PUBLIC NOTICE News Media Information 202 / 418-0500 Internet: http://www.fcc.gov TTY: 1-888-835-5322 Federal Communications Commission 445 12th Street, S.W. Washington, D.C. 20554 DA 12-1199 Released July 26, 2012 WIRELINE COMPETITION BUREAU SEEKS COMMENT ON PROPOSED URBAN RATES SURVEY AND ISSUES RELATING TO REASONABLE COMPARABILITY BENCHMARKS AND THE LOCAL RATE FLOOR WC Docket No. 10-90 Comments: [30 days after publication in the Federal Register] 1. In this Public Notice, the Wireline Competition Bureau seeks comment on a proposed survey of urban rates for fixed voice and fixed broadband residential services. The Bureau also seeks comment concerning how, using data from the urban rates survey, to determine the local voice rate floor and the reasonable comparability benchmarks for fixed voice and fixed broadband services. 2. Background. On November 18, 2011, the Commission released the USF/ICC Transformation Order and FNPRM, which comprehensively reforms and modernizes the universal service and intercarrier compensation systems.1 In the Order, among other things, the Commission directed the Wireline Competition Bureau and Wireless Telecommunications Bureau to conduct a survey of residential urban rates for fixed voice, fixed broadband, mobile voice, and mobile broadband services.2 In the Further Notice, the Commission sought comment on various issues associated with determining reasonable comparability for voice and broadband rates.3 3. The rate survey, conducted once each year, will be used to establish a rate floor that carriers receiving high-cost loop support (HCLS) or high-cost model support must meet in order to receive their full support amounts, beginning in 2014.4 In addition, the rate survey will be used to develop reasonable comparability benchmarks for voice and broadband rates that carriers will annually certify their rates do not exceed, with the first certification due July 1, 2013. 1 Connect America Fund, WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order or Order); pets. for review pending sub nom. In re: FCC 11-161, No. 11-9900 (10th Cir. filed Dec. 8, 2011); Connect America Fund, WC Docket No. 10-90 et al., Order on Reconsideration, 26 FCC Rcd 17633 (2011); Connect America Fund, WC Docket No. 10-90 et al., Second Order on Reconsideration, FCC 12-47 (rel. Apr. 25, 2012) (Second Reconsideration Order); Connect America Fund, WC Docket No. 10-90 et al., Third Order on Reconsideration, FCC 12-52 (rel. May 14, 2012) (Third Reconsideration Order). 2 USF/ICC Transformation Order, 22 FCC Rcd at 17694, para. 85, 17708, para. 114. We do not address the mobile voice and broadband components of the survey at this time. 3 Id. at 18046-47, paras. 1018-27. 4 Id. at 17751, para. 239, 17855, para. 592. The rate floor is set at $10 for the year beginning July 1, 2012, and $14 for the year beginning July 1, 2013. Supported carriers are required to report their local rates that are below the relevant benchmark beginning July 1, 2012. These reports will be used to determine whether support reductions are required for carriers with artificially low rates. 24. Content of Rate Survey. Appendix A to this Public Notice contains the survey instrument that the Bureau proposes to gather data regarding fixed voice and fixed broadband rates. We seek comment on the details of the proposed rate survey as described below. 5. In the fixed voice section of the survey, the Bureau proposes that providers will separately report non-discounted rates and other charges (i.e. taxes, fees, etc.) for their unlimited or flat-rate local service, unlimited all-distance service, and measured or messaged local service. If the provider does not offer such service, it will indicate as such and not report data for that item. Providers will report rates for both public switched telephone network (PSTN) and Voice over Internet Protocol (VoIP) service, to the extent each is offered. Various non-recurring charges will also be surveyed. We seek comment on the proposed data to be collected in the fixed voice section of the survey. 6. In the fixed broadband section of the survey, the Bureau proposes that providers will separately report non-discounted rates and other charges for four specific advertised speed tiers of broadband service.5 Are the four proposed speed tiers a reasonable set on which to collect rates? For each offering, the provider will also report on any capacity limits and what action is taken if the capacity limit is reached. Such actions may include overage charges, blocking traffic, and rate limiting.6 Are there any other service provider practices regarding capacity limits that should be included? Do the survey’s questions about capacity limits adequately capture market offerings given the current market for residential, fixed broadband? Is the proposed format appropriate for collecting information on usage-based broadband pricing for fixed services, and, if not, how should the format be modified? 7. The Bureau intends to implement this survey through an online reporting form accessible to those urban providers of fixed voice and broadband services who are selected to participate. Urban providers will be chosen to create a statistically valid sample for the purpose of setting a reasonable comparability benchmark for fixed voice and fixed broadband services and a rate floor for fixed voice service. Independent samples will be chosen for the fixed voice and fixed broadband sections of the survey. The proposed survey will use as a population from which to sample all terrestrial providers of residential voice or broadband services in urban areas. The Bureau proposes defining “urban” for the purposes of this survey as all 2010 Census urban areas and urban clusters that sit within a Metropolitan Statistical Area (MSA). We seek comment on this approach. 