issued several orders and enacted rules prior to that decision which had a positive impact on small businesses. In the CPNI Report and Order released on February 26, 1998, the Commission promulgated rules to implement Section 222. Those rules permitted carriers to use CPNI, without customer approval, to market offerings that are related to, but limited by, the customer's existing service relationship with the carrier. On September 3, 1999, the Commission released an Order on Reconsideration that lessened the regulatory burden of various CPNI safeguards for both wireline and wireless companies, while continuing to require that carriers protect customer privacy. Specifically, the Commission reduced the restriction on telecommunications companies' use of CPNI to market services and equipment to their own customers. The Commission allowed wireline telephone carriers to use CPNI without customer approval to market related information services. Wireless carriers were awarded broader discretion to use CPNI without customer approval to market all information services that are necessary to, or used in the provision of, their telecommunications services. The Commission also allowed telecommunications companies to use CPNI in their efforts to win back customers lost to competitors, reasoning that win-back campaigns are good for competition and consistent with the 1996 Act. The Commission also modified its requirement that carriers develop and implement software that indicates a customer's CPNI approval status within the first few lines of the first screen of a customer's service record. Now, carriers must clearly establish the status of a customer's CPNI approval prior to the use of CPNI, but the specific details of compliance are left to the carriers. In so doing, the Commission allowed the carriers the flexibility to adapt their record-keeping systems in a manner most conducive to their individual size, capital resources, culture, and technological capabilities. 38. The Commission also eliminated the requirements that carriers maintain an electronic audit mechanism that tracks access to customer accounts. Instead, the Commission required carriers to maintain a record of their sales and marketing campaigns that use CPNI. The Commission also modified the CPNI "flagging" rule to state that carriers must implement a system by which the status of a customer's CPNI approval can be clearly established prior to use of CPNI -- a number of small and rural carriers had stated their concern that these requirements were particularly burdensome for carriers of their size. These modifications will permit all carriers to develop and implement a system for auditing and flagging that is suitable to, among other things, their unique size, capital resources, culture, and technological capabilities. 1. Provision of Advanced Services 39. On December 9, 1999, the Commission released the Advanced Services Third Report and Order. In that order, the Commission adopted measures to promote the availability of competitive broadband xDSL-based services, especially to residential and small business customers. The Commission amended its unbundling rules to require ILECs to provide unbundled access to a new network element, the high frequency portion of the local loop. This will enable competitive LECs to compete with larger ILECs to provide to consumers xDSL-based services through telephone lines that the competitive LECs can share with ILECs. The provision of xDSL-based service by a competitive LEC and voiceband service by an ILEC on the same loop is frequently called "line sharing." The Commission believes that line sharing is vital to the development of competition in the advanced services market, especially for residential and small business consumers. The Commission also believes that unbundled access to the high frequency portion of the loop can be implemented rapidly and in an equitable manner that balances the needs of both potential competitors and ILECs. 1. The E-Rate Program and the Potential for Market Participation 40. The Universal Service Schools and Libraries program, popularly known as the "E-rate" program, is regarded as a program that will help close the "digital divide" between the technology "haves" and "have-nots" in America. Established by the 1996 Act, and funded at up to $2.25 billion per year by contributions from telecommunications companies, the E-rate provides discounts of 20 percent to 90 percent on the cost of telecommunications services, Internet access, and internal connections to schools and libraries. The discounts are paid directly to the companies that provide schools and libraries with these technology services. 41. The E-rate program helps to bridge the "digital divide" in access to information technology between the affluent and non-affluent in America by providing greater discounts for poorer and rural schools. The E-rate thus helps to ensure that all children, including those without computers or Internet access at home, will have the high-tech tools necessary to compete in the new digital economy. This will help to remove the market entry barriers to those disadvantaged segments of our society. A. WIRELESS SERVICES 1. Spectrum Assignment Policies 42. The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") added Section 309(j) to the Communications Act. Section 309(j) originally authorized the Commission to employ competitive bidding to choose from among mutually exclusive applications for initial licenses in services where the licensee receives compensation from subscribers. In the summer of 1997, Congress revised the Commission's auction authority. Specifically, the Balanced Budget Act of 1997 amended Section 309(j)(1) to require the Commission to award mutually exclusive applications for initial licenses or permits using competitive bidding procedures, except in limited circumstances. Section 309(j) requires the Commission to promote the development and rapid deployment of new technologies, products and services for the benefit of the public, including those residing in rural areas, without administrative or judicial delays. It further requires the Commission to promote opportunity and competition by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups or women. 43. Since the 1993 mandate to ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups or women are given the opportunity to participate in the provision of spectrum-based services, Congressional and Supreme Court actions have narrowed our options for fulfilling this mandate. In 1994, Congress repealed Section 1071 of the Internal Revenue Code, voiding the Commission's tax certificate program. In 1995, the Supreme Court held in Adarand Constructors, Inc. v. Pe¤a that "all racial classifications . . . must be analyzed by a reviewing court under strict scrutiny." The Court ruled that any federal program that imposes racial classifications must serve a compelling governmental interest and must be narrowly tailored to serve that interest. In 1996, the Supreme Court held in United States v. Virginia that a state program that makes distinctions on the basis of gender must be supported by an "exceeding[ly] persuasive justification" in order to withstand constitutional scrutiny. Because the record developed in promulgating rules to promote Section 309(j)'s objectives did not assume application of a "strict scrutiny test," the Commission limited its available provisions to those benefiting small business. The Commission continues to encourage the participation of a variety of entrepreneurs in the provision of wireless services, believing that innovation by small businesses will result in a diversity of service offerings which, in turn, will increase customer choice and promote competition. 44. In the 1997 Report proceeding, commenters indicated that our spectrum assignment decisions, specifically the assignment of spectrum for large geographic service areas and in large spectrum blocks, create a barrier to entry for small businesses. They stated that wide-area geographic systems are more capital intensive to construct and operate than other types of systems and that these costs are often too expensive for a small business and thus constitute a substantial market entry barrier for small businesses. Commenters expressed concern that the Commission's allocation of spectrum in larger blocks in some services reflected a bias in favor of larger commercial carriers, while ignoring the needs of small businesses operating site-specific systems. 45. At the outset, we note that not all Commission wireless licensing is for large geographic areas in large spectrum blocks. For example, the Commission's rules provide for certain shared, non-exclusive use of private land mobile radio ("PLMR") spectrum. By this process, many small businesses or entities in a given geographic area might be assigned the same spectrum, increasing the amount of frequency re-use that is possible compared to the alternative of exclusive use with set distance separations. Small businesses or entities in the same geographic area, each licensed for shared spectrum in this way, often combine resources to use transmitters and equipment offered by a single (often third-party) provider under a concept called multiple licensing. Additionally, a given licensee, whether on shared spectrum or not, may share the use of its particular PLMR license with other small businesses or entities also eligible for that particular spectrum. Finally, we note that we have encouraged partnering between PLMR licensees, such as public safety entities and utilities. Each of these sharing paradigms promotes conservation of capital, operational efficiency, and cost reduction for the small business entity. 