Jere W. Glover, Chief Counsel
S. Jenell Trigg, Assistant Chief
Counsel for Telecommunications
Office of Advocacy
U.S. Small Business Administration
409 Third Street, S.W. Suite 7800
Washington, D.C. 20416
(202) 205-6533
December 12, 1997
The Office of Advocacy of the United States Small Business Administration (SBA) submits the following Ex parte Petition for Reconsideration in the above-captioned proceeding. The Office of Advocacy was established by Congress in 1976 by Pub. L. No. 94-305 (codified as amended at 15 U.S.C. §§ 634 a-g, 637) to represent the views and interests of small business within the federal government. Its statutory duties include reviewing federal government policies and regulations that affect small business, developing proposals for changes in federal agencies' policies and communicating these proposals to the agencies. 15 U.S.C. § 634c(1)-(4). The Office of Advocacy also has a statutory duty to monitor and report on the FCC's compliance with the Regulatory Flexibility Act of 1980 ("RFA"), Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. § 601 et seq.), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 ("SBREFA"), Subtitle II of the Contract with America Advancement Act, Pub. L. No. 104-121, 110 Stat. 857 (1996). 5 U.S.C. § 612(a).
Advocacy appreciates this opportunity to share its concerns with the Commission on the record regarding In re Toll Free Service Access Codes et al., Second Report and Order and Further Notice of Proposed Rulemaking, CC Dkt. No. 95-155, FCC 97-123, (rel. Apr. 11, 1997). Our primary concern is 47 C.F.R. § 52.107.
Advocacy details the tremendous economic impact on small businesses that this Second Report and Order will impose. Most importantly, these comments also detail the material flaws in the Second Report and Order's Final Regulatory Flexibility Analysis ("FRFA") and provides a recommendation on how the Commission can meet the requirements of the RFA and the Administrative Procedure Act ("APA"). 5 U.S.C. §§ 553, 706. A FRFA, as a matter of law, is required when there is a "significant economic impact on a substantial number of small entities." See 5 U.S.C. § 605.
Advocacy asserts that the Commission has not complied with the statutory requirements of notice and comment rulemaking pursuant to the APA and RFA by: 1) failing to provide proper public notice of a proposed rule to small businesses in the Notice of Proposed Rulemaking ("NPRM") and the Initial Regulatory Flexibility Analysis ("IRFA"); 2) finalizing a rule that is not a logical outgrowth of the NPRM; 3)failing to identify properly, describe, and reasonably estimate the number of all small entities to which these rules will apply; 4) failing to detail all of the compliance requirements that small businesses subject to the rule must undertake; and 5) failing to analyze the impact of its rules on small business end users, and small business toll free providers, especially those engaged in the secondary market.
Toll free use also involves the provision of toll free service by entities that are not telecommunications companies such as local exchange or interexchange carriers, paging providers, cellular or PCS providers, or Resp Orgs (which are often subsidiaries of telephone companies). The variety of private entities that also provide access to a toll free number, (either by sale or lease) are loosely classified as the secondary market. The Commission has not explained in the substantive body of the Second Report and Order, nor the FRFA, how the ex post facto finding of illegality for the sale of a toll free number or the possession of multiple toll free numbers, including the provision of forfeitures and criminal sanctions for hoarding and brokering, serves to encourage rapid private sector deployment in all telecommunications markets as envisioned by Congress. Neither has the Commission fully explained nor justified how the elimination of businesses engaged in the secondary market deplete an allegedly scarce resource and/or does not serve the public interest. Advocacy asserts that this Second Report and Order is in direct contradiction to the congressional intent of the 1996 Act to foster competition in all telecommunications markets.
Advocacy is very concerned that the actual implementation of these rules established in the Second Report and Order will impose egregious harm on the economic welfare of millions of small businesses throughout the country that have value in and a reasonable, productive, and prudent use for their toll free numbers. Failure to recognize the marketplace realities arguably supports a characterization of the Commission's Order as arbitrary.
For these reasons, the Office of Advocacy respectfully requests
that the Commission grant the petitions for an emergency stay
of the rule, and rescind Sec. 52.107 in its entirety. It is evident
by record evidence and marketplace realities, that Section 52.107,
as drafted, cannot stand. At minimum, revision of the
rule is necessary to clarify exactly what behavior is prohibited,
what entities are subject to the rule, what entities are exempt,
and who should enforce the rule under proper due process. These
revisions should be made and released for proper notice and comment
in a Further Notice of Proposed Rulemaking that includes a properly
executed Initial Regulatory Flexibility Analysis.
In the Matter of
Toll Free Service Access Codes
CC Docket No. 95-155
The Office of Advocacy of the United States Small Business Administration (SBA) submits the following Ex parte Petition for Reconsideration in the above-captioned proceeding(!) The Office of Advocacy was established by Congress in 1976 by Pub. L. No. 94-305 (codified as amended at 15 U.S.C. §§ 634 a-g, 637) to represent the views and interests of small business within the federal government. Its statutory duties include reviewing federal government policies and regulations that affect small business, developing proposals for changes in federal agencies' policies and communicating these proposals to the agencies. 15 U.S.C. § 634c(1)-(4). The Office of Advocacy also has a statutory duty to monitor and report on the FCC's compliance with the Regulatory Flexibility Act of 1980 ("RFA"), Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. § 601 et seq.), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 ("SBREFA"), Subtitle II of the Contract with America Advancement Act, Pub. L. No. 104-121, 110 Stat. 857 (1996). 5 U.S.C. § 612(a).
The Office of Advocacy appreciates this opportunity to share its concerns with the Commission on the record regarding the Second Report and Order. Our primary concern are the provisions adopted in 47 C.F.R. 52.107. Advocacy must admit that, at first glance, these provisions appeared innocuous enough. We fully support the Commission's objective in ensuring that toll free numbers are distributed and used efficiently. However, when Advocacy learned of the numerous classes of small entities to which the rule will apply and how these small businesses are affected by the rule, we have concluded that this rule has a potential to destroy hundreds of small businesses in certain categories and will also impact the millions of small businesses that use toll free service.
In its development of these comments, Advocacy has reviewed a considerable part of the record since 1995 and has spoken to a number of industry representatives including advertising/marketing professionals, numerous small businesses providing toll free service or engaged in the secondary market, and small business end users. It is Advocacy's objective to highlight the tremendous economic impact on small businesses that this Second Report and Order will impose and to recommend significant alternatives for the Commission to consider in its re-evaluation of this rule. Most importantly, these comments also detail the material flaws in the Order's Final Regulatory Flexibility Analysis ("FRFA") and provides a recommendation on how the Commission can meet the requirements of the RFA and the Administrative Procedure Act ("APA"). 5 U.S.C. §§ 553, 706.
I. The Commission's Final Regulatory Flexibility Analysis
Does Not Comply With the Statutory Requirements of the Administrative
Procedure Act nor the Regulatory Flexibility Act.
The Office of Advocacy asserts that the Commission has not complied with the statutory requirements of notice and comment rulemaking pursuant to the APA and RFA by: 1) failing to provide proper public notice of a proposed rule to small businesses in the Notice of Proposed Rulemaking ("NPRM") and the Initial Regulatory Flexibility Analysis ("IRFA"); 2) finalizing a rule that is not a logical outgrowth of the NPRM; 3) failing to identify properly, describe, and reasonably estimate the number of all small entities to which these rules will apply; 4) failing to detail all of the compliance requirements that small businesses subject to the rule must undertake; and 5) failing to analyze the impact of its rules on small business end users, and small business toll free providers, especially those engaged in the secondary market.
