Table of Contents
XV. FINAL REGULATORY FLEXIBILITY ANALYSIS
1324. As required by Section 603 of the Regulatory Flexibility Act (RFA), 5 U.S.C. 603,
an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the NPRM. The
Commission sought written public comment on the proposals in the NPRM. The Commission's
Final Regulatory Flexibility Analysis (FRFA) in this Order conforms to the RFA, as amended
by the Contract With America Advancement Act of 1996 (CWAAA), Pub. L. No. 104-121, 110
Stat. 847 (1996).(1)
A. Need for and Objectives of this Report
and Order and the Rules Adopted Herein
1325. The Commission, in compliance with section 251(d)(1) of the Communications Act of
1934, as amended by the Telecommunications Act of 1996 (the 1996 Act), promulgates the
rules in this Order to ensure the prompt implementation of sections 251 and 252 of the
1996 Act, which are the local competition provisions. Congress sought to establish through
the 1996 Act "a pro-competitive, de-regulatory national policy framework" for
the United States telecommunications industry.(2) Three
principal goals of the telephony provisions of the 1996 Act are: (1) opening local
exchange and exchange access markets to competition; (2) promoting increased competition
in telecommunications markets that are already open to competition, particularly long
distance services markets; and, (3) reforming our system of universal service so that
universal service is preserved and advanced as local exchange and exchange access markets
move from monopoly to competition.
1326. The rules adopted in this Order implement the first of these goals -- opening
local exchange and exchange access markets to competition. The objective of the rules
adopted in this Order is to implement as quickly and effectively as possible the national
telecommunications policies embodied in the 1996 Act and to promote the development of
competitive, deregulated markets envisioned by Congress.(3)
In doing so, we are mindful of the balance that Congress struck between this goal of
bringing the benefits of competition to all consumers and its concern for the impact of
the 1996 Act on small incumbent local exchange carriers, particularly rural carriers, as
evidenced in section 251(f) of the 1996 Act.
B. Analysis of Significant Issues
Raised in Response to the IRFA
1327. Summary of the Initial Regulatory Flexibility Analysis (IRFA). In the
NPRM, the Commission performed an IRFA.(4) In the IRFA, the
Commission found that the rules it proposed to adopt in this proceeding may have a
significant impact on a substantial number of small business as defined by section 601(3)
of the RFA. The Commission stated that its regulatory flexibility analysis was
inapplicable to incumbent LECs because such entities are dominant in their field of
operation. The Commission noted, however, that it would take appropriate steps to ensure
that the special circumstances of smaller incumbent LECs are carefully considered in our
rulemaking. The Commission also found that the proposed rules may overlap or conflict with
the Commission's Part 69 access charge and Expanded Interconnection rules.
Finally, the IRFA solicited comment on alternatives to our proposed rules that would
minimize the impact on small entities consistent with the objectives of this proceeding.
1. Treatment of Small LECs
1328. Comments. The Small Business Administration (SBA), the Rural Telephone
Coalition (Rural Tel. Coalition), and CompTel maintain that the Commission violated the
RFA when it failed to include small incumbent LECs in its IRFA without first consulting
SBA to establish a definition of "small business."(5)
Rural Tel. Coalition and CompTel also argue that the Commission failed to explain its
statement that "incumbent LECs are dominant in their field of operation" or how
that finding was reached.(6) Rural Tel. Coalition states
that such an analysis of the market power of incumbent LECs is necessary because incumbent
LECs are now facing competition from a variety of sources, including wireline and wireless
carriers. Rural Tel. Coalition recommends that the Commission abandon its determination
that all incumbent LECs are dominant, and perform regulatory flexibility analysis for
incumbent LECs having fewer than 1500 employees.(7)
1329. Discussion. In essence, SBA and Rural Tel. Coalition argue that we
exceeded our authority under the RFA by certifying all incumbent LECs as dominant in their
field of operation, and concluding on that basis that they are not small businesses under
the RFA. SBA and Rural Tel. Coalition contend that the authority to make a size
determination rests solely with SBA and that, by excluding a group (small incumbent LECs)
from coverage under the RFA, the Commission made an unauthorized size determination.(8) Neither SBA nor Rural Tel. Coalition cites any specific
authority for this latter proposition.
1330. We have found incumbent LECs to be "dominant in their field of
operation" since the early 1980's, and we consistently have certified under the RFA(9) that incumbent LECs are not subject to regulatory
flexibility analyses because they are not small businesses.(10)
We have made similar determinations in other areas.(11) We
recognize SBA's special role and expertise with regard to the RFA, and intend to continue
to consult with SBA outside the context of this proceeding to ensure that the Commission
is fully implementing the RFA. Although we are not fully persuaded on the basis of this
record that our prior practice has been incorrect, in light of the special concerns raised
by SBA and Rural Tel. Coalition in this proceeding, we will, nevertheless, include small
incumbent LECs in this FRFA to remove any possible issue of RFA compliance. We, therefore,
need not address Rural Tel. Coalition's arguments that incumbent LECs are not dominant.(12)
2. Other Issues
1331. Comments. Parties raised several other issues in response to the
Commission's IRFA in the NPRM. SBA and CompTel contend that commenters should not be
required to separate their comments on the IRFA from their comments on the other issues
raised in the NPRM.(13) SBA maintains that separating RFA
comments and discussion from the rest of the comments "isolates" the regulatory
flexibility analysis from the remainder of the discussion, thereby handicapping the
Commission's analysis of the impact of the proposed rules on small businesses.(14) SBA further suggests that our IRFA failed to: (1) give
an adequate description of the projected reporting, recordkeeping, and other compliance
requirements of the proposed rules, including an estimate of the classes of small entities
that will be subject to the requirement and the professional skills necessary to prepare
such reports or records;(15) and (2) describe significant
alternatives that minimize the significant economic impact of the proposal on small
entities, including exemption from coverage of the rule.(16)
SBA also asserts that none of the alternatives in the NPRM is designed to minimize the
impact of the proposed rules on small businesses.
1332. The Idaho Commission argues that the Commission's rules will be devised for large
carriers and therefore will be "de facto burdensome" to Idaho's incumbent LECs
and probably to potential new entrants, which may be small companies.(17)
Therefore, Idaho requests that state commissions be permitted flexibility to address the
impacts of our rules on smaller incumbent LECs.
1333. The Small Cable Business Association (SCBA) contends that the Commission's IRFA
is inadequate because it does not state that small cable companies are among the small
entities affected by the proposed rules.(18) In its
comments on the IRFA, SCBA refers to its proposal that the Commission establish the
following national standards for small cable companies: (1) the definition of "good
faith" negotiation; (2) the development of less burdensome arbitration procedures for
interconnection and resale; (3) the designation of a small company contact person at
incumbent LECs and state commissions; and (4) the application of section 251(f) of the
1996 Act.(19)
1334. Discussion. We disagree with SBA's assessment of our IRFA. Although the
IRFA referred only generally to the reporting and recordkeeping requirements imposed on
incumbent LECs, our Federal Register notice set forth in detail the general reporting and
recordkeeping requirements as part of our Paperwork Reduction Act statement.(20) The IRFA also sought comment on the many alternatives
discussed in the body of the NPRM, including the statutory exemption for certain rural
telephone companies.(21) The numerous general public
comments concerning the impact of our proposal on small entities in response to the NPRM,
including comments filed directly in response to the IRFA,(22)
enabled us to prepare this FRFA. Thus, we conclude that the IRFA was sufficiently detailed
to enable parties to comment meaningfully on the proposed rules and, thus, for us to
prepare this FRFA. We have been working with, and will continue to work with SBA, to
ensure that both our IRFAs and FRFAs fully meet the requirements of the RFA.
1335. SBA also objects to the NPRM's requirement that responses to the IRFA be filed
under a separate and distinct heading, and proposes that we integrate RFA comments into
the body of general comments on a rule.(23) Almost since
the adoption of the RFA, we have requested that IRFA comments be submitted under a
separate and distinct heading.(24) Neither the RFA nor
SBA's rules prescribe the manner in which comments may be submitted in response to an IRFA(25) and, in such circumstances, it is well established that
an administrative agency can structure its proceedings in any manner that it concludes
will enable it to fulfill its statutory duties.(26) Based
on our past practice, we find that separation of comments responsive to the IRFA
facilitates our preparation of a compulsory summary of such comments and our responses to
them, as required by the RFA. Comments on the impact of our proposed rules on small
entities have been integrated into our analysis and consideration of the final rules. We,
therefore, reject SBA's argument that we improperly required commenters to include their
comments on the IRFA in a separate section.
1336. We also reject SBA's assertion that none of the alternatives in the NPRM is
designed to minimize the impact of the proposed rules on small businesses. For example, we
proposed that incumbent LECs be required to offer competitors access to unbundled local
loop, switching, and transport facilities.(27) These
proposals permit potential competitors to enter the market by relying, in part or
entirely, on the incumbent LEC's facilities. Reduced economic entry barriers are designed
to provide reasonable opportunities for new entrants, particularly small entities, to
enter the market by minimizing the initial investment needed to begin providing service.
In addition, we believe section 251(f) and our rules provide states with significant
flexibility to "deal with the needs of individual companies in light of public
interest concerns," as requested by the Idaho Commission. With regard to the
potential burdens on small entities other than incumbent LECs, we believe our rules permit
states to structure arbitration procedures, for example, in ways that minimize filing or
other burdens on new entrants that are small entities.
1337. We also disagree with SCBA's assertion that the IRFA was deficient because it did
not identify small cable operators as entities that would be affected by the proposed
rules. The IRFA in the NPRM states: "Insofar as the proposals in this Notice apply to
telecommunications carriers other than incumbent LECs (generally interexchange carriers
and new LEC entrants), they may have a significant impact on a substantial number of small
entities."(28) The phrase "new LEC
entrants" clearly encompasses small cable operators that become providers of local
exchange service. The NPRM even identifies cable operators as potential new entrants.(29)
1338. We agree with SCBA's argument that the Commission should identify certain minimum
standards to provide guidance on the requirement that parties negotiate in good faith.(30) As discussed in Section III.B, we conclude that we
should establish minimum standards that will offer parties guidance in determining whether
they are acting in good faith. We believe that these minimum standards address SCBA's
assertion that federal guidelines for good faith negotiations may be particularly
important for small entities because unreasonable delays in negotiations could represent
an entry barrier for small entities.
