Proposed Rule2024-15567
Jurisdictional Separations and Referral to the Federal-State Joint Board
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 19, 2024
Issuing agencies
Federal Communications Commission
Abstract
In this document, the Federal Communications Commission (Commission) proposes to extend, for an additional six years, the jurisdictional separations category relationships and cost allocation factors (together, separations rules) freeze for rate-of-return incumbent local exchange carriers (LECs). Further extending the freeze will enable the Commission to continue to work with the Federal-State Joint Board on Jurisdictional Separations (Joint Board) to determine next steps in amending the separations rules in light of sweeping technological and regulatory changes since these rules were initially adopted.
Full Text
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<title>Federal Register, Volume 89 Issue 139 (Friday, July 19, 2024)</title>
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[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Proposed Rules]
[Pages 58692-58698]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-15567]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 36
[CC Docket No. 80-286; FCC 24-71; FR ID 231217]
Jurisdictional Separations and Referral to the Federal-State
Joint Board
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) proposes to extend, for an additional six years, the
jurisdictional separations category relationships and cost allocation
factors (together, separations rules) freeze for rate-of-return
incumbent local exchange carriers (LECs). Further extending the freeze
will enable the Commission to continue to work with the Federal-State
Joint Board on Jurisdictional Separations (Joint Board) to determine
next steps in amending the separations rules in light of sweeping
technological and regulatory changes since these rules were initially
adopted.
DATES: Comments are due on or before August 19, 2024; reply comments
are due on or before September 3, 2024.
ADDRESSES: Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments and
reply comments on or before the dates indicated on the first page of
this document. Comments may be filed using the Commission's Electronic
Comment Filing System (ECFS). You may submit comments, identified by WC
Docket No. 80-286, by either of the following methods:
<bullet> Electronic Filers: Comments may be filed electronically
using the internet by accessing the ECFS: <a href="https://www.fcc.gov/ecfs/">https://www.fcc.gov/ecfs/</a>.
<bullet> Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing.
<bullet> Filings can be sent by hand or messenger delivery, by
commercial courier, or by the U.S. Postal Service. All filings must be
addressed to the Secretary, Federal Communications Commission.
<bullet> Hand-delivered or messenger-delivered paper filings for
the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m.
by the FCC's mailing contractor at 9050 Junction Drive, Annapolis
Junction, MD 20701. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
<bullet> Commercial courier deliveries (any deliveries not by the
U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis
Junction, MD 20701. Filings sent by U.S. Postal Service First-Class
Mail, Priority Mail, and Priority Mail Express must be sent to 45 L
Street NE, Washington, DC 20554.
<bullet> People with Disabilities: To request materials in
accessible formats for people with disabilities (braille, large print,
electronic files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#cbada8a8fefbff8bada8a8e5aca4bd"><span class="__cf_email__" data-cfemail="88eeebebbdb8bcc8eeebeba6efe7fe">[email protected]</span></a> or
call the Consumer & Governmental Affairs Bureau at 202-418-0530.
FOR FURTHER INFORMATION CONTACT: Marv Sacks, Pricing Policy Division of
the Wireline Communications Bureau, at (202) 418-2017 or via email at
<a href="/cdn-cgi/l/email-protection#432e2231352a2d6d3022202830032520206d242c35"><span class="__cf_email__" data-cfemail="3e535f4c485750104d5f5d554d7e585d5d10595148">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 80-286,
FCC 24-71, adopted and released on July 1, 2024. The full text of this
document is available at the following internet address: <a href="https://docs.fcc.gov/public/attachments/FCC-24-71A1.pdf">https://docs.fcc.gov/public/attachments/FCC-24-71A1.pdf</a>. A notice of the
renewal of the existing referrals to the Federal-State Joint Board on
Separations relating to this document is published elsewhere in this
issue of the Federal Register.
Paperwork Reduction Act. This document does not contain proposed
information collection requirements subject to the Paperwork Reduction
Act of 1995, Public Law 104-13. In addition, therefore, it does not
contain any new or modified information collection burden for small
business concerns with fewer than 25 employees pursuant to the Small
Business Paperwork Relief Act of 2002, Public Law 107-198.
