36 CFR Part 1194 - Proposed Information and Communication Technology (ICT) Standards and Guidelines NPRM - Preamble

B. Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 (RFA), as amended (5 U.S.C. 601 - 612) requires agencies to evaluate the potential effects of their rulemakings on small entities.¹⁴ Section 603 of the RFA requires agencies to prepare and make available for public comment an initial regulatory flexibility analysis describing the impact of proposed rules on small entities. Because the proposed 255 Guidelines regulate non-federal entities (e.g., telecommunications equipment manufacturers), these guidelines fall within the purview of the RFA. The proposed 508 Standards, on the other hand, directly regulate only federal entities that are not covered by the RFA. Accordingly, the Access Board evaluates here only the impact of the proposed 255 Guidelines on small entities. The Board provides below an initial regulatory flexibility analysis (Initial RFA) for these proposed guidelines.

Description of the reasons why the Access Board is considering regulatory action. Section 255 of the Communications Act of 1934 (47 U.S.C. 255), as amended, requires telecommunication equipment to be accessible to and usable by individuals with disabilities, where readily achievable. The Access Board is statutorily responsible for developing accessibility guidelines for telecommunications equipment and customer premises equipment (CPE). The Access Board is also required to review and update the guidelines periodically. The Federal Communications Commission (FCC), however, is solely responsible for issuing implementing regulations and enforcing Section 255. The FCC is not bound to adopt the Access Board’s guidelines as its own or to use them as minimum standards.

In 1998, the Board issued the existing 255 Guidelines (36 CFR Part 1193). Since then, telecommunications technology and commercial markets have changed dramatically, along with the usage of telecommunications equipment. Given these tremendous changes, the Board is proposing to update the 255 Guidelines.

Objectives of, and legal basis for, the proposed rule. The Board’s proposed 255 Guidelines would provide a much-needed “refresh” of the existing 255 Guidelines, and, thereby, better support the access needs of individuals with disabilities, while also taking into account incremental compliance costs to covered manufacturers of CPE and telecommunications equipment. The proposed guidelines would be applicable only to new products to the extent that compliance is readily achievable; they would not require retrofitting of existing equipment or retooling. Manufacturers may consider costs and available resources when determining whether, and the extent to which, compliance is required.

Description and estimate of the number of small entities to which the proposed rule will apply. The proposed 255 Guidelines cover manufacturers of telecommunications equipment and CPE, as well as the manufacturers of equipment that functions as telecommunications and CPE.¹⁵ The Board used publicly available data from the Office of Advocacy of the Small Business Administration (SBA) to estimate the number of small businesses that may be affected by the proposed guidelines. The North American Industry Classification System (NAICS) is the standard used by federal statistical agencies in classifying business establishments.¹⁶

To determine the number of small businesses potentially subject to the proposed 255 Guidelines, the Board reviewed NAICS industry classifications and SBA small business size standards. The Board determined that three NAICS-based industry classifications may be subject to the proposed 255 Guidelines. These industry categories and their accompanying six-digit NAICS codes are: (a) NAICS Code 334210 – Telephone Apparatus Manufacturing; (b) NACIS Code 334220 – Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; and (c) NACIS Code 334111 – Electronic and Computer Manufacturing. The Board then matched these three NAICS classifications with SBA small business size standards (based on number of employees) to determine the number of small business within each of the respective classifications.¹⁷

Table 7 below provides the potential number of small businesses, based on SBA size standards, for each of the three types of equipment manufacturers (by NACIS code) that may be affected by the proposed 255 Guidelines.

Table 7 - Small Businesses Potentially Affected by the Proposed 255 Guidelines

A few notes are in order about the foregoing estimates of the number of small firms potentially affected by the 255 Guidelines. First, because all telephone equipment is covered by Section 255, all entities included in the telephone apparatus manufacturing category (334210) are necessarily subject to the guidelines. However, not all entities in the remaining two industry categories (334220 and 334111) are covered by the proposed guidelines because many of these entities may manufacture only equipment that falls outside the scope of Section 255. For example, only radio and broadcasting equipment that meets the statutory definition of telecommunications (that is, “the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received”), is covered by the proposed guidelines. Also, computers lacking modems or Internet telephony software are not covered by the proposed guidelines. However, the Board lacks quantitative information to differentiate regulated from non-regulated manufacturing firms within these two NAICS categories, as well as to determine how many of the “small businesses” in each NAICS category are subject to the proposed guidelines. The number of small entities listed in Table 7 that may be affected by the proposed 255 Guidelines should, therefore, be considered an upper-bound estimate. 

Second, given that manufacturers of telecommunications equipment and CPE must comply with Section 255 only to the extent such compliance is “readily achievable” (i.e., easily accomplishable and able to be carried out without much difficulty or expense), there will likely be some small firms for which compliance with the proposed guidelines will prove too difficult or expensive. This is not a new proposition. Under both the existing guidelines and current FCC regulations, compliance for manufacturing firms of all sizes is limited by the readily achievable exception, though such exception necessarily applies with greater frequency to smaller entities. (See 36 CFR 1193.21; 47 CFR 6.3(g)). The Board also understands that many small firms in the three NAICS categories listed above serve as partners or suppliers to larger firms that provide a full range of products and services. For these reasons, the Board assumes that many small firms identified in Table 7—particularly those with fewer than 20 employees—likely would not incur new costs under the proposed 255 Guidelines. Accordingly, the mid-point estimate for the number of small businesses that may be affected by the proposed 255 Guidelines is assumed to be small firms that meet the SBA size standards and employ twenty or more workers.