1339. We also agree with SCBA's recommendation that we should establish guidelines for
the application of section 251(f) regarding exemptions, suspensions, and modifications of
our rules governing interconnection with rural carriers. As discussed in section XII.B, we
find that a rural incumbent LEC should not be able to obtain an exemption, suspension, or
modification of its obligations under section 251 unless it offers evidence that the
application of those requirements would be likely to cause injury beyond the financial
harm typically associated with efficient competitive entry. We are also persuaded by the
suggestion of SCBA and others that incumbent LECs should bear the burden of showing that
they should be exempt pursuant to section 251(f)(1) from national interconnection
requirements. We believe that this finding is consistent with the pro-competitive goals of
the 1996 Act and our determination in Section XII that Congress did not intend to withhold
from consumers the benefits of local telephone competition that could be provided by small
entities, such as small cable operators.
1340. We do not adopt SCBA's proposal to establish abbreviated arbitration procedures.(31) Most commenters oppose adoption of federal rules to
govern state mediation and arbitration proceedings. As set out in Section XIV.A, we
conclude that state commissions are better positioned to develop rules for mediation and
arbitration that support the objectives of the 1996 Act. The rules we adopt in Section
XIV.A apply only where the Commission assumes a state commission's responsibilities
pursuant to section 252(e)(5). States may develop specific measures that address the
concerns of small entities participating in mediation or arbitration, as suggested by
SCBA. In addition, although we do not specifically incorporate SCBA's request that the
Commission designate a "small company contact person at incumbent LECs and state
commissions,"(32) we find that a refusal throughout
the negotiation process to designate a representative with authority to make binding
representations on behalf of the party, and thereby significantly delay resolution of
issues, would constitute failure to negotiate in good faith. Therefore, we conclude that
the potential benefits of SCBA's proposal are achieved by our determination that the
failure of an incumbent LEC to designate a person authorized to bind his or her company in
negotiations is a violation of the good faith obligation of section 251.
C. Description and Estimates of the Number of
Small Entities Affected by this Report and Order
1341. For the purposes of this Order, the RFA defines a "small business" to
be the same as a "small business concern" under the Small Business Act, 15
U.S.C. 632, unless the Commission has developed one or more definitions that are
appropriate to its activities.(33) Under the Small
Business Act, a "small business concern" is one that: (1) is independently owned
and operated; (2) is not dominant in its field of operation; and (3) meets any additional
criteria established by the Small Business Administration (SBA).(34)
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.(35) 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.
1342. 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 FRFA. 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 SBA as "small business
concerns."(36)
1. Telephone Companies (SIC 481)
1343. Total Number of Telephone Companies Affected. Many of the decisions and
rules adopted herein may have a significant effect on a substantial number of the small
telephone companies identified by 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.(37)
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, 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."(38)
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 LECs that may be affected by this Order.
1344. Wireline Carriers and Service Providers. 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.(39)
According to SBA's definition, a small business telephone company other than a
radiotelephone company is one employing fewer than 1,500 persons.(40)
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 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
decisions and rules adopted in this Order.
1345. Local Exchange Carriers. Neither the Commission nor SBA has developed a
definition of small providers of local exchange services (LECs). 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 LECs nationwide of which we are aware appears to be the data that we collect
annually in connection with the Telecommunications Relay Service (TRS). According to our
most recent data, 1,347 companies reported that they were engaged in the provision of
local exchange services.(41) 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 decisions and rules adopted in this Order.
1346. Interexchange Carriers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to providers of interexchange
services (IXCs). 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 IXCs nationwide of which we are aware
appears to be the data that we collect annually in connection with TRS. According to our
most recent data, 97 companies reported that they were engaged in the provision of
interexchange services.(42) 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
IXCs that would qualify as small business concerns under SBA's definition. Consequently,
we estimate that there are fewer than 97 small entity IXCs that may be affected by the
decisions and rules adopted in this Order.
1347. Competitive Access Providers. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to providers of
competitive access services (CAPs). 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 CAPs nationwide of which we
are aware appears to be the data that we collect annually in connection with the TRS.
According to our most recent data, 30 companies reported that they were engaged in the
provision of competitive access services.(43) 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 CAPs that would qualify as small business concerns under SBA's
definition. Consequently, we estimate that there are fewer than 30 small entity CAPs that
may be affected by the decisions and rules adopted in this Order.
1348. Operator Service Providers. Neither the Commission nor SBA has developed
a definition of small entities specifically applicable to providers of operator services.
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 operator service providers nationwide of which we are
aware appears to be the data that we collect annually in connection with the TRS.
According to our most recent data, 29 companies reported that they were engaged in the
provision of operator services.(44) 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 operator service providers that would qualify as small business concerns
under SBA's definition. Consequently, we estimate that there are fewer than 29 small
entity operator service providers that may be affected by the decisions and rules adopted
in this Order.
1349. Pay Telephone Operators. Neither the Commission nor 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. According to our most
recent data, 197 companies reported that they were engaged in the provision of pay
telephone services.(45) 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 pay
telephone operators that would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 197 small entity pay telephone
operators that may be affected by the decisions and rules adopted in this Order.
1350. Wireless (Radiotelephone) Carriers. SBA has developed a definition of
small entities for radiotelephone (wireless) companies. The Census Bureau reports that
there were 1,176 such companies in operation for at least one year at the end of 1992.(46) According to SBA's definition, a small business
radiotelephone company is one employing fewer than 1,500 persons.(47)
The Census Bureau also reported that 1,164 of those radiotelephone companies had fewer
than 1,000 employees. Thus, even if all of the remaining 12 companies had more than 1,500
employees, there would still be 1,164 radiotelephone companies that might qualify as small
entities if they are independently owned are operated. 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 radiotelephone carriers and service
providers that would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 1,164 small entity radiotelephone
companies that may be affected by the decisions and rules adopted in this Order.
1351. Cellular Service Carriers. Neither the Commission nor SBA has developed
a definition of small entities specifically applicable to providers of cellular services.
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 cellular service carriers nationwide of which we are
aware appears to be the data that we collect annually in connection with the TRS.
According to our most recent data, 789 companies reported that they were engaged in the
provision of cellular services.(48) 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 cellular service carriers that would qualify as small business concerns under
SBA's definition. Consequently, we estimate that there are fewer than 789 small entity
cellular service carriers that may be affected by the decisions and rules adopted in this
Order.
1352. Mobile Service Carriers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to mobile service carriers, such as
paging companies. 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 mobile service carriers nationwide of which
we are aware appears to be the data that we collect annually in connection with the TRS.
According to our most recent data, 117 companies reported that they were engaged in the
provision of mobile services.(49) 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 mobile service carriers that would qualify under SBA's definition. Consequently,
we estimate that there are fewer than 117 small entity mobile service carriers that may be
affected by the decisions and rules adopted in this Order.
1353. Broadband PCS Licensees. The broadband PCS spectrum is divided into six
frequency blocks designated A through F. As set forth in 47 C.F.R. 24.720(b), the
Commission has defined "small entity" in the auctions for Blocks C and F as a
firm that had average gross revenues of less than $40 million in the three previous
calendar years. Our definition of a "small entity" in the context of broadband
PCS auctions has been approved by SBA.(50) The Commission
has auctioned broadband PCS licenses in Blocks A, B, and C. We do not have sufficient data
to determine how many small businesses bid successfully for licenses in Blocks A and B.
There were 90 winning bidders that qualified as small entities in the Block C auction.
Based on this information, we conclude that the number of broadband PCS licensees affected
by the decisions in this Order includes, at a minimum, the 90 winning bidders that
qualified as small entities in the Block C broadband PCS auction.
1354. At present, no licenses have been awarded for Blocks D, E, and F of broadband PCS
spectrum. Therefore, there are no small businesses currently providing these services.
However, a total of 1,479 licenses will be awarded in the D, E, and F Block broadband PCS
auctions, which are scheduled to begin on August 26, 1996. Eligibility for the 493 F Block
licenses is limited to entrepreneurs with average gross revenues of less than $125
million.(51) We cannot estimate, however, the number of
these licenses that will be won by small entities under our definition, nor how many small
entities will win D or E Block licenses. Given that nearly all radiotelephone companies
have fewer than 1,000 employees(52) and that no reliable
estimate of the number of prospective D, E, and F Block licensees can be made, we assume
for purposes of this FRFA, that all of the licenses in the D, E, and F Block Broadband PCS
auctions may be awarded to small entities under our rules, which may be affected by the
decisions and rules adopted in this Order.
1355. SMR Licensees. Pursuant to 47 C.F.R. 90.814(b)(1), the Commission has
defined "small entity" in auctions for geographic area 800 MHz and 900 MHz SMR
licenses as a firm that had average annual gross revenues of less than $15 million in the
three previous calendar years. This definition of a "small entity" in the
context of 800 MHz and 900 MHz SMR has been approved by the SBA.(53)
The rules adopted in this Order may apply to SMR providers in the 800 MHz and 900 MHz
bands that either hold geographic area licenses or have obtained extended implementation
authorizations. We do not know how many firms provide 800 MHz or 900 MHz geographic area
SMR service pursuant to extended implementation authorizations, nor how many of these
providers have annual revenues of less than $15 million. We assume, for purposes of this
FRFA, that all of the extended implementation authorizations may be held by small
entities, which may be affected by the decisions and rules adopted in this Order.
1356. The Commission recently held auctions for geographic area licenses in the 900 MHz
SMR band. There were 60 winning bidders who qualified as small entities in the 900 MHz
auction. Based on this information, we conclude that the number of geographic area SMR
licensees affected by the rule adopted in this Order includes these 60 small entities. No
auctions have been held for 800 MHz geographic area SMR licenses. Therefore, no small
entities currently hold these licenses. A total of 525 licenses will be awarded for the
upper 200 channels in the 800 MHz geographic area SMR auction. However, the Commission has
not yet determined how many licenses will be awarded for the lower 230 channels in the 800
MHz geographic area SMR auction. There is no basis, moreover, on which to estimate how
many small entities will win these licenses. Given that nearly all radiotelephone
companies have fewer than 1,000 employees and that no reliable estimate of the number of
prospective 800 MHz licensees can be made, we assume, for purposes of this FRFA, that all
of the licenses may be awarded to small entities who, thus, may be affected by the
decisions in this Order.