The Regulatory Flexibility Act of 1980 was designed to place the burden on the government to review all regulations to ensure that, while accomplishing their intended purposes, they do not unduly inhibit the ability of small entities to compete, innovate, or to comply with the regulation.(2). Major objectives of the RFA are: 1) to increase agency awareness and understanding of the impact of their regulations on small business; 2) to require that agencies communicate and explain their findings to the public; and 3) to encourage agencies to use flexibility and to provide regulatory relief to small entities where feasible and appropriate to its public policy objectives.(3)
On March 29, 1996, the SBREFA was signed into law and, inter alia, amends the RFA to allow judicial review of an agency's compliance with the RFA. 5 U.S.C. § 611.(4)
The RFA, as amended, does not seek preferential treatment for small businesses, nor does it require agencies to adopt regulations that impose the least burden on small entities or mandate exemptions for small entities. Rather, it establishes an analytical process for determining how public issues can best be resolved without erecting barriers to competition. The law seeks a level playing field for small business, not an unfair advantage. To this end, the RFA requires the FCC to analyze the economic impact of proposed regulations on different-sized entities, estimate each rule's effectiveness in
addressing the agency's purpose for the rule, and consider alternatives that will achieve the rule's objectives while minimizing the burden on small entities. 5 U.S.C. § 604. This
analysis, as a matter of law, is required when there is a "significant economic impact on a substantial number of small entities." See 5 U.S.C. § 605.
Pursuant to the APA, the FCC is also required to issue rational rules.(5) To determine whether the results of informal rulemaking meet that standard, the rulemaking record must support the factual conclusions underlying the rule, the policy determinations undergirding the rule must be rational, and the agency must adequately explain its conclusions.(6) Therefore, the failure to examine less burdensome alternatives on the "whole record" that impact small businesses and to follow statutory procedural requirements of notice and comment rulemaking or the RFA violates the APA.(7) Even prior to the SBREFA amendments, courts have held that failure to undertake a proper regulatory flexibility analysis as part of the rulemaking could result in arbitrary and capricious rulemaking.(8)
A. The Initial Regulatory Flexibility Analysis was Inadequate
and Did Not Provide An Adequate Foundation for the FRFA, Therefore
the Final Rule is Arbitrary and Capricious.
Congress recognized that "small businesses bear a disproportionate share of regulatory costs and burdens." SBREFA, § 202(2), codified at 5 U.S.C. § 601 Note.
Therefore, the first stage of a sufficient regulatory flexibility analysis of a final rule is the IRFA in which the FCC shall, inter alia, provide
(b)(3) a description of and, where feasible, an estimate of the number of small entities to which the rule shall apply; (4) a description of the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for the preparation of the report or record; . . . [and]
(c ) a description of any significant alternatives to the proposed
rule which accomplish the stated objectives of applicable statutes
and which minimize any significant economic impact of the proposed
rule on small entities.
5 U.S.C. § 603. It is also incumbent on the agency to identify "a quantifiable or numerical description of the effects of a proposed rule or alternatives to the proposed rule, or more general descriptive statements if quantification is not practicable or reliable."
5 U.S.C. §§ 603, 607. Proper implementation of this section is critical at the NPRM stage, so that such impact, either detrimental or beneficial, will have the opportunity for public notice and comment.(9) Done properly, the IRFA provides the foundation for not only for an adequate FRFA, but for an informed decision-making process for the Commission given the benefit of comments from all interested parties.
The IRFA in this proceeding did not fulfill any of the aforementioned statutory requirements.(10) In fact, the IRFA admitted that the proposals in the NPRM "may have a significant economic impact on a substantial number of small entities"(11) but did not analyze this impact nor offer significant alternatives that would help to minimize the impact. Advocacy is aware that the NPRM for this proceeding was adopted and released prior to the amendments to the RFA in 1996. However, it is important to note that the requirements of the IRFA are not new under the SBREFA amendments, but have been staples of the RFA since 1980. Pub. L. No. 96-354, § 2(b), 94 Stat. 1164 (1980). Thus, the IRFA was also in violation of the RFA.
1. The IRFA Was Inadequate Because the NPRM Did Not
Propose an Actual Rule and Therefore, Did Not Provide Public Notice
Under the APA.
The material deficiencies of the IRFA are attributable to a material deficiency in the NPRM. The purpose of the NPRM in this proceeding was to give general notice to affected persons of "either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 U.S.C.§ 553(b)(3) (emphasis added). However, the NPRM, from the onset, did not contain proper notice of the Commission's final rule (Section 52.107) and therefore, violated the APA and RFA.(12) Both the NPRM and the IRFA are devoid of any mention of the specific topics and issues addressed in Section 52.107 such as a rebuttable presumption of illegal behavior for the possession of multiple toll free numbers, a blanket prohibition of hoarding and brokering and the imposition of civil and criminal penalties.
The Commission does make a general inquiry about "what actions the Commission can take to discourage Resp Orgs or 800 Subscribers from warehousing or hoarding toll free numbers and what remedy would be appropriate for such violations."(13) However, this general request for comment is more of a Notice of Inquiry, not a NPRM. This NPRM contains no actual terms or draft of a proposed rule. Nor does it provide any indication to interested parties that the Commission was contemplating such drastic measures on the entire toll free industry, including a new definition of illegal behavior and application of the rule to classes of entities beyond those addressed in the NPRM. The general request for comments addressed Resp Orgs and subscribers, not businesses engaged in telemarketing or the secondary market of providing toll free service. Small businesses engaged in toll free service as telemarketers, catalog sales, or those engaged in the sale of numbers in the secondary market did not have proper notice that this proceeding would have such a direct impact on their businesses. Small business end users, although identified in the NPRM, did not have any indication that they would be presumed to be committing an illegal act if they had more than one toll free number, and for this behavior, their service could be terminated. Also, small business end users or those in the secondary market were not aware that they could be subject to civil and criminal penalties.
Section 52.107 is not an acceptable "logical outgrowth" of the NPRM because the final rule was the result of the public's response to a general inquiry, and not to an actual proposed rule.(14) Even if the record evidence supports the Commission's extension of the final rule beyond Resp Orgs and end users it identified in the NPRM to the entire toll free industry, the Commission was still obligated under the APA to have formally submitted for public notice and comment, prior to adoption of the final rule, the agency's recommendation, discussion of the impact of the proposed rule on all small entities, and a range of alternatives being considered.(15)
Even if the NPRM is deemed to be an adequate proposed rule under the APA, the final rule is still not a logical outgrowth of the NPRM. The Commission does not have "carte blanche" to establish a rule contrary to the one proposed merely because it receives proposals to alter the rule during the comment period.(16) Advocacy does not submit that the Commission may not promulgate a final rule that may differ from the one proposed given the information it receives from commenters. The final rule, however, to qualify as a logical outgrowth, must have been reasonably anticipated from the rule proposed.(17) Here, Section 52.107's provisions were not anticipated by entire classes of small entities.
