**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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**ORDER ON REMAND, FURTHER NOTICE OF PROPOSED RULEMAKING, AND MEMORANDUM
OPINION AND ORDER**

**Adopted: October 16, 2003 Released: October 27, 2003**

**Comment Date: 30 days after publication in the Federal Register**

**Reply Comment Date: 60 days after publication in the Federal
Register**

By the Commission: Chairman Powell, Commissioners Abernathy, Copps and
Adelstein issuing separate statements; Commissioner Martin approving in
part, dissenting in part, and issuing a separate statement.

Table of Contents

Heading Paragraph

I. introduction 1

II\. executive summary 4

III\. Background 5

IV\. Discussion 12

A. Federal and State Roles in Supporting Universal Service 13

1\. Background 15

2\. Discussion 21

B. Definitions of Relevant Statutory Terms 30

1\. Background 31

2\. Discussion 36

C. Cost Benchmark 49

1\. Background 50

2\. Discussion 55

D. Rate Review and Expanded Certification Process 70

1\. Background 71

2\. Discussion 76

a\. Nationwide Urban Rate Benchmark 80

b\. Definition of Rural and High-Cost Areas 83

c\. Basic Service Rate Template 86

d\. Expanded Certification Process 89

e\. Ability of States to Request Further Federal Action 93

E. Complete Plan for Supporting Universal Service 97

V. Further Notice of Proposed rulemaking 108

A. Collection of Additional Rate Data 109

B. Calling Scopes 113

C. Procedures for Filing and Processing Any State Requests for Further
Federal Action 114

1\. Timing of Requests for Further Federal Action 115

2\. Required Showings 117

3\. Types of Further Federal Action 121

D. Additional Inducements for State Action 126

VI\. ORDER ON RECONSIDERATION 133

A. AT&T Petition 134

B. Puerto Rico Tel. Co. Petition 138

C. SBC and PCIA Petitions 141

D. Wyoming Commission Petition 143

VII\. PROCEDURAL MATTERS 146

VIII\. ORDERING CLAUSES 179

Appendix A -- Final Rules

Appendix B -- Residential Monthly Urban Rate Data

Appendix C -- Adjusted GAO Rate Data

Appendix D -- Dispersion of Statewide Average Costs Per Line

Appendix E -- Cluster Analysis Based on Simulated Statewide Average Cost
Per Line Data

Appendix F -- Bureau Rate Survey

Appendix G -- Proposed Methods of Targeting Additional Federal Support

Appendix H -- Parties Filing Comments and Reply Comments

#  introduction

1.   In this Order, in response to the decision of the United States
    Court of Appeals for the Tenth Circuit and the recommendations of
    the Federal-State Joint Board on Universal Service (Joint Board), we
    modify the high-cost universal service support mechanism for
    non-rural carriers and adopt measures to induce states to ensure
    reasonable comparability of rural and urban rates in areas served by
    non-rural carriers.[^1] We will continue to determine non-rural
    support by comparing statewide average costs to a national cost
    benchmark, but we establish a new cost benchmark at two standard
    deviations above the national average cost. Our action today ties
    the cost benchmark more closely to the data in the record,
    consistent with the court's directive, but does not substantially
    alter the level of non-rural support. Based on analysis of the
    relevant data, we explain why the modified non-rural mechanism will
    be sufficient to achieve the statutory principle of making rural and
    urban rates for non-rural carrier customers reasonably comparable.

2.  In addition, we will implement a rate review, through an expanded
    annual certification process, to induce states to achieve reasonably
    comparable rates and to assess how successfully the non-rural
    high-cost support mechanism ensures reasonably comparable rural and
    urban rates. Consistent with the Joint Board recommendation, states
    will be required to certify that the basic service rates in their
    rural, high-cost areas served by non-rural carriers are reasonably
    comparable to a national urban rate benchmark or explain why they
    are not.[^2] This process will add a dynamic element to the
    non-rural high-cost support mechanism.[^3] By requiring states to
    review their rates in rural, high-cost areas served by non-rural
    carriers annually in comparison to a national urban rate benchmark,
    the Commission will be able to determine whether federal and state
    universal service mechanisms are resulting in reasonably comparable
    rural and urban rates as competition develops and erodes implicit
    support mechanisms.

3.  In the attached Further Notice of Proposed Rulemaking, we seek
    comment to further develop the record on specific issues that relate
    to the rate review and expanded state certification process
    recommended by the Joint Board. We also seek comment on a proposal
    to further encourage states to preserve and advance universal
    service by making available additional targeted federal support for
    high-cost wire centers in states that implement explicit universal
    service mechanisms.

#  executive summary

4.  In this Order, we take the following actions to modify the non-rural
    high-cost support mechanism and to induce states to ensure
    reasonably comparable rural and urban rates in areas served by
    non-rural carriers:

-   Consistent with the Joint Board's recommendations, we reaffirm that
    comparing statewide average costs to a nationwide cost benchmark
    reflects the appropriate federal and state roles in determining
    federal non-rural high-cost support. We find no evidence in the
    record either for radically altering the current non-rural mechanism
    or for establishing a substantially larger federal subsidy to lower
    local telephone service rates, as some commenters advocate.

-   In response to the Tenth Circuit's remand, we define the relevant
    statutory terms "sufficient" and "reasonably comparable" more
    precisely for purposes of the non-rural mechanism. As recommended by
    the Joint Board, we define "sufficient" in terms of the statutory
    principle in section 254(b)(3), as enough federal support to enable
    states to achieve reasonable comparability of rural and urban rates
    in high-cost areas served by non-rural carriers. We also agree with
    the Joint Board that the principle of sufficiency means that
    non-rural support should be only as large as necessary to achieve
    the statutory goal. We define "reasonably comparable" in terms of a
    national urban rate benchmark recommended by the Joint Board. As
    part of the rate review process discussed below, the rate benchmark
    will be used in determining whether a state's local rates in rural,
    high-cost areas served by non-rural carriers are reasonably
    comparable to urban rates nationwide.

-   We modify the non-rural mechanism by basing the cost benchmark,
    which is used to determine the amount of non-rural high-cost
    support, on two standard deviations above the national average cost
    per line. Modifying the cost benchmark ties it more directly to the
    relevant data, consistent with the court's directive, but does not
    alter the level of non-rural support in a major way. We agree with
    the Joint Board that the current level of non-rural support is
    supported by data from a General Accounting Office (GAO) Report
    indicating that rural and urban rates generally are reasonably
    comparable today.

-   To induce states to achieve reasonably comparable rates, we adopt
    with minor changes the rate review and expanded certification
    process recommended by the Joint Board. Each state will be required
    to review its rates in rural, high-cost areas served by non-rural
    carriers annually to assess their comparability to urban rates
    nationwide, and then to file a certification with the Commission
    stating whether its rural rates are reasonably comparable to urban
    rates nationwide or explaining why they are not.

-   For purposes of the rate review process, we adopt the Joint Board's
    recommendation that we establish an annually-adjusted nationwide
    rate benchmark based on the most recent urban residential rates in
    the *Reference Book*, the Wireline Competition Bureau's annual rate
    survey. Specifically, we adopt a rate benchmark of two standard
    deviations above the average urban rate, which, based on the most
    recent *Reference Book* survey, is \$32.28 or 138 percent of the
    average urban rate. The rate benchmark will establish a "safe
    harbor," that is, a presumption that rates in rural, high-cost areas
    that are below the rate benchmark are reasonably comparable to urban
    rates nationwide. States with rural rates below the rate benchmark
    may certify that their rates are reasonably comparable without
    providing additional information, or rebut the presumption by
    demonstrating that factors other than basic service rates affect the
    comparability of their rates.

-   For purposes of the rate review process, we also establish a basic
    service rate template for states to use in comparing rates in rural,
    high-cost areas served by non-rural carriers to the nationwide urban
    rate benchmark. In addition, we adopt, with slight modifications,
    the definition of "rural area" already contained in section 54.5 of
    the Commission's rules for purposes of the rate review process.

-   We adopt the Joint Board's recommendation to permit states to
    request further federal action, if necessary, based on a
    demonstration that the state's rates in rural, high-cost areas
    served by non-rural carriers are not reasonably comparable to urban
    rates nationwide and that the state has taken all reasonable steps
    to achieve reasonable comparability through state action and
    existing federal support.

-   In response to the Tenth Circuit's remand, we review and explain our
    comprehensive plan for supporting universal service in high-cost
    areas.

-   In the attached Further Notice, we seek comment on issues related to
    the rate review and expanded certification process. In particular,
    we propose a method for calculating any additional targeted federal
    support that may be provided in response to a state request for
    further federal action, based on forward-looking cost estimates.
    Under this proposal, any such support would be targeted on a
    wire-center basis, based on a set percentage of per-line costs
    exceeding a threshold above the national average cost for wire
    centers.

-   We also seek comment in the attached Further Notice on whether we
    should make additional targeted federal support available for
    high-cost wire centers in states that implement explicit universal
    service mechanisms, without regard to their achievement of rate
    comparability, in order to encourage states to adopt universal
    service mechanisms that will be sustainable in a competitive
    environment.

# Background

## The Act

5.  The Telecommunications Act of 1996 Act codified the historical
    commitment of the Commission and state regulators to promote
    universal service by ensuring that consumers in all regions of the
    nation have access to affordable, quality telecommunications
    services.[^4] In section 254 of the Act, Congress directed the
    Commission, after consultation with the Joint Board, to establish
    specific, predictable, and sufficient support mechanisms to preserve
    and advance universal service, based on several enumerated
    principles.[^5] Among other things, section 254(b) provides that
    consumers in rural, insular, and high-cost areas should have access
    to telecommunications services at rates that are "reasonably
    comparable to rates charged for similar services in urban
    areas."[^6] In addition, section 254(e) provides that federal
    universal service support "should be explicit and sufficient to
    achieve the purposes of this section."[^7]

## Ninth Report and Order

6.   Consistent with the Act, the Commission has taken major steps over
    the last seven years to put in place explicit federal universal
    service support mechanisms that will be resilient as competition
    develops over time.[^8] In one of these major steps, in the *Ninth*
    and *Tenth Report and Orders*, the Commission established a new
    federal high-cost universal service support mechanism for non-rural
    carriers based on forward-looking economic costs.[^9] The non-rural
    mechanism determines the amount of federal support to be provided to
    non-rural carriers in each state by comparing the statewide average
    cost per line, as estimated by the Commission's cost model, to a
    nationwide cost benchmark of 135 percent of the national average
    cost.[^10] Federal support is provided to non-rural carriers in
    states with costs that exceed the benchmark.

## Tenth Circuit Remand

7.  In *Qwest*, the Tenth Circuit upheld the Commission's cost model,
    but remanded the methodology for determining non-rural support
    adopted in the *Ninth Report and Order*. On remand, the court
    required the Commission to define more precisely the statutory terms
    "reasonably comparable" and "sufficient" and then to assess whether
    the non-rural mechanism will be sufficient to achieve the statutory
    principle of making rural and urban rates reasonably
    comparable.[^11] In addition, the court found that the Commission
    failed to explain how its 135 percent nationwide cost benchmark will
    help achieve the goal of reasonable comparability or
    sufficiency.[^12] The court required the Commission on remand "to
    develop mechanisms to induce adequate state action."[^13] Finally,
    because the non-rural mechanism concerns only one piece of universal
    service reform, the court stated that it could not properly assess
    whether the total level of federal support for universal service was
    sufficient and indicated the Commission would have the opportunity
    on remand to explain further its complete plan for supporting
    universal service.[^14]

## Joint Board Recommendation

8.  On February 15, 2002, the Commission released a Notice of Proposed
    Rulemaking seeking comment on: (1) how the Commission should define
    the key statutory terms "reasonably comparable" and
    "sufficient"; (2) whether, in light of the interpretation of those
    key statutory terms, the Commission can and should maintain the
    previously established benchmark or, in the alternative, should
    adopt a new benchmark or benchmarks; and (3) how the Commission
    should induce states to implement state universal service
    policies.[^15] Because the *Ninth Report and Order* was based on
    previous Joint Board recommendations, the Commission determined that
    further Joint Board input would be beneficial for its consideration
    of the issues on remand. Accordingly, the Commission referred the
    issues described in the *Remand Notice*, and the record developed
    therein, to the Joint Board for a recommended decision.[^16]

9.  In its *Recommended Decision*, the Joint Board recommended that, for
    purposes of non-rural high-cost support, sufficiency should be
    principally defined as enough support to enable states to achieve
    reasonably comparable rates.[^17] The Joint Board also reaffirmed
    that the statutory principle of sufficiency means non-rural support
    should be only as large as necessary to achieve its statutory
    goal.[^18] The Joint Board recommended that support should continue
    to be based on cost differences among states.[^19] In addition, the
    Joint Board supported the continued use of statewide average costs
    compared to a national cost benchmark for purposes of determining
    non-rural support amounts, because this methodology reflects an
    appropriate division of federal and state responsibility for
    achieving rate comparability for non-rural carrier customers.[^20]
    The Joint Board also supported continued use of a national cost
    benchmark of 135 percent.[^21]

10. To induce states to achieve reasonably comparable rural and urban
    rates, the Joint Board recommended that the Commission implement a
    rate review. States would be required to certify that the basic
    service rates in their high-cost areas are reasonably comparable to
    a national urban rate benchmark or explain why they are not.[^22] In
    addition to inducing states to achieve rate comparability, the Joint
    Board concluded the rate review would allow the Commission to assess
    whether non-rural high-cost support continues to provide sufficient
    support to enable states to maintain reasonably comparable
    rates.[^23] States would have the opportunity to demonstrate that
    further federal action is needed based on a showing that federal
    support and state actions together are not sufficient to yield
    reasonably comparable rates.[^24] The Joint Board also suggested
    that the Commission further develop the record on certain issues
    related to the rate review.[^25]

11. On November 5, 2002, a Public Notice invited comment on the Joint
    Board's recommendations.[^26] Comments were filed by December 20,
    2002, and reply comments were filed by January 17, 2003.

#  Discussion

12. Below, we first reaffirm our view that the basic framework of the
    non-rural high-cost support methodology is consistent with the Act's
    dual regulatory structure. Next, in response to the specific issues
    remanded by the court, we define the relevant statutory terms
    "sufficient" and "reasonably comparable" more precisely for purposes
    of the non-rural mechanism. Then, we establish a new cost benchmark
    at two standard deviations above the national average cost, and
    explain why the level of support provided using this benchmark will
    be sufficient to ensure that urban and rural rates are reasonably
    comparable. We then adopt the rate review process recommended by the
    Joint Board to induce states to achieve reasonably comparable rural
    and urban rates and to permit assessment of the non-rural
    mechanism's success in ensuring rate comparability.[^27] Finally, we
    explain further how the federal high-cost support mechanisms work
    together to provide sufficient support for universal service.

## Federal and State Roles in Supporting Universal Service

13. Before turning to the specific issues remanded to us for further
    consideration and explanation, we begin by discussing in more detail
    the appropriate federal and state roles in supporting universal
    service. As held in *Texas Office of Public Utility Counsel v. FCC*,
    section 254 did not affect the proscription in section 2(b) of the
    Communications Act against Commission regulation of intrastate
    rates.[^28] Thus, our choices in implementing the universal service
    goals of the Act and in determining the basic framework of the
    non-rural high-cost support methodology are shaped and limited by
    the continued dual federal/state jurisdictional structure. A
    discussion of this framework provides the context needed to fully
    explain our actions with respect to the specific issues remanded by
    the court. In addition, a discussion of the dual federal/state
    jurisdictional roles is a critical backdrop to addressing several
    commenters' arguments that the Commission must fundamentally alter
    this basic framework in response to the court's remand decision.

14. As discussed below, we find support in the court's opinion for the
    basic framework of the non-rural support methodology, which is
    designed to reflect the division of federal and state roles under
    the Act. We do not believe that the court's decision requires us to
    fundamentally alter this framework. We agree with the Joint Board,
    therefore, that we should continue to determine non-rural high-cost
    support by comparing statewide average costs to a national cost
    benchmark. We find no evidence in the record either for radically
    altering the current non-rural mechanism or for establishing a
    substantially larger federal subsidy to lower local telephone
    service rates, as some commenters advocate.

### Background

15.  Historically, the purpose of universal service support always has
    been to promote universally available telephone service at
    reasonable and affordable rates.[^29] When the 1996 Act was adopted,
    universal service was achieved largely through implicit support
    mechanisms.[^30] Although the Commission and a few states had in
    place some explicit support mechanisms to enable access to telephone
    service in areas where the cost of such service otherwise would be
    prohibitively high,[^31] most universal service support came from
    state rate designs aimed at ensuring affordable residential
    rates.[^32] States typically maintained low residential basic
    service rates through, among other things, geographic rate
    averaging, higher rates for business customers, higher intrastate
    access rates, higher rates for intrastate toll service, and/or
    higher rates for vertical features, such as call waiting. In
    addition, the federal access charge rate structure provided some
    implicit support for the interstate portion of joint and common
    costs.[^33]

16.  Congress recognized that the universal service support mechanisms
    developed in a monopoly environment would not be appropriate in the
    competitive environment envisioned by the 1996 Act. In particular,
    it would be difficult to sustain implicit subsidies in a competitive
    market: competition would erode the implicit subsidies that state
    and, to a lesser extent, federal policies had relied on to keep
    rates comparable because competitive pressures would drive down
    above-cost rates.[^34] Congress adopted section 254 to help ensure
    that, as competition develops, explicit support mechanisms would
    replace, as far as possible, implicit support mechanisms in order to
    preserve the fundamental communications policy goal of providing
    universal telephone service in all regions of the nation at
    reasonably comparable rates.[^35]

17.  The Act makes clear that preserving and advancing universal service
    is a shared federal and state responsibility.[^36] Among the
    principles in section 254(b) is that "\[t\]here should be specific,
    predictable, and sufficient Federal and State mechanisms to preserve
    and advance universal service."[^37] Pursuant to section 2(b) of the
    Communications Act, states retain primary responsibility for
    ensuring reasonable comparability of rates within their
    borders.[^38] In *Texas Office of Public Utility Counsel v. FCC*,
    the United States Court of Appeals for the Fifth Circuit held that
    section 254 of the Act did not affect the proscription in section
    2(b) against Commission regulation of intrastate rates.[^39]

18. In recognition of the Act's dual federal/state jurisdictional
    structure, in the *Ninth Report and Order*, the Commission
    determined, based on the recommendations of the Joint Board, that
    the primary federal role in ensuring the statutory goal of
    reasonably comparable rural and urban rates for non-rural carrier
    customers is to enable reasonable comparability *among* states.[^40]
    By averaging costs at the statewide level, the non-rural high-cost
    support mechanism adopted in the *Ninth Report and Order* compares
    the relative costs of providing supported services in different
    states.[^41] The mechanism then provides support to non-rural
    carriers in those states with costs that exceed the national average
    by a certain amount, i.e., the national benchmark. This approach
    ensures that no state with average costs greater than the national
    benchmark will be expected to keep rates reasonably comparable
    without the benefit of federal support.

19. The Tenth Circuit recognized that the 1996 Act "plainly contemplates
    a partnership between the federal and state governments to support
    universal service."[^42] The court further recognized that the
    Commission "may not be able to implement universal service by
    itself, since it lacks jurisdiction over intrastate service," citing
    section 2(b) of the Communications Act.[^43] The court rejected the
    petitioner's argument "that the FCC alone must support the full
    costs of universal service."[^44] The court also rejected the
    petitioner's argument "that the use of statewide and national
    averages is necessarily inconsistent with \[section\] 254."[^45]
    Thus, the court's decision recognizes the Act's dual federal/state
    jurisdictional structure.

20. In response to the court's decision, the Joint Board affirmed its
    belief that the non-rural mechanism reflects the appropriate
    division of federal and state responsibility for achieving
    reasonably comparable rural and urban rates for non-rural carrier
    customers. The Joint Board explained that "\[b\]ecause the states,
    not the Commission, set intrastate rates, the states have primary
    responsibility for ensuring reasonably comparable rural and urban
    rates."[^46] Because some states cannot support their high-cost
    areas by using resources from their low-cost areas, "\[t\]he
    Commission's primary role is to identify those states that do not
    have the resources within their borders to support all of their
    high-cost lines."[^47]

### Discussion

21.  Consistent with the Act's dual jurisdictional structure, we agree
    with the Joint Board that the states should continue to have primary
    responsibility for ensuring reasonably comparable rural and urban
    rates, and that the Commission's primary role under the non-rural
    mechanism is to identify those states that do not have the resources
    within their borders to support all of their high-cost lines. The
    1996 Act makes clear that Congress intended preserving and advancing
    universal service to be a shared federal and state
    responsibility.[^48] The legislative history of the 1996 Act also
    indicates that Congress intended the states to continue to have the
    primary role in implementing universal service for intrastate
    services.[^49] In designing the non-rural mechanism, the Commission
    left intact the states' primary jurisdiction over intrastate
    support.[^50] The Commission stated that "it would be unfair to
    expect the federal support mechanism, which by its very nature
    operates by transferring funds among jurisdictions, to bear the
    support burden that has historically been borne within a state by
    intrastate, implicit support mechanisms."[^51] The Tenth Circuit's
    decision supports the view that Congress did not intend the
    Commission to federalize the dual federal/state universal service
    support system by converting implicit state subsidies to explicit
    federal subsidies and taking on the entire burden of providing
    support for intrastate costs in high-cost and rural areas. The court
    said that it saw "nothing in \[section\] 254 requiring the FCC to
    replace implicit support previously provided by the states with
    explicit federal support."[^52] Indeed, the court rejected the
    petitioner's argument that the Commission alone must support the
    full costs of universal service. [^53]

22.  Moreover, primary state responsibility for ensuring intrastate rate
    comparability is consistent with state ratemaking authority under
    the Act. The states, not the Commission, set intrastate rates.[^54]
    Since passage of the 1996 Act, many states have adopted explicit
    universal service support mechanisms, but most states continue to
    provide at least some implicit support to residential customers
    through their rate designs.[^55] Given the substantial amounts of
    universal service support built into most state rate designs, the
    Commission previously observed that "states are best positioned to
    determine how and whether these \[implicit\] mechanisms need to be
    altered to ensure that carriers do not double-recover universal
    service support."[^56] We continue to believe that the states are in
    the best position to assess the impact of competition on the erosion
    of implicit support in their jurisdictions and adjust their
    universal service mechanisms accordingly.[^57] We believe that the
    states generally are fulfilling their responsibilities under the
    Act, with the help of federal support in high-cost states, to ensure
    reasonably comparable rates in rural and urban areas within their
    borders.[^58]

23.  We also agree with the Joint Board that we must consider cost
    differences in determining which states need federal support to
    achieve rural rates that are comparable to urban rates.[^59] Because
    the states retain jurisdiction over intrastate rates, the Joint
    Board and the Commission always have looked at cost differences, not
    rate differences, in determining high-cost support.[^60] States may
    base rates on a variety of factors, so that comparing only rates,
    which may or may not include implicit support, would not be a fair
    and equitable way to apportion federal support.[^61] Because the
    underlying purpose of rates is to recover the cost of providing
    service, comparing costs provides a more accurate and consistent
    measure of what rate differences would be in any given state, given
    identical state rate policies. States with high costs would have
    higher rates in the aggregate than those in other states, were it
    not for federal support. We disagree with the argument that the
    statutory principle of reasonable comparability requires the
    determination of non-rural support to be based on rate
    differences.[^62] We find nothing in the court's remand decision
    that requires such an approach.[^63] The advocates of such an
    approach have not suggested methods of apportioning non-rural
    support based on rate differences that would be fair, equitable, or
    administratively manageable. Moreover, nothing in the record
    suggests that basing non-rural support on cost differences will not
    result in reasonably comparable rural and urban rates. Indeed, as
    discussed below, we find that our cost-based non-rural support
    mechanism has achieved rates that generally are reasonably
    comparable.[^64]

24.  We also agree with the Joint Board that the general framework of
    the non-rural mechanism, through the use of statewide average costs,
    reflects the appropriate division of federal and state
    responsibility for determining high-cost support for non-rural
    carriers.[^65] The non-rural mechanism estimates costs by
    determining the average cost in each wire center, weighted by lines,
    and then averaging the wire center costs at the state level,
    weighted by lines. In effect, this "nets out" the high-cost and
    low-cost lines in a state. States with high average costs do not
    have enough low-cost lines to support their high-cost areas.
    High-cost states receive federal non-rural support, which is
    targeted to their high-cost wire centers.[^66] This is the most
    reasonable way to identify the states that do not have enough
    non-rural carrier low-cost lines to keep their rural rates
    reasonably comparable to urban rates in most other states. Statewide
    averaging effectively enables the state to support its high-cost
    wire centers with funds from its low-cost wire centers through
    implicit or explicit support mechanisms, rather than unnecessarily
    shifting funds from other states.[^67]

25. We recognize, as the Joint Board observed, that statewide averaging
    may not be appropriate for the high-cost mechanism providing support
    to rural carriers.[^68] Compared to non-rural carriers, rural
    carriers generally serve fewer subscribers, serve more sparsely
    populated areas, and generally do not benefit from economies of
    scale and scope as much as non-rural carriers.[^69] In addition,
    compared to customers of non-rural carriers, customers of rural
    carriers tend to have a relatively small local calling scope and
    make proportionately more toll calls.[^70] Most non-rural carriers
    historically have received lower levels of high-cost support than
    rural carriers. Specifically, the high-cost loop support mechanism
    provides a greater percentage of federal support to carriers with
    200,000 or fewer lines.[^71] In the future, we intend to ask the
    Joint Board to conduct a comprehensive review of the high-cost
    support mechanisms for rural and non-rural carriers as a whole to
    ensure that both mechanisms function efficiently in a coordinated
    fashion.[^72]

26.  Several commenters criticize the *Recommended Decision* for
    appearing to endorse continued reliance on implicit subsidies.[^73]
    While we generally agree that states should be encouraged to replace
    implicit support with explicit support mechanisms, we are not
    persuaded that, to comply with the court's remand, we must require
    or induce all states to immediately remove implicit subsidies from
    intrastate rates through substantial increases in federal
    support.[^74] We do not find in the language of the statute, as SBC
    does,[^75] a clear mandate requiring states to establish explicit
    universal service support mechanisms.[^76] Although section 254
    states a clear preference for explicit, rather than implicit,
    support, the Joint Board and the Commission previously agreed that
    the 1996 Act does not require states to adopt explicit universal
    service support mechanisms.[^77] Section 254(e), which provides that
    support should be explicit, refers only to federal, not state,
    universal service support.[^78] Section 254(f), which provides that
    states *may* adopt regulations not inconsistent with the
    Commission's rules to preserve and advance universal service, does
    not include the word "explicit."[^79] In addition, requiring the
    states to establish explicit universal service support mechanisms
    raises serious legal concerns in light of section 2(b) of the
    Communications Act.[^80] Requiring the states to remove implicit
    support from their rate structures arguably would involve the
    Commission in the regulation of intrastate rates.[^81]

27.  We disagree with some commenting states that the Commission must
    significantly increase federal support by adopting an urban cost
    benchmark.[^82] They claim that the Joint Board's premise, that
    Congress sought to prevent prospective harm due to competition,
    narrows and distorts the purpose of section 254.[^83] We are not
    persuaded by their arguments. In particular, we find no evidence for
    one state's claim that section 254(b) was intended to address a
    pending waiver petition of a specific Commission rule related to
    high-cost support for larger carriers.[^84] Nothing in the 1996
    Act's language or legislative history suggests such an intention. If
    Congress intended to address a particular Commission proceeding in
    section 254, it knew how to make its intention clear.[^85] For
    example, the conference report explains that section 254(g) is
    intended to incorporate the Commission's rate integration policies
    contained in a specific Commission order.[^86] Rather than directing
    the Commission to establish any particular universal service support
    mechanism, we find that a better reading of the statute is that
    Congress provided general principles and goals in section 254 to
    preserve and advance universal service as competition develops.[^87]
    The Commission already had in place federal support mechanisms that
    had the effect of shifting support among states. Pursuant to section
    254, the Commission adapted those mechanisms to be sustainable and
    appropriate for a competitive environment.[^88] We find nothing in
    the statute to support the commenting states' contention that we
    should dramatically increase federal support flows among states. We
    note that actions taken by the Commission in implementing the 1996
    Act rendered the waiver petition moot.[^89]

28.  We also agree with the Joint Board that, for purposes of
    determining non-rural high-cost support, comparing statewide average
    costs to the nationwide average cost, rather than to an urban
    average cost, more appropriately reflects the division of federal
    and state responsibility under the Act as outlined above.[^90]
    Because the national urban average cost is lower than the national
    average cost, the effect of using the national urban average cost,
    assuming use of the same cost benchmark, would be to increase
    federal support. For example, using the benchmark proposed by the
    proponents of an urban average cost benchmark would increase federal
    non-rural support from approximately \$214 million to an estimated
    \$1.7 billion.[^91] We do not need to use an urban cost benchmark in
    order to achieve rural rates that are reasonably comparable to urban
    rates because, as explained below, we conclude that the current
    level of federal support has resulted in rural and urban rates that
    generally are reasonably comparable.[^92] Using an urban cost
    benchmark (or obtaining the same result with a lower national
    average cost benchmark) would simply increase the amount of federal
    support, thereby driving the costs to be supported with federal
    funds down to the lower-than-average urban level.[^93] That is,
    federal support would be used to reduce overall intrastate rate
    levels by replacing the support in state rates with federal support.
    As discussed above, we do not believe that the 1996 Act or the
    court's remand requires the Commission to replace the implicit
    support historically provided by states with explicit federal
    support, thereby significantly increasing the federal burden for
    supporting intrastate costs.[^94] Moreover, as discussed below,
    significantly increasing the amount of federal support without
    evidence that such a measure is necessary to achieve rural and urban
    rate comparability would be inconsistent with the statutory
    principle of sufficiency.[^95]

29. We reaffirm that comparing statewide average costs to a nationwide
    cost benchmark reflects the appropriate federal and state roles in
    determining federal non-rural high-cost support amounts. We find
    that the basic framework of the non-rural support methodology is
    consistent with the court's view that the Commission is not required
    by the Act to replace implicit state support with explicit federal
    support or to support the full costs of universal service.