Providing Accountability Through Transparency Act. The Providing
Accountability Through Transparency Act requires each agency, in
providing notice of a rulemaking, to post online a brief plain-language
summary of the proposed rule. Accordingly, the Commission will publish
the required summary of this Further Notice on <a href="https://www.fcc.gov/proposed-rulemakings">https://www.fcc.gov/proposed-rulemakings</a>.
Synopsis
I. Introduction
1. Today, the separations rules remain applicable to only a limited
and
[[Page 58693]]
declining number of incumbent LECs that continue to rely on costs to
calculate rates or universal service support. Due to the breadth and
complexity of these rules, as well as their narrow applicability, the
Commission has repeatedly extended the freeze that was first adopted in
2001. The Commission expects that the benefits of its proposal to
further extend the separations rules' freeze likely outweigh the costs
of allowing it to end and seeks comment on various aspects of its
proposal.
II. Background
2. Jurisdictional Separations Process. The jurisdictional
separations rules were designed to ensure that rate-of-return incumbent
LECs apportion the costs of their regulated services between the
interstate or intrastate jurisdictions in a manner that reflects the
relative use of their networks to provide interstate or intrastate
telecommunications services. Jurisdictional separations is the third
step in a four-step regulatory cost-based rate-making process. First, a
rate-of-return carrier records its costs and revenues in various
accounts using the Uniform System of Accounts prescribed by the
Commission's part 32 rules. Second, the carrier divides the costs in
these accounts between regulated and nonregulated activities in
accordance with the Commission's part 64 rules, a step that helps
ensure that the costs of nonregulated activities will not be recovered
through regulated interstate rates. Third, the carrier separates the
regulated costs and revenues between the interstate and intrastate
jurisdictions using the Commission's part 36 jurisdictional separations
rules. Finally, the carrier apportions the interstate regulated costs
among the interexchange services and the rate elements that form the
cost basis for its exchange access tariffs. Carriers subject to rate-
of-return regulation perform this apportionment in accordance with the
Commission's part 69 rules.
3. To comply with these rules, rate-of-return incumbent LECs must
perform annual cost studies that include jurisdictional separations.
After separating non-regulated from regulated costs and revenues, the
cost study directly assigns or allocates the regulated costs and
revenues to various part 36 categories. Amounts in categories that are
used exclusively for interstate or intrastate communications are
directly assigned to the appropriate jurisdiction. Amounts in
categories that support both interstate and intrastate services are
divided between the jurisdictions using allocation factors developed in
accordance with part 36 that reflect relative use or a fixed
percentage.
4. Attempts at Separations Reform and Separations Freezes. In 1997,
recognizing that ``changes in the law, technology, and market structure
of the telecommunications industry'' necessitated a thorough
reevaluation of the jurisdictional separations process, the Commission
initiated a proceeding to comprehensively reform the separations rules.
At the same time, pursuant to section 410(c) of the Communications Act
of 1934, as amended (the Communications Act), the Commission referred
the matter of jurisdictional separations reform to the Joint Board for
a recommended decision.
5. In 2000, the Joint Board--comprised of both State and Federal
members--issued a recommendation that the Commission freeze the part 36
category relationships and jurisdictional allocation factors pending
resolution of comprehensive reform. In 2001, the Commission adopted an
order concluding that a freeze would stabilize the separations process
pending reform by minimizing any impact of cost shifts on separations
results due to circumstances--such as the growth of internet usage, new
technologies, and local competition--not contemplated by the rules. The
Commission also determined that a freeze would simplify the separations
process by eliminating the need for many separations studies until
separations reform was implemented. Accordingly, the Commission froze
all part 36 allocation factors and allowed rate-of-return carriers to
voluntarily freeze their category relationships, enabling each carrier
to determine whether such a freeze would be beneficial ``based on its
own circumstances and investment plans.'' In 2009, the Commission made
another referral, asking the Joint Board to consider comprehensive
jurisdictional separations reform as well as ``an interim adjustment of
the current jurisdictional separations freeze.'' In 2018, the
Commission tasked the Joint Board with addressing two specific issues
during the interim period pending comprehensive reform. These included
exploring the possibility of amending separations rules to acknowledge
that certain carriers are no longer bound by them, as well as updating
existing recordkeeping requirements to align with the current
applicability of separations rules. The Joint Board has not to date
submitted a recommended decision on comprehensive separations reform or
on any interim adjustments.
