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Phase II Challenge Process and Statewide Commitment Public Notice

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Released: December 27, 2012

PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0513

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322


DA 12-2075

Release Date: December 27, 2012

WIRELINE COMPETITION BUREAU SEEKS COMMENT ON PROCEDURES

RELATING TO AREAS ELIGIBLE FOR FUNDING AND ELECTION TO MAKE A

STATEWIDE COMMITMENT IN PHASE II OF THE CONNECT AMERICA FUND

WC Docket No. 10-90

Comment Date:


[30 days after Federal Register publication]

Reply Comment Date:

[45 days after Federal Register publication]

I.

INTRODUCTION

1. The Commission has delegated to the Wireline Competition Bureau (Bureau) the task of
developing a forward-looking cost model to determine support levels to be offered to price cap
carriers in Phase II of the Connect America Fund. The Bureau recently announced the availability of
version one of the Connect America Cost Model, which provides the ability to calculate costs using
a variety of different inputs and assumptions.1
2. The Bureau expects to solicit additional public comment on the cost model through its
ongoing Virtual Workshop, which focuses on technical model design and input issues, and public
notices, which will focus on other issues relating to implementation of Phase II, before finalizing the
Connect America Cost Model.
3. In this Public Notice, the Bureau proposes procedures to provide an opportunity for
parties to challenge whether census blocks that are identified as eligible to receive Phase II support
are in fact unserved by an unsubsidized competitor. We also seek comment on procedures relating
to the election of price cap carriers to accept Phase II support in exchange for making a statewide
commitment.

II.

BACKGROUND

4. On November 18, 2011, the Commission released the USF/ICC Transformation Order
and FNPRM, which comprehensively reforms and modernizes the universal service and intercarrier
compensation systems. As part of the reform, the Commission adopted a framework for providing
ongoing support to areas served by price cap carriers, including areas lacking broadband-capable
infrastructure, known as Phase II of the Connect America Fund. Specifically, the Commission will


1 Wireline Competition Bureau Announces Availability of Version One of the Connect America Fund Phase II
Cost Model,
WC Docket Nos. 10-90 and 05-337, Public Notice, DA 12-2011 (Wireline Comp. Bur. Dec. 11,
2012).

provide ongoing support to these areas for a five-year period through “a combination of a forward-
looking cost model and competitive bidding.”2
5. Since then, the Bureau released the Request for Models Public Notice, inviting interested
parties to submit proposed cost models.3 In response, parties submitted two separate models into the
record.4 In June 2012, the Bureau sought comment on these models as well as “on a number of
threshold decisions regarding the design of and data inputs to the forward-looking cost model.”5
6. The Bureau hosted an in-person workshop in September 2012 to discuss the design and
mechanics of the cost models in the record and commenced a virtual workshop in October, soliciting
input on a variety of topics related to the development and adoption of the cost model.6 On
December 10, 2012, the Bureau sought comment on whether additional functionalities should be
added to the Connect America Cost Model platform.7 We will provide additional opportunity for
public comment on the model inputs prior to adopting the final Connect America Cost Model.
7. The Commission has implemented or is seeking comment on potential processes to
determine areas eligible for support in other, related proceedings. In particular, earlier this year the
Wireless Telecommunications Bureau provided an opportunity for public input before finalizing the


2 See Connect America Fund, WC Docket No. 10-90, et al., Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd 17663, 17673, para. 23 (2011) (USF/ICC Transformation Order or Order), pets. for
review pending sub nom
. In re: FCC 11-161, No. 11-9900 (10th Cir. filed Dec. 8, 2011).
3 Request for Connect America Fund Cost Models, Public Notice, WC Docket Nos. 10-90 and 05-337, 26 FCC
Rcd 16836 (Wireline Comp. Bur. 2011) (Request for Models PN).
4 Letter from Jonathan Banks, USTelecom, to Marlene H. Dortch, Federal Communications Commission, filed
Feb. 13, 2012 (attaching updated documentation of CQBAT model) (CQBAT letter). This submission updated
the ABC Coalition’s prior proposal for a forward-looking model, which had been submitted prior to the release
of the USF/ICC Transformation Order. Letter from Robert W. Quinn, Jr., AT&T, Steve Davis, CenturyLink,
Michael T. Skrivan, FairPoint, Kathleen Q. Abernathy, Frontier, Kathleen Grillo, Verizon, and Michael D.
Rhoda, Windstream, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al., Attach. 1 at 13 (filed
July 29, 2011) (ABC Plan). The ABC Coalition model was submitted pursuant to a protective order adopted
by the Bureau. See Connect America Fund, High-Cost Universal Service Support, WC Docket Nos. 10-90 and
05-337, Second Supplemental Protective Order, 27 FCC Rcd 1503 (2012). Alaska Communications Systems
Group, Inc. also submitted a model that estimates the cost of serving Alaska only. See Comments of Alaska
Communications Systems Group, Inc., WC Docket Nos. 10-90 and 05-337 (filed Feb. 1, 2012). This model
was submitted pursuant to a protective order adopted by the Bureau. Connect America Fund, High-Cost
Universal Service Support
, WC Docket Nos. 10-90 and 05-337, Second Protective Order, 27 FCC Rcd 1494,
1494 n.2 (Wireline Comp. Bur. 2012).
5 Wireline Competition Bureau Seeks Comment on Model Design and Data Inputs for Phase II of the Connect
America Fund
, WC Docket Nos. 10-90 and 05-337, Public Notice, 27 FCC Rcd 6147 (Wireline Comp. Bur.
2012).
6 Wireline Competition Bureau Announces Connect America Phase II Cost Model Workshop, WC Docket Nos.
10-90 and 05-337, Public Notice, 27 FCC Rcd. 9882 (Wireline Comp. Bur. 2012); Wireline Competition
Bureau Announces Commencement of Connect America Phase II Cost Model Virtual Workshop
, WC Docket
Nos. 10-90 and 05-337, Public Notice, 27 FCC Rcd 11977 (Wireline Comp. Bur. 2012).
7 Wireline Competition Bureau Announces Availability of Version One of the Connect America Fund Phase II
Cost Model
; see also http://www.fcc.gov/blog/connect-america-cost-model-platform.
2

list of eligible census blocks in the Mobility Fund Phase I auction proceeding.8 The Commission
also recently sought comment on a challenge process for potential future rounds of Connect America
Fund Phase I.9

III.

DISCUSSION

A.