## Definitions of Relevant Statutory Terms

30. We now turn to the specific issues remanded by the court. Consistent
    with the Joint Board's recommendations, we define "sufficient" for
    purposes of the non-rural mechanism in terms of the statutory
    principle in section 254(b)(3), as enough federal support to enable
    states to achieve reasonable comparability of rural and urban rates
    in high-cost areas served by non-rural carriers. We also agree with
    the Joint Board that the principle of sufficiency means that
    non-rural high-cost support should be only as large as necessary to
    meet the statutory goal. In addition, we establish a more precise
    definition of "reasonably comparable" rural and urban rates, based
    on the Joint Board's recommended national urban rate benchmark, for
    purposes of assessing whether the non-rural mechanism is sufficient
    to achieve reasonably comparable rates.[^96] Specifically, we define
    "reasonably comparable" rates in terms of a rate benchmark based on
    the most recent urban residential rates in the *Reference Book*, the
    Wireline Competition Bureau's annual rate survey.[^97] By adopting a
    rate benchmark based on actual data, we will help ensure that rural
    rates remain reasonably comparable to urban rates as market
    conditions and rates change over time.

### Background

31.  Section 254(b) provides that "\[t\]he Joint Board and the
    Commission shall base policies for the preservation and advancement
    of universal service" on certain principles, two of which the court
    found were relevant to this proceeding.[^98] Section 254(b)(3)
    provides that consumers in rural, insular, and high-cost areas
    should have access to telecommunications services at rates that are
    "reasonably comparable to rates charged for similar services in
    urban areas."[^99] Section 254(b)(5) provides that "\[t\]here should
    be specific, predictable, and sufficient Federal and State
    mechanisms to preserve and advance universal service."[^100] In
    addition, section 254(e) provides that any federal universal service
    support "should be explicit and sufficient to achieve the purposes
    of this section."[^101]

32. In the *Ninth Report and Order*, the Commission stated that the
    non-rural high-cost support mechanism would "provide sufficient
    support to enable reasonably comparable rates."[^102] While the Act
    does not define "reasonably comparable," the Joint Board and the
    Commission interpreted the reasonable comparability standard to
    refer to "a fair range of urban/rural rates both within a state's
    borders, and among states nationwide."[^103] The Commission
    interpreted the goal of maintaining a "fair range" of rates to mean
    that "support levels must be sufficient to prevent pressure from
    high costs and the development of competition from causing
    unreasonable increases in rates above current, affordable
    levels."[^104] The Commission explained that "reasonably comparable
    does not mean that rate levels in all states, or in every area of
    every state, must be the same," but rather means "some reasonable
    level above the national average forward-looking cost per line,
    i.e., greater than 100 percent of the national average."[^105]

33. The court found that the Commission did not define adequately the
    key statutory terms "reasonably comparable" and "sufficient."[^106]
    The court observed that the Commission's definition of reasonably
    comparable as a fair range of urban/rural rates failed to address
    petitioners' claim that some rural rates will be 70 to 80 percent
    higher than urban rates under the non-rural mechanism.[^107] The
    court also found that the Commission's further explanations of the
    meaning of reasonably comparable could not be considered reasonable
    interpretations of the statutory language, because "\[t\]he Act
    calls for reasonable comparability between rural and urban
    rates."[^108] The court stated that the Commission's further
    definitions "simply substitute different standards."[^109] The court
    also concluded that the Commission asserted without explanation in
    the *Ninth Report and Order* that the non-rural mechanism would be
    sufficient.[^110] The court declared the Commission's holding
    conclusory and, thus, "inadequate to enable appellate review of the
    sufficiency of the federal mechanism."[^111] The court required the
    Commission on remand to define "reasonably comparable" and
    "sufficient" "more precisely in a way that can be reasonably related
    to the statutory principles, and then assess whether its funding
    mechanism will be sufficient for the principle of making rural and
    urban rates reasonably comparable."[^112]

34. In response to the court remand, the Joint Board recommended that,
    for purposes of non-rural high-cost support, sufficiency should be
    principally defined as enough support to enable states to achieve
    reasonably comparable rates.[^113] The Joint Board reasoned that
    sufficiency should be defined in terms of the relevant statutory
    goals found in section 254(b) and, therefore, the definition of
    sufficiency may vary depending on the underlying purpose of the
    universal service program in question.[^114] The Joint Board found
    that the principal purpose of the non-rural high-cost support
    mechanism is to provide enough federal support to enable states to
    achieve reasonable comparability of rural and urban rates, the
    principle found in section 254(b)(3).[^115] The Joint Board also
    found that correct fund size is essential to ensure that all
    consumers benefit from universal service, and reaffirmed its view
    that the statutory principle of sufficiency means that non-rural
    high-cost support should be only as large as necessary to achieve
    its statutory goal.[^116]

35. Although the Joint Board did not explicitly propose a definition of
    "reasonably comparable," in its *Recommended Decision*, it
    recommended that the Commission require states to certify annually
    that their rates are reasonably comparable or explain why they are
    not. Specifically, the Joint Board recommended that the Commission
    establish a "safe harbor" whereby a state whose rates in high-cost
    areas served by non-rural carriers are at or below a certain rate
    benchmark may certify that its basic service rates are reasonably
    comparable without the necessity of submitting additional
    information.[^117] The Joint Board recommended that the Commission
    base the rate benchmark on the most recent average urban residential
    rate in the Wireline Competition Bureau's *Reference Book*, an
    annual survey of local telephone rates in ninety-five urban areas
    that the Bureau has conducted for the past seventeen years.[^118]
    The Joint Board suggested that 135 percent of this average rate may
    be an appropriate rate benchmark for the safe harbor, but
    recommended that the Commission further develop the record on the
    appropriate rate benchmark.[^119] The rate benchmark would establish
    a presumption that rates are reasonably comparable, but states could
    submit additional information to demonstrate that other factors
    affect the comparability of their rates.[^120]

### Discussion

36. We agree with the Joint Board that "sufficient" should be defined,
    for purposes of the non-rural mechanism, as enough federal support
    to enable states to achieve reasonably comparable rural and urban
    rates. We also agree that "sufficient" should be defined in terms of
    the statutory principle in section 254(b) that the particular
    universal service program is designed to achieve.[^121] The
    non-rural high-cost support mechanism is designed to help ensure
    that consumers in high-cost areas, served by non-rural carriers,
    have access to telecommunications services at rates that are
    reasonably comparable to rates charged for similar services in urban
    areas.[^122] As explained in part IV.A.2. above, the non-rural
    mechanism achieves this goal by identifying and providing support to
    those states that do not have the resources within their borders to
    achieve reasonably comparable rural and urban rates for their
    non-rural carrier customers. Accordingly, for purposes of the
    non-rural mechanism, we define "sufficient" in terms of the section
    254(b)(3) principle of reasonable comparability of rural and urban
    rates.

37. We also agree with the Joint Board that the principle of sufficiency
    encompasses the idea that the amount of support should be only as
    large as necessary to achieve the relevant statutory goal.[^123]
    Because support ultimately is recovered from customers, collecting
    more support than is necessary to benefit certain customers would
    needlessly burden all customers.[^124] We agree with the Joint Board
    that correct fund size is essential to ensure all consumers benefit
    from universal service.[^125] In discussing whether support is
    sufficient, the Commission previously cited the Fifth Circuit's
    suggestion that "excessive funding may itself violate the
    sufficiency requirements of the Act."[^126] We find that the idea of
    minimizing the burden on contributors is inherent in the principle
    of sufficiency.[^127] For these reasons, we disagree with commenters
    who claim that we should not consider the size of the fund in
    determining how much support should be provided.[^128] We also
    disagree with commenters who urge us to adopt a separate principle
    under section 254(b)(7) to consider the burdens on contributors in
    determining sufficiency.[^129]

38. In response to the Tenth Circuit's remand, we also adopt a more
    precise definition of "reasonably comparable" rural and urban rates
    for purposes of assessing the sufficiency of the non-rural high-cost
    support mechanism. Specifically, for purposes of the non-rural
    mechanism, rates in rural areas will be presumed to be "reasonably
    comparable" to urban rates if they deviate no further than two
    standard deviations above the national average urban rate in the
    Bureau's *Reference Book*.[^130] This definition of "reasonably
    comparable" rural and urban rates is derived from the recommendation
    of the Joint Board that we establish a national urban rate benchmark
    based on the available rate data in the Bureau's *Reference Book*.
    Although the Joint Board did not explicitly define "reasonably
    comparable," it recommended that the Commission establish a "safe
    harbor" whereby a state whose rates in rural, high-cost areas served
    by non-rural carriers are at or below the national urban rate
    benchmark may certify that its rural rates in areas served by
    non-rural carriers are reasonably comparable to urban rates
    nationwide.[^131] We emphasize that the definition of "reasonably
    comparable" we adopt establishes a presumption only.[^132] As
    discussed below in part IV.D.2, factors other than basic rates may
    affect rate comparability, and states will have the opportunity to
    provide additional information rebutting the presumption established
    by the definition.[^133]

39.  We conclude that the range of variability of urban rates is an
    appropriate measure of what should be considered reasonably
    comparable rural and urban rates for purposes of assessing the
    sufficiency of non-rural high-cost support. We agree with the Joint
    Board that Congress, in seeking to preserve universal service,
    considered rural and urban rates to be reasonably comparable in
    1996.[^134] If Congress had determined that rates were not
    reasonably comparable at the time of the Act, it would have
    explicitly directed the Commission and the states to alter the
    existing intrastate rate structure.[^135] Instead, Congress
    specifically preserved state authority and flexibility in setting
    intrastate rates.[^136] We also note that Congress used the words
    "preservation" and "preserve" in the 1996 Act, indicating its view
    that the universal service mechanisms that pre-dated the 1996 Act
    adequately promoted universal service.[^137] We do not believe that
    our reading of the statute is undermined by the fact that section
    254 is designed to advance, as well as preserve, universal service.
    We find that the goal of advancing universal service is consistent
    with our understanding that our universal service rules should
    evolve as markets and technology change.[^138]

40.  In considering what Congress meant by reasonably comparable rates,
    therefore, we find it reasonable to assume that Congress was well
    aware that local rates varied from state to state, in large part
    because states base rates on a variety of different policies, in
    addition to cost.[^139] Although we do not have readily available
    rural rate data from that period, we know from the Bureau's annual
    rate survey that, at the time of the 1996 Act, urban residential
    rates ranged from \$13.04 to \$30.62 and the average urban rate was
    \$20.01 in the ninety-five cities surveyed.[^140] The highest urban
    rate in the survey was 234 percent of the lowest urban rate and 153
    percent of the average urban rate.[^141] We find it reasonable to
    assume that Congress was aware of the variability of urban rates
    when it enacted the 1996 Act. We do not believe that Congress would
    have required rural rates to be any closer to the average urban rate
    than other urban rates.

41.  We also find that the measure of reasonable comparability should be
    adjusted every year based on actual rate data, rather than set at a
    fixed percentage.[^142] By adjusting the rate benchmark each year,
    our reasonable comparability standard will reflect changes in urban
    rates as the marketplace changes. Since passage of the 1996 Act,
    residential urban rates have increased somewhat but the range of
    rates has remained approximately the same. In 2002, surveyed
    residential urban rates ranged from \$15.65 to \$35.19.[^143] The
    highest urban rate in the *Reference Book* is 225 percent of the
    lowest urban rate and 151 percent of the average urban rate
    (\$23.38).[^144] As explained below in part IV.D.2.a., we find that
    it is appropriate to use standard deviation analysis, rather than
    the range of rates in the *Reference Book*, to set the urban rate
    benchmark, because the standard deviation measures the dispersion
    from the average, thereby reflecting both the average urban rate and
    the variation of urban rates.[^145] We also find below that setting
    the urban rate benchmark at the average urban rate in the *Reference
    Book* plus two standard deviations best serves the rate benchmark's
    intended purpose as a safe harbor, because it will require that
    states more closely scrutinize rural rates that approach the highest
    urban rates.[^146] Based on the most recent Bureau data, an urban
    rate benchmark of two standard deviations above the national average
    urban rate is \$32.28, or 138 percent of the nationwide average
    urban rate.

42.  The definition of reasonably comparable rates we adopt today is
    primarily designed to permit us to compare relevant rates among
    states and to assess whether the non-rural mechanism provides
    sufficient support to enable high-cost states to achieve reasonably
    comparable rates. We find that our definition is consistent with the
    purpose of federal support under the non-rural mechanism. As
    discussed in detail above, the non-rural mechanism identifies and
    provides support to non-rural carriers in high-cost states. While
    most states have the resources to ensure reasonably comparable rates
    within their borders, high-cost states likely could not achieve
    rural rates comparable to urban rates in most other states without
    federal support.

43.  We disagree with commenters who argue that a national urban rate
    benchmark cannot adequately define reasonably comparable rates
    because it does not compare rural and urban rates within
    states.[^147] Currently, the range of variability of rural and urban
    rates within most states, based on the data in the GAO Report, is
    narrower than the range of variability of urban rates among states
    in the Bureau's *Reference Book*.[^148] In addition, in most states
    the rates are generally within the range of nationwide urban rates.
    Thus, in most cases, a state's successful efforts to maintain rural
    rates below the rate benchmark would also result in rural and urban
    rates within the state that differ no more than urban rates
    nationwide.[^149] Therefore, the national urban rate benchmark
    provides an adequate measure for comparing rural and urban rates at
    this time.

44.  We find no support in the language of the Act, its legislative
    history, or in the actual rate data in the record to support the
    claim that "a 25% difference is the outer limit of being 'reasonably
    comparable'."[^150] As set forth above, urban rates themselves
    varied more widely at the time of the 1996 Act and vary more widely
    today. A benchmark of 25 percent above the average urban rate would
    require rural rates to be closer to the average urban rate than
    other urban rates. As discussed above, we do not believe Congress
    would have required such a result.[^151] The *Qwest* court suggested
    that a discrepancy between rural and urban rates of 70 to 80 percent
    would not be considered to be reasonably comparable.[^152] Based on
    our analysis of the relevant data, we believe that the rate
    benchmark we adopt in this Order, currently 38 percent above the
    nationwide average urban rate, is likely to remain well below 70 or
    80 percent. Between 1993 and 2002, the nationwide average urban rate
    plus two standard deviations ranged from 133 percent to 143 percent
    above the average urban rate.[^153] Although the court did not
    specify whether it was considering the relationship of the maximum
    to the average or to the floor when it addressed whether a 70 or 80
    percent discrepancy would be reasonably comparable, we think that it
    is appropriate to measure the divergence from the average rate for
    purposes of interpreting section 254(b)(3). The average urban rate
    is more representative of urban rates nationwide than any single
    urban rate in the *Reference Book*. Measuring divergence from the
    lowest urban rate could be too heavily influenced by a particular
    state's rate policies. Measuring divergence from the national
    average urban rate more accurately captures the variability of rate
    polices among the states, and is, therefore, more consistent with
    the purposes of the non-rural mechanism.[^154]

45.  We are not persuaded by SBC that the Commission should establish an
    affordability benchmark for local telephone service based on the
    median household income of a particular geographic area.[^155] While
    the Joint Board and the Commission generally have considered
    affordability in implementing section 254, the Commission has not
    specifically identified an affordable rate, and we decline to do so
    now.[^156] Because various factors, many of which are local in
    nature, affect rate affordability, the Commission agreed with the
    Joint Board that it would not be appropriate to establish a
    nationwide affordable rate.[^157] The Commission also agreed with
    the Joint Board that states should exercise primary responsibility
    for determining the affordability of rates.[^158] The Commission
    previously rejected a proposal similar to the one SBC suggests now,
    concluding that it "would over-emphasize income levels in relation
    to other non-rate factors that may affect affordability and fail to
    reflect the effect of local circumstances on the affordability of a
    particular rate."[^159] Given the unique characteristics of each
    jurisdiction, we continue to find that states are better suited than
    the Commission to make determinations regarding affordability.[^160]
    Moreover, the Commission has previously rejected a proposal to link
    non-rural high-cost support to income and stated that "section
    254(b)(3) reflects a legislative judgment that all Americans,
    regardless of income, should have access to the network at
    reasonably comparable rates."[^161]

46. We disagree with some commenting states that, because non-rural
    high-cost support is based on costs, "reasonably comparable" must
    also be defined in terms of costs, not rates.[^162] Specifically,
    they claim that the Commission must provide a standard to measure
    whether cost levels net of support in rural areas are reasonably
    comparable to those in urban areas.[^163] Two states argue that
    "\[i\]f 'rates equal costs' for support, then 'rates equal costs'
    for accountability."[^164] First, the court emphasized that the Act
    speaks in terms of reasonable comparability of rates, not
    costs.[^165] Furthermore, rates do not "equal" costs for purposes of
    non-rural high-cost support.[^166] Costs can be used as a "proxy"
    for rates only in a general sense.[^167] Rather, as discussed above,
    cost differences represent the best measure of the resources each
    state can bring to bear in exercising its primary responsibility for
    achieving local rate comparability, in light of the Act's dual
    regulatory structure.[^168] Moreover, the approach advocated by
    these parties would fundamentally disregard the court's mandate that
    we induce states to establish reasonably comparable rates.
    Essentially, they maintain that "reasonably comparable" must be
    defined in terms of cost because the federal role is limited to
    providing support to high-cost states, and the Commission cannot
    encourage or induce state action to ensure rate comparability.[^169]
    This is precisely what the court found was required of the
    Commission under the Act, however. [^170]

47.  We also reject NASUCA's argument that the definition of reasonable
    comparability recommended by the Joint Board places too much
    emphasis on costs and rates, and should emphasize service quality
    issues, such as local calling areas, as well.[^171] While we agree
    with NASUCA that service quality is an important goal, we believe
    that states are in the best position to address service quality
    issues and will have ample opportunity to do so in the rate review
    and expanded certification process discussed in part IV.D. below. In
    the *First Report and Order*, consistent with the Joint Board's
    recommendations, the Commission concluded that federally-imposed
    service quality or technical standards were not required at the
    time.[^172] Because most states had established mechanisms designed
    to ensure service quality in their jurisdictions, the Commission
    found that additional efforts undertaken at the federal level would
    be largely redundant.[^173]

48. We conclude that our definition of reasonably comparable rates,
    combined with the rate review process we adopt below, will allow us
    "to assess whether \[the FCC's\] funding mechanism will be
    sufficient for the principle of making rural and urban rates
    reasonably comparable," as required by the court.[^174] We find that
    this definition responds to the court's criticism of the
    Commission's previous definitions of "reasonably comparable" for
    failing to "help answer the questions that arise about reasonable
    comparability."[^175] We also find that the rate review and expanded
    certification process responds to the court's admonition that
    section 254 "requires a comparison of rural and urban areas, not
    states."[^176] Rates in rural areas served by non-rural carriers can
    easily be compared to the national urban rate benchmark to determine
    whether or not a state's rural rates are presumed to be reasonably
    comparable to urban rates nationwide. As discussed in detail below,
    states will be required to certify that their non-rural company
    rates in high-cost areas are reasonably comparable to a national
    urban rate benchmark or explain why they are not.[^177] This process
    will allow the Commission to better assess whether or not the
    non-rural mechanism is achieving its goal of ensuring reasonably
    comparable rural and urban rates and will induce states to maintain
    and ensure rural and urban rate comparability as competition
    develops and market conditions change.

## Cost Benchmark

49. We modify the non-rural mechanism by changing the cost benchmark to
    one based on two standard deviations above the national average cost
    per line. The cost benchmark is used to determine the amount of
    non-rural high-cost support that non-rural carriers in each state
    will receive.[^178] As discussed below, modifying the benchmark ties
    it more directly to the relevant data, consistent with the court's
    directive, but does not alter the level of non-rural support in a
    major way. We agree with the Joint Board that the current benchmark
    level is supported by data from the GAO Report indicating that rural
    and urban rates generally are reasonably comparable today. In our
    analysis of the data in the GAO Report, we apply the definition of
    reasonably comparable rural and urban rates adopted in this Order.
    We also agree with the Joint Board that standard deviation analysis
    of the relevant cost data supports the current level of non-rural
    support. Based on our examination of the record, we find that a
    two-standard-deviation threshold provides sufficient non-rural
    high-cost support to achieve the statutory principle of making urban
    and rural rates reasonably comparable. We further conclude that
    setting the cost benchmark based on two standard deviations would
    address changes in the dispersion of statewide average costs per
    line more directly than the current 135 percent benchmark.

### Background

50. In the *Ninth Report and Order*, the Commission set the cost
    benchmark for the non-rural high-cost support mechanism at 135
    percent of the national average cost per line.[^179] If the
    statewide average cost per line for non-rural carriers, as
    calculated by the cost model, exceeds the benchmark, then the
    non-rural mechanism provides support for intrastate costs in excess
    of the benchmark.[^180] The Commission stated several reasons for
    setting the benchmark at 135 percent of the national average cost
    per line. A benchmark of 135 percent, the Commission reasoned,
    "falls within the range recommended by the Joint Board" of 115 to
    150 percent of the national average cost per line.[^181] The
    Commission also stated that a 135 percent benchmark was "consistent
    with the precedent of the existing support mechanism\[.\]"[^182] In
    addition, the Commission found that the 135 percent benchmark was a
    "reasonable compromise of commenters' proposals\[,\]" which ranged
    from 80 to 200 percent of the nationwide average.[^183] The
    Commission further stated that "a national benchmark of 135 percent
    strikes a fair balance between the federal mechanism's
    responsibility to enable reasonable comparability of rates among
    states and the burden placed on below-benchmark states (and
    ratepayers) whose contributions fund the federal support
    mechanism."[^184]

51. In *Qwest*, the court found that the Commission's justifications in
    the *Ninth Report and Order* failed to adequately support the choice
    of a 135 percent national average cost benchmark, stating that the
    Commission's duty is not to "pick the 'midpoint' or come to a
    'reasonable compromise' among competing positions."[^185] Rather,
    the Commission must "make rational and informed decisions on the
    record before it in order to achieve the principles set by
    Congress."[^186] Nonetheless, the court recognized that the
    "determination of a benchmark will necessarily be somewhat
    arbitrary."[^187] The court also acknowledged that the Commission is
    "entitled to deference in its line-drawing when it makes a reasoned
    decision."[^188] The court directed the Commission to "address the
    relevant data and provide adequate record support and reasoning for
    whatever level of support it ultimately selects upon remand."[^189]

52.  In the *Recommended Decision*, the Joint Board recommended that the
    Commission continue using the 135 percent national average cost
    benchmark.[^190] First, the Joint Board found that evidence of
    nationwide urban and rural rate comparability supported continued
    use of this benchmark. The Joint Board reasoned that attainment of
    reasonably comparable rural and urban rates is a key factor in
    determining an appropriate benchmark.[^191] The Joint Board stated
    that both the Joint Board and the Commission have previously
    considered rates to be affordable and reasonably comparable, and
    found that data from the recent GAO Report supports this
    conclusion.[^192] The Joint Board stated that "\[b\]ased on data
    contained in the GAO Report, it appears that six years after passage
    of the Act the national averages of rural, suburban and urban rates
    for residential customers diverge by less than two percent. We
    believe that the comparability of average rural and urban rates
    supports continued use of the 135 percent cost benchmark."[^193]

53. In addition, the Joint Board concluded that standard deviation
    analysis supports continued use of the 135 percent benchmark.[^194]
    Verizon argued that rural rates within two standard deviations of
    the mean urban rate, as reflected in the GAO Report, should be
    considered reasonably comparable,[^195] and that the cost benchmark
    level of 135 percent is justified because it is nearly equivalent to
    two standard deviations above the national average cost per
    line.[^196] The Joint Board recognized that, unlike the rate data in
    the GAO Report, the cost data is not normally distributed. The Joint
    Board stated that the objective of the non-rural support mechanism
    is to provide support to states with the highest average costs,
    however, so it is appropriate to use the two-standard-deviation
    measurement to identify such high-cost states, even though this
    measurement may identify more than expected in a normal
    distribution.[^197] Based on this information, the Joint Board
    concluded that the 135 percent benchmark is a reasonable dividing
    line separating high-cost states from the remainder of average and
    low-cost states.[^198]

54. The Joint Board also determined that cluster analysis supports the
    135 percent cost benchmark.[^199] Cluster analysis is an analytical
    technique that arranges information according to specified variables
    so that relatively homogeneous groups, or "clusters," can be
    identified. The Joint Board used cluster analysis "to identify
    groups of states that had similar cost characteristics, thereby
    warranting different treatment regarding universal service
    support."[^200] Based on cost estimates used to determine non-rural
    high-cost support in 2002, the cluster analysis identified a
    high-cost, rural cluster of states that matched the group of states
    currently receiving support under the non-rural mechanism.
    Accordingly, the Joint Board concluded that the current benchmark of
    135 percent distributes support to states appropriately.

### Discussion

55.  We agree with the Joint Board that the current level of non-rural
    high-cost support is supported by GAO Report data showing that most
    rural and urban rates are reasonably comparable.[^201] We have
    expanded on the Joint Board's analysis of the GAO Report data by
    comparing individual rates in rural and high-cost areas served by
    non-rural carriers to the national urban rate benchmark adopted in
    this Order.[^202] We recognize, of course, that our analysis is not
    conclusive. In particular, the rate review and expanded
    certification process will give states the option of submitting
    additional data to demonstrate that factors other than basic service
    rates affect the comparability of rates in their states. As
    discussed in more detail below, however, the GAO Report contains the
    best data available regarding rates in rural and high-cost areas
    nationwide. Our analysis of the GAO Report data indicates that rates
    in rural and high-cost areas are reasonably comparable to those in
    urban areas nationwide, with limited exceptions.