8. For each section (fixed voice and fixed broadband), urban providers will be chosen in order to generate a statistically valid sample for the purpose of calculating benchmarks and rate floors. Responding providers will be asked for rates in a specified geographic area. We propose specifying, for each surveyed provider, a 2010 Census tract (that is “urban,” as explained above) for which rates should be reported. For sampling purposes, the Bureau will use in-house data to determine which providers are serving a Census tract. To aid providers in locating the specified Census tract when completing the survey, the survey will include hyperlinks where the respondent can look up the Census tract on a map. Will this approach allow respondents to easily and accurately report rates? 9. In the interest of simplicity, the proposed survey will not collect rates for bundles of applications (i.e., voice and broadband bundle; voice, broadband, and TV bundle, etc.). The survey will also only collect 5 The proposed survey asks for broadband rates for service within the following advertised speed ranges (download range)/( upload range): Tier 1 (?4 Mbps and <6 Mbps)/(?1 Mbps and <1.5 Mbps); Tier 2 (?6 Mbps and <10 Mbps)/(?1.5 Mbps and <2 Mbps); Tier 3 (?10 Mbps and <25 Mbps)/(?2 Mbps and <3 Mbps); Tier 4 (?25 Mbps)/(?3 Mbps). 6 Rate limiting is an action taken by an Internet service provider that restricts the rate at which a user can send or receive data over the provider’s network. 3non-discounted rates that are available to potential customers rather than actual rates paid by existing customers. For the survey’s intended purposes, obtaining information about bundles, discounts and promotional pricing of limited duration would unnecessarily increase the complexity and burden of the data collection on service providers that are selected to respond to the survey. We seek comment on this approach. 10. To the extent commenters contend that we should modify the content of the proposed survey, they should specify with particularity how the proposed survey should be altered and explain why their preferred approach better serves to accomplish the Commission’s objectives. Should any of the survey’s questions or terminology be altered for clarity or accuracy? Should we modify proposed sampling and collection process in any way? Are there any other changes that should be made? 11. Use of Data for Urban Rate Floor. The Bureau also seeks comment on how the information collected in the proposed urban rates survey should be used to establish the local rate floor. Historically, the Bureau surveyed local rates (both flat-rate and measured local service) and developed a single urban local rate average.7 For purposes of the rate floor, we propose to use the urban flat local rate data to derive a population-weighted national urban average that will be used as the local rate floor in 2014 and updated annually thereafter. We seek comment on this proposal. 12. Use of Data for Reasonable Comparability of Voice Service. In the USF/ICC Transformation Order, the Commission required that carriers certify that their voice rates are within two standard deviations of “the national average” for voice service.8 We request comment on how rate survey data should be used to determine this national average. 13. For fixed voice service, the Bureau seeks comment on deriving the national average for rate comparability purposes solely from data collected regarding local, flat rate voice service in urban areas. Alternatively, should we instead develop the national average based solely on urban data for unlimited, all- Distance service, as determined from the survey? A reason to adopt a national average based on the urban unlimited, all-distance rates rather than the local, flat rate is that the unlimited, all-distance service best reflects the varied ways - in terms of call frequency, duration, and distance - that households typically communicate using voice services. We seek comment on these two alternatives and the implications of each in terms of the ability of carriers to meet the certification requirement. Under either approach, we propose to develop a population-weighted average. We seek comment on this approach. How, if at all, should we take into account non-recurring charges when computing the fixed voice benchmark? 14. The Bureau proposes to establish a single benchmark for fixed voice service by which supported carriers would certify their rates, for purposes of reasonable comparability, regardless of the voice service offered (i.e. flat, local; unlimited, all-distance; measured local). One reason for doing so is that the urban availability of some services may diminish over time and reduce the available sample population for a given service. This in turn could increase the year-to-year variability in the benchmarks, while also creating, as a statistical artifact, wide deviations in the benchmarks for different types of voice services. 15. Another alternative would be to develop a separate national average for each voice service surveyed (i.e. flat, local; unlimited, all distance; measured, local). To the extent commenters believe the Bureau should establish multiple, service-specific reasonable comparability benchmarks for voice rather than simply developing a single average for urban voice service, they should explain why such an approach is 7 IATD, Wir. Comp. Bur., Universal Service Monitoring Report, Table 7.6, Average Residential Rates for Local Service in Urban Areas, 1986-2007 (Dec. 2008). 8 Id. at 17694, para. 85. 