Procedures for Challenging Whether an Area is Served by an Unsubsidized
Competitor

8. The Commission directed the Bureau, after the cost model is adopted, to “publish a list
of all eligible census blocks” (specifically, those census blocks in price cap territories below the
extremely high-cost threshold but above the funding threshold) and provide an opportunity for
parties to “challenge the determination of whether or not areas are unserved by an unsubsidized
competitor.”10 We propose to utilize the following procedures to allow interested parties to make
such challenges when we adopt a final model and seek comment on these proposed procedures.
9. The Commission concluded that “it would be appropriate to exclude any area served by
an unsubsidized competitor,” and it delegated to the Bureau “the task of implementing the specific
requirements of this rule.” 11 Consistent with the directive in the USF/ICC Transformation Order,
we propose to publish a list of eligible census blocks classified by the cost model as unserved by an
unsubsidized competitor offering service that meets the broadband performance obligations for
Phase II. For purposes of this determination, the Commission has defined an unsubsidized
competitor as one that is offering terrestrial fixed broadband with an advertised speed of 4 Mbps
downstream and 1 Mbps upstream.12 Consistent with the approach adopted by the Commission for
Connect America Phase I, we propose to use 3 Mbps downstream and 768 kbps upstream as a proxy
for 4 Mbps downstream and 1 Mbps upstream in developing this initial list because that information
is readily available from other data sources.13 Likewise, for administrative simplicity, we propose


8 See Mobility Phase I Auction Scheduled for September 27, 2012 Notice and Filing Requirements and Other
Procedures for Auction 901
, AU Docket No. 12-25, Public Notice, 27 FCC Rcd 4725 (Wireless Tel. Bur.,
Wireline Comp. Bur. 2012).
9 See Connect America Fund, WC Docket No. 10-90, Further Notice of Proposed Rulemaking, 27 FCC Rcd
14566 (2012); see also Wireline Competition Bureau Seeks Comment on Areas Shown as Unserved on the
National Broadband Map for Connect America Phase I Incremental Support
, WC Docket No. 10-90, Public
Notice, DA 12-1961 (Wireline Comp. Bur. Dec. 5, 2012) (Phase I Challenge Process PN).
10 USF/ICC Transformation Order, 26 FCC Rcd at 17701, 17729, paras. 103, 170.
11 Id. at 17729, para. 171. The Commission noted that the model scenarios submitted by the ABC Plan
proponents excluded areas already served by a cable company offering broadband. It also acknowledged that
other commenters suggested that areas with reliable 4G wireless service and areas that received American
Recovery and Reinvestment Act stimulus funding from RUS or NTIA to build broadband facilities could be
excluded.
12 Id. at 17701, para. 103. There are currently petitions for reconsideration pending regarding the definition of
unsubsidized competitor. See, e.g., Petition for Partial Reconsideration of the Wireless Internet Service
Providers, WC Docket No. 10-90 et al. (filed Dec. 29, 2011); NTCH Petition for Reconsideration, WC Docket
No. 10-90 et al. (filed Dec. 29, 2011). This Public Notice does not prejudge the disposition of those petitions.
13 This is consistent with the Commission’s prior approach in the USF/ICC Transformation Order, which
recognized that data on broadband availability at 3 Mbps/768 kbps collected for the National Broadband Map
and through the Commission’s Form 477 process is an acceptable proxy for determining whether an area is
served by 4 Mbps/1 Mbps. See USF/ICC Transformation Order, 26 FCC Rcd at 17701, para. 103 n.168.
3

that to the extent a party is challenging the classification of a particular census block, it may present
evidence demonstrating the block in question is served by service providing 3 Mbps downstream and
768 kbps upstream.
10. We expect the final Connect America Cost Model we adopt will use the National
Broadband Map reflecting State Broadband Initiative (SBI) data as of June 2012, potentially
supplemented with other data sources.14 Once we publish the relevant list of unserved census blocks
with costs between the extremely high-cost threshold and the funding threshold shown in the model,
we propose that interested parties would then have an opportunity to challenge that list. Specifically,
challengers would submit revisions and other potential corrections to the list of eligible census
blocks where coverage by unsubsidized competitors is either overstated (i.e., census blocks are listed
as served where they are in fact unserved) or understated (i.e., census blocks are listed as unserved
when they are in fact served). We propose that parties contending the Bureau’s original
classification as served or unserved is accurate would have an opportunity to submit evidence to
rebut the challenge.
11. Commenters seeking to challenge the eligibility of a particular area for funding would
be required to list specific census blocks that are inaccurately classified as served or unserved by an
unsubsidized competitor, along with a brief statement and supporting evidence demonstrating that
those census blocks are inaccurately reported. We propose not to process any challenge that lacks
some evidentiary showing regarding the census block in question; a challenge that merely asserts the
area is or is not served would not be sufficient. Challenges to a census block’s eligibility may be
based on any or all of the Commission’s broadband performance metrics – speed, latency, and/or
capacity (i.e., minimum usage allowance).15 Challenges may also be based on non-performance
metrics that affect the availability of broadband in a census block. For example, if the provider of
broadband in that census block only offers service to business customers and not residential
customers, the status of that block as served may be challenged.
12. Consistent with our proposal above, we propose that to be deemed served, a census
block must have access to broadband with speeds of at least 3 Mbps downstream and 768 kbps
upstream.16 Proposed examples of potential types of probative evidence regarding the availability of
broadband service meeting the speed requirements established by the Commission include, but are
not limited to, more recent SBI data than that used in version of the model adopted by the Bureau;
maps or printouts of websites indicating coverage for a particular area accompanied by an officer


14 Other data could include information provided in response to the public notice seeking updates for a
potential future round of Phase I. See Phase I Challenge Process PN.
15 We note that an unsubsidized competitor not only must meet the Commission’s broadband speed
requirements but also must meet defined capacity and latency requirements. Phase II support is excluded for
“areas where an unsubsidized competitor offers broadband service that meets the broadband performance
requirements
. . . .” USF/ICC Transformation Order, 26 FCC Rcd at 17729, para. 170 (emphasis added). The
broadband performance requirements are listed in Section VI.B of the USF/ICC Transformation Order and
include speed, latency, and capacity. See id. at 17696-99, paras. 92-100. Thus, to demonstrate that a census
block marked as unserved is in fact served, a challenger would need to show all three performance metrics
were met – speed, latency, and capacity. However, to demonstrate that a census block is unserved, a
challenger need only show that any of the three is not met – speed, latency, or capacity.
16 As discussed above, 3 Mbps/768 kbps is used as a proxy for 4 Mbps/1 Mbps. See supra para. 9. See also
USF/ICC Transformation Order
, 26 FCC Rcd at 17701, para. 103 n.168.
4

certification that such materials reflect current conditions;17 printouts of billing information for
customers within the particular census block, with identifying customer information appropriately
masked; engineering analyses or drive tests; explanations of methodologies for determining
coverage; and certifications by one or more individuals as to the veracity of the material provided.18
What other information regarding the speed of alleged service offerings would be readily available
to potential challengers or parties seeking to maintain the classification of an area as shown on the
National Broadband Map?
13. The Commission specified in the USF/ICC Transformation Order that latency should be
sufficiently low as to enable real-time applications, such as Voice over Internet Protocol (VoIP).19
Proposed examples of potential types of probative evidence regarding latency include, but are not
limited to, documentation that a provider is actually offering voice service to customers in the
relevant area, such as a printout of a website showing voice service availability at a particular
address in the census block accompanied by an officer certification, or a sworn declaration from one
or more customers within the census block that they subscribe to voice from that provider. What
other information regarding the latency of alleged service offerings would be readily available to
potential challengers or parties seeking to maintain the classification of an area as shown on the
National Broadband Map?
14. The Commission delegated to the Wireline Competition Bureau and Wireless
Telecommunications Bureau the task of adopting capacity or “minimum usage allowance”
requirements for recipients of Phase II support.20 Proposed examples of potential types of probative
evidence regarding minimum usage include, but are not limited to, a printout of a website showing
market offerings meeting the minimum usage requirement accompanied by an officer certification,
or a sworn declaration from one or more customers within the census block that they subscribe to a
service offering meeting the minimum usage allowance requirement. What other information
regarding the capacity of alleged service offerings would be readily available to potential challengers
or parties seeking to maintain the classification of an area as shown on the National Broadband
Map? Should we require one or more of these evidentiary showings for a challenge to be deemed
complete as filed?
15. We propose that all certifications regarding evidence supporting or opposing a challenge
be signed by an individual with relevant knowledge (such as officer of the company making or
opposing the challenge, or a representative of the state mapping agency) certifying that the
information presented is accurate to the best of his or her knowledge.
16. To assist in the development of a more complete record, we also seek comment on how
to ensure that potentially interested parties are aware of the opportunity for public input. For
instance, should a purported unsubsidized competitor challenging the classification of a block as
unserved (and therefore eligible for funding) be required to serve a copy of its challenge on the price
cap carrier? If a price cap carrier believes a particular census block should be on the list of blocks