46. The Commission continues to seek innovative policies to make spectrum available for services and thereby create additional market opportunities for small businesses. Recently, the Commission released its Second Report and Order in the 700 MHz proceeding, establishing service and auction rules for the 6 MHz of Guard Band spectrum (746-747/ 776-777 MHz and 762-764/ 792-794 MHz). Licenses in the Guard Bands will be assigned only to Guard Band Managers, a new class of commercial licensee that will be engaged solely in the business of leasing spectrum to third parties on a for- profit basis. The Guard Band Manager may subdivide its spectrum in any manner it chooses and make it available to system operators, including small businesses, or directly to end users for fixed or mobile communications, consistent with the frequency coordination and interference rules specified for these bands. Guard Band Manager licensing will have many potential benefits, including: (1) Guard Band Managers will engage in market-based transactions in wireless capacity at a time when access to spectrum is a critical need for a wide variety of wireless operations; (2) spectrum users, including small businesses, will have more flexibility in obtaining access to the amount of spectrum, in terms of quantity, length of time, and geographic area, that best suits their needs; (3) development of a "free market" in spectrum could result in more efficient use of this limited resource; and (4) this licensing approach will streamline the day-to-day management of this spectrum. As a result, in this band many spectrum-related functions ordinarily carried out by the Commission will be handled by Guard Band Managers. 47. We remain mindful of the challenges that small businesses face in their efforts to acquire geographic area licenses generally, and have taken several steps to alleviate these possible difficulties. First, our decisions defining the service areas and spectrum blocks by which licenses for wireless services are to be assigned have taken into account the needs of small businesses. For example, in some services we have adopted band plans that included licenses for small geographic areas and spectrum blocks. These plans will promote economic opportunity for a wide variety of applicants, including small businesses, rural telephone companies and businesses owned by minorities or women. Moreover, in many of our auctionable services, we have adopted special provisions, such as bidding credits and partitioning and disaggregation, to assist small businesses, including minority- and women-owned businesses and rural telephone companies, in acquiring spectrum assigned in geographic service areas and spectrum blocks. 48. We believe that rules and policies that permit geographic partitioning and spectrum disaggregation also address the concerns raised regarding geographic area licensing. In a series of rulemakings, we have adopted rules that permit geographic partitioning and spectrum disaggregation in certain services including: Broadband and Narrowband PCS, Cellular, Multipoint Distribution Service ("MDS"), 800 MHz and 900 MHz Specialized Mobile Radio ("SMR"), 39 GHz fixed point-to-point microwave, Wireless Communications Services ("WCS"), Local Multipoint Distribution Service ("LMDS"), Maritime Services, Paging, the commercial service in the 700 MHz band (formerly allocated to broadcast channels 60-69), and the 218-219 MHz service. We believe that such provisions will help to: (1) remove potential impediments to entry thereby increasing competition in the wireless telecommunications marketplace; (2) encourage parties to use spectrum more efficiently; and (3) speed service to unserved and underserved areas. Parties that are unsuccessful bidders or that do not participate in auctions will be able to benefit from partitioning and disaggregation as methods to acquire spectrum rights after the auctions. Smaller or newly formed entities, for example, might choose to enter the market for the first time through partitioning or disaggregation. 49. The Commission has also recently adopted a Report and Order and Further Notice of Proposed Rulemaking, in which it adopts terrestrial wireless and satellite policy initiatives to address telecommunications needs on tribal lands. As we have stated previously, the 1996 Act instructed the Commission to help ensure that all Americans have access to affordable telecommunications services. Because many tribal lands, particularly those in the western United States, are geographically isolated, obtaining the lowest cost for providing basic telephone service to the reservation population may often require use of a terrestrial wireless technology, a satellite technology, or a combination of both. Terrestrial wireless technology includes both mobile services, such as cellular and PCS, and fixed "wireless local loop" services. In this order, the Commission provides bidding credits to successful bidders who agree to provide service to unserved areas on tribal lands. 1. Construction Requirements 50. In recent years, with the auctioning of geographic-area licenses, the Commission has adopted longer, more flexible construction requirements for various wireless licensees, including small businesses, than it had previously imposed on site-by- site licensees. In the 220 MHz and Paging services, the Commission has adopted either population-based coverage requirements or substantial service requirements for geographic licenses that are purchased at auction. In the 800 MHz SMR service, the Commission in 1991 began granting certain 800 MHz licensees extended implementation ("EI") authority to construct their systems, whereby the licensee had up to five years to construct all of the facilities within the licensed wide-area "footprint." At the end of the EI period, any frequency licensed at a specific site within the footprint that was not fully constructed and in operation would cancel automatically. 51. In December 1995, the Commission adopted a new wide-area licensing scheme by creating geographic-area licenses (Economic Area, or "EA," licenses) for the upper 200 channels of the 800 MHz SMR band. The Commission also required licensees who had previously obtained EI authorizations to rejustify their authorizations by demonstrating that continuing to maintain their extended time to construct their facilities was warranted and in the public interest. In May and November 1997, the Wireless Telecommunications Bureau acted on the rejustification submissions filed by thirty-seven wide-area licensees, including many small businesses. In July 1997, the Commission generally affirmed the EA licensing system and decided that rejustified EI licensees would receive a maximum of two years to complete construction of their facilities. Any site- specific license within a licensee's wide-area "footprint" that was not constructed by the two-year deadline would be automatically cancelled. 52. In February 1999, in Fresno Mobile Radio, Inc. v. FCC, the United States Court of Appeals for the District of Columbia remanded the Commission's decision regarding the construction requirements for EI licensees. The court directed the Commission to explain why these SMR licensees were not allowed to apply more liberal coverage requirements similar to those adopted for 800 MHz EA licensees, cellular licensees, and PCS licensees, given that they are substantially similar CMRS providers. On December 23, 1999, the Commission released a Remand Order responding to the Fresno decision. In the Remand Order, the Commission adopted more liberal construction periods for incumbent wide-area 800 MHz SMR licensees who were within their construction periods at the time of the Fresno decision. These incumbents must satisfy population-based construction requirements similar to those given to Economic Area licensees in the 800 MHz band (i.e., 1/3 population at 3 years, 2/3 population at 5 years) on the upper 200 channels or show substantial service for the lower 230 channels of the 800 MHz band. The Commission has requested further comment on whether the relief afforded by the Remand Order should also be extended to SMR licensees who operate wide-area systems on non-SMR channels through inter-category sharing. This proceeding is currently pending. 1. Application Processing and Filing 53. The Commission has taken several steps since the 1997 Report to ensure that its application processing and filing rules and policies do not present barriers for small businesses. In this regard, the Commission has revised its rules and policies to bring competition to the frequency coordination process, unify its administrative rules for filing applications, and implement electronic filing and online information resources over the Internet. As described below, each of these actions constitutes an affirmative step toward reducing burdens on small businesses that hold radio (wireless) licenses. 