6. The Commission specified that the 2001 freeze would last five
years or until the Commission completed comprehensive separations
reform, whichever came first. The Commission also concluded that, prior
to the expiration of the five-year period, the Commission would, in
consultation with the Joint Board, determine whether the freeze period
should be extended, explaining that ``the determination of whether the
freeze should be extended at the end of the five-year period shall be
based upon whether, and to what extent, comprehensive reform of
separations has been undertaken by that time.''
7. Since 2001, the Commission has extended the separations freeze
eight times, for periods ranging from one year to six years, the most
recent extension of which expires on December 31, 2024. In repeatedly
extending the freeze, the Commission has explained that the freeze
would stabilize and simplify the separations process while the Joint
Board and the Commission continued to work on separations reform.
8. Declining Relevance of Jurisdictional Separations. The
jurisdictional separations rules no longer apply to the majority of
carriers currently providing telecommunications services. Currently,
out of 1,079 rate-of-return carriers, only about 247 carriers that
receive cost-based Universal Service Fund (USF) support make the full
use of separations to set end-user common line, business data services
(BDS), and Consumer Broadband-Only Loop service rates, as well as to
determine the level of USF support. Approximately 374 Alternative-
Connect America Cost Model and Alaska Plan carriers use separations
only for setting BDS rates. The separations rules were never applicable
to wireless carriers, and in 2008, the Commission granted price cap
incumbent LECs forbearance from the separations rules, leaving rate-of-
return incumbent LECs as the only remaining carriers required to comply
with the separations rules. In addition, in 2018, the Commission
offered rate-of-return carriers the option to receive fixed or model-
based high-cost universal service support with the ability to elect
incentive regulation for their business data services (BDS). Carriers
electing both model-based support and incentive regulation for BDS no
longer need to engage in separation of their costs for any Federal
regulatory purpose, whether for universal service funding or rate-
making. Currently, 232 A-CAM carriers have elected incentive regulation
for BDS. Moreover, apart from a handful of carriers performing sample
cost studies,
[[Page 58694]]
the separations rules do not apply to rate-of-return carriers that are
``average schedule companies.'' At present, 226 companies participate
in NECA's average schedule. These companies do not perform
jurisdictional separations; they receive pool revenues, or settlements,
from the National Exchange Carrier Association, Inc. for interstate
telecommunications services based on a series of statistical formulas,
approved by the Commission, that approximate the amounts received by a
similar cost company. What is more, the Commission expects additional
rate-of-return carriers will take advantage of the Commission's latest
Enhanced A-CAM program for universal service support and will also
select to be subject to incentive regulation for BDS--thus, the
Commission expects the number of carriers that will be subject to the
separations rules to decrease even further.
9. For carriers that remain subject to the separations rules, the
separations process has increasingly limited application because of
regulatory reforms by the Commission that remove the need to engage in
the separations process. For example, as part of comprehensive reform
and modernization of the universal service and intercarrier
compensation systems, the Commission adopted rate caps for the switched
access services of rate-of-return carriers (including a transition to
bill-and-keep for certain rate elements), thereby eliminating the need
to apply separations rules for calculating switched access rates.
Further, rate-of-return carriers receiving high-cost universal service
support based on the Commission's A-CAM programs but not electing
incentive regulation for business data services no longer need to use
jurisdictional separations to quantify the amount of high-cost support
for the interstate portion of their common line services or to set
interstate rates for these services.
III. Further Notice of Proposed Rulemaking
10. The Commission proposes to extend the separations freeze for
another six years and invites comment on this proposal. Several
factors--recent changes to the composition of the Joint Board, the
complex nature of the work required to develop comprehensive
recommendations for separations reform, and the fact that the current
freeze expires at the end of this calendar year--have combined to leave
limited and insufficient time within which to develop and advance
recommended decisions. Moreover, allowing the freeze to expire without
further extension would force rate-of-return carriers to engage in
unnecessary, costly and burdensome cost studies based on outdated rules
and assumptions that bear little relationship to the marketplace today.