17 Such a situation could occur, for instance, if an unsubsidized competitor completed deployment to a
particular census block after the last collection of SBI data. The officer of the unsubsidized competitor would
certify that service is now available in the block shown on the map or website printout.
18 See, e.g., Mobility Phase I Auction Scheduled for September 27, 2012 Notice and Filing Requirements and
Other Procedures for Auction 90
1, 27 FCC Rcd at 4734-35, para. 20.
19 USF/ICC Transformation Order, 26 FCC Rcd at 17698, para. 96.
20 Id. at 17799, para. 99.
5

eligible for funding (because it is not served), should it be required to serve a copy of its challenge
by overnight delivery on any entity shown as serving the block on the National Broadband Map?
17. We intend to conduct this challenge process in an expeditious fashion. We propose that
after the release of the list of census blocks, parties would have 45 days to file challenges to the list.
Parties wishing to rebut such challenges would have an additional 20 days to submit evidence
supporting their contentions. We seek comment on whether this proposed time frame adequately
serves our goal of providing a meaningful opportunity for challenge, while concluding this challenge
process in a reasonable timeframe. We propose that all evidence regarding the status of a particular
census block must be filed within this timeframe; any evidence filed after these dates will be deemed
untimely. Strict adherence to these deadlines is necessary to provide an adequate opportunity for the
party that contends the classification as served or unserved is accurate to respond to all evidence
submitted by the challenger within the reply comment timeframe, and in order for this administrative
process to be completed expeditiously.
18. At the close of the challenge timeframe, we propose that where the Bureau finds that it
is more likely than not that a census block is inaccurately classified as served or unserved, we would
modify the classification of that census block for purposes of finalizing the census blocks that will be
eligible for a price cap carrier statewide commitment under the Connect America Phase II program.
In the event that both the challenger and the opponent provide credible evidence regarding the status
of a particular block, we propose that the default determination will be however the block is
classified on the National Broadband Map at the time the challenge is resolved. We recognize the
practical difficulties that may ensue in situations where one party says service exists and the other
party says service does not exist. Because it may be difficult and expensive for the party contending
that service does not exist to prove a negative, we propose that the most expedient solution in such
situations is to rely upon the most current available map data.
19. We propose that, in making its determinations, the Bureau would consider whether the
challenger took steps to bring the alleged errors in the National Broadband Map to the attention of
the relevant state mapping authority and the outcome of any such efforts. It is possible that the
December 2012 SBI data may become available shortly before or after the forward looking cost
model is adopted, and therefore challengers may wish to present evidence of the more recent
classification on the National Broadband Map in their challenges. If December 2012 SBI data is
available at the time the Bureau resolves these challenges, we propose to rely upon the December
2012 classification.
20. While the Bureau will rely on updates to the available SBI data, we propose to focus on
evidence regarding current broadband availability at the time we resolve the challenge, and not on
announced market expansion plans that may occur at some future date.21 We note that announced
deployment plans may change for business and other reasons, and if we were to exclude a census
block area based on announced plans to extend service to that block, that could provide an
opportunity for potential competitors to engage in strategic behavior to eliminate support for a
particular census block, without an assurance that the competitor will actually serve the block at a
future date.


21 We note that under the requirements for the collection of SBI data, broadband service is deemed “‘available’
to an end user at an address if a broadband service provider does, or could, within a typical service interval (7
to 10 business days) without an extraordinary commitment of resources” provision service at the requisite
speed. Broadband Data Improvement Act Notice of Funds Available, 74 Fed. Reg. 32545, 32548 (July 8,
2009).
6

21. We also propose that the Bureau only include on the preliminary list of blocks eligible
for funding those census blocks that are completely unserved. We further propose to treat partially
served census blocks as served and therefore not eligible for funding in Phase II. We anticipate that
entertaining challenges with respect to potentially many thousands of individual census blocks could
be a significant undertaking by itself, and we are concerned that the administrative burden of
permitting challenges at the sub-census block level would outweigh the potential benefits. We
therefore propose to conduct the challenge process at the census block level. To the extent
commenters believe that we should entertain sub-census block challenges, they should describe with
specificity how their proposed process would work, and in particular how we would ensure
compliance with build out requirements in partially served census blocks.
22. We seek comment on all these proposals and on any alternatives. If commenters believe
different procedures would better serve the Commission’s goal of targeting support to areas without
unsubsidized competitors, they should provide a detailed description of their preferred alternative.
We welcome suggested alternatives that minimize the impact of these proposals on small businesses,
as well as comments regarding the cost and benefits of implementing these proposals.

B.

Procedures for Implementing the Price Cap Carrier Election to Make a
Statewide Commitment

23. We propose that after reviewing any public comment, the Bureau will publish a revised
list of census blocks and a revised list of support amounts associated with each eligible area that will
be offered to price cap carriers. We seek comment on whether the election period should be 90 days
from the date of release of the finalized list, which would be the same as the time period provided to
price cap carriers for electing to accept incremental support for Connect America Phase I. In the
alternative, should the time period for price cap carriers to elect to make a statewide commitment in
Phase II be longer, such as 120 days, due to the complexity of the decisions individual carriers will
need to make? We also seek comment on requiring the submissions either electing or declining
support to be submitted on a confidential basis prior to the deadline for election. Should carriers be
allowed or required to make confidential submissions? In the event that such submissions were
afforded confidentiality, we propose that the Bureau would announce all statewide elections on a
single date shortly after the close of the election period.
24. We propose that a carrier electing to accept the statewide commitment would submit a
letter, signed by an officer of the company, by the deadline specifying that it agrees to meet the
Commission’s requirements in exchange for receiving support in amounts set forth in the final
Bureau public notice. To the extent a letter of credit or other form of security is required to ensure
compliance with these obligations, we propose to require its submission within ten days of
exercising the statewide commitment.
25. We seek comment on what information carriers should be required to submit along with
their acceptance notices. Should such carriers be required to specify the technology or combination
of technologies they intend to deploy in a particular state, at the wire center or census block level?
Should carriers also be required to provide information such as geocoded latitude and longitude
location information, along with census block and wire center information, for the specific locations
where they intend to provide service meeting the 6 Mbps downstream/1.5 Mbps upstream
requirement, as determined by the Bureau? Should carriers be required at the time of acceptance to
submit a preliminary plan showing the census blocks and/or wire centers, and associated number of
7

