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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 ) ) The Commission's Forfeiture ) CI Docket No. 95-6 Policy Statement and ) Amendment of Section 1.80 ) of the Rules to Incorporate ) the Forfeiture Guidelines ) REPORT AND ORDER Adopted: June 19, 1997 Released: July 28, 1997 By the Commission: TABLE OF CONTENTS Paragraph No. I. INTRODUCTION 1 II. BACKGROUND 2 III. DISCUSSION 5 A. Forfeiture versus the traditional 5 case-by-case approach B. Proposal Modifications9 (i) Use of the same base forfeiture amount for similar 12 violations indifferent services (ii) Revisions to the proposed base forfeiture amounts 18 C. Adjustment Factors Percentage Ranges 25 D. Other Issues 28 E. Other Matters 50 IV. CONCLUSION 53 V. ADMINISTRATIVE MATTERS 54 A. Regulatory Flexibility Analysis 54 B. Ex Parte Rules -- Permit but Disclose Proceeding 55 VI. ORDERING CLAUSES 56 APPENDICES Appendix A. Amendment to Rules, Forfeiture Guidelines Appendix B. List of Commenters Appendix C. Final Regulatory Flexibility Analysis I. INTRODUCTION 1. This Report and Order adopts an amendment to Section 1.80 of the Commission's Rules to add a note to this rule that incorporates guidelines for assessing forfeitures. By this rule making proceeding, we adopt, with revisions, the Forfeiture Policy Statement and guidelines that were vacated by the court's decision in United States Telephone Association v. FCC, 28 F.3d 1232 (D.C. Cir. 1994) (USTA). II. BACKGROUND 2.In 1989, Congress amended the Communications Act of 1934 (the Act) to increase substantially the maximum dollar amounts for forfeitures that the Commission could impose under Section 503(b) and under other sections of the Act. Specifically, Section 503 of the Act sets forth maximum forfeiture amounts for violations by licensees or regulatees in three categories: broadcasters and cable operators ("broadcast"), common carriers ("common carrier"), and other licensees, entities and members of the public that do not belong to the previous two categories ("other"). On August 1, 1991, the Commission released the Policy Statement, Standards for Assessing Forfeitures, 6 FCC Rcd 4695 (1991) (Policy Statement), to assist both the Commission and licensees in adjusting to the statutory increases. Prior to the statutory increases, the Commission determined forfeiture amounts on a case-by-case basis using relevant precedent. The Policy Statement modified this approach by establishing base forfeiture amounts for a wide range of violations. The base forfeiture amount for each type of violation was calculated as a percentage of the statutory maximum for the service involved for each violation or each day of a continuing violation as set forth in Section 503(b). The guidelines further provided that the base forfeiture amount could be increased or decreased by the adjustment criteria that corresponded to the statutory factors that the Commission is required to consider in assessing a monetary forfeiture penalty. 47 U.S.C.  503(b)(2)(D). To determine the degree of the upward or downward adjustment, the guidelines recommended percentage ranges for each adjustment criterion. 3.On reconsideration, petitioners argued that the Policy Statement was invalid because it was a substantive rule adopted without notice and comment rule making procedures required by the Administrative Procedure Act and not a general statement of policy. See 5 U.S.C.  553. The Commission disagreed, noting that the Policy Statement expressly stated that the Commission retained discretion in individual cases and did not consider the Policy Statement a binding rule. Policy Statement Reconsideration Order, 7 FCC Rcd 5339 (1992), denying reconsideration of 6 FCC Rcd 4695 (1991). In 1993, after reviewing how the Policy Statement functioned in practice, the Commission made several modifications to the Policy Statement to ensure both consistency and flexibility in applying the forfeiture amounts and adjustment criteria in individual cases. Again the Commission reiterated that it retained discretion to deviate from the guidelines in specific cases. 1993 Policy Statement, 8 FCC Rcd 6215 (1993), (1993 Policy Statement). In 1994, the United States Court of Appeals for the District of Columbia Circuit vacated the Policy Statement (including the reconsideration order and 1993 Policy Statement), on the ground that it was a rule promulgated without notice and comment and therefore invalid. United States Telephone Association v. FCC, 28 F.3d 1232 (D.C. Cir. 1994). Following the court's decision, the Commission and its staff returned to determining forfeiture amounts on a case-by-case basis, using the statutory factors set forth in Section 503(b) of the Act. 4.In the Notice of Proposed Rule Making (NPRM), we followed the court's requirement that the Commission's forfeiture policy statement be put out for notice and comment. We proposed to adopt the same forfeiture guidelines set out in the original Policy Statement, but requested comments on all aspects of that proposal. In addition, we requested specific comment on the following issues: A. Whether the Commission should use guidelines to assess forfeitures instead of the traditional case-by-case approach; B. Whether the guidelines proposed in the notice of proposed rule making should be modified; C. Whether adjustment factor ranges should be adopted. Additionally, we sought comment on our proposal to apply any newly adopted Forfeiture Policy Statement and guidelines to all pending forfeiture proceedings which were initiated after the effective date of the Forfeiture Policy Statement. We received a total of 17 comments, 1 informal comment, and 8 reply comments in response to the NPRM. III. DISCUSSION A. Forfeiture versus the traditional case-by-case approach 5.In general, most commenters supported the concept of a guideline-based forfeiture system rather than a case-by-case approach in assessing forfeitures. Ten commenters and one reply commenter explicitly or generally supported the concept of a guideline-based forfeiture system: ARRL at 9-11; Bell Atlantic at 4; MCI at 1; USTA at 1; Infinity at 2; MariTEL at 5; PageNet at 7- 10; AMTA at 3; PCIA at 1; Southwestern Bell at 2; Motorola at 1. In particular, MCI Telecommunications Corporation (MCI) noted that a schedule of fines with discretionary adjustment ranges should translate into public benefit through fair and prompt resolutions of violations. MCI Comments, 1. The United States Telephone Association (USTA) also indicated that forfeiture guidelines can contain information that may deter violations of important rules and assist the Commission in developing priorities among different violations. USTA Comments, 2. One commenter supported the case-by-case approach simply because it believed the Commission could not oversee a procedure that encompassed both flexible guidelines and staff discretion. Brown and Schwaninger Comments, 2. Three commenters raised specific concerns about the potential adverse effect that the guidelines may have on businesses and their goal to provide universal services, and claimed that forfeiture guidelines would thus be inconsistent with Section 303(r) of the Act, 47 U.S.C.  303(r), which provides the Commission with broad rule making authority to further the public interest, convenience and necessity. Emery et al. at 6. Emery et al. suggest that the Commission not proceed with this rule making because the Republican Party's "Contract with America" imposes a moratorium on all rule making. Thus, Emery et al. contend that the issuance of any rules would be invalid and contrary to the express wishes of Congress. See Emery Comments, 9. An informal commenter, Mr. William L. Dougan, stated that the guidelines and forfeitures violate the United States Constitution because he cannot get a license for low power operation on FM frequencies. Letter from William Dougan to Secretary, FCC, April 4, 1995, at 1- 2. San Bernardino Coalition of Low Power FM Broadcasting (San Bernardino), which also favors a registration program. See San Bernardino Reply Comments, para. 14. 6.We have considered the specific concerns raised by some of the commenters regarding the Commission's exercise of its discretion under a guideline-based system. We are satisfied that our procedures, as set out in paragraphs 25 and 26, will allow the Commission to apply its guidelines in a consistent and fairly uniform manner, while retaining discretion to look at the individual facts and circumstances surrounding a particular violation. We have also addressed the concerns raised by Emery et al. regarding the effects of the proposed base forfeiture amounts on the provision of universal services. We have devised a forfeiture policy that does not make any distinctions among the various common carriers (see discussion in paragraphs 13, 14 and 15). Specifically, the procedures set out in paragraph 25 are sufficient to provide the subject of an NAL with consideration of any mitigating factors that should be considered prior to imposition of a final forfeiture. We also do not believe our forfeiture guidelines will undercut universal service objectives of the Act. We also note that the moratorium mentioned by Emery et al. was not enacted into law. With respect to the concerns raised by Emery et al. however, we note that Congress enacted legislation that provides an opportunity for Congressional review of all major rules promulgated by agencies. The Contract with America Advancement Act of 1996, Pub. L. No. 104-121  110 Stat. 847 (1996). 7.We reject the constitutional objections to the guidelines or to the adoption of any policy statement as raised by Mr. Dougan or San Bernardino. The Commission may, consistent with the First Amendment, impose forfeiture penalties for violations of its licensing rules, even when its licensing scheme does not provide for certain types of transmissions. See National Broadcasting Co. v. United States, 319 U.S. 190, 209-217 (1943). 8.We therefore agree with the commenters that adoption of forfeiture guidelines is warranted. Guidelines will provide the needed measure of predictability to the process and uniformity to our administrative sanctions while retaining flexibility for the Commission to act appropriately in particular cases. For this purpose, we hereby adopt a base forfeiture amount structure that will serve as a guideline for determining forfeiture liability amounts for specific violations of the Act and the Commission's Rules. As was our intent with the prior Policy Statement, these guidelines will not be binding on the Commission, the staff or the public. We retain discretion to take action in specific cases as warranted. B. Proposal Modifications 9.Many commenters concluded that, although guidelines are beneficial to the forfeiture process, the guidelines as proposed were not rational and equitable. The National Association of Broadcasters (NAB) along with several common carriers, both wireline and wireless, including MCI, Southwestern Bell Telephone Company (Southwestern Bell), MobileMedia Communications Incorporated (MobileMedia), USTA, Personal Communications Industries Association (PCIA), WJGMariTEL Corporation (MariTEL), and Paging Network (PageNet), urged the Commission to consider modification of the vacated schedule of forfeitures. Commenters further contended that many of the assumptions underlying the forfeiture guidelines are outdated. For example, MobileMedia stated that a Further NPRM was needed because Commercial Mobile Radio Service (CMRS) licensees and Personal Communication Service (PCS) licensees were not in existence when Congress increased the statutory forfeiture amounts and were not mentioned by the Commission in the instant NPRM. MobileMedia Comments, 2-3. 10.American Mobile Telecommunications Association, Incorporated (AMTA), echoing comments submitted by Southwestern Bell, noted that as "service offerings merge among various classes of licensees, these widely-differing base amounts no longer make regulatory sense, nor do they reflect the Commission's goal of regulatory parity." In the face of convergence of the cable TV and telephone industries, Bell Atlantic contended that "[a]s competition among the various industries accelerates, the legal requirements of providing balanced incentives coincide to dictate that the penalties be set based on the nature of the offense, and not the identity of the transgressor." Bell Atlantic Comments, 3-4. In addition, commenters urged the Commission to consider new ways to implement a policy rather than merely proposing the same guidelines that the court rejected. In implementing any guidelines, commenters asked the Commission to address or clarify how the guidelines affect issues such as the use of different base amounts for similar violations in different services, the use of different statutory maxima to justify different base amounts, the use of upward and downward adjustment factors, the method for ascertaining ability to pay a forfeiture, and the weight to be given to a previous violation in subsequent enforcement or transactional proceedings involving the same licensee. 11.Inasmuch as the NPRM in this proceeding asked for comments on all aspects of the Commission's forfeiture policy, including the "other" category, and given that CMRS and PCS are both common carrier services, we believe that a Further NPRM concerning the need to include new services is unnecessary. Upon review, however, we are persuaded that the guidelines should be revised. The following paragraphs discuss the two main revisions that we have made to the proposed guidelines and the reasons for these revisions. i. Use of the same base forfeiture amount for similar violations in different services. 12.Most commenters objected to the proposed system of imposing different base forfeiture amounts for similar violations depending upon the service provided by the violator. They argued this structure was arbitrary because the Forfeiture Policy Statement failed to provide an explanation for the different base forfeiture amounts. USTA pointed out that the court found that the Commission did not provide any rationale for this action. Other commenters pointed out that the availability of mitigating factors did not remedy the Commission's error in not providing a reasoned analysis for the different base forfeiture amounts among services. See, e.g., Emery Comments, 17; USTA Comments, 4, n. 3. They also argued that neither the language of the 1989 statutory amendment nor its legislative history provided support for the Commission's action establishing different base forfeiture amounts for each service, or higher base forfeiture amounts when the violation occurs in a service that has a higher maximum. Commenters argued that in setting different forfeiture amounts based on the identity of the violator rather than the nature of the violation, the Commission violated basic and fundamental principles of regulatory parity. See e.g., MCI Comments, 3. Several commenters also pointed out that, with upcoming changes in ownership rules and the technical and legal ability of different licensees to provide the same type of communication service, implementing different base amounts as proposed would result in dissimilar forfeiture amounts for similar violations based solely on the identity of the licensee providing the service. PageNet Comments, 2-3; Southwestern Bell Telephone Company (Southwestern Bell) Comments, 3; Bell Atlantic Comments, 3-4. Bell Atlantic argued that, contrary to the Commission's assertions in the NPRM, adoption of the forfeiture schedule as proposed would not "allow for comparable treatment of similarly situated offenders," but would levy forfeitures against common carriers that are four times the amount levied against broadcast or cable TV companies for the same or similar violations. Bell Atlantic Comments, 2-3. 