Accordingly, after weighing the likely benefits of extending the
current freeze against the likely costs of allowing it to expire, the
Commission proposes to extend the separations freeze until December 31,
2030. The Commission seeks comment on this proposal as well as whether
it should change any aspect of the separations freeze should the
Commission extend the freeze as proposed.
11. Process Considerations. The proposal to extend the freeze
through December 31, 2030, would allow the Joint Board to consider next
steps in addressing separations reform. This Joint Board has quite
recently seated several new members who are just beginning their
opportunity to delve into the complicated issues they need to grapple
with in considering reform measures. For example, in 2018, the
Commission referred a couple of discrete issues to the Joint Board, but
the Joint Board has not been able to issue a recommended decision on
them. In short the new Board will need time to develop a meaningful
recommendation. The combination of these recent changes and the
procedural process necessary for any recommendation render it unlikely
that the Joint Board could issue a recommended decision on
comprehensive reform and that the Commission could consider that
recommendation, and then act upon it before the current freeze expires.
Even if the Joint Board could develop a recommendation for
consideration, the Commission would likely seek comment on that
recommendation before issuing an order revising the rules. Section
410(c) contemplates a Joint Board recommendation before the Commission
moves forward on comprehensive separations reform. Therefore, as a
practical matter, the Commission is limited at this point to either
extending the separations freeze or allowing the long-fallow and
outdated separations rules to take effect on January 1, 2025.
12. Benefits Outweigh the Costs. The Commission seeks comment on
the limited options it has under the current circumstances. The
Commission has consistently found that letting the freeze expire would
impose significant burdens on rate-of-return carriers, particularly
smaller rural carriers, and create undue instability. In extending the
most recent freeze in 2018, the Commission explained that lifting the
freeze and reinstating the separations rules after an absence of more
than two decades, would make it extremely difficult, if not impossible,
for most carriers to perform all of the studies needed to remain in
full compliance. This would require substantial training and investment
by rural incumbent LECs, and could cause significant disruptions to
regulated rates, cost recovery, and other operating conditions when
applying the outdated separations rules to today's operations. Indeed,
the Commission has found that requiring carriers to reinstate their
separations systems ``would be unduly burdensome when there is a
significant likelihood that there would be no lasting benefit to doing
so.'' 82 FR 25535-01. The Commission has thus previously concluded that
the benefits that will result from granting a further extension of the
freeze far exceed any possible harms. These prior conclusions are also
compelling and remain relevant today. The Commission proposes to find
that an additional extension of the freeze far outweighs any potential
harms, and the Commission seeks comment on this proposal.
13. In extending the separations freeze, the Commission also
proposes to direct rate-of-return incumbent LECs to continue to use the
same frozen category relationships and jurisdictional allocation
factors. When the Commission allowed a one-time unfreeze of category
relationships in 2018, only three carriers capitalized on this
opportunity. The Commission seeks comment on whether it should
reintroduce the option to unfreeze category relationships at this time.
The Commission also seeks comment on the comparative costs and benefits
of maintaining the separations freeze without offering an option to
unfreeze category relationships.
14. Length of the Freeze Extension. The Commission proposes an
extension period of up to six years. Under this proposal, the freeze
would be extended until December 31, 2030 or until comprehensive reform
of the part 36 rules is achieved, whichever occurs earlier. The
Commission seeks comment on this proposal. In 2018, given the
difficulty of achieving reform up to that point, the Commission
initially proposed a 15 year freeze because short-term extensions
adopted in the past would ``not provide the Joint Board, the
Commission, and interested stakeholders sufficient time'' to revise its
rules. After considering comments submitted in response to that
proposal, including from the State members of the Joint Board, the
Commission found that
[[Page 58695]]
an extension of up to six years was more appropriate.
15. When the Commission extended the freeze for six years in 2018,
it concluded that this time period best ``balances the competing
considerations'' of enabling the Joint Board to focus on solving the
complex issues versus the Commission's experience in granting a series
of short-term separations extensions in the past when attempts at
separations reform stalled. Does this assessment continue to weigh in
favor of the Commission granting another six-year freeze extension?
