28 February 2002
Source: http://www.access.gpo.gov/su_docs/aces/fr-cont.html

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[Federal Register: February 28, 2002 (Volume 67, Number 40)]
[Proposed Rules]
[Page 9232-9242]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe02-25]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[CC Docket No. 02-33, CC Docket No. 95-20, CC Docket No. 98-10; FCC 02-
42]


Appropriate Framework for Broadband Access to the Internet Over
Wireline Facilities

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document initiates a thorough examination of the
appropriate legal and policy framework under the Communications Act of
1934, as amended (the Act), for broadband access to the Internet
provided over domestic wireline facilities. In particular, it seeks
comment on the appropriate statutory classification and regulatory
framework for wireline broadband Internet access services. It also
seeks comment on whether facilities-based providers of broadband
Internet access services provided over wireline and other platforms,
including cable, wireless and satellite, should be required to
contribute to universal service. For purposes of this Notice of
Proposed Rulemaking, the Commission uses the term ``facilities-based''
to refer to providers of broadband Internet access services that
furnish their own last-mile connection, irrespective of transmission
medium, to the customer. Through this proceeding, the Commission
intends to further its goals of encouraging the ubiquitous availability
of broadband to all Americans, promoting the development and deployment
of multiple broadband platforms, fostering investment and innovation in
a competitive broadband market, and developing an analytical framework
for regulating broadband that is consistent, to the extent possible,
across multiple platforms.

DATES: Comments are due April 15, 2002 and reply comments are due May
14, 2002.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM) in CC Docket Nos. 02-33, 95-20 and 98-10,
FCC 02-42, adopted February 14, 2002, and released February 15, 2002.
The complete text of this NPRM is available for inspection and copying
during normal business hours in the FCC Reference Information Center,
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC, 20554.
This document may also be purchased from the Commission's duplicating
contractor, Qualex International, Portals II, 445 12th Street, SW.,
Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile
202-863-2898, or via e-mail qualexint@aol.com. It is also available on
the Commission's website at http://www.fcc.gov.

Synopsis of the Notice of Proposed Rulemaking (NPRM)

    1. Background. In this proceeding, the Commission initiates an
examination of the legal and policy framework under the Act for
broadband access to the Internet provided over domestic wireline
facilities. The widespread deployment of broadband infrastructure has
become a central communications policy objective and it is believed
that widespread ubiquitous broadband deployment will bring valuable new
services to consumers, stimulate economic activity and advance economic
opportunity. The Commission has also initiated three other proceedings
that focus on the regulatory treatment of broadband. These proceedings,
together with this NPRM, build the foundation for a comprehensive and
consistent national broadband policy. First, near the end of 2000, the
Commission launched the Cable Modem NOI. (65 FR 60441, October 11,
2000) This considers, among other issues, the appropriate regulatory
classification for cable modem service, which is used to provide high-
speed Internet access. Second, in the Incumbent LEC Broadband Notice,
(67 FR 1945, January 15, 2002) the Commission examines whether
incumbent local exchange carriers (LECs) that are dominant in the
provision of traditional local exchange and exchange access service
should also be considered dominant when they provide broadband
telecommunications services. Third, in the Triennial UNE Review Notice,
(67 FR 1947, January 15, 2002) the Commission addresses, among other
things, the incumbent LECs' wholesale obligations under section 251 of
the Act to make their facilities available as unbundled network
elements to competitive LECs for the provision of broadband services.
These latter two proceedings thus investigate how Title II regulation
under the Act applies to broadband service provided as
telecommunications services and whether facilities that can be used to
provide broadband services should be

[[Page 9233]]

subject to Title II unbundling obligations. By contrast, this NPRM
addresses the fundamental definitional and classification questions for
wireline broadband Internet access services. Because the instant
inquiry overlaps with the Commission's pending Computer III Further
Remand, (60 FR 12529, March 7, 1995) the Commission incorporates the
Computer III Further Remand proceeding by reference insofar as it
relates to the Bell Operating Companies' (BOCs) access obligations with
respect to broadband services.
    2. This proceeding specifically addresses questions regarding
classifying Internet access service that were raised in two Commission
proceedings, the 1998 Report to Congress on Universal Service,
Federal--State Joint Board on Universal Service, CC Docket No. 96-45,
Report to Congress, 13 FCC Rcd 11501 (rel Apr. 10, 1998), (63 FR 43088,
August 12, 1998) and the Missouri/Arkansas 271 Order. See Joint
Application by SBC Communications Inc., Southwestern Bell Telephone
Company, and Southwestern Bell Communications Services, Inc. d/b/a
Southwestern Bell Long Distance Pursuant to Section 271 of the
Telecommunications Act of 1996 to Provide In-Region, InterLATA Services
in Arkansas and Missouri, CC Docket No. 01-194, Memorandum Opinion and
Order, 16 FCC Rcd 20719, 20759-60, paras. 81-82 (2001). (66 FR 59249,
November 27, 2001)
    3. Application of Statutory Classifications to Wireline Broadband
Internet Access Services. The NPRM discusses the appropriate
classification of wireline broadband Internet access services. The
Commission tentative concludes that, as a matter of statutory
interpretation, the provision of wireline broadband internet access
service is an information service. The Commission tentatively concludes
that when an entity provides wireline broadband Internet access service
over its own transmission facilities, this service, too, is an
information service under the Act. In addition, the Commission
tentatively concludes that the transmission component of retail
wireline broadband Internet access service provided over an entity's
own facilities is ``telecommunications'' and not a ``telecommunications
service'' as defined in section 3 of the Act.
    4. Applying the statutory framework in the Act, the Commission
tentatively concludes that providers of wireline broadband Internet
access service offer more than a transparent transmission path to end-
users and offer enhanced capabilities. Thus, it tentatively concludes
that this service is properly classified as an ``information service''
under section 3 of the Act. The Commission bases this tentative
conclusion on the fact that providers of wireline broadband Internet
access provide subscribers with the ability to run a variety of
applications that fit under the characteristics stated in the
``information service'' definition in section 3 of the Act. The
Commission seeks comment on these tentative conclusions and the
supporting statutory analysis asks additional questions with regard to
the proper classification of wireline broadband Internet access
service, including asking parties to offer any factual evidence that
would suggest a contrary application of the statute.
    5. The NPRM also analyzes whether wireline broadband Internet
access service provided over the provider's own facilities is an
information service, a telecommunications service, or both. As an
initial matter, the Commission tentatively concludes that nothing about
the nature of wireline broadband Internet access services offered over
a provider's own facilities changes the fact that the end-user service
is an information service. Consistent with the statutory analysis
described previously, a provider of end-user wireline broadband
Internet access service delivered over its own facilities provides the
end-user the ``capability for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or making available
information via telecommunications.'' The Commission believes that the
end user is receiving an integrated package of transmission and
information processing capabilities from the provider. It believes that
the fact that the provider owns the transmission does nothing to change
the nature of the service to the end-user. Accordingly, the Commission
tentatively concludes that wireline broadband Internet access service
provided over a provider's own facilities is an information service.
    6. Additionally, as a logical extension of the determination that
the provision of wireline broadband Internet access service over a
provider's own facilities is an information service, the Commission
tentatively concludes that the transmission component of the end-user
wireline Internet access service provided over those facilities is
``telecommunications'' and not a ``telecommunications service.'' As
stated previously, an entity provides ``telecommunications'' (as
opposed to merely using telecommunications) when it both provides a
transparent transmission path and it does not change the form or
content of the information. The provision of telecommunications rises
to the level of a ``telecommunications service'' under the Act when it
is offered ``for a fee directly to the public.'' It seems as if a
provider offering the service over its own facilities does not offer
``telecommunications'' to anyone, it merely uses telecommunications to
provide end-users with wireline broadband Internet access services,
which, for the reasons discussed previously, the Commission believes is
an information service. Therefore, the Commission tentatively concludes
that in the case where an entity combines transmission over its own
facilities with its offering of wireline Internet access service, the
classification of that input is telecommunications, and not a
telecommunications service. It seeks comment on these tentative
conclusions and the statutory analysis underlying them.
    7. The Commission also seeks comment on the prior conclusion in the
Deployment of Wireline Services Offering Advanced Telecommunications
Capability, CC Docket No. 98-147, Memorandum Opinion and Order and
Notice of Proposed Rulemaking, 13 FCC Rcd 24012, 24029, para. 35
(1998)(63 FR 45140, August 24, 1998) that an entity is providing a
``telecommunications service'' to the extent that such entity provides
only broadband transmission on a stand-alone basis, without a broadband
Internet access service. Commenters should address what the appropriate
statutory classification of broadband transmission should be when it is
not coupled with the Internet access component. Commenters should also
address whether the provision of wholesale xDSL transmission should be
considered ``telecommunications'' or ``telecommunications service''
under the Act. If xDSL is being offered on a wholesale basis as an
input to ISPs' information services, is it being offered ``directly to
the public''? In this regard, commenters should discuss how judicial
and Commission definitions of common carriage might apply, and address
whether ISPs--as a class--might be interpreted as the ``public'' under
the statutory definition of ``telecommunications service.'' Commenters
should also discuss the circumstances under which owners of
transmission facilities offer broadband transmission on a private
carriage basis. Specifically, the Commission seeks comment on whether
and how the Commission might regulate incumbent LEC provision of
broadband to third-party ISPs as private carriage. Further, to the
extent that a carrier continued to