56. Our analysis of the GAO Report data is set forth in Appendix C. For
    purposes of this analysis, we considered residential rates in the
    individual rural and high-cost areas served by non-rural
    carriers.[^203] We adjusted these rates in the GAO Report to include
    all of the charges in the basic rate template recommended by the
    Joint Board.[^204] We then compared the adjusted residential rates
    to the national urban rate benchmark adopted in this Order.[^205] As
    discussed above, this benchmark presumes rates in rural and
    high-cost areas served by non-rural carriers to be reasonably
    comparable to urban rates nationwide if they deviate no further than
    two standard deviations above the national average urban rate in the
    Bureau's *Reference Book*.[^206]

57. Our analysis of the GAO Report data indicates that, with limited
    exceptions, residential rates in rural and high-cost areas served by
    non-rural carriers are reasonably comparable to urban rates
    nationwide. Only three of the 51 jurisdictions included in the GAO
    Report -- Michigan, Vermont and Wyoming -- had residential rates in
    rural and high-cost areas served by non-rural carriers exceeding the
    national urban rate benchmark.[^207] Given the available data and
    based on our definition of reasonable comparability, we find that
    residential rates in rural and high-cost areas served by non-rural
    carriers generally are reasonably comparable to urban rates in most
    states. Those states where rates do not appear to be reasonably
    comparable, based on our analysis of the GAO Report data, will have
    the opportunity to provide additional information through the rate
    review and expanded certification process.[^208]

58. Some commenters maintain that the GAO Report has a number of flaws,
    including the general criticism that the GAO lacks expertise in the
    complexities of local exchange rates and that the size of the study
    is too small to be statistically valid.[^209] We disagree. The GAO
    was established for the very purpose of evaluating public programs
    and activities for Congress, and conducts audits, reviews, analyses
    and investigations on a regular basis.[^210] In this case, the GAO
    gathered a representative sample of up to 11 residential and
    business local service rates from every rate-setting jurisdiction,
    and concluded that the sample pool size it used was appropriate for
    purposes of its study.[^211] Given the experience and expertise of
    the GAO in general, and upon review of the GAO Report as a whole, we
    find that the data and conclusions in the GAO Report are generally
    reliable.[^212]

59. We also reject criticisms that the GAO did not adjust rates in
    different areas for differences in calling area size, service
    quality, or other characteristics.[^213] These commenters
    essentially argue that local rates cannot be compared unless
    adjusted for any conceivable difference in local rate design policy.
    We recognize that states apply different ratemaking policies.[^214]
    We agree with the Joint Board, however, that basic service rates
    provide a valid basis for evaluating rate comparability.[^215] The
    rate review process and expanded certification will allow states to
    bring factors other than basic service rates to our attention if
    they believe that such factors affect the comparability of rates in
    their jurisdictions.[^216]

60. Furthermore, we reject criticisms that the GAO Report excludes
    certain charges that may vary from state to state.[^217] As
    discussed above, we have adjusted the individual rates in the GAO
    Report to include an average of the additional charges in the basic
    rate template recommended by the Joint Board.[^218] We recognize
    that these additional charges may vary from state to state; however,
    we conclude that it is appropriate to use average adjustments in the
    absence of more specific data.[^219]

61.  Finally, we disagree with the claim by some commenters that the GAO
    did not choose consistent rates when more than one service plan was
    offered in an area, based on the single example of Michigan
    rates.[^220] The GAO Report states that rates listed are for
    unlimited service, where available. If unlimited service was not
    available, the GAO reports the tariffed rate for message service,
    assuming 100 5-minute calls per month for residential
    customers.[^221] In its report of listed rates, the GAO does in fact
    include the rate for unlimited service in Michigan, which was
    \$43.95 in all non-rural carrier service areas reported.[^222] The
    GAO notes, however, that, according to the Michigan Commission, most
    residential customers purchase a message-rate service that allows
    400 calls per month at a base rate of \$12.01.[^223] From the
    example of Michigan rates, it appears that the GAO not only abides
    by its own parameters for the study and selects rates consistently,
    but also provides additional relevant information to enable an
    informed analysis of the data. Commenters provide no other examples
    of inconsistencies in the GAO's selection of rates, and we find
    none.

62.  Turning to the Joint Board's use of standard deviation analysis, we
    agree with the Joint Board that standard deviation analysis of the
    relevant cost data supports the determination that the cost
    benchmark rejected by the court does in fact provide an appropriate
    level of non-rural high-cost support.[^224] Standard deviation
    analysis is a commonly used statistical analysis that measures
    dispersion of data points from the mean of those data points.[^225]
    Both the Commission and state commissions have employed standard
    deviation analysis as a statistical standard for determining parity
    or comparability.[^226] In this proceeding, we use standard
    deviation analysis to measure the dispersion of statewide average
    costs per line, as estimated by the cost model, in order to identify
    states with significantly higher costs than the national average.
    Consistent with the court's directive, standard deviation analysis
    provides an empirical method, based on relevant data, of identifying
    states with significantly higher costs than the national average
    that are likely to have difficulty maintaining comparable rates
    without federal support.[^227]

63. The Joint Board staff analyzed state cost per line model run data
    for the year 2001.[^228] As some commenters observed, the graphed
    data have the characteristics of an asymmetrical lognormal
    curve.[^229] Following the Joint Board's analysis, Commission staff
    determined the standard deviation of the data for the years 2001 and
    2002 and plotted where two standard deviations above the mean falls
    on the graph, as represented in the graphs provided in Appendix D.
    Based on 2002 data, a benchmark of two standard deviations above the
    national average cost defines ten states as having very high average
    costs for purposes of distributing non-rural support.[^230]

64.  We conclude that two standard deviations is an appropriate
    threshold for purposes of determining non-rural high-cost
    support.[^231] As discussed above, to provide sufficient support for
    statutory purposes, the non-rural mechanism must provide enough
    support to enable states to achieve reasonable comparability of
    urban and rural rates, without overburdening consumers who
    indirectly fund the federal universal service support mechanisms
    through carrier universal service line items.[^232] As the Joint
    Board noted, two standard deviations translates approximately to a
    135 percent national average cost benchmark and, therefore,
    approximately the same level of non-rural support as has been
    provided in the past.[^233] We agree with the Joint Board that this
    is an appropriate level of non-rural support, based on evidence in
    the record that urban and rural rates have been and continue to be
    reasonably comparable, and because the principle of sufficiency
    requires that support be only as large as necessary to achieve the
    statutory objective.[^234] In sum, we conclude that a
    two-standard-deviation threshold strikes a fair balance between
    ensuring that states have enough federal support to ensure
    reasonable comparability of urban and rural rates, and avoiding the
    risks of excessive support.

65. We reject the argument of some commenters that the Joint Board
    improperly applied standard deviation analysis.[^235] First, as the
    commenters acknowledge, the cost data need not be "normally
    distributed" in order to apply standard deviation analysis.[^236]
    Second, standard deviation analysis may be used to identify data
    points significantly different from the general population.[^237] In
    this case, standard deviation analysis identifies states that have
    average costs per line significantly higher than the average state
    cost per line. Standard deviation analysis is not applied here to
    perform "statistical hypothesis testing."[^238] Third, the Joint
    Board specifically addressed the empirical distribution of the cost
    data and recognized that a threshold set at two standard deviations
    above the national average cost identifies more data points than
    expected in a normal distribution.[^239] Fourth, the Joint Board did
    not "mechanically" apply standard deviation analysis,[^240] but
    explained the reasons underlying its conclusion that two standard
    deviations is an appropriate threshold.[^241] Finally, the Joint
    Board did not suggest a "new and different formulation of the
    statutory language."[^242] Rather, it recommended application of the
    two-standard-deviation measurement as a rational method of
    determining a benchmark level that is suited to the goals of the
    1996 Act.[^243]

66. We further conclude that we should modify the national average cost
    benchmark by basing it on two standard deviations. The Joint Board
    recommended the existing 135 percent benchmark in part because it
    reasoned that a percentage-based benchmark provides certainty in the
    funding process.[^244] We are not persuaded, however, that a
    percentage-based benchmark provides greater certainty. The dollar
    equivalent of a cost benchmark will change each year, as the
    national average cost changes, regardless of whether it is
    percentage-based or calculated based on two standard deviations. In
    addition, basing the cost benchmark on two standard deviations
    responds to the court's directive by tying the benchmark more
    directly to the relevant data.[^245] We believe that a benchmark
    based on two standard deviations is better justified than a 135
    percent benchmark in light of the determination above that two
    standard deviations is an appropriate threshold for non-rural
    support.[^246] Moreover, setting the cost benchmark at two standard
    deviations will respond to annual changes in the dispersion of
    statewide average costs per line relative to the national average.
    Therefore, we conclude that a benchmark based on two standard
    deviations is better suited to ensuring sufficient non-rural
    high-cost support over time.[^247] For these reasons, we adopt a
    cost benchmark based on two standard deviations above the national
    average cost per line.[^248]

67. We do not rely on the Joint Board's cluster analysis in our
    determination of a cost benchmark. The Joint Board identified
    through cluster analysis, using 2001 cost estimates, the same group
    of states as those receiving support.[^249] We have performed
    additional cluster analyses on simulated model cost estimates for
    future years to determine whether there is likely to be a similar
    correspondence between the group of high-cost states defined by
    cluster analysis and those states receiving support based on a cost
    benchmark set at two standard deviations above the national average
    cost.[^250] The resulting clusters of states on the high-cost end of
    the spectrum generally correspond to the benchmark level, but do not
    appear likely to correspond exactly to the states receiving
    non-rural high-cost support each year.[^251] We find it unnecessary
    to rely on cluster analysis because we believe our determination of
    a cost benchmark based on two standard deviations above the national
    average cost has adequate record support.[^252]

68.  We agree with the Joint Board and commenters that we should reject
    proposals to establish a lower threshold for non-rural support based
    on average urban cost.[^253] Because urban average costs are likely
    to be lower than urban average rates due to state universal service
    actions, an urban average cost benchmark would tend to exaggerate
    the need for federal support to ensure rural and urban rate
    comparability. Proponents of the urban cost benchmark maintain that
    the urban average cost is representative of rates in urban areas,
    and that statewide average costs are similarly representative of
    rates in rural areas, net of federal support.[^254] Yet, an average
    of urban costs -- however "urban" is defined -- does not
    proportionately relate to an urban rate because it does not take
    into account the effect of state mechanisms to balance rates.[^255]
    Rates in urban areas will tend to be driven up due to contributions
    in the aggregate made for state universal service funds, rate
    averaging or other state universal service mechanisms. Rates in
    rural areas will tend to be driven down in the aggregate due to the
    receipt of implicit and explicit support from such mechanisms. While
    a statewide average cost takes into account a state's efforts to
    achieve reasonable comparability of rates within the state by
    driving urban rates up and rural rates down through explicit or
    implicit support mechanisms, an urban average cost does not. In
    other words, the urban average cost will likely be
    disproportionately lower than the actual average urban rate. The
    imbalanced comparison of urban and statewide average costs,
    therefore, creates the appearance of urban and rural rate
    differences that are far greater than in reality. As a result, using
    an urban cost benchmark would cause the federal mechanism to provide
    more support than necessary to fulfill statutory requirements and to
    shoulder both federal and state responsibility in providing
    support.[^256]

69.  Proponents of a lower threshold based on average urban cost point
    out that the 135 percent national average cost benchmark when
    defined in terms of urban average cost is close to the 70-80 percent
    discrepancy that the court stated it doubted was within a "fair
    range" for purposes of determining rate comparability.[^257] We find
    this argument misplaced. The court referred to a 70 to 80 percent
    discrepancy between urban and rural rates, yet the proponents of an
    urban cost benchmark rely on a discrepancy between urban and rural
    costs.[^258] As discussed above, we define reasonable comparability
    for statutory purposes in terms of rates, not costs, and, based on
    our analysis of the relevant data, the discrepancy between urban and
    rural rates likely will remain well below 70 or 80 percent.[^259]
    Moreover, we reject the premise underlying this argument that the
    appropriate comparison for purposes of determining non-rural
    high-cost support is average urban cost, rather than national
    average cost. The threshold for non-rural high-cost support we adopt
    here is based on our analysis of the data in the record, which
    indicates that the current level of non-rural support is sufficient
    to achieve rate comparability. Adoption of a lower threshold without
    evidence that such a measure is required to ensure rate
    comparability would violate an aspect of sufficiency reaffirmed by
    the Joint Board -- that the amount of support should be only as
    large as necessary to achieve the statutory goals.[^260]

## Rate Review and Expanded Certification Process

70. In order to induce states to achieve reasonably comparable rates, we
    adopt with minor changes the rate review and expanded certification
    process recommended by the Joint Board.[^261] This rate review
    process will require the states to regularly examine whether the
    residential rates paid by consumers in rural, high-cost areas served
    by non-rural carriers are reasonably comparable to those paid by
    urban consumers nationwide. We also will require each state annually
    to file with the Commission a certification stating whether its
    rural rates are reasonably comparable to urban rates nationwide. As
    part of the rate review and expanded certification process, we adopt
    a nationwide urban rate benchmark, below which rural rates may be
    presumed reasonably comparable to urban rates nationwide.[^262] In
    addition, we establish a basic service rate template for states to
    use to compare rates. We adopt, with slight modifications, the
    definition of "rural area" already contained in section 54.5 of the
    Commission's rules for the purpose of the rate review and expanded
    certification process. Finally, we adopt the Joint Board's
    recommendation that states be allowed to request further federal
    action based upon a demonstration that, despite the state's best
    efforts, federal non-rural support and state action together have
    not achieved reasonable comparability of rural and urban
    rates.[^263]

### Background

71. In the *Ninth Report and Order*, the Commission determined that the
    primary federal role in achieving the statutory goal of reasonably
    comparable rural and urban rates is to enable reasonable
    comparability among states and the primary role of each state is to
    ensure reasonable comparability of rural and urban rates within its
    borders.[^264] The Commission adopted the Joint Board's earlier
    recommendation that the Commission "abstain from requiring any state
    action as a condition for receiving federal high-cost
    support."[^265] The Commission found it most appropriate for states
    to determine how non-rural high-cost support is used, "\[b\]ecause
    the support . . . is intended to enable the reasonable comparability
    of *intrastate* rates, and states have primary jurisdiction over
    intrastate rates."[^266] As a regulatory safeguard, the Commission
    required states that wish to receive non-rural high-cost support to
    certify annually that all such support will be used in a manner
    consistent with section 254(e).[^267]

72. As noted above, in *Qwest*, the Tenth Circuit required the
    Commission on remand to develop a mechanism to induce state action
    to ensure the reasonable comparability of rural and urban
    rates.[^268] Specifically, the court noted that the non-rural
    support mechanism adopted in the *Ninth Report and Order* would
    result in reasonably comparable rates only if states implement their
    own universal service policies, but that the *Ninth Report and
    Order* did not include any inducements for state action or future
    inducements in the absence of reasonable comparability of rural and
    urban rates.[^269] The court acknowledged that the Commission may
    not be able to implement universal service by itself, and that it is
    therefore appropriate or even necessary for the Commission to rely
    on state action to implement universal service goals.[^270] The
    court concluded, however, that the Commission may not simply assume
    that the states will act on their own to preserve and advance
    universal service and that it must create some inducement\--"a
    'carrot' or a 'stick,' for example, or simply a binding cooperative
    agreement with the states"\--for the states to implement universal
    service provisions.[^271]

73. In its *Recommended Decision*, the Joint Board recommended that the
    Commission implement a rate review and expanded certification
    process.[^272] Specifically, each state would be required to review
    its rural rates to determine if they were reasonably comparable to
    urban rates nationwide.[^273] The Joint Board recommended that the
    Commission establish a nationwide urban rate benchmark to facilitate
    this review.[^274] Each state would be required to file a
    certification with the Commission annually stating whether its
    residential rates in rural and high-cost areas served by non-rural
    carriers were reasonably comparable to urban rates nationwide.[^275]
    Rates less than the nationwide urban rate benchmark would be
    presumed reasonably comparable, and states could certify that their
    basic service rates in rural, high-cost areas are reasonably
    comparable without submitting rate information.[^276] A state would
    have the option of submitting additional rate data to demonstrate
    that factors other than basic service rates affect the comparability
    of their rates in high-cost areas.[^277] The Joint Board concluded
    that this process would satisfy the court's requirement for
    inducement of state action by "encourag\[ing\] states to scrutinize
    their rates . . ., to determine whether they are reasonably
    comparable, and if not, to take actions to make them reasonably
    comparable."[^278] The Joint Board also emphasized that its
    recommended approach affords the states maximum flexibility to
    regulate basic services and rates.[^279]

74. The Joint Board made several specific recommendations with respect
    to the rate review and expanded certification process, and suggested
    that the Commission seek further comment with respect to certain
    issues. The Joint Board recommended that the Commission base the
    rate benchmark on the most recent average urban residential rate
    shown in the Wireline Competition Bureau's annual *Reference Book*,
    as modified to reflect the most recent changes in subscriber line
    charges.[^280] The Joint Board suggested that a benchmark level of
    135 percent of the nationwide average urban rate "\[might\] be
    appropriate," but suggested that the Commission seek further comment
    on this issue.[^281] The Joint Board further recommended that the
    Commission establish a basic service rate template that instructs
    the states which rate elements to compare to the rate benchmark as
    part of their rate review.[^282] The Joint Board recommended that
    this basic service rate template include the same items as the
    Bureau's *Reference Book*.[^283] The Joint Board suggested that
    rural, high-cost areas be defined as all wire centers with a line
    density less than 540 lines per square mile, but recommended that
    the Commission seek further comment on whether a different
    definition of rural, high-cost areas would be more
    appropriate.[^284] The Joint Board recommended that states review
    only residential rate information at this time.[^285]

75. The Joint Board further recommended that a state be permitted to
    request further federal action based on a showing that federal
    support and state action together were not sufficient to yield basic
    service rates in rural and high-cost areas served by non-rural
    carriers that were reasonably comparable to urban rates
    nationwide.[^286] This further action could include, but would not
    be limited to, additional targeted federal support or actions to
    modify calling scopes or improve quality of service where states
    have limited jurisdiction.[^287] The Joint Board recommended that
    further federal action be available only when the state demonstrates
    that it has already taken all reasonably possible steps and used all
    available state and federal resources to make basic service rates
    reasonably comparable.[^288] The Joint Board also recommended that
    the Commission develop exact procedures to be used in filing and
    processing requests for further federal action.[^289]

### Discussion

76.  We agree with the Joint Board and commenters that, consistent with
    the court's decision in *Qwest*, the rate review and expanded
    certification process will induce state action to ensure that rates
    in rural and high-cost areas served by non-rural carriers are
    reasonably comparable to urban rates nationwide.[^290] Each state
    will be required to review its rates in rural, high-cost areas
    served by non-rural carriers annually to assess their comparability
    to urban rates nationwide, and then to file a certification with the
    Commission regarding the comparability of rates. Moreover, a state
    that has not achieved reasonably comparable rural and urban rates
    must make a public certification explaining why it has not been able
    to achieve rate comparability, and must do so annually until it can
    certify that it has achieved reasonable rate comparability. We
    believe that this mandatory rate review will induce states to
    fulfill their obligations under the federal-state universal service
    partnership. As discussed above, our review of the record indicates
    that states generally are succeeding, some with federal support, in
    ensuring rate comparability.[^291] The rate review and expanded
    certification process will ensure that state action to ensure rate
    comparability continues and, where state action has not achieved
    reasonable comparability, will create significant pressure on states
    to take action to achieve reasonable comparability. The annual
    certification will be a state's public representation that it has
    engaged in the required rate review. We believe that a state will
    make significant efforts to achieve rate comparability to avoid
    making repeated certifications that its rates are not reasonably
    comparable.[^292]

77.  We do not adopt other proposed state inducements at this time,
    which would pose significant jurisdictional or policy issues. We
    find that the record does not support claims that, to comply with
    the court's remand, we must require or induce all states to
    immediately remove implicit subsidies from intrastate rates through
    substantial increases in federal support.[^293] Our analysis of the
    GAO Report data confirms the Joint Board's finding that, six years
    after passage of the 1996 Act, urban and rural rates nationwide
    generally remained reasonably comparable.[^294] Carriers arguing
    that immediate, nationwide rate rebalancing is urgently needed have
    not provided data to quantify the implicit support in intrastate
    rates.[^295] Moreover, they do not seem to consider the possibility
    that competition may drive costs down so that the total amount of
    support needed may decrease as competition increases.[^296] We agree
    with the Wisconsin Commission that the impact of competition has not
    been geographically ubiquitous or long-lived enough to assess
    definitively its effect on rates for universal service
    purposes.[^297] As discussed above, we find that states continue to
    be in the best position to determine when to eliminate implicit
    support in their rate designs and establish explicit, sustainable
    universal service mechanisms.[^298] In the event that our review of
    the states' rate comparability certifications indicates that states
    are not, in fact, making sufficient efforts to achieve rate
    comparability, we will then consider whether it is necessary to
    institute stronger inducements. We do not foreclose the possibility
    of withdrawing non-rural support from a state or conditioning
    non-rural support on specific state action, if such action is found
    appropriate in the future.[^299]

78. The steps we take today represent a measured response to the court's
    decision, and we will assess in the future whether additional
    inducements are necessary. Consistent with the Joint Board's
    recommendations, we believe that the approach we adopt establishes
    effective state inducements while affording the states maximum
    flexibility to regulate basic rates and services. We anticipate that
    the erosion of implicit support by competition will, in time, compel
    states to replace those implicit support mechanisms with explicit
    support mechanisms, which will be sustainable in a competitive
    marketplace.[^300] We also believe that incentives in terms of
    additional federal support may be appropriate where states have
    eliminated implicit support and the resulting rebalanced rates are
    significantly higher than rates in other states.[^301] In the
    Further Notice, therefore, we propose to make available additional
    targeted federal support for high-cost wire centers in most states
    as a positive incentive for those states to reform their implicit
    universal service mechanisms.[^302]

79.  The rate review and expanded certification process also will add a
    dynamic element to the non-rural high-cost support mechanism by
    enabling the Commission to assess on an ongoing basis whether
    combined federal and state actions continue to result in reasonably
    comparable rural and urban rates nationwide. With the information
    collected through this process, the Commission will be better able
    to assess how successfully the non-rural support mechanism ensures
    the reasonable comparability of rates, and to respond accordingly.
    For example, the data will better enable the Commission to identify
    any systemic problems with rate comparability that may arise with
    the advent of competition, and to determine whether any such
    problems should be addressed through adjustments to the cost
    benchmark level, further inducements for state action, or other
    measures.

#### Nationwide Urban Rate Benchmark

80.  We adopt the Joint Board's recommendation that we establish an
    annually adjusted nationwide urban rate benchmark for the purpose of
    the rate review and expanded certification process.[^303] This rate
    benchmark will be used by the states and the Commission as a tool to
    assess the reasonable comparability of rates in rural and high-cost
    areas served by non-rural carriers to nationwide urban rates.[^304]
    As recommended by the Joint Board, we base the urban rate benchmark
    on the most recent average urban residential rate shown in the
    Bureau's *Reference Book*.[^305] The Bureau's annual *Reference
    Book* includes a sample of flat-rate services available in 95 cities
    from many regions of the country.[^306] The weighted average of
    urban rates in the *Reference Book* provides an appropriate baseline
    for the purpose of determining whether rates in rural areas are
    reasonably comparable to those in urban areas nationwide. However,
    because of the great variation in urban rates nationwide, we are not
    convinced that we should focus solely on the average urban rate in
    determining whether rural rates are reasonably comparable to urban
    rates.[^307] We find that using a standard deviation analysis, which
    measures the dispersion of urban rates from the average, to set the
    urban rate benchmark will appropriately reflect both the average and
    the variation of urban rates.[^308]

81.  We adopt an urban rate benchmark level of two standard deviations
    above the average urban rate in the *Reference Book*. Based on the
    most recent data, the current benchmark level is \$32.28, or 138
    percent of the nationwide average urban rate.[^309] This benchmark
    level is similar to the 135 percent benchmark level that the Joint
    Board suggested we consider.[^310] This benchmark level is also
    consistent with our conclusion above that Congress did not intend
    the 1996 Act to narrow the permissible range of urban and rural
    rates, but rather to ensure continued rate comparability with the
    advent of competition.[^311] The rate benchmark should therefore be
    set at a level that permits a rural rate to be presumed reasonably
    comparable to urban rates nationwide if it does not deviate from the
    average urban rate more than urban rates generally. For the purpose
    of establishing a safe harbor, two standard deviations is an
    appropriate measure of the amount of deviation commonly found in
    urban rates. We estimate that, based on the data in the *Reference
    Book*, 96 percent of urban rates nationwide are below the average
    urban rate plus two standard deviations.[^312] Although a rate
    benchmark of the average urban rate plus three standard deviations
    would encompass 98.5 percent of urban rates,[^313] we find that the
    average plus two standard deviations better serves the rate
    benchmark's intended purpose of a safe harbor. A rate benchmark
    level of two standard deviations above the average urban rate will
    permit most states to presume that their rates in rural areas served
    by non-rural carriers are reasonably comparable to urban rates
    nationwide, thereby providing an effective safe harbor, but will
    require that states more closely scrutinize rural rates that
    approach the highest margin of urban rates nationwide and,
    therefore, are more likely to present problems of reasonable
    comparability.

82.  Consistent with the Joint Board's recommendations, we emphasize
    that this benchmark merely creates a presumption regarding the
    reasonable comparability of rural and urban rates, and is not the
    sole test of whether rural and urban rates are reasonably
    comparable.[^314] Factors such as the quality of service, the size
    of calling areas, or the availability of alternative rate plans
    could impact a state's review of the comparability of rural and
    urban rates. A state may conclude that its rural rates are
    reasonably comparable to nationwide urban rates even if they exceed
    the urban rate benchmark. Similarly, a state with rural rates below
    the urban rate benchmark may still conclude that its rural rates are
    not reasonable comparable to urban rates nationwide. We are not
    persuaded by the argument that setting a nationwide urban rate
    benchmark will effectively create a target rate for local service
    rates.[^315] States are unlikely to abdicate their ratemaking
    authority due to the existence of this rate benchmark. Nor are we
    persuaded by the argument that we should not set a rate benchmark
    because administrative hurdles would prevent adjustments if costs or
    other factors used to calculate the rate benchmark change.[^316] The
    nationwide urban rate benchmark we adopt will change annually based
    on changes to the urban rates identified in the Bureau's *Reference
    Book*. Thus, the rate benchmark level will automatically change to
    reflect marketplace trends in rates, including changing costs and
    other factors in ratemaking.[^317]

#### Definition of Rural and High-Cost Areas

83.  Based on our examination of the record in this proceeding, we adopt
    a modified version of the existing definition of "rural area"
    contained in section 54.5 of our rules for the purpose of
    determining whether rates in rural, high-cost areas served by
    non-rural carriers are reasonably comparable to urban rates.[^318]
    Under this definition, a "rural area" is, with the exceptions
    discussed further below, any non-metropolitan county or
    county-equivalent, as identified by the Office of Management and
    Budget. The Commission adopted this definition in the *First Report
    and Order* as a relatively simple and effective means to determine
    which health care providers were located in rural areas and,
    therefore, eligible for support under the rural healthcare
    mechanism.[^319] The Commission found that political divisions like
    counties are more easily identified than density-based definitions
    of rural and urban areas and that the use of this definition was
    consistent with Congress's intent to secure telecommunications
    services for rural healthcare providers at rates that were
    reasonably comparable to those received by urban health care
    providers.[^320] For the same reasons, we find that this definition
    will provide a simple and effective means for states to determine
    whether areas are rural for the purposes of identifying rural,
    high-cost areas served by non-rural carriers in their states.[^321]
    A state should easily be able to determine how its rate zones
    overlap well-established political divisions and determine rates
    within those areas.

84. We believe that a state's rates in non-metropolitan counties will,
    in the vast majority of instances, be a reliable indicator of rural
    rates in the state. To provide states with additional flexibility,
    however, we also adopt a provision that will permit a state to
    identify as rural areas wire centers served by non-rural carriers
    within the state that are not covered by the definition of rural
    area in the Commission's current Part 54 rules, if the state
    concludes that consideration of those areas is necessary and
    appropriate for purposes of the rate review and expanded
    certification process to develop a complete picture of rate
    comparability in the state.[^322] A state choosing to identify an
    area as rural under this provision must do so on a wire center
    basis, and must explain its conclusion that the area should be
    treated as a rural area for purposes of the rate review process. We
    anticipate that few states will find it necessary to identify
    additional wire centers as rural areas under this provision, but
    conclude that providing an additional degree of flexibility to
    states in applying the definition of a rural area for purposes of
    the rate review process is appropriate to permit them to address any
    extraordinary circumstances that exist in their boundaries.

85. We do not adopt a wire-center based definition of rural, high-cost
    areas for the purposes of the rate review and expanded certification
    process. The Joint Board suggested that we consider defining rural,
    high-cost areas as all wire centers with a line density less than
    540 lines per square mile.[^323] Some commenters criticized the
    proposed wire-center definition as difficult to use and inconsistent
    with the non-rural support methodology's treatment of "high-cost"
    wire centers.[^324] Moreover, if we were to base such a definition
    on current data, as the Joint Board suggested, the areas considered
    rural under the definition would likely change every year as the
    line density of the average cost wire center changes. We believe
    that the definition we adopt will enable states to more readily
    identify their rural, high-cost areas than a wire-center definition.

#### Basic Service Rate Template

86.  We adopt the Joint Board's recommended basic service rate template
    for states to use to compare rates.[^325] This basic service rate
    template, which consists of the rate elements included in the
    Bureau's annual *Reference Book*, instructs each state which rate
    elements should be included in its rate review. This template will
    permit the Commission and each state to compare rate data with
    assurance that each state's data include the same rate elements. The
    comparison of rural and urban rates among states will be more
    meaningful as a result and permit more accurate assessment of the
    overall success of the combined federal and state efforts to achieve
    rate comparability.[^326] The template will also simplify the rate
    review for states and reduce the burden of completing the expanded
    certification by explicitly directing states which rate elements
    must be included and which, by their exclusion from the template,
    need not be included.