locations, where they anticipate meeting the third year 85 percent build-out milestone?22 What other
information should be required in the initial acceptance notices in order to ensure the Commission
has the tools it needs to monitor compliance with performance obligations? Should the Commission
afford confidential treatment to any of the information required to be submitted after the Bureau
announces the acceptance by carriers of funding on a statewide level?
26. We propose that a carrier declining to accept a statewide commitment in a particular
state would file a letter by the deadline specifying that it is declining funding. Alternatively, a
carrier failing to file a letter by the deadline could be deemed as having declined funding.
27. We seek comment on all these proposals and on any alternatives. To the extent
commenters believe that other procedures would better serve the Commission’s goals, they should
provide a detailed description of their proposal for the statewide commitment process. We welcome
suggested alternatives that minimize the impact of these proposals on small businesses, as well as
comments regarding the cost and benefits of implementing these proposals.

IV.

PROCEDURAL MATTERS

Initial Regulatory Flexibility Act Analysis

28. As required by the Regulatory Flexibility Act of 1980 (RFA),23 the Commission has
prepared an Initial Regulatory Flexibility Analysis (IRFA) relating to this Public Notice. The IRFA
is attached to this Public Notice as an appendix. Written public comments are requested on the
IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for
comments provided at the beginning of this Public Notice. The Commission will send a copy of the
Public Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA).24

Initial Paperwork Reduction Act of 1995 Analysis

29. This document contains proposed modified information collection requirements. The
Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public
and the Office of Management and Budget (OMB) to comment on the information collection
requirements contained in this document, as required by the Paperwork Reduction Act of 1995,
Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment on how we might further
reduce the information collection burden for small business concerns with fewer than 25 employees.


22 Carriers must deploy to all locations within five years – at the three year mark, they must have deployed to
85 percent of locations. USF/ICC Transformation Order, 26 FCC Rcd at 17726-27, paras. 160-63.
23 See 5 U.S.C. § 603. The RFA, see 5 U.S.C. § 601 et. seq., has been amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 847 (1996).
The SBREFA was enacted as Title II of the Contract with America Advancement Act of 1996 (CWAAA).
24 See 5 U.S.C. § 603(a). In addition, the Public Notice and IRFA (or summaries thereof) will be published in
the Federal Register. Id.
8

Ex Parte Presentations

30. Permit-But-Disclose. The proceeding this Public Notice initiates shall be treated as a
“permit-but-disclose” proceeding in accordance with the Commission’s ex parte rules.25 Persons
making ex parte presentations must file a copy of any written presentation or a memorandum
summarizing any oral presentation within two business days after the presentation (unless a different
deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are
reminded that memoranda summarizing the presentation must (1) list all persons attending or
otherwise participating in the meeting at which the ex parte presentation was made, and (2)
summarize all data presented and arguments made during the presentation. If the presentation
consisted in whole or in part of the presentation of data or arguments already reflected in the
presenter’s written comments, memoranda or other filings in the proceeding, the presenter may
provide citations to such data or arguments in his or her prior comments, memoranda, or other filings
(specifying the relevant page and/or paragraph numbers where such data or arguments can be found)
in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff
during ex parte meetings are deemed to be written ex parte presentations and must be filed
consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the
Commission has made available a method of electronic filing, written ex parte presentations and
memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed
through the electronic comment filing system available for that proceeding, and must be filed in their
native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should
familiarize themselves with the Commission’s ex parte rules.

Filing Requirements

31. Comments and Replies. Pursuant to sections 1.415 and 1.419 of the Commission’s
rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments on or
before the dates indicated on the first page of this document. Comments may be filed using the
Commission’s Electronic Comment Filing System (ECFS). See Electronic Filing of Documents in
Rulemaking Proceedings
, 63 FR 24121 (1998).
§
Electronic Filers: Comments may be filed electronically using the Internet by accessing the
ECFS: http://fjallfoss.fcc.gov/ecfs2/.
§
Paper Filers: Parties who choose to file by paper must file an original and one copy of each
filing. If more than one docket or rulemaking number appears in the caption of this
proceeding, filers must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by
first-class or overnight U.S. Postal Service mail. All filings must be addressed to the
Commission’s Secretary, Office of the Secretary, Federal Communications Commission.
§
All hand-delivered or messenger-delivered paper filings for the Commission’s
Secretary must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-
A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand


25 47 C.F.R. §§ 1.1200 et seq.
9

deliveries must be held together with rubber bands or fasteners. Any envelopes and
boxes must be disposed of before entering the building.
§
Commercial overnight mail (other than U.S. Postal Service Express Mail and
Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD
20743.
§
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445
12th Street, SW, Washington DC 20554.
32. People with Disabilities. To request materials in accessible formats for people with
disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or
call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
33. Availability of Documents. Comments, reply comments, and ex parte submissions will
be publically available online via ECFS.26 These documents will also be available for public
inspection during regular business hours in the FCC Reference Information Center, which is located
in Room CY-A257 at FCC Headquarters, 445 12th Street, SW, Washington, DC 20554. The
Reference Information Center is open to the public Monday through Thursday from 8:00 a.m. to
4:30 p.m. and Friday from 8:00 a.m. to 11:30 a.m.
Additional Information. For additional information on this proceeding, contact Ryan Yates of the
Wireline Competition Bureau, ryan.yates@fcc.gov (202) 418-0886.


26 Documents will generally be available electronically in ASCII, Microsoft Word, and/or Adobe Acrobat.
10

APPENDIX

Initial Regulatory Flexibility Act Analysis

1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),1 the
Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible
significant economic impact on a substantial number of small entities by the policies and rules
proposed in this Public Notice. Written comments are requested on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the deadlines for comments on the Public
Notice. The Commission will send a copy of the Public Notice, including this IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration (SBA).2 In addition, the Public Notice
and IRFA (or summaries thereof) will be published in the Federal Register.3

A.