1357. Resellers. Neither the Commission nor SBA has developed a definition of
small entities specifically applicable to resellers. The closest applicable definition
under SBA rules is for all telephone communications companies. The most reliable source of
information regarding the number of resellers nationwide of which we are aware appears to
be the data that we collect annually in connection with the TRS. According to our most
recent data, 206 companies reported that they were engaged in the resale of telephone
services.(54) 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 resellers that
would qualify as small business concerns under SBA's definition. Consequently, we estimate
that there are fewer than 206 small entity resellers that may be affected by the decisions
and rules adopted in this Order.
2. Cable System Operators (SIC 4841)
1358. 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 1,323 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.(55)
1359. 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.(56) 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.(57) 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 1,468 small entity cable system operators that may be affected by the
decisions and rules adopted in this Order.
1360. 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."(58) There were 63,196,310 basic cable
subscribers at the end of 1995, and 1,450 cable system operators serving fewer than one
percent (631,960) of subscribers.(59) 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.
D. Summary Analysis of the Projected Reporting, Recordkeeping,
and Other Compliance Requirements and Steps Taken to
Minimize the Significant Economic Impact of this Report and
Order on Small Entities and Small Incumbent LECs, Including
the Significant Alternatives Considered and Rejected
1361. Structure of the Analysis. In this section of the FRFA, we analyze the
projected reporting, recordkeeping, and other compliance requirements that may apply to
small entities and small incumbent LECs as a result of this Order.(60)
As a part of this discussion, we mention some of the types of skills that will be needed
to meet the new requirements. We also describe the steps taken to minimize the economic
impact of our decisions on small entities and small incumbent LECs, including the
significant alternatives considered and rejected.(61) Due
to the size of this Order, we set forth our analysis separately for individual sections of
the item, using the same headings as were used above in the corresponding sections of the
Order.
1362. We provide this summary analysis to provide context for our analysis in this
FRFA. To the extent that any statement contained in this FRFA is perceived as creating
ambiguity with respect to our rules or statements made in preceding sections of this
Order, the rules and statements set forth in those preceding sections shall be
controlling.
Summary Analysis of Section II
SCOPE OF THE COMMISSION'S RULES
1363. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. As discussed in Section II.E, a common carrier, which may be a small
entity or a small incumbent LEC, may be subject to an action for relief in several
different fora if a party believes that small entity or incumbent LEC violated the
standards under section 251 or 252. Should a small entity or a small incumbent LEC be
subjected to such an action for relief, it will require the use of legal skills.
1364. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. We believe that our actions
establishing minimum national rules will facilitate the development of competition in the
local exchange and exchange access markets for the reasons discussed in Sections II.A and
II.B above. For example, national rules may: help equalize bargaining power; minimize the
need for duplicative marketing strategies and multiple network configurations; lower
administrative costs; lessen the need to re-litigate the same issue in multiple
jurisdictions; and reduce delay and transaction costs, which can pose particular burdens
for small businesses. In addition, our rules are designed to accommodate differences among
regions and carriers, and the reduced regulatory burdens and increased certainty produced
by national rules may be expected to minimize the economic impact of our decisions for all
parties, including any small entities and small incumbent LECs. As set forth in Section
II.A above, we reject suggestions to adopt more, or fewer, national rules than we
ultimately adopt in this Order. We reject the arguments that we should establish
"preferred outcomes" from which parties could deviate upon an adequate showing,
or that we establish a process by which state commissions could seek a waiver from the
Commission's rules, for the reasons set forth in Section II.B above.
1365. We believe that our determination that there are multiple methods for bringing
enforcement actions against parties regarding their obligations under sections 251 and 252
will assist all parties, including small entities and small incumbent LECs, by providing a
variety of methods and fora for seeking enforcement of such obligations. (Section II.E -
Authority to Take Enforcement Action.) Similarly, our conclusion that Bell Operating
Company (BOC) statements of generally available terms and conditions are governed by the
same national rules that apply to agreements arbitrated under section 252 should ease
administrative burdens for all parties in markets served by BOCs, which may include small
entities, because they will not need to evaluate and comply with different sets of rules.
(Section II.F - BOC Statements of Generally Available Terms.) Finally, we decline to adopt
different requirements for agreements arbitrated under section 252 and BOC statements of
generally available terms and conditions for the reasons set forth in section II.F above.
Summary Analysis of Section III
DUTY TO NEGOTIATE IN GOOD FAITH
1366. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Incumbent LECs, including small incumbent LECs that receive requests
for access to network elements and/or services pursuant to sections 251 and 252 of the Act
will be required to negotiate in good faith over the terms of interconnection agreements.
This Order identifies several practices as violations of the duty to negotiate in good
faith, including: (1) a party's seeking or entering into an agreement prohibiting
disclosure of information requested by the FCC or a state commission, or supplied in
support of a request for arbitration pursuant to section 252(b)(2)(B); (2) seeking or
entering into an agreement precluding amendment of the agreement to account for changes in
federal or state rules; (3) an incumbent's denial of a reasonable request for cost data
during negotiations; and (4) an entrant's failure to provide to the incumbent LEC
information necessary to reach agreement. Complying with the projected requirements of
this section may require the use of legal skills. In addition, incumbent LECs and new
entrants having interconnection agreements that predate the 1996 Act must file such
agreements with the state commission for approval under section 252(e).
1367. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. As set forth above, we believe our
decision to establish national rules and a review process concerning parties' duties to
negotiate in good faith are designed to facilitate good faith negotiations, which should
minimize regulatory burdens and the economic impact of our decisions for all parties,
including small entities and small incumbent LECs. (Section III.A - Advantages and
Disadvantages of National Rules.) We also expect economic impacts to be minimized for
small entities seeking to enter into agreements with incumbent LECs as a result of the
decision that incumbent LECs may not impose a bona fide request requirement on carriers
seeking agreements pursuant to sections 251 and 252. (Section III.B - Specific Practices
that may Constitute a Violation of Good Faith Negotiation.) For the reasons set forth in
Section III.B above, we also find that certain additional practices are not always
violations of the duty to negotiate in good faith, including the suggested alternative
that all nondisclosure agreements violate the good faith duty.
1368. We do not require immediate filing of preexisting interconnection agreements,
including those involving small incumbent LECs and small entities. We set an outer time
period of June 30, 1997, by which preexisting agreements between Class A carriers must be
filed with the relevant state commission. This decision will ensure that third parties,
including small entities, are not prevented indefinitely from reviewing and taking
advantage of the terms of preexisting agreements. It also limits burdens that a national
filing deadline might impose on small carriers. In addition, the determination that
preexisting agreements must be filed with state commissions seems likely to foster
opportunities for small entities and small incumbent LECs to gain access to such
agreements without requiring investigation or discovery proceedings or other
administrative burdens that could increase regulatory burdens. (Section III.C -
Applicability of Section 252 to Preexisting Agreements). For the reasons set forth in
Section III.C above, we reject the alternative of not requiring certain agreements to be
filed with state commissions.
Summary Analysis of Section IV
INTERCONNECTION
1369. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Incumbent LECs, including small incumbent LECs, are required by section
251(c) to provide interconnection to all requesting telecommunications carriers for the
transmission and routing of telephone exchange service and exchange access service. Such
interconnection must be: (1) provided at any technically feasible point; (2) at least
equal in quality to that provided to the incumbent LEC itself and to any other parties
with interconnection agreements; and (3) provided on rates, terms, and conditions that are
"just, reasonable, and nondiscriminatory . . . ."(62)
We conclude that interconnection refers solely to the physical linking of networks for the
mutual exchange of traffic, and identify a minimum set of technically feasible points of
interconnection. The minimum points at which an incumbent LEC, which may be a small
incumbent LEC, must provide interconnection are: (1) the line side of a local switch; (2)
the trunk side of a local switch; (3) the trunk interconnection points for a tandem
switch; (4) central office cross-connect points; and (5) out-of-band signaling facilities.
In addition, the points of access to unbundled elements (discussed below) are also
technically feasible points of interconnection. Compliance with these requests may require
the use of engineering, technical, operational, accounting, billing, and legal skills.
1370. To obtain interconnection pursuant to section 251(c)(2), telecommunications
carriers must seek interconnection for the purpose of transmitting and routing telephone
exchange traffic, or exchange access traffic, or both. (Section IV.D. - Definition of
"Technically Feasible.") This will require new entrants to provide either local
exchange service or exchange access service to obtain section 251(c)(2) interconnection. A
requesting carrier will be required to bear the additional costs imposed on incumbent LECs
as a result of interconnection. (Section IV.E. - Technically Feasible Points of
Interconnection.) Carriers seeking interconnection, including small entities, may be
required to collect information to refute claims by incumbent LECs that the requested
interconnection poses a legitimate threat to network reliability. (Id.)
1371. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. The decision to adopt clear
national rules in this section of the Order is also intended to help equalize bargaining
power between incumbent LECs and requesting carriers, expedite and simplify negotiations,
and facilitate comprehensive business and network planning. This could decrease entry
barriers and provide reasonable opportunities for all carriers, including small entities
and small incumbent LECs, to provide service in markets for local exchange and exchange
access services. (Section IV.B. - National Interconnection Rules). National rules should
also facilitate the consistent development of standards and resolution of issues, such as
technical feasibility, without imposing additional litigation costs on parties, including
small entities and small incumbent LECs. We determine that successful interconnection at a
particular point in a network creates a rebuttable presumption that interconnection is
technically feasible at other comparable points in the network. (Section IV.E - Definition
of "Technically Feasible.") We also identify minimum points of interconnection
where interconnection is presumptively technically feasible: (1) the line side of a
switch; (2) the trunk side of a switch; (3) trunk interconnection points at a tandem
switch; (4) central office cross-connect points; and (5) out-of-band signaling facilities.
(Section IV.F - Technically Feasible Points of Interconnection.) These decisions may be
expected to facilitate negotiations by promoting certainty and reducing transaction costs,
which should minimize regulatory burdens and the economic impact of our decisions for all
parties, including small entities and small incumbent LECs. We decline, however, to
identify additional points where interconnection is technically feasible for the reasons
set forth in section IV.F above.
