83 FR 53377 - Toll Free Assignment Modernization; Toll Free Service Access Codes
FEDERAL COMMUNICATIONS COMMISSION Federal Register Volume 83, Issue 205 (October 23, 2018)
Federal Register Volume 83, Issue 205 (October 23, 2018)
| Page Range | 53377-53396 | |
| FR Document | 2018-22674 |
[Federal Register Volume 83, Number 205 (Tuesday, October 23, 2018)] [Rules and Regulations] [Pages 53377-53396] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-22674] ======================================================================= ----------------------------------------------------------------------- FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 52 [WC Docket No. 17-192, CC Docket No. 95-155; FCC 18-137] Toll Free Assignment Modernization; Toll Free Service Access Codes AGENCY: Federal Communications Commission. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: In this document, the Federal Communications Commission (Commission) revises its rules to allow the Commission to assign numbers by competitive bidding, on a first-come, first-served basis, by an alternative assignment methodology, or by a combination of methodologies. The Commission further establishes a single round, sealed-bid Vickrey auction for roughly 17,000 mutually exclusive numbers in the 833 code, set aside in the process of opening that code. Government and non-profit entities may file a petition seeking that a number be set aside from the auction for use for public health and safety purposes, and net proceeds from the auction will offset the costs of toll free numbering administration. Full auction procedures will be established in subsequent public notices. The Commission also revises its toll free rules to allow for the development of a secondary market for toll free numbers assigned in an auction, and to modernize its toll free rules to make them consistent with the other revisions adopted in this document and with industry terminology and practice. DATES: Effective November 23, 2018. FOR FURTHER INFORMATION CONTACT: Wireline Competition Bureau, Competition Policy Division, Matthew Collins, at (202) 418-7141, matthew.collins@fcc.gov. SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report and Order in WC Docket No. 17-192, CC Docket No. 95-155, FCC 18-137, adopted September 26, 2018, and released September 27, 2018. The full text of this document is available for public inspection during regular business hours in the FCC Reference Information Center, Portals II, 445 12th Street SW, Room CY-A257, Washington, DC 20554. It is available on the Commission's website at https://docs.fcc.gov/public/attachments/FCC-18-137A1.pdf. Synopsis I. Introduction 1. Today, we demonstrate our continued commitment to modernize the way we assign toll free numbers by adopting an additional assignment methodology that is both market-based and equitable. Based on the Federal Communications Commission's success using competitive bidding to assign spectrum licenses and award universal service support, we adopt new measures to explore the use of competitive bidding for the assignment of toll free numbers. To further evaluate this approach, as an experiment we establish the framework in this Report and Order for an auction of the rights to use certain numbers in the recently-opened 833 toll free code. After the release of this Report and Order, we will initiate the pre-auction phase of this proceeding to seek input on the procedures for the auction. This experiment will help us determine how best to use competitive bidding to most effectively assign toll free numbers, as well as provide experience in applying auction procedures to the toll-free numbering assignment process. II. Background 2. Toll free calling and texting remains an important part of our communications system. Even as websites and smartphone apps have provided new avenues for public engagement, businesses, government entities, and non-profit organizations alike continue to make use of toll free services to keep an open line to the public, and enterprising subscribers put toll free numbers to use in creative new ways. Toll free services rely on toll free numbers--a limited resource the Commission is charged by statute with making available ``on an equitable basis.'' 3. Toll free calling began in 1967, with the introduction of the 800 toll free code. The 800 code was established by AT&T, and the Commission's role in the toll free service market increased over the following 30 years. In 1997, faced with the possibility of exhaust of the 800 code, the Commission concluded that the Communications Act of 1934, as amended, ``require[s] the Commission to ensure the efficient, fair, and orderly allocation of toll free numbers.'' Thirty years later, when the Commission opened the second toll free code--888--it addressed an age-old question for the first time in the context of toll free numbers: How can limited resources be most fairly and efficiently allocated when some of those resources are more desirable than others? Whether they [[Page 53378]] were desirable because they were easy to remember, because they could spell a name or common word, or because a subscriber had built up good will in that number in the 800 code, some 888 numbers were likely to be highly desirable while others might draw no interest at all. 4. Congress has given the Commission only one guideline regarding the allocation of toll-free numbers: Do so ``on an equitable basis.'' Interpreting this guideline after opening the 888 code, the Commission understood ``equitable'' to include two prongs: ``orderly and efficient'' and ``fair.'' After considering multiple methodologies to assign toll free numbers, the Commission settled on a first-come, first-served approach. The Commission also offered a limited right of first refusal to subscribers of 800 numbers that expressed an interest in subscribing to that number in the 888 code. Inspired by its low cost and simplicity, the Commission found such an approach to be ``orderly and efficient''; it also concluded that it was ``fair'' because it did not discriminate on its face against any potential subscribers. 5. Among the alternate methodologies the Commission considered when it opened the 888 code was competitive bidding. The Commission observed the fairness of this approach, stating that it ``would offer all participants an equal opportunity to obtain a particular . . . number''; it also described auctions as ``generally efficient.'' Although the Commission had conducted spectrum auctions prior to the 888 code opening, the Commission concluded that an auction of toll free numbers presented ``practical difficulties''--not only could it cost more than a first-come, first-served approach, but it could also require oversight to ensure that bidders met requirements and followed auction procedures. 6. When the Commission decided how to assign certain 888 toll free numbers, the Commission's auctions program was still in its relatively early stages. The Commission's first spectrum auction was held in July 1994. The Notice of Proposed Rulemaking for the 888 toll free code was adopted in October 1995, and the 1998 Toll Free Order was adopted in March 1998. In the 20 years since that decision, the Commission has conducted over 70 spectrum auctions, including those for commercial wireless licenses and broadcast construction permits, using various auction formats. More recently, the Commission has begun using auctions as a mechanism for distributing universal service high-cost support. 7. During this same period, the first-come, first-served approach to toll free number assignment--which was used with some modification for the 877, 866, 855, and 844 code openings--has been subject to scrutiny by the Wireline Competition Bureau (Bureau) for falling short of expectations in several ways. For example, first-come, first-served assignment has rewarded actors that have invested in systems to increase the chances that their choices are received first in the Service Management System Database (the Toll Free Database, the ``database system for toll free numbers,'' in which entities reserve numbers and ``enter and amend the data about toll free numbers within their control''); and, by assigning numbers at no cost, it has allowed accumulation of numbers without ensuring those numbers are being put to their most efficient use. The Bureau addressed this latter issue, and the issue of some registrants having enhanced connectivity to the toll free database, by limiting registrants to 100 numbers per day for a month after the opening of the last two codes, 844 and 855. 8. 833 Code Opening. In April 2017, the Bureau authorized Somos, Inc. (Somos), the Toll Free Numbering Administrator, to open the 833 toll free code. To facilitate the exploration of alternative assignment methodologies, the Bureau took steps in the pre-code opening process to identify numbers that could be part of an experiment regarding the use of an alternative assignment process, such as an auction. Specifically, the Bureau authorized Responsible Organizations (RespOrgs, which are ``entit[ies] chosen by a toll free subscriber to manage and administer the appropriate records in the toll free Service Management System for the toll free subscriber'') to identify up to 2,000 desired numbers in the 833 code and submit a request for those numbers to Somos. The Bureau directed Somos to review these requests, identify numbers subject to multiple requests, and place these ``mutually exclusive'' numbers in unavailable status (which means ``[t]he toll free number is not available for assignment due to an unusual condition'') pending the outcome of this proceeding. Numbers that were not requested by multiple RespOrgs were made available on a first-come, first-served basis. 9. Nearly 150 RespOrgs participated in the 833 pre-code opening process, requesting over 72,000 numbers. Somos identified over 17,000 mutually exclusive numbers--including `` `repeaters' (833-333-3333, 833-888-8888, 833-800-0000, etc.) and numbers that spell memorable words or phrases (833-DENTIST, 833-DOCTORS, 833-FLOWERS . . . etc.)''-- and placed those numbers in unavailable status. Ten or more RespOrgs requested over 1,800 mutually exclusive numbers, and 65 or more RespOrgs requested the ten most popular numbers. 10. Notice of Proposed Rulemaking. In September 2017, the Commission released the Toll Free Assignment NPRM, which proposed and sought comment on steps to better promote the equitable and efficient assignment and use of toll free numbers. Specifically, the Commission proposed expanding the existing toll free number assignment rule to include assignment by auction or other equitable assignment methodologies, and assigning the over 17,000 mutually exclusive numbers in the 833 toll free code through competitive bidding. (The Commission also proposed and sought comment on various specific auction rules and mechanisms.) The Commission also sought comment on eliminating the brokering (under our rules, the selling of numbers by a subscriber for a fee), warehousing (the reservation of numbers by a RespOrg without an actual subscriber for whom the numbers are being reserved), and hoarding (the acquisition of more numbers by a subscriber than it intends to use) prohibitions; setting aside numbers for use for public interest purposes; options to address abuse of toll free numbers; and changes to overall toll free numbering administration. The Commission received comments from various stakeholders including RespOrgs, service providers, and companies that have built their businesses around toll free calling. III. Discussion 11. Given the passage of time since adopting the first-come, first- served methodology, and experience gained in opening five toll free codes, we modify our toll free number assignment rule to give the Commission flexibility to implement alternative approaches to assigning numbers. As an experiment in using such an alternative approach, we establish an auction to assign the over 17,000 identified mutually exclusive numbers in the 833 code (the 833 Auction). We also designate Somos as the auctioneer. While this Report and Order provides Somos with the general framework for the 833 Auction, we also provide for a pre-auction process to establish detailed auction procedures after additional notice and comment, as is typical in all Commission auctions. We require Somos to implement the established procedures to conduct the auction and, after the bidding has [[Page 53379]] ended, to provide the Commission with all data and information gained from the auction. Moreover, consistent with our goal of assigning numbers via a market mechanism, we create an exception to our brokering, warehousing, and hoarding prohibitions for numbers acquired through competitive bidding. A. The Toll Free Assignment Rule 1. Adopting a Revised Toll Free Assignment Rule 12. We adopt the toll free assignment revision of section 52.111 of our rules that the Commission proposed in the Toll Free Assignment NPRM. (We adopt the proposed rule revision with two minor changes. First, we make our rule consistent with the rules governing spectrum and universal service support competitive bidding, by using the phrase ``competitive bidding'' rather than ``auction.'' Second, we improve the clarity of our rule by removing proposed language providing that the Commission will assign numbers through an assignment methodology ``as circumstances require.'' We further make administrative revisions to our toll free rules, consistent with the recommendations of the North American Numbering Council (NANC) Toll Free Assignment Modernization Working Group Report.) Our revised rule allows the Commission to direct the assignment of toll free telephone numbers to RespOrgs and subscribers on an equitable basis by competitive bidding, on a first- come, first-served basis, by using an alternative assignment methodology, or by a combination of these approaches. We find that our experience assigning toll free numbers since the original rule's adoption 20 years ago--in which time certain entities have undertaken efforts to increase their chances that desirable numbers are assigned to them through the first-come, first-served system--supports the revised rule's flexible approach to number assignment and is supported by the record. 13. With our revised rule, we increase our options to assign toll free numbers in a way that accounts for valuable social use. The revised rule provides us greater flexibility to explore alternative assignment mechanisms in addition to the current first-come, first- served methodology. By revising our rule to permit--but not obligate-- the Commission to assign toll free numbers by auction, we add a valuable tool to our tool chest while maintaining the flexibility to craft assignment mechanisms suited to the nature of different inventories of numbers. One commenter argues that, in so doing we are ``upending'' the toll free market to address demand for a ``statistically insignificant'' amount of toll free numbers. But the demand for those specific numbers is not insignificant and, in fact, demonstrates the need to reconcile the demand with the assignment mechanism. Our rule does not mandate the use of a new assignment mechanism, instead allowing for targeted modifications to the assignment process going forward as circumstances require. 2. Considerations of Assignment Methodologies 14. We find that revising our rules to allow alternative means of toll free number assignment is consistent with our statutory obligation to distribute numbers on an equitable basis. Section 251(e)(1) of the Communications Act of 1934, as amended (the Act), directs the Commission to make numbers available on an equitable basis. We find that the revised rule adopted today facilitates assignment of numbers equitably, per the standards of our precedent. The flexibility of our rule, including the option to use competitive bidding to assign toll free numbers, increases the likelihood that, as limited resources, toll free numbers will be assigned to parties that value the numbers most. 15. In considering whether number distribution means are equitable under section 251(e)(1), we consider the principles of order, efficiency, and fairness. In so doing, the Commission has allowed exceptions to the assignment of numbers by the first-come, first-served approach, with the intent to serve the broader public interest of equitably distributing the finite resource of toll free numbers. (For example, the Wireline Competition Bureau allowed a right of first refusal in 1997 for 800 number subscribers seeking corresponding 888 code numbers. The Bureau has also rationed the release of disconnected 800 code numbers, and the release of 844 and 855 numbers upon opening of those codes. Aside from modifications of first-come, first-served, assignment, the Bureau has also assigned numbers upon request for reasons of national defense and public safety.) When it established the first-come, first-served assignment method in the 1998 Toll Free Order, the Commission opined that pursuant to section 251(e)(1), the Commission must apply a two-part test to determine if any given assignment methods were ``1) orderly and efficient, and 2) fair.'' When it first applied this test over twenty years ago, based on certain limitations and unknown factors with respect to number auctions, the Commission found that ``the use of a first-come, first-served assignment method is a more equitable method of allocating these numbers.'' With the benefit of some twenty years' of additional experience in toll free number allocation, in addition to extensive use of the auction mechanism in various contexts, we now reassess this conclusion. 16. Section 251(e)(1) Test for Assigning Toll Free Numbers. We reapply the 251(e)(1) two-part test and conclude that the use of competitive bidding, like the other assignment methodologies in revised rule section 52.111, will result in an orderly, efficient, and fair assignment of toll free resources. The Commission has explained that an orderly toll free number assignment mechanism ``will simplify the administrative requirements necessary to assign toll free numbers and avoid the need to resolve competing claims among subscribers to particular numbers.'' Additionally, an efficient toll free number assignment mechanism will minimize exhaust of the toll free numbering resource. 17. After reevaluating the criteria in the 1998 Toll Free Order, we conclude that assigning toll free numbers through the use of competitive bidding is orderly; any entity interested in a toll free number can, through an auction, express the value it places on a particular number, in a clear, transparent, and relatively simple manner. Moreover, assigning a number to the entity that places the highest bid is easy to understand and avoids the need to resolve competing claims among potential subscribers to particular numbers. Further, the first-come, first-served approach has not always resulted in an orderly and efficient distribution of highly-valued--i.e., mutually exclusive--numbers. Since the Commission's adoption of this approach in the 1998 Toll Free Order, the Bureau has intervened to withhold or ration highly desired numbers in subsequent code openings due to concerns with the first-come, first-served assignment process. The Bureau, expressing concern that RespOrgs were inefficiently warehousing numbers, implemented conservation plans for four out of the seven presently available toll free number codes. 18. Given the Commission's considerable experience with auctions since 1998 and the ability of an entity to bid the value it places on a particular number in a clear, transparent, and relatively simple manner, we believe any administrative costs and ``practical difficulties'' in holding an auction would be significantly lower than [[Page 53380]] previously believed, making it more likely that the efficiencies of competitive bidding will outweigh such costs. Therefore, we conclude that adding competitive bidding as one possible assignment method meets the first prong of our established test, namely, that an assignment mechanism be orderly and efficient. 19. We also find that the market-based assignment methodologies in revised rule 52.111 are fair, meeting the second part of the section 251(e)(1) test. The Commission has explained that a fair toll free number assignment mechanism is one that gives ``[a]ll subscribers . . . an equal opportunity to reserve desirable toll free numbers as new codes are opened.'' Using a competitive bidding process to assign mutually exclusive toll free numbers can provide interested parties with a level playing field, on which everyone has the same ability to express their valuation for specific numbers in a clear, transparent manner, using an equally accessible method. Based on our experience with auctions in other contexts, we find that we are more likely to achieve our stated objective of assigning mutually exclusive toll-free numbers on an equitable basis by allowing all qualified bidders the same opportunity to express their value for a number and assigning the numbers to the party that values it the most, than if we use a method by which a number is assigned to the party that employs the most advanced access system. (We expect that the experimental use of an auction for mutually exclusive 833 toll free numbers (as adopted in this item) will yield additional insight into whether auctions are the best methodology for assigning toll free numbers and, if so, how best to use competitive bidding in the future.) Moreover, the current method leads to unnecessary expenditure on equipment to gain a timing advantage, whereas the proceeds from a toll free number auction will go towards the administration of the toll free system. 20. While in its 1998 application of this test, the Commission stated that auctions ``offer all participants an equal opportunity to obtain a particular . . . number,'' it also concluded that a first- come, first-served assignment mechanism was also fair and selected that approach due to its then perceived benefits of order and efficiency. We find that the Commission's prior conclusion has not borne out for highly desired toll free numbers; indeed, the Bureau has intervened in the last four toll free code openings, altering the first-come, first- served methodology precisely to ensure fairness in the toll free number assignment methodology. 21. Since the 1998 Toll Free Order was adopted, the Commission has observed that the underlying numbering access technology has evolved: Certain automated systems now used to access the Toll Free Database have placed smaller RespOrgs at a competitive disadvantage because they do not have the capacity to quickly reserve sought-after vanity numbers. Enhanced connectivity gives larger, more sophisticated entities the incentive to invest in these systems to increase the chances that their number requests are processed. This situation undermines a key rationale for the first-come, first-served approach: That all interested parties have an equal chance of getting a number. And while it advances the separate goal of ensuring a number is quickly allocated to the party that values it most highly--a differential willingness to invest indicates an underlying differential in the value the investing party sees in numbers--it does so only loosely, since there is no direct mechanism that allows potential subscribers to bid in their valuation. In the absence of conservation controls, the Bureau has seen evidence of unfair access following new toll free code openings. For example, following the 877 and 866 code openings, the Commission received reports from RespOrgs suggesting that during database ``timeouts,'' only RespOrgs with more advanced access systems were able to reserve numbers, while RespOrgs not using those advanced systems were ``locked out'' and unable to reserve their desired numbers. For the 855 and 844 toll free code openings, the Bureau directed the toll free database administrator to limit the quantity of toll free numbers a RespOrg may reserve to 100 per day for the first 30 days--``larger RespOrgs with enhanced connectivity to the [toll free] database'' would otherwise be able to more quickly to reserve sought- after numbers than smaller RespOrgs without enhanced connectivity. 22. We reject commenters' arguments that an auction is unfair because it favors parties with deep pockets. An auction allocates the number to the bidder willing to pay the most, but that willingness may derive from expected future revenues from a profitable business case, rather than from the bidders' current finances. Moreover, auctions should reflect the value of the toll free number in the marketplace and a bidder may be able to obtain financing based on anticipated profitability. We anticipate that a first-come, first-served approach will continue to be an appropriate assignment methodology in some circumstances, however. For instance, first-come, first-served assignment may be appropriate for less desirable numbers, or in instances where numbers made available via an auction are not assigned thereby. We expect that our experience with the 833 Auction will provide us with insight we can use when determining the best mechanism for assignment of a given set of numbers. 23. Effective Assignment of Toll Free Resources. Our revised assignment rule gives us a new option for the assignment of numbers, without removing currently available options. The Commission has extensive experience in public outreach and education about the auction process, including online tutorials for the auction application and bidding processes. Based on this experience, we disagree with the argument that providing adequate notice to the public about auction procedures will be unreasonably costly. Nor do we agree with commenters who argue that preparing for and participating in the auction will be unduly burdensome to participants. We recognize that individual subscribers or RespOrgs acquiring toll free numbers through an auction may incur some costs relating to the participation in the auction that they did not incur through the first-come, first-served process, but we believe those costs are outweighed by the benefits to the toll free system at large when toll free numbers are put to their highest-valued use. Many toll free numbers have a much greater value for certain subscribers. Some 150 RespOrgs participated in the 833 pre-code opening process, requesting over 72,000 numbers. This fact undermines the basic rationales on the effectiveness of first-come, first-served for mutually exclusive numbers--that first-come, first-served allocation requires less oversight, and avoids ``the need to resolve competing claims among subscribers to assignment of particular numbers.'' On the contrary, the Commission has been compelled to provide increased oversight by intervening multiple times to ensure new code openings are ``orderly and efficient'' and ``fair,'' and adjudicated numbering conflicts in at least two notable cases. Our practice of resolving competing claims has previously been resolved inefficiently in favor of the party most privileged with access to the faster reservation system. Instead of the number going to whichever entity happens to be first in the door (thereby preventing others, who may value it more, from getting it), use of [[Page 53381]] competitive bidding will give all entities an equal opportunity to express the value they place on any particular number. By increasing the likelihood that mutually exclusive toll free numbers are assigned to parties that will use the resource in the most productive way, we in turn increase the efficiency and equity of our number assignment process. 