4preferable and consistent with the framework established by the Commission in the USF/ICC Transformation Order. The Bureau also proposes not combining multiple service rates collected in the survey into a single benchmark because this would require weighting each service’s rate by its number of subscribers. Collecting such subscriber information would unnecessarily impose more burden on the carriers surveyed. To the extent commenters contend that the Bureau should combine multiple services’ rates into a single benchmark, how should the rates be combined and what measures could be taken to minimize burden on those providers that are surveyed? 16. The Further Notice sought comment on whether to adopt a presumption that if a given provider is offering the same rates, terms and conditions (including capacity limits) to both urban and rural customers, that is sufficient to meet the statutory requirement that services be reasonably comparable. 9 Under such a presumption, providers that serve both rural and urban markets would not be required to certify their voice rates against a national urban benchmark derived from the proposed rate survey. We seek further focused comment on this potential approach. In particular, commenters are encouraged to identify the universe of providers that would be able to utilize the presumption, under the proposed survey approach that would define urban areas as MSAs. 17. Calculation of Voice Rates for Certifying Carriers Offering Measured Service. We also seek comment on how a fixed voice provider offering only measured service will determine its rate that should be compared to the national urban average for voice service, for purposes of rate comparability. The Bureau proposes allowing such carriers to calculate a “blended” rate which will be compared to the national urban rate voice average, consistent with the approach adopted by the Commission for purposes of the local rate floor. 10 In particular, we propose that a supported carrier with measured service should use its average minutes of use data during each rate period (e.g. peak, off-peak) to calculate its rate for reasonable comparability purposes. We seek comment on this approach. 18. Use of Data for Reasonable Comparability of Fixed Broadband Service. To the extent there were a presumption that offering the same service in both rural and urban areas meets the reasonable comparability requirements of the statute, there would be no need for some providers to compare their broadband rates to a national average urban rate benchmark derived from the results of the proposed rate survey. For fixed broadband, the Bureau proposes using the surveyed rate data for each speed tier to set reasonable comparability benchmarks for those providers that are required to certify against a national urban benchmark. Each speed tier would have its own benchmark, and providers would certify their rates against the speed tier corresponding to the slowest broadband service they offer. We are proposing to establish different benchmarks for different speed tiers so that supported providers offering substantially faster broadband service than the minimum required under the Commission’s public interest obligations can certify their rates against a more comparable urban service, rather than an urban benchmark for a much slower service or an average of rates for both slower and faster services. We seek comment on this approach. Would such an approach be a workable way to determine reasonable comparability for providers that do not offer broadband services in urban areas? 19. Alternatively, should the several speed tiers be combined to form a single benchmark? How, if at all, should we take into account non-recurring charges when computing the fixed broadband benchmark? 9 Further Notice at 18047, para. 1027. 10 In the Third Reconsideration Order, the Commission clarified that for purposes of the rate floor, the local service rate reported by carriers that provide measured or message rate plans should reflect the basic rate for local service plus the additional charges incurred for measured service, using the mean number of minutes or message units for all customers subscribing to that rate plan multiplied by the applicable rate per minute or message unit. Connect America Fund, WC Docket No. 10-90 et al., Third Order on Reconsideration, 27 FCC Rcd 5622, 5630, para. 22 (2012). 5How, if at all, should the capacity limit data be used for determining reasonable comparability? Given the emergence of usage-based broadband pricing, how should such rates be incorporated into the benchmark? Should the Bureau collect usage data on such plans so a “blended” rate can be calculated? How might a supported broadband provider with a usage-based service certify its rates? Procedural Matters 20. Filing Requirements. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, interested parties may file comments on or before the dates indicated on the first page of this document.11 Comments may be filed using the Commission’s Electronic Comment Filing System (ECFS).12 § Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/. § Paper Filers: Parties who choose to file by paper must file an original and one copy of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number. 21. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first- class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s Secretary, Office of the Secretary, Federal Communications Commission. § All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building. § Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. § U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street, SW, Washington DC 20554. 22. People with Disabilities: To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (tty). 