13.Some common carriers, including commercial mobile radio service providers argued that the Commission has no basis for imposing higher forfeitures for common carrier violations. Emery et al. argued that the 1989 statutory change only creates a higher statutory maximum for common carriers, and no legislative history or language in the statute supports the Commission's proposal that common carriers be treated more severely than broadcasters. They also contended that adoption of a forfeiture policy which made no distinctions between large and small common carriers would also violate the Commission's mandate and fundamental purpose as stated in Section 1 of the Act: to promote communications services and competition. 14.In light of the problems outlined, most of the commenters suggested that the Commission implement a uniform forfeiture system, imposing fines according to the nature of the violation rather than the type of violator. In the alternative, if the guidelines must be based on the type of violator as well as the nature of the violation, several commenters propose that the Commission make distinctions among the types of violators (e.g., large common carriers versus small CMRS) within a group of licensees that provides the same type of communication service. Some commenters suggested that the guidelines be based on the degree of injury or harm rather than a percentage of the maximum amount. Emery et al., for example, urged the Commission to look at the various approaches it took prior to implementing the Forfeiture Policy Statement. It argued that the amounts imposed were more reasonable because less serious violations were assessed on a flat- rate approach and serious violations involving aggravating circumstances were assessed the per diem statutory maximum, which was then no more than $2,000. Two commenters even suggested that one base amount be used for all violations, as was done with tower lighting and marking violations. 15.While we continue to believe that our prior approach was lawful, we have determined that it would be a fairer approach for the forfeiture guidelines to adopt uniform base forfeiture amounts for similar violations regardless of the nature of the service involved. We believe that this decision is fully supported by the record established by the commenters, and will result in a generally fairer approach to forfeiture proceedings in most cases. 16.Our decision reflects consideration of the issues of fair treatment raised by several commenters. First, we reviewed the recommendation made by several commenters that CMRS and other services not mentioned in the original Policy Statement be treated in the "other" category rather than in the "common carrier" category. Although Section 332 provides that CMRS licensees are common carriers under the Act, these commenters argued that it is unfair to now impose higher base forfeiture amounts when these entities would receive smaller fines under the earlier Policy Statement as private carriers that were in the "other" category. MariTEL Comments, 3. Alternatively, if the Commission does not treat them as belonging to the "other" category, CMRS commenters argued that a new category should be created for these services. We find this argument unpersuasive. Section 332(c)(1) requires that CMRS providers will be treated as common carriers for purposes of the Act. Accordingly, CMRS providers will be treated as common carriers for purposes of Section 503 of the Act and our forfeiture guidelines. As a second issue of fair treatment raised in this proceeding, PageNet contends that the proposed forfeitures did not address the discriminatory effect that would result against Radio Common Carrier (RCC) paging carriers because they are licensed on a transmitter basis rather than a market basis as are Personal Communications Service (PCS) licensees. PageNet Comments, 2. We believe, however, that this concern relates to licensing procedures that are not within the scope of this rule making proceeding. 17.We recognize that Congress established different statutory maxima for broadcasters and for common carriers than for other persons who violate our rules. We believe this permits, but does not require, a forfeiture schedule that distinguishes among these categories of entities. As discussed below (see para. 24), however, we believe that there are better ways to achieve Congress's explicit intention that forfeitures serve as "a meaningful sanction to the wrongdoers and an effective deterrent to others." see Omnibus Budget Reconciliation Act of 1989, H.R. Conf. Rep. 386, 101st Cong., 1st Sess., 434 (1989). ii. Revisions to the proposed base forfeiture amounts. 18.The majority of commenters took issue with the base forfeiture amounts. Some commenters suggested that the amounts proposed for each violation were unreasonably high, did not deter violations, evidenced a punitive rather than a remedial purpose, and only served to hinder entities who were often unaware of the regulatory requirements. In particular, Emery et. al. argued that the proposed base forfeiture amounts of 40-80 percent of the statutory maxima were contrary to the Commission's history of assessing reasonable forfeitures to ensure substantial compliance by licensees and therefore, the amounts should be reduced. In support, they noted that common carrier forfeitures issued before the statutory increase were seldom more than 25 percent of the maximum, and that forfeitures assessed after the statutory increase but before the implementation of the prior policy statement were no more than 0.5 percent of the new one million dollar maximum. Emery Comments, 11-12. NAB and MCI also agreed that the base amounts suggested in the proposed forfeiture guidelines were too high and should be reduced by 50 percent with the exception of tower safety violations. NAB Comments, 5; MCI Reply Comments, 3. 19.The legislative history of Section 503 of the Act demonstrates that, Congress recognized the need to authorize the Commission to impose forfeitures sufficiently high to deter violations and constitute a meaningful sanction when violations occur. Specifically, in 1978, Congress increased the Commission's forfeiture authority, stating: The maximum amount of forfeitures permitted for single and multiple violations is unrealistically low to be an effective deterrent for highly profitable communications entities or to provide sufficient penalty to warrant the Attorney General's or the various U.S. district attorneys' attention for prosecuting forfeitures within the Federal district courts. Sen. Rep. No. 580, 95th Cong. 1st Sess. 3 (1978), reprinted in 1978 U.S.C.C.A.N. 109, 111. Similarly, in 1989, Congress further increased the Commission's forfeiture authority stating its intent that forfeitures "serve as both a meaningful sanction to the wrongdoers and a deterrent to others." See H.R. Conf. Rep. 386, at 434 (1989). We believe that the increases in our forfeiture authority as well as the accompanying legislative history of our forfeiture authority support our determination that forfeiture amounts should be set high enough to serve as a deterrent and foster compliance with our rules. 20.As noted before, however, we have also determined that the guidelines for base forfeitures adopted here will not reflect distinctions based on the traditional classification of broadcast, common carrier, and other services. Consistent with our policy of protecting the public and ensuring the availability of reliable, affordable communications, we based the guidelines on the degree of harm or potential for harm that may arise from the violation. Thus, the dollar amount for the violation, regardless of service, generally starts at the same amount. Our experience in assessing forfeitures, however, has shown that although the type of violation is the same, each case will present its own unique facts. In particular, the identity of the licensee or the nature of the service are not wholly irrelevant to a determination of the seriousness of the harm. We cannot, for example, say that the degree of harm resulting from a violation of operating power limits committed by a full power broadcast station is identical to the degree of harm resulting from the same violation by an amateur radio operator. Nor can we conclude that the prospect of a $10,000 forfeiture for a particular offense will have the same deterrent effect on a small computer vendor, a moderately-sized radio common carrier, and a $10 billion per year local telephone company or interexchange carrier. Accordingly, as discussed below, we will use the adjustment factors to assess the forfeiture amount in light of all relevant facts. 21.In order to develop base amounts that could apply to all services, we concluded that the uniform base amounts could not be higher than the statutory maxima for any service. Inasmuch as the statutory maxima for broadcast, cable and common carrier are higher than for the remaining services, the statutory maxima for services other than broadcast, cable and common carrier was used as the common denominator. Thus, the uniform base forfeiture amounts generally adhere to the higher end of the statutory maximum of $10,000, which is the maximum forfeiture amount per violation that may be assessed against entities that are not classified as broadcasters, cable operators, or common carriers. Consistent with these parameters, the uniform base forfeiture amounts adopted here and set forth in Appendix A reflect reductions in most of the forfeiture amounts that were proposed in the NPRM. We have made, however, two exceptions to our determination to use the $10,000 statutory maximum as a basis for establishing uniform base forfeiture amounts. First, we have set the base forfeiture amount for misrepresentation at the statutory maximum for the particular type of service provided by the violator. Regardless of the factual circumstances of each case, misrepresentation to the Commission always is an egregious violation. Any entity or individual that engages in this type of behavior should expect to pay the highest forfeiture applicable to the service at issue. Indeed, the revocation of the license may well also result from misrepresentation. 47 U.S.C.  312(a)(1). Second, we have made an exception for violations that are unique to a particular service. In establishing guidelines for base forfeiture amounts for these violations, we have used case precedent developed by the Commission since the Court vacated the Policy Statement and, where no precedent exists, we have determined base amounts that reflect the level of egregiousness, based on the degree of harm, that we attach to the particular violation. 22.We believe it is important to make the following general observations about the base forfeiture amounts adopted here. First, any omission of a specific rule violation from the list set forth in Appendix A should not signal that the Commission considers any unlisted violation as nonexistent or unimportant. The Commission expects, and it is each licensee's obligation, to know and comply with all of the Commission's rules. Indeed, we believe that the rigorous enforcement of the minimum regulatory requirements resulting from the recent amendments to the Communications Act will become critical to the preservation of the open competitive markets that the recent amendments seek to create. Although we have adopted the base forfeiture amounts as guidelines to provide a measure of predictability to the forfeiture process, we retain our discretion to depart from the guidelines and issue forfeitures on a case-by-case basis, under our general forfeiture authority contained in Section 503 of the Act. See para. 24 infra. 23.Second, we note that the base forfeiture amounts set forth in Appendix A may appear high for entities that fall within the statutory classification of "other," for whom the statutory maximum is $10,000 per violation. In other words, base forfeiture amounts are indeed very close to the maximum forfeiture that may be assessed against these entities. We believe, however, that the system of uniform base forfeiture amounts can be applied in a fair and equitable manner, with respect to all licensees, permittees, regulatees, and members of the public. Under the Act, many of the services in the "other" category, e.g., citizen band (CB) radio, domestic ship radios and aircraft radios are licensed by rule. See Section 307(e)(1) of the Communications Act of 1934, 47 U.S.C.  307(e)(1). See also Section 403 of the Telecommunications Act of 1996, Pub. L. No. 104 -104, 110 Stat. 56 (1996). Except for egregious violations, it has been our general practice to issue warnings to first time violators who are not licensed on an individual basis. Thus, this type of violator would receive a forfeiture only after it has violated the Act or rules despite the prior warning. We believe that the continuation of this practice of warnings to entities licensed by rule, except in egregious cases involving harm to others or safety of life issues, decreases any adverse impact that the adopted base forfeiture amounts may have on these entities. 