54. Coordination. In the Part 90 (47 C.F.R. Part 90) private land mobile radio ("PLMR") services, frequency coordinators analyze applications before they are submitted to the Commission to select a frequency that will meet the applicant's needs, while minimizing interference to licensees already using the frequency band. The frequency coordinator makes a recommendation to the Commission regarding the best available frequency for the applicant's proposed operations. Frequency coordinators are most frequently utilized for shared PLMR spectrum. In the bands below 512 MHz, which are mostly shared (non-exclusive) PLMR spectrum, the Commission, in the Refarming proceeding, consolidated twenty radio services into two broad frequency pools: Public Safety and Industrial/Business. 55. In the Commission's Refarming docket we adopted rules to inject competition into the frequency coordination process. Previously, frequency coordinators had sole control over the frequencies within their respective radio services. Now, we generally allow coordination of any Industrial/Business pool frequency by any of the coordinators of the services that were consolidated into the pool, who notify the other in-pool frequency coordinators within one business day. This competitive coordination is intended to lessen market entry barriers by reducing prices, improving coordination services, and providing more flexibility to the small businesses that constitute the bulk of private land mobile radio licensees. 56. Unified Filing Rules and Policies. Since the 1997 Report, the Commission has taken significant steps to simplify its application filing rules and policies. Specifically, the Commission found that its administrative rules for the filing and treatment of commercial, private, and personal radio services were contained under various sections in Parts 22, 24, 26, 27, 80, 87, 90, 95, 97, and 101 of the Commission's Rules, and that these rules differed slightly for the various radio services. This approach complicated the regulatory process for small businesses that held licenses in multiple radio services. For example, a small business holding a cellular license may also hold licenses in the microwave and private land mobile services in order to facilitate backhaul communications and communications among its employees, respectively. In this example, the licensee would need to be familiar with application filing procedures under Parts 22, 90, and 101 in order to remain in compliance with our rules. To remedy this situation, the Commission adopted a unified set of procedural rules governing the filing of all wireless applications in its Universal Licensing System Report and Order. Today, small businesses can find a single set of procedures in Part 1 of the Commission's Rules, simplifying the process of filing wireless license applications with the Wireless Telecommunications Bureau ("WTB"). 57. Electronic Filing. We noted in the 1997 Report that one commenter, the Small Business in Telecommunications Association, had suggested that the Commission design its electronic filing programs so that they can be used on less sophisticated computers, and, in particular, can be used to prepare applications on computers which are not interconnected. Since that time, the Commission's goal has been to ensure that all wireless licensees have access to licensing information online and the ability to file license applications electronically without the need for high-end computer systems or specialized, hard-to-obtain software. The Commission has achieved this goal for the wireless radio services by implementing its Universal Licensing System ("ULS"). 58. The ULS is an online, interactive application filing system and research facility allowing wireless applicants to file applications electronically, as well as view license information and applications online. ULS eliminates the need for wireless carriers to file duplicative applications, increases the accuracy and reliability of licensing information, and increases the speed and efficiency of the application process. Significantly, ULS benefits licensees who are small businesses in three ways. 59. First, electronic filing is now easily accessible. Licensees may file applications electronically via ULS using inexpensive computer equipment, a standard telephone line, and web browser software that is available free via the Internet. As a result, licensees need only learn to use a single software program in order to file applications with the WTB. Today, license and application searches are available via the Internet, while application filing is available through a toll-free dial-up connection. The WTB has made application filing available via the Internet in May 2000. 60. Second, electronic filing is simple. When filing through ULS, applicants do not need to determine which forms and schedules to file, which questions must be answered, or which fees are due. Instead, ULS determines what questions need to be answered based on the applicant's radio service and application purpose, checks the applicant's answers and provides feedback before the application is submitted, and calculates the fee for the applicant. 61. Third, application, license, and Public Notice information is available online. Licensees can view license information (e.g., administrative and technical data) and applications via ULS using a web browser. In this connection, the WTB has combined ten separate licensing databases into the single ULS database, eliminating the need for small businesses to conduct research on multiple databases and be familiar with multiple database formats. The WTB web site (www.fcc.gov/wtb) provides the public with on line access to all released documents, public notices, and the current auction schedule (including maps and channel band plans). Further, licensees may review the Commission's weekly public notices online. This provides instant access to applications that have been accepted for filing, as well as actions taken by the staff. Small businesses benefit from this approach by having the capability to quickly review Commission actions and proposed actions in a consistent format without having to obtain paper copies. 62. Today, the Commission has nearly completed its ULS implementation for the wireless services. In June 1998, the WTB implemented ULS for commercial wireless services such as Paging, Cellular, PCS, and all other auctioned radio services. This was followed in August 1999 with the implementation of the microwave radio services and will conclude in 2000 with a phased implementation of the Part 90 Land Mobile Radio Services. 1. Outreach Efforts 63. The WTB operates a booth at many industry trade shows, including those regularly attended by representatives of small businesses. The booth provides hands-on training regarding use of the Commission's ULS and auction bidding software over the Internet. The Commission's outreach program also includes a Web Page and the Telemarketing Hot Line. Members of the Commission and its staff have spoken at numerous industry, trade association, public interest organization, and telecommunications user group conferences on opportunities in wireless services licensed by the Commission, and will continue to do so. In addition, prior to the start of each service-specific Commission auction, the WTB routinely holds seminars for bidders to provide additional information about auction procedures. These seminars are offered free of charge and provide anyone interested in specific auctions the opportunity to see presentations on radio service and auction rules and observe a demonstration of the competitive bidding system. After each auction, the WTB conducts a customer survey of auction participants regarding their experiences in the auction and the auction process generally. 64. In implementing the electronic ULS, the Commission established a task force to receive public input on the design of the system and to coordinate efforts. The WTB conducted numerous interactive demonstrations for licensees and their representatives on the proper use of the system for filing license applications and conducting database research. Demonstrations were announced by public notice and, in 1999, approximately sixty sessions were held on certain topics of interest, including: (1) finding information in ULS for license and application searches; (2) filing and researching license transfers and assignments; and (3) general application filing procedures. As stated above, implementation of ULS has resulted in substantial benefits to all applicants, including small businesses. The WTB periodically updates its "ULS Newsletter" on the WTB web site to provide the public with current information on ULS and related topics of interest. The WTB has held public forums and has issued numerous public notices to educate the public on ULS procedures and benefits and to obtain public input on ULS issues. The WTB maintains an electronic mail list of interested parties, which are provided with updated ULS information free of charge. The WTB also maintains a toll-free phone line to assist with licensing questions during the ULS transition and has established a technical support hotline (and e-mail address) to assist the public with computer-related issues, including set-up and configuration. 