[[Page 9234]]

offer xDSL transmission under tariff, would all xDSL transmission
services offered by that carrier be deemed ``telecommunications
services,'' or could certain xDSL services be concurrently offered
through individually negotiated contracts as private carriage?
Commenters should discuss both statutory and policy rationales in
support of their suggested classification.
    8. Although the Commission tentatively concludes that wireline
broadband Internet access service is an information service, it asks
parties to comment on whether it should be classified as something
other than an information service. For example, is there anything about
the self-provision of this service that alters the function provided to
the end user such that the service should be classified as a
telecommunications service? Alternatively, should it be classified as
two separate services, both an information service and a
telecommunications service? Should it instead be classified as a new
kind of hybrid communications service, neither an information service
nor a telecommunications service?
    9. The Commission is also considering concurrently with this
proceeding in the Incumbent LEC Broadband Notice (67 FR 1945, January
15, 2002) whether incumbent LECs that are dominant in the provision of
local exchange and exchange access service should also be considered
dominant when they provide broadband telecommunications services. In
order to consider broadband issues in a consistent manner, the
Commission asks parties to comment on whether issues raised in that
proceeding have an impact on the statutory classifications considered
in this proceeding.
    10. The Commission also notes that the 1996 Act uses and defines
the term ``advanced telecommunications capability'' in section 706. To
date, the Commission has utilized this term for purposes of collecting
data to measure the deployment of advanced telecommunications. It seeks
comment on whether wireline broadband Internet access services should
be classified as an ``advanced telecommunications capability.'' It
seeks comment on the relevance, if any, that section 706 has to the
issues raised in this proceeding.
    11. Regulatory Framework for Wireline Broadband Internet Access
Services. The NPRM also addresses the appropriate regulatory framework
for wireline broadband Internet access services. The Commission seeks
comment on what regulations, if any, should apply in the future if
these broadband offerings are found to be information services subject
to Title I of the Act. It also asks what regulatory requirements, if
any, should attach to the transmission component of the information
service. Specifically, the Commission seeks comment on the relevance of
access and non-access obligations to providers of self-provisioned
wireline broadband Internet access services and on how classifying
wireline broadband Internet access services as Title I service will
affect public safety and welfare obligations. In addition, the
Commission seeks comment generally on the role of the states with
respect to regulating wireline broadband Internet access services.
    12. Access Safeguards. The Commission seeks comment on whether the
Computer Inquiry requirements that are applicable to the transmission
component of information services should be modified or eliminated, and
whether such requirements are overly broad or under inclusive as
applied to the nascent broadband market. Specifically, the NPRM
contains specific questions addressing the necessity and usefulness of
these requirements as applied to self-provisioned wireline broadband
Internet access service, and seeks comment on whether it may be
appropriate to impose alternative requirements to better address the
technology and market characteristics of these services.
    13. In responding to the questions raised in this part of the
Notice, the Commission asks parties to comment with specificity upon
whether the various goals articulated in the Computer II and Computer
III inquiries are equally valid today. Parties should explain the basis
for their conclusions, and also explain what other goals should be
taken into account, given the significant changes in the technological
and competitive landscapes. Further, it seeks comment on the analyses
employed in the Computer Inquiries, including the factors the
Commission relied upon in promulgating the Computer II and III regimes.
Are those factors still relevant today? Should they be modified, or
given less weight? Are there additional factors that should be taken
into account today by the Commission as it considers whether to modify
the Computer II and III regimes?
    14. To the extent the Commission decides that none of the existing
Computer II/III nondiscriminatory access obligations should apply to
carriers providing wireline broadband Internet access services, it
seeks comment on whether alternative access obligations should be
applied. It notes that Internet Service Providers (ISPs) currently
purchase transmission services under tariff to provide their own
information services. Commenters should address how entities have used
means other than those provided through the Computer II/III access
requirements to acquire the transmission necessary to provide their
information service offerings, including reliance on negotiated
contractual arrangements. In addition, it seeks comment on how any
proposed alternative regulatory or contractual access obligations might
be priced in the context of a minimal regulatory Title I regime. For
example, commenters should consider whether, under a new regulatory
approach, self-provisioning wireline broadband providers should be
required to do no more than make transmission available to competitors
at market-based prices, or whether they should be required to make
transmission available to competitors at commercially reasonable rates.
Or, is some alternative set of pricing regulations preferable?
    15. If a regulatory framework is necessary, parties should comment
on how such a framework could reduce the regulatory burdens on wireline
broadband providers while promoting the availability of broadband to
both competitors and consumers. Such an approach might encourage market
participants to deploy broadband networks more expeditiously and
increase facilities-based competition. The Commission seeks comment on
the benefits and costs, as well as concrete details of market-based
approaches to broadband regulation, and encourages interested parties
to offer other proposals designed to encourage the deployment of
broadband. It also asks parties to comment on what the appropriate
classification would be of any broadband transmission services required
to be offered to independent ISPs. It also seeks comment on the
applicability of sections 201 and 202 of the Act to any such stand-
alone broadband offerings, and how those sections should inform any
determination we may make about the pricing of broadband transmission
provided to third parties.
    16. The Commission asks parties to comment specifically on the
incentives that the Commission would create were it to impose
requirements other than the Computer II/III requirements on the
provision of wireline broadband Internet access service. For example,
were the Commission to modify or eliminate the requirements that the
underlying transmission be made available to other ISPs on a
nondiscriminatory basis, how would