87.  We do not include within the basic service rate template any
    specific reference to quality of service or scope of calling, as
    proposed by NASUCA.[^327] These factors, by their nature, are
    difficult to quantify and cannot be systematically incorporated in
    the template in a manner that appropriately reflects all
    circumstances. Moreover, as we discuss above, we believe that each
    state may be in a better position to address service quality issues
    within the state, and can best determine how the quality of service
    or calling scopes available to consumers in the state should be
    incorporated into its rate comparability analysis.[^328] The
    approach that we adopt minimizes administrative burdens on states,
    while allowing a state to show that calling scope is a significant
    factor in determining whether rates in its jurisdiction are
    reasonably comparable to urban rates nationwide.[^329] We seek
    comment in the attached Further Notice, however, on whether we
    should provide guidelines for states as to whether and how to
    address calling scopes in their rate comparability analyses.

88. We clarify that the availability and pricing of services provided by
    competitive carriers or pursuant to alternate rate plans offered by
    the incumbent carrier should be treated as relevant additional
    factors in each state's rate review, but need not be formally
    compared to the nationwide urban rate benchmark or included in a
    state's certification unless such services and rates are relevant to
    the state's conclusion regarding the reasonable comparability of
    rates. The availability and pricing of competitive services in rural
    and high-cost areas may be relevant to determining whether rates are
    reasonably comparable to urban rates nationwide. For example, the
    widespread availability in rural, high-cost areas of competitive
    services at low rates may permit a state to conclude that rates in
    those areas are reasonably comparable to urban rates nationwide,
    even if the incumbent eligible telecommunications carrier's (ETC's)
    basic service rate exceeds the nationwide urban rate benchmark.
    Thus, we agree with the Joint Board's recommendation that rates and
    services provided by all ETCs should be included in the rate review
    process.[^330] We agree, however, with CUSC that the basic service
    rate template cannot necessarily be applied to the rates of
    competitive carriers, whose rates generally are not regulated by the
    Commission or the states and do not always include the rate elements
    specified in the template.[^331] The basic service rate template
    also is not necessarily applicable to alternate, non-flat rate plans
    provided by incumbent local exchange carriers. We believe the
    approach we adopt provides appropriate flexibility for states to
    address competitively-provided services and alternative rate plans,
    without requiring states to "fit" non-conforming rates into the
    basic service rate template.

#### Expanded Certification Process

89. As recommended by the Joint Board, we adopt an expanded
    certification process in which each state will provide information
    to the Commission regarding the comparability of the rates in rural
    areas served by non-rural carriers within the state to urban rates
    nationwide.[^332] The existing certification process requires states
    to certify that all ETCs receiving federal universal service funding
    pursuant to the non-rural high-cost mechanism are using the funds to
    achieve the goals of the Act.[^333] The new certification process
    will expand reporting requirements to address reasonable rate
    comparability. Pursuant to the expanded certification process, each
    state will be required to state whether its rates in rural areas
    served by non-rural carriers are reasonably comparable to urban
    rates nationwide and explain the basis for its conclusion as well as
    its proposed remedies, if necessary.

90.  In the expanded certification process, states will report on rate
    comparability in one of several ways. If a state's rural rates are
    within the safe harbor provided by the urban rate benchmark, its
    rates may be presumed reasonably comparable. We anticipate that most
    states will certify to this effect and will not be required to file
    any additional explanation or supporting data. Other states,
    however, will be required to support their certifications with
    explanations and supporting data, including the rate data for
    residential customers in rural areas served by non-rural carriers. A
    state with rural rates within the safe harbor that nevertheless
    certifies that its rural rates are not reasonably comparable to
    urban rates nationwide based on its analysis of other relevant
    factors must fully explain its analysis, its proposed method of
    identifying and implementing a means of achieving rate
    comparability, and supporting data that show the rates paid by its
    residential consumers in rural areas served by non-rural
    carriers.[^334] Rural rates outside the safe harbor may be presumed
    not reasonably comparable, and a state so certifying must explain
    its proposed course of action to address its failure to achieve
    reasonable comparability and submit rate data for the rural areas
    within the state served by non-rural carriers. A state's
    consideration of other relevant factors, however, may overcome the
    presumption that its rural rates are not reasonably comparable to
    urban rates nationwide.[^335] In this case, the state should explain
    its rate analysis and submit relevant rate data.

91. We conclude that this expanded certification should be filed at the
    same time as the existing certification that states must file
    pursuant to section 254(e) of the Act, according to the schedule set
    forth in section 54.313(d)(3) of the Commission's rules, using the
    rates in effect as of the prior July 1.[^336] Using the existing
    filing schedule will minimize burdens and simplify filings for the
    states. Using rates as of the prior July 1 will give the states
    maximum time to review their rates and prepare their certifications,
    while still ensuring the use of rates from the same federal tariff
    year that the filing occurs. As with the existing certification, the
    expanded certification must be filed with the Universal Service
    Administrative Company and the Commission.[^337] In order to provide
    states with adequate time to conduct their initial rate review and
    begin complying with the rules we adopt today, we conclude that the
    initial filing pursuant to the expanded certification shall not be
    due until October 1, 2004. We believe that this will provide states
    with adequate time to develop processes for conducting their rate
    reviews.

92. We agree with NASUCA that the certification will effectively induce
    states to adopt measures to promote reasonable comparability only if
    it is a condition of receiving non-rural high-cost support. [^338]
    Given the importance of state rate review to ensuring the continued
    achievement of reasonably comparable rural and urban rates
    nationwide, we find that it is appropriate to condition the receipt
    of non-rural high-cost support on the completion of the expanded
    certification process. Moreover, the conditioning of support on
    completion of the expanded certification is consistent with the
    existing section 254(e) certification, which is also a condition of
    support. Accordingly, non-rural carriers in any state that does not
    complete the certification will not receive non-rural high cost
    support.

#### Ability of States to Request Further Federal Action

93.  We adopt the Joint Board's recommendation to permit states to
    request further federal action, if necessary, based on a showing
    that federal and state action together are not sufficient to achieve
    reasonable comparability of basic service rates in rural, high-cost
    areas served by non-rural carriers within the state to urban rates
    nationwide.[^339] Further federal actions could include, but are not
    limited to, additional targeted federal support or actions to modify
    calling scopes or improve quality of service where state commissions
    have limited jurisdiction.[^340] The ability to request further
    federal action provides a means to address any isolated failures to
    achieve reasonable comparability of rural rates that may require
    extraordinary efforts to resolve. Consistent with the Joint Board's
    recommendations, we will require that any request for further
    federal action fully explain the basis of the request, including a
    demonstration that the state's rural rates are not reasonably
    comparable to urban rates nationwide and that the state has taken
    all reasonably possible steps to achieve reasonable comparability
    through state action and existing federal support.[^341]

94. On receipt of a request for further federal action, the Wireline
    Competition Bureau will expeditiously issue a public notice seeking
    comment on the request.[^342] Although we expect the Commission to
    act as rapidly as possible, we note that a request for further
    federal action will necessarily involve consideration of a wide
    range of issues, including rates in non-rural carriers' service
    areas throughout the state and state universal service mechanisms.
    We further note that, although we expect requests for further
    federal action to be rare, it is possible that multiple requests for
    further federal action may be filed at the same time.[^343]

95.  We reject arguments that we should not adopt the Joint Board's
    recommendation to permit states to seek further federal action
    because the process is ill-defined.[^344] Because the ability to
    request further federal action is intended to address isolated,
    unique circumstances, we concur with the Joint Board's
    recommendation that states should be afforded great flexibility in
    showing that further federal action is required.[^345] Moreover, we
    agree with the Wisconsin Commission that flexibility in making the
    required showings is appropriate because it is not possible at this
    time to predict all future circumstances that may require further
    federal action, and retaining flexibility will permit states to
    adapt their showings to fit the circumstances.[^346] We recognize,
    however, that the process should also be as clearly defined as
    possible. We seek comment in the attached Further Notice of Proposed
    Rulemaking, therefore, on proposals that will better define the
    process for states and ensure predictable results. In particular, we
    seek comment on the timing of such requests, and on a flexible
    showing including the factors identified by the Joint Board. We also
    seek comment on a methodology to determine any additional targeted
    federal support on a wire-center basis using model cost estimates.

96. We reject arguments that permitting states to request further
    federal action, including additional targeted federal support,
    raises sufficiency concerns.[^347] Above, we conclude that the
    non-rural support mechanism is sufficient to achieve the goal of
    making rural and urban rates reasonably comparable.[^348] The
    availability of further federal action, based upon a state's
    request, to address isolated and unique problems does not undermine
    that conclusion. Moreover, we reject arguments that further federal
    action cannot be conditioned on a state's request because it may be
    necessary to achieve reasonable comparability of rates.[^349] We
    agree with the Joint Board that the burden must fall on the state to
    demonstrate the reasons underlying the failure to achieve reasonable
    comparability, because only the state is in a position to identify
    the existence and sources of problems that may be unique to that
    state.[^350] Additionally, those commenters argue, essentially, that
    the Commission's obligation to provide sufficient support to assure
    the reasonable comparability of rates among states prevents the
    Commission from conditioning further federal action on a state's
    demonstration that it has made full use of its resources in
    attempting to achieve reasonable comparability of rates.[^351] To
    the contrary, the *Qwest* court recognized that state action is an
    integral part of achieving the Act's universal service goals, and
    expressly held that the Commission could not simply provide support
    without also providing an inducement for state action.[^352] Where
    state action is necessary to achieve the Act's goals\--such as the
    reasonable comparability of rates\--the Commission has an obligation
    to ensure that states fulfill their part of the federal-state
    partnership.

## Complete Plan for Supporting Universal Service

97. In this section, we review our comprehensive plan for supporting
    universal service in high-cost areas. As discussed below, the
    Commission has taken important steps to reform the federal high-cost
    support system and to ensure its overall sufficiency, but our task
    is not done. The Commission continues to adapt the overall plan to
    meet changing conditions, and to implement the various components of
    the plan on a sequenced, coordinated basis.

98. The Tenth Circuit recognized that it could not "properly assess the
    total level of federal support for universal service to ensure
    'sufficiency'" because the *Ninth Report and Order* concerns only
    intrastate high-cost support for non-rural carriers.[^353] In
    particular, the court noted that the Commission had reserved the
    possibility of applying a different funding mechanism for rural
    carriers. In addition, the court noted that in the *Ninth Report and
    Order*, which deals with reforming explicit federal support, the
    Commission had stated its intention to address the implicit federal
    support built into interstate access charges in a separate
    order.[^354] The court did not "necessarily require the FCC to
    resolve finally all of these issues at once," but stated that
    "\[o\]n remand, the FCC will have an opportunity to explain further
    its complete plan for supporting universal service."[^355]

99. Prior to the court's decision, the Commission had adopted
    significant universal service and interstate access charge reforms,
    in particular for the larger, price cap carriers.[^356] In May 1997
    companion orders, the Commission modified the existing federal
    universal service support mechanisms to make them explicit,
    competitively neutral, and sustainable in an increasingly
    competitive telecommunications marketplace.[^357] The Commission
    also adopted measures to remove implicit subsidies from interstate
    access charges and move them toward lower, cost-based levels for
    price cap carriers, by phasing out loop and other non-traffic
    sensitive costs from per-minute charges, and providing for recovery
    of such costs through more economically efficient, flat
    charges.[^358] In 1999, the Commission adopted a forward-looking
    cost model for calculating intrastate high-cost support for
    non-rural carriers and the order at issue in this proceeding.[^359]
    In 2000, it adopted additional access charge reforms and created a
    new, explicit support mechanism for price cap carriers in the
    *CALLS* proceeding.[^360] The Commission decided to proceed more
    cautiously in reforming universal service and access charges for the
    smaller, rate-of-return carriers, in recognition of the differences
    between these carriers and the larger carriers.[^361]

100. In 2001, the year the Tenth Circuit remanded the *Ninth Report and
     Order* to the Commission, the Commission completed the universal
     service and interstate access charge reforms it initiated following
     passage of the 1996 Act. In particular, in the May 2001 *Rural Task
     Force Order*, the Commission adopted a modified embedded cost
     mechanism for rural carriers for a five-year period.[^362] The
     Commission found that continuing to base intrastate high-cost
     support for rural carriers on embedded costs for five years, rather
     than attempting to modify the forward-looking high-cost support
     mechanism for non-rural carriers so that it could be applied to
     rural carriers, was a reasonable and prudent approach to take in
     light of the record in the proceeding.[^363] The Commission also
     found that the modified embedded cost mechanism would provide
     sufficient support for purposes of section 254.[^364] The
     Commission stated that it would use the transitional period during
     which a modified embedded cost mechanism is in place to develop a
     long-term universal service plan that better targets support to
     rural carriers serving the highest cost areas, while recognizing
     the significant distinctions among rural carriers and between rural
     and non-rural carriers.[^365]

101. Then, in November 2001, the Commission reformed the interstate
     access charge system for rate-of-return carriers and established
     the interstate common line support (ICLS) mechanism, building on
     interstate access charge reforms previously implemented for price
     cap carriers, consideration of the Multi-Association Group (MAG)
     plan, and the record developed in several interrelated
     proceedings.[^366] The Commission designed the ICLS mechanism to
     provide support equal to the interstate loop costs that
     rate-of-return carriers do not recover through revenues from
     Subscriber Line Charges, which are capped to ensure
     affordability.[^367] ICLS ensures recovery of revenues that
     rate-of-return carriers previously recovered through per-minute
     access charges containing implicit support. The Commission
     explained that this cautious approach was appropriate based on
     examination of the record in the proceeding, and that ICLS would
     safeguard this important revenue stream for rate-of-return
     carriers.[^368]

102. Thus, today, in addition to non-rural high-cost support, universal
     service support is provided in rural and high-cost areas through
     the following mechanisms: high-cost loop support; local switching
     support (LSS); interstate access support (IAS); and interstate
     common line support (ICLS).[^369] Each of these other mechanisms
     provides support to eligible telecommunications carriers for a
     portion of the cost of providing telephone service in rural and
     high-cost areas, based generally on costs averaged at the
     study-area level.[^370] With the exception of LSS, each of these
     mechanisms defrays the costs of the common line or loop that
     connects an end user to the LEC central office.[^371] The non-rural
     high-cost support mechanism is a relatively small portion of
     overall federal high-cost support: roughly \$233 million out of
     \$3.2 billion provided in 2002.[^372]

103. The amount of federal high-cost support available to an incumbent
     carrier differs according to the size, population density, and
     topography of the incumbent carrier's study area, whether the costs
     of service are allocated to the state or federal jurisdiction, and
     whether the incumbent carrier's interstate access service is
     subject to price cap or rate-of-return regulation. Rural carriers
     are eligible for high-cost loop support to cover intrastate loop
     costs, based on the degree to which their average embedded loop
     costs exceed 115 percent of the national average loop cost.[^373]
     LSS is designed to cover some of the intrastate switching costs of
     carriers serving study areas with 50,000 or fewer lines, in
     recognition of such carriers' high average fixed switching costs
     compared to larger carriers with greater economies of scale.[^374]
     ICLS was created to replace implicit support in the rate-of-return
     carriers' interstate access charges, and recovers the difference
     between each carrier's permitted common line revenues and its
     actual revenues from capped subscriber line changes (SLCs).[^375]
     Similarly, IAS provides price cap carriers with support for a
     portion of their price cap CMT revenues that cannot be recovered
     through capped SLCs.[^376]

104. In implementing the provisions of the 1996 Act, the Commission
     consistently has taken into consideration the differences between
     large, price-cap regulated non-rural carriers and small,
     rate-of-return regulated rural carriers and will continue to do so.
     The Commission also has taken into account the appropriate federal
     and state roles in supporting reasonable, affordable and reasonably
     comparable local rates. In the case of each federal high-cost
     support mechanism, the Commission has used its expertise and
     informed judgment to make a reasonable determination as to what
     constitutes "sufficient" support for purposes of section 254(e), in
     light of the particular circumstances and the statutory policies
     the mechanism serves. In doing so, the Commission has kept close
     track of the total size of the federal universal service fund. As a
     result of the Commission's reforms, there are explicit, specific,
     predictable, and sufficient federal high-cost support mechanisms in
     place to defray both the intrastate- and the interstate-allocated
     costs of the common line or loop, the largest portion of total
     network investment, particularly in rural areas.[^377]

105. Overall, we believe that the federal high-cost support system has
     proved sufficient to preserve and advance universal service,
     consistent with the mandate of section 254. Local telephone service
     subscribership is currently at 95.3%, and within the last year
     subscribership was 95.5%, the highest level of subscribership ever
     recorded.[^378] As the Joint Board observed, the GAO Report
     findings generally support the conclusion that basic local service
     rates in rural and high-cost areas are reasonably comparable to
     those in urban areas.[^379] In concert with other reforms to the
     interstate access rate structure adopted in the *CALLS* and *MAG
     Orders*, the IAS and ICLS mechanisms have reduced the recovery of
     interstate common line costs through inefficient rate elements
     containing implicit support and facilitated the transition toward
     fuller, more rational competition, while ensuring that rates and
     services in rural and high-cost areas remain affordable and
     reasonably comparable to those in urban areas.[^380]

106. Although the Commission has taken important steps to reform
     universal service, our task is not done. The Commission has taken a
     market-based approach to interstate access charge reform, relying
     largely on competition to identify and remove implicit subsidies
     from access charges and drive them down to cost-based levels.[^381]
     The IAS mechanism was adopted as part of the integrated, five-year
     CALLS plan for transitioning to more efficient competition, lower
     rates for consumers, and secure universal service support
     mechanisms.[^382] As the term of the CALLS plan nears its end, the
     Commission will need to consider what measures are appropriate for
     the future. Likewise, the access charge and universal service
     reforms for rate-of-return carriers adopted in the *MAG Order* "are
     not designed as a permanent solution."[^383] The pending
     intercarrier compensation proceeding, in which the Commission is
     fundamentally re-examining all currently-regulated forms of
     intercarrier compensation, raises implications for our universal
     service plan.[^384]

107. Furthermore, as discussed above, the *Rural Task Force Order*
     adopted modifications to the high-cost loop support mechanism for
     rural carriers for an interim, five-year period. The Commission
     must and will initiate a proceeding to address the appropriate
     intrastate high-cost support mechanism for rural carriers after the
     Rural Task Force plan expires, as well as how to ensure that the
     intrastate support mechanisms for rural and non-rural carriers
     function efficiently and in a coordinated fashion.[^385] The
     Commission also has pending proceedings to re-examine its
     assessment methodology for contributions to universal service, and
     its rules for determining high-cost support in areas served by
     multiple ETCs, to ensure that its policies remain competitively
     neutral and ensure a sustainable universal service fund in light of
     changes in the telecommunications marketplace.[^386] As the
     Commission previously has recognized, "\[o\]ur universal service
     rules cannot remain static in a dynamic marketplace."[^387] We will
     continue to develop and refine our universal service rules and
     policies in a coordinated manner to fulfill the mandate of the 1996
     Act.

# Further Notice of Proposed rulemaking 

108. In this Further Notice of Proposed Rulemaking, we seek further
     comment on issues related to the rate review and expanded
     certification process that we adopt in the foregoing Order.[^388]
     First, we seek comment on whether we should require states to file,
     in connection with their reasonable comparability certifications,
     additional data that might enhance the Commission's ability to
     assess the non-rural mechanism and state actions to achieve
     comparability of urban and rural rates, including business rate
     data, rate data for non-rural areas served by non-rural carriers,
     and rate data from states that would not otherwise be required to
     file data under the rules we adopt today. Second, we seek comment
     on the role of calling scopes in the rate review process. Third, we
     seek comment on how to treat any state requests for further federal
     action, including procedures for states to submit any such
     requests, required showings by requesting states, and how to
     calculate any additional targeted federal support. In addition, we
     propose a method for calculating additional targeted federal
     support on a wire-center basis using forward-looking model cost
     estimates. Finally, we seek comment on a proposal to further
     encourage states to advance the Act's universal service goals by
     making available additional targeted federal support to states that
     implement explicit universal service mechanisms, without regard to
     their achievement of rate comparability.

## Collection of Additional Rate Data

109. We seek comment on whether all states should submit rate data to
     the Commission in connection with the rate review and expanded
     certification process, in order to establish a more complete
     picture of state efforts to achieve rate comparability. In the
     foregoing Order, we adopt rules that require a state to file, in
     connection with its expanded certification, rate data for rural
     areas served by non-rural carriers only if its rural rates exceed
     the nationwide urban rate benchmark or if it certifies that its
     rural rates are not reasonably comparable to urban rates
     nationwide, despite being within the safe harbor established by the
     nationwide urban rate benchmark.[^389] These data, along with the
     expanded certifications filed by all states, will aid the
     Commission in its review of the reasonable comparability of rural
     and urban rates nationwide.[^390] We seek comment on whether
     collecting additional rate data from a larger number of states,
     either on a mandatory or voluntary basis, would provide the
     Commission with a better basis for its review.[^391] To what extent
     would collecting additional rate data from all states improve the
     Commission's ability to assess the reasonable comparability of
     rural and urban rates nationwide through the rate review and
     expanded certification process? To what extent would the
     availability of this additional rate data improve the ability of
     each state to analyze its own rate comparability issues? To what
     extent would the availability of this additional rate data improve
     the ability of other interested parties to monitor the reasonable
     comparability of rural and urban rates nationwide? We anticipate
     that each state will have assembled much of the additional data in
     the course of performing its rate review. Would it be unduly
     burdensome if all states were to file such data?

110. We seek comment on whether we should require states to file data
     related to business rates, in addition to residential rates.[^392]
     A meaningful comparison of rates across different states may
     necessarily include business rates in addition to residential
     rates. For example, because Wyoming, unlike many other states, has
     rebalanced its single-line business rates to levels equivalent to
     residential rates, Wyoming's residential rates no longer rely on
     implicit support flows from its business rates, and its business
     customers pay lower rates than they would in a state that relied on
     such implicit support flows.[^393] Collecting data only on
     residential rates, therefore, may not permit the Commission to
     identify the specific nature of any problems with reasonable
     comparability. Would collecting data on business rates provide the
     Commission with a more useful picture of the local rates charged in
     rural areas? Would requiring states to file business rate data
     unduly increase the administrative burdens on states associated
     with the rate review and expanded certification process? Is there
     any reason why the Commission should or should not concentrate
     solely on residential rates in assessing the state of rate
     comparability nationwide?

111. We also seek comment on whether we should collect data related to
     rates in non-rural areas served by non-rural carriers.[^394] While
     the rules we adopt today will result in the collection of some data
     regarding the rates in rural areas served by non-rural carriers,
     collecting non-rural rate data would provide the Commission with
     more complete data. To what extent would collecting rate
     information for non-rural areas in addition to rural areas provide
     the Commission with useful data to assess the reasonable
     comparability of rural and non-rural rates nationwide? To what
     extent would the collection of such data permit the Commission to
     assess the reason for high rural rates? For example, if a state's
     rates in areas other than rural areas were also above the
     benchmark, would it indicate that an adjustment to the federal
     support mechanism was warranted? To what extent would collecting
     non-rural rate information aid the Commission in assessing whether
     states are fulfilling their obligations to promote the Act's goals?
     To what extent would requiring states to file non-rural rate data
     unduly increase the administrative burdens on the states associated
     with the rate review process?

112. With additional rate data, should states be required to file
     information annually related to their efforts to advance universal
     service by adopting explicit universal service mechanisms, such as
     the establishment of explicit state universal service funds? To
     what extent would such information aid the Commission in assessing
     the sources of any problems with rate comparability to determine
     whether additional actions are necessary at the federal level? If
     we conclude that such information should be collected, what
     specific information should each state be required to file? For
     example, should each state be required to file data related to the
     existence and size of any explicit universal service support
     mechanisms established in the state? Should states be required to
     identify implicit support flows in the rate structure, including
     implicit support flowing from business line rates to residential
     line rates, from geographically averaged rates, and from intrastate
     access charges? Commenters should identify any other information
     related to the establishment of explicit universal service policies
     that would assist the Commission in refining our comprehensive plan
     for supporting universal service in high-cost areas over time.

## Calling Scopes

113. We seek comment on the role of calling scopes in the rate review
     process. The foregoing Order permits a state to consider the
     calling scopes available in rural areas served by non-rural
     carriers when reviewing whether rates in those areas are comparable
     to urban rates nationwide.[^395] Calling scopes are not included in
     the rate template, however, and states need not consider them if
     they choose to certify based on the safe harbor. To what extent
     should states be encouraged to consider the calling scopes
     available in rural areas served by non-rural carriers in assessing
     rate comparability? Should the Commission incorporate calling
     scopes into the safe harbor? If so, how would the Commission do so?
     To what extent would consideration of calling scopes increase the
     burdens associated with the rate review process? Commenters should
     describe in detail any proposed methodologies for normalizing the
     impact of calling scopes on rates. Alternatively, should the
     Commission provide states with additional guidance as to how
     calling scopes may be factored into their rate comparability
     analyses, if states decide that this is appropriate? What data
     would be useful for analyzing the calling scopes available in rural
     and urban areas?

## Procedures for Filing and Processing Any State Requests for Further Federal Action

114. Consistent with the Joint Board's recommendation, we recognize that
     the procedures for filing and reviewing state requests for further
     federal action should be as specific and predictable as possible,
     while also providing the necessary flexibility for each state to
     demonstrate the unique circumstances involved in its request.[^396]
     We also note that the Joint Board did not recommend a specific
     method for calculating any additional targeted federal support, if
     necessary, and the present record does not provide an adequate
     basis for us to determine an appropriate method.[^397] Accordingly,
     we seek comment below on several interrelated issues. First, we
     seek comment on the timing of state requests for further federal
     action. Second, we seek comment on the showing that a state should
     be required to make in order to demonstrate a need for further
     federal action. Third, we seek comment on the types of further
     federal action that may be provided to requesting states if the
     Commission determines that further federal action is necessary in a
     particular instance, including possible methods of calculating any
     additional targeted federal support.

### Timing of Requests for Further Federal Action

115. The Joint Board recommended that the Commission develop exact
     procedures to be used in the filing and processing of requests for
     further federal action. We propose that a state should be permitted
     to make a request for further federal action only concurrently with
     the filing of its expanded certification regarding the
     comparability of its rural rates in areas served by non-rural
     carriers.[^398] We anticipate that any state request for further
     federal action will arise from the state rate review process and
     the expanded certification, and any state requests for further
     federal action are likely to rely on the same data. Therefore, we
     believe that requiring the filing of any state requests at the time
     of the expanded certification will promote administrative
     simplicity. We seek comment on this proposal.

116. We also seek comment on how frequently a state should be required
     to seek further federal action if the state's request is granted
     the first time. Should a state be required to seek further federal
     action every year? Should further federal action be provided for a
     specified period of years? If so, should that period be dependent
     on the specific circumstances of a particular request?

### Required Showings

117. We seek comment on the showings that a state should be required to
     make in support of a request for further federal action, in the
     interest of making the process as specific and predictable as
     possible. The Joint Board's *Recommended Decision* suggests that
     two showings should be required: (1) a demonstration that rural
     rates in non-rural carrier service areas in the state are not
     reasonably comparable to urban rates nationwide, including an
     analysis of the rates in the basic service template and other
     relevant factors; and (2) a demonstration that the state has taken
     all reasonable actions to achieve reasonable comparability of its
     rural rates to urban rates nationwide, including an explanation of
     how the requesting state has used any federal support currently
     received to achieve comparable rates and whether it has implemented
     a state universal service fund.[^399] We propose that these
     showings should be required in support of a state's request for
     further federal action. We further propose that each state should
     bear the responsibility of fully explaining the basis for each
     element of its showing. As discussed in the foregoing Order, each
     state has rate-setting jurisdiction and primary responsibility for
     ensuring rate comparability within its border and, therefore, is in
     the best position to explain any problems it may have in achieving
     rate comparability and the actions it has taken to address those
     problems.[^400] In addition to these showings, are there any
     additional types of showings that a state should be required to
     make in support of a request for further federal action? Should
     different showings be required for different types of further
     federal action (*e.g.*, Commission action to address calling areas
     or quality of service where the state lacks jurisdiction)?

118. We also seek comment on what a state should be required to show to
     satisfy the first element of the Joint Board's recommended test, a
     demonstration that rural rates within the state are not reasonably
     comparable to urban rates nationwide. In making the required
     showing, to what extent should a state be permitted to rely on the
     presumption created by the nationwide urban rate benchmark? Should
     the Commission consider residential and business rates or only
     residential rates? What weight, relative to the presumption created
     by the rate benchmark, should the Commission accord additional
     non-rate factors that the state contends are relevant in
     determining whether rural rates in a state are reasonably
     comparable to urban rates nationwide?

119. Consistent with the Joint Board's recommendation, we also seek
     comment on what state actions should be considered reasonable and,
     therefore, necessary to support a request for further federal
     action for purposes of the second element of the Joint Board's
     recommended showing. In particular, we seek comment on the extent
     to which states must reform their universal service support
     mechanisms in order to be able to demonstrate that they have taken
     all reasonably possible actions to achieve rate comparability. In
     this regard, we note that the Act strongly favors explicit support
     mechanisms, which are less vulnerable to erosion in competitive
     markets than implicit support mechanisms. [^401] Although states
     are not required to adopt explicit mechanisms to support universal
     service, we propose that a state that has not done so cannot be
     deemed to have taken all reasonably possible steps to support rate
     comparability within the state, the requirement recommended by the
     Joint Board. We seek comment on this proposal.