The prohibition on hoarding and brokering is a change in the Commission's policy and therefore, the general request for remedies in the NPRM did not put all effected parties on notice. Advocacy is not aware of any Commission rule that explicitly and expressly prohibits hoarding, brokering, or the possession of multiple toll free numbers, with or without civil forfeitures and criminal sanctions. The Commission may not have condoned hoarding or brokering, but it did not outlaw it either, until now. Therefore, the rules set forth in the Second Report and Order are new rules which reflect a change in FCC policy and thus, were subject to proper public notice and a reasoned analysis.(18)
Advocacy is also aware that this proceeding has been ongoing since 1995. It is incumbent upon the Commission to provide outreach during the rulemaking process to small businesses that will be affected by the rule. 5 U.S.C. § 609.(19) In this instance, given the radical change in FCC policy and its significant impact on small businesses, publication of the NPRM in the Federal Register in 1995(20)was not sufficient outreach to bring a final rule adopted in 1997 into compliance with the RFA. A more concerted effort by the Commission should have been made to gauge the impact on small business end users and the secondary market.(21)
Given the FCC's lack of full disclosure of the impact on small business end users and secondary market in the NPRM, the IRFA, and an absence of adequate outreach under 5 U.S.C. § 609, it is not surprising that many small businesses, even those in the industry, were unaware of the actual economic impact of the final rule until it was released this year.(22)
In its implementation of Section 257, Market Entry Barriers, of the Telecommunications Act of 1996, the Commission acknowledged in its statutory mandated Report that a "significant procedural barrier [for small businesses] is the manner in which Commission rules are proposed and adopted."(23) The instant proceeding is an excellent example of how Commission rulemaking procedures serve as a market entry barrier to small businesses.
B. The FRFA Violates the RFA Because It Did Not Identify All
the Small Businesses Engaged in Providing Toll free Service To
Which The Rule Will Apply.
In the FRFA, the Commission is obligated by the RFA and the APA to discuss the obvious and asserted impact on all affected small entities raised by record evidence, whether or not these issues were raised as separate IRFA comments. The Commission is required to "includ[e] a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected." 5 U.S.C. § 604(a)(5) (emphasis added). The RFA does not state in this section that only comments and alternatives raised in response to the IRFA must be considered.(24) Such comments are also part of the whole record, and the Commission is obligated to review and address all significant issues.(25)
The first step in this analysis, identical to the IRFA, is to identify all of the small entities to which the rule will apply. 5 U.S.C. § 604.(26) In the Second Report and Order, there are several classes of small entities that are affected. In the section entitled Description and Estimate of the Number of Small Entities to Which the Rules Will Apply, paras 116 - 137, the Commission has done an outstanding job of identifying and estimating the number of the traditional industry entities, i.e., interexchange carriers, telephone companies, Resp Orgs, PCS, cellular, etc. However, the Commission fails to identify, describe, and estimate the entire class of small businesses that provide toll free service, including those on the secondary market. The Commission does include a generic listing of Toll Free Subscribers,(27) but businesses such as telemarketing companies (SIC Code 7389), public relations firms (SIC Code 8743); marketing consultants (SIC Code 8742), advertising agencies (SIC Code 7311), commercial catalog publishers (SIC Code 2741 and retail/mail-order firms (SIC Code 5961), direct mail advertising services (SIC Code 7331), computer customer services (See generally SIC Industry Group 731 Businesses Services); and bundled and shared-use providers (see telemarketing), are very different from a typical "subscriber."(28) A description and estimate of the number of these entities should have been included in the IRFA and the FRFA. The economic impact of these rules on the secondary market is also different and more substantial than the impact on a typical subscriber. See infra Section II.
It is incumbent upon the Commission to have full knowledge of the entities involved in the industries it regulates, even in the absence of record evidence, given the severe detrimental impact on small businesses in the secondary market. The Commission should have included, based on its expertise and on its own initiative, the various classes of providers of toll free numbers in its FRFA, particularly since the secondary market has flourished for many years.(29)
Although no comments were filed directly on the IRFA, the general comments included some indication of the number of small entities and the economic impact on the secondary market and subscribers. For example, comments filed by the Direct Marketing Association and NIMA International, Inc., in 1995, addressed their concerns on behalf of 3,500 and 470 member companies, respectively.
In these comments, Advocacy provides information that identifies many of the various types of small businesses affected by this proceeding. We do not purport to be experts on the toll free industry. Our comments reflect a compilation of the record, discussions with many small businesses, and some institutional knowledge. However, it remains the Commission's duty to glean this information from the comments and other available resources.(30) We encourage the Commission to undertake outreach to different small business entities in its re-evaluation of this entire proceeding (including the issues specifically related to vanity numbers) to better ascertain the workings of the toll free industry.
C. The FRFA Violates the RFA Because It Did Not Include All
the Compliance Requirements That Small Entities Must Undertake.
The section titled Description of Projected Reporting, Recordkeeping and Other Compliance Requirements did not include the compliance requirement that toll free service carriers must terminate the service of a subscriber if the subscriber is suspected of hoarding or brokering numbers.(31) The Commission has acknowledged that telephone companies, cellular, paging, and PCS carriers may be small. The Commission's mandate that carriers must terminate a subscriber's service is an "other compliance requirement." The changes in lag time and warehousing rules for Resp Orgs should also have been included in this section.
D. The FRFA Violates the RFA Because It Did Not Analyze the
Significant Economic Impact on All Small Business Entities To
Which the Rule Will Apply.
Advocacy is primarily concerned that the Commission did not fulfill the statutory mandates under the RFA, as amended, by properly analyzing the "significant economic impact" of its rules on small businesses engaged in the provision of toll free numbers on the secondary market and small business end users. A proper analysis would have uncovered the fact that a wholesale class of small business activity would be declared illegal by Section 52.107, i.e., the possession of more than one toll free number, the sale of toll free numbers as part of telemarketing or shared-use services, the brokering of vanity numbers on behalf of a client, or the sale of one toll free number by one subscriber to another, even if the number had not been initially acquired with the specific intent to sell it and the buyer initiated the sales transaction.
The IRFA acknowledged that "toll free numbers are essential to many business both in terms of marketing and advertising products. Toll free numbers may also have intrinsic value to many businesses."(32) Yet in the Second Report and Order, the Commission neglects to justify its policy and analyze the impact of the rule on subscribers whose toll free numbers are "essential" and have "intrinsic value." In this comment, Advocacy discusses in detail the significant economic impact imposed on the different classes of small businesses.
The Commission has only one viable option at this stage of the proceeding - to rescind the rule in its entirety, and reissue a revised proposed rule including a new Initial Regulatory Flexibility Analysis. It is evident by record evidence and marketplace realities, that Section 52.107, as drafted, cannot stand. At minimum, revision of the rule is necessary to clarify exactly what behavior is prohibited, what entities are subject to the rule, what entities are exempt, and who should enforce the rule under proper due process. These revisions should be made and released for proper notice and comment in a Further Notice of Proposed Rulemaking that includes a properly executed Initial Regulatory Flexibility Analysis.
Simply revising the final rule and the FRFA at this stage would render the RFA insignificant given that the purpose of the RFA is for the Commission to take into consideration the impact on small business during the initial rulemaking process. 5 U.S.C. § 601 et seq. A revised FRFA, given the lack of public notice on the IRFA and the draft of the final rule, compounded by the significant economic impact on entire classes of small entities, would be an impermissible post hoc rationalization that would render the revised FRFA itself arbitrary and capricious.(33)
II. The Commission's Rebuttable Presumption That The Possession
of More Than One Toll Free Number Indicates Illegal Activity Pre-Determines
A Regulatory Outcome that is Extremely Burdensome on Small Businesses.