[[Page 9235]]

this affect the deployment of broadband? How would competing ISPs that
do not own transmission facilities obtain the inputs they need to
provide competing broadband Internet access services? Would the removal
of all unbundling requirements motivate incumbent LECs, including BOCs,
to only provide broadband transmission as part of integrated
information services in order to restrict its availability, or would
there be countervailing reasons why carriers would still choose to
provide high-speed transmission to other entities on a stand-alone
basis? Will these incentives be affected to the extent that these
broadband Internet access services begin replacing traditional
telecommunications services? Commenters arguing that removal of the
requirements will lead to a significant reduction in the availability
of high-speed transmission to non-facilities-based ISPs should address
with specificity why this situation cannot be addressed through
private, unregulated contractual arrangements or other marketplace
solutions. Alternatively, if the Commission were to continue to impose
unbundling requirements only on incumbent LECs or BOCs, how would this
affect their incentive to continue deploying new and innovative
broadband information services?
    17. Other Obligations. The Commission seeks comment on the extent
to which other obligations might be affected by classifying wireline
broadband Internet-access services as information services. It asks
questions about the relevance of three basic public protection
obligations of telecommunications service providers--(i) national
security, (ii) network reliability, and (iii) consumer protection--to
wireline broadband Internet-access services. It also asks how this
classification may affect unbundling obligations pursuant to sections
251 and 252 of the Act.
    18. It asks commenters to discuss how our tentative conclusion that
wireline broadband Internet access service is an information service
will affect the scope of the CALEA assistance capabilities that
telecommunications carriers must offer to law enforcement authorities.
See Communications Assistance for Law Enforcement Act, Report and
Order, CC Docket No. 97-213, 14 FCC Rcd 16794, 16795-96, paras. 2-3
(1999). (64 FR 14834, March 29, 1999) Commenters should address what
effect, if any, the USA PATRIOT Act of 2001 may have on an entity that
provides information services. Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001) (USA
PATRIOT Act) (codified in scattered sections of 18 U.S.C., 47 U.S.C.,
50 U.S.C.). (66 FR 63620, December 7, 2001) While section 222 of the
USA PATRIOT Act states that ``nothing in this Act shall impose any
additional technical obligation or requirement on a provider of wire or
electronic communication service or other person to furnish facilities
or technical assistance,'' commenters may wish to discuss how the
expansion of surveillance authority to electronic communications under
various provision of the USA PATRIOT Act might affect providers of
wireline broadband Internet access service if these services were
classified as information services. More generally, the Commission asks
for comment on how designating wireline broadband Internet access
service as an information service may affect other national security or
emergency preparedness obligations applicable to service providers and
their networks.
    a. Second, commenters should discuss what role, if any, the
Commission or its designees should have in ensuring the network
reliability and interoperability of wireline broadband Internet access
services. For telecommunications service providers, the Commission has
found that network reliability is of paramount importance in any number
of settings and, in particular, has directed the Network Reliability
and Interoperability Council (NRIC) to explore and recommend measures
that would enhance network reliability and interconnectivity.
Commenters should address the costs and benefits of authorizing NRIC to
make technical interconnectivity and interoperability recommendations
with respect to wireline broadband Internet access service.
    19. Third, commenters should address how classification of wireline
broadband Internet access as an information service would affect
existing consumer protection requirements. For instance, section 214 of
the Communications Act limits the ability of a telecommunications
carrier to unilaterally discontinue telecommunications service to
customers. Commenters should address the extent to which it is
appropriate or necessary to apply such a requirement to the provision
of wireline broadband Internet access service if we classify such
services as information services. Consistent with the Communications
Act, the Commission restricts how telecommunications carriers use,
disclose, and access customer proprietary network information derived
from the provision of a telecommunications service (CPNI). Section 258
of the Act prohibits telecommunications carriers from changing
consumers' carriers without prior consent. The Commission has also
adopted truth-in-billing principles and guidelines to ensure that
telephone bills provide consumers with information they may use to
protect themselves from fraud and make informed choices in the
competitive telecommunications marketplace. How would classification of
wireline broadband Internet access service as an information service
affect the applicability of these requirements? In addition, section
255 of the Act requires a provider of telecommunications service to
ensure the service is accessible and usable by individuals with
disabilities, if that is readily achievable. How would classification
of wireline broadband Internet access service as an information service
affect the applicability of such requirements? Similarly, section 201
of the Act contains obligations applicable to the furnishing of service
and charges for ``communication service'' and section 202 makes it
unlawful for a common carrier to unreasonably discriminate with regard
to like ``communications service.'' How would our classification affect
these obligations? Commenters should refer to specific sections of the
Act when they are addressing these issues. Commenters should address
whether these requirements are needed to protect the interests of
consumers in the context of a minimally intrusive regulatory regime for
wireline broadband Internet access service, and discuss whether,
through intermodal competition for broadband services, there are
adequate incentives absent additional regulation for providers of
wireline broadband Internet access to protect consumers' varied
interests.
    20. Finally, the Commission seeks comment on the implications of
its tentative conclusions for incumbent LECs' obligations to provide
access to network elements under sections 251 and 252 of the Act.
Because ``network element'' is defined under the Act as a ``facility or
equipment used in the provision of a telecommunications service,'' how
could an incumbent LEC provider of wireline broadband Internet access
service over its own facilities be required to provide access to those
facilities as ``network elements'' if those facilities are used by the
incumbent LEC exclusively to provide information services? For example,
what would be the implications for the Commission's line sharing and
line splitting rules? See