65. The Commission's Antenna Structure Registration ("ASR") program was also revised in conjunction with the implementation of ULS, resulting in a streamlined approach to application filings and greater public access to ASR information. For example, antenna structure owners may now use the Internet to determine interactively whether their structures meet certain registration criteria. Previously, such research involved dialing into a Commission network and paying a per-minute fee to use Commission software. Similarly, the Commission has expanded the public's ability to research existing records on the Internet, and began providing expanded database, daily transaction and Federal Aviation Administration ("FAA") files for downloading. The new ASR procedures allow electronic filers to determine, at the time of filing, whether their application will be granted, which reduces delay and transactional costs associated with the registration of antenna structures. 66. The WTB has also developed a wireless facility-siting page that, among other things, provides current information about Commission rules and procedures. The web page provides access to fact sheets, rules and regulations regarding local government and environmental issues related to wireless facility siting. The web site also provides links to the Commission's environmental rules and federal agencies responsible for environmental laws that are of concern to small businesses proposing to locate on communications facilities such as towers. 67. Further, in autumn of 2000, the Commission will offer a seminar aimed at providing information to Native American tribal leaders and other interested parties to help increase telecommunications services to tribal residents. The Commission will bring together its own experts, along with representatives from other federal government agencies, telecommunications companies and emerging technology firms, to inform tribal governments about various facets of telecommunications services and how different technologies, regulatory rules, and government programs can benefit tribal communities. 1. Interconnection and Resale 68. The 1997 Report addressed concerns about obstacles that small businesses may face in their abilities to resell, interconnect, or benefit from economies of scale. It noted that the Commission had taken steps to overcome market entry and expansion barriers to small businesses by facilitating resale and interconnection agreements with established providers of Commercial Mobile Radio Services ("CMRS"). First, the 1997 Report noted that in the CMRS Resale Order, the Commission prohibited certain CMRS providers from restricting the resale of their services during a five-year, transitional period in order to promote competition and accelerate the entry of new service providers. The Commission also stated that it intended to enforce actively the requirements of Sections 201 and 202 of the 1996 Act, as well as other provisions of the 1996 Act and the Commission's Rules, to resolve complaints that were pending regarding resale and interconnection obligations. Finally, the 1997 Report noted that, by establishing geographic partitioning and spectrum disaggregation of channels in CMRS service rules, the Commission was providing existing licensees and new entrants, including resellers, with a fair opportunity to compete and develop their businesses. 69. Since the release of the 1997 Report, the Commission has continued to address resale and interconnection issues in order to ensure that such issues are not market barriers for small wireless businesses. On reconsideration, the Commission generally affirmed the resale rule adopted in the CMRS Resale Order as an important means to facilitate CMRS market entry by small businesses consistent with the goals of Congress and Section 257. The five-year effective period of the rule was retained in recognition that new entry and increasing competition will obviate the need for the rule within the next few years, but that under current conditions the rule continues to confer benefits upon the public. To ensure compliance with the rule, the Commission adopted a stepped-up mediation program to resolve formal and informal complaints filed by a reseller and avoid delays or other practices by CMRS carriers covered by the rule that may prevent resale arrangements. 70. The Commission took additional action in the CMRS Resale Reconsideration Order to promote competition by small wireless businesses. The scope of the resale rule was modified to exclude certain smaller or limited CMRS providers, inasmuch as imposing the obligations of the resale rule on such providers was neither necessary nor useful in securing the benefits intended from providers with excess capacity or extensive market share. The exclusion from the rule was applied to certain C, D, E, and F block PCS licensees and, in addition, the Commission exempted all CMRS providers that do not utilize in-network-switching facilities. Finally, as discussed above, the Commission continues to adopt CMRS service rules that enable smaller or newly formed wireless entities to enter the service market for the first time through partitioning and disaggregation. 1. Definition of "Covered SMR" 71. Our definition of covered SMR services has changed since the 1997 Report. In the CMRS proceeding, the Commission determined that an SMR licensee offering interconnected service falls within the statutory definition of a CMRS provider. In several other proceedings, however, the Commission determined that certain CMRS rules should apply only to a subset of SMR licensees that can realistically compete with traditional cellular and broadband PCS services. The 1997 Report noted that requests were pending to modify the definition of SMR licensees covered by these rules as overly inclusive and a market entry barrier for certain small businesses that do not compete in the mobile telephony mass market. In response, the Commission has agreed that its former definition of covered SMR services subject to certain CMRS-related regulations was too broad and has changed the rule to exclude certain providers that have limited capacity and services. Specifically, the Commission decided to exclude SMR providers that do not utilize in-network switching facilities from the obligations imposed on CMRS providers by (1) the resale rule, (2) the Enhanced 911 transmissions ("E911") rule, and (3) the number portability rule. The modified definitions also were extended to exclude cellular and broadband PCS providers that similarly do not utilize an in-network switching facility. The Commission found that, unless CMRS providers have in-network switching facilities, they are likely to be offering only geographically or functionally limited services (such as dispatch) that those particular rules were not intended to cover, and that application of these rules to those services would not benefit the public. 1. Competitive Bidding Incentives 72. As noted above, Section 309(j) of the Communications Act, like Section 257, fulfills Congress' intent to facilitate opportunities for small businesses in telecommunications. In enacting Section 309(j), Congress found that "unless the Commission is sensitive to the need to maintain opportunities for small businesses, competitive bidding could result in a significant increase in concentration in the telecommunications industries" and that small businesses should "continue to have opportunities to become Commission licensees." To this end, Section 309(j) requires the Commission to establish competitive bidding rules and other provisions to ensure that small businesses, businesses owned by minorities and women, and rural telephone companies have an opportunity to participate in the wireless telecommunications industry. Section 309(j) requires that in designing systems of competitive bidding, the Commission "promot[e] economic opportunity and competition . . . by disseminating licenses among a wide variety of applicants, including small businesses . . . and businesses owned by members of minority groups and women." Section 309(j)(4)(D) requires that in prescribing regulations, the Commission "ensure that small business . . . and businesses owned by members of minority groups and women are given the opportunity to participate in the provision of spectrum-based services, and for such purposes, consider the use of tax certificates, bidding preferences, and other procedures." 73. The Commission has designed a number of incentives to encourage the participation of small businesses, rural telephone companies, and businesses owned by members of minority groups or women in the wireless spectrum-based services. For example, in the broadband PCS auctions, the Commission established entrepreneurs' blocks in which participation was limited to applicants with $125 million or less in annual gross revenues for the previous two years and total assets of $500 million or less. In the past, incentives have included reduced upfront payments, bidding credits, installment payment plans with favorable interest rates, and reduced down payments on winning bids. As noted above, we have recently adopted rules to provide bidding credits to applicants that intend to provide service to tribal lands or other unserved areas. 