23. In addition, one copy of each pleading must be sent to each of the following: (1) Jay Schwarz, Industry Analysis and Technology Division, Wireline Competition Bureau, 445 12th Street, S.W., 6-A134, Washington, D.C. 20554; e-mail: Jay.Schwarz@fcc.gov. (2) Alexander Minard, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th Street, S.W., 5-A334, Washington, D.C. 20554; e-mail: Alexander.Minard@fcc.gov. 24. The proceeding this Notice initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission’s ex parte rules.13 Persons making ex parte presentations must file a copy 11 47 C.F.R. §§ 1.415, 1.419. 12 See Electronic Filing of Documents in Rulemaking Proceedings, GC Docket No. 97-113, Report and Order, 13 FCC Rcd 11322 (1998). 13 47 C.F.R. §§ 1.1200 et seq. 6of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter’s written comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission’s ex parte rules. 25. Paperwork Reduction Act. This document contains proposed new information collection requirements. The Bureau, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Bureau seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees. 26. Initial Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act of 1980 (RFA),14 the Bureau has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and rules proposed in the Public Notice. The analysis is found in the Appendix B. The Bureau requests written public comment on the analysis. Comments must be filed in accordance with the same deadlines as comments filed in response to the Public Notice and must have a separate and distinct heading designating them as responses to the IRFA. The Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of this Report and Order and Further Notice of Proposed Rulemaking, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. - FCC - For more news and information about the Federal Communications Commission please visit: www.fcc.gov 14 See 5 U.S.C. § 603. 7APPENDIX A Proposed Rate Survey Questions for Fixed Services Sections of Rate Survey Note: The below survey instrument is intended to be implemented via an online interface accessible to survey participants. The particular format used in this appendix is for explanatory purposes only. I. SURVEY RESPONDENT INFORMATION This survey asks questions about PROVIDER NAME’s (FIXED VOICE, FIXED BROADBAND, MOBILE) services and rates. Please answer all questions as they pertain to the specific geographic location indicated below on MONTH DAY, YEAR. Enter identifying information below as it pertain to the location identified in the bottom line of Section I. I. SURVEY RESPONDENT INFORMATION Provider Name: Pre-populated by FCC Provider FRN (used on Dec 31, 2011 Form 477): Provider Study Area Code (if current USF recipient): Name of Person Completing Form: Contact Phone Number: Contact Email Address: Name of Certifying Official: Certifying Official's Phone Number: Certifying Official's Email Address: Location for Which Reported Rates Apply: Pre-populated by FCC 8II. FIXED VOICE Report rates on fixed voice service provided in GEOGRAPHIC LOCATION. All reported rates should be non-discounted, residential rates available on MONTH DAY, YEAR to any existing or potential customer at the specified location. Report rates for fixed voice service that is not bundled with any other product (e.g. Internet, TV). II. FIXED VOICE INFORMATION Indicate which fixed voice plan types are offered and whether the service is available to customers through circuit switched, VoIP or both. II.a Does this carrier offer unlimited or flat-rate local voice service? Yes - circuit switched, VoIP? No II.b Does this carrier offer unlimited or flat-rate, all-distance service? Yes - circuit switched, VoIP? No II.c Does this carrier offer measured/metered local voice service? Yes - circuit switched, VoIP? No For each service offered (as indicated "Yes" in II-a, II-b, and II-c), report each component of the rate in dollar and cents amounts. If both PSTN and VoIP service is offered, answer questions separately as prompted for each service. "All-distance" services include only domestic calling, not international. (Answered separately, as appropriate, for PSTN and VoIP) II.d - Monthly Rates Unlimited or Flat- Rate Local Service (II-a) Unlimited All- Distance Service (II-b) Measured or Messaged Local Service (II-c) II.d.1 Recurring service charge (without SLC) II.d.2 Federal subscriber line charge (SLC), if any II.d.3 Access Recovery Charge (ARC), if any II.d.4 Federally tariffed local number portability (LNP) surcharge, if any II.d.5 Federal universal service surcharge on Fed. SLC, LNP or ARC, if any II.d.6 State SLC, if any II.d.7 State USF charge, if any II.d.8 Mandatory extended area service (EAS) charges, if any II.d.9 Other mandatory surcharges (such as gross receipts tax) accounted as company revenue and not included elsewhere II.d.10 Tax or surcharge for funding 911 service 9II.d.11 Interstate telecommunications relay service (TRS or relay) II.d.12 State TRS II.d.13 Total other taxes (such as sales, excise, etc.) levied on customers by state, county, local governments. II.d.14 Federal excise tax on local service NA II.d.15 Number of voice calls or message units included in monthly rate if measured service (local service area calls only) NA NA II.d.16 Dollar calling allowance for voice calls included in monthly rate if measured service (local service area calls only). NA NA 11.d.17 Peak period local rate per unit (minute or call/message) once allowance exceed, if measured service. NA NA Indicate if rate is per call or per minute 11.d.18 Off-peak period local rate per unit (minute or call/message) once allowance exceeded, if measured service. NA NA Indicate if rate is per call or per minute II.e - Service Initiation Charges II.e.1 Total connection charge for residential service if no premises visit is required. II.e.2 Minimum additional charge if drop line and terminal block are needed to connect service. Do not include any inside wiring charges. II.e.3 Mandatory surcharges on connection accounted as company revenue II.e.4 State, county, and local taxes