[[Page 9236]]

47 CFR 51.319(h); Deployment of Wireline Services Offering Advanced
Telecommunications Capability and Implementation of the Local
Competition Provisions of the Telecommunications Act of 1996, Third
Report and Order in CC Docket No. 98-147 and Fourth Report and Order in
CC Docket No. 96-98, 14 FCC Rcd 20912 (1999). (65 FR 1331, January 10,
2000) If an incumbent LEC provider of wireline broadband Internet
access service over its own facilities uses certain facilities to
provide both information services and telecommunications services, to
what extent would the LEC be required to provide access to such shared-
use facilities as ``network elements?'' The Commission seeks comment on
whether the Commission could compel the unbundling of network elements
used in the provision of information services, pursuant to Title I or
some other statutory authority. Does the Commission's Title I authority
allow it to limit such obligations to certain types of providers, such
as incumbent LECs, or would the Commission be required to adopt rules
of general applicability under Title I? In addition, because section
251(c)(3) allows a requesting carrier to request access to network
elements ``for the provision of a telecommunications service,'' would a
provider be prohibited from using network elements pursuant to section
251 to provide wireline broadband Internet access service?
    21. Impact on Federal and State Responsibilities. The Commission
seeks comment generally on the role of the states with respect to
wireline broadband Internet access services if the Commission were to
find it to be appropriately classified as an information service under
Title I of the Act. The Commission has previously found that when xDSL
transmission is used to provide Internet access services, these
services are interstate and, thus, subject to Commission jurisdiction.
See GTE Telephone Operating Cos., GTOC Tariff No. 1, GTE Transmittal
No. 1148, CC Docket No. 98-79, Memorandum Opinion and Order, 13 FCC Rcd
22466 (1998). It thus seeks comment on whether, and if so how,
classification of wireline broadband Internet access service as an
information service would affect the balance of responsibilities
between the Commission and the states. It asks parties to comment on
what they consider an appropriate role for the states in this area,
taking into account both policy considerations and legal constraints,
including any applicable limitations on delegations of authority to the
states under Title I of the Act. Additionally, parties should comment
on whether current state regulations, if any, should be preempted to
any extent if the Commission were to find that wireline broadband
Internet access service is appropriately classified under Title I of
the Act. Parties should be specific in identifying such state
regulations and in explaining how such regulations would interfere with
the Commission's oversight under Title I. In addition, the NPRM notes
that the Ninth Circuit Court of Appeals affirmed the Commission's
authority to preempt state regulation of jurisdictionally mixed
enhanced services. California v. FCC, 39 F.3d 919, 931-33 (9th Cir.
1994). Parties should address whether any such existing state laws are
in fact subject to preemption under that decision.
    Commenters should also address how the dual state-federal
ratemaking framework might be affected by the regulatory classification
of wireline broadband Internet access service as an information
service. For instance, if wireline broadband Internet access service is
an information service, how should joint and common costs of facilities
used to provide both those services and telecommunications services be
allocated under part 64.901 of the Commission's rules, 47 CFR 64.901?
Should the Commission modify its current cost allocation rules, and, if
so, how? Commenters should also address the implications for
jurisdictional separations of the issues addressed in this proceeding.
It specifically encourages state members of the Federal-State Joint
Board on Separations (Separations Joint Board) to submit comments on
the issues addressed previously.
    21a. Universal Service Obligations of All Providers of Broadband
Internet Access. The NPRM seeks comment on whether providers of
broadband Internet access services provided over wireline and other
platforms, including cable, wireless and satellite, should be required
to contribute to universal service. In this proceeding, the Commission
will continue to pursue and protect the core objectives of universal
service, as reflected in our statutory mandates and in many of our
precedents. It recognizes, however, that the manner in which it
preserves and advances universal service will, of necessity, change as
the market, technology and consumers needs and priorities change.
    22. Universal service has historically been based on the assumption
that consumers use the network for traditional voice-related services
and that those voice services are provided over circuit-switched
networks. As traditional services migrate to broadband platforms, the
Commission needs to assess the implications for funding universal
service and ask commenters to discuss how to sustain universal service
in an evolving communications market. Any analysis must take into
account the Commission's overarching objectives of preserving and
advancing universal service, as directed by Congress. At the same time,
however, it seeks to avoid policies that may skew the marketplace or
overburden new service providers, so that they can continue to innovate
and have incentives to deploy broadband infrastructure. The Commission
seeks to further these objectives by exploring the following
fundamental question: in an evolving telecommunications marketplace,
should facilities-based broadband Internet access providers be required
to contribute to support universal service and, if so, on what legal
basis? This Notice explores this question by seeking comment on what
universal service contribution obligations such providers of broadband
Internet access should have as the telecommunications market evolves,
and how any such obligations can be administered in an equitable and
non-discriminatory manner.
    23. This fundamental question is intertwined with issues raised in
the separate Universal Service Contribution Methodology proceeding,
which explores possible ways to reform our current methodology for
assessing universal service contributions, and in particular whether to
modify our present requirement that carriers be assessed based on end-
user telecommunications revenues. Federal-State Joint Board on
Universal Service, CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-
200, 95-116, Notice of Proposed Rulemaking, FCC 01-145 (rel. May 8,
2001) (Universal Service Contribution Methodology). (66 Fr 28718) Among
other possible reforms, the Commission is considering assessing
contributions based upon connections to a public network. FCC Takes
Next Step To Reform Universal Service Fund Contribution System, CC
Dockets Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, News
Release, FCC 02-43 (rel. Feb. 14, 2002) (Contribution Methodology
Further Notice). Although it seeks comment in this proceeding on the
ways in which reform of the current contribution methodology might
alter the analysis of the fundamental question described previously,
the Commission leaves questions of whether to make