Have any circumstances changed that would lead to a different
assessment, or do parties have other views on the length of an
extension? Should the freeze be extended for a longer period of time
than six years? Repeated short-term freeze extensions necessarily
consume Commission, State, and industry resources. Alternatively,
should the Commission permanently extend the separations freeze, as
some commenters have suggested in the past?
16. The Commission asks commenters to discuss the advantages and
disadvantages of a temporally defined extension period versus an
unlimited extension until comprehensive reform is achieved, and seeks
comment on the specific reasons in support of recommended timeframes.
In this regard, the Commission recognizes that the Federal and State
members of the Joint Board have not issued a recommended decision on
comprehensive separations reform in the more than two decades since the
Commission originally proposed such reform. Commenters supporting
shorter extension periods than the proposed six years should also take
into account the time necessary for the Commission and the industry to
adopt and implement revised separations rules and procedures.
17. The Commission also invites comment on what effect, if any,
particular extension periods would have on rates and ratepayers. Would
a relatively long or permanent extension be inconsistent with section
201(b) of the Act's prohibition on unjust and unreasonable charges? For
example, in the past, some commenters have supported extending the
freeze for 15 years, while others expressed concern that such a long
freeze would result in unjust and unreasonable rates because of the
frozen allocation of the underlying costs to the interstate and
intrastate jurisdictions.
IV. Procedural Matters
18. Ex Parte Requirements. This proceeding shall be treated as a
``permit-but-disclose'' proceeding in accordance with the Commission's
ex parte rules. Persons making ex parte presentations must file a copy
of any written presentation or a memorandum summarizing any oral
presentation within two business days after the presentation (unless a
different deadline applicable to the Sunshine period applies). Persons
making oral ex parte presentations are reminded that memoranda
summarizing the presentation must (1) list all persons attending or
otherwise participating in the meeting at which the ex parte
presentation was made, and (2) summarize all data presented and
arguments made during the presentation. If the presentation consisted
in whole or in part of the presentation of data or arguments already
reflected in the presenter's written comments, memoranda or other
filings in the proceeding, the presenter may provide citations to such
data or arguments in his or her prior comments, memoranda, or other
filings (specifying the relevant page and/or paragraph numbers where
such data or arguments can be found) in lieu of summarizing them in the
memorandum. Documents shown or given to Commission staff during ex
parte meetings are deemed to be written ex parte presentations and must
be filed consistent with rule 1.1206(b). In proceedings governed by
rule 1.49(f) or for which the Commission has made available a method of
electronic filing, written ex parte presentations and memoranda
summarizing oral ex parte presentations, and all attachments thereto,
must be filed through the electronic comment filing system available
for that proceeding, and must be filed in their native format (e.g.,
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding
should familiarize themselves with the Commission's ex parte rules.
19. Regulatory Flexibility Act. The Regulatory Flexibility Act of
1980, as amended (RFA), requires that an agency prepare a regulatory
flexibility analysis for notice and comment rulemakings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) in appendix B of the Further
Notice and set forth below concerning the possible/potential impact of
the rule and policy changes contained in this Further Notice. Written
public comments are requested on the IRFA. Comments must be identified
as responses to the IRFA and must be filed by the deadlines for comment
on this Further Notice. Comments must have a separate and distinct
heading designating them as responses to the IRFA.
20. Paperwork Reduction Act. This document does not contain
proposed information collection requirements subject to the Paperwork
Reduction Act of 1995, Public Law 104-13. In addition, therefore, it
does not contain any new or modified information collection burden for
small business concerns with fewer than 25 employees pursuant to the
Small Business Paperwork Relief Act of 2002, Public Law 107-198.
21. Providing Accountability Through Transparency Act. The
Providing Accountability Through Transparency Act requires each agency,
in providing notice of a rulemaking, to post online a brief plain-
language summary of the proposed rule. Accordingly, the Commission will
publish the required summary of this Further Notice on <a href="https://www.fcc.gov/proposed-rulemakings">https://www.fcc.gov/proposed-rulemakings</a>.
V. Initial Regulatory Flexibility Analysis
22. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible significant economic impact
on a substantial number of small entities by the policies and rules
imposed in the Further Notice of Proposed Rulemaking (Further Notice).