and surcharges on connection II.e.5 Other mandatory connection charges 10 III. FIXED BROADBAND Report rates on fixed broadband service provided in GEOGRAPHIC LOCATION. All reported rates should be standard, non-discounted, residential rates available on MONTH DAY, YEAR to any existing or potential customer. Report rates for fixed broadband service that is not bundled with any other product (e.g. telephone, TV). Exclude residential broadband service that is provided via satellite. III. BROADBAND INTERNET SERVICE INFORMATION III.a Does this provider offer a standalone broadband Internet service with advertised data transfer speeds in the following ranges? Note that the service must meet both the download and upload speed criteria. III.a.1 SERVICE RANGE 1: Download: at or above 4 Mbps and less than 6 Mbps; Upload: at or above 1 Mbps and less than 1.5 Mbps Yes No III.a.2 SERVICE RANGE 2: Download: at or above 6 Mbps and less than 10 Mbps; Upload: at or above 1.5 Mbps and less than 2 Mbps Yes No III.a.3 SERVICE RANGE 3: Download: at or above 10 Mbps and less than 25 Mbps; Upload: at or above 2 Mbps and less than 3 Mbps Yes No III.a.4 SERVICE RANGE 4: Download: at or above 25 Mbps; Upload: at or above 3 Mbps Yes No III.b If the provider offers at least one standalone service in the specified range, report in Mbps the advertised download and upload speeds of the slowest service meeting the criteria of the service range. Also, report each capacity limit (in GB) applied to the service, if any. If multiple capacity limits are available for the same service speed, list each separately. If only one capacity limit is offered, only report this limit. A capacity limit is the level at which the ISP begins to block, rate- limit, or charge excess fees for additional data transmission. If no limit is applied, enter "Unlimited." For each capacity limit in place, indicate what action is taken when the limit is reached. If a capacity limit is based on a customer's use relative to other customers, report the data amount for which the limit would be reached as of MONTH DAY, 2012. Note: For services with capacity limits, a drop down box will offer a menu of actions the ISP will take once the limit is reached. These include: "Overage Charge," "Blocking Traffic", "Rate- limiting," and "Other (explain)." SERVICE RANGE 1 Advertised Speed (Mbps) Capacity Limit(s) (GB) Action Taken When Limit Reached Download Upload 1 1 2 2 3 3 SERVICE RANGE 2 Advertised Speed (Mbps) Capacity Limit(s) (GB) Action Taken When Limit 11 Reached Download Upload 1 1 2 2 3 3 SERVICE RANGE 3 Advertised Speed (Mbps) Capacity Limit(s) (GB) Action Taken When Limit Reached Download Upload 1 1 2 2 3 3 SERVICE RANGE 4 Advertised Speed (Mbps) Capacity Limit(s) (GB) Action Taken When Limit Reached Download Upload 1 1 2 2 3 3 For each service offered (as indicated "Yes" in III.a.1 to III.a.4), report each component of the rate in dollar and cents amounts. Reported monthly rates should be standard, non-discounted residential rates. In some cases, this may be the month-to-month rate available to a customer not eligible for introductory rates, etc. SERVICE RANGE III.c - Recurring Access Rates 1 2 3 4 III.c.1 Recurring monthly charge III.c.2 Total of state, local, and municipal taxes III.c.3 Total of all other mandatory fees and taxes (such as provider surcharges, etc.) passed through. III.c.4 Surcharges on the service accounted as company revenue (i.e. non-pass through) For each item listed, report the minimum amount a customer would pay for each non-recurring charge in the event the item was required for the customer to access the Internet via the broadband service. If an item is not offered by the provider, then mark it as "NA". SERVICE RANGE III.d - Non-Recurring Charges (Minimums) 1 2 3 4 III.d.1 Activation or Connection not requiring a service visit to the premises III.d.2 Activation or connection requiring a service visit (but assuming the premises is already physically wired) III.d.3 Does this service require the customer use a modem or other hardware? Yes/No Yes/No Yes/No Yes/No 12 III.d.4 If "Yes" for III.h.3, what is the purchase price for necessary hardware? (If provider sells such hardware.) III.d.5 If "Yes" for III.h.3, what is the monthly rental price for necessary hardware? (If provider rents hardware.) III.d.6 Computer/laptop hook-up by service technician already making a service visit. 13 APPENDIX B Initial Regulatory Flexibility Act Analysis As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 1 the Bureau has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this Notice. Written comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Public Notice. The Commission will send a copy of the Public Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA).2 In addition, the Public Notice and IRFA (or summaries thereof) will be published in the Federal Register.3 A. Need for, and Objectives of, the Proposed Rules The Public Notice seeks comment on a proposed survey of urban rates for fixed voice and fixed broadband residential services. The Bureau also seeks comment concerning how, using data from the urban rates survey, to determine the local voice rate floor and the reasonable comparability benchmarks for fixed voice and fixed broadband services. The rate survey, and benchmarks and rate floors based on the survey, is part of implementing the USF/ICC Transformation Order to insure supported provider’s rates are not unreasonably high or unnecessarily low.4 B. Legal Basis The legal basis for any action that may be taken pursuant to the Notice is contained in sections 1, 2, 4(i), 214, 254, 303(r), 403, and 706 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 214, 254, 303(r), 403, and 706, and sections 1.1 and 1.1421 of the Commission’s rules, 47 C.F.R. §§ 1.1, 1.421. C. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted.5 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.”6 In addition, the term “small business” has the same meaning as the term “small- business concern” under the Small Business Act.7 A small-business concern” is one which: (1) is 1 See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601–612, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996). 2 See 5 U.S.C. § 603(a). 3 See id. 4 See Notice at para. 2. 5 See 5 U.S.C. § 603(b)(3). 6 See 5 U.S.C. § 601(6). 7 See 5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the Small Business Act, 15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register.” 14 independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.8 Small Businesses. Nationwide, there are a total of approximately 27.5 million small businesses, according to the SBA.9 Wired Telecommunications Carriers. The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or fewer employees.10 According to Census Bureau data for 2007, there were 3,188 firms in this category, total, that operated for the entire year.11 Of this total, 3144 firms had employment of 999 or fewer employees, and 44 firms had employment of 1000 employees or more.12 Thus, under this size standard, the majority of firms can be considered small. Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services. The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.13 According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers.14 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees.15 Consequently, the Commission estimates that most providers of local exchange service are small entities, that may be affected by the rules and policies proposed in the Public Notice. Incumbent Local Exchange Carriers (incumbent LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to incumbent local exchange services. The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.16 According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers.17 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees.18 Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by rules adopted pursuant to the Public Notice.. We have included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.”19 The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent LECs are 8 See 15 U.S.C. § 632. 9 See SBA, Office of Advocacy, “Frequently Asked Questions,” http://www.sba.gov/advo/stats/sbfaq.pdf (accessed Dec. 2010). 10 13 C.F.R. § 121.201, NAICS code 517110. 11 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010). 12 See id. 13 13 C.F.R. § 121.201, NAICS code 517110. 14 See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service). 15 See id. 16 See 13 C.F.R. § 121.201, NAICS code 517110. 17 See Trends in Telephone Service at Table 5.3. 18 See id. 19 5 U.S.C. § 601(3). 15 not dominant in their field of operation because any such dominance is not “national” in scope.20 We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts. Competitive Local Exchange Carriers (competitive LECs), Competitive Access Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.21 According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services.22 Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have more than 1,500 employees.23 In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees.24 In addition, 72 carriers have reported that they are Other Local Service Providers.25 Of the 72, seventy have 1,500 or fewer employees and two have more than 1,500 employees.26 Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, Shared- Tenant Service Providers, and Other Local Service Providers are small entities that may be affected by rules adopted pursuant to the Public Notice. Wireless Telecommunications Carriers (except Satellite). Since 2007, the SBA has recognized wireless firms within this new, broad, economic census category.27 Prior to that time, such firms were within the now-superseded categories of Paging and Cellular and Other Wireless Telecommunications.28 Under the present and prior categories, the SBA has deemed a wireless business to be small if it has 1,500 or fewer employees.29 For this category, census data for 2007 show that there were 1,383 firms that operated for the entire year.30 Of this total, 1,368 firms had employment of 999 or fewer employees and 15 had employment of 1000 employees or more.31 Similarly, according to Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service (PCS), and Specialized Mobile Radio (SMR) Telephony services.32 Of these, an estimated 261 have 1,500 or 20 See Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA incorporates into its own definition of “small business.” See 15 U.S.C. § 632(a); see also 5 U.S.C. § 601(3). SBA regulations interpret “small business concern” to include the concept of dominance on a national basis. See 13 C.F.R. § 121.102(b). 21 See 13 C.F.R. § 121.201, NAICS code 517110. 22 See Trends in Telephone Service at Table 5.3. 23 See id. 24 See id. 25 See id. 26 See id. 27 See 13 C.F.R. § 121.201, NAICS code 517210. 28 U.S. Census Bureau, 2002 NAICS Definitions, “517211 Paging”; http://www.census.gov/epcd/naics02/def/NDEF517.HTM.; U.S. Census Bureau, 2002 NAICS Definitions, “517212 Cellular and Other Wireless Telecommunications”; http://www.census.gov/epcd/naics02/def/NDEF517.HTM. 29 13 C.F.R. § 121.201, NAICS code 517210. The now-superseded, pre-2007 C.F.R. citations were 13 C.F.R. § 121.201, NAICS codes 517211 and 517212 (referring to the 2002 NAICS). 30 U.S. Census Bureau, Subject Series: Information, Table 5, “Establishment and Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517210” (issued Nov. 2010). 31 Id. Available census data do not provide a more precise estimate of the number of firms that have employment of 1,500 or fewer employees; the largest category provided is for firms with “100 employees or more.” 32 See Trends in Telephone Service at Table 5.3. 