120. We further propose that, in order to enable the Commission to
     determine whether a state has made its universal service mechanisms
     explicit, a state requesting further federal action should be
     required to explain the extent to which it has made its universal
     service mechanisms explicit, and file supporting data, including
     rate data for residential and business lines in rural and urban
     areas served by non-rural carriers. We seek comment on these
     proposals. We also seek comment on the extent of reform that should
     be required for further federal action. Some commenters argue that
     it is necessary for states to rebalance their residential and
     business rates in order to eliminate implicit support flows.[^402]
     For example, Wyoming has rebalanced its residential and business
     rates, while other states have not rebalanced rates. As a result,
     Wyoming's residential rates presumably will be higher than a state
     with comparable resources that has chosen to maintain implicit
     support flows through higher business rates. Should the rebalancing
     of residential and business rates be required in support of a
     request for further federal action?

### Types of Further Federal Action

121. We seek comment on the types of further federal action that should
     be available to a requesting state if the Commission determines
     that further federal action is appropriate. The Joint Board
     recommended that further federal action could include additional
     targeted federal support, as well Commission action to address
     scope of local calling areas or quality of service where the state
     commission lacked the authority to do so.[^403] Are there any other
     types of further federal action that the Commission should consider
     in addition to the Joint Board's recommendations? Should the
     Commission specify in advance all possible forms of further federal
     action, or, in light of the Joint Board's recommendation that the
     Commission provide maximum flexibility for states, should the
     Commission retain the ability to develop additional types of
     further federal action in response to the specific circumstances
     underlying a particular state's request?[^404] Are there any
     reasons that the Commission should not consider making certain
     types of federal action available on request?

122. We propose that any additional targeted federal support should
     equal a set percentage of estimated forward-looking wire-center
     costs in excess of two standard deviations above the average cost
     per line.[^405] We believe that a method for calculating any
     additional targeted federal support based on forward-looking
     wire-center cost estimates would be specific and predictable, and
     provide consistency with the non-rural support mechanism, which
     also uses model cost estimates to calculate and target
     support.[^406] We also believe that such a method would provide a
     fair and equitable means of determining any additional targeted
     federal support and avoid inappropriate incentives that might be
     created if we were to base any additional targeted federal support
     on rate levels in a particular area.[^407] Furthermore, a
     forward-looking cost estimate-based method would permit any
     additional support to be targeted specifically to high-cost
     wire-centers, consistent with the Joint Board's
     recommendation.[^408] We seek comments on this proposal. Is there
     another proposed method that, based on some measure other than
     forward-looking cost estimates, would provide a more appropriate
     basis for calculating any additional targeted federal support? If
     so, a commenter should describe the method with specificity and
     provide any relevant supporting data. If any commenters contend
     that a rate-based method would be more appropriate, they should
     support their contentions with a detailed explanation of how
     rate-based support would be calculated under their proposal and any
     relevant supporting data.

123. To determine any additional targeted federal support based on
     forward-looking cost estimates, we propose that any additional
     federal support should be provided to wire centers in qualifying
     states with costs per line exceeding a benchmark of two standard
     deviations from the average cost per line among all non-rural
     carrier wire centers nationwide.[^409] Based on recent
     forward-looking high-cost model results, a wire center with
     per-line costs that are two standard deviations above the average
     wire center would have an average cost per line of \$40.85, or 189
     percent of the nationwide average cost per line.[^410] Wire centers
     with costs per line exceeding the proposed nationwide average cost
     per loop would be very high cost wire centers in which it is likely
     to be more difficult to achieve rate comparability, despite
     otherwise sufficient state resources and federal support. Because
     most states have wire centers that exceed two standard deviations
     from the national average wire center cost per line, we believe
     that this benchmark would provide an effective means of calculating
     any additional targeted federal support for any qualifying state in
     a specific, predictable and consistent manner.[^411] We seek
     comment on this proposed method for calculating additional targeted
     federal support. Is two standard deviations an appropriate
     threshold for this purpose?

124. We also propose that any additional targeted federal support for
     eligible wire centers in qualifying states should be calculated as
     a set percentage of costs in excess of the benchmark.[^412] For
     example, if the Commission were to set the percentage at 5 percent
     of costs in excess of two standard deviations above the average and
     Wyoming were to qualify for additional targeted federal support, it
     would be eligible for approximately \$546,000. If the Commission
     were to set the percentage at 25 percent of costs in excess of two
     standard deviations above the average and Wyoming were to qualify,
     it would be eligible for approximately \$2,731,000 in additional
     targeted federal support.[^413]

125. We believe that this proposal is consistent with the current and
     past methodologies for determining high-cost support for non-rural
     carriers and would provide meaningful support to assist states in
     resolving any rate comparability issues that combined federal and
     state action have failed to resolve. Under the non-rural support
     mechanism, a non-rural carrier in a state with an average cost per
     loop for areas served by non-rural carriers that exceeds the cost
     benchmark of two standard deviations above the average is eligible
     for support for 76 percent of its costs in excess of the
     benchmark.[^414] This percentage represents an estimate of the
     costs above the benchmark that are assigned to the intrastate
     jurisdiction. Because any additional targeted federal support would
     supplement the non-rural support mechanism in order to address
     exceptional problems, we do not believe that it would be necessary
     that such support be provided for the same percentage of costs in
     excess of the benchmark as covered by the non-rural support
     mechanism.[^415] We seek comment on what percentage of costs in
     excess of the benchmark should be supported for purposes of
     additional targeted federal support. Is there another proposed
     method of calculating any additional targeted federal support based
     on forward-looking cost estimates that would better address the
     purpose for which the support would be intended?

## Additional Inducements for State Action

126. Finally, we seek comment on whether we should make additional
     targeted federal support available for high-cost wire centers in
     states that implement explicit universal service mechanisms. The
     purpose of this proposal is to create a positive incentive for
     states to reform their implicit universal service mechanisms. Under
     this proposal, as discussed below, any additional targeted federal
     support would be determined using a methodology similar to that
     proposed above in connection with state requests for further
     federal action. Unlike state requests for further federal action,
     states would not be required to demonstrate that combined state and
     federal efforts had failed to achieve rate comparability.

127. As discussed above, section 254 states a clear preference for
     explicit, rather than implicit, support, but the 1996 Act does not
     require states to adopt explicit universal service support
     mechanisms.[^416] In the foregoing Order, therefore, we decline to
     adopt measures to require or induce all states to immediately
     remove implicit subsidies from intrastate rates through substantial
     increases in federal support. Nevertheless, we agree with
     commenters that states should be encouraged to replace implicit
     support with explicit support mechanisms that will be sustainable
     in a competitive environment.[^417] To what extent should the
     Commission encourage states to replace their implicit universal
     service support mechanisms with explicit mechanisms? We seek
     comment on whether the Commission has an interest, other than the
     aspirational provisions of the Act, in states' decisions to adopt
     explicit mechanisms or to rely on implicit support flows. How do
     state universal service mechanisms, explicit and implicit, interact
     with the federal universal service support mechanisms? We note that
     some states have made progress in making explicit their universal
     service support mechanisms.[^418] Can we expect states to adopt, in
     advance of or concurrently with the local development of
     competition, reforms that will reduce the vulnerability of the
     states' universal service mechanisms to competition? If states have
     not yet taken action to adopt explicit universal service
     mechanisms, can we assume that they will do so?

128. We seek comment on whether providing additional targeted federal
     support to states that replace implicit universal service
     mechanisms with explicit universal service mechanisms would be an
     appropriate means of inducing reforms of state universal service
     support mechanisms. The availability of additional targeted federal
     support would provide each state with a direct incentive to make
     its universal service support mechanisms explicit, rather than
     implicit. This method of inducement would pose less risk to our
     universal service goals than conditioning receipt of existing
     non-rural high-cost support on state action. Moreover, providing
     states that implement universal service reforms with additional
     targeted federal support might mitigate possible transitional
     issues associated with the replacement of implicit support with
     explicit support and encourage states to adopt a long-term approach
     to universal service. To what extent are there transitional issues
     associated with moving from implicit support mechanisms to explicit
     support mechanisms? If such transitional issues are a significant
     deterrent to state adoption of universal service reforms, should
     any additional targeted federal support be limited for the period
     of time during which the transition takes place? If commenters
     contend that another form of inducement would be better suited for
     achieving the Commission's goals, the commenters should provide a
     detailed explanation of their inducement.

129. We further propose that any additional targeted federal support
     that is provided to induce states to adopt explicit universal
     service mechanisms should be based on forward-looking wire-center
     cost estimates. Basing any additional targeted federal support on
     forward-looking cost estimates will make such support specific and
     predictable, consistent with the Act, and would target the support
     to high-cost areas, which may ease a state's implementation of
     explicit universal service mechanisms. Similar to the additional
     targeted federal support proposed above with respect to state
     requests for further federal action to achieve rate comparability,
     we propose that any additional targeted federal support provided
     for inducement purposes should be calculated based on a percentage
     of forward-looking costs in excess of a particular threshold for
     high-cost wire centers.[^419]

130. Specifically, we propose that, if a state meets the necessary
     conditions, it should receive additional targeted federal support
     equal to a specific percentage of costs in excess of two standard
     deviations above the average cost wire center. We seek comment on
     this proposed method of calculating additional targeted federal
     support for inducement purposes. We specifically seek comment on
     the appropriate percentage of costs in excess of the threshold that
     we should support with additional targeted federal support. We note
     that 48 states and Puerto Rico would have at least one wire center
     with costs per loop above the benchmark of the average cost per
     loop plus two standard deviations.[^420] We estimate that if the
     support amount were set at 10 percent of costs exceeding the
     proposed high-cost wire center benchmark, the 48 states and Puerto
     Rico would be eligible to receive a total of approximately \$116
     million if they met the conditions for additional targeted federal
     support, in addition to the support provided under the rules we
     adopt today.[^421]

131. Would the proposed methodology provide significant inducement to
     each state to reform its universal service mechanisms? Would the
     benefits of inducing state action to reform state universal service
     mechanisms outweigh the cost of the additional contributions to the
     universal service fund that this additional targeted federal
     support could entail? Commenters should address how this proposal
     relates to the Act's requirement that universal service should be
     sufficient to achieve the Act's goals and, specifically, that
     sufficiency requires that support should not exceed the amount
     necessary to achieve the Act's goals.[^422]

132. We also seek comment on what showings a state should be required to
     make in order to receive any additional targeted federal support,
     if such an inducement mechanism were adopted. Above, we seek
     comment on what showings a state must make in support of a request
     for further federal action, in addition to showing the failure to
     achieve rate comparability. To what extent should the showings that
     a state is required to make in order to receive additional targeted
     federal support for inducement purposes differ from the showings
     the state should be required to make in order to demonstrate that
     it has taken all reasonably possible actions to achieve rate
     comparability? Should a state be required to show that it has
     established an explicit support mechanism of a particular size
     relative to the number of lines in the state or some other measure?
     Should a state be required to demonstrate that it has rebalanced
     its residential and business rates? Should a state be required to
     demonstrate that it has eliminated geographic rate averaging
     through implicit support flows? Are there any specific actions
     reasonably calculated to eliminate or reduce implicit support in
     intrastate rates that a state should be required to show?

#  ORDER ON RECONSIDERATION

133. In this Order on Reconsideration, we address requests to reconsider
     portions of the *Ninth Report and Order* filed by AT&T Corp.
     (AT&T), the Puerto Rico Telephone Company, Inc. (Puerto Rico Tel.
     Co.), SBC Communications Inc. (SBC), Personal Communications
     Industry Association (PCIA), and the Wyoming Public Service
     Commission (Wyoming Commission).[^423]

##  AT&T Petition 

### Background

134. In its petition, AT&T requests reconsideration of the rule
     governing calculation of non-rural high-cost support for a
     competitive eligible telecommunications carrier (CETC) providing
     service through unbundled network elements (UNEs).[^424] AT&T also
     requests that the Commission target non-rural high-cost support
     based on UNE zones, rather than targeting support to high-cost wire
     centers.[^425] Finally, AT&T requests that the Commission clarify
     that states, to comply with section 254(e) certification
     requirements, must direct carriers to spend non-rural high-cost
     support within the group of wire centers to which the support is
     targeted.[^426]

### Discussion

135. We deny AT&T's request for reconsideration of the rule governing
     calculation of non-rural high-cost support for a CETC providing
     service through UNEs. Section 54.307 of the Commission's rules
     provides that a CETC using UNEs to provide supported services will
     receive a level of universal service support not to exceed the
     price of the UNEs to which it purchases access.[^427] AT&T contends
     that there is no basis for maintaining this limitation of universal
     service support because the Commission adopted it as an interim
     measure pending implementation of a forward-looking support
     mechanism.[^428] Although the Commission emphasized in the *First
     Report and Order* that a forward-looking, more precisely-targeted
     support methodology should alleviate concerns that providing
     high-cost support to CETCs using UNEs would create uneconomic
     incentives,[^429] the Commission did not adopt the challenged
     limitation as an interim measure.[^430] AT&T's broader underlying
     argument that a CETC "should get the *full* measure of high-cost
     support that the incumbent had received for the line, regardless of
     whether the entrant is using entirely its own facilities or
     providing service via UNEs"[^431] is within the scope of the
     separate proceeding to comprehensively reexamine the Commission's
     rules governing portability of high-cost support, which is
     currently before the Joint Board.[^432] We therefore decline to
     address that argument here, and emphasize that our denial of AT&T's
     petition for reconsideration here does not in any way prejudge what
     action we ultimately may take in the portability proceeding.

136. We also deny AT&T's request that the Commission require support to
     be targeted based on UNE zones and distributed on a uniform
     per-line basis within each zone. The Commission's rules target
     non-rural high-cost support to wire centers, but permit states to
     file waiver petitions to target support to other areas, such as UNE
     zones.[^433] The Commission determined that a wire-center targeting
     approach best suits the non-rural high-cost support
     mechanism.[^434] AT&T contends that states should be required to
     target support to UNE zones "so that support and the underlying
     costs of the elements used to provide service are more closely
     aligned."[^435] In achieving the different goals of deaveraging
     non-rural high-cost support and UNEs, however, we need not adopt
     identical approaches.[^436] Moreover, the Commission fully
     explained why it decided to target non-rural high-cost support to
     wire centers in the *Ninth Report and Order*.[^437] AT&T has
     presented no new arguments on reconsideration that persuade us to
     reconsider at this time the Commission's prior decision to target
     non-rural high-cost support on a wire-center basis.

137. Finally, we deny AT&T's request that the Commission clarify that
     non-rural high-cost support must be used in wire centers to which
     it is targeted. Under the Commission's rules, states must certify
     that high-cost support flowing to non-rural carriers within their
     territories will be used in a manner consistent with section 254(e)
     of the Act.[^438] AT&T asks the Commission to clarify that, in
     order to comply with this requirement, states must direct non-rural
     carriers to use support only within the wire centers to which it is
     targeted. Because non-rural high-cost support is intended to enable
     reasonably comparable intrastate rates, and states have primary
     jurisdiction over those rates, the Commission determined that
     states should decide how support will be used to advance the goals
     of section 254(e).[^439] We conclude that the requested
     clarification is inconsistent with the Commission's stated
     intention in the *Ninth Report and Order*.[^440] To the extent this
     argument overlaps with arguments raised in the pending Joint Board
     proceeding on portability of support, we emphasize that our
     decision here does not prejudge how we ultimately may resolve
     issues raised in the portability proceeding.

## Puerto Rico Tel. Co. Petition 

### Background

138. In its petition, Puerto Rico Tel. Co. challenges the sufficiency of
     the non-rural high-cost support methodology implemented in the
     *Ninth Report and Order*.[^441] Puerto Rico Tel. Co. maintains that
     its loss of intrastate high-cost support since the phasedown of
     interim hold-harmless support began in 2001 increases the
     challenges it faces in serving an insular area with high costs and
     low income levels.[^442] Puerto Rico Tel. Co. points to Puerto
     Rico's low subscribership levels as evidence that the Commission
     should act to restore the intrastate support it has lost since the
     phasedown began. Specifically, Puerto Rico Tel. Co. requests that
     the Commission treat it as a "rural" carrier rather than as a
     "non-rural" carrier for purposes of intrastate high-cost support
     because it serves an insular area.[^443] In the alternative, Puerto
     Rico Tel. Co. requests that the Commission revise the non-rural
     high-cost support mechanism so that support is both calculated and
     targeted on a wire-center basis with a cost benchmark adjusted
     according to the statewide subscribership rate.[^444]

### Discussion

139. We reject Puerto Rico Tel. Co.'s request for reconsideration of the
     non-rural high-cost support methodology adopted in the *Ninth
     Report and Order*. For the reasons discussed above, we find that
     the methodology reflects the appropriate division of federal and
     state responsibility for ensuring reasonable comparability of local
     rates in urban and rural areas served by non-rural carriers.[^445]
     The Commission previously rejected Puerto Rico Tel. Co.'s argument
     that it should be treated as a rural carrier for purposes of
     intrastate high-cost support because it serves an insular area. The
     Commission explained that large telephone companies such as Puerto
     Rico Tel. Co. "should possess economies of scale and scope to deal
     efficiently with the cost of providing service in their areas, and
     thus, the level of that support will be determined through a
     forward-looking mechanism."[^446] Puerto Rico Tel. Co. has not
     justified reconsideration of the Commission's prior decisions. In
     particular, Puerto Rico Tel. Co. has offered no evidence that the
     decline in its intrastate high-cost support has caused rate shock
     or rate comparability problems.[^447] We note that we do not
     address here Puerto Rico Tel. Co.'s request in an *ex parte*
     letter, filed on June 6, 2003, that the Commission create a
     separate category of "non-rural insular" carriers for purposes of
     intrastate high-cost support.[^448]

140. In addition, we are not persuaded that providing more high-cost
     support to Puerto Rico Tel. Co. would effectively address the
     underlying concern it identifies: low subscribership levels in
     Puerto Rico.[^449] As discussed above, the purpose of non-rural
     high-cost support is to ensure reasonable comparability of rates
     among states.[^450] Puerto Rico Tel. Co. has not shown that the low
     subscribership levels in Puerto Rico are related to local rate
     levels or that providing additional non-rural high-cost support
     would have any direct impact on subscribership levels.[^451] As the
     Commission stated in the *Seventh Report and Order*, federal
     high-cost support is not the appropriate federal program for
     addressing issues of affordability and subscribership.[^452] The
     Consumer and Governmental Affairs Bureau is committed to engaging
     in outreach to increase the awareness in Puerto Rico of our
     existing Lifeline and Link-Up programs. We also note that the
     Commission currently is considering whether to adopt income-based
     eligibility default standards for participation in Lifeline and
     Link-Up, which could have a significant effect on subscribership in
     Puerto Rico.

## SBC and PCIA Petitions

141. SBC requests that the Commission require reporting of cost and line
     count data by carriers operating in territories of non-rural
     carriers on an annual rather than a quarterly basis. We dismiss the
     request to reduce the frequency of cost data reporting as moot, and
     deny the request to reduce line count reporting. In the *Rural Task
     Force Order*, the Commission amended section 36.611 of the rules to
     require non-rural carriers to submit loop cost data on an annual
     basis, rather than on a quarterly basis.[^453] Accordingly, we
     dismiss SBC's request to require reporting of cost data on an
     annual basis as moot. In the *Twentieth Order on Reconsideration*,
     the Commission clarified that carriers must report line count data
     quarterly in order to receive support on a regular quarterly
     basis.[^454] The Commission determined that non-rural high-cost
     support must be determined based on line reported on a quarterly
     basis "to ensure portability of support among carriers."[^455] SBC
     has not provided any new information or arguments on
     reconsideration that warrant alteration of the requirement of
     quarterly line count reporting.

142. We also deny the PCIA's request that the Commission reconsider
     aspects of its decision in the *Ninth Report and Order* affecting
     the portability of non-rural high-cost support to mobile wireless
     CETCs.[^456] The issues raised by PCIA are within the scope of the
     separate proceeding to comprehensively reexamine the Commission's
     rules governing portability of high-cost support, which is
     currently before the Joint Board.[^457] We emphasize that our
     denial of PCIA's petition here does not in any way prejudge what
     action we ultimately may take in the portability proceeding.

## Wyoming Commission Petition

### Background

143. In its petition, the Wyoming Commission argues that the *Ninth
     Report and Order* fails to fulfill the comparability and
     sufficiency objectives of the 1996 Act.[^458] The Wyoming
     Commission explains that Wyoming's customers pay local rates that
     are above the national average, yet non-rural high-cost support to
     the state has been reduced due to the changes implemented by the
     *Ninth Report and Order*.[^459] The Wyoming Commission maintains
     that it has done its share to promote competition in its state,
     including eliminating implicit subsidies and deaveraging unbundled
     elements and local prices, and that the Commission must do more to
     support universal service and to promote competition in the state.
     The Wyoming Commission asks that non-rural high-cost support be
     calculated at the wire center level rather than statewide.[^460] As
     an alternative, the Wyoming Commission asks that the Commission
     provide additional federal support where a non-rural carrier's
     average forward-looking cost exceeds a designated threshold and the
     state has a universal service fund of a certain size.[^461]

### Discussion

144. The Commission commends the Wyoming Commission for implementing
     pro-competitive policies by deaveraging rates and eliminating
     implicit subsidies. We recognize that Wyoming is in a unique
     position as the only state with significant rural territories that
     has implemented such policies. However, we deny the Wyoming
     Commission's petition for reconsideration of the *Ninth Report and
     Order*. As we explain above, the distribution of support on a
     statewide basis in the non-rural high-cost support mechanism
     reflects the appropriate division of federal and state
     responsibility.[^462] Statewide averaging also is consistent with
     the *Qwest* court's view that the Commission is not required by the
     Act to replace implicit state support with explicit federal support
     or to support the full costs of universal service.[^463] We
     conclude that the Wyoming Commission has not provided any new
     information or arguments on reconsideration that require us to
     alter our decision to determine support on a statewide basis, as
     the Joint Board recommended. As part of the rate review and
     expanded certification process described above in Section IV.D.,
     each state will have the opportunity to request further federal
     action based upon a demonstration that, despite the state's best
     efforts, federal non-rural support and state action together have
     not achieved reasonable comparability of rural and urban
     rates.[^464] Wyoming therefore has an avenue to pursue its argument
     that additional support is warranted.

145. We also deny the Wyoming Commission's request to award additional
     support to non-rural carriers based on above-average costs and high
     state universal service contributions at this time. In the Further
     Notice, we propose to make available additional targeted federal
     support for states that adopt explicit universal service
     mechanisms.[^465] We anticipate that this proposal, if adopted,
     would help to address the concerns raised by the Wyoming Commission
     in its petition.

# PROCEDURAL MATTERS

## Final Regulatory Flexibility Analysis 

146. As required by the Regulatory Flexibility Act of 1980, as amended
     (RFA),[^466] an Initial Regulatory Flexibility Analysis (IRFA) was
     incorporated in the *Remand Notice*.[^467] The Commission sought
     written public comment on the proposals in the *Remand Notice*,
     including comment on the IRFA. This Final Regulatory Flexibility
     Analysis (FRFA) conforms to the RFA.[^468]

### Need for, and Objectives of, the Report and Order

147. This Order is necessary to respond to the remand by the United
     States Court of Appeals for the Tenth Circuit of the *Ninth Report
     and Order* and also to respond to the Joint Board's *Recommended
     Decision*. Along with fulfilling the court's remand requirements,
     the objectives of this Order are to implement a non-rural high-cost
     support mechanism that fulfills the relevant principles in section
     254(b) of the Act. The rules we adopt in this Order reflect the
     Commission's careful and considered determination to implement the
     mechanism consistently with section 254(b) and with the Joint
     Board's recommendations.

148. In this Order, we take the following actions in response to the
     Tenth Circuit's remand and the Joint Board's recommendations to
     modify the non-rural high-cost support mechanism and to induce
     states to ensure reasonably comparable rural and urban rates in
     areas served by non-rural carriers:

-   Consistent with the Joint Board's recommendations, we reaffirm that
    comparing statewide average costs to a nationwide cost benchmark
    reflects the appropriate federal and state roles in determining
    federal non-rural high-cost support. We find no evidence in the
    record either for radically altering the current non-rural mechanism
    or for establishing a substantially larger federal subsidy to lower
    local telephone service rates, as some commenters advocate.

-   In response to the Tenth Circuit's remand, we define the relevant
    statutory terms "sufficient" and "reasonably comparable" more
    precisely for purposes of the non-rural mechanism. As recommended by
    the Joint Board, we define "sufficient" in terms of the statutory
    principle in section 254(b)(3), as enough federal support to enable
    states to achieve reasonable comparability of rural and urban rates
    in high-cost areas served by non-rural carriers. We also agree with
    the Joint Board that the principle of sufficiency means that
    non-rural support should be only as large as necessary to achieve
    the statutory goals. We define "reasonably comparable" in terms of a
    national urban rate benchmark recommended by the Joint Board. As
    part of the rate review process discussed below, the rate benchmark
    will be used in determining whether a state's local rates in rural,
    high-cost areas served by non-rural carriers are reasonably
    comparable to urban rates nationwide.

-   We modify the non-rural mechanism by basing the cost benchmark,
    which is used to determine the amount of non-rural high-cost
    support, on two standard deviations above the national average cost
    per line. Modifying the cost benchmark ties it more directly to the
    relevant data, consistent with the court's directive, but does not
    alter the level of non-rural support in a major way. We agree with
    the Joint Board that the current level of non-rural support is
    supported by data from the GAO Report indicating that rural and
    urban rates generally are reasonably comparable today.

-   To induce states to achieve reasonably comparable rates, we adopt
    with minor changes the rate review and expanded certification
    process recommended by the Joint Board. Each state will be required
    to review its rates in rural, high-cost areas served by non-rural
    carriers annually to assess their comparability to urban rates
    nationwide, and then to file a certification with the Commission
    stating whether its rural rates are reasonably comparable to urban
    rates nationwide or explaining why they are not.

-   For purposes of the rate review process, we adopt the Joint Board's
    recommendation that we establish an annually-adjusted nationwide
    rate benchmark based on the most recent urban residential rates in
    the *Reference Book*, the Wireline Competition Bureau's annual rate
    survey. Specifically, we adopt a rate benchmark of two standard
    deviations above the average urban rate, which, based on the most
    recent *Reference Book* survey, is \$32.28 or 138 percent of the
    average urban rate. The rate benchmark will establish a "safe
    harbor," that is, a presumption that rates in rural, high-cost areas
    that are below the rate benchmark are reasonably comparable to urban
    rates nationwide. States with rural rates below the rate benchmark
    may certify that their rates are reasonably comparable without
    providing additional information, or rebut the presumption by
    demonstrating that factors other than basic service rates affect the
    comparability of their rates.

-   For purposes of the rate review process, we also establish a basic
    service rate template for states to use in comparing rates in rural,
    high-cost areas served by non-rural carriers to the nationwide urban
    rate benchmark. In addition, we adopt, with slight modifications,
    the definition of "rural area" already contained in section 54.5 of
    the Commission's rules for purposes of the rate review process.

-   We adopt the Joint Board's recommendation to permit states to
    request further federal action, if necessary, based on a
    demonstration that the state's rates in rural, high-cost areas
    served by non-rural carriers are not reasonably comparable to urban
    rates nationwide and that the state has taken all reasonable steps
    to achieve reasonable comparability through state action and
    existing federal support.

-   In response to the Tenth Circuit's remand, we review and explain our
    comprehensive plan for supporting universal service in high-cost
    areas.

-   In the attached Further Notice, we seek comment on issues related to
    the rate review and expanded certification process. In particular,
    we propose a method for calculating any additional targeted federal
    support that may be provided in response to a state request for
    further federal action, based on forward-looking cost estimates.
    Under this proposal, any such support would be targeted on a
    wire-center basis, based on a set percentage of per-line costs
    exceeding a threshold above the national average cost for wire
    centers.

-   We also seek comment in the attached Further Notice on whether we
    should make additional targeted federal support available for
    high-cost wire centers in states that implement explicit universal
    service mechanisms, without regard to their achievement of rate
    comparability, in order to encourage states to adopt universal
    service mechanisms that will be sustainable in a competitive
    environment.

### Summary of Significant Issues Raised by Public Comments in Response to the IRFA

149. The Commission received no comments specifically addressing the
     IRFA. Nonetheless, the Commission considered the potential impact
     of the adopted rules on small entities and, based on analysis of
     the relevant data, determined that the compliance burden for small
     entities directly impacted will not be significant.