24.Third, on the other end of the spectrum of potential violators, we recognize that for large or highly profitable communications entities, the base forfeiture amounts set forth in Appendix A are generally low. In this regard, we are mindful that, as Congress has stated, for a forfeiture to be an effective deterrent against these entities, the forfeiture must be issued at a high level. See para. 19, supra. For this reason, we caution all entities and individuals that, independent from the uniform base forfeiture amounts set forth in Appendix A, and pursuant to Section 503(b)(2)(D) of the Act, 47 U.S.C.  503(b)(2)(D), we intend to take into account the subject violator's ability to pay in determining the amount of a forfeiture to guarantee that forfeitures issued against large or highly profitable entities are not considered merely an affordable cost of doing business. Such large or highly profitable entities should expect in this regard that the forfeiture amount set out in a Notice of Apparent Liability against them may in many cases be above, or even well above, the relevant base amount. C. Adjustment Factors Percentage Ranges 25.Several commenters also took issue with the Commission's guidelines for applying upward and downward adjustment factors in determining a reasonable forfeiture amount. They contended that under the vacated guidelines, violations were seldom considered "minor violations" that would require reductions of 50 percent to 90 percent of the base amount and reductions were, therefore, illusory. For example, NAB indicated that a downward adjustment for a minor violation should apply when a rule encompasses multiple requirements, for example, maintaining all necessary records in the "public files", 47 C.F.R.  73.1212. NAB Comments, 6-7. Additionally, some commenters contended that forfeitures should be upwardly adjusted only when the violator knows that it has deliberately violated the Commission's rules. See e.g., PageNet Comments, 8. 26.We agree with the commenters that there were difficulties associated with applying the adjustment factor ranges. Although the percentage ranges were designed as guidelines for adjusting the forfeiture based on the statutory criteria, the ranges still afforded the Commission and its Bureaus and Offices wide discretion to apply a specific percentage within the particular range at issue. To reflect more clearly the Commission's discretion to increase or reduce a forfeiture penalty as much as warranted based on the unique facts of each case, we have determined that the percentage ranges for the upward and downward adjustment factors should be eliminated. Thus, the Forfeiture Policy Statement and forfeiture guidelines that we adopt herein no longer provide percentage ranges for the adjustment factors outlined in Section 503 of the Act. (We are also eliminating the percentage ranges for the statutory forfeitures that are not assessed pursuant to Section 503 of the Act, see 47 U.S.C.  202(c), 203(e), 205(b), 214(d), 219(b), 220(d), 223, 364, 386, 506, 554. This means that the Commission will initially assess these violations at the statutory amount, but can adjust downward based on the adjustment factors set out in Section 503 and the facts of the case.) 27.Although we are eliminating the percentage ranges, we are required by statute to consider various adjustment criteria before determining a forfeiture amount in each case. The adjustment criteria listed in Appendix A of the guidelines reflect the factors outlined in the statute. For example, the statute requires that we consider the "nature, circumstances, extent and gravity of the violation". Thus, the adjustment factors regarding the severity of the violation that may increase or decrease the forfeiture are: substantial harm, repeated or continuous violation, or substantial or economic gain derived from the violation, and the minor nature of the violation. The statute also requires that "with respect to the violator," we consider factors such as "the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." Accordingly, the adjustment factors we evaluate in considering the actions of the violator include egregious misconduct, ability or inability to pay, intentional violation, prior violation of same or other requirements, good faith or voluntary disclosure, and history of overall compliance. 47 U.S.C.  503(b)(2)(D). In sum, although the base amount is the starting point in assessing a forfeiture, the forfeiture may be decreased below the base amount or increased to the statutory maximum when the adjustment criteria are considered based on the facts of the case. D. Other Issues 28.Discretion to depart from forfeiture guidelines. We sought comment on whether the Commission should retain discretion to depart from the guidelines in appropriate circumstances or, in the alternative, adopt the guidelines as a binding rule. Both USTA and Brown and Schwaninger indicated that guidelines could not provide effective notice to licensees or result in administrative efficiency as stated in the NPRM if the Commission is free to exercise its discretion and deviate from those guidelines. USTA Comments, 6; Brown and Schwaninger Comments, 2. Brown and Schwaninger contended that the guideline system would, in effect, become a case-by-case system, by prompting violators to seek exemptions from the guidelines for lesser forfeiture penalties and would invite litigation in forfeitures assessed by staff discretion. Brown and Schwaninger Comments, 2. 29.We agree that the predictability in the forfeiture process is an important objective and adherence to the guidelines is a method to achieve this goal. Because this is only a guideline and not a binding rule, however, the Commission retains its discretion to depart from the guidelines where appropriate. As for the concerns expressed by the Commenters that the Commission's exercise of discretion will invite litigation, we note that regardless of which method is used to assess the forfeiture, parties who are dissatisfied with the process have always had the right to seek reconsideration of a forfeiture penalty before the Commission. Moreover, in a case initiated by a Notice of Apparent Liability, the party ultimately may be heard in a trial de novo in a district court of appropriate jurisdiction. 30.Use of warnings for first time violations. Some commenters suggested that the Commission adopt new enforcement methods, including an increased use of warnings for first time or minor violations prior to issuance of forfeitures. NAB, in particular, suggested that the Commission's rule making proceeding should look into more effective methods to obtain compliance rather than "better ways to accomplish the goals of developing guidelines for determining forfeiture amounts." NAB Comments, 9. 31.As the NPRM noted, it was never our intention that the guidelines be read to require that a forfeiture be issued in every case or in any particular case. NPRM, at 2945. We agree that warnings can be an effective compliance tool in some cases involving minor or first time violations. The Commission has broad discretion to issue warnings in lieu of forfeitures. See 47 C.F.R.  1.89. Nonetheless, an approach whereby, except in cases of harm to others or safety of life, we would always issue a warning to first-time violators would greatly undermine the credibility and effectiveness of our overall compliance efforts. Licensees must strive to comply with rules. Such an approach could invite some licensees to commit first-time violations with impunity. Thus, we will continue to determine whether to issue a warning or assess a forfeiture based on the nature and circumstances of the specific violation. 32.Use of the issuance of an unpaid NAL in subsequent proceedings. Several commenters stated that the Commission's proposed forfeiture guidelines did not indicate the purpose for which the Commission uses pending forfeitures against a violator in subsequent proceedings. Infinity Broadcasting Inc. (Infinity) argued that the use of a Notice of Apparent Liability (NAL) or an unpaid Notice of Forfeiture in a subsequent proceeding appeared to contravene Section 504(c), which prohibits the use of a non-final, non-adjudicated forfeiture proceeding in any other proceeding before the Commission, and also prohibits the use of the underlying facts of the violations to increase the amount of subsequent forfeitures. Infinity Comments, 5-7. Comments from NAB and ARRL also raised this issue. 33.Section 504 of the Act provides, inter alia that: In any case where the Commission issues a notice of apparent liability looking toward the imposition of a forfeiture under this Act, that fact shall not be used, in any other proceeding before the Commission, to the prejudice of the person to whom such notice was issued, unless (i) the forfeiture has been paid, or (ii) a court of competent jurisdiction has ordered payment of such forfeiture, and such order becomes final. 47 U.S.C.  504 (c). The legislative history of Section 504(c), however, indicates that the Commission may use the facts underlying a violation in a subsequent proceeding. Although the Senate Commerce Committee Report noted that the Commission could not use the pendency of a forfeiture action prior to final adjudication against a licensee, the report went on to say: [S]ubsection (c) . . . is not intended to mean that the facts upon which a notice of forfeiture liability against a licensee is based cannot be considered by the Commission in connection with an application for renewal of a license, for example, or with respect to the imposition of other sanctions authorized by the Communications Act of 1934 . . . . [F]acts going to the fitness of the licensee could be introduced in evidence against such licensee notwithstanding that such facts are the basis of an order of forfeiture. S. Rep. No. 1857, 86th Cong., 2d Sess. 11 (1960). 34.We believe that we have faithfully implemented congressional intent in this area. Consistent with Section 504 of the Act, the Commission does not use the mere issuance or failure to pay an NAL to the prejudice of the subject. We reiterate here that we will not do so in the future unless the forfeiture penalty constitutes a final action: in other words, unless the forfeiture has been paid or finally adjudicated as stated in Section 504 of the Act. What the Commission has done in the past, and what we will continue to do where appropriate, is to use the facts underlying the prior violations that may have been the subject of an NAL. We are persuaded that using the underlying facts of a prior violation that shows a pattern of non-compliant behavior against a licensee in a subsequent renewal, forfeiture, transfer, or other proceeding does not cause the prejudice that Congress sought to avoid in Section 504(c). 35.The following example should provide guidance as to our use of facts underlying the issuance of an NAL. Assume that the Commission determined that a licensee violated the Commission's rules regarding permissible power on March 1, 1996, again on June 1, 1996, and again on October 1, 1996. Assume further that we then issue a $5,000 NAL for the March 1 violation and a second $5,000 NAL for the June 1 violation. In issuing an NAL for the October 1 violation, the Commission may well view the October 1 violation as repeated or part of a pattern of violations, in light of the earlier March 1 and June 1 violations. Thus, we may issue an NAL for $7,500 for the October 1 violation, citing the apparent March 1 and June 1 violations as a basis for a higher forfeiture. The NAL for the October 1 violation is not higher because of the two prior NALs or because the licensee has not paid the prior forfeitures, but rather because the underlying facts of the two prior apparent violations suggest egregious misbehavior by the licensee. The licensee will not be required to pay the $7,500 forfeiture without having an opportunity to present evidence before the Commission or in court that it did not commit the earlier violations. Obviously, if it were to convince the Commission or a court that it had not committed violations on March 1 and June 1, the licensee's forfeiture would be reduced by the Commission or the court for the October 1 violation (assuming it was proven to be a first time violation) to reflect the fact that it was not a repeated violation or part of a pattern of violations. The Commission would have complied with Section 504(c) because it would have used only the underlying facts, not the existence of prior NALs, against the licensee, and the licensee would have had the full opportunity to present appropriate evidence before having to pay any forfeiture. 36.Under this approach, the licensee is not being hurt in any way for its failure to pay the NAL. Moreover, the licensee will always have the opportunity to present evidence that the underlying facts relied on by the Commission did not constitute a violation, either by introducing evidence to that effect in a Commission hearing (e.g., renewal or transfer hearing) or in a court action to collect a subsequent forfeiture that is for a higher amount because of the earlier violations. See S. Rep. No. 1857. ("The licensee could not, therefore, complain of the introduction of such evidence so long as he has the right to cross-examine the witnesses introducing it and the further right to offer evidence to rebut it"). 37.Specific rule violations. Several commenters raised concerns about the amounts proposed for specific violations. MCI, for example, urged that the amount of forfeitures charged for unauthorized conversions, known as "slamming" violations, should be reduced from the $75,000 proposed in the NPRM. MCI suggested that because these violations can easily result from human error, there should be a separate category of violations for "Failure to verify order to change long distance carrier." MCI argued that, although it is critical to deter fraudulent conversions, "it is important that the Commission not deter telemarketing invitations altogether." See MCI Comments, 1-2. NAB urged reductions in the amounts assessed for violations that involve multiple compliance factors (e.g., broadcast files where only a few documents may be missing). NAB proposed a provision that if a licensee violates only a portion of a rule, e.g., omits one document from the public file, the Commission will assess only a portion of the base forfeiture amount. NAB also sought "amnesty" from complying with the operator on duty and lottery broadcast requirements inasmuch as the Commission has initiated rule makings or made recommendations to Congress to eliminate these requirements. NAB also requested amnesty for Emergency Broadcast System/Emergency Alert System (EBS/EAS) violations during the transition period until all equipment has been converted. NAB Comments, 13-15. In addition, NAB urged that amnesty be offered for violations such as exceeding authorized antenna height, operation at an unauthorized location, and other tower related violations that do not pose safety threats. See NAB Comments, 11-12. Motorola agreed with NAB's amnesty proposal, and urged that the ultimate or primary burden for tower rules violations be placed on tower owners. Motorola Reply Comments, 2-3. 