16 fewer employees and 152 have more than 1,500 employees.33 Consequently, the Commission estimates that approximately half or more of these firms can be considered small. Thus, using available data, we estimate that the majority of wireless firms can be considered small. Local Multipoint Distribution Service. Local Multipoint Distribution Service (“LMDS”) is a fixed broadband point-to-multipoint microwave service that provides for two-way video telecommunications.34 The auction of the 986 LMDS licenses began and closed in 1998. The Commission established a small business size standard for LMDS licenses as an entity that has average gross revenues of less than $40 million in the three previous calendar years.35 An additional small business size standard for “very small business” was added as an entity that, together with its affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years.36 The SBA has approved these small business size standards in the context of LMDS auctions.37 There were 93 winning bidders that qualified as small entities in the LMDS auctions. A total of 93 small and very small business bidders won approximately 277 A Block licenses and 387 B Block licenses. In 1999, the Commission re-auctioned 161 licenses; there were 32 small and very small businesses winning that won 119 licenses. Cable and Other Program Distribution. Since 2007, these services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies.”38 The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees.39 According to Census Bureau data for 2007, there were a total of 955 firms in this previous category that operated for the entire year.40 Of this total, 939 firms had employment of 999 or fewer employees, and 16 firms had employment of 1000 employees or more.41 Thus, under this size standard, the majority of firms can be considered small and may be affected by rules adopted pursuant to the Public Notice. Cable Companies and Systems. The Commission has developed its own small business size standards, for the purpose of cable rate regulation. Under the Commission’s rules, a “small cable company” is one serving 400,000 or fewer subscribers, nationwide.42 Industry data indicate that, of 1,076 cable 33 See id. 34 See Rulemaking to Amend Parts 1, 2, 21, 25, of the Commission’s Rules to Redesignate the 27.5-29.5 GHz Frequency Band, Reallocate the 29.5-30.5 Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, CC Docket No. 92-297, Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rule Making, 12 FCC Rcd 12545, 12689-90, para. 348 (1997) (“LMDS Second Report and Order”). 35 See LMDS Second Report and Order, 12 FCC Rcd at 12689-90, para. 348. 36 See id. 37 See Alvarez to Phythyon Letter 1998. 38 U.S. Census Bureau, 2007 NAICS Definitions, “517110 Wired Telecommunications Carriers” (partial definition), http://www.census.gov/naics/2007/def/ND517110.HTM#N517110. 39 See 13 C.F.R § 121.201, NAICS code 517110. 40 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, Employment Size of Firms for the United States: 2007, NAICS code 5171102 (issued Nov. 2010). 41 See id. 42 See 47 C.F.R. § 76.901(e). The Commission determined that this size standard equates approximately to a size standard of $100 million or less in annual revenues. See Implementation of Sections of the 1992 Cable Television Consumer Protection and Competition Act: Rate Regulation, MM Docket Nos. 92-266, 93-215, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 7408 para. 28 (1995). 17 operators nationwide, all but eleven are small under this size standard.43 In addition, under the Commission’s rules, a “small system” is a cable system serving 15,000 or fewer subscribers.44 Industry data indicate that, of 7,208 systems nationwide, 6,139 systems have under 10,000 subscribers, and an additional 379 systems have 10,000-19,999 subscribers.45 Thus, under this second size standard, most cable systems are small and may be affected by rules adopted pursuant to the Public Notice. Cable System Operators. The Act also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.”46 The Commission has determined that an operator serving fewer than 677,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate.47 Industry data indicate that, of 1,076 cable operators nationwide, all but ten are small under this size standard.48 We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million,49 and therefore we are unable to estimate more accurately the number of cable system operators that would qualify as small under this size standard. Open Video Services. The open video system (“OVS”) framework was established in 1996, and is one of four statutorily recognized options for the provision of video programming services by local exchange carriers.50 The OVS framework provides opportunities for the distribution of video programming other than through cable systems. Because OVS operators provide subscription services,51 OVS falls within the SBA small business size standard covering cable services, which is “Wired Telecommunications Carriers.”52 The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees. According to Census Bureau data for 2007, there were a total of 955 firms in this previous category that operated for the entire year.53 Of this total, 939 firms had employment of 999 or fewer 43 These data are derived from R.R. BOWKER, BROADCASTING & CABLE YEARBOOK 2006, “Top 25 Cable/Satellite Operators,” pages A-8 & C-2 (data current as of June 30, 2005); WARREN COMMUNICATIONS NEWS, TELEVISION & CABLE FACTBOOK 2006, “Ownership of Cable Systems in the United States,” pages D-1805 to D-1857. 44 See 47 C.F.R. § 76.901(c). 45 WARREN COMMUNICATIONS NEWS, TELEVISION & CABLE FACTBOOK 2006, “U.S. Cable Systems by Subscriber Size,” page F-2 (data current as of Oct. 2005). The data do not include 718 systems for which classifying data were not available. 