[[Page 9237]]

such a reform to the separate Contribution Methodology proceeding.
    24. As discussed in greater detail further, this NPRM builds on the
foundation established in the Report to Congress and seeks comment on
how the Commission can continue to meet the goals of universal service
in a changing marketplace where competing providers are deploying
broadband Internet access. It specifically encourages state members of
the Federal-State Joint Board on Universal Service to submit comments
on the issues addressed further.
    25. Section 254 of the Act codified the Commission's historic
commitment to advancing universal service by ensuring the affordability
and availability of telecommunications services for all Americans.
Specifically, section 254 of the Act directed the Commission to reform
its universal service systems by making them explicit and workable in
an increasingly competitive market. Section 254 also instructed the
Commission to collect contributions for the explicit universal service
support mechanisms from telecommunications carriers that provide
interstate telecommunications services and, if in the public interest,
other providers of interstate telecommunications. Based on this
statutory language, the Commission determined that universal service
would be funded through contributions based on the interstate end-user
telecommunications revenues of telecommunications carriers and certain
other providers of telecommunications. Section 254(d) of the Act states
``[e]very telecommunications carrier that provides interstate
telecommunications services shall contribute'' to universal service. As
noted previously, section 3 of the Act defines a telecommunications
carrier as ``any provider of telecommunications services * * *,'' and
``telecommunications service'' as the ``offering of telecommunications
for a fee directly to the public, or to such classes of users as to be
effectively available directly to the public, regardless of the
facilities used.'' In contrast, section 3 of the Act defines mere
``telecommunications'' as ``transmission, between or among points
specified by the user, of information of the user's choosing without
change in the form or content of the information as sent and
received.'' In the First Report and Order, the Commission interpreted
this statutory language as imposing a mandatory contribution
requirement on all telecommunications carriers that provide interstate
telecommunications services.
    Although section 254 falls within Title II of the Act, which
generally applies to telecommunications carriers, the Commission has
interpreted its reach to extend beyond telecommunications carriers.
Specifically, section 254(d) of the Act provides the Commission the
permissive authority to require ``[a]ny other provider of interstate
telecommunications'' to contribute to universal service if required by
the public interest. In the First Report and Order, the Commission
exercised its permissive authority over certain other providers of
interstate telecommunications under section 254(d). The Commission
required entities that provide interstate telecommunications to end-
users for a fee and payphone aggregators to contribute to universal
service. This category of providers would include entities that lease
excess telecommunications capacity to end-users on a private
contractual basis. The Commission concluded that these providers, like
telecommunications carriers, ``have built their businesses or part of
their businesses on access to the [public switched telephone network],
provide telecommunications in competition with common carriers, and
their non-common carrier status results solely from the manner in which
they have chosen to structure their operations.'' The Commission
declined at that time to exercise its permissive authority over
entities that provide telecommunications solely to meet their internal
needs, because telecommunications ``do not comprise the core of [a
self-provider's] business.'' The Commission noted that private network
operators that serve only their internal needs do not lease excess
capacity to end-users and do not charge end-users for use of their
network.
    26. Under existing rules and policies, telecommunications carriers
providing telecommunications services, including broadband transmission
services, are subject to contribution requirements. In particular, with
respect to wireline telecommunications carriers, such carriers must
contribute to the extent they provide broadband transmission services
or other telecommunications services on a stand-alone basis to
affiliated or unaffiliated Internet service providers (ISPs) or to end-
users. Accordingly, those carriers must contribute based on the
revenues associated with the telecommunications services. The
Commission also has concluded that if a wireline telecommunications
carrier offers wireline broadband Internet access to end-users for a
single price, it must also contribute to universal service. In the CPE/
Enhanced Service Bundling Order, the Commission addressed the question
of ``how to allocate revenues when telecommunications services and CPE/
enhanced services are offered as a bundled package, for purposes of
calculating a carrier's universal service contribution.'' Policy and
Rules Concerning the Interstate, Interexchange Marketplace;
Implementation of Section 254(g) of the Communications Act of 1934, as
amended; 1998 Biennial Regulatory Review--Review of Customer Premises
Equipment and Enhanced Services Unbundling Rules in the Interexchange,
Exchange Access and Local Exchange Markets, CC Docket Nos. 96-61 and
98-183, Report and Order, 16 FCC Rcd 7418, 7445-46, para. 46 (2001).
(66 FR 19398, April 16, 2001) The Commission concluded that, for
universal service contribution purposes, the carrier may elect to
report revenues from the bundle based on the unbundled
telecommunications service or, if it cannot distinguish
telecommunications service revenue from non-telecommunications service
revenue, all revenues from the bundled offering. The Commission seeks
comment on whether these requirements and their basis in our rules and
precedents are appropriate and consistent with the tentative
conclusions regarding the statutory classification of wireline
broadband Internet access.
    27. The Commission emphasizes that this proceeding does not change
the mandatory obligations of telecommunications carriers that are
currently required to contribute to universal service based on their
provision of broadband services to affiliated or unaffiliated ISPs or
end-users. To avoid any disruption to universal service funding during
the pendency of this proceeding, the Commission continues to require
all such carriers to make universal service contributions in the same
manner required today, pending the effective date of a final Commission
decision regarding the status of wireline broadband Internet access. It
finds that the public interest is served by maintaining the status quo
and ensuring that universal service contributions continue to be
assessed and collected under current law without disruption.
    28. ISPs that own no telecommunications facilities and lease
transmission, such as T1 lines, from telecommunications carriers to
transmit their information services, do not contribute directly to
universal service, but they make indirect contributions through charges
paid to the underlying telecommunications carrier providing

[[Page 9238]]