24. Revising the Commission's rules to allow us to assign numbers by auction, on a first-come, first-served basis, an alternative assignment methodology, or by a combination of the forgoing as circumstances require, gives the Commission the flexibility to adapt our assignment procedures to the circumstances and characteristics of the specific toll free numbers to be assigned. In any future toll free code release, the revised rule will not require the Commission to use competitive bidding and, if it decides to use competitive bidding, the Commission will not be confined to a specific auction design, or the designation of a particular auctioneer. Instead, for new toll free code openings, the Commission can determine the best method to proceed for assigning numbers, armed with the data collected in the 833 Auction. B. The 833 Auction 1. The 833 Auction Established as an Experiment 25. We establish the 833 Auction as an experiment to analyze the most efficient way to use competitive bidding as a toll free number assignment method. We agree with one commenter who argues that, as a first step, the Commission should assign toll free numbers by auction on a ``limited, trial basis,'' which will allow us to ``study the impact of this new allocation method and make any necessary changes to serve the public interest.'' (By adopting the 833 Auction as an experiment, the actions we take today are also consistent with the recommendation of the Administrative Conference of the United States (ACUS) that agencies adopt pilot programs and learn from regulatory experience.) Thus, we will offer in this auction only the rights to use the 17,000 mutually exclusive numbers in the 833 toll free code that were identified pursuant to the 833 Code Opening Order. Once the auction is complete, we direct Somos to assign those numbers to winning bidders based on the auction's results. We will continue to assign 833 numbers that are not part of the 833 Auction using our first-come, first-served approach. 26. After completion of the 833 Auction, and subsequent number assignments, the Bureau will issue a report outlining the outcomes of the 833 Auction, lessons learned, and future recommendations for toll free number assignment methodologies. 27. We intend to use this experiment as an opportunity to evaluate the contours of using competitive bidding for toll free assignments and to determine how to best use a market-based assignment to effectively assign toll free numbers. We also underscore the need to reform the current method of assigning highly desired toll free numbers. We envision that the experiment, as designed in this Report and Order and forthcoming Auction Procedures Public Notice, will meet our goals of equitable distribution and be used, as designed, for certain future toll free number assignments or be used for future assignments with refinements. 2. General Framework for the 833 Auction 28. In the Toll Free Assignment NPRM, the Commission ``invite[d] parties to . . . offer further economic, legal, or logistical insights about . . . auction designs and procedures.'' Given the experimental nature of using competitive bidding as a mechanism for assigning toll free numbers, we outline here a general framework for the 833 Auction and require a pre-auction proceeding in which we will seek public input on the procedures for the auction after the release of this Report and Order. We expect that our approach to the 833 Auction will be modeled on the rules and procedures governing auctions for wireless spectrum licenses, broadcast permits, and universal service support, where appropriate, given the success and familiar nature of those auctions. 29. Specifically, we will issue an Auction Comment Public Notice after the release of this Report and Order and will solicit public input on proposed application and bidding procedures, including specific proposals for application requirements and bidding mechanisms, such as bid processing and determining payments. Thereafter, we will release an Auction Procedures Public Notice, and will specify final auction procedures, including dates, deadlines, and other final details of the application and bidding processes. We require the auctioneer to implement the auction pursuant to the procedures specified in the Auction Procedures Public Notice. We conclude that, in addition to the general framework we provide here, the Commission's practice of finalizing auction procedures in the pre-auction process will give interested participants sufficient time and opportunity both to comment on the final procedures and to develop business plans in advance of the auction. a. Auction Design 30. We adopt the proposal in the Toll Free Assignment NPRM to conduct the 833 Auction as a Vickrey single round, sealed-bid auction. In this type of auction, a qualified bidder can submit a sealed-bid for each available toll free number that the bidder wants. The 833 Auction will consist of only a single round of bidding, and the highest bidder for each toll free number will win the rights to that number, but will generally only pay the second highest bid for them. In the case of tied bids, a winning bidder may end up paying the tied bid amount. For the 833 Auction, we defer to the pre-auction process, the detailed procedures for bid processing and payment determination, including, among other things, how winners and payments will be determined in the case of tied bids and what to do if a toll free number receives only one bid in the single round of bidding. 31. A Vickrey auction can yield an equitable and efficient assignment of mutually exclusive toll free numbers as it incentivizes bidders to bid their true valuation. In particular, the amount paid by the winner (i.e., the bidder with the highest bid) is determined by the second highest bid and does not depend on the exact amount of the winning bidder's own bid. This payment rule results in the winning bidder essentially receiving what it might view as a ``surplus,'' i.e., the difference between its own bid and the second highest bid. A Vickrey auction thus encourages bidders to bid the true maximum they are willing to pay, while at the same time efficiently assigns the numbers to the bidders who have the highest valuations for the numbers. (As a first approximation, it is likely that individual valuations for toll free numbers are not dependent on another's valuation, at least beyond a broker's desire to purchase for resale. Moreover, to the extent that this is not the case, auction theory does not provide unambiguous direction as to optimal auction design. Thus, for our opening experiment in assigning toll free numbers via competitive bidding, we adopt the simple and transparent Vickrey auction.) 32. We conclude that the 833 Auction should use a single round rather than multiple rounds to keep the auction process for this experiment as simple and cost-effective as possible. As the [[Page 53382]] Commission observed in the Toll Free Assignment NPRM, a single round, sealed-bid auction is relatively easy for both the auctioneer (to implement) and participants (to participate in). In addition, a single round auction will be completed more quickly than a multi-round auction, and comes at a lower cost to the auctioneer and the participants. In fact, we do not believe that auction participants will be required to incur substantial time or expense to prepare for the auction. They have already determined which 833 numbers to reserve, thus spending some time and expense in reaching those determinations; the incremental effort on their part to participate in the auction is unlikely to impose an additional time or cost burden on them. And because of the lower cost of a single round Vickrey auction, we reject commenters' concerns that the costs to implement and run the auction will be excessive. 33. We also reject the notion that a Vickrey single round, sealed- bid auction will result in a scenario where inexperienced bidders will overbid and be unwilling or unable to pay the winning bid. A second- price auction encourages bidders to bid the true maximum that they are willing to pay, knowing they will not actually pay more than needed to outbid the second highest bidder. Also, we note that each bid is a binding commitment, so bidders know in advance that they should only submit bids that they are willing to pay. (This is true even in a Vickery auction, where the winning bidder will only pay the second highest bid, because the second highest bid price may be equal to (in case of a tie) or just slightly less than the winning bidder's submitted bid. As Power Auction notes, ``[i]t is important for bids to be binding commitments, because the lack of binding commitments could cause the auction process to be manipulated or to unravel.'') In addition, as discussed further below, entities interested in participating in an auction generally have to submit some form of financial security in order to participate. Further, consistent with the Commission's standard practice, we will ensure that prospective auction participants have an opportunity to become fully informed about the auction through public outreach and education, including online tutorials about the application and bidding processes. 34. Alternative Auction Methodologies. Although the Commission sought comment on alternative auction methodologies to consider for assigning the mutually exclusive 833 numbers, we decline to employ any such methodologies for the 833 Auction. (For example, the Toll Free Assignment NPRM sought comment on a pay-your-bid auction, whereby the highest bidder wins and pays its bid, and an open auction, such as a simultaneous multi-round auction used by the Commission for our spectrum auctions.) One commenter suggested that we use what it calls an ``open'' auction, specifically ``a simultaneous ascending clock auction with multiple independent clocks.'' While this type of auction has certain advantages over a single round, sealed-bid, Vickrey auction, we conclude that these advantages do not justify the additional complexity and expense of a multiple round auction at this time. (Power Auctions enumerates several advantages of an ``open'' auction, including (1) permitting bidders the opportunity of price discovery; (2) permitting bidders more control over the money spent on winning bids; (3) permitting bidders some ability to handle bids for numbers that may be viewed as substitutes; (4) maintaining privacy of auction participants' bids; and (5) potentially resulting in higher auction revenues and more efficient results.) While the Commission uses multiple round auctions and will continue to do so, the 833 Auction will be the Commission's first auction of the rights to use toll free numbers, and our intent for this experiment is to gather data to help inform future toll free assignment decisions while minimizing the complexity and cost to the Commission, auctioneer, and participants during the experiment. We also have limited information on which to base any estimate of the dollar amounts potential subscribers are willing to bid. Also, the relatively modest nature of the items to be auctioned--the rights to use toll free numbers, as opposed to spectrum licenses or Universal Service Fund support--seems at this juncture to warrant a less complex and costly type of auction. Thus, we do not want to create a more complex and costly auction than necessary at this early stage. 35. One commenter argues that a single round, sealed-bid Vickrey auction limits the ability of a bidder to develop a bidding strategy involving substitute numbers vis-[agrave]-vis an ``open'' auction. That commenter does not, however, provide a basis for its position that bidders in the 833 Auction will have a need for such a complex auction, or how such a need outweighs the impact to cost and complexity for this experimental auction. Further, unlike other auctions the Commission has conducted, such as auctions for spectrum and Universal Service Fund support, where some items may be substitutable, this auction allocates items for which managing bids across substitutes is less important. Similarly, there are important complementarities in bids for spectrum and Universal Service Fund support which we have no reason to believe apply to the toll free number market. 36. More specifically, the Commission has historically used multiple round bidding as the primary auction methodology in spectrum auctions. When implementing its spectrum auction authority, the Commission found that multiple round auctions provide needed information about the value of substitutable and complementary licenses and allows participants the flexibility to pursue back-up strategies during an auction, allowing the spectrum to go to its highest value use. The Commission recognized, however, that while multiple round auctions are preferable, if the value of the licenses or the number of bidders would be so low that the administrative costs of a multiple round auction may exceed its benefits, other auction methods are available. Our spectrum auctions, generally, involve many entities pursuing complex strategies weighing the cost of various quantities of spectrum within and between markets. Similarly, in competitive bidding for Universal Service Fund support, many participants are contemplating multiple markets that they are willing to serve based on the price of the subsidy. In the case of toll free numbers, there is limited information in the record that one number is a substitute for another or on how bidders will view the relative values of the available numbers. The Commission hopes to obtain such information through this auction. 37. In sum, because the Vickrey single round, sealed-bid auction should demand fewer resources from the Commission, the auctioneer, and the auction participants while still yielding an efficient allocation of toll free numbers, we believe it will help achieve our objectives for this experiment. We note, however, that we are not intending to foreclose the use of an ``open'' auction--or another auction methodology--in any future toll free number auctions. (To the contrary, we recognize that there are cases where an open auction may perform better than a sealed-bid auction.) We expect that the Bureau's report will address the success of the Vickrey single round, sealed-bid auction methodology, and compare it to alternative methodologies. [[Page 53383]] b. Auction Eligibility 38. Deciding which parties can participate in an auction is an integral part of the process. Although we generally require applicants for our auctions to demonstrate certain qualifications consistent with the regulatory objectives of a particular auction, it is also true that the broader the participation, the more likely it is that 833 numbers will be assigned to the highest-valuing bidders. For the 833 Auction, we will allow any party interested in obtaining an 833 number (potential subscriber) to participate directly in the auction or indirectly through a RespOrg. We also will not limit the 833 Auction to only those RespOrgs that participated in the 833 pre-code opening; any RespOrg may participate. We believe allowing all interested parties to participate directly in the auction will provide them with greater flexibility and control to accurately express their level of interest and will allow the Commission to glean as much information from the experiment as possible to better inform future toll free code opening assignments. 39. 833 Auction Not Limited to RespOrgs. We will permit any potential subscriber to participate directly in the 833 Auction or indirectly through a RespOrg. (A toll free ``subscriber,'' per the rule revision we adopt today, is ``The entity that has been assigned a toll free number.'' Because we do not intend to limit auction participation to entities that already have been assigned numbers, we establish that ``potential subscribers''--any parties interested in subscribing to a toll free number--may participate in the 833 Auction. As auction participants, these parties will be obligated to comply with the Auctions Procedures Public Notice in this proceeding.) In the Toll Free Assignment NRPM, the Commission proposed to permit only RespOrgs to participate in the proposed auction, based on RespOrgs' role as manager and administrator of toll free records in the Toll Free Database. (The Commission also recognized ``the importance of RespOrgs as market makers'' and noted that RespOrgs ``may have strengths in maximizing the valuation of certain numbers, for example, by piecing together geographic coalitions of subscribers who may be unable to coordinate themselves.'') After reviewing the record, we conclude that allowing potential subscribers to directly participate will likely increase the efficiency of the auction while also addressing possible conflicts of interest between RespOrgs and potential subscribers. We agree with 800 Response, who argues that allowing potential subscribers to participate will minimize opportunities for participants to engage in undesirable and/or anticompetitive strategic behavior that could occur if a RespOrg and one or more of its subscribers were interested in the same 833 numbers. (If a RespOrg and one or more of its subscribers do not have an interest in the same 833 numbers, permitting RespOrgs to participate in the auction gives subscribers to option to have their RespOrgs bid on their behalf.) Therefore, we find it appropriate to allow potential subscribers to act on their own behalf and represent their own interests in the auction. (Potential subscribers also have the option to become a RespOrg by meeting various requirements for certification. By formally allowing potential subscribers the option to participate directly, non-RespOrg participants will not need to spend resources to become a RespOrg if they are concerned that current RespOrgs would not fully represent their interests.) We stress that if a potential subscriber directly participates in and is assigned a number via the 833 Auction, it must still work with a RespOrg after the auction to reserve the number in the Toll Free Database in accordance with our rules. 40. We do not go so far as to remove RespOrgs from the process of acquiring toll free numbers in the 833 Auction, as one commenter suggests. Because subscribers are familiar with working with RespOrgs to acquire toll free numbers and may prefer to continue to take advantage of RespOrg expertise here, we conclude that we should allow subscribers the choice of working with a RespOrg in the 833 Auction. 41. Some commenters oppose permitting potential subscribers to participate in the auction. For example, Somos claims that allowing subscribers to participate ``would introduce unnecessary and potentially costly administrative problems'' and Power Auctions advocates allowing only RespOrgs to participate since they can maximize valuations of certain numbers and including subscribers would increase the costs of running the auction. On the other hand, one commenter advocates excluding RespOrgs completely, and allowing only end-user customers to participate. We recognize the value added by RespOrgs as ``market makers'' (as the Commission recognized in the Toll Free Assignment NPRM, RespOrgs ``may have strengths in maximizing the valuation of certain numbers, for example, by piecing together geographic coalitions of subscribers who may be unable to coordinate themselves''), but find that allowing potential subscribers to participate in the auction will likely increase the efficiency of the auction, by increasing competition and reducing the likelihood of tacit collusion and other undesirable strategic behavior that can occur when there are very few auction participants. Although we recognize there may be additional cost in auction overhead by allowing more participants, we believe that the benefits to auction efficiency created by expanding the pool of potential participants identified above are worth the minimal expense in determining whether the additional participants are qualified to bid in the auction. And by allowing potential subscribers to bid on their own, we lower administrative costs for participants who choose not to place a bid through a RespOrg. 42. Maximizing Auction Participation. We will not otherwise limit the number of participants in the auction, such as by limiting RespOrg eligibility to participate in the 833 Auction only to those RespOrgs that participated in the 833 pre-code opening process. Permitting the maximum number of eligible participants to bid in the 833 Auction ensures a robust auction and results in the bidders with the highest willingness to pay being assigned a number, which is in the public interest. The inclusion of all RespOrgs and potential subscribers in the pool of eligible participants will also provide the Commission with greater information about the value of toll free numbers, increasing the value of the experiment. In furtherance of this goal, the Commission, along with Somos in its role as auctioneer, will undertake outreach efforts to promote maximum participation among RespOrgs and potential subscribers. c. Application Process 43. In Commission auctions, interested parties must disclose certain information and make certain certifications in an application or series of applications. In the Commission auctions, we typically have a two-stage application filing process. In the pre-auction ``short-form'' application, a potential bidder will need to establish its eligibility to participate, providing, among other things, basic ownership information. After the auction, the Commission conducts a more extensive review of the winning bidders' qualifications to receive support through ``long-form'' applications. This information helps promote auction transparency and integrity and assists us in monitoring compliance with our [[Page 53384]] auction rules and procedures, including, for example, the prohibition against certain communications. We find it is necessary to qualify entities to participate in the auction, and therefore require interested entities to submit a short-form application to participate in the auction. The information and certification required in the short-form application, along with an upfront payment, will help determine if an applicant is qualified to bid in the 833 Auction. We will not require applicants to submit a long-form application after the conclusion of this auction, given the lack of need to verify winning bidders' qualifications in this context and to limit the administrative burden on bidders, the auctioneer, and the Commission. (i) Short-Form Application Requirements 44. We establish here some basic requirements and limitations regarding applications to participate. We expect that each entity interested in bidding in the 833 Auction will be required to disclose certain information and make certain certifications to promote compliance with the framework we outline here and protect auction integrity. These submissions will promote the transparency and efficiency of the auction and reduce the instances of conflicts of interest and the likelihood of undesirable and/or anticompetitive strategic behavior by participants. 45. A Potential Subscriber May Participate Through Only a Single Auction Applicant and Submit a Single Application. Potential subscribers can participate in the 833 Auction through only a single auction applicant. In particular, a potential subscriber may not engage multiple applicants to bid for a particular number in which it is interested. This prohibition assures a level playing field for all bidders and prevents distortions in the information on bidder interests, by assuring that each auction participant has at most one bid per number in the single round. 46. We likewise prohibit a single party, or multiple parties with a controlling interest in common, from becoming qualified to bid based on multiple applications. While we will seek comment and decide how to define parties with common controlling interests in our pre-auction process, we anticipate utilizing the Commission's definitions adopted for similar purposes in our spectrum auctions. We employ this same prohibition in spectrum auctions to ensure that auction participants bid in a straightforward manner. We believe that this type of restriction is warranted in the 833 Auction and will address concerns raised in the record regarding the potential for undesirable strategic bidding behavior, which could harm other bidders. 47. A RespOrg Can Apply on Behalf of Only a Single Potential Subscriber (Including Itself) per Number. We recognize that allowing RespOrgs to serve as bidders for potential subscribers of toll free numbers may present the opportunity for certain auction participants to have more information about the competition for certain numbers. Such asymmetric information could be used in ways that adversely affect some potential subscribers. To mitigate the potential anticompetitive effects of RespOrgs bidding for potential subscribers, we will limit a RespOrg to representing a single potential subscriber (including itself) for the rights to use a particular number. We note that, under a different auction design (e.g., in a multiple round auction) or with different eligibility requirements, a different limitation may be appropriate to help ensure that RespOrgs fully represent subscriber interests, but, for the 833 Auction, we find this limitation to be appropriate. 