150. We note that the Commission did receive some general small
     entity-related comments not specifically addressing the rules and
     policies presented in the IRFA. Some commenters suggested that
     eligible communications carriers (ETCs) should be treated
     differently than the incumbent non-rural carriers.[^469] CUSC
     stated that the certification process should apply only to the
     incumbent non-rural carriers.[^470] RICA stated that ETCs and
     incumbent non-rural carriers should receive support through
     separate mechanisms.[^471] In making the determination reflected in
     the Order, we have considered the impact of our actions on these
     small entities. We have determined that any impact on small
     entities will be negligible.

151. Other small-entity related comments concerned the rural high-cost
     support mechanism and were not relevant to this Order, which
     modifies the non-rural high-cost support mechanism only.[^472] The
     federal non-rural high-cost support mechanism, revised and
     implemented by this Order, calculates and distributes federal
     support to non-rural carriers providing service in high-cost areas.
     For purposes of the mechanism, "non-rural carriers" are those that
     do not meet the statutory definition of a rural telephone company.
     [^473] As stated above, the rural and non-rural high-cost support
     mechanisms are separate.[^474]

### Description and Estimate of the Number of Small Entities to Which Rules Will Apply 

152. The RFA directs agencies to provide a description of, and, where
     feasible, an estimate of the number of small entities that will be
     directly affected by the rules adopted herein.[^475] The RFA
     generally defines the term "small entity" as having the same
     meaning as the terms "small business," "small organization," and
     "small governmental jurisdiction."[^476] In addition, the term
     "small business" has the same meaning as the term "small business
     concern" under the Small Business Act, unless the Commission has
     developed one or more definitions that are appropriate to its
     activities.[^477] Under the Small Business Act, a "small business
     concern" is one that: (1) is independently owned and operated; (2)
     is not dominant in its field of operation; and (3) meets any
     additional criteria established by the Small Business
     Administration (SBA).[^478]

153. The Commission has determined that the group of small entities
     directly affected by the rules adopted in this Order are eligible
     telecommunications carriers (ETCs)[^479] providing service in areas
     served by non-rural carriers. Within the category of ETCs we find
     competitive local exchange carriers (CLECs), which are all wired
     telecommunications carriers, and wireless carriers. Further
     descriptions of these entities are provided below.

154. **Wired Telecommunications Carriers.** 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.[^480] According to Census Bureau data for 1997, there
     were 2,225 firms in this category, total, that operated for the
     entire year.[^481] Of this total, 2,201 firms had employment of 999
     or fewer employees, and an additional 24 firms had employment of
     1,000 or more.[^482] Thus, under this size standard, the great
     majority of firms can be considered small.

155. **Competitive Local Exchange Carriers (CLECs), Competitive Access
     Providers (CAPs) and "Other Local Exchange Carriers.**" Neither the
     Commission nor the SBA has developed a size standard for small
     businesses specifically applicable to providers of competitive
     exchange services or to competitive access providers or to "Other
     Local Exchange Carriers." The closest applicable size standard
     under SBA rules is for Wired Telecommunications Carriers. Under
     that size standard, such a business is small if it has 1,500 or
     fewer employees.[^483] According to Commission data,[^484] 532
     companies reported that they were engaged in the provision of
     either competitive access provider services or competitive local
     exchange carrier services. Of these 532 companies, an estimated 411
     have 1,500 or fewer employees and 121 have more than 1,500
     employees.[^485] In addition, 55 carriers reported that they were
     "Other Local Exchange Carriers." Of the 55 "Other Local Exchange
     Carriers," an estimated 53 have 1,500 or fewer employees and two
     have more than 1,500 employees.[^486] Consequently, the Commission
     estimates that most providers of competitive local exchange
     service, competitive access providers, and "Other Local Exchange
     Carriers" are small entities that may be affected by the rules and
     policies adopted herein.

156. **Cellular and Other Wireless Telecommunications Carriers.**[^487]
     The SBA has developed a small size standard for Cellular and Other
     Wireless Telecommunications Carriers which consists of all such
     companies having 1,500 or fewer employees. According to the
     Commission's most recent data,[^488] 1,761 companies reported that
     they were engaged in the provision of wireless service. Of these,
     1,761 companies, and estimated 1,175 have 1,500 or fewer employees
     and 586 have more than 1,500 employees.[^489] Consequently, the
     Commission estimates that most wireless service providers are small
     entities that may be affected by the rules and policies adopted
     herein.

157. **Eligible Telecommunications Carriers (ETCs) that Provide Service
     in Areas Serviced by Non-Rural Carriers.** Neither the SBA nor the
     Commission has developed a definition of small entities
     specifically applicable to ETCs. ETC designation allows a carrier
     to receive universal service support in accordance with section 254
     of the Act. An entity is designated as an ETC by a state commission
     or, if there is no state jurisdiction, by the Commission upon
     meeting the requirements of section 214(e) of the Act. Any entity
     offering services supported by federal universal service mechanisms
     that uses its own facilities or a combination of its own facilities
     and resale of another carrier's services and advertises such
     charges and rates can seek designation as an ETC.[^490] ETCs are
     competitive carriers that are not dominant in the field. The group
     of ETCs providing service in areas served by non-rural carriers is
     composed of mostly competitive local exchange carriers (CLECs) and
     wireless carriers. We have indicated above that, pursuant to SBA
     standards, ETCs are CLECs or wireless carriers. In addition, we
     note that the only ETCs affected by this Order are those that
     provide service in areas served by non-rural carriers. If we had no
     further information concerning the specific ETCs affected by this
     rulemaking, we would estimate that numerous ETCs, which are either
     CLECs or wireless service providers that provide service in areas
     served by non-rural carriers, are small businesses that may be
     affected by the rules adopted herein.

158. At this time, however, the Commission is aware of approximately 30
     ETCs providing service in areas served by non-rural carriers. We
     have determined that at least 9 of these ETCs are subsidiaries of
     public companies -- not independently owned and operated -- and,
     therefore, not small businesses under the Small Business Act.[^491]
     We do not have data specifying whether the remaining ETCs, or other
     ETCs not accounted for, are independently owned and operated, and
     therefore we are unable to estimate with greater precision the
     number of these carriers that would qualify as small business
     concerns under SBA's definition. Consequently, we estimate that
     there are 20 or fewer small entities that may be affected directly
     by the proposed rules herein adopted.

### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 

159. This Order does not impose directly any change in projected
     reporting, record keeping or other compliance requirements on small
     entities. No changes have been made to the reporting or
     recordkeeping requirements of carriers receiving federal non-rural
     high-cost support.

### Steps Taken To Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered 

160. The RFA requires an agency to describe any significant alternatives
     that it has considered in reaching its proposed approach, which may
     include the following four alternatives (among others): "(1) the
     establishment of differing compliance or reporting requirements or
     timetables that take into account the resources available to small
     entities; (2) the clarification, consolidation, or simplification
     of compliance or reporting requirements under the rule for small
     entities; (3) the use of performance, rather than design,
     standards; and (4) an exemption from coverage of the rule, or any
     part thereof, for small entities."[^492]

161. In this Order, in response to the Tenth Circuit's remand and the
     Joint Board's *Recommended Decision*, we modify the high-cost
     universal service support mechanism for non-rural carriers and
     adopt measures to induce states to ensure reasonable comparability
     of rural and urban rates in areas served by non-rural carriers. Our
     actions will affect the amount of support distributed to non-rural
     carriers and ETCs providing service in areas served by non-rural
     carriers. Based on our analysis of the relevant data, the
     Commission believes that there will be minimal, if any, economic
     impact on small entities in adopting modifications to the federal
     non-rural high-cost support mechanism and rate review and expanded
     certification process. The modifications to the current federal
     non-rural high-cost support mechanism, as adopted in the Order,
     should maintain or increase the current level of non-rural
     high-cost support to carriers receiving such support. As such,
     based on the relevant data, we anticipate little, if any, negative
     economic effects on any small businesses directly affected by the
     modifications to the non-rural high-cost mechanism implemented by
     this Order.

### Report to Congress

162. The Commission will send a copy of the Order, including the FRFA,
     in a report to be sent to Congress pursuant to the Congressional
     Review Act.[^493] In addition, the Commission will send a copy of
     the Order, including this FRFA, to the Chief Counsel for Advocacy
     of the Small Business Administration. A copy of this Order and FRFA
     (or summaries thereof) will also be published in the Federal
     Register.[^494]

## Paperwork Reduction Act Analysis

163. The action contained herein has been analyzed with respect to the
     Paperwork Reduction Act of 1995 and found to impose new or modified
     reporting and recordkeeping requirements or burdens on the public.
     Implementation of these new or modified reported and recordkeeping
     requirements will be subject to approval by the Office of
     Management and Budget (OMB) as prescribed by the Act, and will go
     into effect upon announcement in the Federal Register of OMB
     approval.

## Initial Regulatory Flexibility Act Analysis 

164. As required by the Regulatory Flexibility Act of 1980, as amended
     (RFA),[^495] the Commission has prepared this Initial Regulatory
     Flexibility Analysis (IRFA) of the possible significant economic
     impact on small entities of policies and rules proposed in this
     Further Notice of Proposed Rulemaking (Further Notice). Written
     public comments are requested on this IRFA. Comments must be
     identified as responses to the IRFA and must be filed by the
     deadlines for comments on the Further Notice.[^496] The Commission
     will send a copy of this Further Notice, including this IRFA, to
     the Chief Counsel of Advocacy of the Small Business Administration
     (SBA).[^497] In addition, the Further Notice and IRFA (or summaries
     thereof) will be published in the Federal Register.[^498]

### Need for and Objectives of the Proposed Rules

165. Consistent with the Tenth Circuit's remand of the *Ninth Report and
     Order* and the recommendations of the Federal-State Joint Board on
     Universal Service (Joint Board), we modify the high-cost universal
     service support mechanism for non-rural carriers and adopt measures
     to induce states to ensure reasonable comparability of rural and
     urban rates in areas served by non-rural carriers in the
     Order.[^499] As discussed, the Further Notice is necessary to
     develop the record on specific issues that relate to the rate
     review and expanded state certification process recommended by the
     Joint Board.[^500] The rate review and expanded state certification
     process will fulfill the requirement of the Tenth Circuit remand by
     inducing state action to ensure that rates in rural and high-cost
     areas served by non-rural carriers are reasonably comparable to
     urban rates nationwide in compliance with section 254(b) of the
     Act.[^501]

166. First, in this Further Notice, we seek comment on whether we should
     require states to file, in connection with their reasonable
     comparability certifications, additional data that might enhance
     the Commission's ability to assess the non-rural mechanism and
     state actions to achieve comparability of urban and rural rates,
     including business rate data, urban rate data, and rate data from
     states that would not otherwise be required to file data under the
     rules we adopt today. Second, we seek comment on how to treat any
     state requests for further federal action, including procedures for
     states to submit any such requests; how to review required showings
     by requesting states; and how to calculate any additional targeted
     federal support. In addition, we propose a method for calculating
     additional targeted federal support on a wire-center basis using
     forward-looking model cost estimates. Finally, we also seek comment
     on a proposal to further encourage states to advance the Act's
     universal service goals by making available additional targeted
     federal support to states that implement explicit universal service
     mechanisms, without regard to their achievement of rate
     comparability.[^502]

### Legal Basis

167. The legal basis as proposed for this *Further Notice* is contained
     in sections 4(i), 4(j), 201-205, 218-220, 254, 403 and 410 of the
     Communications Act of 1934, as amended, 47 U.S.C. §§ 4(i), 4(j),
     201-205, 218-220, 254, 403, 410.

### Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply

168. The RFA directs agencies to provide a description of, and, where
     feasible, an estimate of the number of small entities that may be
     affected by the rules adopted herein.[^503] The RFA generally
     defines the term "small entity" as having the same meaning as the
     terms "small business," "small organization," and "small
     governmental jurisdiction."[^504] In addition, the term "small
     business" has the same meaning as the term "small business concern"
     under the Small Business Act, unless the Commission has developed
     one or more definitions that are appropriate to its
     activities.[^505] Under the Small Business Act, a "small business
     concern" is one that: (1) is independently owned and operated; (2)
     is not dominant in its field of operation; and (3) meets any
     additional criteria established by the Small Business
     Administration (SBA).[^506]

169. We have described in detail, *supra*, in the Final Regulatory
     Flexibility Analysis, the categories of entities that may be
     directly affected by any rules or proposals adopted in our efforts
     to reform the universal service contribution system.[^507] For this
     Initial Regulatory Flexibility Analysis, we hereby incorporate
     those entity descriptions by reference.

### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

170. Should the Commission decide that modifications must be made to the
     rate review and expanded certification process implemented above,
     the associated rule changes will only modify the reporting
     requirements of the state commissions. Based on our review of the
     process, such state reporting requirements have no direct effect on
     the federal reporting and recordkeeping requirements of
     telecommunications service providers regulated under the
     Communications Act, including any small business entities directly
     affected by the Order. No questions posed in the Further Notice
     consider any changes to the rules that would directly impose
     additional reporting, recordkeeping, and other compliance
     requirements on small business entities.

### Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

171. The RFA requires an agency to describe any significant alternatives
     that it has considered in reaching its proposed approach, which may
     include the following four alternatives (among others): (1) the
     establishment of differing compliance or reporting requirements or
     timetables that take into account the resources available to small
     entities; (2) the clarification, consolidation, or simplification
     of compliance or reporting requirements under the rule for small
     entities; (3) the use of performance, rather than design,
     standards; and (4) an exemption from coverage of the rule, or any
     part thereof, for small entities.[^508]

172. The Commission does not foresee that any modifications to the rate
     review and expanded certification process resulting from this
     Further Notice will have a direct impact on any small business
     entities. Furthermore, based on the current data, we do not believe
     that the result in any area of the proposals under consideration
     will have a differential impact on small entities. In this Further
     Notice, however, the commenters may present the Commission with
     various proposals that may have varying impacts on small
     businesses. We seek comment on whether any proposals, if
     implemented, may result in an unfair burden. If there is such an
     unfair burden, we seek comment on how best to mitigate or eliminate
     it, as appropriate.

### Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

173. None.

## Initial Paperwork Reduction Act of 1995 Analysis

174. The *Further Notice* contains either a proposed or modified
     information collection from state commissions. As part of a
     continuing effort to reduce paperwork burdens, we invite the
     general public and the Office of Management and Budget (OMB) to
     take this opportunity to comment on the information collections
     contained in this Further Notice, as required by the Paperwork
     Reduction Act of 1995, Public Law 104-13. Public and agency
     comments are due at the same time as other comments on the Further
     Notice; OMB comments are due 60 days from the date of publication
     of the Further Notice in the Federal Register. Comments should
     address: (a) whether the proposed collection of information is
     necessary for the proper performance of the functions of the
     Commission, including whether the information shall have practical
     utility; (b) the accuracy of the Commission's burden estimates; (c)
     ways to enhance the quality, utility, and clarity of the
     information collected; and (d) ways to minimize the burden of the
     collection of information on the respondents, including the use of
     automated collection techniques or other forms of information
     technology.

## Comment Filing Procedures

175. We invite comment on the issues and questions set forth in the
     Further Notice and Initial Regulatory Flexibility Analysis
     contained herein. Pursuant to applicable procedures set forth in
     sections 1.415 and 1.419 of the Commission's rules,[^509]
     interested parties may file comments on or before 30 days after
     Federal Register publication of this Further Notice, and reply
     comments on or before 60 days after Federal Register publication of
     this Further Notice. All filings should refer to CC Docket No.
     96-45. Comments may be filed using the Commission's Electronic
     Comment Filing System (ECFS) or by filing paper copies.[^510]

176. Comments filed through the ECFS can be sent as an electronic file
     via the Internet to \<http://www.fcc.gov/e-file/ecfs.html\>.
     Generally, only one copy of an electronic submission must be filed.
     If multiple docket or rulemaking numbers appear in the caption of
     this proceeding, however, commenters must transmit one electronic
     copy of the comments to each docket or rulemaking number referenced
     in the caption. In completing the transmittal screen, commenters
     should include their full name, U.S. Postal Service mailing
     address, and the applicable docket or rulemaking number. Parties
     may also submit an electronic comment by Internet e-mail. To get
     filing instructions for e-mail comments, commenters should send an
     e-mail to ecfs@fcc.gov, and should include the following words in
     the body of the message, "get form \<your e-mail address\>." A
     sample form and directions will be sent in reply.

177. Parties who choose to file by paper must file an original and four
     copies of each filing. If more than one docket or rulemaking number
     appears in the caption of this proceeding, commenters must submit
     two additional copies for each additional docket or rulemaking
     number. Filings can be sent by hand or messenger delivery, by
     commercial overnight courier, or by first-class or overnight U.S.
     Postal Service mail (although we continue to experience delays in
     receiving U.S. Postal Service mail). The Commission's contractor,
     Natek, Inc., will receive hand-delivered or messenger-delivered
     paper filings for the Commission\'s Secretary at 236 Massachusetts
     Avenue, N.E., Suite 110, Washington, D.C. 20002. The filing hours
     at this location are 8:00 a.m. to 7:00 p.m. All hand deliveries
     must be held together with rubber bands or fasteners. Any envelopes
     must be disposed of before entering the building. Commercial
     overnight mail (other than U.S. Postal Service Express Mail and
     Priority Mail) must be sent to 9300 East Hampton Drive, Capitol
     Heights, MD 20743. U.S. Postal Service first-class mail, Express
     Mail, and Priority Mail should be addressed to 445 12th Street, SW,
     Washington, D.C. 20554. All filings must be addressed to the
     Commission's Secretary, Marlene H. Dortch, Office of the Secretary,
     Federal Communications Commission.

178. Parties also must send three paper copies of their filing to Sheryl
     Todd, Telecommunications Access Policy Division, Wireline
     Competition Bureau, Federal Communications Commission, 445 12th
     Street S.W., Room 5-B540, Washington, D.C. 20554. In addition,
     commenters must send diskette copies to the Commission's copy
     contractor, Qualex International, Portals II, 445 12th Street,
     S.W., Room CY-B402, Washington, D.C. 20054.

# ORDERING CLAUSES

179. Accordingly, IT IS ORDERED that, pursuant to the authority
     contained in sections 1, 4(i), 4(j), 201-205, 214, 218-220, 254,
     403 and 405 of the Communications Act of 1934, as amended, 47
     U.S.C. §§151, 154(i), 154(j), 201-205, 214, 218-220, 254, 403 and
     405, this ORDER ON REMAND is hereby ADOPTED.

180. IT IS FURTHER ORDERED that Part 54 of the Commission's rules, 47
     C.F.R. Part 54, IS AMENDED as set forth in Appendix A attached
     hereto, effective thirty (30) days after their publication in the
     Federal Register. The collections of information contained within
     are contingent upon approval by the Office of Management and
     Budget.

181. IT IS FURTHER ORDERED that, pursuant to the authority contained in
     sections 1, 4(i), 4(j), 201-205, 214, 218-220, 254, and 403 of the
     Communications Act of 1934, as amended, 47 U.S.C. §§151, 154(i),
     154(j), 201-205, 214, 218-220, 254 and 403, this Further Notice of
     Proposed Rulemaking IS ADOPTED.

182. IT IS FURTHER ORDERED that, pursuant to section 1.106(j) of the
     Commission's rules, 47 C.F.R. §1.106(j), the Petitions for
     Reconsideration of the Ninth Report and Order and Eighteenth Order
     on Reconsideration filed by AT&T Corp., Personal Communications
     Industry Association, Puerto Rico Telephone Company, and the
     Wyoming Public Service Commission on January 3, 2000 are DENIED,
     and the Petition for Reconsideration of the Ninth Report and Order
     and Eighteenth Order on Reconsideration filed by SBC Communications
     Inc. on January 3, 2000 is DENIED in part and DISMISSED AS MOOT in
     part.

183. IT IS FURTHER ORDERED that, pursuant to section 4(i) of the
     Communications Act of 1934, as amended, 47 U.S.C. §154(i), and
     section 1.3 of the Commission's rules, 47 C.F.R. §1.3, the Petition
     for Waiver of Section 36.631 of the Commission's Rules Governing
     the Universal Service Fund, filed by the Vermont Department of
     Public Service and the Vermont Public Service Board, September 21,
     1993, AAD 93-103, is DISMISSED AS MOOT.

184. IT IS FURTHER ORDERED that the Commission's Consumer and
     Governmental Affairs Bureau, Reference Information Center, SHALL
     SEND a copy of this Order on Remand, Further Notice of Proposed
     Rulemaking, and Memorandum Opinion and Order, including the Final
     Regulatory Flexibility Analysis and Initial Regulatory Flexibility
     Analysis, to the Chief Counsel for Advocacy of the Small Business
     Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch Secretary

**APPENDIX A \-- FINAL RULES**

Part 54 of the Code of Federal Regulations is amended as follows:

**PART 54 \-- UNIVERSAL SERVICE**

1\. The authority citations continue to read as follows:

Authority: 47 U.S.C. § 1, 4(i), 201, 205, 214, and 254 unless otherwise
noted.

**Subpart D \-- Universal Service Support in High Cost Areas**

2\. Section 54.309 (a)(3) is revised to read as follows:

**§ 54.309 Calculation and distribution of forward-looking support for
non-rural carriers.**

\(a\) \* \* \*

\(3\) The national cost benchmark shall equal two weighted standard
deviations above the national average FLEC per line.

\* \* \*

3\. Add section 54.316 as follows:

**§ 54.316 Rate comparability review and certification for areas served
by non- rural carriers.**

\(a\) *Certification.* Each state will be required annually to review
the comparability of residential rates in rural areas of the state
served by non-rural incumbent local exchange carriers to urban rates
nationwide, and to certify to the Commission and the Administrator as to
whether the rates are reasonably comparable, for purposes of section
254(b)(3) of the Telecommunications Act of 1996. If a state does not
rely on the safe harbor described in paragraph (b), or certifies that
the rates are not reasonably comparable, the state must fully explain
its rate comparability analysis and provide data supporting its
certification, including but not limited to residential rate data for
rural areas within the state served by non-rural incumbent local
exchange carriers. If a state certifies that the rates are not
reasonably comparable, it must also explain why the rates are not
reasonably comparable and explain what action it intends to take to
achieve rate comparability.

\(b\) *Safe Harbor*. For the purposes of its certification, a state may
presume that the residential rates in rural areas served by non-rural
incumbent local exchange carriers are reasonably comparable to urban
rates nationwide if the rates are below the nationwide urban rate
benchmark. The nationwide urban rate benchmark shall equal the most
recent average urban rate plus two weighted standard deviations. The
benchmark shall be calculated using the average urban rate and standard
deviation shown in the most recent annual *Reference Book of Rates,
Price Indices, and Expenditures for Telephone Service* published by the
Wireline Competition Bureau. To the extent that a state relies on the
safe harbor, the rates that it compares to the nationwide urban rate
benchmark shall include the access charges and other mandatory monthly
rates included in the rate survey published in the most recent annual
*Reference Book of Rates, Price Indices, and Expenditures for Telephone
Service*. The *Reference Book of Rates, Price Indices, and Expenditures
for Telephone Service* is available is available for public inspection
at the Commission's Reference Center at 445 12th Street, S.W.,
Washington, D.C. 20554 and on the Commission website at
www.fcc.gov/wcb/iatd/lec.html.

\(c\) *Definition of "Rural Area."* For the purposes of this section, a
"rural area" is a non-metropolitan county or county equivalent, as
defined in the Office of Management and Budget's (OMB) Revised Standards
for Defining Metropolitan Areas in the 1990s and identifiable from the
most recent Metropolitan Statistical Area (MSA) list released by OMB. At
a state's discretion, a "rural area" may also include any wire center
designated by the state as rural for the purposes of this section. In
the event that a state designates a wire center as rural, it must
provide an explanation supporting such designation in its certification
pursuant to paragraph (a).

\(d\) *Schedule for Certification.* Annual certifications are required
on the schedule set forth in section 54.313(d)(3), beginning October 1,
2004. Certifications due on October 1 of each year shall pertain to
rates as of the prior July 1. Certifications filed during the remainder
of the schedule set forth in section 54.313(d)(3) shall pertain to the
same date as if they had been filed on October 1.

\(e\) *Effect of Failure to Certify*. In the event that a state fails to
certify, no eligible telecommunications carrier in the state shall
receive support pursuant to section 54.309.

**APPENDIX B**

**Residential Monthly Urban Rate Data**

***Reference Book* Residential Monthly Urban Rate Data**

**1993-2002**

**[1993]{.underline} [1994]{.underline} [1995]{.underline}
[1996]{.underline} [1997]{.underline} [1998]{.underline}
[1999]{.underline} [2000]{.underline} [2001]{.underline}
[2002]{.underline}**

Maximum \$32.68 \$31.63 \$30.62 \$28.65 \$28.78 \$28.27 \$28.75 \$29.72
\$34.75 \$35.19

Minimum \$12.18 \$12.18 \$13.04 \$13.04 \$13.05 \$13.05 \$13.05 \$13.21
\$15.31 \$15.65

Representative Monthly

Charge (Average) \$19.95 \$19.81 \$20.01 \$19.95 \$19.88 \$19.76 \$19.93
\$20.78 \$22.62 \$23.38

Weighted Standard

Deviation (Std Dev) \$4.23 \$4.28 \$3.41 \$3.28 \$3.35 \$3.24 \$3.46
\$3.57 \$4.20 \$4.45

**Average + 2\*(Std Dev) \$28.41 \$28.38 \$26.84 \$26.51 \$26.58 \$26.24
\$26.85 \$27.92 \$31.01 \$32.28**

**Percentage to Average 142% 143% 134% 133% 134% 133% 135% 134% 137%
138%**

Average + 3\*(Std Dev) \$32.65 \$32.66 \$30.25 \$29.78 \$29.93 \$29.47
\$30.31 \$31.49 \$35.21 \$36.72

Percentage to Average 164% 165% 151% 149% 151% 149% 152% 152% 156% 157%

Source:

Industry Analysis and Technology Division, Wireline Competition Bureau,
*Reference Book of Rates, Price Indices, and Household Expenditures for
Telephone Service* (July 2003) (*2003 Reference Book*).