74. As we noted in the Third Report and Order in our proceeding concerning general auction rules (the "Part 1 Proceeding"), the Commission has found that obligating licensees to pay for their licenses as a condition of receipt requires greater financial accountability from applicants. Therefore, we determined to eliminate installment payments. We noted that Congress had not required the use of installment payments in all auctions, but rather recognized them as one means of promoting the objectives of Section 309(j)(3). In light of the decision to eliminate the installment payment program, we adopted a schedule of tiered bidding credits that, coupled with providing bidders with sufficient time to raise financing, will provide adequate opportunities for small businesses, including minority- and women-owned businesses, to compete successfully in spectrum auctions. 75. In addition, our policies regarding geographic partitioning and spectrum disaggregation should aid small businesses and other entrepreneurs through the creation of smaller, less capital intensive license authorizations that are more easily within the reach of smaller entities. Moreover, such policies may increase access to capital that can be used to construct and maintain wireless systems. We note that small businesses have both participated in and been successful bidders in the majority of spectrum auctions we have conducted to date. Specifically, in our simultaneous multiple-round spectrum auctions, 82 percent of the high bidders were small businesses (as defined for each respective service). A. CABLE SERVICES 76. Since the 1997 Report, we have relieved small cable entities of additional regulatory burdens. In the 1997 Report, it was noted that the Commission had already taken significant steps to minimize the impact of the Commission's cable television regulations on small business, and that effort has continued. We have increased the number of small entities that qualify for relief from rate regulation. In addition, we have amended our "leased access" regulations to make access by an independent programmer to a cable system more affordable. We have adopted new "inside wiring" rules that enhance the ability of a new competitor, whether large or small, to enter a multi-dwelling unit and provide service. And we have reduced the record keeping requirements of small entities, thus lowering their costs. 1. Deregulation of Small Cable Companies 77. Prior to the 1997 Report, we had adopted regulations that substantially relieved small cable systems and small cable companies from the burdens of rate regulation. The 1995 Small System Order extended relief from cable rate regulation to approximately 7,000 small cable systems. While the small system relief did not constitute complete deregulation, the practical effect was to reduce significantly the impact of rate regulation on small cable systems. At the time, we regarded the regulatory initiative adopted in the Small System Order as the most important action the Commission had taken on behalf of small cable systems since Congress had directed the imposition of rate regulation pursuant to the 1992 Cable Act. Then, with the implementation of additional regulatory relief provided by Congress in the 1996 Act, "small cable operators," as that term was defined in the 1996 Act, were wholly exempted from a significant portion of rate regulation. The combination of the Commission's small system initiative and the relief afforded "small cable operators" under the 1996 Act, effectively removed most small cable companies from the burdens of rate regulation. 78. More specifically, pursuant to the 1992 Cable Act, the Commission recognized "small cable companies" and "small systems" as deserving of special regulatory treatment. A "small cable company" was defined as one serving fewer than 400,000 subscribers nationwide. At the time of adoption, we estimated that there were approximately 1,440 cable companies that qualified as small cable companies. We defined a "small [cable] system" as a cable system with 15,000 or fewer subscribers. As a result of this Commission initiative, both "small cable companies" and "small systems" were subject to significantly less rate regulation than larger cable companies. Then, with enactment of the 1996 Act, we adopted regulations recognizing an additional class of cable provider to be afforded regulatory relief under that legislation. Congress had created another category of cable company which it defined as a "small cable operator" and which was measured by the number of subscribers served (no more than one percent of all cable subscribers) and gross revenues earned (no more than $250 million annual gross revenues), and freed such "small cable operators" from rate regulation of their "upper tiers" of service or, if they had only one tier, from rate regulation entirely. At the time, based on available data, we concluded that approximately 1,450 cable operators were relieved from the regulatory burdens of upper tier rate regulation with the enactment of the 1996 Act. 79. In the 1997 Report, we also discussed our efforts towards implementing the small operator rate deregulation provided in the 1996 Act; in particular, how we proposed to define the term "affiliate" in measuring whether a small operator is eligible for the rate deregulation provided in the 1996 Act. The 1996 Act provided certain rate deregulation for operators with less than $250 million gross revenues. Subsequent to release of the 1997 Report, we adopted a definition of "affiliate" in the Cable Act Reform Order under which an ownership of 20 percent or greater of one cable operator by another entity would require the combination of the gross revenues of both companies in calculating whether the cable operator was eligible for rate deregulation under the 1996 Act. We set our ownership threshold of 20 percent at a point where a large entity would be able to make a significant enough stake in a small operator to permit it to extend financial resources to the small operator to meet the operator's needs -- and not subject the small operator to more comprehensive rate regulation. In addition, we concluded that if two or more unaffiliated entities each holds less than a 20 percent interest in the cable operator, neither is deemed "affiliated" for purposes of the gross revenue test. 1. Leased Access 80. The 1997 Report also discussed the concept of "leased access" through which independent programmers are provided access to local cable operators. The 1992 Cable Act requires that a certain percentage of channels be "accessible" to programmers as a way of enhancing diversity and promoting small business. Soon after enactment, we adopted a formula to be used for calculating the maximum level of compensation that the cable operator could demand from a programmer, typically a small business, seeking access to the cable system. In 1997 we revised that formula to lower the maximum rates, thereby enhancing the likelihood that a small business could afford leased access. In addition, we established special provisions for small cable operators, excusing small systems from having to respond to leased access requests unless the programmer provides specific information and also allowing the small operator twice as much time to respond to the programmer. Together, the changes are intended to assist both the independent programmer and the small operator in meeting the leased access requirements. 1. Multiple Dwelling Units 81. Another issue raised in the 1997 Report involved the pending rulemaking addressing access of competitive video providers to multiple dwelling units ("MDUs"). That issue was subsequently addressed affirmatively in our Cable Home Wiring Order. In that order we adopted "home run wiring " rules for MDUs setting forth guidelines for use by a video provider of cable wiring already installed in an MDU and owned by a provider whose contract with the MDU owner has terminated and who is no longer entitled to remain in the MDU. The intent of the home run wiring rules was to promote competition, especially by new market entrants. In addition, in a pending proceeding, we are considering whether to limit the use of exclusive and perpetual contracts between MDU owners and cable operators. Perpetual contracts enable an incumbent cable provider to remain in an MDU indefinitely. Such contracts, it is alleged, frustrate competition or entry by competitive video providers, whether large or small. Exclusive contracts give Multichannel Video Programming Distributors ("MVPDs") the exclusive right to serve MDUs. Some commenters allege that exclusive contracts frustrate competition by allowing only one provider to serve a building; others state that alternative MVPDs need exclusive contracts to enable them to serve MDUs and thereby compete with the incumbent cable operators. 1. Filing and Record Keeping 82. Since release of the 1997 Report, we have adopted a number of small entity- friendly rules for the cable industry beyond those discussed above. One involves the relief afforded small cable systems with regard to the filing of the Annual Report of Cable Television Systems Form (Form 325). Form 325 serves as the Commission's annual reporting requirement for the cable television industry. In 1998, in the Form 325 Order, the Commission considered whether to retain the requirement that cable systems file Form 325. The Commission concluded it would not eliminate the Form 325 information collection process, but that it would reduce the administrative burden of completing the information request and filing the form by drastically reducing the number of cable systems required to file it. Instead of requiring all cable systems to file, the Form 325 Order requires that only systems with 20,000 or more subscribers file and devised a sampling methodology to gather information from cable systems with fewer than 20,000 subscribers. Thus, the filing requirement was completely eliminated for almost 90 percent of cable systems. The Form 325 Order also replaced the old four-part Form 325 with a streamlined two-part form. The Form 325 Order further reduced the burden on those cable systems still required to file the form by modifying it so information now will be collected on a system-wide basis rather than on a community-by-community basis. 