38.We agree with MCI that the forfeiture penalty amount proposed for unauthorized conversion of a consumer's primary interexchange carrier should be reduced. A review of the forfeitures issued for slamming violations since the USTA decision indicates that the Commission has generally assessed forfeitures at $40,000 for violations such as those in which fraud is an issue, or in cases where the carrier's deliberate failure to ensure that letters of authorization are valid and properly authorized rise to the level of gross negligence. See e.g., Excel Telecommunications, Inc., 11 FCC Rcd 19765 (1996), Long Distance Services, Inc., FCC Rcd (1997) DA 97-956 (released May 8, 1997). Accordingly, we are reducing the base amount for slamming to $40,000 rather than the $75,000 originally proposed in the NPRM. 39.Regarding NAB's contention that a violation should be reduced as minor when it is a partial violation of the rule, we note that the forfeiture guidelines we adopt today provide sufficient flexibility to allow for a forfeiture less than the base amount. In this regard, we disagree with NAB's characterization that omission of the issue/program list from the public file is a minor violation; such a violation is serious in that it diminishes the public's ability to determine and comment at renewal time on whether the station is serving its community. Nonetheless, even in these circumstances, we would always look to the facts surrounding any partial violation to determine if it warranted the base forfeiture amount or less. We reject NAB's proposal that we decline to issue forfeitures for violations of our operator on duty and lottery broadcast requirements. Unless Congress amends the Communications Act to deregulate the action in question, we will continue to issue forfeitures for this violation, as warranted in each case. We note that NAB's arguments with respect to antenna tower violations have been largely rendered moot by the Commission's adoption of the Report and Order, Streamlining the Antenna Structure Clearance Procedure and Revision of the Rules Concerning Construction, Marking and Lighting of Antenna Structures, 11 FCC Rcd 4272 (1995). Under the new tower registration procedures adopted by the Commission, it is tower owners rather than licensees who will be primarily responsible for registering towers requiring marking and lighting under the Federal Aviation Administration guidelines. Further, in the antenna proceeding, the Commission also granted an amnesty period during which no forfeitures will be issued to licensees seeking to correct existing tower records. 40.With respect to violations for technical and equipment deficiencies resulting from changes from the EBS to the EAS, the request for amnesty is moot for broadcasters. The issue of violation of the operator on duty rule is moot because the rule was eliminated by order released October 23, 1995. Amendment of Parts 73 and 74 of the Commission's Rules to Permit Unattended Operation of Broadcast Stations and to Update Broadcast Station Transmitter Control and Monitoring Requirements, 10 FCC Rcd 11479 (1995). As to other violations for which NAB seeks amnesty for licensees (e.g. operation at unauthorized location) we see no public interest basis for such action. 41.Clarification of certain terms. A few commenters urged clarification of the term "ability to pay" as an adjustment factor. Some commenters, echoing small carriers who argued that they should be guided by a different forfeiture scheme, noted that the Commission's apparent definition of "ability to pay" is limited to "gross revenues" and does not adequately consider that many carriers provide high-cost, high-maintenance, low-profit services to rural communities as "an adjunct" to other operations. For this reason, they note, the revenues from more profitable operations should not be considered when evaluating the carrier's ability to pay. 42.These commenters also argued that the large forfeitures in some cases could be the equivalent of a license revocation. They argue that "ability to pay" is based on gross revenues and no consideration is given to operating or maintenance expenses. A company, they argue, may be considered profitable when in fact it is operating on the margin. The commenters contend that this approach to determining "ability to pay" contravenes the "universal service" mandate of Section 1 of the Act because it disproportionately injures businesses who provide service to rural or less profitable areas, and discourages diversity. In addition, the commenters argue that this approach to "ability to pay" erodes the protections otherwise given to small businesses in the Paperwork Reduction Act and the Regulatory Flexibility Act. They argued that smaller carriers that now provide high-cost, high-maintenance, low-profit services to rural communities, e.g., improved mobile telephone services (IMTS) or Basic Exchange Telecommunications Radio Service (BETRS), will be driven out of business if they must pay higher forfeitures than other licensees for similar violations. Because these services are provided by carriers as "an adjunct" to its other operations, they argue that the Commission would consider the higher profits from their other operations and the forfeitures would not be reduced based on the subsidiary's ability to pay. 43.As the commenters noted, Commission cases point to gross revenues as the starting point for determining a party's ability to pay. In PJB Communications of Virginia, Inc., 7 FCC Rcd 2088 (1992) (PJB Communications), we stated: [i]n general, a licensee's gross revenues are the best indicator of its ability to pay a forfeiture. Nevertheless, we recognize that in some cases, other financial indicators, such as net losses, may also be relevant. If gross revenues are sufficiently great, however, the mere fact that a business is operating at a loss does not itself mean that it cannot afford to pay a forfeiture. PJB Communications, At 2089. Thus, PJB Communications indicates that factors other than gross revenues may also be considered. Indeed, the Commission does not use a strict "gross revenues" standard. For example, the Commission has reduced a forfeiture to an amount adequate to deter future misconduct after consideration of the violators' unprofitable history, and the relative lower value of the licensed operation at issue. See e.g., First Greenville Corporation, 11 FCC Rcd 7399 (1996); Benito Rish, 10 FCC Rcd 2861 (1995) (profit and loss statement submitted to reflect inability to pay a forfeiture); see also Pinnacle Communications, Inc., 11 FCC Rcd 15496 (1996) (analysis of the balance sheet and the profit and loss statement accompanied by the licensee's certification focused on net liabilities in light of default of loan payment). Although forfeiture amounts will be initially assessed according to the violation, the Commission's staff reviews all responses to NALs that claim inability to pay a forfeiture on a case-by-case basis in accordance with Section 503(b)(2)(D) of the Act. In this respect, we do not believe that focusing on the payment of forfeiture will deter service to rural or less profitable areas, discourage diversity or otherwise operate inconsistently with the universal service goals of the Communications Act. 44. We are cognizant of the concerns raised by small entities as to the burden and expense of documenting inability to pay a forfeiture by means of audited financial statements. In this regard, we note that the Commission has the flexibility to consider any documentation, not just audited financial statements, that it considers probative, objective evidence of the violator's ability to pay a forfeiture. See 47 C.F.R.  1.80 (f)(3). The Commission intends to continue its policy of being sensitive to concerns of small entities who may not have the ability to pay a particular forfeiture amount or the ability to submit the same kind of documentation to corroborate the inability to pay. This is consistent with section 503(b)(2)(D) of the Communications Act and section 1.80(b)(4) of our rules, which provides that the Commission will take into account ability to pay in assessing forfeitures, and with our longstanding case law. 45.American Mobile Telecommunications Association (AMTA) sought clarification of various violations listed in the proposed Forfeiture Policy Statement. AMTA contended that several of the listed violations overlap or are duplicative such as construction or operation without a license, using an unauthorized frequency, and construction or operation at an unauthorized location, and recommended that the Commission simplify the proposed types of violations relating to the actual operation of a station. In addition, AMTA indicated that, because the Commission's overall regulatory scheme is generally designed to prevent interference among entities, the Commission has failed to explain why operating without any license would be considered four times as egregious as operating at a location not covered by the authorization. Similarly, AMTA questioned why forfeitures for using unauthorized frequencies are lower than forfeitures for operating without a license, but higher than forfeitures for operating at the wrong location. AMTA noted that it is unclear which violations would be applicable to a specialized mobile radio (SMR) licensee authorized to operate in the Washington, D.C. area that initiated service in Annapolis, MD on different frequencies prior to the grant of an FCC authorization to do so. AMTA asserted that the severity of the forfeiture should be based on likelihood or actuality of causing interference to another licensee. AMTA believed that the Commission needs to distinguish clearly between essentially ministerial/administrative violations and those with the potential for disturbing or disabling the operations of other facilities (interference potential). AMTA Comments, 7-8. 46.As AMTA noted, one of the principal reasons for requiring an FCC license to broadcast is to prevent interference with broadcast signals so that such signals can be received by the public. In the absence of a scheme requiring a license before transmitting can commence, it is not clear how interference conflicts would be resolved. Such an approach would be costly, disruptive, inefficient, and directly contrary to the express will of Congress. See Turner Broadcasting System Inc. v. FCC, 114 S. Ct. 2445, 2456-57 (1994). Thus, ensuring that parties operate in accord with the license authorization is fundamental to successful implementation of our spectrum management objectives. Failure to receive authorization to transmit prior to transmission is not a mere ministerial oversight; it is an intentional disregard of the Commission's efforts to prevent interference. Thus, in AMTA's example about the SMR licensee, the party has engaged in unlicensed operation because, regardless of where it may properly transmit, it is transmitting from a location on a frequency prior to any Commission approval for that operation. 47.With respect to operating on an unauthorized frequency or unauthorized location, we note that frequency and location are very important to our spectrum management and interference prevention functions. These types of violations arise when a party seeks and receives an FCC license, but does not operate in full compliance with the authorization of license. Both scenarios involve operation under color of a license that creates a potential for interference or disruption of communications between licensed entities. Therefore, we agree with AMTA that the base forfeiture amount for each of these types of violations should be the same. We reiterate, however, that although we are using the same base forfeiture amount for these violations, the forfeiture amount may be affected by the severity of the interference and intentional nature of the violation, as well as all other adjustment factors. 48.Treatment of pending cases. NAB stated that the Commission should rescind any forfeiture imposed under the 1991 Policy Statement or 1993 Policy Statement that has not been paid. NAB Comments, 8. Infinity argued that forfeitures for violations prior to the effective date of any new policy statement should be based on case law decided under the statutory maximum in effect prior to changes in the statute in 1989. Infinity Comments, 9 n. 8. 49.We reject these suggestions. Pursuant to Section 503 of the Act, the Commission has full authority to apply the increased statutory maximum in effect since 1989 and to adjust its policies and decisions in specific cases on an ongoing basis to take account of increased statutory amounts or changes in Commission enforcement priorities, regardless of the existence or non-existence of a forfeiture policy statement. All forfeitures assessed under the 1991 and 1993 Policy Statements conformed to the standards set out in Section 503 of the Act and, therefore, constitute the Commission's findings of liability for those violations. For these reasons, we will include recent case law in our analysis of pending cases. With respect to these pending proceedings, we will evaluate them under the case-by-case approach in effect when the violation occurred. We will also use the case-by-case approach for violations arising from facts that occurred before the effective date of this order but where the Commission will commence forfeiture action after the effective date. E. Other Matters 50.In cases where the Commission designates forfeiture matters for hearing (e.g., as part of a license application, license revocation or license renewal proceeding), the Commission's typically indicates that the forfeiture liability amount may be assessed up to the relevant statutory maximum. See Ellwood Beach Broadcasting, Ltd., 8 FCC Rcd 453, 454 n. 5 (1993). In light of recent amendments to the Equal Access to Justice Act made as part of the Contract with America Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), we will discontinue this practice. Instead, we will indicate an appropriate maximum forfeiture amount in light of the specific facts at issue when initiating such hearing cases effective immediately. 51.We note that Section 223 of the recently enacted Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), enacted as part of the Contract with American Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), requires agencies to establish a policy providing for the reduction and, under appropriate circumstances, the waiver of civil penalties imposed on small entities. As part of this policy, under appropriate circumstances, the agency may consider ability to pay in determining penalty assessments on small entities. Such circumstances may include, among others, violations discovered because the small entity participated in a compliance assistance or audit program, and good faith efforts demonstrated by the entity to comply with the law. Circumstances that may be excluded from the policy's applicability cover small entities that have been subject to multiple enforcement actions, willful or criminal violations, and violations that pose serious health, safety or environmental threats. 