**APPENDIX C**

**Adjusted GAO Rate Data**

  ------------- -------------- ------------- --------------- ------------- ----------- ----------- --
  State         Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                             Rate + \$8.78 (Central    (Non-MSA)   
                                                                           City /                  
                                                                           Suburban)               

  Alabama       Auburn         CentralCity   BellSouth       \$24.73       \$24.73                 

  Alabama       Baileyton      Non-MSA       BellSouth       \$24.73                   \$24.73     

  Alabama       Birmingham     CentralCity   BellSouth       \$25.08       \$25.08                 

  Alabama       Decatur        CentralCity   BellSouth       \$25.08       \$25.08                 

  Alabama       Goodwater      Non-MSA       BellSouth       \$24.43                   \$24.43     

  Alabama       Hillsboro      Suburb        BellSouth       \$24.73       \$24.73                 

  Alabama       Morris         Suburb        BellSouth       \$25.08       \$25.08                 

  Alabama       Notasulga      Suburb        GTE Systems of  \$25.16       \$25.16                 
                                             the South                                             

  Alaska        Anchorage      CentralCity   ATU Telecom     \$18.48       \$18.48                 

  Arizona       Flagstaff      CentralCity   Qwest           \$21.96       \$21.96                 

  Arizona       Gila Bend      Suburb        Qwest           \$21.96       \$21.96                 

  Arizona       Phoenix        CentralCity   Qwest           \$21.96       \$21.96                 

  Arizona       Sierra Vista   Non-MSA       Qwest           \$21.96                   \$21.96     

  Arizona       South Tucson   Suburb        Qwest           \$21.96       \$21.96                 

  Arizona       Tucson         CentralCity   Qwest           \$21.96       \$21.96                 

  Arizona       Williams       Suburb        Qwest           \$21.96       \$21.96                 

  Arizona       Winslow        Non-MSA       Qwest           \$21.96                   \$21.96     

  Arkansas      Barling        Suburb        Southwestern    \$23.69       \$23.69                 
                                             Bell                                                  

  Arkansas      Fort Smith     CentralCity   Southwestern    \$23.69       \$23.69                 
                                             Bell                                                  

  Arkansas      Haynes         Non-MSA       Southwestern    \$22.29                   \$22.29     
                                             Bell                                                  

  Arkansas      Little Rock    CentralCity   Southwestern    \$25.09       \$25.09                 
                                             Bell                                                  

  Arkansas      Oil Trough     Non-MSA       Southwestern    \$20.89                   \$20.89     
                                             Bell                                                  

  Arkansas      Pine Bluff     CentralCity   Southwestern    \$23.69       \$23.69                 
                                             Bell                                                  

  Arkansas      Sherrill       Suburb        Southwestern    \$20.89       \$20.89                 
                                             Bell                                                  

  Arkansas      Wrightsville   Suburb        Southwestern    \$25.09       \$25.09                 
                                             Bell                                                  

                                                                                                   

  \* Rate data                                                                                     
  from GAO                                                                                         
  report for                                                                                       
  areas served                                                                                     
  by non-rural                                                                                     
  carriers                                                                                         
  only,                                                                                            
  adjusted by                                                                                      
  adding \$8.78                                                                                    
  to each rate                                                                                     
  to reflect                                                                                       

  additional                                                                                       
  charges                                                                                          
  included in                                                                                      
  Bureau\'s                                                                                        
  Reference                                                                                        
  Book                                                                                             
  Residential                                                                                      
  Monthly Urban                                                                                    
  Rate Data.                                                                                       
  ------------- -------------- ------------- --------------- ------------- ----------- ----------- --

  ------------- ------------- ------------- --------------- ------------- ----------- ----------- --
  State         Place name    Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                            Rate + \$8.78 (Central    (Non-MSA)   
                                                                          City /                  
                                                                          Suburban)               

  California    Dos Palos     Suburb        Contel          \$25.63       \$25.63                 

  California    El Centro     Non-MSA       Pacific Bell    \$19.90                   \$19.90     

  California    Greenfield    Suburb        Pacific Bell    \$19.47       \$19.47                 

  California    Hanford       Non-MSA       Pacific Bell    \$19.47                   \$19.47     

  California    Los Angeles   CentralCity   Pacific Bell    \$19.47       \$19.47                 

  California    Merced        CentralCity   Pacific Bell    \$19.47       \$19.47                 

  California    Placerville   Suburb        Pacific Bell    \$19.47       \$19.47                 

  California    Sacramento    CentralCity   Pacific Bell    \$19.47       \$19.47                 

  California    Salinas       CentralCity   Pacific Bell    \$19.47       \$19.47                 

  California    San Fernando  Suburb        GTE             \$26.03       \$26.03                 

  Colorado      Boulder       CentralCity   Qwest           \$23.69       \$23.69                 

  Colorado      Buena Vista   Non-MSA       Qwest           \$23.69                   \$23.69     

  Colorado      Colorado      CentralCity   Qwest           \$23.69       \$23.69                 
                Springs                                                                           

  Colorado      Lafayette     Suburb        Qwest           \$23.69       \$23.69                 

  Colorado      Leadville     Non-MSA       Qwest           \$23.69                   \$23.69     

  Colorado      Monument      Suburb        Qwest           \$23.69       \$23.69                 

  Colorado      Pueblo        CentralCity   Qwest           \$23.69       \$23.69                 

  Connecticut   Chester       Non-MSA       SNET            \$19.31                   \$19.31     
                Center                                                                            

  Connecticut   Essex         Non-MSA       SNET            \$19.31                   \$19.31     

  Connecticut   Groton        Suburb        SNET            \$20.31       \$20.31                 

  Connecticut   Hartford      CentralCity   SNET            \$23.31       \$23.31                 

  Connecticut   New Canaan    Suburb        SNET            \$20.31       \$20.31                 

  Connecticut   Stamford      CentralCity   SNET            \$21.31       \$21.31                 

  Connecticut   Waterbury     CentralCity   SNET            \$22.31       \$22.31                 

  Delaware      Dover         CentralCity   Bell Atlantic   \$19.74       \$19.74                 

  Delaware      Felton        Suburb        Bell Atlantic   \$19.74       \$19.74                 

  Delaware      Lewes         Non-MSA       Bell Atlantic   \$20.40                   \$20.40     

  Delaware      Millville     Non-MSA       Bell Atlantic   \$20.40                   \$20.40     

  Delaware      Newport       Suburb        Bell Atlantic   \$20.40       \$20.40                 

  Delaware      Wilmington    CentralCity   Bell Atlantic   \$20.40       \$20.40                 

  District of   Washington    CentralCity   Bell Atlantic   \$21.56       \$21.56                 
  Columbia                                                                                        
  ------------- ------------- ------------- --------------- ------------- ----------- ----------- --

  ---------- -------------- ------------- --------------- ------------- ----------- ----------- --
  State      Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                          Rate + \$8.78 (Central    (Non-MSA)   
                                                                        City /                  
                                                                        Suburban)               

  Florida    Bartow         Suburb        GTE             \$20.33       \$20.33                 

  Florida    Fanning        Non-MSA       BellSouth       \$19.95                   \$19.95     
             Springs                                                                            

  Florida    Fernandina     Suburb        BellSouth       \$17.00       \$17.00                 
             Beach                                                                              

  Florida    Havana         Suburb        BellSouth       \$18.07       \$18.07                 

  Florida    Jacksonville   CentralCity   BellSouth       \$19.24       \$19.24                 

  Florida    Lakeland       CentralCity   GTE             \$20.33       \$20.33                 

  Georgia    Aldora         Non-MSA       BellSouth       \$26.23                   \$26.23     

  Georgia    Augusta        CentralCity   BellSouth       \$23.63       \$23.63                 

  Georgia    Avera          Non-MSA       BellSouth       \$21.28                   \$21.28     

  Georgia    Columbus       CentralCity   BellSouth       \$23.63       \$23.63                 

  Georgia    Hamilton       Suburb        BellSouth       \$23.63       \$23.63                 

  Georgia    Hephzibah      Suburb        BellSouth       \$23.63       \$23.63                 

  Georgia    Macon          CentralCity   BellSouth       \$23.63       \$23.63                 

  Georgia    Payne          Suburb        BellSouth       \$23.63       \$23.63                 

  Hawaii     Hana           Non-MSA       GTE Hawaiian    \$21.28                   \$21.28     
                                          Tel Co                                                

  Hawaii     Honolulu       CentralCity   GTE Hawaiian    \$23.18       \$23.18                 
                                          Tel Co                                                

  Hawaii     Kailua         Non-MSA       GTE Hawaiian    \$23.18                   \$23.18     
                                          Tel Co                                                

  Idaho      Boise City     CentralCity   Qwest           \$26.24       \$26.24                 

  Idaho      Caldwell       Suburb        Qwest           \$26.24       \$26.24                 

  Idaho      Dietrich       Non-MSA       Qwest           \$26.24                   \$26.24     

  Idaho      Inkom          Suburb        Qwest           \$26.24       \$26.24                 

  Idaho      Pocatello      CentralCity   Qwest           \$26.24       \$26.24                 

  Idaho      Wendell        Non-MSA       Qwest           \$26.24                   \$26.24     

  Illinois   Arlington      Suburb        Ameritech       \$21.78       \$21.78                 
             Heights                                                                            

  Illinois   Champaign      CentralCity   Ameritech       \$21.78       \$21.78                 

  Illinois   Chicago        CentralCity   Ameritech       \$18.31       \$18.31                 

  Illinois   Clayton        Non-MSA       GTE             \$29.55                   \$29.55     

  Illinois   Homer          Suburb        GTE             \$29.55       \$29.55                 

  Illinois   Minier         Suburb        GTE             \$29.55       \$29.55                 

  Illinois   Neponset       Non-MSA       GTE             \$29.55                   \$29.55     

  Illinois   Peoria         CentralCity   Ameritech       \$21.78       \$21.78                 
  ---------- -------------- ------------- --------------- ------------- ----------- ----------- --

  ---------- -------------- ------------- --------------- ------------- ----------- ----------- --
  State      Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                          Rate + \$8.78 (Central    (Non-MSA)   
                                                                        City /                  
                                                                        Suburban)               

  Indiana    Edgewood       Suburb        Ameritech       \$19.26       \$19.26                 

  Indiana    Fort Wayne     CentralCity   GTE             \$26.34       \$26.34                 

  Indiana    Indianapolis   CentralCity   Ameritech       \$20.95       \$20.95                 

  Indiana    Kokomo         CentralCity   Ameritech       \$18.53       \$18.53                 

  Indiana    Ladoga         Non-MSA       Ameritech       \$18.53                   \$18.53     

  Indiana    Marengo        Non-MSA       GTE             \$26.34                   \$26.34     

  Indiana    Waterloo       Suburb        GTE             \$21.13       \$21.13                 

  Indiana    Windfall       Suburb        GTE             \$24.72       \$24.72                 

  Iowa       Atlantic City  Non-MSA       Qwest           \$19.49                   \$19.49     

  Iowa       Davenport      CentralCity   Qwest           \$21.43       \$21.43                 

  Iowa       Des Moines     CentralCity   Qwest           \$21.43       \$21.43                 

  Iowa       Dubuque        CentralCity   Qwest           \$20.46       \$20.46                 

  Iowa       Durango        Suburb        Qwest           \$20.46       \$20.46                 

  Iowa       Hartford       Suburb        Qwest           \$21.43       \$21.43                 

  Iowa       Panorama Park  Suburb        Qwest           \$21.43       \$21.43                 

  Iowa       Renwick        Non-MSA       Qwest           \$19.49                   \$19.49     

  Kansas     Auburn         Suburb        Southwestern    \$23.53       \$23.53                 
                                          Bell                                                  

  Kansas     Beloit         Non-MSA       Southwestern    \$22.68                   \$22.68     
                                          Bell                                                  

  Kansas     El Dorado      Suburb        Southwestern    \$22.68       \$22.68                 
                                          Bell                                                  

  Kansas     Eudora         Suburb        Southwestern    \$22.68       \$22.68                 
                                          Bell                                                  

  Kansas     Lawrence       CentralCity   Southwestern    \$22.68       \$22.68                 
                                          Bell                                                  

  Kansas     Parsons        Non-MSA       Southwestern    \$22.68                   \$22.68     
                                          Bell                                                  

  Kansas     Topeka         CentralCity   Southwestern    \$22.68       \$22.68                 
                                          Bell                                                  

  Kansas     Wichita        CentralCity   Southwestern    \$22.98       \$22.98                 
                                          Bell                                                  

  Kentucky   Lexington      CentralCity   GTE             \$27.73       \$27.73                 

  Kentucky   Louisville     CentralCity   BellSouth       \$27.18       \$27.18                 

  Kentucky   Owensboro      CentralCity   BellSouth       \$23.15       \$23.15                 

  Kentucky   Plymouth       Suburb        BellSouth       \$27.18       \$27.18                 
             Village                                                                            

  Kentucky   Scottsville    Non-MSA       GTE             \$21.98                   \$21.98     

  Kentucky   Stamping       Suburb        BellSouth       \$24.00       \$24.00                 
             Ground                                                                             

  Kentucky   Stanford       Non-MSA       BellSouth       \$21.55                   \$21.55     

  Kentucky   Whitesville    Suburb        BellSouth       \$23.15       \$23.15                 
  ---------- -------------- ------------- --------------- ------------- ----------- ----------- --

  --------------- -------------- ------------- --------------- ------------- ----------- ----------- --
  State           Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                               Rate + \$8.78 (Central    (Non-MSA)   
                                                                             City /                  
                                                                             Suburban)               

  Louisiana       Houma          CentralCity   BellSouth       \$21.21       \$21.21                 

  Louisiana       Lockport       Suburb        BellSouth       \$19.75       \$19.75                 

  Louisiana       Monroe         CentralCity   BellSouth       \$21.42       \$21.42                 

  Louisiana       New Llano      Non-MSA       BellSouth       \$20.59                   \$20.59     

  Louisiana       New Orleans    CentralCity   BellSouth       \$21.42       \$21.42                 

  Louisiana       Sterlington    Suburb        BellSouth       \$21.42       \$21.42                 

  Louisiana       Vidalia        Non-MSA       BellSouth       \$20.59                   \$20.59     

  Louisiana       Westwego       Suburb        BellSouth       \$21.42       \$21.42                 

  Maine           Auburn         Suburb        Verizon -- New  \$25.69       \$25.69                 
                                               England                                               

  Maine           Augusta        Non-MSA       Verizon -- New  \$25.69                   \$25.69     
                                               England                                               

  Maine           Bangor         CentralCity   Verizon -- New  \$25.69       \$25.69                 
                                               England                                               

  Maine           Belfast        Suburb        Verizon -- New  \$24.41       \$24.41                 
                                               England                                               

  Maine           Lewiston       CentralCity   Verizon -- New  \$25.69       \$25.69                 
                                               England                                               

  Maine           Portland       CentralCity   Verizon -- New  \$25.69       \$25.69                 
                                               England                                               

  Maine           Waterville     Non-MSA       Verizon -- New  \$24.81                   \$24.81     
                                               England                                               

  Maine           Westbrook      Suburb        Verizon -- New  \$25.69       \$25.69                 
                                               England                                               

  Maryland        Baltimore      CentralCity   Bell Atlantic   \$25.04       \$25.04                 

  Maryland        Cumberland     CentralCity   Bell Atlantic   \$23.79       \$23.79                 

  Maryland        Eldorado       Non-MSA       Bell Atlantic   \$23.79                   \$23.79     

  Maryland        Frostburg      Suburb        Bell Atlantic   \$23.79       \$23.79                 

  Maryland        Hagerstown     CentralCity   Bell Atlantic   \$23.79       \$23.79                 

  Maryland        Hancock        Suburb        Bell Atlantic   \$24.29       \$24.29                 

  Maryland        Kitzmiller     Non-MSA       Bell Atlantic   \$23.79                   \$23.79     

  Maryland        Manchester     Suburb        Bell Atlantic   \$24.29       \$24.29                 

  Massachusetts   Boston         CentralCity   Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Bourne         Non-MSA       Verizon -- New  \$26.12                   \$26.12     
                                               England                                               

  Massachusetts   Chelmsford     Suburb        Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Fitchburg      CentralCity   Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Lowell         CentralCity   Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Taunton        Suburb        Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Templeton      Suburb        Verizon -- New  \$26.12       \$26.12                 
                                               England                                               

  Massachusetts   Williamstown   Non-MSA       Verizon -- New  \$26.12                   \$26.12     
                                               England                                               

  State           Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                               Rate + \$8.78 (Central    (Non-MSA)   
                                                                             City /                  
                                                                             Suburban)               

  Michigan        Ann Arbor      CentralCity   Ameritech       \$52.73       \$52.73                 

  Michigan        Benton Harbor  CentralCity   Ameritech       \$52.73       \$52.73                 

  Michigan        Custer         Non-MSA       Ameritech       \$52.73                   \$52.73     

  Michigan        Detroit        CentralCity   Ameritech       \$52.73       \$52.73                 

  Michigan        East Grand     Suburb        Ameritech       \$52.73       \$52.73                 
                  Rapids                                                                             

  Michigan        Eau Claire     Suburb        Ameritech       \$52.73       \$52.73                 

  Michigan        Fairgrove      Non-MSA       Ameritech       \$52.73                   \$52.73     

  Michigan        Grand Rapids   CentralCity   Ameritech       \$52.73       \$52.73                 

  Michigan        Milan          Suburb        Ameritech       \$52.73       \$52.73                 

  Michigan        Sturgis        Non-MSA       GTE             \$22.44                   \$22.44     

  Michigan        Wayne          Suburb        Ameritech       \$52.73       \$52.73                 

  Minnesota       Minneapolis    CentralCity   Qwest           \$23.54       \$23.54                 

  Minnesota       Rochester      CentralCity   Qwest           \$22.74       \$22.74                 

  Minnesota       Rock Creek     Non-MSA       Qwest           \$22.74                   \$22.74     

  Minnesota       Sauk Rapids    Suburb        Qwest           \$22.74       \$22.74                 

  Minnesota       St. Cloud      CentralCity   Qwest           \$22.74       \$22.74                 

  Minnesota       Stewartville   Suburb        Qwest           \$22.74       \$22.74                 

  Mississippi     Canton         Suburb        BellSouth       \$24.28       \$24.28                 

  Mississippi     Duck Hill      Non-MSA       BellSouth       \$23.93                   \$23.93     

  Mississippi     Gulfport       CentralCity   BellSouth       \$27.79       \$27.79                 

  Mississippi     Hattiesburg    CentralCity   BellSouth       \$26.73       \$26.73                 

  Mississippi     Jackson        CentralCity   BellSouth       \$27.79       \$27.79                 

  Mississippi     McComb         Non-MSA       BellSouth       \$25.68                   \$25.68     

  Mississippi     Ocean Springs  Suburb        BellSouth       \$27.44       \$27.44                 

  Mississippi     Purvis         Suburb        BellSouth       \$23.57       \$23.57                 

  Missouri        Bella Villa    Suburb        Southwestern    \$20.03       \$20.03                 
                                               Bell                                                  

  Missouri        Bragg City     Non-MSA       Southwestern    \$16.26                   \$16.26     
                                               Bell                                                  

  Missouri        Columbia       CentralCity   GTE d/b/a/      \$18.69       \$18.69                 
                                               Verizon                                               

  Missouri        Duenweg        Suburb        Southwestern    \$17.80       \$17.80                 
                                               Bell                                                  

  Missouri        Harrisburg     Suburb        GTE             \$18.69       \$18.69                 

  Missouri        Joplin         CentralCity   Southwestern    \$17.80       \$17.80                 
                                               Bell                                                  

  Missouri        St. Louis      CentralCity   Southwestern    \$20.03       \$20.03                 
                                               Bell                                                  

  Missouri        Wyatt          Non-MSA       Southwestern    \$16.26                   \$16.26     
                                               Bell                                                  

  State           Place name     Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                               Rate + \$8.78 (Central    (Non-MSA)   
                                                                             City /                  
                                                                             Suburban)               

  Montana         Billings       CentralCity   Qwest           \$25.51       \$25.51                 

  Montana         Cascade        Suburb        Qwest           \$25.51       \$25.51                 

  Montana         Dillon         Non-MSA       Qwest           \$25.51                   \$25.51     

  Montana         Great Falls    CentralCity   Qwest           \$25.51       \$25.51                 

  Montana         Laurel         Suburb        Qwest           \$25.51       \$25.51                 

  Montana         Whitehall      Non-MSA       Qwest           \$25.51                   \$25.51     

  Nebraska        Avoca          Suburb        Aliant          \$26.28       \$26.28                 

  Nebraska        Hebron         Non-MSA       Aliant          \$26.28                   \$26.28     

  Nebraska        Humphrey       Non-MSA       Qwest           \$26.93                   \$26.93     

  Nebraska        Lincoln        CentralCity   Aliant          \$26.28       \$26.28                 

  Nebraska        Omaha          CentralCity   Qwest           \$26.93       \$26.93                 

  Nebraska        Roca           Suburb        Aliant          \$26.28       \$26.28                 

  Nevada          Carson City    Non-MSA       Nevada Bell     \$19.53                   \$19.53     

  Nevada          Henderson      Suburb        Central Tel Co  \$17.83       \$17.83                 
                                               of NV Sprint                                          

  Nevada          Las Vegas      CentralCity   Central Tel Co  \$17.83       \$17.83                 
                                               of NV Sprint                                          

  Nevada          Lovelock       Non-MSA       Nevada Bell     \$19.53                   \$19.53     

  Nevada          Reno           CentralCity   Nevada Bell     \$19.53       \$19.53                 

  Nevada          Sparks         Suburb        Nevada Bell     \$19.53       \$19.53                 

  New Hampshire   Franklin       Suburb        Verizon -- New  \$23.23       \$23.23                 
                                               England                                               

  New Hampshire   Littleton      Non-MSA       Verizon -- New  \$20.92                   \$20.92     
                                               England                                               

  New Hampshire   Manchester     CentralCity   Verizon -- New  \$24.51       \$24.51                 
                                               England                                               

  New Hampshire   Mason          Suburb        Verizon -- New  \$22.07       \$22.07                 
                                               England                                               

  New Hampshire   Nashua         CentralCity   Verizon -- New  \$24.51       \$24.51                 
                                               England                                               

  New Hampshire   Rochester      CentralCity   Verizon -- New  \$23.23       \$23.23                 
                                               England                                               

  New Hampshire   Somersworth    Suburb        Verizon -- New  \$23.23       \$23.23                 
                                               England                                               

  New Hampshire   Whitefield     Non-MSA       Verizon -- New  \$20.92                   \$20.92     
                                               England                                               

  New Jersey      Atlantic City  CentralCity   Bell Atlantic - \$16.23       \$16.23                 
                                               NJ                                                    

  New Jersey      Cap May Point  Suburb        Bell Atlantic - \$16.23       \$16.23                 
                                               NJ                                                    

  New Jersey      Hoboken        Suburb        Bell Atlantic - \$16.97       \$16.97                 
                                               NJ                                                    

  New Jersey      Jersey City    CentralCity   Bell Atlantic - \$16.97       \$16.97                 
                                               NJ                                                    

  New Jersey      Newark         CentralCity   Bell Atlantic - \$16.97       \$16.97                 
                                               NJ                                                    

  New Jersey      Victory        Suburb        Bell Atlantic   \$16.23       \$16.23                 
                  Gardens                      -- NJ                                                 

                                                                                                     
  --------------- -------------- ------------- --------------- ------------- ----------- ----------- --

  ---------- ------------- ------------- --------------- ------------- ----------- ----------- --
  State      Place name    Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                         Rate + \$8.78 (Central    (Non-MSA)   
                                                                       City /                  
                                                                       Suburban)               

  New Mexico Albuquerque   CentralCity   Qwest           \$19.44       \$19.44                 

  New Mexico Angel Fire    Non-MSA       Qwest           \$19.44                   \$19.44     

  New Mexico Bernalillo    Suburb        Qwest           \$19.44       \$19.44                 

  New Mexico Las Cruces    CentralCity   Qwest           \$19.44       \$19.44                 

  New Mexico Las Vegas     Non-MSA       Qwest           \$19.44                   \$19.44     

  New Mexico Santa Fe      CentralCity   Qwest           \$19.44       \$19.44                 

  New Mexico Sunland Park  Suburb        Qwest           \$19.44       \$19.44                 

  New York   Bronxville    Suburb        Verizon         \$28.94       \$28.94                 

  New York   Cattaraugus   Non-MSA       Verizon         \$21.92                   \$21.92     

  New York   Cornwall on   Suburb        Verizon         \$25.43       \$25.43                 
             Hudson                                                                            

  New York   Glens Falls   CentralCity   Verizon         \$25.43       \$25.43                 

  New York   Ithaca        Non-MSA       Verizon         \$24.06                   \$24.06     

  New York   New York      CentralCity   Verizon         \$28.94       \$28.94                 

  New York   Newburgh      CentralCity   Verizon         \$25.43       \$25.43                 

  New York   Rochester     CentralCity   Frontier        \$20.49       \$20.49                 

  New York   Sodus Point   Suburb        Verizon         \$25.43       \$25.43                 

  New York   Whitehall     Suburb        Verizon         \$24.06       \$24.06                 

  North      Asheville     CentralCity   BellSouth       \$20.97       \$20.97                 
  Carolina                                                                                     

  North      Biltmore      Suburb        BellSouth       \$20.97       \$20.97                 
  Carolina   Forest                                                                            

  North      Charlotte     CentralCity   BellSouth       \$21.31       \$21.31                 
  Carolina                                                                                     

  North      Elk Park      Non-MSA       BellSouth       \$19.25                   \$19.25     
  Carolina                                                                                     

  North      Lake Park     Suburb        BellSouth       \$21.04       \$21.04                 
  Carolina                                                                                     

  North      Belfield      Non-MSA       Qwest           \$26.47                   \$26.47     
  Dakota                                                                                       

  North      Bismarck      CentralCity   Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

  North      Emerado       Suburb        Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

  North      Fargo         CentralCity   Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

  North      Grand Forks   CentralCity   Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

  North      Grandin       Suburb        Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

  North      Mandan        Suburb        Qwest           \$26.47       \$26.47                 
  Dakota                                                                                       

                                                                                               
  ---------- ------------- ------------- --------------- ------------- ----------- ----------- --

  -------------- ------------------ ------------- --------------- ------------- ----------- ----------- --
  State          Place name         Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                                  Rate + \$8.78 (Central    (Non-MSA)   
                                                                                City /                  
                                                                                Suburban)               

  Ohio           Canton             CentralCity   Ameritech       \$23.03       \$23.03                 

  Ohio           Clarksville        Non-MSA       GTE             \$22.71                   \$22.71     

  Ohio           Dayton             CentralCity   Ameritech       \$23.03       \$23.03                 

  Ohio           Miamisburg         Suburb        Ameritech       \$23.03       \$23.03                 

  Ohio           Middleport         Non-MSA       GTE             \$22.71                   \$22.71     

  Ohio           Waynesburg         Suburb        Ameritech       \$23.13       \$23.13                 

  Oklahoma       Cache              Suburb        Southwestern    \$20.85       \$20.85                 
                                                  Bell                                                  

  Oklahoma       Claremore          Suburb        Southwestern    \$22.50       \$22.50                 
                                                  Bell                                                  

  Oklahoma       Lake Aluma         Suburb        Southwestern    \$22.50       \$22.50                 
                                                  Bell                                                  

  Oklahoma       Lawton             CentralCity   Southwestern    \$20.85       \$20.85                 
                                                  Bell                                                  

  Oklahoma       Oklahoma City      CentralCity   Southwestern    \$22.50       \$22.50                 
                                                  Bell                                                  

  Oklahoma       Pawnee             Non-MSA       Southwestern    \$19.00                   \$19.00     
                                                  Bell                                                  

  Oklahoma       Pocola             Non-MSA       Southwestern    \$20.85                   \$20.85     
                                                  Bell                                                  

  Oklahoma       Tulsa              CentralCity   Southwestern    \$22.50       \$22.50                 
                                                  Bell                                                  

  Oregon         Adams              Non-MSA       Qwest           \$21.58                   \$21.58     

  Oregon         Albany             Suburb        Qwest           \$21.58       \$21.58                 

  Oregon         Corvallis          CentralCity   Qwest           \$21.58       \$21.58                 

  Oregon         Eugene             CentralCity   Qwest           \$21.58       \$21.58                 

  Oregon         Junction City      Suburb        Qwest           \$21.58       \$21.58                 

  Oregon         Milton-Freewater   Non-MSA       Qwest           \$21.58                   \$21.58     

  Oregon         Portland           CentralCity   Qwest           \$21.58       \$21.58                 

  Oregon         Yamhill            Suburb        GTE             \$21.37       \$21.37                 

  Pennsylvania   Exeter             Suburb        Bell Atlantic - \$20.91       \$20.91                 
                                                  PA                                                    

  Pennsylvania   Franklin           Suburb        Verizon North   \$21.61       \$21.61                 

  Pennsylvania   Johnstown          CentralCity   Verizon North   \$22.58       \$22.58                 

  Pennsylvania   Oxford             Suburb        Bell Atlantic - \$19.66       \$19.66                 
                                                  PA                                                    

  Pennsylvania   Philadelphia       CentralCity   Bell Atlantic - \$22.21       \$22.21                 
                                                  PA                                                    

  Pennsylvania   Saltsburg          Non-MSA       Verizon North   \$18.65                   \$18.65     

  Pennsylvania   Scranton           CentralCity   Bell Atlantic - \$20.91       \$20.91                 
                                                  PA                                                    

  Pennsylvania   South New Castle   Non-MSA       Bell Atlantic   \$17.06                   \$17.06     
                                                  -- PA                                                 

  Rhode Island   East Providence    Suburb        Verizon         \$26.04       \$26.04                 

  Rhode Island   Providence         CentralCity   Verizon         \$26.04       \$26.04                 

  State          Place name         Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                                  Rate + \$8.78 (Central    (Non-MSA)   
                                                                                City /                  
                                                                                Suburban)               

  South Carolina Arcadia Lakes      Suburb        BellSouth       \$24.18       \$24.18                 

  South Carolina Calhoun Falls      Non-MSA       GTE             \$24.74                   \$24.74     

  South Carolina Columbia           CentralCity   BellSouth       \$24.18       \$24.18                 

  South Carolina Greenville         CentralCity   BellSouth       \$24.18       \$24.18                 

  South Carolina Norris             Suburb        BellSouth       \$22.83       \$22.83                 

  South Carolina Springfield        Non-MSA       BellSouth       \$21.48                   \$21.48     

  South Carolina Sumter             CentralCity   GTE             \$24.74       \$24.74                 

  South Dakota   Chamberlain        Non-MSA       Qwest           \$24.53                   \$24.53     

  South Dakota   Hill City          Suburb        Qwest           \$26.53       \$26.53                 

  South Dakota   Kranzburg          Non-MSA       Qwest           \$25.33                   \$25.33     

  South Dakota   Madison            Non-MSA       Qwest           \$25.33                   \$25.33     

  South Dakota   Rapid City         CentralCity   Qwest           \$26.53       \$26.53                 

  South Dakota   Sioux Falls        CentralCity   Qwest           \$27.03       \$27.03                 

  South Dakota   Tea                Suburb        Qwest           \$27.03       \$27.03                 

  Tennessee      Cumberland Gap     Non-MSA       BellSouth       \$18.03                   \$18.03     

  Tennessee      Dover              Non-MSA       BellSouth       \$17.08                   \$17.08     