the leased telecommunications services. As discussed previously, the
Commission concluded in the Report to Congress that facilities-based
ISPs that provide no stand-alone telecommunications services could be
required to contribute to universal service under its permissive
authority, but the Commission declined to exercise its permissive
authority at that time. Given the anticipated growth of broadband
Internet access, and the growth of broadband Internet access provided
by ISPs, the Commission believes it is now the appropriate occasion to
investigate, among other things, the questions that remain unanswered
by the Report to Congress. Specifically, it asks whether broadband
Internet access providers that supply last-mile connectivity over their
own facilities should be required to contribute to universal service
based upon their self-provisioning of telecommunications.
    29. In this NPRM, the Commission tentatively concludes that
wireline broadband Internet access should be classified as an
``information service'' and that the transmission aspect of that
service is ``telecommunications'' when the same entity provides the
telecommunications input. Accordingly, it must examine how the
regulatory status of wireline broadband Internet access might impact
the current system of assessments and contributions to universal
service. It invites commenters to discuss how this tentative conclusion
will impact contributions to universal service under current revenues-
based system. It also seeks comment on whether the Commission's current
treatment of such services as bundled offerings of telecommunications
services and information services for universal service contribution
purposes continues to be appropriate or should be modified in some
fashion. It also seeks comment on the impact on universal service
implementation if it concludes instead that the transmission input is a
telecommunications service, separate services (information service and
telecommunications service), or a new hybrid communications service
that is neither an information or telecommunications service. In
addition, it asks commenters whether and under what circumstances the
public interest would require it to exercise its permissive authority
over wireline broadband Internet access providers that utilize their
own transmission facilities to provide a broadband Internet access
service if such a service were an information service with a
telecommunications input. Commenters should identify the factors that
the Commission should consider when deciding whether the public
interest requires exercise of its permissive authority under section
254(d) over wireline broadband Internet access providers. Assuming the
public interest supports exercise of permissive authority, the
Commission's contribution policies must also be equitable and
nondiscriminatory. Therefore, the Commission requests that commenters
describe the competitive impact of contribution requirements in an
evolving communications marketplace. It asks commenters generally to
discuss whether either outcome, assessing or not assessing facilities-
based wireline broadband Internet access providers, would be consistent
with the requirement of section 254 that contributions be assessed on
an equitable and nondiscriminatory basis. For example, should all
facilities-based wireline broadband Internet access providers--both
wireline telecommunications carriers and ISPs--be subject to the same
contribution requirements? If wireline broadband Internet access
providers that self-provision telecommunications inputs are required to
contribute, would that be consistent with the goal suggested in the
companion Universal Service Contribution Methodology proceeding of
ensuring that relevant services are assessed only once for universal
service purposes? Whenever possible, commenters should explain how the
Commission may minimize the incentives/distortions created solely by
the contribution requirements.
    If the Commission chooses to revisit its conclusion that wireline
broadband Internet access should be viewed, for universal service
contribution purposes, as a bundled offering of a telecommunications
service and an information service, should it decline to exercise its
permissive authority over facilities-based providers of wireline
broadband Internet access or simply modify the basis on which such
providers contribute to universal service? For example, should
facilities-based wireline broadband Internet access providers
contribute based on all of their wireline broadband Internet access
revenues, some fraction of those revenues, or some other amount?
Commenters advocating that such providers of wireline broadband
Internet access should contribute to universal service should discuss
how to allocate revenues separately associated with the
telecommunications or telecommunications service input from revenues
associated with Internet access. As noted previously, in a separate
proceeding, the Commission is seeking comment on a proposal to assess
universal service contributions based on connections, rather than
revenue. If the Commission were to adopt such a reform, how should it
be implemented with respect to wireline broadband Internet access
providers? In addition, how would the Commission implement such a
reform if the Commission were to adopt a connection-based assessment
methodology?
    30. Broadband Internet access services may also be provided over
other platforms, e.g., wireless, cable, and satellite. Those other
platforms may be utilized to provide broadband Internet access services
in direct competition with wireline broadband Internet access services.
Thus, while this proceeding largely seeks comment on the classification
and regulatory implications of wireline broadband Internet access, we
also undertake a comprehensive review of the effects of the growth of
broadband Internet access on universal service, regardless of platform.
It therefore asks whether other facilities-based providers of broadband
Internet access services may, as a legal matter, or should, as a policy
matter, be required to contribute. For example, if other broadband
Internet access services are determined in other proceedings to be
information services with a telecommunications input, would the public
interest require exercise of our permissive authority? The Commission
requests that commenters identify factors that should be considered
when deciding whether the public interest would be served by requiring
other facilities-based providers of broadband Internet access to
contribute. Commenters should discuss whether these factors differ from
or are the same as those relevant for wireline broadband Internet
access providers. It also seeks comment on what contribution
obligations, if any, should apply if other broadband Internet access
services are classified as something other than information services
with a telecommunications input. Finally, it seeks comment on the
implications for each commenter's analysis of a change in the
assessment system from a revenue-based system to some other basis for
assessment, such as a per-connection charge.
    31. As the Commission stated in the First Report and Order,
contribution policies should ``reduce[] the possibility that carriers
with universal service obligations will compete directly with carriers
without such obligations.''

[[Page 9239]]

Accordingly, commenters should address the competitive impact across
broadband platforms, if any, created by the contribution requirements.
Based on the Commission's understanding of today's communications
market, wireline broadband Internet access providers may compete
directly with cable, wireless and satellite operators that provide
broadband Internet access services for end-user customers. Therefore,
the Commission seeks comment on whether all facilities-based broadband
Internet access providers should be subject to the same contribution
obligations. What are the advantages and disadvantages of such an
approach? In particular, to what extent is such broad assessment of
universal service contributions on facilities-based broadband Internet
access providers necessary to ensure that universal service mechanisms
will satisfy the objectives of section 254? In addition, if the
Commission were to adopt a connection-based assessment methodology,
commenters should address how such a reform would be implemented.
    32. Because section 254 of the Act requires the Commission to
preserve and advance universal service to the extent possible, it must
strive to understand changes in technology and the marketplace and
anticipate their implications for universal service. The Commission
asks commenters to describe how the growth of broadband Internet access
services will impact current the universal service system and the
Commission's ability to support universal service. For example, if
broadband Internet access service providers increasingly provide
broadband Internet access services over their own facilities, will that
result in lost contribution revenues, and if so, how much? It also
seeks comment on the implications of such developments if the
Commission were to move to a per-connection-based assessment.
Commenters should discuss the impact, if any, on the expected growth of
broadband Internet access services if contributions were assessed on a
per-connection or some other non-revenue-based system. Additionally,
commenters should discuss whether they expect voice traffic to migrate
to broadband Internet platforms. If so, commenters should address the
potential impact of such migration on the Commission's ability to
support universal service. Specifically, if voice traffic over
broadband Internet platforms increases and traditional circuit-switched
voice traffic decreases, how, if at all, will that impact the
Commission's ability to support universal service in an equitable and
non-discriminatory manner? Will migration lower or raise the cost of
providing service? What, if any, will be the impact on the level of
high-cost universal service support needed as voice traffic migrates
from traditional circuit switched networks to broadband Internet
platforms? For example, will costs of providing supported services in
high-cost areas increase or decrease as migration occurs?
    33. Section 254(k) of the Act prohibits telecommunications carriers
from using services that are not competitive to subsidize services that
are subject to competition. The Commission seeks comment on how this
provision should be implemented for wireline broadband Internet access.
Section 254(k) also requires that services supported by universal
service bear no more than a reasonable share of joint and common costs
of the facilities used to provide these services. Because information
services do not currently fall within the definition of services
supported by universal service, deeming wireline broadband Internet
access to be an information service would mean that the Commission
would have to ensure that the costs of the network are properly
allocated between regulated Title II services and Title I information
services to comply with this statutory mandate. It seeks comment on how
it may ensure that services supported by universal service bear no more
than a reasonable portion of the costs associated with facilities used
to provide both supported services and unsupported Internet access.
Specifically, the Commission invites commenters to address the general
sufficiency of existing allocation rules and policies in a broadband
environment and whether those rules should be modified in order to meet
the requirements of section 254(k).