83. In another effort to reduce the regulatory burden on all entities and particularly small businesses, we have revised and streamlined the public file and notice requirements set forth in the Commission's Part 76 cable television rules. The public file requirements provide consumers with information about the services they receive and the rates they pay for those services. For example, cable operators must notify subscribers before increasing rates and must maintain records demonstrating compliance with certain safety standards. The 1999 Streamlining Order reduced the regulatory burden faced by cable operators of all sizes with regard to public file requirements by: (1) reorganizing the public file requirements; (2) providing cable operators with an alternative to maintaining a paper public file; (3) eliminating outdated public file requirements; and (4) expanding the definition of small cable systems for purposes of the public inspection rules. With respect to the record-keeping requirement of small cable systems, our previous rules exempted cable systems serving fewer than 1000 subscribers from certain public file requirements. In the Streamlining Order, we granted cable systems serving 1000 to 5000 subscribers relief from certain public file requirements as well. Pursuant to that order, we adopted an amendment to Section 76.305(a) providing that, except for the political file requirements contained in Section 76.207, the information that was to be maintained under Section 76.305(a) would no longer have to be maintained in a file and could be provided only upon request. The maintenance of the political file requirements by cable systems with 1000 to 5000 subscribers was continued. The relief granted constituted an exemption from the public inspection rules for approximately 79 percent of all cable systems serving approximately 12 percent of subscribers. The amendment provides regulatory relief while ensuring that the public continues to have access to important information. 1. Closed Captioning Exemption 84. Still another area of small business activity given special consideration by the Commission in the cable industry involved our adoption of rules generally requiring closed captioning of video programming as required by the 1996 Act. In the Closed Captioning Order, we adopted several exemptions for small operators where we concluded a captioning requirement would impose an economic burden. The 1996 Act permitted exemptions of "programs, classes of programs, or services" for which the Commission determined that "the provision of closed captioning would be economically burdensome." With statutory authority to adopt exemptions, we did so, some of which provided relief to small businesses. For example, we adopted a four-year exemption from the captioning requirements for all new networks on grounds that we did not intend the captioning requirements to inhibit new sources of programming, which we recognized as being provided by, among others, small entities. We also adopted two revenue-based exemptions from the captioning requirements. Under the first exemption, a video programming provider is not required to spend any money to caption any channel of video programming that produced less than $3 million in annual gross revenues in the previous year. That exemption is intended to address the problems of small providers that are not in a position to devote significant resources towards captioning. Also, no programming provider will be required to spend more than 2 percent of its annual gross revenues from any channel on any such captioning. A. MASS MEDIA SERVICES 85. The Mass Media Bureau ("MMB") has endeavored to keep constant the goal of eliminating market entry barriers in the broadcast and wireless cable sectors. In a number of rulemaking proceedings and policy initiatives, the MMB has developed regulations that should help sustain small, minority- and women-owned businesses, as well as encourage their entry into the telecommunications marketplace. Developments in this regard have occurred particularly in the areas of low power radio, Class A television, wireless cable, and our local television and radio/television cross ownership rules. For example, in creating a new low power FM radio service, the Commission is advancing its goal of encouraging diverse voices on the nation's airwaves and creating opportunities for new entrants in broadcasting. Our new TV ownership rule ensures that small stations may combine operations, reduce expenses, and perhaps diversify programming. The modified radio/TV cross-ownership rule will allow stations, including small stations, to realize economies of scale. Further, pursuant to new rules, certain low-power television stations will be accorded Class A status, which is a "primary" status similar to full power television broadcasters. We believe these new regulations will facilitate the acquisition of capital needed by these stations -- which comprise a large variety of licensees, including minorities and women -- to provide locally originated programming to their communities. Additionally, the MMB amended several of its MDS rules to facilitate the provision of new, enhanced services, including new digital and two-way communications services. Our modified rules will simplify our licensing system and provide greater flexibility in the use of the allotted spectrum to licensees. It is expected that such changes will further eliminate market entry barriers for small entities. 86. Since the 1997 Report, the Commission has launched a number of initiatives that have helped small broadcasters to file applications, find information at the Commission, and participate in the rulemaking process. The MMB's web page provides many self-service functions that greatly assist small entities, including those owned by minorities and women, who often have fewer financial and business resources. By accessing the MMB web page (http://www.fcc.gov.mmb), licensees may utilize an on-line retrieval system of broadcast radio and television station and application information; as well as an online call sign reservation and authorization service. Other MMB web page services include links to obtain information on subjects such as, "How to Start a New Broadcast Station," "Details on Low Power or 'Micro' Stations," and "Digital Television Tower Siting Fact Sheet and Frequently Asked Questions." Additionally, the web pages for the Policy and Rules Division and the Audio Services Division of the MMB include information on how to participate in the rulemaking process. Moreover, the MMB has implemented an electronic filing capability. Users can access the Radio and Television Broadcast Station Consolidated Database System ("CDBS") via the Internet from the MMB web site. This new Internet-based electronic forms filing system enables radio and television broadcast station applicants to file electronically with the Commission several license, transfer of control, and assignment forms. These initiatives have benefited small entities by helping them to obtain Commission authorizations and approvals more easily, access information more readily, and make their concerns known to the Commission. Below are additional initiatives to reduce market entry barriers. 1. Low Power Radio 87. In January of 2000, in the LPFM Report and Order, the Commission authorized the licensing of two new classes of noncommercial low power FM ("LPFM") radio stations. One class of stations will operate at a maximum power of 100 watts with power from 50-100 watts and a service radius of approximately 3.5 miles ("LP100"), and the other class of stations will operate at a maximum power of 10 watts with power from 1-10 watts and a service radius of about 1 to 2 miles ("LP10"). In so doing, the Commission continues to advance its goal of encouraging diverse voices on the nation's airwaves and creating opportunities for new entrants in broadcasting. Many of the LPFM rules adopted are designed to create significant opportunities for small entity new entrants. In addition, the Commission has taken steps to minimize the impact on existing small business. For example, LP100 and LP10 stations will be noncommercial, educational stations, and so will not compete with small business commercial broadcasters for advertising revenue. 