52.Our existing policies, as reflected in our precedent, and as retained here, comply with Section 223 of SBREFA. Warnings, rather than forfeitures, may continue to be appropriate in particular cases involving small businesses or others. See par. 31, supra. Under Section 503(b)(2)(D) of the Communications Act and section 1.80(b)(4) of our rules, we will continue to consider inability to pay a relevant factor in assessing forfeitures. See par. 44, supra. See also Appendix A, Section II, downward adjustment criterion (4). Our other upward and downward adjustment factors, which are reflective of existing policy, encompass many of the conditions and exclusions listed and Section 223 of SBREFA. See Appendix A, Section II. These factors will continue to be applied in cases of violations involving small entities (as well as others) to determine whether a waiver or reduction of a forfeiture is warranted. IV. CONCLUSION 53.The forfeiture guidelines are intended as a guide for frequently recurring violations. They are not intended to be a complete or exhaustive list of violations. Moreover, the guidelines do not apply to violations for which the forfeiture amounts are statutorily established. See para. 23, supra. The mitigating factors of Section 503(b)(2) (D) will, however, be used to make adjustments in all appropriate cases, as warranted. In addition, the fact that a particular violation is not listed on the forfeiture guidelines schedule should also not be taken to mean that the violation is unimportant or nonexistent. The Commission retains the discretion to impose forfeitures for other violations, including new violations of existing laws or regulations, or violations that arise from the use of new technologies or services. V. ADMINISTRATIVE MATTERS A. Final Regulatory Flexibility Analysis 54.Final Regulatory Flexibility Analysis: As required by Section 604 of the Regulatory Flexibility Act (RFA), the Commission prepared an Initial Regulatory Flexibility Analysis (IRFA) that was incorporated in the Notice of Proposed Rulemaking (NPRM). The Commission sought written public comments on all the proposals in the NPRM, including the IRFA. Based on the analysis of the public comments, the Commission has prepared a final Regulatory Flexibility Analysis of the expected impact on small entities of the rule changes adopted in this Report and Order. The Final Regulatory Flexibility Analysis is discussed fully in Appendix C of this Report and Order. B. Ex Parte Rules -- Permit-But-Disclose Proceeding 55.This is a permit-but-disclose notice and comment rule making proceeding. Ex parte presentations are permitted except during the Sunshine Agenda period, provided, they are disclosed as outlined in the Commission's rules. See generally 47 C.F.R.  1.1202, 1.1203, and 1.1206(a). VI. ORDERING CLAUSES 56. ACCORDINGLY, IT IS ORDERED that, pursuant to the authority contained in Sections 4(i), 303(r) and 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 303(r), 503(b), Part 1, Subpart A, Section 1.80(b), 47 C.F.R.  1.80(b), is amended to incorporate as a note the Commission's Forfeiture Policy Statement, and the Guidelines for Assessing Forfeitures set forth in Appendix A. 57. IT IS FURTHER ORDERED, that this Report and Order will be effective sixty (60) days after publication of a summary thereof in the Federal Register. 58. IT IS FURTHER ORDERED, that a copy of the Report and Order shall be sent to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary Appendix A Chapter I of Title 47 of the Code of Federal Regulations is amended by adding a footnote to Part 1, Subpart A-Practice and Procedure, as follows: I. Part 1--PRACTICE AND PROCEDURE 1. The authority citation for Part 1 continues to read as follows: Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless otherwise noted. 2. Section 1.80 is amended by revising subsection (b) to read as follows:  1.80 Forfeiture Proceedings. (b) * * * * * (4) * * * NOTE: GUIDELINES FOR ASSESSING FORFEITURES The Commission and its staff may use these guidelines in particular cases. The Commission and its staff retain the discretion to issue a higher or lower forfeiture than provided in the guidelines, to issue no forfeiture at all, or to apply alternative or additional sanctions as permitted by the statute. The forfeiture ceiling per violation or per day for a continuing violation stated in Section 503 of the Communications Act and the Commission's Rules are $25,000 for broadcasters and cable operators or applicants, $100,000 for common carriers or applicants, and $10,000 for all others. These base amounts listed are for a single violation or single day of a continuing violation. 47 U.S.C.  503(b)(2); 47 C.F.R.  1.80. For continuing violations involving a single act or failure to act, the statute limits the forfeiture to $250,000 for broadcasters and cable operators or applicants, $1,000,000 for common carriers or applicants, and $75,000 for all others. Id. Pursuant to the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. No. 104-134,  31001, 110 Stat. 1321 (1996), civil monetary penalties assessed by the federal government, whether set by statutory maxima or specific dollar amounts as provided by federal law, must be adjusted for inflation at least every four years based on the formula outlined in the DCIA. Thus, the statutory maxima increased to $27,000 for broadcasters and cable operators or applicants; $110,000 for common carriers or applicants, and $11,000 for others. For continuing violations, the statutory maxima increased to $275,000 for broadcasters, cable operators, or applicants; $1,100,000 for common carriers or applicants; and $82,500 for others. The increased statutory maxima became effective March 5, 1997. There is an upward adjustment factor for repeated or continuous violations, see Section II, infra. That upward adjustment is not necessarily applied on a per violation or per day basis. Id. Unless Commission authorization is required for the behavior involved, a Section 503 forfeiture proceeding against a non-licensee or non-applicant who is not a cable operator or common carrier can only be initiated for a second violation, after issuance of a citation in connection with a first violation. 47 U.S.C.  503(b) (5). A citation is not required, however, for non-licensee tower owners who have previously received notice of the obligations imposed by Section 303(q) and Part 17 of the Commission's rules from the Commission. See Streamlining the Commission's Antenna Structure Clearance Procedure and Revision of Part 17 of the Commission's Rules concerning Construction, Marking, and lighting of Antenna Structures, 61 Fed. Reg. 04359 (Feb. 2, 1995). Forfeitures issued under other sections of the Act are dealt with separately in Section III below. Section I. BASE AMOUNTS FOR SECTION 503 FORFEITURES VIOLATION AMOUNT Misrepresentation/lack Statutory of candor Maximum for each Service Construction and/or operation $10,000 without an instrument of authorization for the service Failure to comply with $10,000 prescribed lighting and/or marking Violation of public file rules $10,000 Violation of political rules: $9,000 reasonable access, lowest unit charge, equal opportunity, and discrimination Unauthorized substantial $8,000 transfer of control Violation of children's television $8,000 commercialization or programming requirements Violations of rules relating to $8,000 distress & safety frequencies False distress communications $8,000 EAS equipment not installed or operational $8,000 Alien ownership violation $8,000 Failure to permit inspection $7,000 Transmission of indecent/ $7,000 obscene materials Interference $7,000 Importation or marketing of $7,000 unauthorized equipment Exceeding of authorized $5,000 antenna height VIOLATION AMOUNT Fraud by wire, radio or $5,000 television Unauthorized discontinuance $5,000 of service Use of unauthorized equipment $5,000 Exceeding power limits $4,000 Failure to respond to $4,000 Commission communications Violation of sponsorship ID requirements $4,000 Unauthorized emissions $4,000 Using unauthorized frequency $4,000 Failure to engage in required $4,000 frequency coordination Construction or operation at $4,000 unauthorized location Violation of requirements pertaining to $4,000 broadcasting of lotteries or contests Violation of transmitter control $3,000 and metering requirements Failure to file required forms $3,000 or information Failure to make required measurements $2,000 or conduct required monitoring Failure to provide station ID $1,000 Unauthorized pro forma $1,000 transfer of control Failure to maintain $1,000 required records Violations Unique to the Service VIOLATIONSERVICESAMOUNT AFFECTED Unauthorized conversion of long Common $40,000 distance telephone service Carrier Violation of operator Common $7,000 services requirements Carrier Violation of pay-per-call Common $7,000 requirements Carrier Failure to implement rate reduction Cable $7,500 or refund order Violation of cable program Cable $7,500 access rules Violation of cable leased Cable $7,500 access rules Violation of cable cross-ownership rules Cable $7,500 Violation of cable broadcast Cable $7,500 carriage rules Violation of pole attachment rules Cable $7,500 Failure to maintain directional Broadcast $7,000 pattern within prescribed parameters Violation of main studio rule Broadcast $7,000 Violation of broadcast Broadcast $7,000 hoax rule AM tower fencing Broadcast $7,000 Broadcasting telephone Broadcast $4,000 conversations without authorization Violation of enhanced Broadcast $2,000 underwriting requirements Section II. ADJUSTMENT CRITERIA FOR SECTION 503 FORFEITURES Upward Adjustment Criteria (1) Egregious misconduct (2) Ability to pay/relative disincentive (3) Intentional violation (4) Substantial harm (5) Prior violations of any FCC requirements (6) Substantial economic gain (7) Repeated or continuous violation Downward Adjustment Criteria (1) Minor violation (2) Good faith or voluntary disclosure (3) History of overall compliance (4) Inability to pay Section III. NON-SECTION 503 FORFEITURES THAT ARE AFFECTED BY THE DOWNWARD ADJUSTMENT FACTORS Unlike Section 503 of the Act, which establishes maximum forfeiture amounts, other sections of the Act, with one exception, state prescribed amounts of forfeitures for violations of the relevant section. These amounts are then subject to mitigation or remission under Section 504 of the Act. The one exception is Section 223 of the Act, which provides a maximum of $50,000 per day. For convenience, the Commission will treat the $50,000 set forth in Section 223 as if it were a prescribed base amount, subject to downward adjustments. The amounts listed below were adjusted for inflation pursuant to the Debt Collection Improvement Act of 1996 (DCIA) (Pub. L. No. 104-134,  31001, 110 Stat 1321 (1996). The new amounts became effective on March 5, 1997. These non-Section 503 forfeitures may be adjusted downward using the "Downward Adjustment Criteria" shown for Section 503 forfeitures in Section II above. Violation Statutory Amount Sec. 202 (c) Common Carrier Discrimination $6,600 $330/day Sec. 203 (e) Common Carrier Tariffs $6,600 $330/day Sec. 205 (b) Common Carrier Prescriptions $13,200 Sec. 214 (d) Common Carrier Line Extensions $1,200/day Sec. 219 (b) Common Carrier Reports $1,200 Sec. 220 (d) Common Carrier Records & Accounts $6,600/day Sec. 223 (b) Dial-a-Porn $55,000 maximum/day Sec. 364(a) Ship Station Inspection $5,00 (owner) Sec. 364(b) Ship Station Inspection $1,100 (vessel master) Sec. 386(a) Forfeitures $5,500/day (owner) Sec. 386(b) Forfeitures $1,100 (vessel master) Sec. 634 Cable EEO $500/day APPENDIX B A. Comments 1. American Mobile Telecommunications Association, Inc. 2. American Radio Relay League 3. Bell Atlantic Telephone Company 4. Brown and Schwaninger 5. Emery Telephone 6. Harrisonville Telephone Company 7. Infinity Broadcasting Corporation 8. MCI Telecommunications Corporation 9. MobileMedia Communications, Inc. 10. Mobile Phone of Texas, Inc. 11. National Association of Broadcasters 12. Paging Network, Inc. 13. Personal Communications Industry Association 14. San Bernardino Coalition of Low Power FM Broadcasting 15. Southwestern Bell Telephone Company 16. United States Telephone Association 17. WJGMariTEL Corporation B. Informal Comment 1. William Dougan C. Reply Comments 1. American Mobile Telecommunications Association, Inc. 2. MCI Telecommunications Corporation 3. Motorola, Inc. 4. National Telephone Cooperative Association 5. Personal Communications Industry Association 6. San Bernardino Coalition of Low Power FM Broadcasting 7. Southwestern Bell Telephone Company 8. United States Telephone Association APPENDIX C ADMINISTRATIVE MATTERS Final Regulatory Flexibility Analysis 1. As required by Section 603 of the Regulatory Flexibility Act (RFA), 5 U.S.C.  603, the Commission prepared an Initial Regulatory Flexibility Analysis (IRFA) that was incorporated in the Notice of Proposed Rule Making (NPRM). The Commission sought written public comments on all of the proposals in the NPRM, including the IRFA. Based on the analysis of the public comments, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) of the expected impact the Report and Order adopted today will have on small businesses and entities. The FRFA in this Report and Order conforms to the RFA, as amended by the Contract with America Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996). a. Need for and Purpose of This Action 2.Section 503 of the Communications Act, as amended, 47 U.S.C.  503 (the Act) provides the statutory authority for the Commission to assess forfeitures for violations of the Act and the Commission's rules. This Report and Order amends Section 1.80 of the Commission's rules to incorporate by reference the Commission's forfeiture policy statement (Policy Statement) and the schedule of forfeitures as a note to the rule. Forfeitures are one of the tools available to the Commission to enhance and ensure compliance by serving as a sanction to a violator and a deterrent to other potential violators that are similarly situated. By adopting the forfeiture guidelines as a note to the rule, the Commission will provide guidance and clarity to all potential violators, including small businesses, as to base forfeiture amounts that can be expected for a violation of the Communications Act and the Commission's rules. The guidelines will also provide an increased level of predictability and uniformity in the forfeiture process. We believe that the footnote adopted here today has no substantial impact on small businesses. The footnote does not create a new substantive Commission rule with which small businesses must comply. The forfeiture policy adopted here today merely provides guidance as to the general forfeiture amount that any violator may expect the Commission to assess for a violation of the Act and rules. To ensure, however, that the forfeiture guidelines adopted today reflect the Commission's understanding of the impact of its regulations on small businesses as well as our efforts to analyze what, if any, regulatory relief can be provided to small businesses in light of this Report and Order, we will explain the steps taken to minimize any significant economic impact on small entities. b. Summary of Significant Issues Raised by the Public Comments in Response to the Initial Regulatory Flexibility Analysis 3.In responding to the IRFA in the NPRM, several commenters, such as improved mobile telephone services (IMTS) or basic exchange telecommunications radio services (BETRS) contend that the Commission's determination of an entity's inability to pay a forfeiture based on its gross revenues erodes the protections otherwise given to small businesses in the Paperwork Reduction Act and the Regulatory Flexibility Act. They contend that these rural services will pay higher forfeitures than other licensees for similar violations because they are run by common carriers as an adjunct to the main operations whose gross revenue would be considered in determining the issue of inability to pay. These arguments were considered and rejected as discussed below. 