1372. The ability to enter local markets by offering only telephone exchange service or
only exchange access service may minimize regulatory burdens and the economic impact of
our decisions for some entrants, including small entities. We decline, however, to
interpret section 251(c)(2) as requiring incumbent LECs to provide interconnection to
carriers seeking to offer only interexchange services for the reasons set forth in section
IV.C above. In addition, we determine that an incumbent LEC may refuse to interconnect on
the grounds that specific, significant, and demonstrable network reliability concerns may
make interconnection at a particular point sufficiently infeasible. We further determine
that the incumbent LEC must prove such infeasibility to the state commission. (Section
IV.E - Definition of "Technically Feasible.")
1373. Competitive carriers, many of whom may be small entities, will be permitted to
request interconnection at any technically feasible point, and the determination of
feasibility must be conducted without consideration of the cost of providing
interconnection at a particular point. (Section IV.D. - Definition of "Technically
Feasible.") Consequently, our rules permit the party requesting interconnection,
which may be a small entity, and not the incumbent LEC to decide the points that are
necessary to compete effectively. (Section IV.E. - Definition of Technically Feasible). We
decline, however, to impose reciprocal terms and conditions for interconnection on
carriers requesting interconnection. Our decision that an party requesting interconnection
must pay the costs of interconnecting should minimize regulatory burdens and the economic
impact of our interconnection decisions for small incumbent LECs. Similarly, regulatory
burdens and the economic impact of our decisions may be minimized through the decision
that, while a requesting party is permitted to obtain interconnection that is of higher
quality than that which the incumbent LEC provides to itself, the requesting party must
pay the additional costs of receiving the higher quality interconnection. (Section IV.H -
Interconnection that is Equal in Quality.)
Summary Analysis of Section V
ACCESS TO UNBUNDLED NETWORK ELEMENTS
1374. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Under section 251(c), incumbent LECs are required to provide
nondiscriminatory access to unbundled network elements. We identify a minimum set of
network elements: (1) local loops; (2) local and tandem switches; (3) interoffice
transmission facilities; (4) network interface devices; (5) signaling and call-related
database facilities; (6) operations support systems and functions; and (7) operator and
directory assistance facilities. (Section V.J - Specific Unbundling Requirements.)
Incumbent LECs are required to provide nondiscriminatory access to operations support
systems and information by January 1, 1997. States may require incumbent LECs to provide
additional network elements on an unbundled basis. Incumbent LECs must perform the
functions necessary to combine unbundled elements in a manner that allows requesting
carriers to offer a telecommunications service, and the incumbent LEC may not impose
restrictions on the subsequent use of network elements. Compliance with these requests may
require the use of engineering, technical, operational, accounting, billing, and legal
skills.
1375. If a requesting carrier, which may be a small entity, seeks access to an
incumbent LEC's unbundled elements, the requesting carrier is required to compensate the
incumbent LEC for any costs incurred to provide such access. For example, in the case of
operation support systems functions, such work may include the development of interfaces
for competing carriers to access incumbent LEC functions for pre-ordering, ordering,
provisioning, maintenance and repair, and billing. Requesting carriers may also have to
deploy their own operations support systems interfaces, including electronic interfaces,
in order to access the incumbent LEC's operations support systems functions. The
development of interfaces may require new entrants, including small entities, to perform
engineering work. (Section V.J.5 - Operations Support Systems Unbundling.)
1376. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. The establishment of minimum
national requirements for unbundled elements should facilitate negotiations and reduce
regulatory burdens and uncertainty for all parties, including small entities and small
incumbent LECs. National requirements for unbundling may allow new entrants, including
small entities, to take advantage of economies of scale in network design, which may
minimize the economic impact of our decision. As set forth in Section V.B, above, we
reject several alternatives in making this determination, including proposals suggesting
that the Commission should: (1) not identify any required elements; (2) allow the states
exclusively to identify required elements; or (3) adopt an exhaustive list of elements.
1377. As set forth above, the 1996 Act defines a network element to include "all
facilit(ies) or equipment used in the provision of a telecommunications service," and
all "features, functions, and capabilities that are provided by means of such
facility or equipment, including subscriber numbers, databases, signaling systems and
information sufficient for billing and collection or used in the transmission, routing or
other provision of a telecommunications service." (Section V.C - Access to Unbundled
Elements.) As a result, new entrants, which may include small entities, should have access
to the same technologies and economies of scale and scope that are available to incumbent
LECs. In reaching our determination, we reject for the reasons set forth in Section V.C
above, the following alternatives: (1) that we should not adopt a method for identifying
elements beyond those identified in the 1996 Act; and (2) that features sold directly to
end users as retail services are not network elements. Finally, we reject the argument
that requesting carriers, which may include small entities, are required to provide all
services typically furnished by means of an element they purchase. (Id.) Our
rejection of this last alternative may reduce burdens for some small entities by
permitting them to offer some, but not all, of the services provided by the incumbent LEC.
1378. We conclude that the requirement to provide "access" to unbundled
network elements is independent of the interconnection duty imposed by section 251(c)(2),
and that such "access" must be provisioned under the rates, terms and conditions
applicable to unbundled network elements. We believe these conclusions may provide small
entities seeking to compete with incumbent LECs with the flexibility to offer other
telecommunications services in addition to local exchange and exchange access services.
(Section V.D. - Access to Unbundled Elements.) For the reasons set forth above in Section
V.D, we reject the argument that incumbent LECs are not required to provide access to an
element's functionality, and that "access" to unbundled elements can only be
achieved by interconnecting under the terms of section 251(c)(2). See Section V.C. above.
1379. As set forth above, we conclude that an incumbent LEC, which may be a small
incumbent LEC, may decline to provide a network element beyond those identified by the
Commission where it can demonstrate that the network element is proprietary, and that the
competing provider could offer the proposed telecommunications service using other
nonproprietary elements within the incumbent's network. (Section V.E - Access to Unbundled
Elements.) This should minimize regulatory burdens and the economic impact of our
decisions for incumbent LECs, including small incumbent LECs, by permitting such entities
to retain exclusive use of certain proprietary network elements.
1380. We conclude that incumbent LECs: (1) cannot impose restrictions, requirements or
limitations on requests for, or the sale or use of, unbundled network elements; (2) must
provide requesting carriers with all of the functionalities of a particular element so
that requesting carriers can provide any telecommunications services that can be offered
by means of that element; (3) must permit new entrants to combine network elements which
new entrants purchase access to, if so requested; (4) must prove to a state commission
that they cannot combine elements that are not ordinarily combined within an their
network, or that are not ordinarily combined in that manner, because such combination is
not technically feasible or it would impair the ability of other carriers to access
unbundled elements and interconnect with the incumbent LEC; and (5) must provide the
operational and support systems necessary to purchase and combine network elements. As a
result of these conclusions, many small entities should face significantly reduced
barriers to entry in markets for local exchange services. (Section V.F - Access to
Unbundled Elements.) For the reasons set forth in section V.F, we reject the following
alternatives: (1) that incumbent LECs, in all instances, must combine elements that are
not ordinarily combined in their networks; and (2) that incumbent LECs are not obligated
to combine elements for requesting carriers.
1381. By establishing minimum national rules concerning nondiscriminatory access to
unbundled network elements, requesting carriers, including small entities, may face
reduced transaction and regulatory costs in seeking to enter local telecommunications
markets. Among these minimum rules are: (1) access and elements which new entrants receive
are to be equal in quality between carriers; (2) incumbent LECs must prove technical
infeasibility; (3) the rates, terms and conditions established for the provisioning of
unbundled elements must be equal between all carriers, and where applicable, between
requesting carriers and the incumbent LEC itself, and they must provide efficient
competitors with a meaningful opportunity to compete; and (4) incumbent LECs must provide
carriers purchasing unbundled elements with access to electronic interfaces if incumbents
use such functions themselves in provisioning telecommunications services. (Section V.G -
Nondiscriminatory Access to Unbundled Network Elements.)
1382. As set forth above, we conclude that section 251(c)(3) does not require new
entrants to own or control their own local exchange facilities in order to purchase and
use unbundled network elements and, thus, new entrants can provide services solely by
recombining unbundled network elements. (Section V.H - Access to Unbundled Elements.)
1383. As discussed in Section V.J above, we adopt a minimum list of required unbundled
network elements that incumbent LECs, including small incumbent LECs, must make available
to requesting carriers. In adopting this list, we sought to minimize the regulatory
burdens and economic impact for small incumbent LECs. For example, we declined to adopt a
detailed list including many additional elements, as set forth in Section V.B. We also
provided for the fact that certain LECs may possess switches that are incapable of
performing customized routing for competitors, as discussed in Section V.J.2.(c).(ii).
Summary Analysis of Section VI
METHODS OF OBTAINING INTERCONNECTION
AND ACCESS TO UNBUNDLED NETWORK ELEMENTS
1384. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. We conclude that Section 251(c)(6) requires incumbent LECs, including
small incumbent LECs, to provide for any technically feasible method of interconnection or
access to unbundled network elements, including physical collocation, virtual collocation,
and meet-point interconnection. With certain modifications, we adopt some of the
requirements concerning physical and virtual collocation that we adopted in the Expanded
Interconnection proceeding. Compliance with these requests may require the use of
engineering, technical, operational, accounting, billing, and legal skills.
1385. In a meet-point arrangement the new entrant will build out facilities to the
agreed-upon point, which will likely entail the use of engineering and installation
personnel as well as the acquisition of equipment. We allow incumbent LECs to impose
reasonable restrictions on the warehousing of space by collocators. Therefore, small
entities collocating equipment may be required to use the provided space for the
collocation of equipment necessary for interconnection or access to unbundled network
elements or risk losing the right to use that space. (Section VI.B.1.e - Allocation of
Space.) To take advantage of its right to collocate equipment on an incumbent LEC's
premises, competitive entrants, which may include small entities, will be required to
build or lease transmission facilities between their own equipment, located outside of the
incumbent LECs' premises, and the collocated space. (Section VI.B.1.f - Leasing Transport
Facilities.) We allow incumbent LECs to require reasonable security arrangements to
separate an entrant's collocation space from the incumbent LEC's facilities. Small
entities collocating equipment may therefore be required to pay for such security
arrangements. (Section VI.B.1.h - Cage Construction.)