Initial Regulatory Flexibility Analysis

    34. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared the present 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 NPRM. 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 on the NPRM
provided previously in Section V.B. The Commission will send a copy of
the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration. In addition, the NPRM and IRFA (or
summaries thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
    35. In this proceeding, the Commission seeks comment on the
appropriate classification and regulatory framework for wireline
broadband Internet access services. It tentatively concludes that
wireline broadband Internet access services--whether provided over a
third party's facilities or self-provisioned facilities--are
information services subject to regulation under Title I of the Act,
and asks for comment on this tentative conclusion. The Commission has
already sought comment on the regulatory classification for cable modem
service, and this issue will be resolved in a separate proceeding. The
Commission also addresses the appropriate regulatory framework for
wireline broadband Internet access services. It seeks comment on what
regulations should apply in the future if these broadband offerings are
found to be information services subject to Title I of the Act.
Specifically, the Commission examines implications of Title I
classification for wireline broadband offerings for non-discriminatory
access and other core communications policy objectives. In light of
these objectives, it seeks comment on whether to modify or eliminate
existing access obligations on providers of self-provisioned wireline
broadband Internet access services. The Commission seeks comment on how
this regulatory classification may impact other obligations, such as
those associated with public safety and welfare. In addition, the
Commission seeks comment generally on the role of the states with
respect to regulating wireline broadband Internet access services.
Finally, the Commission seeks comment broadly on whether facilities-
based providers of broadband Internet access services provided over
wireline and other platforms, including cable, wireless and satellite,
should be required to contribute to universal service. For purposes of
this NPRM, the Commission uses the term ``facilities-based'' to refer
to providers of broadband Internet access services that furnish their
own last-mile connection, irrespective of the transmission medium, to
the customer.
Legal Basis
    36. The legal basis for any action that may be taken pursuant to
the NPRM is contained in sections 4, 10, 201-202,

[[Page 9240]]

251, 252, 254, 271, 303 and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. 154, 201-202, 251, 252, 254, 271, 303, and 403,
section 706 of the Telecommunications Act of 1996, and sections 1.1,
1.48, 1.411, 1.412, 1.415, 1.419, and 1.1200-1.1216, of the
Commission's rules, 47 CFR 1.1, 1.48, 1.411, 1.412, 1.415, 1.419, and
1.1200-1.1216.
Description and Estimate of the Number of Small Entities to Which the
Proposed Rules Will Apply
    37. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by the proposed rules. 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 Small Business
Administration (SBA). Consistent with SBA's Office of Advocacy's view,
we have included small incumbent LECs in this present RFA analysis. We
emphasize, however, that this RFA action has no effect on Commission
analyses and determinations in other, non-RFA contexts.
    38. Total Number of Telephone Companies Affected. The United States
Bureau of the Census (``the Census Bureau'') reports that, at the end
of 1992, there were 3,497 firms engaged in providing telephone
services, as defined therein, for at least one year. This number
contains a variety of different categories of carriers, including local
exchange carriers, interexchange carriers, competitive access
providers, cellular carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. It seems certain that some of those 3,497
telephone service firms may not qualify as small entities or small
incumbent LECs because they are not ``independently owned and
operated.'' For example, a PCS provider that is affiliated with an
interexchange carrier having more than 1,500 employees would not meet
the definition of a small business. It seems reasonable to conclude,
therefore, that fewer than 3,497 telephone service firms are small
entity telephone service firms or small incumbent LECs that may be
affected by the decisions and rules adopted in this NPRM.
    39. Local Exchange Carriers, Interexchange Carriers, Competitive
Access Providers, Operator Service Providers, Payphone Providers, and
Resellers. Neither the Commission nor SBA has developed a definition
particular to small local exchange carriers (LECs), interexchange
carriers (IXCs), competitive access providers (CAPs), operator service
providers (OSPs), payphone providers or resellers. The closest
applicable definition for these carrier-types under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of these carriers nationwide of which we are aware appears to be the
data that we collect annually on the Form 499-A. According to the
Commission's most recent data, there are 1,335 incumbent LECs, 349
CAPs, 204 IXCs, 21 OSPs, 758 payphone providers and 541 resellers.
Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number
of these carriers that would qualify as small business concerns under
SBA's definition. Consequently, the Commission estimates that there are
fewer than 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758
payphone providers, and 541 resellers that may be affected by the
decisions and rules adopted in this NPRM.
    40. Small Local Exchange Carriers. We have included small incumbent
local exchange carriers in this present RFA analysis. 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 local exchange carriers are not dominant in
their field of operation because any such dominance is not ``national''
in scope. The Commission has therefore included small incumbent local
exchange carriers in this RFA analysis, although it emphasizes that
this RFA action has no effect on Commission analyses and determinations
in other, non-RFA contexts.
    41. Internet Service Providers. Under the new NAICS codes, SBA has
developed a small business size standard for ``On-line Information
Services,'' NAICS Code 514191. According to SBA regulations, a small
business under this category is one having annual receipts of $18
million or less. According to SBA's most recent data, there are a total
of 2,829 firms with annual receipts of $9,999,999 or less, and an
additional 111 firms with annual receipts of $10,000,000 or more. Thus,
the number of On-line Information Services firms that are small under
the SBA's $18 million size standard is between 2,829 and 2,940.
Further, some of these Internet Service Providers (ISPs) might not be
independently owned and operated. Consequently, we estimate that there
are fewer than 2,940 small entity ISPs that may be affected by the
decisions and rules of the present action.
    42. Satellite Service Carriers. The SBA has developed a definition
for small businesses within the category of Satellite
Telecommunications. Under that SBA definition, such a business is small
if it has 1,500 or fewer employees. According to the Commission's most
recent Telephone Trends Report data, 21 carriers reported that they
were engaged in the provision of satellite services. Of these 21
carriers, 16 reported that they have 1,500 or fewer employees and five
reported that, alone or in combination with affiliates, they have more
than 1,500 employees. The Commission does not have data specifying the
number of these carriers that are not independently owned and operated,
and thus is unable at this time to estimate with greater precision the
number of satellite service carriers that would qualify as small
business concerns under the SBA's definition. Consequently, the
Commission estimates that there are 21 or fewer satellite service
carriers that may be affected by the rules.
    43. Wireless Service Providers. The SBA has developed a definition
for small businesses within the two separate categories of Cellular and
Other Wireless Telecommunications or Paging. Under that SBA definition,
such a business is small if it has 1,500 or fewer employees. According
to the Commission's most recent Telephone Trends Report data, 1,495
companies reported that they were engaged in the provision of wireless
service. Of these 1,495 companies, 989 reported that they have 1,500 or
fewer employees and 506 reported that, alone or in combination with
affiliates, they have more than 1,500 employees. The Commission does
not have data specifying the number of these carriers that are not
independently owned and operated, and thus are unable at this time to
estimate with greater precision the number of wireless service
providers that would qualify as small business concerns under the