Written public comments are requested on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the deadlines
for comments specified in the Further Notice. The Commission will send
a copy of the Further Notice, including this IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration (SBA).
A. Need for, and Objectives of, the Proposed Rules
23. The Commission's part 36 rules regarding jurisdictional
separations category relationships and cost allocation factors
(separations rules) originated more than 35 years ago when the
Commission and its State counterparts used costs to set rates, and the
rules were designed to help prevent local exchange carriers (LECs) from
recovering the same costs from both the interstate and intrastate
jurisdictions. In 1997, the Commission initiated a proceeding to
comprehensively reform those rules in light of the statutory,
technological, and marketplace changes that had affected the
[[Page 58696]]
telecommunications industry. In 2001, the Commission, pursuant to a
recommendation by the Federal-State Joint Board on Jurisdictional
Separations (Joint Board), froze the part 36 separations rules for a
five-year period beginning July 1, 2001, or until the Commission
completed comprehensive separations reform, whichever came first. The
Commission has extended the freeze eight times, with the most recent
extension set to expire on December 31, 2024.
24. In repeatedly extending the freeze, the Commission has
explained that the freeze would stabilize and simplify the separations
process while the Joint Board and the Commission continued to work on
separations reform. This Joint Board has quite recently seated several
new members who are just beginning their opportunity to delve into the
complicated issues they need to grapple with in considering reform
measures. In short, the new Joint Board will need time to develop a
meaningful recommendation. The combination of these recent changes and
the procedural process necessary for any recommendation render it
unlikely that the Joint Board could issue a recommended decision on
comprehensive reform and that the Commission could consider that
recommendation, and then act upon it before the current freeze expires.
Section 410(c) of the Communications Act of 1934, as amended,
contemplates a Joint Board recommendation before the Commission moves
forward on comprehensive separations reform. Therefore, as a practical
matter, the Commission is limited at this point to either extending the
separations freeze or allowing the outdated separations rules to take
effect on January 1, 2025.
25. The Commission expects that permitting the freeze to expire
would impose significant burdens on rate-of-return carriers, many of
which include small carriers, that would far exceed the benefits, if
any, of requiring those carriers to comply with rules that they have
not implemented since 2001. As a result, the Further Notice proposes to
extend for up to six years the freeze of part 36 category relationships
and jurisdictional cost allocation factors to enable the Joint Board to
address the complex nature of the work involved in developing
comprehensive recommendations for separations reform. Under this
proposal, this extension would continue until the earlier of December
31, 2030, or the completion of comprehensive reform of the part 36
jurisdictional separations rules. The Commission invites comments on
this proposal.
B. Legal Basis
26. The proposed action is authorized pursuant to sections 1, 4(i)
and (j), 205, 220, 221(c), 254, 303(r), 403, and 410 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j),
205, 220, 221(c), 254, 303(r), 403, 410, and section 706 of the
Telecommunications Act of 1996, as amended, 47 U.S.C. 1302.
C. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
27. 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. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A ``small business concern'' is one which: (1) is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the SBA.
28. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. The Commission's actions, over time, may affect small
entities that are not easily categorized at present. The Commission
therefore describes, at the outset, three broad groups of small
entities that could be directly affected herein. First, while there are
industry specific size standards for small businesses that are used in
the regulatory flexibility analysis, according to data from the Small
Business Administration's Office of Advocacy, in general a small
business is an independent business having fewer than 500 employees.
These types of small businesses represent 99.9% of all businesses in
the United States, which translates to 33.2 million businesses.
29. Next, the type of small entity described as a ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000
or less to delineate its annual electronic filing requirements for
small exempt organizations. Nationwide, for tax year 2022, there were
approximately 530,109 small exempt organizations in the U.S. reporting
revenues of $50,000 or less according to the registration and tax data
for exempt organizations available from the IRS.
30. Finally, the small entity described as a ``small governmental
jurisdiction'' is defined generally as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau data from the 2022 Census of Governments indicate there were
90,837 local governmental jurisdictions consisting of general purpose
governments and special purpose governments in the United States. Of
this number, there were 36,845 general purpose governments (county,
municipal, and town or township) with populations of less than 50,000
and 11,879 special purpose governments (independent school districts)
with enrollment populations of less than 50,000. Accordingly, based on
the 2022 U.S. Census of Governments data, we estimate that at least
48,724 entities fall into the category of ``small governmental
jurisdictions.''