48. Disclosures and Certifications. To promote transparency as well as compliance with the limitations discussed above, we establish certain general requirements for applicant disclosures and certifications. Specifically, we expect that each auction participant-- whether a potential subscriber or a RespOrg serving as a bidding agent--will be required to certify, as applicable, that it is not bidding on behalf of multiple interested parties (including itself) for the same toll free numbers or that it is only bidding through one entity for a given number. A RespOrg can bid on behalf of multiple subscribers, as long the subscribers it represents, as well as itself, are not bidding on the rights to use the same number(s). We will also require the applicants that have overlapping non-controlling interests to certify, during the application process, that they have established internal control procedures to preclude any person acting on behalf of an applicant from possessing information about the bids or bidding strategies of more than one applicant or communicating such information with respect to either applicant to another person acting on behalf of and possessing such information regarding another applicant. To enforce this prohibition, we expect that applicants will need to disclose the party on whose behalf it is bidding, for each toll free number that it selects. To enforce the prohibition, and to allow entities to comply with the prohibition on certain communications discussed below, we also expect that any entity wishing to participate in the 833 Auction will have to fully disclose information regarding the real party- or parties-in-interest in the applicant or application and the ownership structure of the applicant, including both direct and indirect ownership interests of 10 percent or more. We also will also require applicants to provide additional information and make additional certifications in the application, as may be found in the pre-auction process to be necessary to implement our decisions in this Report and Order. By requiring these certifications and disclosures, we guard against potential conflicts of interest between a RespOrg and its customer subscriber(s), between a RespOrg's customer subscribers, and between RespOrgs with overlapping controlling interests seeking the rights to use the same toll free numbers. Moreover, such actions will help implement our overriding principle that each entity should participate through only one bidder, thus encouraging sincere bidding and enhancing the integrity of the auction. (ii) Procedures for Processing Pre-Auction Applications 49. For the 833 Auction, we expect that applications to participate in the auction will be processed in a manner similar to applications to participate in spectrum license auctions. Specifically, no application will be accepted if, by the initial deadline, the applicant has failed to make the required certifications, e.g., no additional applications will be accepted after the initial deadline. Put differently, no additional applications will be accepted after the deadline. Moreover, applicants will be afforded an opportunity to cure any identified minor defects after an initial review of the application. Applications to which major modifications are made after the deadline for submitting applications shall be denied. Major modifications include, but are not limited to, any changes in the ownership of the applicant that constitute an assignment or change of control of the applicant (pro forma transfers and assignments have not generally been considered to be major modifications), or the certifications required in the application. If an applicant fails to make necessary corrections before a resubmission deadline, the applicant would be found not qualified to bid. [[Page 53385]] d. Other Competitive Bidding Considerations for the 833 Auction 50. Prohibition on Certain Communications. For spectrum and universal service auctions, the Commission has adopted rules prohibiting an applicant from communicating certain auction-related information to another applicant from the auction application filing deadline until the post-auction deadline for winning bidders to file long-form applications. In these rules, ``applicant'' is defined broadly to include ``all controlling interest in the entity submitting a short-form application to participate in an auction . . . as well as all holders of partnership and other ownership interests and any stock interest amounting to 10 percent or more of the entity, or outstanding stock, or outstanding voting stock of the entity submitting a short- form application, and all officers and directors of that entity.'' This prohibition on certain communications is intended to reinforce existing antitrust laws, facilitate detection of collusive conduct, and deter anticompetitive behavior. While we believe the 833 Auction should have a similar prohibition on certain communications, we defer until the pre-auction process the details of the prohibition on certain communications, but absent unique factors that may be applicable to the 833 Auction we expect the prohibition to be generally consistent with our rule in spectrum auctions. Regardless of the procedures ultimately decided upon for the 833 Auction, participants will be subject to antitrust laws, which are designed to prevent anticompetitive behavior in the marketplace. 51. Availability of Auction-Related Information During and After the Auction Process. It is our objective that the 833 Auction be transparent and objective. Consistent with that objective, we conclude that the procedures to be established in the pre-auction process should address what auction-related information will be available to bidders and to the public during the auction process, and when any information withheld during the auction will be made publicly available. 52. Upfront Payments and Default Payments. Entities that are interested in participating in the 833 Auction will be required to demonstrate an ability to pay for the rights to use the numbers for which they intend to bid by submitting an upfront payment. Moreover, since bids are binding commitments, if a bidder fails to make full payment on its bid, or otherwise defaults, it should be subject to a default payment. We defer to the pre-auction process what the upfront payments and default payments for the 833 Auction should be, but we generally expect the approach to be modeled on those used in the Commission's spectrum auctions. 53. Bidding Credits. We will not adopt bidding credits for the 833 Auction. We recognize that bidding credits can provide economic opportunity for a wide range of participants. Given the experimental nature of this auction, however, we conclude bidding credits are not appropriate at this time. No commenters who advocate we incorporate bidding credits in the 833 Auction provide specifics about the size standards or size of the bidding credits that might be employed, and we have no prior basis for determining the appropriate amount of any such bidding credit. We further do not wish to confuse the lessons we take away from this experiment by including bidding credits, which would influence bidder behavior. Instead, we will consider all of the data collected from the 833 Auction to determine if bidding credits should be offered in any possible toll free number auctions in the future. 54. Reserve Prices. We also decline to establish reserve prices for the 833 Auction. (By ``reserve price,'' we refer to a minimum amount that must be reached in order for a number to be assigned after the auction closes.) Most commenters oppose establishing reserve prices, arguing that reserves may discourage entities from bidding. Our goal for this auction is to gain as much information as possible about the effectiveness of a market-based approach to toll free number assignment, and we are convinced by the record that a reserve price may discourage auction participation and, thereby, decrease the amount of information we gain from the auction. And because this is our first time using competitive bidding to assign toll free numbers, we have a limited basis on which to establish a reasonable and efficient reserve price. 55. Bidding on Multiple Numbers. Consistent with our proposal in the Toll Free Assignment NPRM, we will not limit the overall quantity of toll free numbers the rights to which can be acquired by an auction participant. Establishing such a limit could hamper the efficiency of the auction by constraining bidders who hold the highest valuations. Moreover, we wish to obtain as much information as possible from this experiment and believe any such constraint would limit the information derived from this experiment. 56. Similarly, we find it is unnecessary to permit package bidding (i.e., single bids for the rights to groups of numbers) in the experiment. As the Commission stated in the Toll Free Assignment NPRM, though it is likely some bidders will demand the rights to multiple numbers, we do not believe valuation synergies warrant the additional complexity that package bidding brings. We desire to minimize the auctioneer's development costs for the auction interface and to simplify the bidding process for the auction participants. We expect the Bureau's post-auction report to address the auction's effectiveness, and to recommend whether any of the measures we have declined to adopt in the Report and Order--including package bidding-- could be useful in deciding on future toll free assignment methods. 57. Post-Auction Winning Bidder Public Notice. Once the auction has been completed, we will release a public notice identifying the winning bidders and establishing the deadline for making final payment for winning bids. This public notice will also explain how unsold inventory--numbers that received no bids--will be assigned after the 833 Auction. As we have explained, any potential subscriber that participates directly in the auction and wins the rights to a number must still work through a RespOrg after the auction to reserve the number in the Toll Free Database in accordance with our rules. 3. Somos as Auctioneer for the 833 Auction 58. We establish Somos, the Toll Free Numbering Administrator, as the auctioneer for the 833 Auction. We believe this role is commensurate with its present statutory and regulatory duties and its responsibilities. The Commission established Somos as the Toll Free Numbering Administrator in the 2013 Toll Free Governance Order. There, we determined that Somos met the impartiality requirement of section 251(e)(1) of the Act--codified in section 52.12 of our rules--and was ``eligible to serve as neutral SMS administrator.'' As the auctioneer for the 833 Auction, Somos shall continue to implement impartially toll free number assignments, consistent with the Act and our implementing rules. 59. In its role as auctioneer, we require Somos to provide the infrastructure and software for online bidding and carry out other activities necessary to implement the auction. These activities include performing bidder education and other outreach; [[Page 53386]] accepting and reviewing applications to participate in the auction; accepting upfront payments; announcing qualified bidders and those not qualified to bid; accepting bids during a single round of bidding; accepting final payments for winning bids and distributing refunds for any upfront payments not applied to winning bids; activating in the toll free database the numbers won at auction and for which final payment has been made; and undertaking any other tasks in furtherance of the 833 Auction that the Commission deems appropriate and as elaborated in the Auction Procedures Public Notice. The Commission will maintain oversight of Somos's implementation of the 833 Auction and will re-direct it as necessary to most effectively execute the 833 Auction. To maintain oversight, the Commission will review tariff filings, issue specific instruction in the Auction Procedures Public Notice, and direct Somos under our broad authority over the Toll Free Numbering Administrator. 60. One commenter posits that the present Toll Free Numbering Administrator should not serve as the toll free number auctioneer because Somos ``has no experience in conducting auctions'' and it ``would be called upon to develop entirely new [auction] processes.'' We disagree. Somos has asserted that it is fully capable of executing the Commission's proposed auction, and we have no basis on which to question its assertion. Moreover, given the considerable expertise in number assignment and administration that Somos has gained since the Commission formally designated it as the Toll Free Numbering Administrator, we are confident that Somos will perform its auctioneer duties in accordance with the procedures established by the Auction Procedures Public Notice. 61. We also agree with Somos that it is critical ``to maintain continuity and stability in TFN [toll free number] administration.'' In contrast, were we to establish an independent auctioneer, the independent auctioneer would have to first coordinate with Somos to verify that the numbers available in the 833 Auction are indeed available. The independent auctioneer would then have to direct Somos to assign the number to the winning bidder. We find this step in the process unnecessary as Somos is capable to serve as auctioneer in accord with the specific and direct instruction to be set forth in the Auction Procedures Public Notice. 62. While we appreciate the novelty of our experiment in using competitive bidding in the toll free context, the Commission itself has a vast amount of experience in conducting auctions in other contexts. We will oversee Somos's implementation of the 833 Auction, along with our general oversight of numbering, to alleviate any concerns about auction execution. Moreover, a single-round, sealed-bid auction should not require complex software or administration. 63. For these reasons, we direct Somos to serve as the auctioneer of the 833 Auction. In the event Somos seeks to add outside personnel to assist with the auction in any way, it may do so provided that it retains the overall administrative responsibility and neutrality. (Section 251(e) requires the Commission to ``create or designate one or more impartial entities to administer telecommunications numbering and to make such numbers available on an equitable basis.'') We further direct Somos to obtain an independent audit of the 833 Auction, including Somos's performance as auctioneer, after completion of the auction. In the event that the Bureau determines, and announces in a Public Notice, that the costs of conducting such an audit are unlikely to exceed the benefits--for example, because of low auction revenue-- Somos need not obtain an audit. 64. In designating Somos as the auctioneer of the 833 Auction, we do not foreclose the Commission's ability to assign this role to a different entity, or through a different method, such as a competitive process, in a future toll free number auction. In its report on the outcomes of the 833 Auction, we direct the Bureau to evaluate Somos' performance as the auctioneer, including its technical execution and cost-effectiveness in conducting the auction. The results of the 833 Auction, including its costs and the degree of its financial success, ought to inform the Commission's method for assigning the role of auctioneer in future toll free number auctions. 65. Auction Information. To allow the Commission to make a fair and accurate assessment of the results and consequences of the 833 Auction, we require Somos to retain and make available to the Commission all data and information about the auction and its administration, gathered before, during, and after the auction. Such information includes, but is not limited to, information on the following: Winning and losing bids, bidders, administrative costs (including detailed costs to design the auction user interface, auction platform, and software to evaluate the auction results), and post-auction secondary market transfers. (Per the exception we establish today, the secondary market is limited to numbers assigned via competitive bidding. The mutually exclusive numbers in the 833 code assigned in the 833 Auction will therefore be eligible for secondary market transfers.) We also require Somos to make available to the Commission information on 833 numbers not included in the auction for comparison purposes. This data will enable us to get a complete picture of the viability of the 833 Auction and on competitive bidding as an assignment method for future toll free code openings. 4. 833 Auction Proceeds 66. We will use any net positive proceeds from the 833 Auction to defray the costs of administering toll free numbering incurred by the Toll Free Numbering Administrator \1\ (i.e., costs beyond conducting the auction) and, potentially, the North American Numbering Plan Administrator (NANPA). (The NANPA is currently Neustar, Inc. The Toll Free Numbering Administrator is Somos, a not-for-profit corporation that provides the Toll Free Numbering Administrator function pursuant to FCC tariff, subject to section 61.38 of the Commission's rules.) By ``net positive proceeds,'' we mean any amount by which revenues from the auction exceed the costs of conducting the auction. (Because Somos will also be developing and conducting the auction, the administrator's costs for the auction will be paid first from auction revenues.) Applying net positive proceeds in this manner is consistent with our authority in section 251(e) to administer numbering, and its requirement that the costs of administration be borne by carriers on a competitively neutral basis. As discussed in the Toll Free Assignment NPRM, it will benefit all toll free [[Page 53387]] subscribers and RespOrgs, as well as potentially all stakeholders in the 20 countries that are members of the NANP. (The NANP member countries are Anguilla, Antigua and Barbuda, Bahamas, Barbados, Bermuda, British Virgin Islands, Canada, Cayman Islands, Dominica, Dominican Republic, Grenada, Jamaica, Montserrat, Sint Maarten, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, Turks and Caicos Islands, and the United States (including American Samoa, Puerto Rico, U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands). NANP toll free numbers are allotted to all member countries. The Toll Free Numbering Administrator administers the pool of toll free number resources allotted to Canada, Sint Maarten, and the United States. Other NANP member countries administer toll free numbering outside of the Toll Free Numbering Administrator and its Toll Free Database.) --------------------------------------------------------------------------- \1\ Somos is a not-for-profit corporation that provides the Toll Free Numbering Administrator function pursuant to FCC tariff, subject to section 61.38 of the Commission's rules. 47 CFR 61.38. Somos must file annual tariff revisions pursuant to the applicable part 61 rules for a dominant carrier, subject to the tariff requirements and enforcement of the Commission pursuant to the Act and the Commission's rules. SMS/800 Order, 28 FCC Rcd at 15342, paragraphs. 37 through38; see also generally Somos, Inc., Tariff F.C.C. No. 1 (2018), https://s3.amazonaws.com/files-prod.somos.com/documents/SMS800FunctionsTariff.pdf (Toll Free Tariff). Previous tariff information is available at https://apps.fcc.gov/etfs/public/tariff.action?idTariff=787. Tariff modifications must be filed each January 31 (following the close of its fiscal year, which is the calendar year) updating the rates for its services, effective during the next tariff year that begins in February. Each such filing must contain an updated cost of service study pursuant to section 61.38. Id. Based upon that cost study, Somos's rates and charges are adjusted to recover those forecasted costs over the ensuing tariff year. --------------------------------------------------------------------------- 67. Disbursement of 833 Auction Revenues That Exceed Somos's Auction Costs. We conclude that net positive proceeds from the 833 Auction should be used to defray toll free numbering administration costs. We establish a methodology that will benefit Toll Free Numbering Administrator users while tempering resulting year-over-year change of administrative rates and charges. We therefore tie our disbursement to the ratio between net positive proceeds and Somos's revenue requirements. In the present tariff year, Somos's revenue requirement for toll free numbering administration services is $56.9 million. (The revenue requirement to cover forecasted costs for toll free numbering administration (referenced in the Tariff as ``SMS/800'') services in the current tariff period, covering February 15, 2018--February 14, 2019, is $56,933,855.) If net positive proceeds are less than five percent of Somos's then-current annual revenue requirement, then the net positive proceeds should be used only to defray toll free numbering administration costs for the tariff period immediately following the close of the 833 Auction. (Somos would make this determination based on its cost study for the ensuing tariff year, with and without cost reduction by offset of auction proceeds. Should there be any further auction proceeds received after such determination (e.g., delayed payments accepted by the Commission), those proceeds will be applied/ remitted in accordance with the manner set forth herein based on the then-cumulative amount of all auction proceeds from that auction, inclusive of such further auction proceeds. Auction proceeds amounting to five percent or less of the current annual revenue requirement applied to that single tariff year would likely have a de minimis effect on administrative rates and charges.) In the event that net positive proceeds exceed five percent of Somos's costs, then the net positive proceeds should be distributed evenly across five years for cost recovery under the tariff to minimize the impact on the administrative rates and charges. This approach avoids substantial year-over-year changes in administrative rates and charges, and allows RespOrgs and toll free subscribers to receive the cost reduction over an extended period if net positive proceeds are large enough to warrant. (The Commission has long sought to ``smooth'' the impact of its actions on telephony rates and charges.) 68. If net positive proceeds from the 833 Auction are large enough that applying them to defray toll free numbering administration costs over five years would result in a greater than 25 percent decrease in the revenue requirement for the Toll Free Numbering Administrator over the five-year period, then the excess of net positive proceeds beyond that amount will be remitted to the Billing and Collection (B&C) Agent for the NANP to be applied to defray the costs of NANP administration on behalf of its 20 member countries. (The present B&C Agent is Welch LLP. The B&C Agent will apply such funds prior to application of the various contribution factors and billing and collections processes.) We find that directing funds in excess of 25 percent for the benefit of the NANP strikes an appropriate balance, avoiding excessive fluctuations in the toll free tariff structure and benefitting both numbering administrations upon which toll free calling is dependent. The toll free numbers administered by the Toll Free Numbering Administrator are numbers within the NANP; it is therefore appropriate that such funds potentially go to defray the costs of the administering the NANP, which are borne by the countries served by the Toll Free Numbering Administrator and the other NANP member countries. In the event proceeds remitted to the B&C Agent exceed five percent of NANPA costs, then the net positive proceeds should be distributed evenly by the B&C Agent across five fiscal years of the NANPA, to minimize the impact on the NANPA rates and charges. If proceeds remitted to the B&C Agent are large enough that applying them to defray NANPA costs over five years would result in a greater than 25 percent decrease in the revenue requirement for the NANPA over the five-year period, then the excess of net positive proceeds beyond that amount will be distributed evenly by the B&C Agent across the next ten fiscal years of the NANPA. 69. Recovery of 833 Auction Costs That Exceed Auction Revenues. In the event the costs of the 833 Auction exceed its revenues, Somos may recover the resulting deficit in the same manner as other costs of toll free number administration: By incorporating them into the cost recovery mechanism in its tariff. These auction costs would be recovered along with all other allowable costs as part of the Toll Free Numbering Administrator's revenue requirement for the ensuing tariff year(s). This means that all RespOrgs and their underlying toll free subscribers will bear the auction's costs, just as they would share the benefit of any net auction proceeds. This approach is consistent with the cost-recovery system whereby all RespOrgs, and ultimately all toll free subscribers, bear the costs of numbering administration collectively. (Toll free numbering administration costs are recovered via the Toll Free Numbering Administrator's rates and charges, in the form of both transaction-specific fees, and monthly and other charges that are not tied to any specific transaction of number acquisition or change.) 70. We anticipate that the 833 Auction will benefit the entire toll-free industry by potentially lowering the monthly fees associated with toll free reservations. Accordingly, we reject the suggestion that equitable and efficient distribution of numbers requires that any costs of the 833 Auction exceeding auction revenues should be imposed only upon auction winners, or auction participants, under ``competitively neutral'' and ``cost-causer'' approaches. The 833 Auction is open to all RespOrgs and all potential subscribers. Moreover, the sharing of any net auction proceeds--or any auction deficit--does not of itself distort the toll free market in any fashion or favor one competitor in that marketplace over any other. As one commenter notes, consumers benefit directly from the use of toll free numbers, and ``reducing the input costs proportionally across RespOrgs will benefit all participants at their level of participation, thereby not distorting the toll-free market. The method proposed by the FCC is an efficient and effective mechanism for achieving that goal.'' 71. Finally, for the reasons discussed above, if the deficit exceeds five percent of the forecasted cost of the Toll Free Numbering Administrator's services for [[Page 53388]] the next tariff year, we will require the recovery of any deficit over the ensuing five years of cost recovery under the tariff. Such a deficit will be divided equally among each of those five years, and incorporated into the administrator's cost studies and revenue requirements for each of those years. By this approach, we seek to avoid or reduce any substantial increases or fluctuations in the Toll Free Number Administrator's rates and charges due to any deficit. 72. International Considerations. One commenter notes the international nature of the NANP and asks ``what right does US, or its agencies, have to unilaterally benefit from an auction?'' This concern is misplaced. The United States will not unilaterally benefit from the 833 Auction's proceeds. Rather, as explained, net positive proceeds will be used to defray the costs of toll free number administration, benefitting all RespOrgs (and ultimately toll free subscribers) in those countries served by the Toll Free Numbering Administrator (Canada, Sint Maarten and the United States), and may also be used to defray the cost of NANP administration, benefitting all of its member countries. Even if the 833 Auction does not meet the 25 percent threshold, RespOrgs from these countries will benefit from lowered charges from the Toll Free Numbering Administrator. We note that a coalition of 10 Canadian RespOrgs, including major Canadian telecommunications service providers, supports our proposal to apply net auction proceeds to the Toll Free Numbering Administrator's administration costs. Applying net auction proceeds as set forth herein is consistent with the way Somos applies RespOrg fee proceeds, and the NANPA collects fees, through the B&C Agent, from member countries and service providers. 73. Somos Tariff Implications. We direct Somos to reflect any net positive proceeds or deficit related to the 833 Auction in the section 61.38 cost support filed with the Toll Free Tariff. We have previously said that Somos must support the costs of its Toll Free Database administration as part of its tariff filing with the Commission. The present Toll Free Tariff ``contains regulations, rates and charges'' applicable to administration of the Toll Free Database. As explained above, any auction proceeds will be applied to decrease Toll Free Database administration costs. This will allow Somos to lower certain of its charges, such as the monthly customer record administration charge. On the other hand, any auction deficit, i.e., auction costs that exceed revenues from the auction, will be recovered via the tariff's cost recovery mechanism along with any other costs associated with administering the database. Inclusion of auction-related costs in the tariff's cost justification is necessary to show the impact of the 833 Auction on the tariffed charges to RespOrgs for use of the Toll Free Database. 