88. The LPFM Report and Order adopted ownership rules to assist small entities to construct LPFM stations. Parties with attributable interests in any full power broadcast facilities are not eligible to have any ownership interest in any low power radio stations. This will prevent owners of full-power stations, including large group owners, from obtaining licenses for LPFM facilities that might otherwise be available to new entrants. The local and national ownership restrictions of one station per community and, initially, one station, and ultimately, 10 stations, nationwide are intended to ensure that authorizations for LPFM stations are dispersed among many new entrants. One of the most important purposes of establishing this service is to afford community-based organizations an opportunity to communicate over the airwaves and thus expand diversity of ownership -- a purpose inconsistent with common ownership of LPFM stations and existing broadcast facilities or other media interests. 89. Further, the Commission minimized the regulatory burdens imposed on LPFM stations. LPFM stations are not required to maintain a public file, although they must maintain a political file. They also need not create quarterly issues and programming lists or maintain a main studio. In addition, while full power and LPFM stations both must participate in the Emergency Alert System ("EAS") and have decoding equipment, LPFM stations need not purchase encoding equipment. These decisions will reduce administrative burdens and costs for small business licensees. 90. The LPFM Report and Order also adopts filing requirements that should help small businesses. The Commission declined to mandate electronic filing for LPFM stations because it recognized that there might be a disparity among applicants for LP100 licenses in terms of computer resources and skills. This result should help small businesses without more advanced technological resources to participate in the LP100 application process. The LPFM Report and Order adopts a filing window process, as opposed to a first-come, first-served process, so as not to disadvantage applicants based solely on the quality of their Internet connection. 1. Local Television Ownership/Radio-Television Cross Ownership 91. The 1996 Act directed the Commission to make a number of significant revisions to its broadcast ownership rules. Specifically, Section 202 required the Commission to: (1) complete a rulemaking proceeding concerning the retention, modification, or elimination of the local television ownership rule and (2) extend the radio-television cross-ownership waiver policy formerly applicable only in the top 25 markets to the top 50 markets, "consistent with the public interest, convenience, and necessity." Under our modified local television ownership rule, adopted in the 1999 Ownership Report and Order, we relaxed the television duopoly rule by narrowing its geographic scope from the current Grade B contour approach to a Designated Market Areas ("DMAs") test. The new test allows common ownership of two television stations without regard to contour overlap if the stations are in separate Nielsen DMAs. In addition, we will allow common ownership of two TV stations in the same DMA if (1) their Grade B contours do not overlap (a continuation of the current rule) or (2) if eight independently owned, full-power and operational television stations (commercial and noncommercial) will remain, provided that one of the commonly-owned stations is not among the top four-ranked stations in the market. 92. The new TV ownership rule ensures that small stations may combine operations, reduce expenses, and perhaps diversify programming. At the same time, both the market rank and the voice count components of the rule further our goal of fostering diversity of voices. The market rank test ensures that the two largest TV stations cannot combine to dominate and exercise market power in advertising and programming markets in which TV stations compete; the voice count test ensures that more than eight competitors must exist in the market before any two of them may combine. 93. Additionally, we have revised our radio/TV cross-ownership rule to permit common ownership of either (1) one or two TV stations and up to six radio stations, provided 20 independent voices will remain in the market; (2) one TV station and seven radio stations, provided 20 independent voices will remain; (3) one or two TV stations and up to four radio stations, provided at least ten voices will remain in the market; or (4) one or two TV stations and one radio station regardless of the number of voices that will remain in the market. As with our amended TV duopoly rule, the modified radio/TV cross-ownership rule will allow stations, including small stations, to realize economies of scale, while ensuring that no market will become concentrated to such an extent that any one or more combinations will dominate the markets in which broadcasters compete, or monopolize the media and sources of information for their audiences. 94. The Commission also determined three specific criteria by which we would evaluate a request for waiver of our local television ownership rule. We will presume a waiver of the rule is in the public interest to permit common ownership of two television stations in the same market where one station is a "failed station," where one of the merging stations is a "failing station," or where the applicants can show that the combination will result in the construction and operation of an authorized but as yet "unbuilt" station. We will continue to grant waivers of our radio-television cross- ownership rule, on a presumptive basis, in situations involving a failed station. In order to qualify as "failed," a station must be dark for at least four months or involved in court- supervised involuntary bankruptcy or involuntary insolvency proceedings. 95. Our waiver policies accommodate small stations, while protecting our competition and diversity goals. Each of these waiver policies was designed to ensure that only truly financially distressed (which are typically smaller) stations could benefit from them. The waiver policies also ensure that more financially successful in-market stations (which are typically larger and would likely value same-market broadcast assets more highly than out-of-market stations) cannot foreclose out-of-market buyers. The in-market buyer must demonstrate that it is the only purchaser ready, willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price. We will monitor the effects of the modifications of our ownership rules on new entry. 1. Class A Television Service 96. In its Class A TV Report and Order, the Commission established a Class A television service and provided that certain qualifying low-power television ("LPTV") stations will be accorded Class A status. This action implemented the Community Broadcasters Protection Act of 1999 ("CBPA"), which sets out certain certification and application procedures for low-power television licensees seeking to obtain Class A status, prescribes the criteria low-power stations must meet to be eligible for a Class A license, and outlines the interference protection Class A applicants must provide to analog (or NTSC), digital ("DTV"), LPTV, and TV translator stations. Class A licensees will have "primary" status as television broadcasters, thereby gaining a measure of protection from full-service television stations, even as those stations convert to digital format. We believe this change in regulatory status will positively affect the ability of LPTV stations to raise necessary capital. 97. The LPTV stations eligible for Class A status provide locally-originated programming, often to rural and certain urban communities that have either no or little access to such programming. LPTV stations are owned by a wide variety of licensees, including minorities and women, and often provide "niche" programming to residents of specific ethnic, racial, and interest communities. These new provisions will facilitate the acquisition of capital needed by these stations to continue to provide free, over-the-air programming, including locally originated programming to their communities. By improving the commercial viability of LPTV stations that provide valuable programming, the Commission's action is consistent with its fundamental goals of ensuring diversity and localism in television broadcasting. 98. The LPTV service has significantly increased the diversity of broadcast station ownership. Stations are operated by such diverse entities as community groups, schools and colleges, religious organizations, radio and TV broadcasters, and a wide variety of small businesses. The service has also provided first-time ownership opportunities for minorities and women. 99. The CBPA, and our implementing regulations, protect the future of low-power television licensees. LPTV stations have secondary spectrum status, and, as such, they can be displaced by full-power TV stations that seek to expand their own service area, or by new full-power stations seeking to enter the same market. This regulatory status has impaired the ability of LPTV stations to raise capital. In addition, Congress recognized that the conversion to digital television further complicates the uncertain future of LPTV stations. Many of these issues have now been addressed by Congress' actions. Class A licensees are now subject to the same license terms and renewal standards as full-power television licensees. Class A licensees are accorded primary status as television broadcasters as long as they continue to meet the eligibility requirements. 