4.At the outset, we note that forfeitures are imposed only against those who fail to comply with our rules. Thus, the issue of inability to pay a forfeiture or maintaining additional paperwork is moot as to small businesses that comply with the rules. As to those that violate the Act and rules, Commission precedent states that gross revenues is a starting point for determining a party's ability to pay. Commission cases, however, also indicate that factors other than gross revenues may be considered. Under Section 503 of the Act, the Commission must look at the inability to pay in light of the totality of the circumstances affecting the particular entity's ability to pay. This includes whether the company is a small business as defined by the Commission and/or the Small Business Administration (SBA) or whether the business is an adjunct of a larger corporation from which it can draw resources. Moreover, although the Commission has accepted audited financial statements as a method to assess a company's inability to pay a forfeiture, the Commission has flexibility to consider any documentation (e.g. balance sheet, profit and loss statement accompanied by licensee's certification) that it considers probative and objective evidence of the violator's ability or inability to pay a forfeiture. This also comports with the requirements of SBREFA. 5.In the general comments to the NPRM, a number of commenters raised issues that might affect small entities. Many commenters oppose the system proposed in the NPRM that would impose differing base amounts based on the service rather than the violation involved. In particular, the commenters, including small commercial mobile radio services (CMRS), noted that the system proposed in the NPRM imposed larger forfeitures on common carriers without any regard for the common carrier's business size. Comments from CMRS entities also contend that, if the proposed fines are adopted, they should be treated in the "other" category as they were in the previous guidelines rather than the "common carrier" category which has higher base amounts and a higher statutory maximum. As adopted, this Policy Statement would impose forfeitures based on the violation and not the service as originally proposed. Thus, CMRS providers who are small businesses will not be treated to higher forfeiture amounts simply because of their "common carrier" status. Moreover, the base forfeiture amount, i.e., the amount at which the Commission may initially assess a forfeiture, is calculated in light of the lowest statutory maximum imposed under Section 503 of the Act, rather than the higher statutory maxima for broadcasters and common carriers. Thus, small broadcast and common carrier businesses are not subject to base amounts higher than those imposed on small businesses in the remaining category, i.e., the "other " category. As to those small businesses in the "other" category, the Commission generally gives warnings to first time violators, who are licensed by rule rather than on an individual basis, based on the facts of each case unless the violation is egregious or a serious safety of life issue. The adopted forfeiture policy statement also eliminated the proposed adjustment factor ranges, thus allowing the Commission to reduce a forfeiture to a minimum amount against a violator such as a small business if warranted by the facts of the case in light of the factors outlined in Section 503 of the Act. Lastly, we note that, in light of recent changes to the Equal Access to Justice Act made as part of the Contract with America Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), we will indicate an appropriate maximum forfeiture amount in cases where the Commission designates forfeiture matters for hearing. Because this maximum forfeiture amount will be based on the specific facts at issue rather than the statutory maximum for that service, small businesses in the "broadcast", "common carrier", and "other" services will not be subject to the statutory maxima in a hearing unless warranted by the facts in that case. c. Description and Estimate of Number of Small Businesses to Which Rules Will Apply: 6.The RFA generally defines "small entity" as having the same meaning as the terms "small business", "small organization", and "small governmental jurisdiction" and "the same meaning as the term 'small business concern' under the Small Business Act unless the Commission has developed one or more definitions that are appropriate for its activities. 15 U.S.C.  632. A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). The Small Business Enforcement Fairness Act of 1996 (SBREFA) provision of the RFA also applies to nonprofit organizations and to governmental organizations such as governments of cities, counties, towns, townships, villages, school districts, or special districts with populations of less than 50,000. There are 85,006 governmental entities in the United States. The forfeiture guidelines contained in the note adopted here today applies to Commission licensees and regulatees that are small businesses, small organizations, and small governmental jurisdictions as well as non-licensees that violate the Communications Act and the Commission's rules subsequent to receiving a warning. 7.It is difficult at this time to quantify precisely how many small business entities would be affected based on the radiotelephone data provided by the SBA. Inasmuch as we may assess forfeitures against companies and entities that are not radiotelephone companies, we must look beyond this category in order to develop our estimate. In addition to regulating the licensing of the electromagnetic spectrum, the Commission also authorizes and regulates the manufacturing and importation of radio transmitters and electronic equipment. Therefore, we will provide reasonable estimates by the services regulated by each Bureau or Office and ancillary entities affected by those services in light of the SBA and/or Commission definition of a small entity and other relevant defining factors. Where possible, we have also attempted to estimate the number of small businesses that may be assessed a forfeiture even though they are not regulatees but are subject to compliance with our rules, e.g., hotels that must comply with our regulations implementing the Hearing Aid Compatibility Act. In our effort to discuss all services and small businesses that could be impacted, we note that our discussion of some services may overlap or our discussion of some small businesses may be duplicative. CABLE SERVICES OR SYSTEMS 8.The SBA has developed a definition of small entities for cable and other pay television services, which includes all such companies generating less than $11 million in revenue annually. This definition includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems and subscription television services. According to the Census Bureau, there were 1,423 such cable and other pay television services generating less than $11 million in revenue that were in operation for at least one year at the end of 1992. 9.The Commission has developed its own definition of a small cable system operator for the purposes of rate regulation. Under the Commission's rules, a "small cable company," is one serving fewer than 400,000 subscribers nationwide. Based on our most recent information, we estimate that there were 1,439 cable operators that qualified as small cable system operators at the end of 1995. Since then, some of those companies may have grown to serve over 400,000 subscribers, and others may have been involved in transactions that caused them to be combined with other cable operators. Consequently, we estimate that there are fewer than 1,439 small entity cable system operators that may be affected by the forfeiture guidelines explained in the Report and Order adopted today. 10.The Communications Act also contains a definition of a small cable system operator, which is "a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000." The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, we found that an operator serving fewer than 617,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that the number of cable operators serving 617,000 subscribers or less totals 1,450. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. 11.The forfeiture guidelines in the Report and Order adopted today also applies to cable and MDS related entities. The SBA has developed a definition of small entities for cable and other pay television services under Standard Industrial Classification 4841 (SIC 4841), which covers subscription television services, which includes all such companies with annual gross revenues of $11 million or less. This definition includes cable systems operators, closed circuit television services, direct broadcast satellite services (DBS), multipoint distribution systems (MDS), satellite master antenna systems (SMATV), and subscription television services. According to the Census Bureau, there were 1,323 such cable and other pay television services generating less than $11 million in revenue that were in operation for at least one year at the end of 1992. This figure is overinclusive since it includes other pay television services, not only cable and MDS. COMMON CARRIER SERVICES AND RELATED ENTITIES 12.According to the Telecommunications Industry Revenue: Telecommunications Relay Service Fund Worksheet Data (TRS Worksheet), there are 2,847 interstate carriers. These carriers are regulated in some form by the FCC, and are, therefore, subject to its forfeiture provisions. These carriers include, inter alia, local exchange carriers, wireline carriers and service providers, interexchange carriers, competitive access providers, operator service providers, pay telephone operators, providers of telephone toll service, providers of telephone exchange service, and resellers. To the extent that we can ascertain businesses that, due to their relationship to these common carriers, may receive forfeitures, e.g., hotels and motels that fail to provide service in compliance with the Hearing Aid Compatibility Act, these businesses are discussed herein. 13.The SBA has defined a small business for Standard Industrial Classification (SIC) categories 4812 (Radiotelephone Communications) and 4813 (Telephone Communications, Except Radiotelephone) to be small entities when they have fewer than 1,500 employees. We first discuss generally the total number of small telephone companies falling within both of those SIC categories. Then, we discuss the number of small businesses within the two subcategories, and attempt to refine further those estimates to correspond with the categories of telephone companies that are commonly used under our rules. 14.Consistent with our prior practice, we shall continue to exclude small incumbent LECs from the definition of a small entity for the purpose of this FRFA. Nevertheless, as mentioned above, we include small incumbent LECs in our analysis. Accordingly, our use of the terms "small entities" and "small businesses" does not encompass "small incumbent LECs." We use the term "small incumbent LECs" to refer to any incumbent LECs that arguably might be defined by the SBA as "small business concerns." 15.Total Number of Telephone Companies Affected. The forfeiture guidelines in the Report and Order adopted herein may apply to the small telephone companies identified by the SBA. The United States Bureau of the Census ("the Census Bureau") reports that, at the end of 1992, there were 3,497 firms engaged in providing telephone services, as defined therein, for at least one year. This number contains a variety of different categories of carriers, including local exchange carriers, interexchange carriers, competitive access providers, cellular carriers, mobile service carriers, operator service providers, pay telephone operators, personal communications services providers, covered specialized mobile radio providers, and resellers. It seems certain that some of those 3,497 telephone service firms may not qualify as small entities or small incumbent LECs because they are not "independently owned and operated." For example, a PCS provider that is affiliated with an interexchange carrier having more than 1,500 employees would not meet the definition of a small business. It seems reasonable to conclude, therefore, that fewer than 3,497 telephone service firms are small entity telephone service firms or small incumbent local exchange carriers that may be affected by the forfeiture guidelines adopted today. 16.Wireline Carriers and Service Providers. The SBA has developed a definition of small entities for telephone communications companies other than radiotelephone (wireless) companies. The Census Bureau reports that, there were 2,321 such telephone companies in operation for at least one year at the end of 1992. According to the SBA's definition, a small business telephone company other than a radiotelephone company is one employing no more than 1,500 persons. All but 26 of the 2,321 non-radiotelephone companies listed by the Census Bureau were reported to have fewer than 1,000 employees. Thus, even if all 26 of those companies had more than 1,500 employees, there would still be 2,295 non-radiotelephone companies that might qualify as small entities or small incumbent LECs. Although it seems certain that some of these carriers are not independently owned and operated, we are unable at this time to estimate with greater precision the number of wireline carriers and service providers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 2,295 small entity telephone communications companies other than radiotelephone companies that may be affected by the adopted forfeiture guidelines. 