Advocacy supports the Commission's overall objective in ensuring that toll free numbers are distributed and used efficiently. We too agree that there should be a "sound policy" in this area. However, Advocacy is concerned about the Commission's means to meet this objective. The Second Report and Order established a rebuttable presumption that any subscriber with "more than one toll free number" is presumed to be illegally brokering or hoarding numbers. 47 C.F.R. § 52.107. The Commission has found that "'hoarding' and 'brokering' of toll free numbers are contrary to the public interest. . . . " Second Report and Order, para. 2
First, Advocacy questions how the Commission can purport to serve the public interest by its adoption of Section 52.107 when it neglected to provide the public with an opportunity to comment on the impact of the rule as drafted? See supra Section I. A.
Second, the Commission has not acknowledged in the body of the Second Report and Order, nor in the FRFA, that there are many legitimate reasons for the possession of multiple toll free numbers and nor has it justified, on a legal, factual, and policy basis how prohibition of these activities serve the public interest or meet the Commission's objectives. Furthermore, there is a necessary, well established, and burgeoning secondary market for the provision of toll free numbers that is directly affected by this dramatic change in toll free number administration. The issue Advocacy wishes to raise is whether the destruction of hundreds of small businesses is in the public interest and whether there are alternatives to this harsh result that would achieve the Commission's objectives.
The rules in this Second Report and Order effectively codified, with minor adjustments, the voluntary Industry Guidelines for Toll Free Administration ("Industry Guidelines") set forth by the Ad Hoc 800 Database Committee and sponsored by the Alliance for Telecommunications Industry Solutions, Inc. ("ATIS"). It is important to note that the "industry," for which the guidelines were designed, is dominated by large telecommunications companies.(34) Therefore, it is most likely that such guidelines, which were created by the consensus of big business, precluded the viewpoints of small business end users and small business providers, including those in the secondary market and new entrants.(35) In fact, the carriers granted to themselves enforcement authority of the guidelines, often in direct conflict with the interest of end users.
The Industry Guidelines state that "Resp Orgs and Toll Free Service Providers are prohibited from selling, brokering, bartering, or releasing for a fee (or any other consideration) any Toll Free Number."(36) However, the Industry Guidelines do not address small businesses that are not Resp Orgs, Toll Free Service Providers, or not part of the traditional telecommunications industry. Moreover, the guidelines state that "the Toll Free Service End-User Subscriber has the ultimate right to control its Toll Free Service, and its reserved, active, or assigned Toll Free Service numbers."(37) The Note to this section further states that "[t]he statements above should not be interpreted as inhibiting the sale, resale, brokering, or bartering of Toll Free Service."(38) Furthermore, the Industry Guidelines are voluntary and loosely enforced by the carriers themselves. The Industry Guidelines do not impede, nor prohibit a subscriber from selling or receiving value for his number.(39)
A. Toll free Numbers Have Significant Value to Small Businesses.
It has been asserted that toll free numbers are public resources and that the subscriber does not have a proprietary interest in the number, neither does a carrier.(40) This lack of "ownership" interest ignores the fact that a number in its numeric or mnemonic form does have significant value to a subscriber, particularly a small business that has limited resources. There is value in the costs incurred by acquiring and using the number (i.e., subscription fees) and in the costs incurred by advertising and marketing of the number (i.e., stationary, business cards, merchandising, television, and print ads). Although the numeric equivalent is not "owned" by the subscriber, a vanity number may have considerable value because of the tremendous investment made by the subscriber in development of a business/marketing plan, and actual marketing of the number to the public. The fruits of this investment belong to the subscriber and the subscriber alone. In fact, such vanity numbers have been subject to trademark protection as a means to prevent competitors from capitalizing on the trademark holder's investment and goodwill.(41)
Advocacy is very concerned that the actual implementation of these rules established in the Second Report and Order will impose egregious harm on the economic welfare of small businesses throughout the country that have value in and reasonable, productive, and prudent use for their toll free numbers. Failure to recognize the marketplace realities arguably supports a characterization of the Commission's Order as arbitrary.
Advocacy is very concerned that the actual implementation of these
rules established in the Second Report and Order will impose
egregious harm on the economic welfare of small businesses throughout
the country that have value in and reasonable, productive, and
prudent use for their toll free numbers. Failure to recognize
the marketplace realities arguably supports a characterization
of the Commission's Order as arbitrary.
B. The Commission's Blanket Prohibition of the Possession
of Multiple Toll free Numbers Ignores Pro-Competitive Business
Realities and the Existence of a Necessary, Well-Established,
and Burgeoning Secondary Market for Small Businesses.
The primary objection to the Second Report and Order by small businesses is its blanket prohibition, less one ambiguous exemption,(42) of the possession of more than one toll free number. The record is replete with examples of previously legal, reasonable, and productive use of multiple toll free numbers, all of which serve the public interest.(43)
1. The Origin and the Importance of the Secondary Market.
Toll free use also involves the provision of toll free service by entities that are not telecommunications companies, telephone companies, paging, cellular, and PCS providers, or Resp Orgs (which are often subsidiaries of telephone companies). The variety of private entities that also provide access to a toll free number, (either by sale or lease) are loosely classified as the secondary market. By enactment of the Telecommunications Act of 1996 ("1996 Act"), Congress envisioned private sector deployment, which includes small businesses, as a means to "open[ ] all telecommunications markets to competition."(44) This certainly includes toll free service.
The Commission has not explained in the substantive body of the Second Report and Order, nor the FRFA, how the ex post facto finding of illegality for the sale of a toll free number or the possession of multiple toll free numbers, including the provision of forfeitures and criminal sanctions for hoarding and brokering, serves to "accelerate[s] rapid private sector deployment of advanced telecommunications and information technologies and services to all Americans . . . ."(45) Neither has the Commission fully explained nor justified how the elimination of businesses engaged in the secondary market deplete an allegedly scarce resource and/or do not serve the public interest.(46) Advocacy asserts that this Second Report and Order is in direct contradiction to the congressional intent of the 1996 Act to foster competition in all telecommunications markets.
There is little dispute amongst the advertising and marketing trade that toll free numbers, especially vanity numbers, are a valuable asset in the marketing and business operations of a company. "800 [vanity] numbers are the crown jewel of marketing."(47) Large companies have used vanity 800 numbers for many years.(48) Today, large and small companies use 800 vanity numbers as a foundation of their marketing plans or as virtual storefronts for their business.(49)
Developing a marketing and advertising plan, then finding the right vanity number that complements that plan is no small task.(50) Hence, the emergence of an innovative secondary market of small businesses that includes consulting, marketing, advertising, public relations, consumer research, and toll free number search services to clients that request a specific vanity number. The FCC has acknowledged that the 800 pool is almost exhausted and 888 numbers are soon to follow. A Resp Org, although with exclusive access to unsubscribed toll free numbers in the Service Management System Database (SMS Database), does not have access to the millions of numbers that have already been allocated. Obviously, the preferred vanity number may not be available through a Resp Org.