Need for, and Objectives of, the Proposed Rules

2. The Public Notice seeks comment on issues related to the implementation of Phase II of
Connect America. As discussed in the USF/ICC Transformation Order, the rapid and efficient
deployment of broadband is crucial for our nation’s growth.4 The proposals contained in this public
notice will help to achieve the Commission’s goal of making broadband accessible to all Americans.
3. The Bureau is currently in the process of developing a cost model for Phase II of
Connect America.5 The Commission directed the Bureau to publish a list of census blocks that
would be eligible for support under the cost model, and to provide an opportunity for parties to make
challenges to that list.6 This Public Notice seeks comment on how to conduct such a challenge
process and what data should be used in that process.7 The Bureau plans to publish a list of census
blocks that are within the cost model’s funding threshold but are unserved by broadband with speeds
of 3 Mbps downstream and 768 kbps upstream.8 Parties could then submit comments challenging
the accuracy of that list.9
4. The Public Notice proposes that parties could make challenges based on the fact that a
purported unsubsidized competitor is or is not meeting the broadband performance requirements for


1 See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601–612, has been amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
2 See 5 U.S.C. § 603(a).
3 See id.
4 See USF/ICC Transformation Order, 26 FCC Rcd at 17667, para. 3.
5 See attached Public Notice paras. 4-6.
6 See id. para. 8.
7 See id. para. 10.
8 See id. paras. 9-10.
9 See id. para. 10.
11

speed, latency, or capacity.10 The Public Notice also suggests various forms of evidence that could
be submitted to support these contentions.11 Assertions that are offered without supporting evidence
would not be considered.12 Where the Bureau finds its more likely than not that a census block is
inaccurately classified as served or unserved, that census block’s status would be altered accordingly
for the purposes of Phase II eligibility.13
5. Under the system proposed in the Public Notice, parties challenging the eligibility of a
particular census block would be required to serve a copy of their challenge on the entity purportedly
serving that block.14 That entity would then have an opportunity to respond and provide evidence
rebutting that challenge.15 In the event that both the challenger and the respondent provide credible
information supporting their claims, the census block’s status would be determined based on its
current status on the most recent version of National Broadband Map available at the time the list of
eligible areas is finalized.16
6. The Public Notice also sets limits on the types of challenges considered. First, only
wholly unserved census blocks would be eligible for Phase II support.17 Therefore, under the
proposed system, sub-census block challenges would not be considered.18 Second, challenges and
rebuttals must be based on current broadband availability, not announced deployment plans.19
7. In addition to seeking comment on issues related to the Phase II challenge process, the
Public Notice also seeks comment on procedures for implementing the process of price cap carriers’
election to receive support in exchange for a commitment to serve all eligible areas within a state.20
Comment is sought on what time period should be used in this process.21 The Public Notice also
seeks comment on what information a carrier should be required to submit when accepting a
statewide commitment.22

B.

Legal Basis



10 See id. paras. 10-11.
11 See id. paras. 12-15.
12 See id. para. 11.
13 See id. para. 18.
14 See id. para. 16.
15 See id. para. 10.
16 See id. para. 18.
17 See id. para. 21.
18 See id.
19 See id. para. 20.
20 See id. paras. 23-27.
21 See id. para. 23.
22 See id. para. 25.
12

8. The legal basis for any action that may be taken pursuant to the Public Notice is
contained in sections 1, 4(i), 4(j), 214, and 218, of the Communications Act of 1934, as amended,
and section 706 of the Telecommunications Act of 1996.

C.

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

9. The RFA directs agencies to provide a description of, and where feasible, an estimate of
the number of small entities that may be affected by the proposed rules, if adopted.23 The RFA
generally defines the term “small entity” as having the same meaning as the terms “small business,”
“small organization,” and “small governmental jurisdiction.”24 In addition, the term “small
business” has the same meaning as the term “small-business concern” under the Small Business
Act.25 A small-business concern” is one which: (1) is independently owned and operated; (2) is not
dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.26
10.

Small Businesses

. Nationwide, there are a total of approximately 27.5 million small
businesses, according to the SBA.27
11.

Wired Telecommunications Carriers

. The SBA has developed a small business size
standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500
or fewer employees.28 According to Census Bureau data for 2007, there were 3,188 firms in this
category, total, that operated for the entire year.29 Of this total, 3,144 firms had employment of 999
or fewer employees, and 44 firms had employment of 1,000 employees or more.30 Thus, under this
size standard, the majority of firms can be considered small.
12.

Local Exchange Carriers (LECs)

. Neither the Commission nor the SBA has
developed a size standard for small businesses specifically applicable to local exchange services.
The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or fewer employees.31 According to


23 See 5 U.S.C. § 603(b)(3).
24 See 5 U.S.C. § 601(6).
25 See 5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the Small
Business Act, 15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business
applies “unless an agency, after consultation with the Office of Advocacy of the Small Business
Administration and after opportunity for public comment, establishes one or more definitions of such term
which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register.”
26 See 15 U.S.C. § 632.
27 See SBA, Office of Advocacy, “Frequently Asked Questions,” http://www.sba.gov/advocacy/7495/29581
(last visited Nov. 19, 2012).
28 13 C.F.R. § 121.201, NAICS code 517110.
29 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and
Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010).
30 See id.
31 13 C.F.R. § 121.201, NAICS code 517110.
13

Commission data, 1,307 carriers reported that they were incumbent local exchange service
providers.32 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301
have more than 1,500 employees.33 Consequently, the Commission estimates that most providers of
local exchange service are small entities that may be affected by the rules and policies proposed in
the Public Notice.
13.

Incumbent Local Exchange Carriers (incumbent LECs)

. Neither the Commission
nor the SBA has developed a size standard for small businesses specifically applicable to incumbent
local exchange services. The closest applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or
fewer employees.34 According to Commission data, 1,307 carriers reported that they were
incumbent local exchange service providers.35 Of these 1,307 carriers, an estimated 1,006 have
1,500 or fewer employees and 301 have more than 1,500 employees.36 Consequently, the
Commission estimates that most providers of incumbent local exchange service are small businesses
that may be affected by rules adopted pursuant to the Public Notice.
14. We have included small incumbent LECs in this present RFA analysis. As noted above,
a “small business” under the RFA is one that, inter alia, meets the pertinent small business size
standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not
dominant in its field of operation.”37 The SBA’s Office of Advocacy contends that, for RFA
purposes, small incumbent LECs are not dominant in their field of operation because any such
dominance is not “national” in scope.38 We have therefore included small incumbent LECs in this
RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses
and determinations in other, non-RFA contexts.
15.

Competitive Local Exchange Carriers (competitive LECs), Competitive Access

Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers.


Neither the Commission nor the SBA has developed a small business size standard specifically for
these service providers. The appropriate size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or
fewer employees.39 According to Commission data, 1,442 carriers reported that they were engaged


32 See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau,
Industry Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service).
33 See id.
34 See 13 C.F.R. § 121.201, NAICS code 517110.
35 See Trends in Telephone Service at Table 5.3.
36 See id.
37 5 U.S.C. § 601(3).
38 See Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC
(May 27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA
incorporates into its own definition of “small business.” See 15 U.S.C. § 632(a); see also 5 U.S.C. § 601(3).
SBA regulations interpret “small business concern” to include the concept of dominance on a national basis.
See 13 C.F.R. § 121.102(b).
39 See 13 C.F.R. § 121.201, NAICS code 517110.
14

in the provision of either competitive local exchange services or competitive access provider
services.40 Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have
more than 1,500 employees.41 In addition, 17 carriers have reported that they are Shared-Tenant
Service Providers, and all 17 are estimated to have 1,500 or fewer employees.42 In addition, 72
carriers have reported that they are Other Local Service Providers.43 Of the 72, seventy have 1,500
or fewer employees and two have more than 1,500 employees.44 Consequently, the Commission
estimates that most providers of competitive local exchange service, competitive access providers,
Shared-Tenant Service Providers, and Other Local Service Providers are small entities that may be
affected by rules adopted pursuant to the Public Notice.
16.