[[Page 9241]]

SBA's definition. Consequently, it estimates that there are 989 or
fewer small wireless service providers that may be affected by the
rules.
    44. Cable Systems. The Commission has developed, with SBA's
approval, its own definition of small cable system operators. Under the
Commission's rules, a ``small cable company'' is one serving fewer than
400,000 subscribers nationwide. Based on our most recent information,
we estimate that there were 1,439 cable operators that qualified as
small cable companies at the end of 1995. Since then, some of those
companies may have grown to serve over 400,000 subscribers, and others
may have been involved in transactions that caused them to be combined
with other cable operators. Consequently, the Commission estimates that
there are fewer than 1,439 small entity cable system operators that may
be affected by the proposals.
    45. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1% of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenue in the aggregate exceeds
$250,000,000.'' The Commission has determined that there are 67,700,000
subscribers in the United States. Therefore, the Commission found 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 of its affiliates, do not exceed $250 million in
the aggregate. Based on available data, the Commission finds that the
number of cable operators serving 677,000 subscribers or less totals
approximately 1,450. Although it seems certain that some of these cable
system operators are affiliated with entities whose gross annual
revenues exceed $250,000,000, we are unable at this time to estimate
with greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.
Description of Projected Reporting, Recordkeeping and Other Compliance
Requirements
    46. Should the Commission decide that broadband Internet access
services are information services with a telecommunications component
and should the Commission decide to exercise its permissive
contribution authority over certain facilities-based providers of such
services, the associated rule changes potentially could modify the
reporting and recordkeeping requirements of certain providers of
interstate telecommunications regulated under the Communications Act.
The Commission could potentially impose contribution requirements on
certain facilities-based providers of interstate telecommunications
that are not currently required to contribute. Accordingly, such
entities would be required to comply with the relevant universal
service reporting requirements. Any such reporting requirements
potentially could require the use of professional skills, including
legal and accounting expertise. Without more data, the Commission
cannot accurately estimate the cost of compliance by small providers of
interstate telecommunications. In this NPRM we do not seek comment on
the actual reporting requirements of entities required to contribute to
universal service. Rather, we seek comment on whether specific entities
should be required to contribute. In the related Contribution
Methodology Further Notice, however, the Commission seeks comment on
the frequency with which carriers should submit reports to the
Universal Service Administrative Company (USAC), the types of burdens
carriers will face in periodically submitting reports to USAC, and
whether the costs of such reporting are outweighed by the potential
benefits of the possible reforms. Entities, especially small
businesses, are encouraged to quantify the costs and benefits of the
reporting requirement proposals in that proceeding.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
    47. 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 or
reporting requirements under the rule for 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 small entities.
    48. The overall objective of this proceeding is to establish an
appropriate classification and regulatory framework for wireline
broadband Internet access service. The Commission tentatively concludes
that wireline broadband Internet access services are information
services under the Act. If it classifies and regulates this service as
an information service, providers of this service, including those
providers that own transmission facilities, could be subject to minimal
and/or reduced regulatory requirements. The Commission believes that
this would have a positive economic impact on small entities to the
extent that it avoids placing restrictions on their operations. The
Commission also tentatively concludes that the transmission aspect of
wireline broadband Internet access service is ``telecommunications''
under the Act as opposed to ``telecommunications service.'' As part of
the regulatory framework we are examining, the Commission seeks comment
on what regulatory requirements, if any, should attach to this
telecommunications input. It asks whether the Commission should modify
or eliminate the requirements in the Computer Inquiry framework for
access to the telecommunications input. The Commission also explores
the implications for other regulatory requirements, including public
safety and welfare, if it were to modify the access obligations.
    49. The Commission notes that the Computer Inquiry requirements are
only applicable to the BOCs, which are not small entities, but that
ISPs, including small ISP entities, may obtain access to the BOCs'
network to provide broadband Internet access service pursuant to these
requirements. Indeed, the Commission notes in the NPRM that ISPs
currently purchase transmission services under tariff to provide their
own information services. The NPRM asks parties to comment on
alternative ways in which ISPs could acquire transmission necessary to
provide their information service offerings if the Commission modifies
or eliminates the current access requirements. Specifically, the
Commission asks whether they can rely on negotiated contractual
arrangements and how such arrangements could be priced. For purposes of
this IRFA, we specifically seek comment from small entities on these
issues, in particular, on the extent to which the use of alternative
access arrangements could impact them economically. Similarly, the
Commission also specifically seeks comment from all affected small
entities regarding the incumbent LECs' obligations to provide access to
network elements under sections 251 and 252 of the Act if it determines
that the

[[Page 9242]]

provision of wireline broadband Internet access service over a
provider's own facilities is an information service and that the
transmission input is telecommunications and not a telecommunications
service, including the extent to which these determinations would
economically impact them. In addition, the Commission generally asks
small entities to comment on these and any other issues that could have
an economic impact on them.
    As discussed previously, this NPRM does not seek comment on the
reporting requirements or assessment methodology for contributors to
universal service. However, the Contribution Methodology Further Notice
seeks comment on how to streamline and reform both the manner in which
the Commission assesses carrier contributions to the universal service
fund and the manner in which carriers may recover those costs from
their customers. Wherever possible, the Contribution Methodology
Further Notice seeks comment on how to reduce the administrative burden
and cost of compliance for small telecommunications service providers.
If certain facilities-based providers of interstate telecommunications
are required to contribute to universal service and are not currently
contributing, such requirements will result in a financial impact. The
impact to small entities, however, is mitigated by the Commission's de
minimis contribution exemption.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
    50. None.

Ordering Clauses

    51. Accordingly, pursuant to the authority contained in sections 2,
4(i)-4(j), 201, and 303(r) of the Communications Act of 1934, as
amended, 47 U.S.C. 152, 154(i)-4(j), 201, 303(r), this NPRM IS Adopted.
    52. The Commission's Consumer Information Bureau, Reference
Information Center, shall send a copy of this NPRM, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 02-4679 Filed 2-27-02; 8:45 am]
BILLING CODE 6712-01-P