Given the large pool of numbers that were already allocated to subscribers and the enormous amount of time and transaction costs incurred by a business to undertake a search for the requested number on its own, these small businesses not only provided a legal service but a service that was necessary given the needs of the marketplace. The marketing firm, advertising agency, public relations firm, telemarketing service bureau (see supra Section I. B. for a more complete list) would search for the desired number in Resp Org pools and amongst current subscribers. Once the number was located, the secondary market provider would negotiate with the private entity, either a business or individual, for the number.
Today, due to the growth of toll free numbers, the desired vanity number is often being used by a person that simply needs toll free access and has no need for a premium number. For example, a farmer in Iowa could have the numerical equivalent of the next 1-800-FLOWERS. The farmer uses the number for his college children to call home or for his farming operations. He only needs toll free access and does not need a specific number. The new business, or its agent (i.e., secondary market provider) completes a private sales (or lease) transaction with the farmer to secure the use of the toll free number - the ideal number which was based on extensive marketing and business plans. These negotiations provide a means for the farmer to be compensated for his own value of the number and covers the costs he incurs in securing a new number. This is a reasonable transaction between private parties that enables the toll free number to go to the person that values it the most.
Necessity is indeed the mother of invention and the growing desire for vanity numbers provided an ideal opportunity for small businesses to serve this niche market since the carriers and Resp Orgs could not. The small businesses that are involved in these transactions, as either buyer or seller, are not hoarding nor speculating, but contributing handsomely to the nation's economy. For example, the television infomercial industry generates over four billion dollars in sales annually.(51) Catalog sales this year are expected to increase between 12-15% over last year, generated by 220 million phone calls to toll free numbers. Overall, small businesses are collectively the engine that is driving the nation's robust economy. Small business provides virtually all of the net new jobs, represents 99.7% of all employers, employs 53% of the private work force, and generates 47% of sales receipts, just to name a few benefits.(52)
In the increasingly competitive advertising field, and 500 channel
universe for advertising, the desire for premium toll free numbers
has not lessened, it has only increased. Vanity numbers are expected
to be in even greater demand for years to come as an indispensable
marketing tool. Unfortunately, the plain language of Section
52.107 makes the sale of a number by a private entity illegal,
even if the seller did not initiate the sale or acquired the number
without the intent to sell it. In light of the three-fold increase
in the amount of numbers, this prohibition will not only destroy
the small businesses that have made their livelihood on the secondary
market - but will also stifle the advertising and marketing industries
as well because these entities cannot fully serve their clients.
The record evidence confirms that Section 52.107 is simply not
practical given the realities of the business world.(53)
C. The Commission Should Define Telemarketing Service Bureaus
and Explicitly Exempt All Entities that Provide Collateral Services
From the Rule Which Prohibits Brokering and Hoarding.
In the Second Report and Order, the Commission stated "to the extent that telemarketing service bureaus [TSB] are performing legitimate services, and not merely buying and selling numbers" such activity would be exempt from the prohibition from hoarding and brokering.(54) However, the FCC neglected to define TSBs and, moreover, did not explicitly exempt TSBs in the plain language of the final rule. See 47 C.F.R.
§ 52.107.
There are many types of businesses, including small businesses, that provide collateral services other than the mere buying and selling of numbers.(55) These businesses include, but are not limited to the following: advertising agencies, marketing consultants, public relations firms, and shared-use providers.
The traditional TSB is a private entity (not a carrier or a Resp Org) that leases access to its stable of toll free numbers to third party clients and provides toll free numbers for placement in direct response commercials, operator service for consumer orders, and/or the monitoring/tracking of advertising activity. The toll free number is usually provided to the client by the TSB. The TSB remains the subscriber. Some TSBs provide commercial production services as well.(56)
However, it is often more cost effective for a business to possess its own toll free numbers and do its own tracking of sales or business activity in-house, particularly as part of an overall marketing plan that includes use of vanity numbers that brands the business to the public. This small business provides a form of telemarketing service, but does not use a traditional full-service TSB. These small businesses subscribe to multiple telephone numbers as a necessity. For example, one toll free number is used for advertising campaign on the west coast and another number is used for a campaign on the east coast. Separate numbers may reflect not only different geographic areas but different products, or different marketing plans which reflect varied consumer tastes and buying habits.
Another valuable service for toll free numbers is provided by the "shared-use" industry. There are two forms of shared use: 1) toll free calls that are routed directly to a call center/clearinghouse on behalf of several businesses (i.e. customer referral services such as 1-800-DENTIST), and 2) one toll free number that is used by several businesses, but exclusively in different geographical areas (i.e. 1-800-FIX-AUTO is used by three independently-owned auto repair shops located in Chicago, Detroit, and Baltimore.) In both forms, the subscriber of record of the toll free number may not necessarily be located in the same city of the businesses using the number. It is possible that the shared-use provider will also sell the number to the businesses using the toll free number, but maintain service on the calling activity.
Shared-use is an innovative and efficient use of toll free numbers. Advocacy estimates that there are several hundred shared-use providers. (Additional statistics are not available at this time.) Neither form serves to exhaust the supply of toll free numbers, in fact, quite the contrary. However, under Section 52.107, businesses that offer shared-use, if such use involves multiple numbers, or the sale of a number, these providers are deemed to be violating the Commission's rules and are subject to termination of their service. If the Commission persists in branding the possession of multiple numbers illegal, what is to become of doctor or dentist referral services that are provided by a call center/clearinghouse with multiple numbers?
1. The Proper Test of Non-Compliance With FCC Rules Should
Be The Measurement of The Behavior of A Toll Free Subscriber and
Not Mere Possession of Multiple Numbers.
Advocacy respectfully requests that the Commission re-evaluate the policy regarding multiple ownership of toll free numbers and adopt rules that use behavior as a trigger for identifying illegal hoarding of toll free numbers. We find it very compelling that traditional toll free providers who plan to fully enforce the FCC's rules have detailed what behavior to look for if a customer is engaged in hoarding and brokering toll free numbers.(57) Such behavior may include a "[c]ustomer request for a large amount of numbers compared to their business needs (i.e. they are not a paging, telemarketing or similar company) . . . [o]r customer frequently adds and/or changes toll free numbers."(58)
Critics may argue that reporting suspected behavior would be administratively burdensome and that the possession of multiple numbers is easier to ascertain, monitor, and report. Conversely, it is this ease of prosecution that the Commission should protect against because if the termination of an account or number, or the imposition of forfeitures, or criminal penalties is the ultimate punishment, Advocacy believes that the threshold of a finding of guilt should be substantially higher.
In summary, there are many legitimate reasons why a business would have multiple toll free numbers. Many of these decisions are of a proprietary nature to the business and, Advocacy believes may be outside of the scope and authority of the Commission under the Communications Act of 1934, as amended. Therefore, outrageous behavior should be the triggering mechanism, not the mere possession of multiple numbers. Even a measurement of behavior will need adequate due process to provide the suspected business an opportunity to explain its behavior.
D. The Rebuttable Presumption and Prohibition of the Possession
of Multiple Toll Free Numbers Creates a Dangerous Potential for
Unjust or Unreasonable Discrimination and Selective Enforcement
Against Small Businesses End-Users.