1386. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. By readopting our Expanded
Interconnection terms and conditions, which allow competitors to collocate equipment
for interconnection with the incumbent LEC, regulatory burdens have likely been reduced
because the terms and conditions for collocation have already been established. (Section
VI.B.1.b - Readoption of Expanded Interconnection Terms and Conditions.) This
seems likely to benefit all parties, including small entities and small incumbent LECs,
since it should reduce the time and expense of negotiation, and reduce the costs of
adapting to new terms and conditions for collocation.
1387. Due to our conclusion that requesting carriers may choose any method of
technically feasible interconnection or access to unbundled elements, new entrants,
including small entities, should have the flexibility to obtain interconnection or access
in the manner that best suits their needs. (Section VI.A. - Methods of Obtaining
Interconnection and Access to Unbundled Elements.) In particular, as discussed in Section
VI.A.3, we recognize that carriers, including small entities, may find virtual collocation
or meet-point arrangements more efficient than physical collocation in certain
circumstances, particularly if they lack the resources to collocate physically in a large
number of incumbent LEC premises.
1388. We adopt a broad definition of the term "premises," which should allow
carriers, including small entities, to collocate equipment for interconnection and access
to unbundled network elements at a range of incumbent LEC locations. (Section VI.B.1.c -
The Meaning of the Term "Premises.") For the reasons set forth in Section VI.B
above, we interpret the term "premises" broadly to include incumbent LEC central
offices, serving wire centers and tandem offices, as well as all buildings or similar
structures owned or leased by the incumbent LEC that house incumbent LEC facilities.
However, as set forth above, we reject the suggestion that security measures be provided
only at the request of the entrant, which should minimize regulatory burdens and the
economic impact of our decisions for small incumbent LECs. (Id.)
1389. We interpret the statute broadly to allow collocation of any equipment used for
interconnection or access to unbundled network elements. (Section VI.B.1.d - Collocation
Equipment.) This standard should offer all competitors, including small entities,
flexibility in collocating equipment they need to interconnect their networks to those of
incumbent LECs. Incumbent LECs will also be required to make space available to requesting
carriers on a first-come, first-served basis, and collocators seeking to expand their
collocated space should be allowed to use contiguous space where available. (Section
VI.B.1.e - Allocation of Space.) These provisions should minimize regulatory burdens and
economic impacts for small entity entrants by reducing opportunities for discriminatory
treatment based on the size of the requesting carrier. We decline, however, to require
incumbent LECs to file reports on the status, planned increase, and use of space for the
reasons set forth in Section VI.B.1. above, which will reduce the regulatory burdens and
economic impact of our decisions for small incumbent LECs.
1390. We conclude that a competitive entrant should be permitted to lease transmission
facilities from the incumbent LEC. (Section VI.B.1.f - Leasing Transport Facilities). This
provision will allow small entities to lease transmission facilities from incumbent LECs
to transmit traffic between the collocated space and their own networks, which may be
comparatively less burdensome for small entities than the alternative of bringing their
own facilities to the collocated equipment on the incumbent LEC's premises. We also
require incumbent LECs to permit two or more carriers that are collocating at the
incumbent LEC's premises to interconnect their networks. (Section VI.B.1.g - Co-Carrier
Cross-Connect.) This requirement should make it easier for new entrants to interconnect
their networks with those of competitors.
1391. We require incumbent LECs to provide the relevant state commissions with detailed
floor plans or diagrams of any premises where the incumbent LEC alleges that there are
space constraints. (Section VI.B.1.i. - Allowing Virtual Collocation in Lieu of Physical).
This requirement may reduce burdens for all parties, including small entities and small
incumbent LECs, by aiding state commissions with their evaluation of incumbent LEC
refusals to allow physical collocation on the grounds of space constraints. For the
reasons set forth in Section VI.B.1 above, however, we decline to require incumbent LECs
to lease additional space or provide trunking at no cost where they have insufficient
space for physical collocation, which should minimize the regulatory burdens and economic
impact of our decisions for incumbent LECs, including small incumbent LECs.
Summary Analysis of Section VII
PRICING OF INTERCONNECTION
AND UNBUNDLED NETWORK ELEMENTS
1392. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Pursuant to sections 251(c) and 252(d) of the 1996 Act, incumbent LECs
must provide interconnection and access to unbundled network elements on rates, terms, and
conditions that are just, reasonable, and nondiscriminatory. In Section VII above, we
adopt a methodology for setting arbitrated prices for interconnection and unbundled
elements on the basis of forward-looking economic cost studies prepared in conformance
with a methodology prescribed by the Commission. Until states utilize economic studies to
develop cost-based prices, they must use default proxies established by the Commission.
Small incumbent LECs may be required, therefore, to prepare economic cost studies. In
addition, small entities seeking arbitration for rates for interconnection or unbundled
elements may find it useful to prepare economic cost studies or prepare critiques of cost
studies prepared by incumbent LECs and others. In both cases, this may entail the use of
economic experts, legal advice, and possibly accounting personnel.
1393. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. Our conclusion that prices for
interconnection and unbundled elements should be set at forward-looking long-run economic
cost, including a reasonable share of forward-looking joint and common costs, should
permit new entrants, including small entities, to interconnect with, and acquire unbundled
elements from, incumbent LECs at prices that replicate, to the extent possible, those in a
competitive market. (Section VII.B.2 - Pricing of Interconnection and Unbundled Elements,
Cost-Based Pricing Methodology, Rate Levels.) Our forward-looking economic cost
methodology for determining prices is designed to permit incumbent LECs to recover their
economic costs of providing interconnection and unbundled elements, which should minimize
the economic impact of our decisions on small incumbent LECs.
1394. Our conclusion that embedded costs, opportunity costs and universal service
subsidies may not be included in the rates for interconnection and unbundled elements is
intended, in part, to avoid distortions in investment decisions, which should lead to more
efficient allocation of resources, thereby reducing regulatory burdens and economic
impacts for some small entities and small incumbent LECs. (Section VII.B.2 - Pricing of
Interconnection and Unbundled Elements, Cost-Based Pricing Methodology, Rate Levels.) We
reject proposals that would have permitted incumbent LECs to recover their embedded costs
in prices for interconnection and unbundled elements as discussed above in Section
VII.B.2.a.(3)(b). As discussed in Section VII.B.2.a.(3)(b), we reject the use of the
efficient component pricing rule (ECPR) to set prices for interconnection and unbundled
elements.
1395. Our conclusion that forward-looking common costs should be allocated in a
reasonable manner should ensure that the prices of network elements that are least likely
to be subject to competition are not artificially inflated by large allocations of common
costs. This, in turn, may also produce more efficient allocations of resources, thereby
minimizing regulatory burdens and economic effects for many parties, including small
entities and small incumbent LECs. (Section VII.B.2 - Pricing of Interconnection and
Unbundled Elements, Cost-Based Pricing Methodology, Rate Levels.) We permit, but do not
require, states to impose peak-sensitive pricing systems for shared facilities as
discussed in Section VII.B.3.b.
1396. We conclude that incumbent LECs should not recover access charges from entrants
that use unbundled network facilities to provide access services to customers that they
win from incumbent LECs. We do, however, permit incumbent LECs to impose on purchasers of
unbundled local switching the carrier common line charge and a charge equal to
seventy-five percent of the transport interconnection charge for an interim period that
shall end no later than June 30, 1997, as discussed in Section VII.B.2.a.(3)(b). As
further explained in that section, this mechanism should serve to reduce any short-term
disruptive impact of our decisions on incumbent LECs, including small incumbent LECs.
1397. We conclude that the Act requires rates for interconnection and unbundled
elements to be geographically deaveraged, using a minimum of three geographic zones, in a
manner that appropriately reflects the costs of the underlying elements. (Section VII.B..3
- Geographic/Class-of-Service Averaging.) We also conclude that distinctions between the
rates charged to requesting carriers for network elements should not vary based on the
classes of service that the requesting carriers provide to their to customers. We expect
these decisions to lead to increased competition and a more efficient allocation of
resources.
1398. The default proxies we adopt for rates for interconnection and unbundled
elements, which states may use to establish prices, are designed to approximate prices
that will enable efficient competitors, including small entities, to enter local exchange
markets. (Section VII.C. - Default Proxy Prices and Ceilings.) We reject the use of rates
in interconnection agreements that predate the 1996 Act as proxy-based ceilings for
interconnection and unbundled element rates as discussed in Section VII.C.1. We also
decline to adopt a generic cost model at this time, as discussed in Section VII.C.3.
1399. We determine that the nondiscrimination provisions in the Act prohibit price
differences that are not based on cost differences. This should permit small entities to
obtain the same terms and conditions of agreements reached by larger carriers that possess
greater bargaining power without having to incur the costs of negotiation and/or
arbitration. (Section VII.D.3 - Discrimination.)
Summary Analysis of Section VIII
RESALE
1400. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Pursuant to section 251(b)(1), all LECs, which may include small entity
competing LECs and small incumbent LECs, may not impose unreasonable or discriminatory
conditions on, or limit the resale of, their telecommunications services. Pursuant to
section 251(c)(4), incumbent LECs are required to offer for resale at wholesale rates any
telecommunications services that they offer to subscribers other than telecommunications
carriers. Providing such services for resale may require some small entities and small
incumbent LECs to use additional billing, technical, and operational skills.
1401. Under section 252(a), resellers, which may include small entities, are required
to prepare and present to incumbent LECs requests for services to resell. We do not
establish guidelines for the content of these requests. Such requests may involve legal,
engineering, and accounting skills. Resellers may also have to engage in arbitration
proceedings with incumbent LECs if voluntary negotiations resulting from the initial
request fail to yield an agreement. This may involve legal and general negotiation skills.
Where a reseller is negotiating or arbitrating with an incumbent LEC, the reseller may
choose to offer arguments concerning economic and accounting data presented by state
commissions or incumbent LECs. Resellers may also choose to make legal and economic
arguments that certain resale restrictions are unreasonable. These tasks may require
legal, economic, and accounting skills.
1402. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. As set forth in Section VIII.B,
above, our decision to adopt clear national rules should reduce regulatory burdens and
uncertainty for all parties, including small entities and small incumbent LECs. Moreover,
our decision not to impose eligibility requirements on resellers should minimize
regulatory burdens for resellers. We reject proposals that the Commission not require
resale of bundled service offerings, promotions and discounts lasting longer than 90 days,
residential service, and services offered at rates below cost for reasons set forth in
Section VIII.A.