Description of the projected reporting, record keeping, and other compliance requirements for small entities. As discussed above, the proposed 255 Guidelines contain many requirements that are similar to the existing guidelines. There, are, however, two new proposed requirements that would apply to manufacturers of telecommunications equipment and CPE: 410.6 (real-time text functionality) and 602.3 (electronic support documentation). These two new requirements would potentially impose new costs on small manufacturing firms.

Regarding real time text (RTT) requirements under proposed 410.6, the Board lacks quantitative cost information. We requested information on RTT costs in the 2010 and 2011 ANPRMs, but did not receive specific cost data. Accordingly, we cannot, at this time, quantify or monetize the potential cost impact of the proposed RTT requirements in the 255 Guidelines. The Board does, however, seek comment on how to estimate the cost impact of the RTT requirements on small businesses subject to the 255 Guidelines so that we may use such information to prepare, as needed, a final regulatory flexibility analysis.

With respect to the new obligation in proposed 602.3 for Section 255-covered manufacturers to ensure the accessibility of electronic support documentation (such as web-based self-service support and electronic manuals), the Preliminary RIA develops estimated incremental costs, heavily relying on the cost methodology used by the Department of Transportation (DOT) in the regulatory assessment of its recent final rule requiring, among other things, airlines to make their websites accessible to persons with disabilities.¹⁸ (See Section VIII.A – Regulatory Process Matters – Preliminary Regulatory Impact Analysis).

Based on the methodology and estimates used in the Preliminary RIA, the Board’s Initial RFA assesses potential compliance costs for small manufacturers of telecommunications equipment and CPE based on estimated (a) one-time costs to create accessible electronic support documentation and websites, and (2) recurring, annual maintenance costs. One-time costs are assumed to be spread equally over the first two years (i.e., half of covered firms realizing costs in the first year, and the other half in year two), with annual maintenance costs incurred thereafter for the remainder of the 10-year regulatory horizon. Estimated compliance costs are based on firm size. For small businesses with 100 or more employees, average one-time costs are assumed to be $125,000 for bringing their respective support documentation and websites into compliance with the proposed 255 Guidelines. For firms with fewer than 100 employees, average per-firm one-time costs under the proposed guidelines are assumed to be $25,000. Annual recurring maintenance costs are estimated as twenty percent of one-time costs regardless of firm size.

Using these cost assumptions, the Initial RFA evaluates the monetary impact of the proposed 255 Guidelines from three perspectives. The first scenario uses the upper-bound estimate for small businesses that may be affected by the proposed guidelines (i.e., all small firms meeting SBA size standards) to assess total one-time and annual maintenance costs across all affected industry categories. These costs, which should be considered an upper-bound estimate, are reflected below:

Table 8-Estimated Incremental Costs for Small Manufacturing Firms Subject to the Proposed 255 Guidelines (Scenario 1 – All Firms)

Second, to reflect the reality that compliance may not be readily achievable for the smallest firms (and, as well, the fact that such firms often serve as suppliers to larger firms and thus may not be covered by Section 255), the second scenario uses the mid-point estimate for small businesses that may be affected by the proposed guidelines (i.e., small firms that meet the SBA size standards and have twenty or more employees) to assess total one-time and annual maintenance costs across all industry categories. These costs, which should be considered a mid-point estimate, are reflected below:

Table 9-Estimated Incremental Costs for Small Manufacturing Firms Subject to the Proposed 255 Guidelines (Scenario 2–Firms with 20 or More Employees)

Third, to assess the magnitude of potential compliance costs for small businesses under the proposed 255 Guidelines relative to annual receipts, the third scenario evaluates the ratio of average annualized costs per-firm to average receipts per firm for each of the three NAICS codes. Average annualized costs represent the per-firm stream of estimated one-time and recurring annual costs over the 10-year regulatory horizon at a 7 percent discount rate. Annualized costs are assumed to be consistent across the three NAICS codes for each of the two studied small firm sizes (i.e., more or less than 100 employees) because the Board does not have NAICS code-based data differentiating receipts by firm size. Annual estimated average per-firm receipts for each NAICS code, in turn, are derived from publicly-available SBA data. The ratio of average per-firm annualized costs and annual per-firm receipts is then calculated for each NACIS code and firm size, with the resulting percentage serving as a metric to evaluate the relative economic significance of compliance costs to small businesses under the proposed 255 Guidelines.

The results are presented below in two separate tables by the size (in terms of number of employees) of small firms covered by Section 255.

Table 10-Ratio of Annualized Per-Firm Costs to Receipts for Small Firms with 100 or More Employees (by NAICS Code)

Table 11-Ratio of Annualized Per-Firm Costs to Receipts for Small Firms with Less Than 100 Employees (by NAICS Code)

The results of these average cost/receipt analyses demonstrate that incremental costs of the proposed 255 Guidelines for small businesses—whether larger or smaller than 100 employees—are expected to be minimal relative to firm receipts. In no case would this ratio exceed about one-half of a percent, with ratios ranging from a low of 0.008 to a high of 0.049. Accordingly, based on the foregoing analysis, the Board does not believe that the proposed 255 Guidelines are likely to have a significant economic impact on a substantial number of small entities.

Question 42. The Board requests input from manufacturers of telecommunications equipment and customer premises equipment, as well as other interested parties, on the small business cost estimation methodology and assumptions used in this Initial RFA. The Board will use relevant information provided in public comments to determine whether or how to revise our estimates for the final regulatory flexibility analysis.

Duplication with other federal rules. To the Board’s knowledge, there are no relevant federal rules that duplicate, overlap, or conflict with the proposed 255 Guidelines.

Description of significant alternatives to the proposed 255 Guidelines. In the Board’s view, there are no alternatives to the proposed guidelines that would accomplish the goal of meeting the access needs of individuals with disabilities, while taking into account compliance costs of manufacturers of telecommunications equipment and CPE.