The Commission's prohibition of the possession of multiple toll free numbers is not only unrealistic in the context of normal business practices but discriminatory to businesses as a whole. It is not as likely that individuals would have multiple numbers. Therefore, business are more likely to be subject to penalties. Small businesses are aggrieved even more. The Commission's rebuttable presumption and pre-determined regulatory outcome gives an unrestricted license to a toll free provider to terminate arbitrarily a small business subscriber's service without proper cause or due process. The record evidence fully supports this dangerous consequence of the Second Report and Order(59)
It is important to recognize that the business of telecommunications is evolving rapidly and dramatically. The passage of the 1996 Act has created the opportunity for telecommunications providers to offer the convenience of one-stop shopping and bundling of multiple customer products and services.(60) Such bundling may include local and long distance service, paging, cellular, and toll free service (i.e., MCI One).
Toll free carriers and their affiliated Resp Orgs naturally operate in their best interests and not necessarily in the interest of the end user. Advocacy applauds those carriers that find that enforcement of the rebuttable presumption and mandatory termination of toll free service for suspected hoarders is "unnecessary and unreasonably burdensome."(61) However, we are not confident that under the right circumstances (i.e., a request for a specific vanity number from a high volume business user that is already assigned to a smaller subscriber), that even MCI would not flex its corporate muscles and attempt to recapture a desirable number from a small business customer that happened to have more than one toll free number, albeit for "legitimate" purposes.
Although 94.9% of all reporting firms in the United States are small with less than $5.0 million in annual gross revenue,(62) large business customers historically have been the most desirable type of customer given a high volume of calls and the need for multiple telecommunications services. Toll free carriers are primarily interested in how much money a particular number will generate in subscription fees(63) It is a simple reality that small business and residential customers are not as desirable as large business customers. This is a truism that has troubled and challenged the Commission, Congress, and the industry throughout history (i.e., Universal Service).
Advocacy also questions whether large business subscribers will
receive the same degree of scrutiny of the possession of multiple
numbers in its toll free account from its toll free provider that
small businesses will likely receive. It is doubtful that carriers
will be as quick to terminate the number or the account of its
large subscriber, if at all. Therefore, there is the great potential
for discriminatory and selective enforcement of the Commission's
rules against small businesses.
E. The Significant Costs Imposed on A Small Business In Order
to Rebut The Presumption That It Has Violated FCC Rules is Extremely
Burdensome.
Advocacy recognizes that the presumption of a violation of FCC rules is only a prima facie finding, and therefore, is rebuttable. Nonetheless, "rebuttable" at what cost to a small business? Advocacy shares the concerns of several commenters that the realistic threat of having a carrier terminate service to a toll free number(s) or worse yet, an entire account, has substantial consequences for both the carrier and the subscriber.(64) The loss of a toll free telephone number by regulatory mandate would be major blow to a small business that uses its number in the course of business. Such termination would cause a loss of customers, a loss of investment, and a potential loss of goodwill and reputation. Because a finding of hoarding or brokering numbers carries additional penalties such as civil forfeitures and ultimately, criminal sanctions,(65) it is absolutely necessary for a small business to defend itself against any complaint which could subject it to an investigation by the FCC or the United States Department of Justice.
Congress recognized that "the failure to recognize differences in the scale and resources of regulated entities has in numerous instances adversely affected competition in the marketplace, discouraged innovation and restricted improvements in productivity." 5 U.S.C. § 601(4) (emphasis added). Therefore, it is critical to recognize the differences in resources and ability for a small business to defend itself against even a preliminary complaint. An adequate defense requires a small business to expend a great deal of time, time away from its business, to address the issue. Retention of legal counsel may also be necessary. The Commission's unreasonable placement of the burden of proof on the subscriber and its subsequent failure to recognize the cost of defense against the rebuttable presumption has hampered, if not eliminated, the ability of small businesses to function effectively in the course of their business.
III. The Commission's Definition of Hoarding and Brokering
is Impermissibly Vague and Overreaching and Therefore, Violates
Due Process.
The Office of Advocacy concurs with other commenters that the Commission's definition of "hoarding and brokering" is vague and insufficient to provide advance notification of what behavior will be subject to sanctions.(66) "The constitutional proscription against vague law is 'a basic principle of due process.'"(67) The standards set forth in Section 52.107 are not clear enough "to curb the danger of arbitrary or discriminatory enforcement."(68)
For example, the Commission defines hoarding as "the acquisition by a toll free subscriber from a Responsible Organization of more toll free numbers than the toll free subscriber intends to use for the provision of toll free service." 47 C.F.R. § 52.107 (emphasis added). Advocacy is concerned about the "intends to use" part of the definition. The phrase is impermissibly vague and subjects a small business that uses its number sporadically or a new business that does not have many toll free calls to be presumed to be in non-compliance of Section 52.107 by its carrier or the FCC.
A business "intends to use" its toll free number for the provision of toll free service in many ways. A number is used not only in the delivery of voice communications from one party to another, but also in the advertising of a business' services including yellow page advertising, business cards, and radio/television commercials. Advertising a toll free number clearly denotes the intent to use the number for the provision of toll free service. Additionally, the amount of call activity should not be the measure of whether a number is "used" or not.(69) Such an arbitrary measurement is discriminatory to new businesses that do not receive a great deal of telephone calls or businesses that are not very successful in attracting customers. If a business advertises its telephone number, Advocacy believes that should be sufficient indication of its intent to use its toll free number.
Proper "use" of a toll free number also should not be measured whether or not there is continuous calling activity on the account. A business may use its toll free number only during certain times of the year, on a seasonal basis such as for Christmas or Easter Holidays. Advertising campaigns are often flighted (i.e., scheduled for intermittent periods throughout the year). Toll free numbers may also be used for an occasional sweepstakes or contest. A sad reality of our times is the need for a toll free number that the public can use for crisis intervention, i.e., food tampering, or child kidnapping cases. Both of the aforementioned uses may be sporadic or limited, but very important to a business and the public it serves. Under Section 52.107, if Tylenol had one toll free number for an advertising promotion and it needed to acquire a second number to be used for a public safety warning (i.e., cyanide tampering outbreak), Tylenol would be presumed to be operating outside the law and would have its service terminated. It is simple to propose a public safety exception from terminating a subscriber's service, but how would the toll free carrier know of the use of the two numbers? Further investigation by the carrier of whether a subscriber was using the number "legitimately" or not raises additional constitutional issues of equal protection, right to privacy, and freedom of speech.
The NPRM defined hoarding as a "toll free subscriber acquiring more numbers from a Resp Org, than it intends to use immediately."(70) The Second Report and Order did not adopt this exact definition, but neither did it negate it. Advocacy seeks clarification on whether use is measured by "immediate" terms and if so, then requests reconsideration.
The term "immediately" is not self-defining and therefore, is also vague and subject to different interpretations by reasonable persons. The common language definition of immediately is "directly; without delay."(71) Does this mean use of a toll free number is required within a day, week, or month after acquisition of the number from a Resp Org? Does immediate use require an actual telephone call to be placed on the account, or is the inclusion of the number on a business card or advertising campaign sufficient? Given the advance preparation it takes to conduct normal business activity that involves a toll free number, such as advertising, marketing campaigns, catalogs, or more basically, the start-up of a new businesses - are these business activities considered a "delay" in using the number, subjecting the subscriber to immediate termination? "Immediate use" is not a practical nor valid measurement of whether an end user is guilty of hoarding or brokering a toll free number.