31. Wired Telecommunications Carriers. The U.S. Census Bureau
defines this industry as 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 communications networks. Transmission
facilities may be based on a single technology or a combination of
technologies. Establishments in this industry use the wired
telecommunications network facilities that they operate to provide a
variety of services, such as wired telephony services, including VoIP
services, wired (cable) audio and video programming distribution, and
wired broadband internet services. By exception, establishments
providing satellite television distribution services using facilities
and infrastructure that they operate are included in this industry.
Wired Telecommunications Carriers are also referred to as wireline
carriers or fixed local service providers.
32. The SBA small business size standard for Wired
Telecommunications Carriers classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau data for 2017 show that there
were 3,054 firms that operated in this industry for the entire year. Of
this number, 2,964 firms operated with fewer than 250 employees.
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 4,590 providers
that reported they were engaged in the provision of fixed local
services. Of these providers, the Commission estimates that 4,146
providers have
[[Page 58697]]
1,500 or fewer employees. Consequently, using the SBA's small business
size standard, most of these providers can be considered small
entities.
33. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange carriers. Wired
Telecommunications Carriers is the closest industry with an SBA small
business size standard. The SBA small business size standard for Wired
Telecommunications Carriers classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau data for 2017 show that there
were 3,054 firms in this industry that operated for the entire year. Of
this number, 2,964 firms operated with fewer than 250 employees.
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 1,212 providers
that reported they were incumbent local exchange service providers. Of
these providers, the Commission estimates that 916 providers have 1,500
or fewer employees. Consequently, using the SBA's small business size
standard, the Commission estimates that the majority of incumbent local
exchange carriers can be considered small entities.
34. The Commission has included small incumbent LECs in this 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.'' The
SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent LECs are not dominant in their field of operation because any
such dominance is not ``national'' in scope. Because the Commission's
proposal to freeze the part 36 rules will affect incumbent LECs, some
entities employing 1,500 or fewer employees may be affected by the rule
changes proposed in the Further Notice. The Commission has therefore
included small incumbent LECs in this RFA analysis, although this RFA
action has no effect on the Commission's analyses and determinations in
other, non-RFA contexts.
D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
35. The proposed rules, if adopted, would not impose any new or
additional requirements on small or other entities. The Further Notice
proposes to extend an existing freeze, and the Commission does not
anticipate small entities will incur additional compliance costs, or be
required to hire professionals to comply with the rule proposals, if
adopted.
E. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
36. 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 rule for such small entities; (3) the
use of performance, rather than design, standards; and (4) an exemption
from coverage of the rule, or part thereof, for such small entities.
37. The Commission's proposed rules to extend the separations
freeze is not expected to have a significant economic impact on a
substantial number of small entities. To the contrary, an extension of
the separations freeze constitutes an essential step towards reducing
unnecessary and burdensome costs to small entities when compared to the
alternative of not doing so. For example, if the freeze was allowed to
expire and was not extended, the outmoded separations rules would be
reinstated. The Commission has consistently over the years found that
such a result would impose new significant economic burdens on rate-of-
return carriers, particularly smaller rural carriers, and create undue
instability for those carriers. Indeed, if the separations rules were
reinstated after an absence of more than two decades, most affected
carriers would find it extremely difficult, if not impossible, to
perform all of the studies needed to remain in full compliance. This
would require substantial training and investment by affected rural
incumbent LECs, and could cause significant disruptions in regulated
rates, cost recovery, and other operating conditions when applying the
outdated separations rules to today's operations.
38. In addition, the jurisdictional freeze has eliminated the need
for many rate-of-return incumbent LECs that still perform cost studies,
including incumbent LECs with 1,500 employees or fewer, to complete
certain annual separations studies that otherwise would be required by
the Commission's part 36 jurisdictional separations rules. Thus, an
extension of this freeze would avoid increasing the administrative
burden of regulatory compliance for these carriers, including small
incumbent LECs.