46 47 U.S.C. § 543(m)(2); see also 47 C.F.R. § 76.901(f) & nn.1–3. 47 47 C.F.R. § 76.901(f); see FCC Announces New Subscriber Count for the Definition of Small Cable Operator, Public Notice, 16 FCC Rcd 2225 (Cable Services Bureau 2001). 48 These data are derived from R.R. BOWKER, BROADCASTING & CABLE YEARBOOK 2006, “Top 25 Cable/Satellite Operators,” pages A-8 & C-2 (data current as of June 30, 2005); WARREN COMMUNICATIONS NEWS, TELEVISION & CABLE FACTBOOK 2006, “Ownership of Cable Systems in the United States,” pages D-1805 to D-1857. 49 The Commission does receive such information on a case-by-case basis if a cable operator appeals a local franchise authority’s finding that the operator does not qualify as a small cable operator pursuant to section 76.901(f) of the Commission’s rules. 50 47 U.S.C. § 571(a)(3)-(4). See Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, MB Docket No. 06-189, Thirteenth Annual Report, 24 FCC Rcd 542, 606 para. 135 (2009) (“Thirteenth Annual Cable Competition Report”). 51 See 47 U.S.C. § 573. 52 U.S. Census Bureau, 2007 NAICS Definitions, “517110 Wired Telecommunications Carriers”; http://www.census.gov/naics/2007/def/ND517110.HTM#N517110. 53 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, Employment Size of Firms for the United States: 2007, NAICS code 5171102 (issued Nov. 2010). 18 employees, and 16 firms had employment of 1000 employees or more.54 Thus, under this second size standard, most OVS operators are small and may be affected by rules adopted pursuant to the Public Notice. In addition, we note that the Commission has certified some OVS operators, with some now providing service.55 Broadband service providers (“BSPs”) are currently the only significant holders of OVS certifications or local OVS franchises.56 The Commission does not have financial or employment information regarding the entities authorized to provide OVS, some of which may not yet be operational. Thus, again, at least some of the OVS operators may qualify as small entities. Internet Service Providers. Since 2007, these services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies.”57 The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees.58 According to Census Bureau data for 2007, there were 3,188 firms in this category, total, that operated for the entire year.59 Of this total, 3144 firms had employment of 999 or fewer employees, and 44 firms had employment of 1000 employees or more.60 Thus, under this size standard, the majority of firms can be considered small. In addition, according to Census Bureau data for 2007, there were a total of 396 firms in the category Internet Service Providers (broadband) that operated for the entire year.61 Of this total, 394 firms had employment of 999 or fewer employees, and two firms had employment of 1000 employees or more.62 Consequently, we estimate that the majority of these firms are small entities that may be affected by rules adopted pursuant to the Public Notice. D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities In this Public Notice, the Commission seeks public comment on a proposed survey of urban rates for fixed voice and fixed broadband residential services. The Bureau also seeks comment concerning how, using data from the urban rates survey, to determine the local voice rate floor and the reasonable comparability benchmarks for fixed voice and fixed broadband services. The Public Notice seeks comment on data requirements that would require reporting by small entities. Specifically, the Public Notice seeks comment on the collection of advertised rates and product offerings from small entities in urban areas that are included in the sample. 54 See id. 55 A list of OVS certifications may be found at http://www.fcc.gov/mb/ovs/csovscer.html. 56 See Thirteenth Annual Cable Competition Report, 24 FCC Rcd at 606-07 para. 135. BSPs are newer firms that are building state-of-the-art, facilities-based networks to provide video, voice, and data services over a single network. 57 U.S. Census Bureau, 2007 NAICS Definitions, “517110 Wired Telecommunications Carriers” (partial definition), http://www.census.gov/naics/2007/def/ND517110.HTM#N517110. 58 13 C.F.R. § 121.201, NAICS code 517110. 59 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and Firm Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010). 60 See id. 61 U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, Employment Size of Firms for the United States: 2007, NAICS code 5171103 (issued Nov. 2010). 62 See id. 19 E. Steps Taken to Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.”63 The Public Notice seeks comment on issues related to the rates survey and how the benchmarks and rate floors should be determined. The rate survey issues are not anticipated to have a significant economic impact on small entities because the survey will only sample a small number of providers. Furthermore, since the statistical sampling methodology will result in larger entities being more likely to be surveyed, we anticipate small entities will only compose a minor portion of the overall sample. Moreover, the survey only asks about advertised rates and product offerings which should be readily available to entities of any size. Furthermore, any significant economic impact cannot necessarily be minimized through alternatives since the survey sample will already be restricted to a small set of the total population of carriers necessary for generating a statistically valid sample, and the survey will only ask for readily available advertised rates and will be implemented in an easily accessible online format. F. Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules None. 63 5 U.S.C. § 603(c)(1)–(c)(4).