5. Toll Free Numbers Used for Public Purposes 74. To ensure that the public interest is protected in the 833 Auction, we will set aside numbers in the 833 code that have been identified as mutually exclusive upon reasonable request by government entities and non-profit health and safety organizations. (Government entities include federal, state, local, and Tribal governments, and includes any such entities in all countries served by the Toll Free Numbering Administrator. Non-profit health and safety organizations must be 26 U.S.C. 501(c)(3) organizations.) In the Toll Free Assignment NPRM, the Commission sought comment on whether certain desirable toll free numbers should be set aside for use, without cost, by government agencies or by non-profit health, safety, education, or other non- profit public interest organizations. After reviewing the record, we find that ``[c]ertain desirable toll free numbers that promote health and safety should be set aside for use by government, without cost,'' as well as for use by non-profit health and safety organizations that meet the standard of our precedent. 75. Government (federal, state, local and Tribal) entities as well non-profit health and safety organizations have a unique relationship with toll free numbers. Not only do they use numbers to provide service to the public, but they also face unique budgeting challenges that may place toll free numbers assigned at auction out of reach. We disagree with commenters who argue that the public interest nature of non-profit organizations can be practically difficult to identify, and that setting aside numbers for non-profits presents a greater possibility of fraud and abuse. We further disagree with the suggestion that allowing private non-profit organizations to petition for numbers to be set aside is an act of ``eminent domain.'' This claim is fundamentally at odds with the toll free numbering scheme, which vests the Commission with authority to assign numbers ``equitabl[y].'' Further, subscribers have no property interest in toll free numbers. The Commission will use the 501(c)(3) designation as well our existing standard for public health and safety use to limit set-asides to those legitimate public interest organizations that truly promote public health and safety. This process is consistent with the way the Commission has considered petitions for reassignment of toll free numbers in the past. 76. We disagree with the arguments in the record that offering any public interest-related number set aside for governmental or non-profit entities is inherently not ``equitable'' under section 251(e)(1) of the Act. To the contrary, this set aside works to assuage concerns that some bidders--government and non-profit entities--may be precluded from obtaining desired numbers by our auction experiment. However, we are sympathetic to the argument that the public should have an opportunity to object to requests that numbers be set aside. For this reason, while we will consider requests from government and non-profit entities to set aside numbers in the 833 code that are already considered mutually exclusive, in order for a request to be considered, the government or non-profit entity must file a ``Petition for an 833 Toll Free Number'' with the Bureau in accordance with the Auction Procedures Public Notice. The Bureau will then solicit public comment prior to making its decision on the number request based on the public interest. (Petitions must be filed in ECFS in Docket No. WC 17-192 and CC Docket No. 95-155. Filing the petition does not guarantee the request will be granted.) We intend to maintain our standard for review consistent with the unusual and compelling public health and safety standards in Commission precedent and direct the Bureau to consider each application individually, on a case-by-case basis, as it is filed with the Commission. We note that while being a government entity or a 501(c)(3) organization is a necessary condition for a set aside, it is not in and of itself a sufficient condition and the Bureau must apply the unusual and compelling public health and safety standards discussed above. If, however, multiple government or non-profit entities file petitions requesting the same number for public health and safety purposes which meet the standard of our precedent, we direct Somos to conduct a lottery for the number among the requesting applicants. We believe a lottery is both an equitable and expedient way to resolve competing requests for the same number. The Commission will use the information obtained from this number set aside process to determine whether [[Page 53389]] we should continue to use it in future code openings. 6. Treatment of Trademark Holders 77. We decline to adopt proposals in the record to provide special treatment for trademark-holders. Specifically, commenters have suggested that we provide trademark-holders a right of first refusal or adopt new ``procedures'' to address instances of abuse of a number desired by a trademark-holder. We find that, as under the first-come, first-served methodology, ``concerns regarding trademark infringement and unfair competition . . . should be addressed by the courts under the trademark protection and unfair competition laws, rather than by the Commission.'' 78. We disagree with commenters who argue that failing to provide special treatment for trademark-holders is contrary to the public interest. As 1-800-CONTACTS admits, the Lanham Act already serves to ``protect consumers by preventing confusion and unfair competition,'' and 1-800-FLOWERS has acknowledged its success policing use that infringes on its trademarks under the first-come, first-served methodology. Some commenters argue that a market-based approach to number assignment will encourage ``extortion'' of trademark-holders by bad actors, but we see no reason to diverge from our position that number assignment should be trademark-agnostic. An auction mechanism assigns numbers to those who value them most highly, and a secondary market--which we adopt on a limited basis below--only facilitates this assignment. Subscribers remain bound by trademark law once a number has been assigned. We also disagree with the argument of 1-800-CONTACTS that auctioning numbers without special protection for trademark holders ``would conflict with the statutory requirements of the Lanham Act.'' 1-800-CONTACTS does not identify with specificity which requirements the Commission would violate, or provide support for its argument. The United States Court of Appeals for the Sixth Circuit has found, in the context of an internet domain name registrar, that assigning an item to a third party is not ``use'' for purposes of a trademark infringement claim. C. Secondary Markets for Toll Free Numbers 79. To fully realize the effectiveness of assigning numbers via competitive bidding, we allow for a secondary market of toll free numbers won at auction. In the Toll Free Assignment NPRM, the Commission sought comment on revising our rules to promote development of a secondary market for toll free numbers. We have reviewed the record, and agree with commenters who argue that our current rules may have a ``chilling impact . . . on private enterprise.'' Consistent with our goal of making the rights to use numbers available on an equitable basis by assigning them to those who can put the numbers to their best use, and with the record, we now allow for the development of a secondary market for numbers assigned via competitive bidding. 80. The Commission's current rules prevent three types of conduct that limit or preclude the development of a secondary market. First, the rules prevent brokering--``the selling of a toll free number by a private entity for a fee.'' Second, the rules prevent hoarding, which is the ``acquisition by a toll free subscriber . . . of more toll free numbers than the toll free subscriber intends to use for the provision of toll free service.'' Third, the rules prevent warehousing, a practice in which a RespOrg reserves toll free numbers ``without having an actual toll free subscriber for whom the numbers are being reserved.'' These rules not only preclude the sale of the rights to use toll free numbers--central to a secondary market--but also frustrate number sales by placing obligations on potential sellers. 81. As the Commission explained in the Toll Free Assignment NPRM, a secondary market appears to be ``an efficient and productive use of numbers'' because it ``permit[s] subscribers to legally obtain numbers which they value.'' It also promotes the efficient operation of an auction: Permitting the free acquisition and transfer of the rights to use numbers allows subscribers to purchase or sell numbers in response to the outcome of the auction, and limits pre-auction costs associated with estimating which--and how many--numbers a bidder may win. It further encourages value-creating entities to promote efficiency by procuring rights to numbers with an intent to sell those rights to other interested subscribers. The secondary market thus ensures that numbers are assigned to those parties who can most efficiently use them. Under our current system, by contrast, a party that desires a number most cannot ensure that it is assigned that number; and if it fails to be assigned that number, it has no mechanism to procure it after the initial assignment. An auction mechanism with a robust secondary market not only ensures that numbers are assigned to the bidder that values them most at the time of assignment, but also allows the rights to numbers to be reassigned when valuations change. 82. We disagree with commenters who claim that permitting a robust secondary market will lead to undesirable conduct and extortion. With an auction and secondary market, the rights to numbers will be assigned to those entities who value them most; differences in valuation do not reflect undesirable conduct or extortion. To the extent there is genuine misconduct, trademark and competition law serves to protect parties from bad actors. Further, the argument that allowing a secondary market will ``lead to premature exhaust'' is minimized by our decision to allow a secondary market only for those numbers assigned by auction. In the present experiment, the 833 Auction includes approximately 17,000 numbers--under one percent of all 833 numbers. To the extent our rules preventing a secondary market were adopted to limit exhaust, we do not believe this limited exception will significantly affect the exhaust of the entire pool of 833 numbers. Because creating this limited secondary market will not lead to premature exhaust, we see no need to adopt the proposal in the record that we ``assess[ ] a fixed monthly direct contribution from all toll- free number holders [to] discourage hoarding and warehousing'' in order to combat exhaust. Further, we disagree with CenturyLink's argument that we should not combine a secondary market with the 833 Auction experiment so that an auction ``may be adequately evaluated without the influence of other variables.'' As we have explained, a secondary market is an important component to a successful auction, because it allows auction participants to later transfer numbers in response to information learned at the auction. And exploring these two changes simultaneously will allow us to see how they work in conjunction with one another. 83. We also disagree with the argument that ``abandoning the brokering rule . . . violates the statutory mandate of equitable distribution of numbers.'' The secondary market is both ``orderly and efficient'' and ``fair.'' The secondary market is ``orderly'' because it is simple: Competing claims are resolved by assigning rights to a number to the party who values it most. The secondary market is ``efficient,'' as that term is interpreted under our precedent in this context, in that it will minimize number exhaust by allowing rights to numbers to be obtained without requiring the opening of a new code. Finally, the secondary market is ``fair'' [[Page 53390]] because no potential subscribers are discriminated against; there is equal opportunity to participate in the secondary market. 84. To allow for a secondary market to develop, we adopt exceptions to the Commission's rules prohibiting the brokering, hoarding, and warehousing of toll free numbers for numbers acquired in an auction. (We also modify our rule limiting how long a number may remain in ``reserved'' status in order to harmonize that rule with the exceptions we adopt today.) Because, as explained, a secondary market can promote the efficiency of an auction, we find that it is appropriate that we apply our exceptions to numbers assigned via competitive bidding. Numbers which are eligible for this exception by virtue of having been assigned via competitive bidding do not lose their eligibility if they are sold or otherwise transferred to another subscriber. Numbers which are returned to the spare pool, however, do not retain eligibility for the exception simply because they were once assigned in an auction. 85. We decline, at this time, to mandate that fees associated with the sale of numbers on the secondary market go to the cost of toll free numbering administration borne by Somos. We are convinced by the record that our rules should not ``increase the costs to subscribers.'' However, as we have explained previously, in order to evaluate the operation of the secondary market, we direct Somos to maintain data on secondary market transactions and make that data available to the Commission. To facilitate the collection of data, RespOrgs will be required to provide subscriber information to Somos, including the new subscriber's name and contact information, and other limited information Somos deems necessary. D. Other Toll Free Rule Revisions 86. To further modernize our decades-old toll free numbering rules, we adopt several definitional and technical updates to improve clarity and flexibility in toll free number assignment. We also incorporate recommendations of the North American Numbering Council (NANC, the Commission's Federal Advisory Committee on numbering matters) to revise our definitions and lag time rules to be consistent with our new market-based toll free assignment rule. 87. NANC Report. In the Toll Free Assignment NPRM, the Commission sought comment on whether to ``eliminate or revise any other toll free rules'' and specifically suggested sections 52.101(d) and 52.103 as potential targets for revision. After the release of the NPRM, the Bureau directed the NANC to recommend possible rule changes to promote a market-based approach to the assignment of toll free numbers. In response to this direction, the NANC Toll Free Number Assignment Modernization Working Group recommended revisions to sections 52.101 and 52.103 of our rules regarding general definitions and lag times. 88. General Definitions. We revise section 52.101(a) to replace the term ``Number Administration and Service Center'' (NASC) with the term ``Toll Free Numbering Administrator.'' (Section 52.101(a) currently defines ``Number Administration and Service Center'' as ``The entity that provides user support for the Service Management System and administers the Service Management System database on a day-to-day basis.'') Despite the fact that the Commission has used the term Toll Free Numbering Administrator for several years, our rules have not reflected that terminology. Our rules' reference to the NASC is now outdated, and this revision will update the Commission's rules to reflect current industry terminology. We further modify our definition, consistent with the NANC's recommendation, to reflect that the Toll Free Numbering Administrator role is filled by an entity appointed under our authority pursuant to section 251(e)(1) of the Act. Because the Toll Free Numbering Administrator serves the same purpose as the former NASC, however, we otherwise retain the same definition as to the role of the toll free administrator. 89. We further revise section 52.101(e) to expand the definition of ``Toll Free Subscriber.'' The Commission's rules currently define a Toll Free Subscriber as ``[T]he entity that requests a Responsible Organization to reserve a toll free number from the SMS database.'' Our revised rule establishes that a Toll Free Subscriber is ``The entity that has been assigned a toll free number.'' This change will make our definition consistent with our revised rule section 52.111, which allows for assignment via a market-based methodology, by making clear that a subscriber is not limited to requesting a toll free number be reserved in the toll free database. For example, a subscriber can be assigned a number through the competitive bidding process. 90. Lag Times. We make multiple revisions to section 52.103, which sets forth the various statuses of toll free numbers in the Toll Free Database. First, we adopt a new section 52.103(a)(10) to create a ``Transitional Status'' category for numbers that have been disconnected for less than four months, but for which no service provider intercept recording (also known as Exchange Carrier Intercept Recording) is being provided. (Transitional Status is thus distinct from Disconnect Status, where a service provider intercept recording (i.e., a recording explaining that a number has been disconnected) is being provided.) The NANC comments, and we agree, that adding this Transitional Status will better align the Commission's rules with current industry practice. 91. Second, we modify section 52.103(d) to make the existing Disconnect Status rule compatible with a market-based number assignment approach. Section 52.103(d) requires disconnected numbers to stay in Disconnect Status for a period of up to four months, and then go to Spare Status at the end of that period. The NANC Report recommends amending the rule to allow numbers that have been in Disconnect Status for up to four months to go directly to Unavailable or Spare Status. (We note that numbers set-aside for a market-based assignment are placed in unavailable status.) We conclude, and the NANC agrees, that allowing numbers to go from Disconnect Status to Unavailable--rather than directly to Spare Status--will ensure that any number can be assigned by a market-based mechanism. This change will allow the Toll Free Numbering Administrator to send numbers that have been selected for market-based assignment directly into Unavailable rather than into Spare Status. We thus adopt this change, which will allow greater flexibility and further modernize the toll free assignment process. 92. Finally, we also adopt a change to section 52.103(f), ``Unavailable Status.'' The description of ``Unavailable Status'' in that section references DSMI, which has since been replaced by Somos as the Toll Free Numbering Administrator. The definition should be updated to refer to the Toll Free Numbering Administrator. This revision will ensure that the Commission's rules reflect current industry terminology. We also revise rule section 52.109(c) to change spare ``poll'' to spare ``pool,'' thus correcting a typographical error in this rule. 93. The ministerial revisions we adopt today are a logical outgrowth of the proposals in the Toll Free Assignment NPRM. As the Commission has previously explained, ``[a]n NPRM satisfies the logical outgrowth test if it `expressly ask[s] for comment on a particular issue or otherwise ma[kes] [[Page 53391]] clear that the agency [is] contemplating a particular change.''' That test is satisfied here. The Toll Free Assignment NPRM expressly proposed a revision to the rules governing toll free number assignment to allow for assignment via competitive bidding. It further sought comment on whether to ``eliminate or revise any other toll free rules,'' with specific reference to sections 52.101(d) and 52.103 of the rules. Our ministerial revisions, with one minor exception, apply to sections 52.101 and 52.103. (The exception is our revision to section 52.109(c), correcting a typographical error in that rule.) Further, the revisions operate to harmonize those rules with the competitive bidding assignment methodology expressly noticed in the Toll Free Assignment NPRM. We find that ``parties should have anticipated that the rule [revisions] ultimately adopted [were] possible.'' We also find good cause, to the extent necessary, to adopt these ministerial changes. These revisions are insignificant and inconsequential to the industry and the public. Our revisions to sections 52.101(a), 52.103(a)(10), 52.103(f), and 52.109(c) either correct typographical errors or bring our rules into line with contemporary practice and do not increase or otherwise modify any entities' regulatory burden. Our revisions to sections 52.101(e) and 52.103(d) similarly do not impact any entities' regulatory burden, and only harmonize our rules to allow for the successful operation of the competitive bidding assignment methodology we adopt today. E. Legal Authority 94. The Commission has found section 251(e)(1) of the Act ``to empower the Commission to ensure that toll free numbers, which are a scarce and valuable national public resource, are allocated in an equitable and orderly manner that serves the public interest.'' Pursuant to these statutory mandates, the Commission has the ``authority to set policy with respect to all facets of numbering administration in the United States,'' and a ``require[ment] . . . to ensure the efficient, fair, and orderly allocation of toll free numbers.'' The actions we take today meet the statutory requirement that numbers be made ``available on an equitable basis''--an auction and secondary market are both efficient and orderly, and fair. We also have clear authority to require Somos to serve as the auctioneer for 833 numbers and to comply with requirements adopted in this order. Section 251(e)(1) obligates the Commission to ensure its Toll Free Numbering Administrator administers ``telecommunications numbering and to make such numbers available on an equitable basis.'' And section 201(b) authorizes the Commission to ``prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this [Act].'' 95. CenturyLink argues that we do not have authority to assign toll free numbers through competitive bidding because, unlike in the context of spectrum auctions, Congress did not specifically task the Commission with using competitive bidding for toll free numbers. Since the Act was adopted in 1934, however, Congress has stated with particularity the various means for assignment of spectrum licenses; the specific addition of an assignment via competitive bidding supplemented the previous Congressional direction to make licenses available via an application process or random assignment. By contrast, Congress has used much more general language in section 251 and thus given us broad discretion to administer numbering. In Congress's grant of ``exclusive jurisdiction over those portions of the North American Numbering Plan that pertain to the United States'' in section 251(e)(1), we find authority to employ any number assignment mechanisms which meet the statute's ``equitable basis'' requirement, including competitive bidding. IV. Final Regulatory Flexibility Analysis 1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated into the Notice of Proposed Rulemaking (Toll Free Assignment NPRM) for the Toll Free Assignment Modernization proceeding. The Commission sought written public comment on the proposals in the Toll Free Assignment NPRM, including comment on the IRFA. The Commission received no comments on the IRFA. Because the Commission amends its rules in this Order, the Commission has included this Final Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to the RFA. A. Need for, and Objectives of, the Rules 2. In the Toll Free Assignment NPRM, the Commission reconsidered how to best meet the statutory mandate that it make toll free numbers ``available on an equitable basis.'' To this end, the Commission proposed and sought comment on numerous regulatory reforms to existing rules regarding toll free number assignment. 3. Pursuant to the objectives set forth in the Toll Free Assignment NPRM, this Report and Order (Order) adopts changes to Commission rules regarding toll free number assignment. Specifically, the Order (1) revises the Commission's toll free assignment rule to allow for the use of competitive bidding for toll free numbers; (2) establishes the use of competitive bidding to assign the over 17,000 mutually exclusive numbers in the 833 toll free code, identified pursuant to the 833 Code Opening Order; (3) exempts numbers assigned via competitive bidding from the rules preventing the development of a secondary market; and (4) makes ministerial changes to our toll free number assignment rules. These modifications to our toll free number assignment rules will create a more efficient method of toll free number assignment, consistent with our statutory mandate. Ultimately, these reforms will ensure the equitable and efficient assignment of toll free numbers. B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA 4. The Commission did not receive comments addressing the rules and policies proposed in the IRFAs in the Toll Free Assignment NPRM. C. Response to Comments by the Chief Counsel for Advocacy of the SBA 5. Pursuant to the Small Business Jobs Act of 2010, which amended the RFA, the Commission is required to respond to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA), and to provide a detailed statement of any change made to the proposed rules as a result of those comments. 6. The Chief Counsel did not file any comments in response to this proceeding. D. Description and Estimate of the Number of Small Entities to Which the Rules Will Apply 7. The RFA directs agencies to provide a description and, where feasible, an estimate of the number of small entities that may be affected by the final rules adopted pursuant to the Order. 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. (Pursuant to 5 U.S.C. 601(3), the statutory definition of a small business [[Page 53392]] applies ``unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register.'') A ``small-business concern'' is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. 8. The changes to our toll free number assignment rules affect obligations on wired and wireless telecommunications carriers, local exchange and interexchange carriers, local and toll resellers, prepaid calling card providers, and cable operators. 9. Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions, over time, may affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three comprehensive small entity size standards that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA's Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States which translates to 28.8 million businesses. Next, the type of small entity described as a ``small organization'' is generally ``any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.'' Nationwide, as of 2007, there were approximately 1,621,215 small organizations. Finally, the small entity described as a ``small governmental jurisdiction'' is defined generally as ``governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.'' U.S. Census Bureau data published in 2012 indicate that there were 89,476 local governmental jurisdictions in the United States. We estimate that, of this total, as many as 88,761 entities may qualify as ``small governmental jurisdictions.'' (The 2012 U.S. Census Bureau data for small governmental organizations are not presented based on the size of the population in each organization. There were 89,476 local governmental organizations in the Census Bureau data for 2012, which is based on 2007 data. As a basis of estimating how many of these 89,476 local government organizations were small, we note that there were a total of 715 cities and towns (incorporated places and minor civil divisions) with populations over 50,000 in 2011. If we subtract the 715 cities and towns that meet or exceed the 50,000 population threshold, we conclude that approximately 88,761 are small.) Thus, we estimate that most governmental jurisdictions are small. 10. Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as ``establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired communications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.'' The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this size standard, the majority of firms in this industry can be considered small. 11. Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services. The closest applicable NAICS Code category is Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, census data for 2012 shows that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. The Commission therefore estimates that most providers of local exchange carrier service are small entities that may be affected by the rules adopted. 12. Incumbent LECs. Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The closest applicable NAICS Code category is Wired Telecommunications Carriers as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 3,117 firms operated in that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by the rules and policies adopted. Three hundred and seven (307) Incumbent Local Exchange Carriers reported that they were incumbent local exchange service providers. Of this total, an estimated 1,006 have 1,500 or fewer employees. 13. Competitive Local Exchange Carriers (Competitive LECs), Competitive Access Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate NAICS Code category is Wired Telecommunications Carriers, as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicate that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. Based on this data, the Commission concludes that the majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, and Other Local Service Providers, are small entities. According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services. Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees. In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees. Also, 72 carriers have reported that they are Other Local Service Providers. Of this total, 70 have 1,500 or fewer employees. Consequently, based on internally researched FCC data, the Commission estimates that most providers of competitive local exchange service, competitive access providers, Shared-Tenant Service Providers, and Other Local Service Providers are small entities. 14. We have included small incumbent LECs in this present RFA analysis. As noted above, a ``small business'' under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone [[Page 53393]] communications business having 1,500 or fewer employees), and ``is not dominant in its field of operation.'' The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not ``national'' in scope. (The Small Business Act contains a definition of ``small business concern,'' which the RFA incorporates into its own definition of ``small business.'' SBA regulations interpret ``small business concern'' to include the concept of dominance on a national basis.) We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts. 15. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a definition for Interexchange Carriers. The closest NAICS Code category is Wired Telecommunications Carriers as defined above. The applicable size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicates that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. According to internally developed Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services. Of this total, an estimated 317 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of IXCs are small entities that may be affected by our proposed rules. 16. Local Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, all operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these prepaid calling card providers can be considered small entities. 17. Toll Resellers. The Commission has not developed a definition for Toll Resellers. The closest NAICS Code Category is Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, 1,341 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data, 881 carriers have reported that they are engaged in the provision of toll resale services. Of this total, an estimated 857 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of toll resellers are small entities. 18. Other Toll Carriers. Neither the Commission nor the SBA has developed a definition for small businesses specifically applicable to Other Toll Carriers. This category includes toll carriers that do not fall within the categories of interexchange carriers, operator service providers, prepaid calling card providers, satellite service carriers, or toll resellers. The closest applicable NAICS Code category is for Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 shows that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of Other Toll Carriers can be considered small. According to internally developed Commission data, 284 companies reported that their primary telecommunications service activity was the provision of other toll carriage. Of these, an estimated 279 have 1,500 or fewer employees. Consequently, the Commission estimates that most Other Toll Carriers are small entities that may be affected by rules adopted pursuant to the Report and Order. 19. Prepaid Calling Card Providers. The SBA has developed a definition for small businesses within the category of Telecommunications Resellers. Under that SBA definition, such a business is small if it has 1,500 or fewer employees. According to the Commission's Form 499 Filer Database, 500 companies reported that they were engaged in the provision of prepaid calling cards. The Commission does not have data regarding how many of these 500 companies have 1,500 or fewer employees. Consequently, the Commission estimates that there are 500 or fewer prepaid calling card providers that may be affected by the rules. 20. Wireless Telecommunications Carriers (except Satellite). This industry comprises establishments engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves. Establishments in this industry have spectrum licenses and provide services using that spectrum, such as cellular services, paging services, wireless internet access, and wireless video services. The appropriate size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census data for 2012 show that there were 967 firms that operated for the entire year. Of this total, 955 firms had employment of 999 or fewer employees and 12 had employment of 1000 employees or more. (Available census data do not provide a more precise estimate of the number of firms that have employment of 1,500 or fewer employees; the largest category provided is for firms with ``1000 employees or more.'') Thus under this category and the associated size standard, the Commission estimates that the majority of wireless telecommunications carriers (except satellite) are small entities. 21. The Commission's own data--available in its Universal Licensing System--indicate that, as of October 25, 2016, there are 280 Cellular licensees that will be affected by our actions today. (For the purposes of this FRFA, consistent with Commission practice for wireless services, the Commission estimates the number of licensees based on the number of unique FCC Registration Numbers.) The Commission does not know how many of these licensees are small, as the Commission [[Page 53394]] does not collect that information for these types of entities. Similarly, according to internally developed Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service, and Specialized Mobile Radio Telephony services. Of this total, an estimated 261 have 1,500 or fewer employees, and 152 have more than 1,500 employees. Thus, using available data, we estimate that the majority of wireless firms can be considered small. 22. Wireless Communications Services. This service can be used for fixed, mobile, radiolocation, and digital audio broadcasting satellite uses. The Commission defined ``small business'' for the wireless communications services (WCS) auction as an entity with average gross revenues of $40 million for each of the three preceding years, and a ``very small business'' as an entity with average gross revenues of $15 million for each of the three preceding years. The SBA has approved these definitions. 23. Wireless Telephony. Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As noted, the SBA has developed a small business size standard for Wireless Telecommunications Carriers (except Satellite). Under the SBA small business size standard, a business is small if it has 1,500 or fewer employees. According to Commission data, 413 carriers reported that they were engaged in wireless telephony. Of these, an estimated 261 have 1,500 or fewer employees and 152 have more than 1,500 employees. Therefore, a little less than one third of these entities can be considered small. 24. Cable and Other Subscription Programming. This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis. The broadcast programming is typically narrowcast in nature (e.g., limited format, such as news, sports, education, or youth- oriented). These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers. The SBA has established a size standard for this industry stating that a business in this industry is small if it has 1,500 or fewer employees. The 2012 Economic Census indicates that 367 firms were operational for that entire year. Of this total, 357 operated with less than 1,000 employees. Accordingly we conclude that a substantial majority of firms in this industry are small under the applicable SBA size standard. 25. Cable Companies and Systems (Rate Regulation). The Commission has developed its own small business size standards for the purpose of cable rate regulation. Under the Commission's rules, a ``small cable company'' is one serving 400,000 or fewer subscribers nationwide. Industry data indicate that there are currently 4,600 active cable systems in the United States. (This figure was derived from a August 15, 2015 report from the FCC Media Bureau, based on data contained in the Commission's Cable Operations and Licensing System (COALS).) Of this total, all but eleven cable operators nationwide are small under the 400,000-subscriber size standard. In addition, under the Commission's rate regulation rules, a ``small system'' is a cable system serving 15,000 or fewer subscribers. Current Commission records show 4,600 cable systems nationwide. Of this total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 systems have 15,000 or more subscribers, based on the same records. Thus, under this standard as well, we estimate that most cable systems are small entities. 26. Cable System Operators (Telecom Act Standard). The Communications Act also contains a size standard for small cable system operators, which is ``a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.'' There are approximately 52,403,705 cable video subscribers in the United States today. Accordingly, an operator serving fewer than 524,037 subscribers shall be deemed a small operator if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that all but nine incumbent cable operators are small entities under this size standard. We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million. (The Commission does receive such information on a case-by-case basis if a cable operator appeals a local franchise authority's finding that the operator does not qualify as a small cable operator pursuant to section 76.901(f) of the Commission's rules.) Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, 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. 27. All Other Telecommunications. The ``All Other Telecommunications'' industry is comprised of establishments that are primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing internet services or voice over internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry. The SBA has developed a small business size standard for ``All Other Telecommunications,'' which consists of all such firms with gross annual receipts of $32.5 million or less. For this category, U.S. Census data for 2012 show that there were 1,442 firms that operated for the entire year. Of these firms, a total of 1,400 had gross annual receipts of less than $25 million. Thus a majority of ``All Other Telecommunications'' firms potentially affected by our action can be considered small. E. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities 28. Auction Applications and Certifications. The Order establishes the use competitive bidding to assign the over 17,000 mutually exclusive numbers in the 833 toll free code, identified pursuant to the 833 Code Opening Order. In order to participate in the competitive bidding process, a potential participant will be obligated to submit an application including information regarding, but not limited to, ownership information. Potential participants will also be required to submit certifications stating that they will follow certain auction rules and requirements, including the limitation that each auction participant bid on behalf of only one interested party (including itself) for the same toll free numbers. 29. Secondary Market Transfers. The Order exempts numbers assigned via competitive bidding from the rules [[Page 53395]] preventing the development of a secondary market. We require Somos, Inc., the Toll Free Numbering Administrator, to maintain information regarding post-auction secondary market transfers. Entities will be required to provide transaction information to Somos, including the new subscriber's name and contact information and other limited information as necessary. F. Steps Taken To Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered 30. In this Order, the Commission modifies its toll free number assignment rules to promote the efficient and equitable assignment of toll free numbers. Overall, we believe the actions in this document will reduce burdens on toll free number subscribers, potential subscribers, and Responsible Organizations, including any small entities. 31. In the Order, we find that revising our rule to allow for an auction-based assignment methodology will benefit smaller entities. Our first-come, first-served assignment methodology has allowed larger, more sophisticated entities to invest in systems that provided enhanced connectivity to the Toll Free Database, allowing these entities to be assigned desirable numbers before smaller competitors. An auction-based assignment methodology, by contrast, does not allow sophisticated entities this advantage. 32. In the Order, we also establish the use of a Vickrey single round, sealed-bid auction to assign the over 17,000 mutually exclusive numbers in the 833 toll free code, identified pursuant to the 833 Code Opening Order. We conclude that the use of this type of auction is appropriate because it is simple to participate in, addressing concerns that an auction-based assignment methodology is more complicated than the first-come, first-served approach. G. Report to Congress 33. The Commission will send a copy of the Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register. V. Procedural Matters 34. Congressional Review Act. The Commission will send a copy of this Report and Order, to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). 35. Paperwork Reduction Act of 1995 Analysis. This Order contains new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA, 44 U.S.C. 3507. OMB, the general public, and other Federal agencies will be invited to comment on the revised information collection requirements contained in this proceeding. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. 36. Final Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act of 1980, see 5 U.S.C. 604, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) of the possible significant economic impact on small entities of the policies and rules, as proposed, addressed in this Order. The FRFA is contained in Section IV above. VI. Ordering Clauses 37. Accordingly, it is ordered that, pursuant to sections 1, 4(i), 201(b), and 251(e)(1) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 201(b), and 251(e)(1), this Order is adopted. 38. It is further ordered that Part 52 of the Commission's rules are amended as set forth in Appendix A, and such rule amendments shall be effective thirty (30) days after publication of the rule amendments in the Federal Register. 39. It is further ordered that, pursuant to sections 1, 4(i), 5(c), and 251(e)(1) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 155(c), 251(e)(1), Somos, Inc., the Toll Free Numbering Administrator, is directed to retain and make available to the Commission all data and information about the auction and its administration gathered before, during, and after the auction. 40. It is further ordered that, pursuant to section 251(e)(1) of the Communications Act of 1934, as amended, the Wireline Competition Bureau is directed to review specific petitions and, as necessary and after a notice and comment period, grant toll free numbers to governmental and non-profit entities where such grant is consistent with the public health and safety standards in Commission precedent. 41. It is further ordered that the Commission's Consumer & Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). List of Subjects in 47 CFR Part 52 Communications common carriers, Telecommunications, Telephone. Federal Communications Commission. Marlene H. Dortch, Secretary. Final Rules For the reasons set forth above, part 52 of Title 47 of the Code of Federal Regulations is amended as follows: PART 52--NUMBERING 0 1. The authority citation for part 52 continues to read as follows: Authority: 47 U.S.C. 151, 152, 153, 154, 155, 201-205, 207-209, 218, 225-227, 251-252, 271, 332, unless otherwise noted. Subpart D--Toll Free Numbers 0 2. Amend Sec. 52.101 by revising paragraphs (a) and (e) to read as follows: Sec. 52.101 General definitions. * * * * * (a) Toll Free Numbering Administrator (TFNA). The entity appointed by the Commission under its authority pursuant to 47 U.S.C. 251(e)(1) that provides user support for the Service Management System database and administers the Service Management System database on a day-to-day basis. * * * * * (e) Toll Free Subscriber. The entity that has been assigned a toll free number. * * * * * 0 3. Amend Sec. 52.103 by adding paragraphs (a)(10) and (b)(1); adding and reserving paragraph (b)(2); and revising paragraphs (d) and (f) to read as follows: Sec. 52.103 Lag times. (a) * * * (10) Transitional Status. Toll free numbers that have been disconnected for less than four months, but for which no Exchange Carrier Intercept Recording is being provided. (b) * * * [[Page 53396]] (1) Toll free numbers assigned via competitive bidding may remain in reserved status for a period of unlimited duration. (2) [Reserved] * * * * * (d) Disconnect Status. Toll free numbers must remain in disconnect or a combination of disconnect and transitional status for up to 4 months. No requests for extension of the 4-month disconnect or transitional interval will be granted. All toll free numbers in disconnect status must go directly into the spare or unavailable category upon expiration of the 4-month disconnect interval. A Responsible Organization may not retrieve a toll free number from disconnect or transitional status and return that number directly to working status at the expiration of the 4-month disconnect interval. * * * * * (f) Unavailable Status. (1) Written requests to make a specific toll free number unavailable must be submitted to the Toll Free Numbering Administrator (TFNA) by the Responsible Organization managing the records of the toll free number. The request shall include the appropriate documentation of the reason for the request. The Toll Free Numbering Administrator (TFNA) is the only entity that can assign this status to or remove this status from a number. Responsible Organizations that have a Toll Free Subscriber with special circumstances requiring that a toll free number be designated for that particular subscriber far in advance of its actual usage may request that the Toll Free Numbering Administrator (TFNA) place such a number in unavailable status. (2) Seasonal numbers shall be placed in unavailable status. The Responsible Organization for a Toll Free Subscriber who does not have a year round need for a toll free number shall follow the procedures outlined in Sec. 52.103(f)(1) of these rules if it wants the Toll Free Numbering Administrator (TFNA) to place a particular toll free number in unavailable status. 0 4. Amend Sec. 52.105 by adding paragraph (f) to read as follows: Sec. 52.105 Warehousing. * * * * * (f) The provisions of this section shall not apply to toll free numbers assigned via competitive bidding or to numbers transferred under this exception. 0 5. Amend Sec. 52.107 by adding paragraph (c) to read as follows: Sec. 52.107 Hoarding. * * * * * (c) Toll Free Numbers Assigned via Competitive Bidding. The provisions of this section shall not apply to toll free numbers assigned via competitive bidding or to numbers transferred under the exception to Sec. 52.105 contained in paragraph (f) of that section. 0 6. Amend Sec. 52.109 by revising paragraph (c) to read as follows: Sec. 52.109 Permanent cap on number reservations. * * * * * (c) The Wireline Competition Bureau shall modify the quantity of numbers a Responsible Organization may have in reserve status or the percentage of numbers in the spare pool that a Responsible Organization may reserve when exigent circumstances make such action necessary. The Wireline Competition Bureau shall establish, modify, and monitor toll free number conservation plans when exigent circumstances necessitate such action. 0 7. Revise Sec. 52.111 to read as follows: Sec. 52.111 Toll free number assignment. Toll free telephone numbers must be made available to Responsible Organizations and subscribers on an equitable basis. The Commission will assign toll free numbers by competitive bidding, on a first-come, first-served basis, by an alternative assignment methodology, or by a combination of the foregoing options. [FR Doc. 2018-22674 Filed 10-22-18; 8:45 am] BILLING CODE 6712-01-P
![Federal Register / Vol. 83, No. 205 / Tuesday, October 23, 2018 / Rules and Regulations 53377
half of the draw span, east half only, to FEDERAL COMMUNICATIONS Synopsis
facilitate replacement of worn COMMISSION I. Introduction
equipment discovered after installation
of upgrades. The Hood Canal Bridge 47 CFR Part 52 1. Today, we demonstrate our
crosses Hood Canal, mile 5.0, near Port continued commitment to modernize
Gamble, WA. The bridge has two fixed the way we assign toll free numbers by
[WC Docket No. 17–192, CC Docket No. 95–
spans (east and west), and one draw adopting an additional assignment
155; FCC 18–137]
span (center). The east span provides 50 methodology that is both market-based
feet of vertical clearance, the west span and equitable. Based on the Federal
Toll Free Assignment Modernization;
provides 35 feet of vertical clearance, Communications Commission’s success
Toll Free Service Access Codes
and the center span provides zero feet using competitive bidding to assign
of vertical clearance in the closed-to- AGENCY:Federal Communications spectrum licenses and award universal
navigation position. The center span service support, we adopt new measures
Commission.
provides unlimited vertical clearance in to explore the use of competitive
the open-to-navigation position. Vertical ACTION: Final rule. bidding for the assignment of toll free
clearances are referenced to mean high- numbers. To further evaluate this
water elevation. SUMMARY: In this document, the Federal approach, as an experiment we establish
This deviation allows the center span Communications Commission the framework in this Report and Order
of the Hood Canal Bridge to open half- (Commission) revises its rules to allow for an auction of the rights to use certain
way (300 feet vice 600 feet) on signal the Commission to assign numbers by numbers in the recently-opened 833 toll
after receiving at least a four hour notice competitive bidding, on a first-come, free code. After the release of this
from 6 a.m. on October 13, 2018 to 11:59 first-served basis, by an alternative Report and Order, we will initiate the
p.m. on November 16, 2019. During the assignment methodology, or by a pre-auction phase of this proceeding to
period of this deviation, the drawbridge combination of methodologies. The seek input on the procedures for the
will not be able to operate according to Commission further establishes a single auction. This experiment will help us
the normal operating schedule. The round, sealed-bid Vickrey auction for determine how best to use competitive
normal operating schedule for the Hood roughly 17,000 mutually exclusive bidding to most effectively assign toll
Canal Bridge is in accordance with 33 free numbers, as well as provide
numbers in the 833 code, set aside in
CFR 117.1045. The bridge shall operate experience in applying auction
the process of opening that code.
in accordance to 33 CFR 117.1045 at all procedures to the toll-free numbering
Government and non-profit entities may
other times. Waterway usage on this assignment process.
file a petition seeking that a number be
part of Hood Canal (Admiralty Inlet) set aside from the auction for use for II. Background
includes commercial tugs and barges, public health and safety purposes, and 2. Toll free calling and texting
U.S. Navy and U.S. Coast Guard vessels, net proceeds from the auction will offset remains an important part of our
and small pleasure craft. Coordination the costs of toll free numbering communications system. Even as
has been completed with known administration. Full auction procedures websites and smartphone apps have
waterway users, and a no objections to will be established in subsequent public provided new avenues for public
the deviation have been received. notices. The Commission also revises its engagement, businesses, government
Vessels able to pass through the east toll free rules to allow for the entities, and non-profit organizations
and west spans may do so at any time. development of a secondary market for alike continue to make use of toll free
The center span does not provide toll free numbers assigned in an auction, services to keep an open line to the
passage in the closed-to-navigation
and to modernize its toll free rules to public, and enterprising subscribers put
position. The subject bridge will be able
make them consistent with the other toll free numbers to use in creative new
to open half the center span for Navy
revisions adopted in this document and ways. Toll free services rely on toll free
and Coast Guard vessels during
with industry terminology and practice. numbers—a limited resource the
emergencies, when at least a one hour
Commission is charged by statute with
notice has been given by the Navy or DATES: Effective November 23, 2018.
making available ‘‘on an equitable
Coast Guard. The Coast Guard will also
FOR FURTHER INFORMATION CONTACT: basis.’’