17.Local Exchange Carriers. Neither the Commission nor the SBA has developed a definition for small providers of local exchange services (LECs). The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of LECs nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 1,347 companies reported that they were engaged in the provision of local exchange services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of LECs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 1,347 small incumbent LECs that may be affected by the forfeiture guidelines. 18. Interexchange Carriers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to providers of interexchange services (IXCs). The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of IXCs nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 130 companies reported that they were engaged in the provision of interexchange services. Although it seems certain that some of these carriers are not independently owned and operated, nor have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of IXCs that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 130 small entity IXCs that may be affected by the forfeiture guidelines. 19. Competitive Access Providers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to providers of competitive access services (CAPs). The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of CAPs nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 57 companies reported that they were engaged in the provision of competitive access services. Although it seems certain that some of these carriers are not independently owned and operated, nor have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of CAPs that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 57 small entity CAPs that may be affected by the forfeiture guidelines. 20. Operator Service Providers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to providers of operator services. The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of operator service providers nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 25 companies reported that they were engaged in the provision of operator services. Although it seems certain that some of these companies are not independently owned and operated, nor have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of operator service providers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 25 small entity operator service providers that may be affected by the forfeiture guidelines. 21. Pay Telephone Operators. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to pay telephone operators. The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of pay telephone operators nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS Worksheet. According to our most recent data, 271 companies reported that they were engaged in the provision of pay telephone services. Although it seems certain that some of these carriers are not independently owned and operated, nor have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of pay telephone operators that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 271 small entity pay telephone operators that may be affected by the forfeiture guidelines. 22. Providers of Telephone Toll Service, Providers of Telephone Exchange Service. Neither the Commission nor the SBA has developed a definition of small entities applicable to providers of telephone toll service and telephone exchange service. According to the 1992 Census, there were approximately 3,497 firms engaged in providing telephone services, as defined therein, for at least a year. This number contains a variety of different categories of carriers, including local exchange carriers, interexchange carriers, competitive access providers, cellular carriers, mobile service carriers, operator service providers, pay telephone operators, PCS providers, covered SMR providers, providers of telephone toll service, providers of telephone exchange service, and resellers. It seems certain that some of those 3,497 telephone service firms may not qualify as small businesses because they are not "independently owned and operated." It seems reasonable to conclude, therefore, that fewer than 3,497 telephone service firms are providers of telephone toll service or providers of telephone exchange service and are small entities that may be affected by the forfeiture guidelines. 23. Independent Operator Service Providers, Independent Directory Assistance Providers, Independent Directory Listing Providers, and Independent Directory Database Managers. We were unable to obtain reliable data regarding the number of entities that provide these telecommunications services or how many of these are small entities. The Commission has not developed a definition of small entities applicable to telecommunications service providers. Therefore, the closest applicable definition of a small entity providing telecommunications services is the definition under the SBA rules applicable to business services companies, SIC 7389, which defines a small entity to be a business services company with annual receipts of less than five million dollars. U.S. Census data provides that 46,289 firms providing business services had annual receipts of 5 million dollars or less. Because it seems unlikely that all of the business services firms would meet the other criteria, it seems reasonable to conclude that fewer than 46,289 firms may be small entities that might be affected by our forfeiture guidelines. 24. Resellers (including debit card providers). Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to resellers. The closest applicable SBA definition for a reseller is a telephone communications company, SIC category 4813. However, the most reliable source of information regarding the number of resellers nationwide of which we are aware appears to be the data that the Commission collects annually in connection with the TRS Worksheet. According to our most recent data, 260 companies reported that they were engaged in the resale of telephone service. Although it seems certain that some of these companies are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of resellers that would qualify as small entities or small incumbent LEC concerns under the SBA's definition. Consequently, we estimate that there are fewer than 260 small entity resellers that may be affected by the forfeiture policy contained in the Report and Order . 25. 800 Subscribers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to 800 subscribers. The most reliable source of information regarding the number of 800-subscribers of which we are aware appears to be the data we collect on the number of 800-numbers in use. According to our most recent data, at the end of 1995, the number of 800-numbers in use was 6,987,063. Although it seems certain that some of these subscribers are not independently owned and operated businesses, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of 800- subscribers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 6,987,063 small entity 800-subscribers that may be affected by the forfeiture guidelines adopted today. 26. Location Providers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to location providers. A location provider is the entity that is responsible for maintaining the premises upon which the payphone is physically located. Because location providers do not fall into any specific category of business entity, it is impossible to estimate with any accuracy the number of location providers. Using several sources, however, we have derived a figure of 1,850,000 payphones in existence. Although it seems certain that some of these payphones are not located on property owned by location providers that are small business entities, nor does the figure take into account the possibility of multiple payphones at a single location, we are unable at this time to estimate with greater precision the number of location providers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 1,850,000 small entity location providers that may be affected by the forfeiture guidelines adopted in this Report and Order. 27.In addition to these common carrier licensees, those who may be held liable for forfeitures include non-licensees who provide telephone services as a result of the Hearing Aid Compatibility (HAC) Act or who are operator service providers : (a) workplaces; (b) confined settings, such as hospitals and nursing homes; (c) hotels and motels; and (d) importers and manufacturers of telephones for use in the United States. There is little overlap among these categories because the Commission's workplace rules affect workplace noncommon areas, while the rules that apply to confined settings and hotels and motels affect other than the workplaces of those establishments. Telephone manufacturers would be affected as workplaces, but separately affected by the requirement to affix the letters "HAC" to telephones and by the volume control manufacturing requirement. The determination of whether or not an entity within these industry groups is small is made by the SBA. These standards also apply in determining whether an entity is a small business for purposes of the RFA. 28. Workplaces. Workplaces encompass establishments for profit and nonprofit, plus local, state and federal governmental entities. Establishments with fewer than fifteen employees generally would be excluded, because they are exempt from the Commission's new rules, except for the work station requirement. The SBA guidelines to the SBREFA state that about 99.7 percent of all firms are small and have fewer than 500 employees and less than $25 million in sales or assets. There are approximately 6.3 million establishments in the SBA database. We estimate that our rules would affect fewer than 6.3 million establishments, because our rules exclude establishments with fewer than fifteen employees. However, we have not been able to determine what portion of the 6.3 million establishments have fewer than fifteen employees. The SBA data base does include nonprofit establishments, but it does not include governmental entities. SBREFA requires us to estimate the number of such entities with populations of less than 50,000 that would be affected by our forfeiture guidelines. There are 85,006 governmental entities in the nation. This number includes such entities as states, counties, cities, utility districts and school districts. Of the 85,006 governmental entities, 38,978 are counties, cities, and towns, and of those, 37,566, or 96 percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 96 percent, or 81,600, are small entities that may be subject to a potential forfeiture. 29.Confined Settings. According to the SBA's regulations, nursing homes and hospitals must have annual gross receipts of $5 million or less in order to qualify as a small business concern. 13 C.F.R. 121.201. There are approximately 11,471 nursing care firms in the nation, of which 7,953 have annual gross receipts of $5 million or less. There are approximately 3,856 hospital firms in the nation, of which 294 have gross receipts of $5 million or less. Thus, the approximate number of small confined setting entities to which the Commission's forfeiture guidelines may apply is 8,247. 30.Hotels and Motels. According to the SBA's regulations, hotels and motels must have annual gross receipts of $5 million or less in order to qualify as a small business concern. 13 C.F.R. 121.201. There are approximately 34,671 hotel and motel firms in the United States. Of those, approximately 31,382 have gross receipts of $5 million or less. Thus, the approximate number of hotels and motels to which the Commission's forfeiture guidelines may apply is 31,382. 31. Telephone Manufacturers and Importers. According to the SBA's regulations, telephone apparatus firms must have 1,000 or fewer employees in order to qualify as a small business concern. 13 C.F.R. 121.201. There are approximately 456 telephone apparatus firms in the nation. Figures are not available on how many of these firms have 1,000 or fewer employees, but 401 of the firms have 500 or fewer employees. It is probable that the great bulk of the 456 firms have 1,000 or fewer employees, and would be classified as small entities. In addition to telephone apparatus firms, there are approximately 12,654 wholesale electronic parts and equipment firms in the nation. Many of these firms serve as importers of telephones. According to the SBA's regulations, wholesale electronic parts and equipment firms must have 100 or fewer employees in order to qualify as a small business entity. 13 C.F.R. 121.201. Of the 12,654 firms, 12,161 have fewer than 100 employees, and would be classified as small entities. INTERNATIONAL SERVICES 32.The Commission has not developed a definition of small entities applicable to licensees in the international services. Therefore, the applicable definition of small entity is the definition under the SBA rules applicable to Communications Services, Not Elsewhere Classified. This definition provides that a small entity is expressed as one with $11.0 million or less in annual receipts. 33.Because the RFA amendments were not in effect until the comment period for this proceeding was closed, the Commission was unable to request information regarding the number of licensees in the international services discussed below that meet this definition of a small business. Thus, we are providing an estimate of licensees that constitute a small business. 34.International Broadcast Stations. An international broadcast station employs frequencies allocated to the broadcasting service between 5,950 and 26,100 kHz. The transmissions of an international broadcast station, which are licensed to non-governmental entities only, are intended to be received directly by the general public in foreign countries. Commission records show that there are 20 international broadcast station licensees. Although we were unable to request the revenue information, we estimate that most of the international broadcast licensees would constitute a small business under the SBA definition. 35.International Fixed Public Radio (Public and Control Stations). International fixed public radio is a fixed service in which the stations are intended to provide radio communications between any one of the 50 states or any U. S. possession and any foreign point. In addition, radio communications within the contiguous 48 states in connection with the relaying of international traffic between stations which provide the above service are also deemed international fixed public radio. There are 15 licensees in this service. Although we were unable to request the revenue information, we estimate that some of the international broadcast licensees would constitute a small business under the SBA definition. 