1403. As discussed in Section VIII.B, we expect that the opportunity to resell
telecommunications services currently offered exclusively by incumbent LECs will lead to
increased competition in the provision of telecommunications services. We also determine
that non-cost-based factors shall not be considered when arriving at wholesale discounts,
and we reject the argument that indirect costs should not be considered avoided costs. We
also reject proposals that we either require or forbid a state to include a measure of
profit in its avoided cost calculation. As set forth in Section VIII.B, we considered the
concerns of small incumbent LECs and small entity resellers when adopting the default
range for wholesale discounts. In addition, we allow a state to consider including in
wholesale rates the costs that incumbent LECs incur in selling services on a wholesale
basis, which may minimize the economic impact for small incumbent LECs.
1404. As discussed in Section VIII.C, we remove obstacles faced by small businesses in
reselling telecommunications services by establishing a presumption, applicable to
incumbent and non-incumbent LECs, that most restrictions on resale are unreasonable. This
presumption should reduce unnecessary burdens on resellers, which may include small
entities. It may also produce increased opportunities for resale competition, which may be
expected to be beneficial for some small entities and small incumbent LECs. We do not
permit state commissions to require non-incumbent LECs to offer their services at
wholesale rates for the reasons set forth Section VIII.D. For the reasons discussed in
Section VIII.C, above, we decline to forbear from the application of section 251(b)(1) to
non-incumbent LECs. We also conclude that incumbent LECs are to continue to receive access
charge revenues when local services are resold under section 251(c)(4) for reasons set
forth in Section VIII.E, and that such access services are not subject to resale at
wholesale rates for reasons set forth in Section VIII.A.
Summary Analysis of Section IX
DUTIES IMPOSED ON "TELECOMMUNICATIONS
CARRIERS" BY SECTION 251(a)
1405. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Small entities that provide telecommunications services are subject to
the same obligations imposed on all telecommunications carriers under section 251(a)(1)
and section 251(a)(2), and any reporting requirements that attend such obligations. Among
these duties is the duty to interconnect, directly or indirectly, with requesting
telecommunications carriers. (Section IX - Duties Imposed on "Telecommunications
Carriers" By Section 251(a).) This will likely require small entities to comply with
the technical, economic, and legal requirements involved with interconnection, including
negotiating contracts, utilizing engineering studies, and adding operational capacity. (Id.)
Small incumbent LECs may incur similar compliance requirements to the extent they are
required to interconnect with entities that qualify as "telecommunications
carriers."
1406. Small incumbent LECs and small entities providing telecommunications services
will also be under a duty not to install network features, functions, and capabilities
that do not comply with standards and guidelines under sections 255 and 256. (Section IX -
Duties Imposed on "Telecommunications Carriers" By Section 251(a)(2).) In
addition, small entities that provide both information services and telecommunications
services are classified as telecommunications carriers and are subject to certain
requirements under 251(a). (Section IX - Duties Imposed on "Telecommunications
Carriers" By Section 251(a)(2).)
1407. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. Small entities who provide for a
fee local, interexchange and international services are defined as telecommunications
carriers and, thus, also receive the benefits of section 251 including interconnection,
services, and network elements, which may increase their ability to compete. (Section IX -
Duties Imposed on "Telecommunications Carriers" By Section 251(a)(2).) We reject
the suggestion that CMRS providers, some of which likely are small entities, should not be
included in the definition of a "telecommunications carrier." (Id.) We
determine that entities operating private, internal or shared communications networks do
not qualify as telecommunications carriers, however, which excludes them from the
obligations and benefits under section 251(a). Small entities providing information
services but not telecommunications services are also not classified as telecommunications
carriers and, thus, will not be bound by the duties of section 251(a). A carrier that
provides both information and telecommunications services is deemed subject to the
requirements of section 251(a). We also conclude that telecommunications carriers that
have interconnected under either section 251(a)(1) or 251(c)(2) may offer information
services through the same arrangement or agreement. This will permit new entrants, many of
which may be small entities, to offer full ranges of services to end users without having
to provide some of those services inefficiently through distinct facilities or agreements.
1408. We decide that competitive telecommunications carriers that have the obligation
to interconnect with requesting carriers may choose, based upon their own characteristics,
whether to allow direct or indirect interconnection. (Section IX - Duties Imposed on
"Telecommunications Carriers" By Section 251(a).) This should allow significant
flexibility for small entities to choose the most efficient and economical arrangement for
their particular strategy. As set forth in Section IX, we reject an argument to forbear,
under section 10 of the Communications Act,(63) from
imposing any interconnection requirements on non-dominant carriers.
Summary Analysis of Section X
COMMERCIAL MOBILE RADIO SERVICES
1409. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. We are applying sections 251 and 252 to LEC-CMRS interconnection at
this time. (Section X.D - Jurisdictional Authority for Regulation of LEC-CMRS
Interconnection Rates.) We may revisit our determination not to invoke jurisdiction under
section 332 to regulate LEC-CMRS interconnection rates if we determine that the regulatory
scheme established by sections 251 and 252 does not sufficiently address the problems
encountered by CMRS providers, many of which may be small entities, in obtaining
interconnection on terms and conditions that are just, reasonable, and nondiscriminatory.
1410. Pursuant to our findings in Section X.D, a small CMRS entity seeking to enter
into a reciprocal compensation agreement with an incumbent LEC, which may be a small
incumbent LEC, will have to comply with sections 251 and 252, and state law. The
reporting, recordkeeping, and other compliance requirements associated with reciprocal
compensation are summarized in the following section concerning obligations under section
251(b).
1411. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. The Commission's actions may
minimize the economic impact on CMRS providers, many of which are small entities, by
declaring that CMRS providers are not required to comply with the obligations of LECs
under section 251(b)(5). We decline to adopt the alternative of finding that a CMRS
provider is a LEC for the reasons set forth in Section X.A. We also determine that CMRS
providers are entitled to request reciprocal compensation under section 251(b)(5), and
that certain CMRS providers are also entitled to request interconnection under section
251(c)(2). As discussed in the following section concerning obligations under section
251(b), these decisions may permit small entity CMRS providers the opportunity to
considerably expand their businesses.
Summary Analysis of Section XI
OBLIGATIONS IMPOSED ON LECS BY 251(b)
A. Reciprocal Compensation for Transport
and Termination of Telecommunications
1412. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. All local exchange carriers, including small incumbent LECs and perhaps
some small entities offering competing local exchange services, have a duty to establish
reciprocal compensation for the transport and termination of local telecommunications
traffic, as defined by state commissions. As such, small incumbent LECs and small entities
offering competitive local exchange services may be required to measure the exchange of
traffic, and to bill and collect payment from other carriers. (Section XI.A - Reciprocal
Compensation.) Reciprocal compensation for the transport and termination of traffic may be
based on the incumbent LEC's cost studies, which may require small incumbent LECs to use
economic skills to perform cost studies. To the extent that a competing provider of local
exchange services, which may include a small entity, believes its costs for the
transportation and termination of traffic differ from those of the incumbent LEC, it would
also be required to provide a forward-looking, economic cost study. (Id.)
1413. If a CMRS provider entered into an agreement with an incumbent LEC prior to
August 8, 1996 that does not provide for mutual compensation, the CMRS provider may demand
to renegotiate the agreement. This may impose the burden of re-negotiation on small
incumbent LECs, which may require legal, accounting, and economic skills. In addition,
pending the successful completion of negotiation or arbitration, symmetrical reciprocal
compensation shall apply, which may have the effect of raising the amount small incumbent
LECs currently pay CMRS providers to terminate LEC-originated traffic. This may have the
effect of increasing small incumbent LECs' costs. Finally, a state commission may impose
bill-and-keep arrangements between carriers if the state commission determines that the
amount of local telecommunications traffic from one network to the other is approximately
equal to the amount of local telecommunications traffic flowing in the opposite
directions, and is expected to remain thus. This could have the effect of reducing small
incumbent LECs' revenues and decreasing the expenses of small entities. It also might
place a burden on small entities and small incumbent LECs of establishing that traffic
volumes are imbalanced, which might require accounting, economic, and legal skills.
1414. We require paging companies seeking to recover fees for terminating local calls
to demonstrate to the state the costs of terminating such calls. (Section XI.A. -
Transport and Termination of Traffic.) Consequently, small entity paging companies and
possibly small incumbent LECs may be required to use legal, economic, and possibly
accounting skills.
1415. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. Our adoption of national default
price ceilings and ranges for transportation and termination of local traffic being
arbitrated by the states should provide all parties, including small incumbent LECs and
many new entrant small entities, with a clear understanding of the terms and conditions
that will govern should they fail to reach an agreement. This should minimize regulatory
burdens and economic impacts for those companies, in part by reducing the transaction
costs of arbitration. (Section XI.A.3.c.(4) - Default Proxies.) Permitting CMRS providers
with non-reciprocal agreements to renegotiate their agreements, and imposing symmetrical
reciprocal compensation pending completion of negotiation or arbitration, will provide all
parties with certainty as to applicable rates as of the date of this order, and minimize
litigation and regulatory costs. We believe this decision is consistent with the
pro-competitive goals of the 1996 Act.
1416. We define transport and termination as separate functions -- each with its own
cost calculation for the purposes of sections 251 and 252. This definition may permit
interconnecting carriers, including small entities, to obtain transport and termination
services at lower rates and avoid paying above-cost rates or rates for unneeded services.
(Section XI.A.2 - Definition of Transport and Termination of Telecommunications.) We also
conclude that a LEC may not charge a CMRS provider or other carrier, which may be a small
entity, for receiving and terminating LEC-originated traffic. (Section XI.A.4 - Symmetry.)
We do not permit interexchange carriers to use transport and termination services to avoid
the obligation to pay access charges for terminating interexchange traffic with incumbent
LECs. (Section XI.A.2 - Definition of Transport and Termination of Telecommunications.)
1417. Our decision to permit new entrants to base reciprocal compensation arrangements
on incumbent LECs' cost studies may reduce barriers to entry by permitting competing LECs
to avoid performing their own forward-looking, economic cost studies, which may be
expected to reduce the overall burdens and minimize the economic impact of regulation on
these small entities. (Section XI.A.4 - Symmetry.) The ability of state commissions to
impose bill and keep arrangements where the costs of terminating traffic are nearly
symmetrical, traffic volume is roughly balanced, and both are expected to remain so, may
allow small entities and small incumbent LECs to avoid the cost of measuring traffic
exchange. (Section XI.A.5 - Bill and Keep.) For the reasons set forth in Section XI.A.5
above, we reject the proposed alternative of permitting states to adopt bill-and-keep
arrangements for the transport and termination of traffic where the cost of terminating
traffic is not nearly symmetrical.