Wireless Telecommunications Carriers (except Satellite)

. Since 2007, the SBA has
recognized wireless firms within this new, broad, economic census category.45 Prior to that time,
such firms were within the now-superseded categories of Paging and Cellular and Other Wireless
Telecommunications.46 Under the present and prior categories, the SBA has deemed a wireless
business to be small if it has 1,500 or fewer employees.47 For this category, census data for 2007
show that there were 1,383 firms that operated for the entire year.48 Of this total, 1,368 firms had
employment of 999 or fewer employees and 15 had employment of 1,000 employees or more.49
Similarly, according to Commission data, 413 carriers reported that they were engaged in the
provision of wireless telephony, including cellular service, Personal Communications Service (PCS),
and Specialized Mobile Radio (SMR) Telephony services.50 Of these, an estimated 261 have 1,500
or fewer employees and 152 have more than 1,500 employees.51 Consequently, the Commission


40 See Trends in Telephone Service at Table 5.3.
41 See id.
42 See id.
43 See id.
44 See id.
45 See 13 C.F.R. § 121.201, NAICS code 517210.
46 U.S. Census Bureau, 2002 NAICS Definitions, “517211 Paging”, available at
http://www.census.gov/eos/www/naics/2002NAICS/2002_Definition_File.pdf.; U.S. Census Bureau, 2002
NAICS Definitions, “517212 Cellular and Other Wireless Telecommunications”; available at
http://www.census.gov/eos/www/naics/2002NAICS/2002_Definition_File.pdf.
47 13 C.F.R. § 121.201, NAICS code 517210. The now-superseded, pre-2007 C.F.R. citations were 13 C.F.R.
§ 121.201, NAICS codes 517211 and 517212 (referring to the 2002 NAICS).
48 U.S. Census Bureau, Subject Series: Information, Table 5, “Establishment and Firm Size: Employment Size
of Firms for the United States: 2007 NAICS Code 517210” (issued Nov. 2010).
49 Id. Available census data do not provide a more precise estimate of the number of firms that have
employment of 1,500 or fewer employees; the largest category provided is for firms with “100 employees or
more.”
50 See Trends in Telephone Service at Table 5.3.
51 See id.
15

estimates that approximately half or more of these firms can be considered small. Thus, using
available data, we estimate that the majority of wireless firms can be considered small.
17.

Broadband Personal Communications Service.

The broadband personal
communications service (PCS) spectrum is divided into six frequency blocks designated A through
F, and the Commission has held auctions for each block. The Commission defined “small entity” for
Blocks C and F as an entity that has average gross revenues of $40 million or less in the three
previous calendar years.52 For Block F, an additional classification for “very small business” was
added and is defined as an entity that, together with its affiliates, has average gross revenues of not
more than $15 million for the preceding three calendar years.53 These standards defining “small
entity” in the context of broadband PCS auctions have been approved by the SBA.54 No small
businesses, within the SBA-approved small business size standards bid successfully for licenses in
Blocks A and B. There were 90 winning bidders that qualified as small entities in the Block C
auctions. A total of 93 small and very small business bidders won approximately 40 percent of the
1,479 licenses for Blocks D, E, and F.55 In 1999, the Commission re-auctioned 347 C, E, and F
Block licenses.56 There were 48 small business winning bidders. In 2001, the Commission
completed the auction of 422 C and F Broadband PCS licenses in Auction 35.57 Of the 35 winning
bidders in this auction, 29 qualified as “small” or “very small” businesses. Subsequent events,
concerning Auction 35, including judicial and agency determinations, resulted in a total of 163 C
and F Block licenses being available for grant. In 2005, the Commission completed an auction of
188 C block licenses and 21 F block licenses in Auction 58. There were 24 winning bidders for 217
licenses.58 Of the 24 winning bidders, 16 claimed small business status and won 156 licenses. In
2007, the Commission completed an auction of 33 licenses in the A, C, and F Blocks in Auction


52 See generally Amendment of Parts 20 and 24 of the Commission’s Rules – Broadband PCS Competitive
Bidding and the Commercial Mobile Radio Service Spectrum Cap
, WT Docket No. 96-59, GN Docket No. 90-
314, Report and Order, 11 FCC Rcd 7824 (1996); see also 47 C.F.R. § 24.720(b)(1).
53 See generally Amendment of Parts 20 and 24 of the Commission’s Rules – Broadband PCS Competitive
Bidding and the Commercial Mobile Radio Service Spectrum Cap
, WT Docket No. 96-59, GN Docket No. 90-
314, Report and Order, 11 FCC Rcd 7824 (1996); see also 47 C.F.R. § 24.720(b)(2).
54 See, e.g., Implementation of Section 309(j) of the Communications Act – Competitive Bidding, PP Docket
No. 93-253, Fifth Report and Order, 9 FCC Rcd 5532 (1994).
55 See FCC News, Broadband PCS, D, E and F Block Auction Closes, No. 71744 (rel. Jan. 14, 1997). See also
Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal
Communications Services (PCS) Licensees
, WT Docket No. 97-82, Second Report and Order and Further
Notice of Proposed Rulemaking, 12 FCC Rcd 16436 (1997).
56 See C, D, E, and F Block Broadband PCS Auction Closes, Public Notice, 14 FCC Rcd 6688 (Wireless Tel.
Bur. 1999).
57 See C and F Block Broadband PCS Auction Closes; Winning Bidders Announced, Public Notice, 16 FCC
Rcd 2339 (Wireless Tel. Bur. 2001).
58 See Broadband PCS Spectrum Auction Closes; Winning Bidders Announced for Auction No. 58, Public
Notice, 20 FCC Rcd 3703 (Wireless Tel. Bur. 2005).
16

71.59 Of the 14 winning bidders, six were designated entities.60 In 2008, the Commission completed
an auction of 20 Broadband PCS licenses in the C, D, E and F block licenses in Auction 78.61
18.

Fixed Microwave Services

. Fixed microwave services include common carrier,62
private operational-fixed,63 and broadcast auxiliary radio services.64 At present, there are
approximately 22,015 common carrier fixed licensees and 61,670 private operational-fixed licensees
and broadcast auxiliary radio licensees in the microwave services. The Commission has not created
a size standard for a small business specifically with respect to fixed microwave services. For
purposes of this analysis, the Commission uses the SBA small business size standard for Wireless
Telecommunications Carriers (except Satellite), which is 1,500 or fewer employees.65 The
Commission does not have data specifying the number of these licensees that have more than 1,500
employees, and thus is unable at this time to estimate with greater precision the number of fixed
microwave service licensees that would qualify as small business concerns under the SBA’s small
business size standard. Consequently, the Commission estimates that there are up to 22,015
common carrier fixed licensees and up to 61,670 private operational-fixed licensees and broadcast
auxiliary radio licensees in the microwave services that may be small and may be affected by the
rules and policies adopted herein. We note, however, that the common carrier microwave fixed
licensee category includes some large entities.
19.