36.Recognized Private Operating Agency. The Commission's rules provide a procedure for companies to request a formal designation as a Recognized Private Operating Agency (RPOA). The term RPOA was used in the International Telecommunications Union (ITU) Convention in force at the time the rule was adopted. That convention provides that an RPOA is a "private operating agency" (a company that provides an international telecommunications service or operates a radio facility capable of causing harmful interference with the radio services of other countries) that is authorized by a country that is a member of the ITU. In 1992, the ITU changed the term to "recognized operating agency" (ROA) with essentially the same definition. All entities that the Commission has authorized as common carriers under the Communications Act, including those domestic common carriers for whom the Commission has waived the requirement to obtain Section 214 authorization, are ROAs for purposes of the ITU. Those entities that operate radio frequencies capable of causing harmful interference with radio operations in other countries are also ROAs. Additionally, the U.S. Department of State grants ROA status to enhanced service providers under the Commission's ROA-designation rules. The Department has designated approximately 20 such enhanced service providers ROAs. 37.Section 214 Applications. Section 214 of the Communications Act requires common carriers to obtain a certificate that the public convenience and necessity requires or will require construction and/or operation of a line of communication, or the discontinuance, reduction or impairment of service. There are more than 500 Section 214 license applications per year. Although we were unable to request the revenue information, we estimate that the majority of the licensees with this status would constitute a small business under the SBA definition. 38. Fixed Satellite Transmit/Receive Earth Stations. Fixed satellite transmit/receive earth stations include international and domestic earth stations operating in the 4/6 GHz and 11/12/14 GHz bands. There are approximately 4200 earth station authorizations, a portion of which are Fixed Satellite Transmit/Receive Earth Stations. Although we were unable to request the revenue information, we estimate that some of the earth stations would constitute a small business under the SBA definition. 39.Fixed Satellite Small Transmit/Receive Earth Stations. Small transmit/receive earth stations operate in the 4/6 GHz frequency bands with antennas that are two meters or less in diameter. There are 4200 earth station authorizations, a portion of which are Fixed Satellite Small Transmit/Receive Earth Stations. Although we were unable to request the revenue information, we estimate that some of the fixed satellite transmit/receive earth stations would constitute a small business under the SBA definition. 40.Receive Only Earth Stations. These stations are licensed only to receive transmissions from satellites. There are approximately 6,390 receive only earth station registrations on file. Although we were unable to request the revenue information, we estimate that most of the receive only earth stations would constitute a small business under the SBA definition. 41.Fixed Satellite Very Small Aperture Terminal (VSAT) Systems. VSAT systems operate in the 12/14 GHz frequency bands. Although various size small earth stations may be used, all stations of a particular size must be technically identical. Because these stations operate on a primary basis, frequency coordination with terrestrial microwave systems is not required. Thus, a single "blanket" application may be filed for a specified number of small antennas and one or more hub stations. The Commission has processed 377 applications. At this time, we are unable to estimate of the number of small business licensees that are VSAT systems that could be impacted by the forfeiture guidelines. 42.Mobile Satellite Earth Stations. Mobile satellite earth stations are intended to be used while in motion or during halts at unspecified points. These stations operate as part of a network that includes a fixed hub station or stations. The network may provide a variety of land, maritime and aeronautical voice and data services. There are two licensees. At this time, we are unable to estimate of the number of small business licensees that are mobile satellite earth stations that could be impacted by the forfeiture guidelines. 43.Radio Determination Satellite Earth Stations. A radio determination satellite earth station is used in conjunction with a radio determination satellite service (rdss) system for the purpose of providing position location information. These stations operate as part of a network that includes a fixed hub station or stations that operate in the frequency bands (1610 -1626.5 MHz and 2483.5 - 2500 MHz) allocated to rdss. There are two licensees. At this time, we are unable to estimate the number of small business licensees that are radio determination satellite earth stations that could be impacted by the forfeiture guidelines. 44.Space Stations (Geostationary). Satellite services use radio transmission between authorized geostationary satellite space stations and earth stations for common carrier and private communications. FCC authorization is required to construct, launch and operate space stations. Commission records reveal that there are 24 space station licensees. At this time, we are unable to estimate of the number of small business licensees that are geostationary space stations that could be impacted by the forfeiture guidelines. 45.Space Stations (Non-Geostationary). Satellite space stations orbit the earth in non- geostationary orbits. Because a satellite system is generally comprised of a number of technically identical space stations, a "blanket" system application may be filed for a specified number of space stations. The space stations may transmit to fixed or mobile earth stations for common carrier or private communications. There are six Non-Geostationary Space Station licensees. At this time, we are unable to estimate of the number of small business licensees that are Non-Geostationary Space Stations that could be impacted by the forfeiture guidelines. 46.Direct Broadcast Satellites. The direct broadcast satellite (DBS) service permits signals transmitted or retransmitted by space stations to be directly received by the public. Because DBS provides subscription services, DBS falls within the SBA definition of Cable and Other Pay Television Services. This definition provides that a small entity is expressed as one with $11.0 million in annual receipts. There are eight DBS licensees as of December 1996. At this time, we are unable to estimate of the number of small business licensees that are DBS licensees that could be impacted by the forfeiture guidelines. MASS MEDIA SERVICES 47.Commercial Radio and Television Services. The proposed rules and policies will apply to television broadcasting licensees, radio broadcasting licensees, permittees and potential licensees of either service. The SBA defines a television broadcasting station that has no more than $10.5 million in annual receipts as a small business. Television broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and which produce taped television program materials. Separate establishments primarily engaged in producing taped television program materials are classified under another SIC number. There were 1,509 television stations operating in the nation in 1992. That number has remained fairly constant as indicated by the approximately 1,550 operating television broadcasting stations in the nation as of August, 1996. For 1992, the number of television stations that produced less than $10.0 million in revenue was 1,155 establishments. 48.Additionally, the Small Business Administration defines a radio broadcasting station that has no more than $5 million in annual receipts as a small business. A radio broadcasting station is an establishment primarily engaged in broadcasting aural programs by radio to the public. Included in this industry are commercial, religious, educational, and other radio stations. Radio broadcasting stations which primarily are engaged in radio broadcasting and which produce radio program materials are similarly included. However, radio stations which are separate establishments and are primarily engaged in producing radio program material are classified under another SIC number. The 1992 Census indicates that 96 percent of (5,861 of 6,127) radio station establishments produced less than $5 million in revenue in 1992. Official Commission records indicate that 11,334 individual radio stations were operating in 1992. As of August 1996, official Commission records indicate that 12,088 radio stations were operating. 49.Thus, the Report and Order adopted today will affect approximately 1,550 television stations; approximately 1,194 of those stations are considered small businesses. Additionally, the Policy Statement will affect 12,088 radio stations, approximately 11,605 of which are small businesses. These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from non-television or non-radio affiliated companies. In addition to owners of operating radio and television stations, any entity who seeks or desires to obtain a television or radio broadcast license such as a permittee may be affected by the forfeiture guidelines in the Report and Order. The number of entities that may seek to obtain a television or radio broadcast license is unknown. Alternative Classification of Small Stations 50.An alternative way to classify small radio and television stations is the number of employees. The Commission currently applies a standard based on the number of employees in administering its Equal Employment Opportunity Rule (EEO) for broadcasting. Thus, radio or television stations with fewer than five full-time employees are exempted from certain EEO reporting and record keeping requirements. We estimate that the total number of broadcast stations with 4 or fewer employees is approximately 4,239. Experimental, auxiliary, and special broadcast and other program distribution services 51.This service involves a variety of transmitters, generally used to relay broadcast programming to the public (through translator and booster stations) or within the program distribution chain (from a remote news gathering unit back to the station). The Commission has not developed a definition of small entities applicable to broadcast auxiliary licensees. Therefore, the applicable definition of small entity is the definition under the Small Business Administration (SBA) rules applicable to radiotelephone companies. This definition provides that a small entity is a radiotelephone company employing no more than 1,500 persons. 52.There are currently 2,785 FM translators and boosters, 4,979 TV translators, and 1,951 Low Power TV stations which will be affected by the new forfeiture guidelines. The FCC does not collect financial information on any broadcast facility and the Department of Commerce does not collect financial information on these auxiliary broadcast facilities. We believe, however, that most, if not all, of these auxiliary facilities, including Low Power TV stations, could be classified as small businesses by themselves. We also recognize that most translators and boosters are owned by a parent station which, in some cases, would be covered by the revenue definition of small business entity discussed above. These stations would likely have annual revenues that exceed the SBA maximum to be designated as a small business (either $5 million for a radio station or $10.5 million for a TV station). Multipoint Distribution Service (MDS) 53.This service involves a variety of transmitters, which are used to relay programming to the home or office, similar to that provided by cable television systems. In connection with the 1996 MDS auction the Commission defined small businesses as entities who had annual average gross revenues for the three preceding years not in excess of $40 million. This definition of a small entity in the context of MDS auctions has been approved by the SBA. See Amendment of Parts 21 and 74 of the Commission's Rules With Regard to Filing Procedures in the Multipoint Distribution Service and in the Instructional Television Fixed Service and Implementation of Section 309(j) of the Communications Act - Competitive Bidding, 10 FCC Rcd 9589 (1995). There are 1,573 previously authorized and proposed MDS stations currently licensed. These stations were licensed prior to implementation of Section 309(j) of the Act. Licenses for new MDS facilities are now awarded to auction winners in Basic Trading Areas (BTAs) and BTA-like areas. The MDS auctions resulted in 67 successful bidders obtaining licensing opportunities for 493 BTAs. Of the 67 auction winners, 61 meet the definition of a small business. Thus, we conclude that there are 1,634 MDS providers that are small businesses as deemed by the SBA and the Commission's auction rules. Instructional Television Fixed Services (ITFS) 54.Instructional Television Fixed Service stations (ITFS) are used to relay educational and instructional programming to the home or office. There are presently 2,032 ITFS licensees. All but one hundred of these licenses are held by educational institutions. As stated earlier, educational institutions are included in the definition of a small business. See Appendix C, para. 6, supra. Thus, 1,932 licensees are small businesses. OFFICE OF ENGINEERING AND TECHNOLOGY AUTHORIZATIONS 55.Inasmuch as the RFA amendments were not in effect until the record in this proceeding was closed, the Commission was unable to request information regarding the number of small businesses within each of the services or the number of small businesses seeking Commission authorization from our technical office that could be affected by the forfeiture guidelines. We have, however, made estimates based on our knowledge about the applications that have been submitted in the past. To the extent that a government entity may be a licensee or an applicant, the impact on those entities is included in the estimates for small businesses below. Experimental Radio Service 56.The Experimental Radio Service (ERS) provides for experimental uses of radio frequencies and for development of techniques and systems that are not otherwise permitted under existing service rules. The ERS provides opportunities for manufacturers, inventors, entrepreneurs, and student