1418. By requiring that rates for transport and termination be cost based, we believe
that all parties in telecommunications markets, including small incumbent LECs and small
entities, may benefit from increased opportunities to compete effectively in local
exchange markets. (Section XI.A.3 - Pricing Methodology.) In addition, we conclude that
termination rates for LECs, including small incumbent LECs, should include an allocation
of forward-looking common costs, but not an element for the recovery of lost
contributions. These decisions may be expected to minimize the economic impact of our
decisions on small incumbent LECs and small entities.
1419. This Order eliminates certain charges paging companies may now be assessed by
LECs and enables paging companies to claim new revenues from LECs for terminating paging
calls. (Section XI.A - Transport and Termination of Traffic.) Paging companies, including
small entities, may thereby incur lower costs. Such entities also may increase their
revenues, depending on the outcome of any proceedings concerning their termination costs.
For the reasons set forth in Section XI.A.3 above, we cannot conclude, at this time, that
a LEC's forward looking costs may be used as a reasonable proxy for the costs of call
termination by paging providers. We further conclude that the default price for
termination of traffic from the end office that we adopt in this proceeding in Section
XI.A.3 above does not apply to termination of traffic by paging providers. This default
price is based on estimates in the record of the costs to LECs of termination from the end
office or end-office switching.
B. Access to Rights-of-Way
1420. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Small incumbent LECs that meet the definition of a utility(64) and own poles, ducts, conduits and rights-of-way where
access was not previously mandated are now required to provide access to requesting
telecommunications carriers (other than incumbent LECs and cable television systems) which
may require the use of legal, engineering, and accounting resources for evaluation and
processing of attachment requests. (Section XI.B.2 - Section 224(f): Non-discriminatory
Access.) This may also require small incumbent LECs and small entities to employ technical
personnel to modify pole attachment arrangements.
1421. A complaint of unjustified denial of access must be supported by a written
request for access, the utility's response, and information supporting the complainant's
position. This will likely impose some recordkeeping requirements on small incumbent LECs
and small entities seeking access to rights-of-way. Our requirements may also impose
administrative requirements, including legal and engineering expertise, on small
governmental jurisdictions(65) that resolve disputes
arising under the section 224 of the Communications Act. (Section XI.B.5 - Dispute
Resolution.) In addition, small governmental jurisdictions that have established rules and
regulations for access to poles, ducts and conduits specifically, and interconnection
generally, are also likely to have some level of reporting and recordkeeping requirements
for competing telecommunications carriers that use the poles, some of which may be small
entities. (Section XI.B.6 - Reverse Preemption.)
1422. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. In placing the burden of proof on
the denying utility with respect to the propriety of a denial of access, we recognize that
new entrants, which may be small entities, are not likely to have access to such
information without cooperation from the utilities. Complaints should not be dismissed
where the petitioner was unable to obtain a written response from the denying utility, or
where the utility also denied the petitioner any relevant information needed to establish
a prima facie case. These provisions should allow an entrant to pursue a claim without the
need for expensive discovery, and should not preclude or discourage entities with limited
resources from seeking redress where access is denied. (Section XI.B.5 - Dispute
Resolution.) For the reasons set forth in Section XI.B.5, we reject the recommendation
that an applicant be allowed to seek injunctive relief in federal court and select federal
jurisdiction for enforcement or appeal of any matter regarding pole attachments. Our
conclusion that state and local pole attachment requirements are presumed reasonable may
minimize burdens on small governmental jurisdictions by preserving existing rules and
procedures, and the local government's expertise with its own rules. (Section XI.B.2 -
Specific Rules.) In reaching this result, we reject the alternative of invalidating such
state regulations in favor of federal rules for the reasons stated in Section XI.B.2. Our
determination not to prescribe numerous specific rules in this area recognizes the varying
technologies and facilities deployed by incumbent LECs, including small incumbent LECs.
For example, we recognize that utilities, including small incumbent LECs, normally have
their own operating standards that dictate conditions of access. Thus, we leave in place
such conditions of access. For the reasons set forth in Section XI.B.1, we reject the
alternative of prescribing a comprehensive set of substantive engineering standards
governing access to rights-of-way.
1423. When an attaching entity modifies poles for its use, it will be entitled to
recover a share of its expenses from any later-attaching entities. (Section XI.B.4 -
Modifications.) This should permit attaching entities that modify poles, some of which may
be small entities, to bear only their proportionate costs and prevent them from
effectively subsidizing their later-entering competitors. The requirement that utilities
provide attaching entities with 60 days' notice prior to commencing modifications to any
pole, duct or conduit should provide attaching entities, some of which may be small
entities, with sufficient time to evaluate the impact of the proposed modification on
their interests and to plan and coordinate any modifications to their own attachments. (Id.)
C. Imposing Additional Obligations on LECs that are not Incumbent LECs
1424. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decisions in this section of the Order do not subject any small
entities to reporting, recordkeeping or other compliance requirements.
1425. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. The determination that the 1996
Act does not permit the particular obligations for incumbent LECs set forth in section
251(c) to be imposed on non-incumbent carriers, absent a finding by the Commission under
section 251(h)(2), should limit potential burdens on new entrants, including small
entities. (Section XI.C - Imposing Obligations on LECs that are not Incumbent LECs.)
Summary Analysis of Section XII
EXEMPTIONS, SUSPENSIONS AND
MODIFICATIONS OF SECTION 251 REQUIREMENTS
1426. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Section 251(f)(1) grants rural telephone companies, which may be small
incumbent LECs, an exemption from the requirements of section 251(c) (which only apply to
incumbent LECs) until the rural telephone company has received a bona fide request for
interconnection, services, or network elements, and the state determines that the
exemption should be terminated. Section 251(f)(2) provides that LECs with fewer than two
percent of the nation's subscriber lines may petition a state commission for a suspension
or modification of any requirements of sections 251(b) and 251(c). The latter provision,
section 251(f)(2), is available to all LECs including competitive LECs, which may be small
entities.
1427. After a carrier has made a bona fide request under Section 251, a rural telephone
company, which may be a small incumbent LEC, seeking to retain its exemption under section
251(f)(1) must prove to the state commission that it should retain its exemption. To
remove the exemption, a state commission must find that the bona fide interconnection
request is not unduly economically burdensome, is technically feasible, and is consistent
with section 254. The parties involved in such a proceeding may need to use legal,
accounting, economic and/or engineering services. A small incumbent LEC or a competitive
LEC, which may be a small entity, seeking under 251(f)(2) to modify or suspend the
national interconnection requirements imposed by section 251(b) or 251(c) bears the burden
of proving that interconnection would: (1) create a significant adverse economic impact on
telecommunications users; (2) be unduly economically burdensome; or (3) be technically
infeasible.
1428. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. As set forth in Section XII above,
the determination whether a section 251(f) exemption, suspension, or modification should
be continued or granted lies primarily with the relevant state commission. By largely
leaving this determination to the states, our decisions permit this fact-specific inquiry
to be administered in a manner that minimizes regulatory burdens and the economic impact
on small entities and small incumbent LECs. However, to further minimize regulatory
burdens and minimize the economic impact of our decision, we adopt several rules as set
forth in Section XII above, which may facilitate the efficient resolution of such
inquiries, provide guidance, and minimize uncertainty. As set forth in Section XII above,
we find that the rural LEC or smaller LEC must prove to the state commission that the
financial harm shown to justify an exemption, suspension, or modification would be greater
than the harm that might typically be expected as a result of competition. Finally, we
conclude that section 251(f) adequately provides for varying treatment for smaller or
rural LECs where such variances are justified. As a result, we expect that section 251(f)
will significantly minimize regulatory burdens and economic impacts from the rules adopted
in this Order.
Summary Analysis of Section XIII
ADVANCED TELECOMMUNICATIONS CAPABILITIES
1429. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decision to defer consideration of rules in this section of the
Order does not subject any small entities or small incumbent LECs to reporting,
recordkeeping or other compliance requirements.
1430. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. We do not anticipate that our
decision to defer consideration of rules in this section of the Order will have any
economic impact on small entities or small incumbent LECs.
Summary Analysis of Section XIV
PROVISIONS OF SECTION 252
A. Arbitration Process
1431. Summary of Projected Reporting, Recordkeeping, and Other Compliance Requirements. Pursuant to section 252(b)(1), a party to negotiation may petition a state commission to arbitrate any open issues. Small entities and small incumbent LECs negotiating interconnection agreements may, therefore, participate in state arbitration in order to obtain an interconnection agreement, which may impose significant legal costs. (Section XIV.A - Arbitration Process.) Section 252(e)(5) requires the Commission to assume the state's responsibility under section 252 if the state "fails to act to carry out its responsibility" under the section. We require an aggrieved party, which may be a small entity or a small incumbent LEC, to notify the FCC that a state commission has failed to act under section 252 by filing a detailed written petition, backed by affidavit. As set forth above in Section XIV.A, if the Commission, following a notice and comment period, determines that the state has failed to act, the Commission will assume authority under section 252(e)(5) and mediate or arbitrate the dispute. This process may also entail significant legal expertise.
1432. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. In this Order, the Commission
adopts a minimum set of rules that will provide notice of the standards and procedures
that the Commission will use if it has to assume the responsibility of a state commission
under section 252(e)(5). These rules should benefit small entities and small incumbent
LECs by limiting uncertainty and minimizing transaction costs associated with the
arbitration process. (Section XIV.A - Arbitration Process.)
1433. The Commission concludes that, if it arbitrates agreements, it will use a
"final offer" arbitration method, whereby each party to the arbitration proposes
its best and final offer, and the arbitrator chooses between the proposals. The arbitrator
may choose either proposal in its entirety, or could choose different parties' proposals
on an issue-by-issue basis. This method of arbitration should minimize the economic impact
on small entities and small incumbent LECs by reducing the transaction costs associated
with arbitration. Our rules should also encourage parties, to negotiate after offers are
submitted which should provide additional flexibility for parties including small entities
and small incumbent LECs, to agree to a resolution tailored to their interests. (Section
XIV.A - Arbitration Process.)