The Commission's definition of hoarding also includes number brokering, "which is the selling of a toll free number by a private entity for a fee." 47 C.F.R. §52.107 (emphasis added). As discussed supra, there are many legitimate services that require a sale or lease private party transaction for a toll free number. Moreover, some toll free carriers now tie the assignment of a requested toll free number with extensive service contract requirements. How is this implicit payment for a toll free number any different in effect from the commission's prohibition on "selling for a fee" by a private entity? Is a carrier considered a "private entity?" Is the prohibition of brokering and hoarding by private entities discriminatory? Is the seller still subject to termination if a seller did not initiate the sale, nor had the intent to sell the number when first acquired? Is a buyer of a number also subject to the rule?
The record evidence illustrates that there are many valid reasons
for one person possessing multiple toll free numbers, none of
which promote the inefficient use of toll free numbers. Therefore,
the blanket prohibition of multiple toll free numbers has no rational
basis to the Commission's asserted objective of efficiency.
IV. The Enforcement of the Rebuttable Presumption and Mandatory
Service Termination Policies Must Be Undertaken by the Commission
And Not At the Discretion of A Carrier or Resp Org.
Advocacy joins other commenters in its concern that carriers/Resp Orgs must not have the unrestricted power to terminate the service or account of a subscriber without notice and a formal determination by the Commission that a subscriber is indeed guilty of illegal behavior.(72) The Commission has stated that a "subscriber's service provider must terminate toll free service," if a subscriber is presumed to be hoarding toll free numbers.(73) However, the Commission must establish due process measures before such termination by the carrier. This process must include a fair and administratively easy process for the accused end user to defend itself against the carrier and the FCC, and the requirement that a legal pronouncement of a violation of the Commission's rules prior to termination of the service is necessary. Advocacy also requests a clarification of whether "service" is defined as termination of the toll free number, or the entire toll free account.
There is too great a danger for large toll free carriers and Resp
Orgs to use their market power unduly against small business end
users to serve that carrier's or Resp Orgs' natural self-interests.(74)
Advocacy is aware of instances where small businesses have been
threatened with the termination of their account as a means to
get their toll free numbers, supposedly under color of FCC authority,
even before this rule was promulgated.(75) Unfortunately,
these abused small businesses will not go on the record for fear
of retaliation by their carrier. Nonetheless, the danger is very
real and the Commission is quite aware that undue use of market
power by a large telecommunications carrier is difficult to monitor,
and police. Therefore, we request that the Commission revise
its requirement that a service provider must terminate its subscriber's
toll free service to include protective measures that will ensure
adequate due process.
V. Conclusion
As the forgoing comments make clear, Section 52.107 promulgated in the Second Report and Order, will adversely affect several classes of small businesses in a variety of ways. In its practical application, this rule is unduly burdensome and discriminatory on small business end users and small businesses engaged in the secondary market.
Therefore, the Office of Advocacy respectfully requests 1) that the Commission grant the Petitions for Emergency Stay76) 2) rescind Section 52.107 in its entirety and issue a revised proposed rule in a Further Notice of Proposed Rulemaking, that will be less harsh in meeting the Commission's objectives of efficient toll free service. In its re-consideration of the rule, Advocacy respectfully recommends that the Commission
Respectfully submitted,
Jere W. Glover
Chief Counsel for Advocacy
Jenell Trigg
Assistant Chief Counsel for
Telecommunications
Office of Advocacy
U.S. Small Business Administration
409 Third Street, S.W. Suite 7800
Washington, D.C. 20416
202-205-6533
December 12, 1997
ENDNOTES
1. In re Toll Free Service Access Codes et al., Second Report and Order and Further Notice of Proposed Rulemaking, CC Dkt. No. 95-155, FCC 97-123, (rel. Apr. 11, 1997) ("Second Report and Order").
2. See 5 U.S.C. § 601(4)-(5).
3. U.S. Small Business Administration, Office of Advocacy, A Guide to the Regulatory Flexibility Act, May 1996.
4. The sections of the RFA that are subject to independent judicial review of final agency action are Sections 601, 604, 605(b), 608(b) and 610. 5 U.S.C. § 611. Sections 607 and 609(a) shall be reviewable in connection with the judicial review of section 604. Id.
5. Motor Vehicle Mfrs. Ass'n of the United States v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 43 (1983); see also Bowen v. American Hospital Association, 476 U.S. 610, 643-45 (1986).
6. McGregor Printing Corp. v. Kemp, 20 F.3d 1188, 1194 (D.C. Cir. 1994).
7. See Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 419 (1971).
8. Thompson v. Clark, 741 F.2d 401, 405 (D.C. Cir. 1984); see also Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 538 (D.C. Cir. 1983).
9. 126 Cong. Rec. 24,588 (Sept. 8, 1990) ("the term 'significant economic impact' is neutral with respect to whether such impact is beneficial or adverse").
10. In re Toll Free Service Access Codes, Notice of Proposed Rulemaking, 10 FCC Rcd. 13692, 13707 (1995).
11. Id.
12. See Horsehead Resource Development Co. v. Browner, 16 F.3d 1246, 1268 (D.C. Cir. 1994), cert denied, 115 S. Ct. 72 (1994).
13. NPRM, para. 16.
14. National Mining Assoc. v. Mine Safety and Health Admin., 116 F. 3d 520, 531 (D.C. Cir. 1997) ("No further notice and comment is required if a regulation is a 'logical outgrowth' of the proposed rule.") (emphasis added).
15. Horsehead Resource Dev., 16 F.3d at 1268 (comments addressed to one specific component part . . . do not necessarily bear on the validity of the [industry] as a whole").
16. Chocolate Mfrs. Ass'n of United States v. Block, 755 F. 2d 1098, 1104 (4th Cir. 1985).
17. National Mining, 116 F.3d at 531.
18. Motor Vehicle Mfrs. Ass'n of the United States v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 42 (1983); AT&T v. FCC, 974 F.2d 1351, 1355 (D.C. Cir. 1992).
19. The Commission's outreach efforts are also judicially reviewable. 5 U.S.C. § 611.
20. 60 Fed. Reg. 53157 (1995).
21. Tellnet Communications, Inc., July 8, 1997, at 3 ("Tellnet Comments").
22. See e.g., ICB Petition for Reconsideration and Clarification, May 27, 1997 ("ICB Petition"); Mark D. Olson & Assoc., Inc. Petition for Reconsideration, May 5, 1997 ("Olson Petition"); National Assoc. of Telecommunications End-users Reply and Further Comments, July 10, 1997 ("NATE Further Comments"); NATE Petition for Reconsideration and Emergency Petition Requesting Stay of Enforcement, May 22, 1997 ("NATE Emergency Petition"); Tellnet Comments; Michael West (General Marketing Co.), Sept. 2, 1997 ("West Comments"); Vanity International, Inc., Petition for Stay and Reconsideration, 1997 ("Vanity Int'l Petition"). None of these commenters, except for Vanity Int'l and Mark D. Olson, filed comments or reply comments in response to the NPRM.
23. In re Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Report, GN Dkt. No. 96-113, FCC 97-164, para. 70 (rel. May 8, 1997) (citing Comments of the Cable Telecommunications Association).
24. See id.
25. Bechtel v. FCC, 957 F.2d 873 (D.C. Cir.), cert denied, 113 S. Ct. 57 (1992); Flagstaff Broadcasting Foundation v. FCC, 979 F.2d 1566 (D.C. Cir. 1992); David Ortiz Radio Corp. c. FCC, 941 F. 2d 1253 (D.C. Cir. 1991); City of Brookings Municipal Telephone Co. v. FCC, 822 F.2d 1153 (D.C. Cir. 1987).