1. Multichannel Multipoint Distribution Service 100. In 1998, the Commission adopted its Multichannel Multipoint Distribution Service ("MDS") Report and Order, which amended several of its MDS rules to facilitate the provision of new, enhanced services, including new digital and two-way communications services. Specifically, the MDS Two-way Report and Order: (1) permitted both MDS and Instructional Television Fixed Service ("ITFS") licensees to provide two-way services on a regular basis; (2) permitted increased flexibility on permissible modulation types; (3) permitted increased flexibility in spectrum use and channelization, including combining multiple channels to accommodate wider bandwidths, dividing 6 MHz channels into smaller bandwidths, and channel swapping; (4) adopted a number of technical parameters to mitigate the potential for interference among service providers and to ensure interference protection to existing MDS and ITFS services; (5) simplified and streamlined the licensing process; and (6) modified the ITFS programming requirements. The modifications in our rules were in keeping with the mandate of Section 257, which requires the Commission to identify and eliminate market entry barriers for entrepreneurs and other small businesses to promote diversity of media voices, vigorous economic competition, technological advancement, and the public interest. 101. The rule changes adopted in the MDS Two-way Report and Order to allow two-way operations for MDS and ITFS will simplify our licensing system and provide greater flexibility to licensees in the use of the allotted spectrum. It is expected that such changes will help eliminate market entry barriers for small entities. Further, by allowing for subchannelization, the rules will enable small entity licensees to respond to the demands of the market and create an unlimited number of channels to carry their current and future communications needs. Allowing superchannelization will permit small entity licensees to combine their spectrum with other small entity licensees and create larger systems to meet their particular operations and to operate at greater speeds. 102. To permit small entity ITFS licensees with limited resources adequate time to evaluate a two-way applicant's proposed service plan, we adopted a certification procedure whereby applicants are required to certify that they have met all requirements regarding interference protection to existing and prior proposed facilities. The applicant will also be required to certify that it has served all potentially affected parties with copies of its application and with its engineering analysis supporting its interference compliance claim. 103. In an effort to minimize the impact of our new rules on educational ITFS, many of whom are small entities, we determined not to restrict ITFS eligible use to the downstream video/audio paradigm because that would preclude flexibility in service offerings for an ITFS licensee which leases excess channel capacity. We provided educational entities with additional flexibility to define what ITFS usage they regard as educational in an effort to permit such entities to further their educational mission. We did not expand our minimum educational usage requirement for digital ITFS transmissions, and we added a requirement that 5 percent of an ITFS station's capacity be set aside for instructional purposes only. 1. Equal Employment Opportunity 104. Commenters in the 1997 Report expressed concerns about enforcement of equal employment opportunity ("EEO") rules in the broadcast marketplace. However, certain aspects of the EEO rules in effect at that time were struck down in 1999 on constitutional grounds by the U.S. Court of Appeals for the D.C. Circuit Court in the Lutheran Church decision. Since then, the Commission has adopted its new EEO Report and Order. In the EEO Report and Order, the Commission adopted new EEO program requirements that are free of the constitutional infirmities identified in the Lutheran Church decision. The Commission also addressed the concerns raised in the Lutheran Church opinion regarding the Commission's authority to promulgate an employment nondiscrimination rule. 105. We believe that the new EEO rules serve an important, constructive function in deterring discrimination in employment and fostering greater diversity of viewpoints and programming that is responsive to the interests of a diverse community. In addition, the new rules and policies provide a way for all individuals, including minorities and women and those with little or no communications experience, to be informed of job opportunities and enter the broadcast and cable industries. This, in turn, could lead in some cases to higher-level positions of greater responsibility that could affect programming and/or provide the experience desired by financial institutions to finance ownership in the broadcast and cable industries. 106. The new EEO rules require wide dissemination of information about all job vacancies by broadcasters, cable operators, and other multichannel video programming distributors. Additionally, these entities may select either to implement supplemental recruitment measures or an alternative recruitment program. Pursuant to the supplemental recruitment option, entities must select and implement a number of non-vacancy-specific recruitment measures from a menu of options. They must also, upon request, send vacancy notices to community groups who provide employment information to those seeking jobs. Broadcast and cable entities who select the alternative recruitment program may use recruitment sources of their own selection, and must maintain records concerning the composition of their applicant pool, to ensure that vacancy notices are reaching all segments of the community. All broadcasters and cable entities are required to assess periodically the effectiveness of their outreach efforts and make any needed modifications in order to reach qualified applicants in their community, including minorities and women. 107. Entities must also maintain records reflecting their outreach efforts and, annually, place a summary of their overall EEO efforts in their public files. The new rules and policies afford broadcasters and cable operators flexibility in designing their EEO programs. The Commission also sought to address the unique circumstances of stations with fewer employees. Recognizing that often fewer staff resources are available to these stations, the Commission provided relief from EEO requirements and recordkeeping. Thus, stations with five to ten full-time employees are required to undertake fewer of the non-vacancy specific recruitment measures than larger stations employing more than ten full-time employees. The Commission has also maintained its previous policy whereby broadcast station employment units with fewer than five full-time employees and cable employment units with fewer than six full-time employees will not be required to demonstrate compliance with the EEO program requirements. A. OTHER SERVICES 1. International Bureau 108. The International Bureau has taken actions in a number of areas to remove barriers to entry for small businesses. In addition to addressing concerns discussed in the 1997 Report, the International Bureau has several programs that provide particular benefits for small businesses. First, streamlining of the international Section 214 process has substantially lowered costs and eliminated delays in the authorization of entry, increased the availability of capital by eliminating unnecessary limits on foreign investment, and reduced reporting burdens. Second, through participation in International Telecommunication Union ("ITU") activities, the Commission addresses one of the most vexing issues for small businesses interested in innovative telecommunications enterprises -- spectrum availability. Third, the International Bureau's consolidated licensing and application processing system has been designed to lower costs for applicants, and thereby lower barriers to entry for small business. This system also provides easier availability of data for small business. 109. Satellite Licensing. In the 1997 Report, the Commission discussed two concerns raised by industry regarding the impact of Commission regulations on small businesses in the international arena. First, the Commission addressed a concern regarding the Commission's policy of not granting earth station authorizations to communicate with satellites that have not yet been authorized, specifically, a request filed by TelQuest for an earth station that would communicate with a Canadian satellite. Second, the Commission addressed concerns raised about its financial qualification policy for satellite licensing. 110. With respect to TelQuest, we stated in the 1997 Report that nothing in the International Bureau policy reflected in that case imposes burdens uniquely or predominantly on small businesses. We note, however, that we have taken actions with respect to earth station licensing that may facilitate use of foreign licensed satellites, and lower the cost for individual earth station owners of using those facilities. Specifically, we have adopted a new procedure that permits operators of foreign-licensed satellites to obtain a ruling that would permit the subsequent routine licensing of earth stations seeking to use that satellite. 111. With respect to financial qualification requirements, since the 1997 Report, the Commission has continued to construe liberally the requirements. Since that time, no applicant has