Satellite Telecommunications

. Since 2007, the SBA has recognized satellite firms
within this revised category, with a small business size standard of $15 million.66 The most current
Census Bureau data are from the economic census of 2007, and we will use those figures to gauge
the prevalence of small businesses in this category. Those size standards are for the two census
categories of “Satellite Telecommunications” and “Other Telecommunications.” Under the


59 See Auction of Broadband PCS Spectrum Licenses Closes; Winning Bidders Announced for Auction No. 71,
Public Notice, 22 FCC Rcd 9247 (2007).
60 Id.
61 See Auction of AWS-1 and Broadband PCS Licenses Rescheduled For August 13, 3008, Notice of Filing
Requirements, Minimum Opening Bids, Upfront Payments and Other Procedures For Auction 78, Public
Notice, 23 FCC Rcd 7496 (2008) (AWS-1 and Broadband PCS Procedures Public Notice).
62 See 47 C.F.R. §§ 101 et seq. (formerly, Part 21 of the Commission’s Rules) for common carrier fixed
microwave services (except Multipoint Distribution Service).
63 Persons eligible under parts 80 and 90 of the Commission’s Rules can use Private Operational-Fixed
Microwave services. See 47 C.F.R. Parts 80 and 90. Stations in this service are called operational-fixed to
distinguish them from common carrier and public fixed stations. Only the licensee may use the operational-
fixed station, and only for communications related to the licensee’s commercial, industrial, or safety
operations.
64 Auxiliary Microwave Service is governed by Part 74 of Title 47 of the Commission’s Rules. See 47 C.F.R.
Part 74. This service is available to licensees of broadcast stations and to broadcast and cable network entities.
Broadcast auxiliary microwave stations are used for relaying broadcast television signals from the studio to the
transmitter, or between two points such as a main studio and an auxiliary studio. The service also includes
mobile television pickups, which relay signals from a remote location back to the studio.
65 See 13 C.F.R. § 121.201, NAICS code 517210.
66 See 13 C.F.R. § 121.201, NAICS code 517410.
17

“Satellite Telecommunications” category, a business is considered small if it had $15 million or less
in average annual receipts.67 Under the “Other Telecommunications” category, a business is
considered small if it had $25 million or less in average annual receipts.68
20. The first category of Satellite Telecommunications “comprises establishments primarily
engaged in providing telecommunications services to other establishments in the
telecommunications and broadcasting industries by forwarding and receiving communications
signals via a system of satellites or reselling satellite telecommunications.”69 For this category,
Census Bureau data for 2007 show that there were a total of 512 firms that operated for the entire
year.70 Of this total, 464 firms had annual receipts of under $10 million, and 18 firms had receipts of
$10 million to $24,999,999.71 Consequently, we estimate that the majority of Satellite
Telecommunications firms are small entities that might be affected by rules adopted pursuant to the
Public Notice.
21. The second category of Other Telecommunications “primarily engaged in providing
specialized telecommunications services, such as satellite tracking, communications telemetry, and
radar station operation.”72 This industry also includes establishments “primarily engaged in
providing satellite terminal stations and associated facilities connected with one or more terrestrial
systems and capable of transmitting telecommunications to, and receiving telecommunications from,
satellite systems; or . . . providing Internet services or voice over Internet protocol (VoIP) services
via client-supplied telecommunications connections.”73 For this category, Census Bureau data for
2007 show that there were a total of 2,383 firms that operated for the entire year.74 Of this total,
2,346 firms had annual receipts of under $25 million.75 Consequently, we estimate that the majority
of Other Telecommunications firms are small entities that might be affected by our action.
22.

Cable and Other Program Distribution.

Since 2007, these services have been defined
within the broad economic census category of Wired Telecommunications Carriers; that category is
defined as follows: “This industry comprises establishments primarily engaged in operating and/or
providing access to transmission facilities and infrastructure that they own and/or lease for the
transmission of voice, data, text, sound, and video using wired telecommunications networks.


67 Id.
68 See 13 C.F.R. § 121.201, NAICS code 517919.
69 U.S. Census Bureau, 2012 NAICS Definitions, “517410 Satellite Telecommunications”, available at
http://www.census.gov/eos/www/naics/2012NAICS/2012_Definition_File.pdf.
70 See 13 C.F.R. § 121.201, NAICS code 517410.
71 See id. An additional 38 firms had annual receipts of $25 million or more.
72 U.S. Census Bureau, 2012 NAICS Definitions, “517919 Other Telecommunications”, available at
http://www.census.gov/eos/www/naics/2012NAICS/2012_Definition_File.pdf.
73 Id.
74 See 13 C.F.R. § 121.201, NAICS code 517919.
75 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and
Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517919” (issued Nov. 2010).
18

Transmission facilities may be based on a single technology or a combination of technologies.”76
The SBA has developed a small business size standard for this category, which is: all such firms
having 1,500 or fewer employees.77 According to Census Bureau data for 2007, there were a total of
955 firms in this previous category that operated for the entire year.78 Of this total, 939 firms had
employment of 999 or fewer employees, and 16 firms had employment of 1,000 employees or
more.79 Thus, under this size standard, the majority of firms can be considered small and may be
affected by rules adopted pursuant to the Public Notice.
23.

Cable Companies and Systems

. The Commission has developed its own small
business size standards, for the purpose of cable rate regulation. Under the Commission’s rules, a
“small cable company” is one serving 400,000 or fewer subscribers, nationwide.80 Industry data
indicate that, of 1,076 cable operators nationwide, all but eleven are small under this size standard.81
In addition, under the Commission’s rules, a “small system” is a cable system serving 15,000 or
fewer subscribers.82 Industry data indicate that, of 7,208 systems nationwide, 6,139 systems have
under 10,000 subscribers, and an additional 379 systems have 10,000-19,999 subscribers.83 Thus,
under this second size standard, most cable systems are small and may be affected by rules adopted
pursuant to the Public Notice.
24.

Cable System Operators

. The Act also contains a size standard for small cable system
operators, 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.”84 The Commission has
determined that an operator serving fewer than 677,000 subscribers shall be deemed a small
operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do


76 U.S. Census Bureau, 2012 NAICS Definitions, “517110 Wired Telecommunications Carriers” (partial
definition), available at U.S. Census Bureau, 2012 NAICS Definitions, “517919 Other Telecommunications”,
available at http://www.census.gov/eos/www/naics/2012NAICS/2012_Definition_File.pdf.
77 See 13 C.F.R § 121.201, NAICS code 517110.
78 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, Employment Size of
Firms for the United States: 2007, NAICS code 5171102 (issued Nov. 2010).
79 See id.
80 See 47 C.F.R. § 76.901(e). The Commission determined that this size standard equates approximately to a
size standard of $100 million or less in annual revenues. See Implementation of Sections of the 1992 Cable
Television Consumer Protection and Competition Act: Rate Regulation
, MM Docket Nos. 92-266, 93-215,
Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 7408 para. 28 (1995).
81 These data are derived from R.R. BOWKER, BROADCASTING & CABLE YEARBOOK 2006, “Top 25
Cable/Satellite Operators,” pages A-8 & C-2 (data current as of June 30, 2005); WARREN COMMUNICATIONS
NEWS, TELEVISION & CABLE FACTBOOK 2006, “Ownership of Cable Systems in the United States,” pages D-
1805 to D-1857.
82 See 47 C.F.R. § 76.901(c).
83 WARREN COMMUNICATIONS NEWS, TELEVISION & CABLE FACTBOOK 2006, “U.S. Cable Systems by
Subscriber Size,” page F-2 (data current as of Oct. 2005). The data do not include 718 systems for which
classifying data were not available.
84 47 U.S.C. § 543(m)(2); see also 47 C.F.R. § 76.901(f) & nn.1–3.
19

not exceed $250 million in the aggregate.85 Industry data indicate that, of 1,076 cable operators
nationwide, all but ten are small under this size standard.86 We note that the Commission neither
requests nor collects information on whether cable system operators are affiliated with entities
whose gross annual revenues exceed $250 million,87 and therefore we are unable to estimate more
accurately the number of cable system operators that would qualify as small under this size standard.
25.