inform the users of the waterways 3. Toll free calling began in 1967,
through our Local and Broadcast Wireline Competition Bureau,
Competition Policy Division, Matthew with the introduction of the 800 toll free
Notices to Mariners of the change in code. The 800 code was established by
operating schedule for the bridge so that Collins, at (202) 418–7141,
matthew.collins@fcc.gov. AT&T, and the Commission’s role in the
vessels can arrange their transits to toll free service market increased over
minimize any impact caused by this SUPPLEMENTARY INFORMATION: This is a the following 30 years. In 1997, faced
temporary deviation. summary of the Commission’s Report with the possibility of exhaust of the
In accordance with 33 CFR 117.35(e), and Order in WC Docket No. 17–192, 800 code, the Commission concluded
the drawbridge must return to its regular CC Docket No. 95–155, FCC 18–137, that the Communications Act of 1934, as
operating schedule immediately at the adopted September 26, 2018, and amended, ‘‘require[s] the Commission to
end of the effective period of this released September 27, 2018. The full ensure the efficient, fair, and orderly
temporary deviation. This deviation text of this document is available for allocation of toll free numbers.’’ Thirty
from the operating regulations is public inspection during regular years later, when the Commission
authorized under 33 CFR 117.35.
khammond on DSK30JT082PROD with RULES
business hours in the FCC Reference opened the second toll free code—888—
Dated: October 17, 2018. Information Center, Portals II, 445 12th it addressed an age-old question for the
Steven Fischer, Street SW, Room CY–A257, first time in the context of toll free
Chief, Bridge Program, Thirteenth Coast Washington, DC 20554. It is available on numbers: How can limited resources be
Guard District. the Commission’s website at https:// most fairly and efficiently allocated
[FR Doc. 2018–23073 Filed 10–22–18; 8:45 am] docs.fcc.gov/public/attachments/FCC- when some of those resources are more
BILLING CODE 9110–04–P 18-137A1.pdf. desirable than others? Whether they
VerDate Sep<11>2014 15:56 Oct 22, 2018 Jkt 247001 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 E:\FR\FM\23OCR1.SGM 23OCR1](https://thefederalregister.org/doc/83_FR_53582/page/1.svg)
![53378 Federal Register / Vol. 83, No. 205 / Tuesday, October 23, 2018 / Rules and Regulations
were desirable because they were easy 7. During this same period, the first- (833–DENTIST, 833–DOCTORS, 833–
to remember, because they could spell come, first-served approach to toll free FLOWERS . . . etc.)’’—and placed those
a name or common word, or because a number assignment—which was used numbers in unavailable status. Ten or
subscriber had built up good will in that with some modification for the 877, 866, more RespOrgs requested over 1,800
number in the 800 code, some 888 855, and 844 code openings—has been mutually exclusive numbers, and 65 or
numbers were likely to be highly subject to scrutiny by the Wireline more RespOrgs requested the ten most
desirable while others might draw no Competition Bureau (Bureau) for falling popular numbers.
interest at all. short of expectations in several ways. 10. Notice of Proposed Rulemaking. In
4. Congress has given the Commission For example, first-come, first-served September 2017, the Commission
only one guideline regarding the assignment has rewarded actors that released the Toll Free Assignment
allocation of toll-free numbers: Do so have invested in systems to increase the NPRM, which proposed and sought
‘‘on an equitable basis.’’ Interpreting chances that their choices are received comment on steps to better promote the
this guideline after opening the 888 first in the Service Management System equitable and efficient assignment and
code, the Commission understood Database (the Toll Free Database, the use of toll free numbers. Specifically,
‘‘equitable’’ to include two prongs: ‘‘database system for toll free numbers,’’ the Commission proposed expanding
‘‘orderly and efficient’’ and ‘‘fair.’’ After in which entities reserve numbers and the existing toll free number assignment
considering multiple methodologies to ‘‘enter and amend the data about toll rule to include assignment by auction or
assign toll free numbers, the free numbers within their control’’); other equitable assignment
Commission settled on a first-come, and, by assigning numbers at no cost, it methodologies, and assigning the over
first-served approach. The Commission has allowed accumulation of numbers 17,000 mutually exclusive numbers in
also offered a limited right of first without ensuring those numbers are the 833 toll free code through
refusal to subscribers of 800 numbers being put to their most efficient use. The competitive bidding. (The Commission
that expressed an interest in subscribing Bureau addressed this latter issue, and also proposed and sought comment on
to that number in the 888 code. Inspired the issue of some registrants having various specific auction rules and
by its low cost and simplicity, the enhanced connectivity to the toll free mechanisms.) The Commission also
Commission found such an approach to database, by limiting registrants to 100 sought comment on eliminating the
be ‘‘orderly and efficient’’; it also numbers per day for a month after the brokering (under our rules, the selling of
concluded that it was ‘‘fair’’ because it opening of the last two codes, 844 and numbers by a subscriber for a fee),
did not discriminate on its face against 855. warehousing (the reservation of
any potential subscribers. 8. 833 Code Opening. In April 2017, numbers by a RespOrg without an actual
the Bureau authorized Somos, Inc. subscriber for whom the numbers are
5. Among the alternate methodologies
(Somos), the Toll Free Numbering being reserved), and hoarding (the
the Commission considered when it
Administrator, to open the 833 toll free acquisition of more numbers by a
opened the 888 code was competitive
code. To facilitate the exploration of subscriber than it intends to use)
bidding. The Commission observed the alternative assignment methodologies, prohibitions; setting aside numbers for
fairness of this approach, stating that it the Bureau took steps in the pre-code use for public interest purposes; options
‘‘would offer all participants an equal opening process to identify numbers to address abuse of toll free numbers;
opportunity to obtain a particular . . . that could be part of an experiment and changes to overall toll free
number’’; it also described auctions as regarding the use of an alternative numbering administration. The
‘‘generally efficient.’’ Although the assignment process, such as an auction. Commission received comments from
Commission had conducted spectrum Specifically, the Bureau authorized various stakeholders including
auctions prior to the 888 code opening, Responsible Organizations (RespOrgs, RespOrgs, service providers, and
the Commission concluded that an which are ‘‘entit[ies] chosen by a toll companies that have built their
auction of toll free numbers presented free subscriber to manage and businesses around toll free calling.
‘‘practical difficulties’’—not only could administer the appropriate records in
it cost more than a first-come, first- III. Discussion
the toll free Service Management
served approach, but it could also System for the toll free subscriber’’) to 11. Given the passage of time since
require oversight to ensure that bidders identify up to 2,000 desired numbers in adopting the first-come, first-served
met requirements and followed auction the 833 code and submit a request for methodology, and experience gained in
procedures. those numbers to Somos. The Bureau opening five toll free codes, we modify
6. When the Commission decided directed Somos to review these requests, our toll free number assignment rule to
how to assign certain 888 toll free identify numbers subject to multiple give the Commission flexibility to
numbers, the Commission’s auctions requests, and place these ‘‘mutually implement alternative approaches to
program was still in its relatively early exclusive’’ numbers in unavailable assigning numbers. As an experiment in
stages. The Commission’s first spectrum status (which means ‘‘[t]he toll free using such an alternative approach, we
auction was held in July 1994. The number is not available for assignment establish an auction to assign the over
Notice of Proposed Rulemaking for the due to an unusual condition’’) pending 17,000 identified mutually exclusive
888 toll free code was adopted in the outcome of this proceeding. numbers in the 833 code (the 833
October 1995, and the 1998 Toll Free Numbers that were not requested by Auction). We also designate Somos as
Order was adopted in March 1998. In multiple RespOrgs were made available the auctioneer. While this Report and
the 20 years since that decision, the on a first-come, first-served basis. Order provides Somos with the general
Commission has conducted over 70 9. Nearly 150 RespOrgs participated framework for the 833 Auction, we also
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spectrum auctions, including those for in the 833 pre-code opening process, provide for a pre-auction process to
commercial wireless licenses and requesting over 72,000 numbers. Somos establish detailed auction procedures
broadcast construction permits, using identified over 17,000 mutually after additional notice and comment, as
various auction formats. More recently, exclusive numbers—including is typical in all Commission auctions.
the Commission has begun using ‘‘ ‘repeaters’ (833–333–3333, 833–888– We require Somos to implement the
auctions as a mechanism for distributing 8888, 833–800–0000, etc.) and numbers established procedures to conduct the
universal service high-cost support. that spell memorable words or phrases auction and, after the bidding has
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previously believed, making it more fairness in the toll free number appropriate assignment methodology in
likely that the efficiencies of assignment methodology. some circumstances, however. For
competitive bidding will outweigh such 21. Since the 1998 Toll Free Order instance, first-come, first-served
costs. Therefore, we conclude that was adopted, the Commission has assignment may be appropriate for less
adding competitive bidding as one observed that the underlying numbering desirable numbers, or in instances
possible assignment method meets the access technology has evolved: Certain where numbers made available via an
first prong of our established test, automated systems now used to access auction are not assigned thereby. We
namely, that an assignment mechanism the Toll Free Database have placed expect that our experience with the 833
be orderly and efficient. smaller RespOrgs at a competitive Auction will provide us with insight we
19. We also find that the market-based disadvantage because they do not have can use when determining the best
assignment methodologies in revised the capacity to quickly reserve sought- mechanism for assignment of a given set
rule 52.111 are fair, meeting the second after vanity numbers. Enhanced of numbers.
part of the section 251(e)(1) test. The connectivity gives larger, more 23. Effective Assignment of Toll Free
Commission has explained that a fair sophisticated entities the incentive to Resources. Our revised assignment rule
toll free number assignment mechanism invest in these systems to increase the gives us a new option for the assignment
is one that gives ‘‘[a]ll subscribers . . . chances that their number requests are of numbers, without removing currently
an equal opportunity to reserve processed. This situation undermines a available options. The Commission has
desirable toll free numbers as new codes key rationale for the first-come, first- extensive experience in public outreach
are opened.’’ Using a competitive served approach: That all interested and education about the auction
bidding process to assign mutually parties have an equal chance of getting
process, including online tutorials for
exclusive toll free numbers can provide a number. And while it advances the
the auction application and bidding
interested parties with a level playing separate goal of ensuring a number is
processes. Based on this experience, we
field, on which everyone has the same quickly allocated to the party that
disagree with the argument that
ability to express their valuation for values it most highly—a differential
providing adequate notice to the public
specific numbers in a clear, transparent willingness to invest indicates an
about auction procedures will be
manner, using an equally accessible underlying differential in the value the
unreasonably costly. Nor do we agree
method. Based on our experience with investing party sees in numbers—it does
with commenters who argue that
auctions in other contexts, we find that so only loosely, since there is no direct
preparing for and participating in the
mechanism that allows potential
we are more likely to achieve our stated auction will be unduly burdensome to
subscribers to bid in their valuation. In
objective of assigning mutually participants. We recognize that
the absence of conservation controls, the
exclusive toll-free numbers on an individual subscribers or RespOrgs
Bureau has seen evidence of unfair
equitable basis by allowing all qualified acquiring toll free numbers through an
access following new toll free code
bidders the same opportunity to express auction may incur some costs relating to
openings. For example, following the
their value for a number and assigning the participation in the auction that they
877 and 866 code openings, the
the numbers to the party that values it did not incur through the first-come,
Commission received reports from
the most, than if we use a method by first-served process, but we believe
RespOrgs suggesting that during
which a number is assigned to the party those costs are outweighed by the
database ‘‘timeouts,’’ only RespOrgs
that employs the most advanced access with more advanced access systems benefits to the toll free system at large
system. (We expect that the were able to reserve numbers, while when toll free numbers are put to their
experimental use of an auction for RespOrgs not using those advanced highest-valued use. Many toll free
mutually exclusive 833 toll free systems were ‘‘locked out’’ and unable numbers have a much greater value for
numbers (as adopted in this item) will to reserve their desired numbers. For the certain subscribers. Some 150 RespOrgs
yield additional insight into whether 855 and 844 toll free code openings, the participated in the 833 pre-code
auctions are the best methodology for Bureau directed the toll free database opening process, requesting over 72,000
assigning toll free numbers and, if so, administrator to limit the quantity of numbers. This fact undermines the basic
how best to use competitive bidding in toll free numbers a RespOrg may reserve rationales on the effectiveness of first-
the future.) Moreover, the current to 100 per day for the first 30 days— come, first-served for mutually
method leads to unnecessary ‘‘larger RespOrgs with enhanced exclusive numbers—that first-come,
expenditure on equipment to gain a connectivity to the [toll free] database’’ first-served allocation requires less
timing advantage, whereas the proceeds would otherwise be able to more oversight, and avoids ‘‘the need to
from a toll free number auction will go quickly to reserve sought-after numbers resolve competing claims among
towards the administration of the toll than smaller RespOrgs without subscribers to assignment of particular
free system. enhanced connectivity. numbers.’’ On the contrary, the
20. While in its 1998 application of 22. We reject commenters’ arguments Commission has been compelled to
this test, the Commission stated that that an auction is unfair because it provide increased oversight by
auctions ‘‘offer all participants an equal favors parties with deep pockets. An intervening multiple times to ensure
opportunity to obtain a particular . . . auction allocates the number to the new code openings are ‘‘orderly and
number,’’ it also concluded that a first- bidder willing to pay the most, but that efficient’’ and ‘‘fair,’’ and adjudicated
come, first-served assignment willingness may derive from expected numbering conflicts in at least two
mechanism was also fair and selected future revenues from a profitable notable cases. Our practice of resolving
that approach due to its then perceived business case, rather than from the competing claims has previously been
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benefits of order and efficiency. We find bidders’ current finances. Moreover, resolved inefficiently in favor of the
that the Commission’s prior conclusion auctions should reflect the value of the party most privileged with access to the
has not borne out for highly desired toll toll free number in the marketplace and faster reservation system. Instead of the
free numbers; indeed, the Bureau has a bidder may be able to obtain financing number going to whichever entity
intervened in the last four toll free code based on anticipated profitability. We happens to be first in the door (thereby
openings, altering the first-come, first- anticipate that a first-come, first-served preventing others, who may value it
served methodology precisely to ensure approach will continue to be an more, from getting it), use of
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![Federal Register / Vol. 83, No. 205 / Tuesday, October 23, 2018 / Rules and Regulations 53381
competitive bidding will give all entities 26. After completion of the 833 pre-auction process will give interested
an equal opportunity to express the Auction, and subsequent number participants sufficient time and
value they place on any particular assignments, the Bureau will issue a opportunity both to comment on the
number. By increasing the likelihood report outlining the outcomes of the 833 final procedures and to develop
that mutually exclusive toll free Auction, lessons learned, and future business plans in advance of the
numbers are assigned to parties that will recommendations for toll free number auction.
use the resource in the most productive assignment methodologies.
27. We intend to use this experiment a. Auction Design
way, we in turn increase the efficiency
and equity of our number assignment as an opportunity to evaluate the 30. We adopt the proposal in the Toll
process. contours of using competitive bidding Free Assignment NPRM to conduct the
for toll free assignments and to 833 Auction as a Vickrey single round,
24. Revising the Commission’s rules sealed-bid auction. In this type of
determine how to best use a market-
to allow us to assign numbers by auction, a qualified bidder can submit a
based assignment to effectively assign
auction, on a first-come, first-served sealed-bid for each available toll free
toll free numbers. We also underscore
basis, an alternative assignment number that the bidder wants. The 833
the need to reform the current method
methodology, or by a combination of the Auction will consist of only a single
of assigning highly desired toll free
forgoing as circumstances require, gives numbers. We envision that the round of bidding, and the highest bidder
the Commission the flexibility to adapt experiment, as designed in this Report for each toll free number will win the
our assignment procedures to the and Order and forthcoming Auction rights to that number, but will generally
circumstances and characteristics of the Procedures Public Notice, will meet our only pay the second highest bid for
specific toll free numbers to be assigned. goals of equitable distribution and be them. In the case of tied bids, a winning
In any future toll free code release, the used, as designed, for certain future toll bidder may end up paying the tied bid
revised rule will not require the free number assignments or be used for amount. For the 833 Auction, we defer
Commission to use competitive bidding future assignments with refinements. to the pre-auction process, the detailed
and, if it decides to use competitive procedures for bid processing and
bidding, the Commission will not be 2. General Framework for the 833 payment determination, including,
confined to a specific auction design, or Auction among other things, how winners and
the designation of a particular 28. In the Toll Free Assignment payments will be determined in the case
auctioneer. Instead, for new toll free NPRM, the Commission ‘‘invite[d] of tied bids and what to do if a toll free
code openings, the Commission can parties to . . . offer further economic, number receives only one bid in the
determine the best method to proceed legal, or logistical insights about . . . single round of bidding.
for assigning numbers, armed with the auction designs and procedures.’’ Given 31. A Vickrey auction can yield an
data collected in the 833 Auction. the experimental nature of using equitable and efficient assignment of
competitive bidding as a mechanism for mutually exclusive toll free numbers as
B. The 833 Auction
assigning toll free numbers, we outline it incentivizes bidders to bid their true
1. The 833 Auction Established as an here a general framework for the 833 valuation. In particular, the amount
Experiment Auction and require a pre-auction paid by the winner (i.e., the bidder with
proceeding in which we will seek the highest bid) is determined by the
25. We establish the 833 Auction as public input on the procedures for the second highest bid and does not depend
an experiment to analyze the most auction after the release of this Report on the exact amount of the winning
efficient way to use competitive bidding and Order. We expect that our approach bidder’s own bid. This payment rule
as a toll free number assignment to the 833 Auction will be modeled on results in the winning bidder essentially
method. We agree with one commenter the rules and procedures governing receiving what it might view as a
who argues that, as a first step, the auctions for wireless spectrum licenses, ‘‘surplus,’’ i.e., the difference between
Commission should assign toll free broadcast permits, and universal service its own bid and the second highest bid.
numbers by auction on a ‘‘limited, trial support, where appropriate, given the A Vickrey auction thus encourages
basis,’’ which will allow us to ‘‘study success and familiar nature of those bidders to bid the true maximum they
the impact of this new allocation auctions. are willing to pay, while at the same
method and make any necessary 29. Specifically, we will issue an time efficiently assigns the numbers to
changes to serve the public interest.’’ Auction Comment Public Notice after the bidders who have the highest
(By adopting the 833 Auction as an the release of this Report and Order and valuations for the numbers. (As a first
experiment, the actions we take today will solicit public input on proposed approximation, it is likely that
are also consistent with the application and bidding procedures, individual valuations for toll free
recommendation of the Administrative including specific proposals for numbers are not dependent on another’s
Conference of the United States (ACUS) application requirements and bidding valuation, at least beyond a broker’s
that agencies adopt pilot programs and mechanisms, such as bid processing and desire to purchase for resale. Moreover,
learn from regulatory experience.) Thus, determining payments. Thereafter, we to the extent that this is not the case,
we will offer in this auction only the will release an Auction Procedures auction theory does not provide
rights to use the 17,000 mutually Public Notice, and will specify final unambiguous direction as to optimal
exclusive numbers in the 833 toll free auction procedures, including dates, auction design. Thus, for our opening
code that were identified pursuant to deadlines, and other final details of the experiment in assigning toll free
the 833 Code Opening Order. Once the application and bidding processes. We numbers via competitive bidding, we
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auction is complete, we direct Somos to require the auctioneer to implement the adopt the simple and transparent
assign those numbers to winning auction pursuant to the procedures Vickrey auction.)
bidders based on the auction’s results. specified in the Auction Procedures 32. We conclude that the 833 Auction
We will continue to assign 833 numbers Public Notice. We conclude that, in should use a single round rather than
that are not part of the 833 Auction addition to the general framework we multiple rounds to keep the auction
using our first-come, first-served provide here, the Commission’s practice process for this experiment as simple
approach. of finalizing auction procedures in the and cost-effective as possible. As the
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![53382 Federal Register / Vol. 83, No. 205 / Tuesday, October 23, 2018 / Rules and Regulations
Commission observed in the Toll Free employ any such methodologies for the conducted, such as auctions for
Assignment NPRM, a single round, 833 Auction. (For example, the Toll Free spectrum and Universal Service Fund
sealed-bid auction is relatively easy for Assignment NPRM sought comment on support, where some items may be
both the auctioneer (to implement) and a pay-your-bid auction, whereby the substitutable, this auction allocates
participants (to participate in). In highest bidder wins and pays its bid, items for which managing bids across
addition, a single round auction will be and an open auction, such as a substitutes is less important. Similarly,
completed more quickly than a multi- simultaneous multi-round auction used there are important complementarities
round auction, and comes at a lower by the Commission for our spectrum in bids for spectrum and Universal
cost to the auctioneer and the auctions.) One commenter suggested Service Fund support which we have no
participants. In fact, we do not believe that we use what it calls an ‘‘open’’ reason to believe apply to the toll free
that auction participants will be auction, specifically ‘‘a simultaneous number market.
required to incur substantial time or ascending clock auction with multiple 36. More specifically, the Commission
expense to prepare for the auction. They independent clocks.’’ While this type of has historically used multiple round
have already determined which 833 auction has certain advantages over a bidding as the primary auction
numbers to reserve, thus spending some single round, sealed-bid, Vickrey methodology in spectrum auctions.