1434. For the reasons set forth above in Section XIV.A, we reject the alternative of
adopting national rules governing state arbitration procedures. We believe the states are
in a better position to develop mediation and arbitration rules that support the
objectives of the 1996 Act. States may develop specific measures that best address the
concerns of small entities and small incumbent LECs participating in mediation or
arbitration.
1435. As set forth above in Section XIV.A, we reject the suggestion that the Commission return jurisdiction over an arbitration to the state commission. We further reject the argument that, once the Commission has mediated or arbitrated an agreement, the agreement must be submitted to the state commission for approval under state law. We decline to adopt the alternative suggested by some parties that, if the Commission steps into the state commission role, it is bound by state laws and standards that would have applied to the state commission. (Section XIV.A - Arbitration Process).
1436. As explained above in Section XIV.A, we also reject the alternative that an
arbitrated agreement not be binding on the parties. Finally, we reject the alternative of
opening the arbitration process to all third parties, which should minimize the costs
involved in such proceedings.
B. Section 252(i)
1437. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decisions in this section of the Order do not subject any small
entities to reporting, recordkeeping or other compliance requirements. Incumbent LECs,
including small incumbent LECs, are required to file with state commissions all
interconnection agreements entered into with other carriers, including adjacent incumbent
LECs. Incumbent LECs must also permit third parties to obtain any individual
interconnection, service or network element arrangement on the same terms and conditions
as those contained in any agreement approved under section 252. Moreover, incumbent LECs
must prove with specificity that terms and conditions contained in filed agreements are
legitimately related to the purchase of the individual element or service being sought.
Incumbent LECs must provide "most favored nation" status with regard to
subsequent carriers regardless of whether they include "most favored nation"
clauses in their agreements. Complying with these requirements may require small incumbent
LECs and requesting small entities to use legal and negotiation skills.
1438. Steps Taken to Minimize Significant Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. Our decision to adopt national
standards to implement section 252(i) should minimize the economic impact of our decision
on both small entities and small incumbent LECs by expediting the resolution of disputes,
thereby reducing transaction costs associated with interconnection. Our decision that
section 252(i) permits requesting carriers to choose among individual provisions contained
in publicly-filed interconnection agreements should minimize the economic impact for small
new entrants by permitting them to obtain the provisions they desire without having to
adopt entire agreements that would not reflect their costs or the specific technical
characteristics of their networks. (Section XIV.B - Section 252(i).) Moreover, small
entities may be able to obtain the same terms and conditions of agreements reached by
larger carriers that possess greater bargaining power without having to incur the costs of
negotiation and/or arbitration.
1439. We also determine that publicly-filed agreements need only be made available to
carriers who cause incumbent LECs to incur no greater costs than did the original carrier,
which should minimize the economic impact on small incumbent LECs. We also minimize the
regulatory burden for small entities and small incumbent LECs by finding that a new
entrant seeking interconnection, network elements, or services pursuant to section 252(i)
need not make such requests pursuant to the procedures for initial section 251 requests,
but shall be permitted to obtain access to agreements on an expedited basis.
1440. As set forth above, we conclude that section 252(i) permits differential
treatment of carriers based on differences in the costs of serving those carriers, but
does not permit incumbent LECs to limit the availability of interconnection, services, or
network elements only to those requesting carriers serving a comparable class of
subscribers or providing the same service as the original party to the agreement. (Section
XIV - Section 252(i).) These decisions should minimize the impact on small entities by
preventing discrimination and enabling them to obtain the same terms and conditions as
larger carriers that possess greater bargaining power. For the reasons set forth in
Section XIV, we reject the interpretation favored by commenters arguing that new entrants
should not be able to choose among provisions of interconnection agreements filed with
state commissions.
E. Report to Congress
1441. The Commission shall send a copy of this FRFA, along with this Order, in a report to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this FRFA will also be published in the Federal Register.
1. 3212 Subtitle II of the CWAAA is "The Small Business Regulatory Enforcement Fairness Act of 1996" (SBREFA), codified at 5 U.S.C. 601 et seq.
2. 3213 S. Conf. Rep. No. 230, 104th Cong., 2d Sess. 1 (1996).
3. 3214 Id.
4. 3215 NPRM at paras. 274-287.
5. 3216 SBA RFA comments at 3-5; Rural Tel. Coalition reply at 38-39; CompTel reply at 46.
6. 3217 Rural Tel. Coalition reply at 39; CompTel reply at 46.
7. 3218 Rural Tel. Coalition reply at 40.
8. 3219 SBA RFA comments at 4-5 (citing 15 U.S.C. 632(a)(2)); Rural Tel. Coalition reply at 38.
9. 3220 See 5 U.S.C. 605(b).
10. 3221 See, e.g., Expanded Interconnection with Local Telephone Company Facilities, Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 5809 (1991); MTS and WATS Market Structure, Report and Order, 2 FCC Rcd 2953, 2959 (1987) (citing MTS and WATS Market Structure, Third Report and Order, 93 F.C.C.2d 241, 338-39 (1983)).
11. 3222 See, e.g., In the Matter of Implementation of Sections of the Cable Television Consumer Protection Act of 1992: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 7418 (1995).
12. 3223 Rural Tel. Coalition reply at 39-40.
13. 3224 SBA RFA comments at 2-3, CompTel reply at 46.
14. 3225 Id.
15. 3226 SBA RFA comments at 5-6, citing 5 U.S.C. 603(b)(4).
16. 3227 SBA RFA comments at 7-8, citing 5 U.S.C. 603(c).
17. 3228 Idaho Commission comments at 15.
18. 3229 SCBA RFA comments at 1.
19. 3230 Id. at 1-2.
20. 3231 NPRM, at para. 283 (rel. Apr. 19, 1996), summarized at 61 Fed. Reg. 18311, 18312 (Apr. 25, 1996).
21. 3232 47 U.S.C. 251(f).
22. 3233 SBA RFA comments; Rural Tel. Coalition reply at 38-41; Idaho Commission comments at 15; SCBA RFA comments; CompTel reply at 45-46.
23. 3234 SBA RFA comments at 2.
24. 3235 See, e.g., Inquiry into the Development of Regulatory Policy in Regard to Direct Broadcast Satellites, Notice of Proposed Policy Statement and Rulemaking, 86 F.C.C.2d 719, 755 (1981).
25. 3236 See 5 U.S.C. 603 (IRFA requirements).
26. 3237 See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 524-25 (1978), citing FCC v. Schreiber, 381 U.S. 279, 290 (1965) and FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940).
27. 3238 NPRM paras. 94-97.
28. 3239 NPRM para. 277.
29. 3240 NPRM para. 6.
30. 3241 This good faith requirement is found in 47 U.S.C. 251(c)(1).
31. 3242 SCBA RFA comments at 1-2.
32. 3243 SCBA RFA comments at 2.
33. 3244 See 5 U.S.C. 601(3) (incorporating by reference the definition of "small business concern" in 5 U.S.C. 632).
34. 3245 15 U.S.C. 632. See, e.g., Brown Transport Truckload, Inc. v. Southern Wipers, Inc., 176 B.R. 82 (N.D. Ga. 1994).
35. 3246 13 C.F.R. 121.201.
36. 3247 See 13 C.F.R. 121.210 (SIC 4813).
37. 3248 United States Department of Commerce, Bureau of the Census, 1992 Census of Transportation, Communications, and Utilities: Establishment and Firm Size, at Firm Size 1-123 (1995) (1992 Census).
38. 3249 15 U.S.C. 632(a)(1).
39. 3250 1992 Census, supra, at Firm Size 1-123.
40. 3251 13 C.F.R. 121.201, Standard Industrial Classification (SIC) Code 4812.
41. 3252 Federal Communications Commission, CCB, Industry Analysis Division, Telecommunications Industry Revenue: TRS Fund Worksheet Data, Tbl. 21 (Average Total Telecommunications Revenue Reported by Class of Carrier) (Feb. 1996) (TRS Worksheet).
42. 3253 Id.
43. 3254 Id.
44. 3255 Id.
45. 3256 Id.
46. 3257 United States Department of Commerce, Bureau of the Census, 1992 Census of Transportation, Communications, and Utilities: Establishment and Firm Size, at Firm Size 1-123 (1995) (1992 Census).
47. 3258 13 C.F.R. 121.201, Standard Industrial Classification (SIC) Code 4812.
48. 3259 Id.
49. 3260 Id.
50. 3261 See Implementation of Section 309(j) of the Communications Act -- Competitive Bidding, PP Docket No. 93-253, Fifth Report and Order, 9 FCC Rcd 5532, 5581-84 (1994).
51. 3262 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, Amendment of the Commission's Cellular/PCS Cross-Ownership Rule, Report and Order, GN Docket No. 90-314, FCC 96-278 (rel. June 24, 1996).
52. 3263 1992 Census, Table 5, Employment Size of Firms: 1992, SIC Code 4812.
53. 3264 See Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the Specialized Mobile Radio Pool, PR Docket No. 89-583, Second Order on Reconsideration and Seventh Report and Order, 11 FCC Rcd 2639, 2693-702 (1995); Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rulemaking, 11 FCC Rcd 1463 (1995).
54. 3265 Id.
55. 3266 1992 Census, supra, at Firm Size 1-123.
56. 3267 47 C.F.R. 76.901(e). The Commission developed this definition based on its determination that a small cable system operator is one with annual revenues of $100 million or less. Implementation of Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393.
57. 3268 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for Dec. 30, 1995).
58. 3269 47 U.S.C. 543(m)(2).
59. 3270 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for Dec. 30, 1995).
60. 3271 See 5 U.S.C. 604(a)(4).
61. 3272 See 5 U.S.C. 604(a)(5).
62. 3273 47 U.S.C. 251(c)(2).
63. 3274 47 U.S.C. 160.
64. 3275 The Act defines "utility" as "any person who is a local exchange carrier or an electric, gas, water, steam, or other public utility, and who owns or controls poles, ducts, conduits, or rights-of-way used, in whole or in part, for any wire communication." 47 U.S.C. 224(a)(1).
65. 3276 Under the Regulatory Flexibility Act, a "small governmental jurisdiction" is one type of "small entity," and is defined as the "governments of cities, counties, towns, townships, villages, school districts, or special districts with a population of less than fifty thousand . . . ." 5 U.S.C. 601(5).
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