Internet Service Providers

. Since 2007, these services have been defined within the
broad economic census category of Wired Telecommunications Carriers; that category is defined as
follows: “This industry comprises establishments primarily engaged in operating and/or providing
access to transmission facilities and infrastructure that they own and/or lease for the transmission of
voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities
may be based on a single technology or a combination of technologies.”88 The SBA has developed a
small business size standard for this category, which is: all such firms having 1,500 or fewer
employees.89 According to Census Bureau data for 2007, there were 3,188 firms in this category,
total, that operated for the entire year.90 Of this total, 3144 firms had employment of 999 or fewer
employees, and 44 firms had employment of 1,000 employees or more.91 Thus, under this size
standard, the majority of firms can be considered small. In addition, according to Census Bureau
data for 2007, there were a total of 396 firms in the category Internet Service Providers (broadband)
that operated for the entire year.92 Of this total, 394 firms had employment of 999 or fewer
employees, and two firms had employment of 1,000 employees or more.93 Consequently, we
estimate that the majority of these firms are small entities that may be affected by rules adopted
pursuant to the Public Notice.
26.

All Other Information Services

. The Census Bureau defines this industry as including
“establishments primarily engaged in providing other information services (except news syndicates,


85 47 C.F.R. § 76.901(f); see FCC Announces New Subscriber Count for the Definition of Small Cable
Operator
, Public Notice, 16 FCC Rcd 2225 (Cable Servs. Bur. 2001).
86 These data are derived from R.R. BOWKER, BROADCASTING & CABLE YEARBOOK 2006, “Top 25
Cable/Satellite Operators,” pages A-8 & C-2 (data current as of June 30, 2005); WARREN COMMUNICATIONS
NEWS, TELEVISION & CABLE FACTBOOK 2006, “Ownership of Cable Systems in the United States,” pages D-
1805 to D-1857.
87 The Commission does receive such information on a case-by-case basis if a cable operator appeals a local
franchise authority’s finding that the operator does not qualify as a small cable operator pursuant to section
76.901(f) of the Commission’s rules.
88 U.S. Census Bureau, 2007 NAICS Definitions, “517110 Wired Telecommunications Carriers” (partial
definition), available at U.S. Census Bureau, 2012 NAICS Definitions, “517919 Other Telecommunications”,
available at http://www.census.gov/eos/www/naics/2012NAICS/2012_Definition_File.pdf.
89 13 C.F.R. § 121.201, NAICS code 517110.
90 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and
Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010).
91 See id.
92 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, Employment Size of
Firms for the United States: 2007, NAICS code 5171103 (issued Nov. 2010).
93 See id.
20

libraries, archives, Internet publishing and broadcasting, and Web search portals).”94 Our action
pertains to interconnected VoIP services, which could be provided by entities that provide other
services such as email, online gaming, web browsing, video conferencing, instant messaging, and
other, similar IP-enabled services. The SBA has developed a small business size standard for this
category; that size standard is $7.0 million or less in average annual receipts.95 According to Census
Bureau data for 2007, there were 367 firms in this category that operated for the entire year.96 Of
these, 334 had annual receipts of under $5.0 million, and an additional 11 firms had receipts of
between $5 million and $9,999,999. Consequently, we estimate that the majority of these firms are
small entities that may be affected by our action.

D. Description of Projected Reporting, Recordkeeping, and Other Compliance

Requirements for Small Entities

27. In this Public Notice, the Bureau seeks public comment on procedures for implementing
Connect America Phase II. Certain proposals could result in additional reporting requirements. 97
28. If the Bureau implements the Phase II challenge process articulated above, commenters,
including small entities, wishing to participate would be required to comply with the listed reporting
and evidentiary standards. This includes filing a challenge along with supporting evidence and
serving a copy of the challenge on any challenged party within a specified timeframe. Similarly, if
the Bureau implements the proposed statewide commitment process, any small entity that is either
accepting or declining a statewide commitment would be subject to additional reporting
requirements.

E.

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

29. The RFA requires an agency to describe any significant, specifically small business,
alternatives that it has considered in reaching its proposed approach, which may include the
following four alternatives (among others): “(1) the establishment of differing compliance or
reporting requirements or timetables that take into account the resources available to small entities;
(2) the clarification, consolidation, or simplification of compliance and reporting requirements under
the rules for such small entities; (3) the use of performance rather than design standards; and (4) an
exemption from coverage of the rule, or any part thereof, for such small entities.”98
30. The Public Notice seeks comment from all interested parties. The Commission is aware
that some of the proposals under consideration may impact small entities. Small entities are


94 U.S. Census Bureau, 2012 NAICS Definitions, “519190 All Other Information Services”, available at U.S.
Census Bureau, 2012 NAICS Definitions, “517919 Other Telecommunications”, available at
http://www.census.gov/eos/www/naics/2012NAICS/2012_Definition_File.pdf.
95 See 13 C.F.R. § 121.201, NAICS code 519190.
96 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 4, “Establishment and Firm
Size: Receipts Size of Firms for the United States: 2007 NAICS Code 519190” (issued Nov. 2010).
97 Most of the reporting, recordkeeping, and compliance requirements of Connect America were discussed in
earlier NPRMs. See Notice of Inquiry and Notice of Proposed Rulemaking, WC Docket No. 10-90 et al., 25
FCC Rcd 6657, 6685 (2010). We do not reiterate those requirements here.
98 5 U.S.C. § 603(c)(1)–(c)(4).
21

encouraged to bring to the Commission’s attention any specific concerns they may have with the
proposals outlined in the Public Notice, and the Commission will consider alternatives that reduce
the burden on small entities.
31. The Commission expects to consider the economic impact on small entities, as identified
in comments filed in response to the Public Notice, in reaching its final conclusions and taking
action in this proceeding. The reporting requirements in the Public Notice could have an impact on
both small and large entities. The Commission believes that any impact of such requirements is
outweighed by the accompanying public benefits. Further, these requirements are necessary to
ensure that the statutory goals of Section 254 of the Act are met without waste, fraud, or abuse.
32. In the Public Notice, the Commission seeks comment on several issues and measures
that may apply to small entities in a unique fashion. Small entities may be more likely to face
challenges to their service areas, and thus be required to comply with the reporting requirements
above in order to have their rebuttals considered. The Bureau will consider comments from small
entities as to whether a different standard should apply.

F.

Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed
Rules

33. None.
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