time and expense in reaching those auction, we conclude that these When implementing its spectrum
determinations; the incremental effort advantages do not justify the additional auction authority, the Commission
on their part to participate in the complexity and expense of a multiple found that multiple round auctions
auction is unlikely to impose an round auction at this time. (Power provide needed information about the
additional time or cost burden on them. Auctions enumerates several advantages value of substitutable and
And because of the lower cost of a of an ‘‘open’’ auction, including (1) complementary licenses and allows
single round Vickrey auction, we reject permitting bidders the opportunity of participants the flexibility to pursue
commenters’ concerns that the costs to price discovery; (2) permitting bidders back-up strategies during an auction,
implement and run the auction will be more control over the money spent on allowing the spectrum to go to its
excessive. winning bids; (3) permitting bidders highest value use. The Commission
33. We also reject the notion that a some ability to handle bids for numbers recognized, however, that while
Vickrey single round, sealed-bid auction that may be viewed as substitutes; (4) multiple round auctions are preferable,
will result in a scenario where maintaining privacy of auction if the value of the licenses or the
inexperienced bidders will overbid and participants’ bids; and (5) potentially number of bidders would be so low that
be unwilling or unable to pay the resulting in higher auction revenues and the administrative costs of a multiple
winning bid. A second-price auction more efficient results.) While the round auction may exceed its benefits,
encourages bidders to bid the true Commission uses multiple round other auction methods are available.
maximum that they are willing to pay, auctions and will continue to do so, the Our spectrum auctions, generally,
knowing they will not actually pay more 833 Auction will be the Commission’s involve many entities pursuing complex
than needed to outbid the second first auction of the rights to use toll free strategies weighing the cost of various
highest bidder. Also, we note that each numbers, and our intent for this quantities of spectrum within and
bid is a binding commitment, so bidders experiment is to gather data to help between markets. Similarly, in
know in advance that they should only inform future toll free assignment competitive bidding for Universal
submit bids that they are willing to pay. Service Fund support, many
decisions while minimizing the
(This is true even in a Vickery auction, participants are contemplating multiple
complexity and cost to the Commission,
where the winning bidder will only pay markets that they are willing to serve
auctioneer, and participants during the
the second highest bid, because the based on the price of the subsidy. In the
experiment. We also have limited
second highest bid price may be equal case of toll free numbers, there is
information on which to base any
to (in case of a tie) or just slightly less limited information in the record that
estimate of the dollar amounts potential
than the winning bidder’s submitted one number is a substitute for another
subscribers are willing to bid. Also, the
bid. As Power Auction notes, ‘‘[i]t is or on how bidders will view the relative
relatively modest nature of the items to
important for bids to be binding values of the available numbers. The
be auctioned—the rights to use toll free
commitments, because the lack of Commission hopes to obtain such
numbers, as opposed to spectrum information through this auction.
binding commitments could cause the
auction process to be manipulated or to licenses or Universal Service Fund 37. In sum, because the Vickrey single
unravel.’’) In addition, as discussed support—seems at this juncture to round, sealed-bid auction should
further below, entities interested in warrant a less complex and costly type demand fewer resources from the
participating in an auction generally of auction. Thus, we do not want to Commission, the auctioneer, and the
have to submit some form of financial create a more complex and costly auction participants while still yielding
security in order to participate. Further, auction than necessary at this early an efficient allocation of toll free
consistent with the Commission’s stage. numbers, we believe it will help achieve
standard practice, we will ensure that 35. One commenter argues that a our objectives for this experiment. We
prospective auction participants have an single round, sealed-bid Vickrey auction note, however, that we are not intending
opportunity to become fully informed limits the ability of a bidder to develop to foreclose the use of an ‘‘open’’
about the auction through public a bidding strategy involving substitute auction—or another auction
outreach and education, including numbers vis-à-vis an ‘‘open’’ auction. methodology—in any future toll free
online tutorials about the application That commenter does not, however, number auctions. (To the contrary, we
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and bidding processes. provide a basis for its position that recognize that there are cases where an
34. Alternative Auction bidders in the 833 Auction will have a open auction may perform better than a
Methodologies. Although the need for such a complex auction, or sealed-bid auction.) We expect that the
Commission sought comment on how such a need outweighs the impact Bureau’s report will address the success
alternative auction methodologies to to cost and complexity for this of the Vickrey single round, sealed-bid
consider for assigning the mutually experimental auction. Further, unlike auction methodology, and compare it to
exclusive 833 numbers, we decline to other auctions the Commission has alternative methodologies.
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accepting and reviewing applications to experience in conducting auctions in secondary market is limited to numbers
participate in the auction; accepting other contexts. We will oversee Somos’s assigned via competitive bidding. The
upfront payments; announcing qualified implementation of the 833 Auction, mutually exclusive numbers in the 833
bidders and those not qualified to bid; along with our general oversight of code assigned in the 833 Auction will
accepting bids during a single round of numbering, to alleviate any concerns therefore be eligible for secondary
bidding; accepting final payments for about auction execution. Moreover, a market transfers.) We also require
winning bids and distributing refunds single-round, sealed-bid auction should Somos to make available to the
for any upfront payments not applied to not require complex software or Commission information on 833
winning bids; activating in the toll free administration. numbers not included in the auction for
database the numbers won at auction 63. For these reasons, we direct comparison purposes. This data will
and for which final payment has been Somos to serve as the auctioneer of the enable us to get a complete picture of
made; and undertaking any other tasks 833 Auction. In the event Somos seeks the viability of the 833 Auction and on
in furtherance of the 833 Auction that to add outside personnel to assist with competitive bidding as an assignment
the Commission deems appropriate and the auction in any way, it may do so method for future toll free code
as elaborated in the Auction Procedures provided that it retains the overall openings.
Public Notice. The Commission will administrative responsibility and
maintain oversight of Somos’s neutrality. (Section 251(e) requires the 4. 833 Auction Proceeds
implementation of the 833 Auction and Commission to ‘‘create or designate one 66. We will use any net positive
will re-direct it as necessary to most or more impartial entities to administer proceeds from the 833 Auction to defray
effectively execute the 833 Auction. To telecommunications numbering and to the costs of administering toll free
maintain oversight, the Commission make such numbers available on an numbering incurred by the Toll Free
will review tariff filings, issue specific equitable basis.’’) We further direct Numbering Administrator 1 (i.e., costs
instruction in the Auction Procedures Somos to obtain an independent audit beyond conducting the auction) and,
Public Notice, and direct Somos under of the 833 Auction, including Somos’s potentially, the North American
our broad authority over the Toll Free performance as auctioneer, after Numbering Plan Administrator
Numbering Administrator. completion of the auction. In the event (NANPA). (The NANPA is currently
60. One commenter posits that the that the Bureau determines, and Neustar, Inc. The Toll Free Numbering
present Toll Free Numbering announces in a Public Notice, that the Administrator is Somos, a not-for-profit
Administrator should not serve as the costs of conducting such an audit are corporation that provides the Toll Free
toll free number auctioneer because unlikely to exceed the benefits—for Numbering Administrator function
Somos ‘‘has no experience in example, because of low auction pursuant to FCC tariff, subject to section
conducting auctions’’ and it ‘‘would be revenue—Somos need not obtain an 61.38 of the Commission’s rules.) By
called upon to develop entirely new audit. ‘‘net positive proceeds,’’ we mean any
[auction] processes.’’ We disagree. 64. In designating Somos as the amount by which revenues from the
Somos has asserted that it is fully auctioneer of the 833 Auction, we do auction exceed the costs of conducting
capable of executing the Commission’s not foreclose the Commission’s ability the auction. (Because Somos will also be
proposed auction, and we have no basis to assign this role to a different entity, developing and conducting the auction,
on which to question its assertion. or through a different method, such as the administrator’s costs for the auction
Moreover, given the considerable a competitive process, in a future toll will be paid first from auction
expertise in number assignment and free number auction. In its report on the revenues.) Applying net positive
administration that Somos has gained outcomes of the 833 Auction, we direct proceeds in this manner is consistent
since the Commission formally the Bureau to evaluate Somos’
with our authority in section 251(e) to
designated it as the Toll Free performance as the auctioneer,
administer numbering, and its
Numbering Administrator, we are including its technical execution and
requirement that the costs of
confident that Somos will perform its cost-effectiveness in conducting the
administration be borne by carriers on a
auctioneer duties in accordance with auction. The results of the 833 Auction,
competitively neutral basis. As
the procedures established by the including its costs and the degree of its
discussed in the Toll Free Assignment
Auction Procedures Public Notice. financial success, ought to inform the
NPRM, it will benefit all toll free
61. We also agree with Somos that it Commission’s method for assigning the
is critical ‘‘to maintain continuity and role of auctioneer in future toll free 1 Somos is a not-for-profit corporation that
stability in TFN [toll free number] number auctions. provides the Toll Free Numbering Administrator
administration.’’ In contrast, were we to 65. Auction Information. To allow the function pursuant to FCC tariff, subject to section
establish an independent auctioneer, the Commission to make a fair and accurate 61.38 of the Commission’s rules. 47 CFR 61.38.
independent auctioneer would have to assessment of the results and Somos must file annual tariff revisions pursuant to
the applicable part 61 rules for a dominant carrier,
first coordinate with Somos to verify consequences of the 833 Auction, we subject to the tariff requirements and enforcement
that the numbers available in the 833 require Somos to retain and make of the Commission pursuant to the Act and the
Auction are indeed available. The available to the Commission all data and Commission’s rules. SMS/800 Order, 28 FCC Rcd at
independent auctioneer would then information about the auction and its 15342, paragraphs. 37 through38; see also generally
Somos, Inc., Tariff F.C.C. No. 1 (2018), https://
have to direct Somos to assign the administration, gathered before, during, s3.amazonaws.com/files-prod.somos.com/
number to the winning bidder. We find and after the auction. Such information documents/SMS800FunctionsTariff.pdf (Toll Free
this step in the process unnecessary as includes, but is not limited to, Tariff). Previous tariff information is available at
Somos is capable to serve as auctioneer information on the following: Winning https://apps.fcc.gov/etfs/public/
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tariff.action?idTariff=787. Tariff modifications must
in accord with the specific and direct and losing bids, bidders, administrative be filed each January 31 (following the close of its
instruction to be set forth in the Auction costs (including detailed costs to design fiscal year, which is the calendar year) updating the
Procedures Public Notice. the auction user interface, auction rates for its services, effective during the next tariff
62. While we appreciate the novelty platform, and software to evaluate the year that begins in February. Each such filing must
contain an updated cost of service study pursuant
of our experiment in using competitive auction results), and post-auction to section 61.38. Id. Based upon that cost study,
bidding in the toll free context, the secondary market transfers. (Per the Somos’s rates and charges are adjusted to recover
Commission itself has a vast amount of exception we establish today, the those forecasted costs over the ensuing tariff year.
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the next tariff year, we will require the costs that exceed revenues from the existing standard for public health and
recovery of any deficit over the ensuing auction, will be recovered via the tariff’s safety use to limit set-asides to those
five years of cost recovery under the cost recovery mechanism along with legitimate public interest organizations
tariff. Such a deficit will be divided any other costs associated with that truly promote public health and
equally among each of those five years, administering the database. Inclusion of safety. This process is consistent with
and incorporated into the auction-related costs in the tariff’s cost the way the Commission has considered
administrator’s cost studies and revenue justification is necessary to show the petitions for reassignment of toll free
requirements for each of those years. By impact of the 833 Auction on the numbers in the past.
this approach, we seek to avoid or tariffed charges to RespOrgs for use of 76. We disagree with the arguments in
reduce any substantial increases or the Toll Free Database. the record that offering any public
fluctuations in the Toll Free Number interest-related number set aside for
5. Toll Free Numbers Used for Public
Administrator’s rates and charges due to governmental or non-profit entities is
Purposes
any deficit. inherently not ‘‘equitable’’ under
72. International Considerations. One 74. To ensure that the public interest
section 251(e)(1) of the Act. To the
commenter notes the international is protected in the 833 Auction, we will
contrary, this set aside works to assuage
nature of the NANP and asks ‘‘what set aside numbers in the 833 code that
concerns that some bidders—
right does US, or its agencies, have to have been identified as mutually
government and non-profit entities—
unilaterally benefit from an auction?’’ exclusive upon reasonable request by
may be precluded from obtaining
This concern is misplaced. The United government entities and non-profit
health and safety organizations. desired numbers by our auction
States will not unilaterally benefit from
(Government entities include federal, experiment. However, we are
the 833 Auction’s proceeds. Rather, as
state, local, and Tribal governments, and sympathetic to the argument that the
explained, net positive proceeds will be
includes any such entities in all public should have an opportunity to
used to defray the costs of toll free
countries served by the Toll Free object to requests that numbers be set
number administration, benefitting all
Numbering Administrator. Non-profit aside. For this reason, while we will
RespOrgs (and ultimately toll free
health and safety organizations must be consider requests from government and
subscribers) in those countries served by
26 U.S.C. 501(c)(3) organizations.) In the non-profit entities to set aside numbers
the Toll Free Numbering Administrator
Toll Free Assignment NPRM, the in the 833 code that are already
(Canada, Sint Maarten and the United
Commission sought comment on considered mutually exclusive, in order
States), and may also be used to defray
the cost of NANP administration, whether certain desirable toll free for a request to be considered, the
benefitting all of its member countries. numbers should be set aside for use, government or non-profit entity must
Even if the 833 Auction does not meet without cost, by government agencies or file a ‘‘Petition for an 833 Toll Free
the 25 percent threshold, RespOrgs from by non-profit health, safety, education, Number’’ with the Bureau in accordance
these countries will benefit from or other non-profit public interest with the Auction Procedures Public
lowered charges from the Toll Free organizations. After reviewing the Notice. The Bureau will then solicit
Numbering Administrator. We note that record, we find that ‘‘[c]ertain desirable public comment prior to making its
a coalition of 10 Canadian RespOrgs, toll free numbers that promote health decision on the number request based
including major Canadian and safety should be set aside for use by on the public interest. (Petitions must be
telecommunications service providers, government, without cost,’’ as well as filed in ECFS in Docket No. WC 17–192
supports our proposal to apply net for use by non-profit health and safety and CC Docket No. 95–155. Filing the
auction proceeds to the Toll Free organizations that meet the standard of petition does not guarantee the request
Numbering Administrator’s our precedent. will be granted.) We intend to maintain
administration costs. Applying net 75. Government (federal, state, local our standard for review consistent with
auction proceeds as set forth herein is and Tribal) entities as well non-profit the unusual and compelling public
consistent with the way Somos applies health and safety organizations have a health and safety standards in
RespOrg fee proceeds, and the NANPA unique relationship with toll free Commission precedent and direct the
collects fees, through the B&C Agent, numbers. Not only do they use numbers Bureau to consider each application
from member countries and service to provide service to the public, but they individually, on a case-by-case basis, as
providers. also face unique budgeting challenges it is filed with the Commission. We note
73. Somos Tariff Implications. We that may place toll free numbers that while being a government entity or
direct Somos to reflect any net positive assigned at auction out of reach. We a 501(c)(3) organization is a necessary
proceeds or deficit related to the 833 disagree with commenters who argue condition for a set aside, it is not in and
Auction in the section 61.38 cost that the public interest nature of non- of itself a sufficient condition and the
support filed with the Toll Free Tariff. profit organizations can be practically Bureau must apply the unusual and
We have previously said that Somos difficult to identify, and that setting compelling public health and safety
must support the costs of its Toll Free aside numbers for non-profits presents a standards discussed above. If, however,
Database administration as part of its greater possibility of fraud and abuse. multiple government or non-profit
tariff filing with the Commission. The We further disagree with the suggestion entities file petitions requesting the
present Toll Free Tariff ‘‘contains that allowing private non-profit same number for public health and
regulations, rates and charges’’ organizations to petition for numbers to safety purposes which meet the
applicable to administration of the Toll be set aside is an act of ‘‘eminent standard of our precedent, we direct
Free Database. As explained above, any domain.’’ This claim is fundamentally at Somos to conduct a lottery for the
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auction proceeds will be applied to odds with the toll free numbering number among the requesting
decrease Toll Free Database scheme, which vests the Commission applicants. We believe a lottery is both
administration costs. This will allow with authority to assign numbers an equitable and expedient way to
Somos to lower certain of its charges, ‘‘equitabl[y].’’ Further, subscribers have resolve competing requests for the same
such as the monthly customer record no property interest in toll free number. The Commission will use the
administration charge. On the other numbers. The Commission will use the information obtained from this number
hand, any auction deficit, i.e., auction 501(c)(3) designation as well our set aside process to determine whether
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we should continue to use it in future comment on revising our rules to of assignment, but also allows the rights
code openings. promote development of a secondary to numbers to be reassigned when
market for toll free numbers. We have valuations change.
6. Treatment of Trademark Holders 82. We disagree with commenters
reviewed the record, and agree with
77. We decline to adopt proposals in commenters who argue that our current who claim that permitting a robust
the record to provide special treatment rules may have a ‘‘chilling impact . . . secondary market will lead to
for trademark-holders. Specifically, on private enterprise.’’ Consistent with undesirable conduct and extortion. With
commenters have suggested that we our goal of making the rights to use an auction and secondary market, the
provide trademark-holders a right of numbers available on an equitable basis rights to numbers will be assigned to
first refusal or adopt new ‘‘procedures’’ by assigning them to those who can put those entities who value them most;
to address instances of abuse of a the numbers to their best use, and with differences in valuation do not reflect
number desired by a trademark-holder. the record, we now allow for the undesirable conduct or extortion. To the
We find that, as under the first-come, development of a secondary market for extent there is genuine misconduct,
first-served methodology, ‘‘concerns numbers assigned via competitive trademark and competition law serves
regarding trademark infringement and bidding. to protect parties from bad actors.
unfair competition . . . should be 80. The Commission’s current rules Further, the argument that allowing a
addressed by the courts under the prevent three types of conduct that limit secondary market will ‘‘lead to
trademark protection and unfair or preclude the development of a premature exhaust’’ is minimized by our
competition laws, rather than by the secondary market. First, the rules decision to allow a secondary market
Commission.’’ prevent brokering—‘‘the selling of a toll only for those numbers assigned by
78. We disagree with commenters free number by a private entity for a auction. In the present experiment, the
who argue that failing to provide special fee.’’ Second, the rules prevent 833 Auction includes approximately
treatment for trademark-holders is hoarding, which is the ‘‘acquisition by 17,000 numbers—under one percent of
contrary to the public interest. As 1– a toll free subscriber . . . of more toll all 833 numbers. To the extent our rules
800–CONTACTS admits, the Lanham free numbers than the toll free preventing a secondary market were
Act already serves to ‘‘protect subscriber intends to use for the adopted to limit exhaust, we do not
consumers by preventing confusion and provision of toll free service.’’ Third, the believe this limited exception will
unfair competition,’’ and 1–800– rules prevent warehousing, a practice in significantly affect the exhaust of the
FLOWERS has acknowledged its which a RespOrg reserves toll free entire pool of 833 numbers. Because
success policing use that infringes on its numbers ‘‘without having an actual toll creating this limited secondary market
trademarks under the first-come, first- free subscriber for whom the numbers will not lead to premature exhaust, we
served methodology. Some commenters are being reserved.’’ These rules not see no need to adopt the proposal in the
argue that a market-based approach to only preclude the sale of the rights to record that we ‘‘assess[ ] a fixed monthly
number assignment will encourage use toll free numbers—central to a direct contribution from all toll-free
‘‘extortion’’ of trademark-holders by bad secondary market—but also frustrate number holders [to] discourage
actors, but we see no reason to diverge number sales by placing obligations on hoarding and warehousing’’ in order to
from our position that number potential sellers. combat exhaust. Further, we disagree
assignment should be trademark- 81. As the Commission explained in with CenturyLink’s argument that we
agnostic. An auction mechanism assigns the Toll Free Assignment NPRM, a should not combine a secondary market
numbers to those who value them most secondary market appears to be ‘‘an with the 833 Auction experiment so that
highly, and a secondary market—which efficient and productive use of an auction ‘‘may be adequately
we adopt on a limited basis below— numbers’’ because it ‘‘permit[s] evaluated without the influence of other
only facilitates this assignment. subscribers to legally obtain numbers variables.’’ As we have explained, a
Subscribers remain bound by trademark which they value.’’ It also promotes the secondary market is an important
law once a number has been assigned. efficient operation of an auction: component to a successful auction,
We also disagree with the argument of Permitting the free acquisition and because it allows auction participants to
1–800–CONTACTS that auctioning transfer of the rights to use numbers later transfer numbers in response to
numbers without special protection for allows subscribers to purchase or sell information learned at the auction. And
trademark holders ‘‘would conflict with numbers in response to the outcome of exploring these two changes
the statutory requirements of the the auction, and limits pre-auction costs simultaneously will allow us to see how
Lanham Act.’’ 1–800–CONTACTS does associated with estimating which—and they work in conjunction with one
not identify with specificity which how many—numbers a bidder may win. another.
requirements the Commission would It further encourages value-creating 83. We also disagree with the
violate, or provide support for its entities to promote efficiency by argument that ‘‘abandoning the
argument. The United States Court of procuring rights to numbers with an brokering rule . . . violates the statutory
Appeals for the Sixth Circuit has found, intent to sell those rights to other mandate of equitable distribution of
in the context of an internet domain interested subscribers. The secondary numbers.’’ The secondary market is both
name registrar, that assigning an item to market thus ensures that numbers are ‘‘orderly and efficient’’ and ‘‘fair.’’ The
a third party is not ‘‘use’’ for purposes assigned to those parties who can most secondary market is ‘‘orderly’’ because
of a trademark infringement claim. efficiently use them. Under our current it is simple: Competing claims are
system, by contrast, a party that desires resolved by assigning rights to a number
C. Secondary Markets for Toll Free a number most cannot ensure that it is to the party who values it most. The
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Numbers assigned that number; and if it fails to secondary market is ‘‘efficient,’’ as that
79. To fully realize the effectiveness be assigned that number, it has no term is interpreted under our precedent
of assigning numbers via competitive mechanism to procure it after the initial in this context, in that it will minimize
bidding, we allow for a secondary assignment. An auction mechanism number exhaust by allowing rights to
market of toll free numbers won at with a robust secondary market not only numbers to be obtained without
auction. In the Toll Free Assignment ensures that numbers are assigned to the requiring the opening of a new code.