26. The holding of the D.C. Circuit in Mid-Tex Electric Cooperative, Inc. v. Federal Energy Regulatory Commission, 773 F.2d 327 (D.C. Cir. 1985), that an analysis of "unregulated entities" is not required, is not relevant in this proceeding because the Commission has directly imposed regulations on all toll free subscribers. Under Mid-Tex, a regulated entity is an entity who is "subject to the rule." Id. at 341. Therefore, any small business that is a subscriber of toll free service is a regulated entity. A regulated entity is not limited to an entity in a field that is traditionally controlled by a pervasive regulatory scheme, such as railroads, telephone companies, or broadcasters. See also 5 U.S.C. §§ 603(b)(3), 604(a)(3) (defining small entities to be identified in an IRFA and FRFA as those "to which the rule will apply").
27. Second Report and Order, para. 119.
28. A provider on the secondary market can also be an end user/subscriber if the provider uses his own toll free number for providing access to toll free service to a third party. Some secondary market providers sell or lease toll free service for non-subscribed numbers.
29. MCI Telecommunications Corp. v. FCC, 842 F.2d 1296 (D.C. Cir 1988) (noting the FCC's duty to gather relevant information and make necessary analyses before reaching a conclusion).
30. See e.g., Direct Marketing Association Comments, Nov. 1, 1995 ("DMA Comments"); NIMA International Comments, Nov. 1, 1995 ("NIMA Comments").
31. Second Report and Order, para. 138.
32. Second Report and Order, para. 138.
33. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).
34. Second Report and Order, paras. 4 (AT&T established the 800 SAC), 6 n.24 (the SMS database system includes ten regional 800 SCP databases in the U.S., which are independently owned by the largest telephone carriers in the country: Ameritech, Bell Atlantic, BellSouth, GTE, NYNEX, Pacific Telesis, SBC Communications, SNET, Sprint (Local) and U.S. West), 8 (the SMS database was administered by DSMI, which is a subsidiary of Bellcore, which in-turn, was wholly owned by the original seven RBOCs).
35. The Industry Guidelines primarily addressed carrier and Resp Org administration. Many small businesses on the secondary market were not aware of the guidelines, and if they were, the guidelines themselves support the sale of toll free numbers. See infra fn 38.
36. Industry Guidelines For Toll Free Number Administration, 2.2.1., Issue 6, October 1996.
37. Id. (emphasis added).
38. Id. (emphasis added).
39. Play Time, Inc. v. LDDS Metromedia Communications, Inc., 123 F.3d 23 (1st Cir. 1997).
40. See Second Report and Order, para. 31.
41. See e.g., Comments of International Trademark Association, Aug. 28, 1996; Vanity Int'l Petition, at 4-5; Lisa Dame Olcott, Confusingly Dissimilar Applications of Trademark Law to Vanity Telephone Numbers, 46 Cath. U. L .Rev. 101, 105 (1997).
42. The Commission recognizes Telemarketing Service Bureaus as providing "legitimate" services when they are not "merely buying and selling numbers." Second Report and Order, para. 40.
43. See e.g., ICB Petition, at 6-8.
44. S. Conf. Rep. No. 104-230, 104th Cong. 2d Sess. 1 (1996) (emphasis added).
45. Id.
46. Advocacy does not agree that toll free numbers are a scarce resource. Unlike electromagnetic spectrum which is finite, toll free numbers are plentiful with the change in one digit, i.e. 888, 887, 886, etc. We do acknowledge that there are limited quantities of "premium" toll free numbers. Such numbers include the original 800 code which has much higher consumer awareness and familiarity than subsequent codes, and mnemonic combinations for vanity numbers.
47. Jennifer Oldham, Toll Free Numbers Crunch Brings Snafus, Calls For Change, L.A. Times, Nov. 11, 1997 (quoting Jeffrey Kagan, president of consulting firm Kagan Telecom Assoc.); see also, Sally Goll Beatty, 800-Number Marketers Dial 888-Not-Fair, Wall St. J., Mar. 7, 1997, at R6.
48. Jeffrey Kagan, Winning Communications Strategies 87 (1997).
49. Id. (citing to 1-800-FLOWERS); see also Vanity Int'l Petition, at 1; NIMA Comments, at 1; DMA Comments, at 3-5.
50.. For more information on the services of firms on the secondary market, please see ICB Petition, NIMA Comments; DMA Comments.
51. NIMA Comments, at 1.
52. U.S. Small Business Administration, Small Business Answer Card 1997.
53. See e.g., ICB Petition, NATE Further Comments, NIMA Comments, Tellnet Comments.
54. Second Report and Order, para. 40.
55. We reiterate that the buying and selling of toll free numbers was a legal activity prior to this rule. Businesses engaged in this activity are no less "legitimate" than a telemarketing service bureau.
56. For more information, see the comments of the Direct Marketing Association and NIMA International, Inc.
57. See e.g., CWI News Bulletin (Appendix A).
58. Id.
59. See e.g., ICB Petition, at 10-11; MCI , at 3; NATE Further Comments, at 6; Tellnet Comments, at 2; Vanity Int'l Petition, at 1.
60. Jeffrey Kagan, Winning Communications Strategies 62 (1997).
61. MCI Reply Comments, at 2.
62. 1992 Economic Census. U.S. Bureau of the Census, Special Tabulation of Census Data under contract to the U.S. Small Business Administration. Also significant is the fact that 50% of small businesses in the country have zero net income or profits. 1993-94 Statistics of Income (SOI).
63. See Play Time, Inc. v. LDDS Metromedia Communications, Inc., 123 F.3d. 23, 26 (1st Cir. 1997) (reporting WorldCom Vice President's question of "how much money the Number could be expected to produce" upon being informed that a desirable vanity number had been taken from a family-owned business that was first to request the number from WorldCom's Resp Org). Id. The likelihood of insignificant revenue was a primary factor in the Vice President's refusal to address the problem. Id.
64. MCI Reply Comments, at 3 (citing to the carrier's exposure to "liability for a myriad of violations, including interference with business relationships breach of contract"); NATE Petition, at 1 (violation of due process to allow disconnection of numbers and service without notice and hearing); ICB Petition, at 8 (noting the inherent tension and conflict between large carriers and their customers).
65. Second Report and Order, para. 42
66. See e.g., MCI Reply Comments at 3 (also citing Toll Free Referrals Co. Petition For Reconsideration, at 2); NATE Further Comments, at 2-3.
67. Information Provider's Coalition for Defense of the First Amendment v. FCC, 928 F.2d 866, 874 (9th Cir. 1991) (citing Grayned v. City of Rockford, 408 U.S. 104, 108 (1972)).
68. Id.
69. Second Report and Order, para. 40.
70. Id. para. 33 (citing NPRM at 13701 n.72) (emphasis added).
71. The American Heritage Dictionary of the English Language, Second College Edition (William Morris ed. Houghton Mifflin Company 1976).
72. See e.g., ICB Petition, at 10-11; MCI Reply Comments, at 3.
73. Second Report and Order, para. 42
74. See e.g., NATE Petition, at 3; ICB Petition, at 8-9.
75. See also, NATE Petition, at 3.
76. See NATE Emergency
Petition and Vanity International Petition for Stay and Reconsideration.