39. The Commission has thus previously concluded that the benefits
that will result from an additional extension of the freeze far exceed
any possible harms and anticipates that those prior conclusions are
compelling and remain relevant today. The Commission therefore proposes
to extend the separations freeze to permit rate-of-return incumbent
LECs to continue to use the same frozen category relationships and
jurisdictional allocation factors. The Commission invites comment on
this proposal and on the relative costs and benefits of continuing the
separations freeze.
40. When the Commission granted a six-year freeze in 2018, it
concluded that this time period best ``balances the competing
considerations'' of enabling the Joint Board to focus on solving the
complex issues versus the Commission's experience in granting a series
of short-term separations extensions in the past when attempts at
separations reform stalled. The Commission seeks comment on whether
this assessment continues to weigh in favor of the Commission granting
another six-year freeze extension, whether any circumstances changed
that would lead to a different assessment, and whether parties have
other views on the length of an extension.
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
41. None.
VI. Ordering Clauses
42. Accordingly, it is ordered, pursuant to sections 1, 4(i) and
(j), 205, 220, 221(c), 254, 303(r), 403, and 410 of the Communication
Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), 205, 220,
221(c), 254, 303(r), 403, 410, and section 706 of the
Telecommunications Act of 1996, as amended, 47 U.S.C. 1302, that this
Further Notice of Proposed Rulemaking and is adopted.
43. It is further ordered, pursuant to section 220(i) of the
Communications Act, 47 U.S.C. 220(i), that notice be given to each
State commission of the above rulemaking proceeding, and that the
Secretary shall serve a copy of this Further Notice of Proposed
Rulemaking on each State commission.
44. It is further ordered that the Commission's Office of the
Secretary shall send a copy of this Further Notice
[[Page 58698]]
of Proposed Rulemaking, including the Initial Regulatory Flexibility
Analysis and Final Regulatory Flexibility Certification, to the Chief
Counsel for Advocacy of the Small Business Administration.
List of Subjects in 47 CFR Part 36
Communications common carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission.
Katura Jackson,
Federal Register Liaison Officer, Office of the Secretary.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications Commission proposes to amend 47 CFR part 36 as follows:
PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES,
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES
0
1. The authority citation for part 36 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 154(i) and (j), 201, 205, 220,
221(c), 254, 303(r), 403, 410, and 1302 unless otherwise noted.
Sec. Sec. 36.3, 36.123, 36.124, 36.125, 36.126, 36.141, 36.142,
36.152, 36.154, 36.155, 36.156, 36.157, 36.191, 36.212, 36.214, 36.372,
36.374, 36.375, 36.377, 36.378, 36.379, 36.380, 36.381, and
36.382 [Amended]
0
2. In 47 CFR part 36 remove the date ``December 31, 2024'' in the
following places wherever it appears and add, in its place, the date
``December 31, 2030''.
0
a. Section 36.3(a) through (c), (d) introductory text, and (e);
0
b. Section 36.123(a)(5) and (6);
0
c. Section 36.124(c) and (d);
0
d. Section 36.125(h) and (i);
0
e. Section 36.126(b)(5) and (6), (c)(4), (e)(4), and (f)(2);
0
f. Section 36.141(c);
0
g. Section 36.142(c);
0
h. Section 36.152(d);
0
i. Section 36.154(g);
0
j. Section 36.155(b);
0
k. Section 36.156(c);
0
l. Section 36.157(b);
0
m. Section 36.191(d);
0
n. Section 36.212(c);
0
o. Section 36.214(a);
0
p. Section 36.372;
0
q. Section 36.374(b) and (d);
0
r. Section 36.375(b)(4) and (5);
0
s. Section 36.377(a) introductory text, (a)(1)(ix), (a)(2)(vii),
(a)(3)(vii), (a)(4)(vii); (a)(5)(vii), and (a)(6)(vii);
0
t. Section 36.378(b)(1);
0
u. Section 36.379(b)(1) and (2);
0
v. Section 36.380(d) and (e);
0
w. Section 36.381(c) and (d); and
0
x. Section 36.382(a).
[FR Doc. 2024-15567 Filed 7-18-24; 8:45 am]
BILLING CODE 6712-01-P
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</html>Indexed from Federal Register on July 19, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.