NPRM, the Commission sought bidder that values them most at the time Finally, the secondary market is ‘‘fair’’
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![53390 Federal Register / Vol. 83, No. 205 / Tuesday, October 23, 2018 / Rules and Regulations
because no potential subscribers are potential targets for revision. After the create a ‘‘Transitional Status’’ category
discriminated against; there is equal release of the NPRM, the Bureau for numbers that have been
opportunity to participate in the directed the NANC to recommend disconnected for less than four months,
secondary market. possible rule changes to promote a but for which no service provider
84. To allow for a secondary market market-based approach to the intercept recording (also known as
to develop, we adopt exceptions to the assignment of toll free numbers. In Exchange Carrier Intercept Recording) is
Commission’s rules prohibiting the response to this direction, the NANC being provided. (Transitional Status is
brokering, hoarding, and warehousing of Toll Free Number Assignment thus distinct from Disconnect Status,
toll free numbers for numbers acquired Modernization Working Group where a service provider intercept
in an auction. (We also modify our rule recommended revisions to sections recording (i.e., a recording explaining
limiting how long a number may remain 52.101 and 52.103 of our rules regarding that a number has been disconnected) is
in ‘‘reserved’’ status in order to general definitions and lag times. being provided.) The NANC comments,
harmonize that rule with the exceptions 88. General Definitions. We revise and we agree, that adding this
we adopt today.) Because, as explained, section 52.101(a) to replace the term Transitional Status will better align the
a secondary market can promote the ‘‘Number Administration and Service Commission’s rules with current
efficiency of an auction, we find that it Center’’ (NASC) with the term ‘‘Toll industry practice.
is appropriate that we apply our Free Numbering Administrator.’’ 91. Second, we modify section
exceptions to numbers assigned via (Section 52.101(a) currently defines 52.103(d) to make the existing
competitive bidding. Numbers which ‘‘Number Administration and Service Disconnect Status rule compatible with
are eligible for this exception by virtue Center’’ as ‘‘The entity that provides a market-based number assignment
of having been assigned via competitive user support for the Service approach. Section 52.103(d) requires
bidding do not lose their eligibility if Management System and administers disconnected numbers to stay in
they are sold or otherwise transferred to the Service Management System Disconnect Status for a period of up to
another subscriber. Numbers which are database on a day-to-day basis.’’) four months, and then go to Spare
returned to the spare pool, however, do Despite the fact that the Commission Status at the end of that period. The
not retain eligibility for the exception has used the term Toll Free Numbering NANC Report recommends amending
simply because they were once assigned Administrator for several years, our the rule to allow numbers that have
in an auction. rules have not reflected that been in Disconnect Status for up to four
85. We decline, at this time, to terminology. Our rules’ reference to the months to go directly to Unavailable or
mandate that fees associated with the NASC is now outdated, and this Spare Status. (We note that numbers set-
sale of numbers on the secondary revision will update the Commission’s aside for a market-based assignment are
market go to the cost of toll free rules to reflect current industry placed in unavailable status.) We
numbering administration borne by terminology. We further modify our conclude, and the NANC agrees, that
Somos. We are convinced by the record definition, consistent with the NANC’s allowing numbers to go from Disconnect
that our rules should not ‘‘increase the recommendation, to reflect that the Toll Status to Unavailable—rather than
costs to subscribers.’’ However, as we Free Numbering Administrator role is directly to Spare Status—will ensure
have explained previously, in order to filled by an entity appointed under our that any number can be assigned by a
evaluate the operation of the secondary authority pursuant to section 251(e)(1) market-based mechanism. This change
market, we direct Somos to maintain of the Act. Because the Toll Free will allow the Toll Free Numbering
data on secondary market transactions Numbering Administrator serves the Administrator to send numbers that
and make that data available to the same purpose as the former NASC, have been selected for market-based
Commission. To facilitate the collection however, we otherwise retain the same assignment directly into Unavailable
of data, RespOrgs will be required to definition as to the role of the toll free rather than into Spare Status. We thus
provide subscriber information to administrator. adopt this change, which will allow
Somos, including the new subscriber’s 89. We further revise section 52.101(e) greater flexibility and further modernize
name and contact information, and to expand the definition of ‘‘Toll Free the toll free assignment process.
other limited information Somos deems Subscriber.’’ The Commission’s rules 92. Finally, we also adopt a change to
necessary. currently define a Toll Free Subscriber section 52.103(f), ‘‘Unavailable Status.’’
as ‘‘[T]he entity that requests a The description of ‘‘Unavailable Status’’
D. Other Toll Free Rule Revisions Responsible Organization to reserve a in that section references DSMI, which
86. To further modernize our decades- toll free number from the SMS has since been replaced by Somos as the
old toll free numbering rules, we adopt database.’’ Our revised rule establishes Toll Free Numbering Administrator.
several definitional and technical that a Toll Free Subscriber is ‘‘The The definition should be updated to
updates to improve clarity and entity that has been assigned a toll free refer to the Toll Free Numbering
flexibility in toll free number number.’’ This change will make our Administrator. This revision will ensure
assignment. We also incorporate definition consistent with our revised that the Commission’s rules reflect
recommendations of the North rule section 52.111, which allows for current industry terminology. We also
American Numbering Council (NANC, assignment via a market-based revise rule section 52.109(c) to change
the Commission’s Federal Advisory methodology, by making clear that a spare ‘‘poll’’ to spare ‘‘pool,’’ thus
Committee on numbering matters) to subscriber is not limited to requesting a correcting a typographical error in this
revise our definitions and lag time rules toll free number be reserved in the toll rule.
to be consistent with our new market- free database. For example, a subscriber 93. The ministerial revisions we adopt
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based toll free assignment rule. can be assigned a number through the today are a logical outgrowth of the
87. NANC Report. In the Toll Free competitive bidding process. proposals in the Toll Free Assignment
Assignment NPRM, the Commission 90. Lag Times. We make multiple NPRM. As the Commission has
sought comment on whether to revisions to section 52.103, which sets previously explained, ‘‘[a]n NPRM
‘‘eliminate or revise any other toll free forth the various statuses of toll free satisfies the logical outgrowth test if it
rules’’ and specifically suggested numbers in the Toll Free Database. First, ‘expressly ask[s] for comment on a
sections 52.101(d) and 52.103 as we adopt a new section 52.103(a)(10) to particular issue or otherwise ma[kes]
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clear that the agency [is] contemplating numbering and to make such numbers 3. Pursuant to the objectives set forth
a particular change.’’’ That test is available on an equitable basis.’’ And in the Toll Free Assignment NPRM, this
satisfied here. The Toll Free Assignment section 201(b) authorizes the Report and Order (Order) adopts
NPRM expressly proposed a revision to Commission to ‘‘prescribe such rules changes to Commission rules regarding
the rules governing toll free number and regulations as may be necessary in toll free number assignment.
assignment to allow for assignment via the public interest to carry out the Specifically, the Order (1) revises the
competitive bidding. It further sought provisions of this [Act].’’ Commission’s toll free assignment rule
comment on whether to ‘‘eliminate or 95. CenturyLink argues that we do not to allow for the use of competitive
revise any other toll free rules,’’ with have authority to assign toll free bidding for toll free numbers; (2)
specific reference to sections 52.101(d) numbers through competitive bidding establishes the use of competitive
and 52.103 of the rules. Our ministerial because, unlike in the context of bidding to assign the over 17,000
revisions, with one minor exception, spectrum auctions, Congress did not mutually exclusive numbers in the 833
apply to sections 52.101 and 52.103. specifically task the Commission with toll free code, identified pursuant to the
(The exception is our revision to section using competitive bidding for toll free 833 Code Opening Order; (3) exempts
52.109(c), correcting a typographical numbers. Since the Act was adopted in numbers assigned via competitive
error in that rule.) Further, the revisions 1934, however, Congress has stated with bidding from the rules preventing the
operate to harmonize those rules with particularity the various means for development of a secondary market; and
the competitive bidding assignment assignment of spectrum licenses; the (4) makes ministerial changes to our toll
methodology expressly noticed in the specific addition of an assignment via free number assignment rules. These
Toll Free Assignment NPRM. We find competitive bidding supplemented the modifications to our toll free number
that ‘‘parties should have anticipated previous Congressional direction to assignment rules will create a more
that the rule [revisions] ultimately make licenses available via an efficient method of toll free number
adopted [were] possible.’’ We also find application process or random assignment, consistent with our
good cause, to the extent necessary, to assignment. By contrast, Congress has statutory mandate. Ultimately, these
adopt these ministerial changes. These used much more general language in reforms will ensure the equitable and
revisions are insignificant and section 251 and thus given us broad efficient assignment of toll free
inconsequential to the industry and the discretion to administer numbering. In numbers.
public. Our revisions to sections Congress’s grant of ‘‘exclusive
52.101(a), 52.103(a)(10), 52.103(f), and B. Summary of Significant Issues Raised
jurisdiction over those portions of the by Public Comments in Response to the
52.109(c) either correct typographical North American Numbering Plan that
errors or bring our rules into line with IRFA
pertain to the United States’’ in section
contemporary practice and do not 4. The Commission did not receive
251(e)(1), we find authority to employ
increase or otherwise modify any comments addressing the rules and
any number assignment mechanisms
entities’ regulatory burden. Our policies proposed in the IRFAs in the
which meet the statute’s ‘‘equitable
revisions to sections 52.101(e) and Toll Free Assignment NPRM.
basis’’ requirement, including
52.103(d) similarly do not impact any
competitive bidding. C. Response to Comments by the Chief
entities’ regulatory burden, and only
Counsel for Advocacy of the SBA
harmonize our rules to allow for the IV. Final Regulatory Flexibility
successful operation of the competitive Analysis 5. Pursuant to the Small Business Jobs
bidding assignment methodology we Act of 2010, which amended the RFA,
adopt today. 1. As required by the Regulatory the Commission is required to respond
Flexibility Act of 1980, as amended to any comments filed by the Chief
E. Legal Authority (RFA), an Initial Regulatory Flexibility Counsel for Advocacy of the Small
94. The Commission has found Analysis (IRFA) was incorporated into Business Administration (SBA), and to
section 251(e)(1) of the Act ‘‘to empower the Notice of Proposed Rulemaking (Toll provide a detailed statement of any
the Commission to ensure that toll free Free Assignment NPRM) for the Toll change made to the proposed rules as a
numbers, which are a scarce and Free Assignment Modernization result of those comments.
valuable national public resource, are proceeding. The Commission sought 6. The Chief Counsel did not file any
allocated in an equitable and orderly written public comment on the comments in response to this
manner that serves the public interest.’’ proposals in the Toll Free Assignment proceeding.
Pursuant to these statutory mandates, NPRM, including comment on the IRFA.
the Commission has the ‘‘authority to The Commission received no comments D. Description and Estimate of the
set policy with respect to all facets of on the IRFA. Because the Commission Number of Small Entities to Which the
numbering administration in the United amends its rules in this Order, the Rules Will Apply
States,’’ and a ‘‘require[ment] . . . to Commission has included this Final 7. The RFA directs agencies to
ensure the efficient, fair, and orderly Regulatory Flexibility Analysis (FRFA). provide a description and, where
allocation of toll free numbers.’’ The This present FRFA conforms to the feasible, an estimate of the number of
actions we take today meet the statutory RFA. small entities that may be affected by
requirement that numbers be made the final rules adopted pursuant to the
A. Need for, and Objectives of, the Rules
‘‘available on an equitable basis’’—an Order. The RFA generally defines the
auction and secondary market are both 2. In the Toll Free Assignment NPRM, term ‘‘small entity’’ as having the same
efficient and orderly, and fair. We also the Commission reconsidered how to meaning as the terms ‘‘small business,’’
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have clear authority to require Somos to best meet the statutory mandate that it ‘‘small organization,’’ and ‘‘small
serve as the auctioneer for 833 numbers make toll free numbers ‘‘available on an governmental jurisdiction.’’ In addition,
and to comply with requirements equitable basis.’’ To this end, the the term ‘‘small business’’ has the same
adopted in this order. Section 251(e)(1) Commission proposed and sought meaning as the term ‘‘small-business
obligates the Commission to ensure its comment on numerous regulatory concern’’ under the Small Business Act.
Toll Free Numbering Administrator reforms to existing rules regarding toll (Pursuant to 5 U.S.C. 601(3), the
administers ‘‘telecommunications free number assignment. statutory definition of a small business
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(1) Toll free numbers assigned via (c) Toll Free Numbers Assigned via this final rule announces that there were
competitive bidding may remain in Competitive Bidding. The provisions of no new light-duty truck (LDT) lines
reserved status for a period of unlimited this section shall not apply to toll free added because none became subject to
duration. numbers assigned via competitive the theft prevention standard for MY
(2) [Reserved] bidding or to numbers transferred under 2017. This final rule also identifies
* * * * * the exception to § 52.105 contained in those vehicle lines exempted from parts
(d) Disconnect Status. Toll free paragraph (f) of that section. marking requirements and removes the
numbers must remain in disconnect or ■ 6. Amend § 52.109 by revising names of vehicle lines whose
a combination of disconnect and paragraph (c) to read as follows: production has been discontinued more
transitional status for up to 4 months. than 5 years.
No requests for extension of the 4- § 52.109 Permanent cap on number DATES: This final rule is effective
month disconnect or transitional reservations.
October 23, 2018.
interval will be granted. All toll free * * * * * FOR FURTHER INFORMATION CONTACT:
numbers in disconnect status must go (c) The Wireline Competition Bureau Hisham Mohamed, Consumer Standards
directly into the spare or unavailable shall modify the quantity of numbers a Division, Office of International Policy,
category upon expiration of the Responsible Organization may have in Fuel Economy and Consumer Programs,
4-month disconnect interval. A reserve status or the percentage of NHTSA, West Building, 1200 New
Responsible Organization may not numbers in the spare pool that a Jersey Avenue SE, (NRM–310, Room
retrieve a toll free number from Responsible Organization may reserve W43–437) Washington, DC 20590. Mr.
disconnect or transitional status and when exigent circumstances make such Mohamed’s telephone number is 202–
return that number directly to working action necessary. The Wireline 366–0307. His fax number is 202–493–
status at the expiration of the 4-month Competition Bureau shall establish, 2990.
disconnect interval. modify, and monitor toll free number
SUPPLEMENTARY INFORMATION: The theft
* * * * * conservation plans when exigent
prevention standard (49 CFR part 541)
(f) Unavailable Status. (1) Written circumstances necessitate such action.
applies to (1) all passenger car lines; (2)
requests to make a specific toll free ■ 7. Revise § 52.111 to read as follows: all multipurpose passenger vehicle
number unavailable must be submitted
§ 52.111 Toll free number assignment. (MPV) lines with a gross vehicle weight
to the Toll Free Numbering
rating (GVWR) of 6,000 pounds or less;
Administrator (TFNA) by the Toll free telephone numbers must be
(3) low-theft light-duty truck (LDT) lines
Responsible Organization managing the made available to Responsible
with a GVWR of 6,000 pounds or less
records of the toll free number. The Organizations and subscribers on an
that have major parts that are
request shall include the appropriate equitable basis. The Commission will
interchangeable with a majority of the
documentation of the reason for the assign toll free numbers by competitive
covered major parts of passenger car or
request. The Toll Free Numbering bidding, on a first-come, first-served
MPV lines; and (4) high-theft LDT lines
Administrator (TFNA) is the only entity basis, by an alternative assignment
with a GVWR of 6,000 pounds or less.
that can assign this status to or remove methodology, or by a combination of the The purpose of the theft prevention
this status from a number. Responsible foregoing options. standard is to reduce the incidence of
Organizations that have a Toll Free [FR Doc. 2018–22674 Filed 10–22–18; 8:45 am] motor vehicle theft by facilitating the
Subscriber with special circumstances BILLING CODE 6712–01–P tracing and recovery of parts from stolen
requiring that a toll free number be
vehicles. The standard seeks to facilitate
designated for that particular subscriber
such tracing by requiring that vehicle
far in advance of its actual usage may
DEPARTMENT OF TRANSPORTATION identification numbers (VINs), VIN
request that the Toll Free Numbering
derivative numbers, or other symbols be
Administrator (TFNA) place such a National Highway Traffic Safety placed on major component vehicle
number in unavailable status. Administration
(2) Seasonal numbers shall be placed parts. The theft prevention standard
in unavailable status. The Responsible requires motor vehicle manufacturers to
49 CFR Part 541 inscribe or affix VINs onto covered
Organization for a Toll Free Subscriber
who does not have a year round need [Docket No. NHTSA–2016–0046] original equipment major component
for a toll free number shall follow the parts, and to inscribe or affix a symbol
RIN 2127–AL72 identifying the manufacturer and a
procedures outlined in § 52.103(f)(1) of
these rules if it wants the Toll Free Federal Motor Vehicle Theft Prevention common symbol identifying the
Numbering Administrator (TFNA) to Standard; Final Listing of 2017 Light replacement component parts for those
place a particular toll free number in Duty Truck Lines Subject to the original equipment parts, on all vehicle
unavailable status. Requirements of This Standard and lines subject to the requirements of the
■ 4. Amend § 52.105 by adding Exempted Vehicle Lines for Model Year standard.
Section 33104(d) provides that once a
paragraph (f) to read as follows: 2017
line has become subject to the theft
§ 52.105 Warehousing. AGENCY: National Highway Traffic prevention standard, the line remains
* * * * * Safety Administration (NHTSA), U.S. subject to the requirements of the
(f) The provisions of this section shall Department of Transportation. standard unless it is exempted under
not apply to toll free numbers assigned ACTION: Final rule. section 33106. Section 33106 provides
khammond on DSK30JT082PROD with RULES
via competitive bidding or to numbers that a manufacturer may petition
transferred under this exception. SUMMARY: This final rule announces the annually to have one vehicle line
■ 5. Amend § 52.107 by adding annual update to the listings of light exempted from the requirements of
paragraph (c) to read as follows: duty truck lines subject to the section 33104, if the line is equipped
requirements and vehicle lines with an antitheft device meeting certain
§ 52.107 Hoarding. exempted from the requirements in the conditions as standard equipment. The
* * * * * theft prevention standard. Specifically, exemption is granted if NHTSA
VerDate Sep<11>2014 15:56 Oct 22, 2018 Jkt 247001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\23OCR1.SGM 23OCR1](https://thefederalregister.org/doc/83_FR_53582/page/20.svg)
Document Created: 2018-10-23 04:14:51
Document Modified: 2018-10-23 04:14:51
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Dates | Effective November 23, 2018. | |
| Contact | Wireline Competition Bureau, Competition Policy Division, Matthew Collins, at (202) 418-7141, [email protected] | |
| FR Citation | 83 FR 53377 | |
| CFR Associated | Communications Common Carriers; Telecommunications and Telephone |
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