  Tennessee      Humboldt           Suburb        BellSouth       \$18.03       \$18.03                 

  Tennessee      Jackson            CentralCity   BellSouth       \$18.58       \$18.58                 

  Tennessee      Memphis            CentralCity   BellSouth       \$21.68       \$21.68                 

  Tennessee      Piperton           Suburb        BellSouth       \$21.68       \$21.68                 

  Texas          Bruceville-Eddy    Suburb        Southwestern    \$17.88       \$17.88                 
                                                  Bell                                                  

  Texas          El Lago            Suburb        Southwestern    \$19.83       \$19.83                 
                                                  Bell                                                  

  Texas          Galveston          CentralCity   Southwestern    \$17.88       \$17.88                 
                                                  Bell                                                  

  Texas          Houston            CentralCity   Southwestern    \$19.83       \$19.83                 
                                                  Bell                                                  

  Texas          Jamaica Beach      Suburb        Southwestern    \$17.88       \$17.88                 
                                                  Bell                                                  

  Texas          Victoria           CentralCity   Southwestern    \$17.58       \$17.58                 
                                                  Bell                                                  

  Texas          Waco               CentralCity   Southwestern    \$17.88       \$17.88                 
                                                  Bell                                                  

  Texas          Winters            Non-MSA       GTE             \$15.88                   \$15.88     

                                                                                                        
  -------------- ------------------ ------------- --------------- ------------- ----------- ----------- --

  ------------ ---------------- ------------- --------------- ------------- ----------- ----------- --
  State        Place name       Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                              Rate + \$8.78 (Central    (Non-MSA)   
                                                                            City /                  
                                                                            Suburban)               

  Utah         Bountiful        Suburb        Qwest           \$19.81       \$19.81                 

  Utah         Provo            CentralCity   Qwest           \$19.81       \$19.81                 

  Utah         River Heights    Non-MSA       Qwest           \$19.81                   \$19.81     

  Utah         Salina           Non-MSA       Qwest           \$19.81                   \$19.81     

  Utah         Salt Lake City   CentralCity   Qwest           \$19.81       \$19.81                 

  Utah         Springville      Suburb        Qwest           \$19.81       \$19.81                 

  Vermont      Burlington       CentralCity   Verizon         \$33.33       \$33.33                 

  Vermont      Jeffersonville   Non-MSA       Verizon         \$33.33                   \$33.33     

  Vermont      Newport          Non-MSA       Verizon         \$33.33                   \$33.33     

  Vermont      South Burlington Suburb        Verizon         \$33.33       \$33.33                 

  Virginia     Buchanan         Suburb        Bell Atlantic   \$21.42       \$21.42                 

  Virginia     Hampton          Suburb        Bell Atlantic   \$23.08       \$23.08                 

  Virginia     Lynchburg        CentralCity   Bell Atlantic   \$21.42       \$21.42                 

  Virginia     Melfa            Non-MSA       Bell Atlantic   \$20.69                   \$20.69     

  Virginia     Radford          Non-MSA       Bell Atlantic   \$21.42                   \$21.42     

  Virginia     Roanoke          CentralCity   Bell Atlantic   \$22.37       \$22.37                 

  Virginia     Virginia Beach   CentralCity   Bell Atlantic   \$23.08       \$23.08                 

  Washington   Bainbridge       Suburb        Qwest           \$21.28       \$21.28                 
               Island                                                                               

  Washington   Bellingham       CentralCity   Qwest           \$21.28       \$21.28                 

  Washington   Bremerton        CentralCity   Qwest           \$21.28       \$21.28                 

  Washington   Kenmore          Suburb        GTE             \$22.03       \$22.03                 

  Washington   Seattle          CentralCity   Qwest           \$21.28       \$21.28                 

  Washington   Tekoa            Non-MSA       GTE             \$20.62                   \$20.62     

  Washington   Warden           Non-MSA       Qwest           \$21.28                   \$21.28     

  West         Huntington       CentralCity   Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  West         Milton           Suburb        Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  West         Moundsville      Suburb        Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  West         Parkersburg      CentralCity   Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  West         Shinnston        Non-MSA       Verizon         \$23.78                   \$23.78     
  Virginia                                                                                          

  West         Terra Alta       Non-MSA       Verizon         \$23.78                   \$23.78     
  Virginia                                                                                          

  West         Vienna           Suburb        Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  West         Wheeling         CentralCity   Verizon         \$23.78       \$23.78                 
  Virginia                                                                                          

  State        Place name       Type of place Non-Rural ILEC  Residential   Urban\      Rural\      
                                                              Rate + \$8.78 (Central    (Non-MSA)   
                                                                            City /                  
                                                                            Suburban)               

  Wisconsin    Brokaw           Suburb        GTE             \$27.03       \$27.03                 

  Wisconsin    Footville        Suburb        GTE             \$28.26       \$28.26                 

  Wisconsin    Genoa            Non-MSA       Ameritech       \$19.45                   \$19.45     

  Wisconsin    Janesville       CentralCity   Ameritech       \$19.45       \$19.45                 

  Wisconsin    Madison          CentralCity   Ameritech       \$19.45       \$19.45                 

  Wisconsin    Stoughton        Suburb        GTE             \$19.45       \$19.45                 

  Wisconsin    Wausau           CentralCity   GTE             \$27.03       \$27.03                 

  Wyoming      Casper           CentralCity   Qwest           \$31.88       \$31.88                 

  Wyoming      Cheyenne         CentralCity   Qwest           \$31.88       \$31.88                 

  Wyoming      Evansville       Suburb        Qwest           \$31.88       \$31.88                 

  Wyoming      Gillette         Non-MSA       Qwest           \$31.88                   \$31.88     

  Wyoming      Hudson           Non-MSA       Qwest           \$57.38                   \$57.38     
  ------------ ---------------- ------------- --------------- ------------- ----------- ----------- --

**APPENDIX D**

**Dispersion of Statewide Average Costs Per Line**

+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
| !      |      |      |      |      |      |      |      |      |
| [](med |      |      |      |      |      |      |      |      |
| ia/ima |      |      |      |      |      |      |      |      |
| ge1.wm |      |      |      |      |      |      |      |      |
| f){wid |      |      |      |      |      |      |      |      |
| th="4. |      |      |      |      |      |      |      |      |
| 927083 |      |      |      |      |      |      |      |      |
| 333333 |      |      |      |      |      |      |      |      |
| 333in" |      |      |      |      |      |      |      |      |
| heigh  |      |      |      |      |      |      |      |      |
| t="5.5 |      |      |      |      |      |      |      |      |
| 208333 |      |      |      |      |      |      |      |      |
| 333333 |      |      |      |      |      |      |      |      |
| 33in"} |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|   ---  |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+

+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
| !      |      |      |      |      |      |      |      |      |
| [](med |      |      |      |      |      |      |      |      |
| ia/ima |      |      |      |      |      |      |      |      |
| ge2.wm |      |      |      |      |      |      |      |      |
| f){wid |      |      |      |      |      |      |      |      |
| th="5. |      |      |      |      |      |      |      |      |
| 145833 |      |      |      |      |      |      |      |      |
| 333333 |      |      |      |      |      |      |      |      |
| 333in" |      |      |      |      |      |      |      |      |
| heigh  |      |      |      |      |      |      |      |      |
| t="5.6 |      |      |      |      |      |      |      |      |
| 458333 |      |      |      |      |      |      |      |      |
| 333333 |      |      |      |      |      |      |      |      |
| 33in"} |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|   ---  |      |      |      |      |      |      |      |      |
|        |      |      |      |      |      |      |      |      |
|   ---  |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+
|        |      |      |      |      |      |      |      |      |
+--------+------+------+------+------+------+------+------+------+

**APPENDIX E**

**Cluster Analysis Based on Simulated Statewide Average Cost Per Line
Data**

<table>
<colgroup>
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
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<td></td>
<td></td>
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</tr>
<tr class="even">
<td></td>
<td></td>
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<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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</tr>
<tr class="odd">
<td></td>
<td></td>
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<td></td>
<td></td>
<td></td>
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<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="23" rowspan="33"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 1%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="24" rowspan="33"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
</tbody>
</table>

<table style="width:100%;">
<colgroup>
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td><table>
<colgroup>
<col style="width: 100%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
</tr>
</tbody>
</table></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
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</table>

**APPENDIX F**

**Bureau Rate Survey**

![](media/image3.png){width="8.1in" height="10.569444444444445in"}

**APPENDIX G**

**Proposed Methods of Targeting Additional Federal Support**

  ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
  **[STATE]{.underline}**   **[25%]{.underline}**     **[20%]{.underline}**     **[15%]{.underline}**     **[10%]{.underline}**     **[5%]{.underline}**

  AK                        86,247                    68,998                    51,748                    34,499                    17,249

  AL                        14,089,895                11,271,916                8,453,937                 5,635,958                 2,817,979

  AR                        5,393,077                 4,314,461                 3,235,846                 2,157,231                 1,078,615

  AZ                        3,544,761                 2,835,809                 2,126,856                 1,417,904                 708,952

  CA                        15,571,160                12,456,928                9,342,696                 6,228,464                 3,114,232

  CO                        4,333,636                 3,466,909                 2,600,182                 1,733,455                 866,727

  CT                        13,622                    10,898                    8,173                     5,449                     2,724

  DC                        \-                        \-                        \-                        \-                        \-

  DE                        122,737                   98,190                    73,642                    49,095                    24,547

  FL                        1,820,616                 1,456,493                 1,092,370                 728,247                   364,123

  GA                        4,447,137                 3,557,710                 2,668,282                 1,778,855                 889,427

  HI                        744,219                   595,375                   446,531                   297,687                   148,844

  IA                        2,203,372                 1,762,698                 1,322,023                 881,349                   440,674

  ID                        3,013,154                 2,410,523                 1,807,893                 1,205,262                 602,631

  IL                        13,962,653                11,170,122                8,377,592                 5,585,061                 2,792,531

  IN                        8,680,321                 6,944,257                 5,208,192                 3,472,128                 1,736,064

  KS                        4,868,330                 3,894,664                 2,920,998                 1,947,332                 973,666

  KY                        12,680,555                10,144,444                7,608,333                 5,072,222                 2,536,111

  LA                        9,945,778                 7,956,623                 5,967,467                 3,978,311                 1,989,156

  MA                        437,020                   349,616                   262,212                   174,808                   87,404

  MD                        834,342                   667,474                   500,605                   333,737                   166,868

  ME                        3,732,778                 2,986,223                 2,239,667                 1,493,111                 746,556

  MI                        11,236,163                8,988,930                 6,741,698                 4,494,465                 2,247,233

  MN                        3,495,280                 2,796,224                 2,097,168                 1,398,112                 699,056

  MO                        15,100,304                12,080,243                9,060,182                 6,040,121                 3,020,061

  MS                        20,963,077                16,770,462                12,577,846                8,385,231                 4,192,615

  MT                        5,850,211                 4,680,169                 3,510,127                 2,340,084                 1,170,042

  NC                        3,277,455                 2,621,964                 1,966,473                 1,310,982                 655,491

  ND                        1,301,696                 1,041,357                 781,017                   520,678                   260,339

  NE                        9,563,011                 7,650,409                 5,737,806                 3,825,204                 1,912,602

  NH                        797,075                   637,660                   478,245                   318,830                   159,415

  NJ                        \-                        \-                        \-                        \-                        \-

  NM                        2,434,405                 1,947,524                 1,460,643                 973,762                   486,881

  NV                        6,168,957                 4,935,166                 3,701,374                 2,467,583                 1,233,791

  NY                        6,873,425                 5,498,740                 4,124,055                 2,749,370                 1,374,685

  OH                        10,496,923                8,397,538                 6,298,154                 4,198,769                 2,099,385

  OK                        7,643,149                 6,114,519                 4,585,889                 3,057,259                 1,528,630

  OR                        4,847,665                 3,878,132                 2,908,599                 1,939,066                 969,533

  PA                        3,839,360                 3,071,488                 2,303,616                 1,535,744                 767,872

  PR                        195,471                   156,377                   117,283                   78,189                    39,094

  RI                        \-                        \-                        \-                        \-                        \-

  SC                        2,344,486                 1,875,589                 1,406,691                 937,794                   468,897

  SD                        2,574,503                 2,059,603                 1,544,702                 1,029,801                 514,901

  TN                        5,956,883                 4,765,506                 3,574,130                 2,382,753                 1,191,377

  TX                        23,970,826                19,176,660                14,382,495                9,588,330                 4,794,165

  UT                        826,729                   661,383                   496,038                   330,692                   165,346

  VA                        8,099,831                 6,479,865                 4,859,898                 3,239,932                 1,619,966

  VT                        2,408,155                 1,926,524                 1,444,893                 963,262                   481,631

  WA                        6,204,584                 4,963,668                 3,722,751                 2,481,834                 1,240,917

  WI                        3,559,407                 2,847,526                 2,135,644                 1,423,763                 711,881

  WV                        7,017,028                 5,613,623                 4,210,217                 2,806,811                 1,403,406

  WY                        [2,731,463]{.underline}   [2,185,170]{.underline}   [1,638,878]{.underline}   [1,092,585]{.underline}   [546,293]{.underline}

  Total                     290,302,932               232,242,346               174,181,759               116,121,173               58,060,586
  ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------

\* This table shows the amount of additional targeted federal support
that each state would receive at a given percentage of wire center costs
exceeding a threshold of 2 standard deviations above the national
average cost. *See supra* paras. 123-26, 132-33. These numbers are
calculated by summing the individual wire center costs that exceed the
average plus 2 standard deviations in each state, and mulitplying by the
given percentage. The District of Columbia, New Jersey and Rhode Island
had no wire centers with costs that exceeded the average plus 2 standard
deviations.

**APPENDIX H**

**Parties Filing Comments and Reply Comments**

**CC Docket No. 96-45**

**Comments:**

**[Commenter]{.underline} [Abbreviation]{.underline}**

AT&T Corp. AT&T

California Public Utilities Commission and of the

People of the State of California California

Competitive Universal Service Coalition CUSC

Maine Public Utilities Commission Maine

Missouri Office of the Public Counsel Missouri

Montana Public Service Commission,

Montana Consumer Counsel,

Vermont Public Service Board,

Vermont Department of Public Service Montana and Vermont

National Association of State Utility Consumer

Advocates NASUCA

National Rural Telecom Association NRTA

New York State Department of Public Service New York

Qwest Communications International Inc. Qwest

Rural Independent Competitive Alliance RICA

SBC Communications SBC

Sprint Corporation Sprint

SureWest Communications SureWest

Texas Public Utility Commission Texas

United States Telecom Association USTA

Verizon Telephone Companies Verizon

Public Service Commission of Wisconsin Wisconsin

Wyoming Public Service Commission Wyoming

**Reply Comments:**

**[Commenter]{.underline} [Abbreviation]{.underline}**

AT&T Corporation AT&T

GVNW Consulting, Inc. GVNW

Maine Public Utilities Commission Maine

National Association of State Utility Consumer Advocates NASUCA

Qwest Communications International Inc. Qwest

SBC Communications Inc. SBC

Sprint Corporation Sprint

Surewest Communications Surewest

Verizon Verizon

WorldCom, Inc. WorldCom

**SEPARATE STATEMENT OF**

**CHAIRMAN MICHAEL K. POWELL**

In many ways, our action today is the ultimate truth-in-billing measure.
In 1996, Congress recognized that the amalgam of implicit support
mechanisms that had creaked along in a monopoly environment would no
longer function in a competitive market for the simple reason that
companies would abandon the artificially unprofitable markets and swarm
the artificially profitable ones. In adopting the 1996 Act, Congress
directed the Commission and the states to stop doing what they had done
for sixty years. Rather than require companies to artificially lower
prices on high-cost residential lines, Congress directed this Commission
to meet the goals of affordability and ubiquity by providing consumers
with explicit discounts for supported telecommunications services. And
rather than permitting companies to recoup costs for unprofitable lines
through higher prices for business services Congress directed us to take
steps in furtherance of a regulatory regime where retail rate structures
reflect the cost of providing service.

In the face of years of hidden costs, uneconomic pricing and
cross-subsidies, Congress gave the Commission the difficult task of
determining the "real" cost of service in all parts of the country,
maintaining a fund sufficient to provide reasonably comparable rates and
distributing money in an equitable manner. Today's *Order and Further
Notice* moves the nation one step closer to dismantling the system of
false pricing information that regulators have imposed on the public.
Admittedly, our action today does not eliminate all implicit support in
local rate structures. However, I remain convinced that in a competitive
market, we can only achieve Congress' universal service goals by
creating an explicit support fund to benefit consumers who need it and
by eliminating the vestiges of implicit support that misallocate
resources and distort competition.

Over the last seven years, the Commission has adopted several measures
to establish explicit universal support mechanisms that remain resilient
to intense competition, including a federal high-cost universal service
support mechanism for non-rural carriers based on forward-looking
economic cost. Consistent with the Act, the Commission's 1999 *Ninth
Report and Order* chose to determine the amount of federal support given
to non-rural carriers in each state by comparing the statewide average
cost per line, as estimated by the Commission's forward-looking cost
model, to a nationwide cost benchmark of the national average cost.
Non-rural carriers whose costs exceed the benchmark would receive
universal-service support.

I voted in favor of the *Ninth Report and Order*, because I believed it
is "imperative that we introduce some notion of economic cost into
universal service support."[^511] While I questioned the adequacy of the
Commission's rationale, I said then that, without some type of a
forward-looking economic cost model, states and carriers would have had
no objective way of knowing how much money they needed, much less where
they should spend the money they got.[^512]

In the appellate litigation that followed the *Ninth Report and Order*,
the Tenth Circuit largely agreed with the Commission's ruling. It upheld
the Commission's cost model, though it remanded the methodology for
determining the precise level of non-rural support for further analysis.
Specifically, the Tenth Circuit directed us to define the statutory
terms "reasonably comparable" and "sufficient" more precisely and then
to assess whether and how the non-rural mechanism we choose would prove
sufficient to achieve the statutory principle of making rural and urban
rates reasonable comparable. The Tenth Circuit also told us to do more
to induce states to ensure local rate comparability and to create
positive incentives for them to abandon their long-standing practice of
permitting implicit cost subsidies based on little more than
back-of-the-envelope perceptions of need.

Today's order fulfills the Tenth Circuit's directives. We have taken
this opportunity to define our goals more precisely and we have done a
better job in determining that support which is "sufficient" to achieve
"reasonably comparable" rates. We have also adopted a rational threshold
to determine when non-rural, high-cost support should become available
by balancing legitimate state need against the risk of excessive
support. And we have reviewed our comprehensive plan for supporting
universal service in high cost areas and sought comment on how to adapt
the overall plan to meet changing conditions. I support fine-tuning our
forward-looking cost model by comparing statewide average costs to a
nationwide cost benchmark closely tied to relevant market data. I also
support measures such as the expanded rate-review and certification
processes that should induce states to achieve reasonably comparable
rates in response to the court's remand. I look forward to working with
my colleagues in the states to achieve the long-term goal of dismantling
the system of cross-subsidies that persists in many of the nation's
telephone rates.

The creation of a rational, economically sound support mechanism, of
course, is only one half of the solution to the problem of cross
subsidies in the telecommunications market. The other half of the
solution lies in the *Triennial Review Order*. No matter how rational
and well reasoned, an economic support mechanism will prove meaningless
if states remain able to avoid its strictures simply by offering
suppliers the option of buying essential telecommunications inputs at
super-efficient prices -- untethered from the realities of providing
that wholesale service. While I therefore support today's decision, true
reform will prove elusive as long as the other half of the problem --
the pricing of wholesale inputs -- goes unaddressed. For this reason, we
should redouble our efforts along a number of different regulatory
vectors. We should seek out new ways for federal and state regulators to
work together and rationalize state support mechanism to achieve
Congress' twin goals of universal service and sustainable local
competition. At the same time, the Commission's universal service focus
will turn to the Joint Board's recommendation in the *Portability*
proceeding and the Commission's efforts to ensure that wholesale rate
structures more accurately reflect the forward-looking economic costs of
providing service to competitors.

**SEPARATE STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

Today we bring closure to the complex set of rules that allocate
universal service funds to non-rural carriers. These companies are the
largest carriers providing telecommunications service across the United
States. Although most of the high cost loop support is directed to
smaller rural carriers (well-over 90%), the non-rural carriers are also
a critical component of the success of USF in America. In some states,
for example, the non-rural carrier may be the primary provider of
communications service for rural Americans. Given this critical
position, the USF Joint Board and the FCC were dedicated to crafting
high-cost support rules that would ensure comparable rural and urban
rates for areas served by the non-rural carriers.

Today's order reflects that effort. First, we adopt a more precise
definition of the statutory terms "sufficient" and "reasonably
comparable" for purposes of the non-rural support mechanism. Second, we
adopt a methodology for setting a national average cost per line
benchmark. Third, we have created an expanded annual certification
process, which provides an inducement to states to achieve reasonably
comparable rates. This mandatory review process encourages each state to
examine whether its policies are achieving rate comparability and if
not, to take such action as necessary to do so. It also enables the
Commission to evaluate whether the non-rural mechanism is achieving the
goal of reasonable comparability among states, while placing primary
responsibility on the states and giving each state the flexibility to
regulate basic rates and services.

I believe the modifications we are making to our Universal Service
requirements address the concerns outlined by the Tenth Circuit. The
order also furthers the goals of the Communications Act by ensuring that
there are reasonably comparable urban and rural rates for all customers
served by non-rural carriers.

**SEPARATE STATEMENT OF\
COMMISSIONER MICHAEL J. COPPS**

Universal service policy is built on the principle that all of us
benefit when more of us are connected. This principle resides at the
core of the Telecommunications Act. And Congress made clear that the
Commission must be working to ensure that all Americans---rural, urban
and everything in between---have access to reasonably comparable
services at reasonably comparable rates.

Today, we bring needed clarity to this concept by retooling our
mechanism for non-rural carrier high-cost support. I am pleased that in
this item we define key statutory terms and adopt further measures to
induce States to ensure reasonable comparability of rural and urban
rates. At last, we can remove the non-rural high-cost mechanism out from
under the cloud of judicial remand that has hovered over it for more
than two years. Our action today represents a measured step in the right
direction and I support it.

I still have, however, a reservation or two with respect to where we are
headed. Today's decision adopts the use of statewide average costs as
part of the mechanism to direct support to non-rural carriers serving
high-cost States. I support this approach, but recognize that some have
argued that the selection of statewide average costs disadvantages
non-rural carriers providing service in States with significant rural
and urban areas. I think the best course going forward is to monitor
carefully the methodology we have chosen here. If the statewide average
approach provides insufficient support, resulting in rates that are not
reasonably comparable, we will have no choice under the statute but to
reconsider.

I also am concerned that rates for basic service that are two standard
deviations higher than the average urban rate may not always be the
right metric for determining reasonably comparable rates. However, I
believe we provide States with ample opportunity through the rate review
and certification process to demonstrate that factors other than basic
service rates affect the comparability of their rates.

Finally, I wish to note that today's item applies only to non-rural
carriers. The assumptions that buttress our analysis here---like using
statewide average costs---may not prove appropriate when we consider
sufficient support for rural carriers.

As technical as this decision is, the goal that undergirds it is simple.
Congress charged us to ensure that comparable technologies are available
all across the country at affordable and roughly equivalent rates. Our
actions here endeavor to advance that goal. This is what the statute
mandates, what the public interest requires and what this item sets us
on the road to accomplish.

**SEPARATE STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

With the passage of the Telecommunications Act, Congress affirmed the
broad principle that "consumers in all regions of the nation \... should
have access to telecommunications and information services that are
reasonably comparable to those available in urban areas and at rates
that are reasonably comparable to rates charged for similar services in
urban areas." This simple, elegantly-stated principle is at the heart of
our universal service policy and is the focus of our attention today.

Through this Order, we modify our universal service funding mechanisms
for non-rural telephone companies. By "non-rural telephone companies,"
we refer to some of the largest local exchange carriers in the nation.
These companies serve rural areas in numerous states, but also serve
non-rural areas including most of the urban, low-cost areas in any given
state. I emphasize that this order applies only to the non-rural
universal service funding mechanisms and I am pleased that this Order
continues to recognize the fundamental geographic, economic, and
demographic differences between rural and non-rural carriers.[^513]

This Order responds to a decision of the United States Court of Appeals
for the Tenth Circuit, which had remanded our prior rules to us for
further consideration and explanation. I believe that this Order speaks
to the concerns raised by the Tenth Circuit Court of Appeals by
providing meaningful definitions for key terms in the Act and by
adopting a two part mechanism for federal universal service funding to
non-rural carriers. The Order is based largely on the helpful
recommendations of the Federal-State Board for Universal Service. When
this Recommended Decision was adopted, I had not yet had the pleasure of
joining this Commission or the Joint Board, so I would like to take this
opportunity to thank my colleagues on the Joint Board, both present and
past, for their hard work on this proceeding.

The Order affirms our practice of comparing statewide average costs to a
nationwide cost benchmark to determine federal non-rural high cost
support. In addition, we take an important step toward ensuring the
reasonable comparability of rates by adopting a supplementary rate
review that can form the basis for additional federal support. Some have
found fault with our reliance on cost as the primary basis for non-rural
support, while others have criticized our two part approach -- looking
both at cost and at rates. In the end, I believe that ensuring that
consumers in rural areas have access to comparable service at comparable
rates is one of our top priorities and I believe that we take a
reasonable approach in this item.

We leave for tomorrow several key details of the supplemental rate
review, including judgments about what specific showings will be
required for additional federal support. I am pleased the item permits
states to consider the calling scopes available in rural areas served by
non-rural carriers when reviewing whether rates in those areas are
comparable to urban rates nationwide and that the item seeks comment on
whether and how consideration of calling scopes might be incorporated
into the basic template. I look forward to working on these issues with
my colleagues and hope that we can provide necessary clarification as
soon as possible.

Finally, I note that this Order relies on recent data from the General
Accounting Office showing that most rural and urban rates are currently
reasonably comparable; this finding supports our conclusion that federal
universal service support is set at a reasonable level. That said, it is
important that we continue to monitor the effectiveness of the actions
we take here. I believe that the new rate data that we will obtain
through the expanded certification process will be essential for that
purpose and can only help us in our efforts to "preserve and advance"
universal service. We can all take pride in the success of our universal
service programs and I am pleased to support this item.

**STATEMENT OF COMMISSIONER KEVIN J. MARTIN**

**Approving in Part, Dissenting in Part**

I appreciate the efforts of my colleagues to address some of the
concerns I raised with the Joint Board recommendation. For the reasons
set forth in my attached statement[^514], I believe that today's
decision continues to fall short in its response to the court mandate
and our obligation to ensure that consumers living in rural and high
cost areas have access to similar telecommunications services at rates
that are reasonably comparable to rates paid by urban consumers.

**STATEMENT OF\
COMMISSIONER** **KEVIN** **J.** **MARTIN**

**Approving in Part, Dissenting in Part**

Joint Board Recommended Decision

I wish to thank all my colleagues on the Federal-State Joint Board for
their hard work and contributions in the effort to reach consensus on
the important issue of establishing a universal service support system
for non-rural carriers. I believe that today's effort, however, falls
short in meeting our obligation to ensure that consumers living in rural
and high cost areas have access to similar telecommunications services
at rates that are reasonably comparable to rates paid by urban
consumers.

Congress gave the Commission a clear mandate: to ensure that consumers
in all regions of the nation have access to services that "...are
reasonably comparable to those services provided in urban areas and that
are available *at rates that are reasonably comparable to rates*
*charged* *for similar services in urban areas* (emphasis added)."[^515]
Congress' direction is also clear regarding the obligation to establish
mechanisms that are "...specific, predictable and sufficient...to
preserve and advance universal service."[^516] In remanding the
Commission's previous attempt to establish a federal-high cost universal
service support mechanism for non-rural carriers, the United States
Court of Appeals for the Tenth Circuit agreed that these fundamental
guiding principles govern Commission action on any policies regarding
universal service support mechanisms.[^517]

Despite this remand, the majority's recommendation essentially reaffirms
the Commission's existing universal service support mechanism for
non-rural carriers. The decision continues to base support on forward
looking costs and creates a sparsely defined second supplemental support
system based on rate comparisons. Today's recommendation falls short in
its response to the court mandate that we define the statutory term
"reasonably comparable" for purposes of the cost-based support mechanism
and fails to demonstrate, with any degree of specificity, how the
proposed secondary mechanism will satisfy the statutory requirement that
universal service support be "specific, predictable and sufficient."

For these and the reasons explained below, I respectfully dissent from
portions of the majority opinion today.[^518]

[Use of Costs as a Surrogate for Rates to Determine Non-Rural High Cost
Support]{.underline}

Section 254(b)(3) of the Communications Act requires that universal
service support mechanism ensure that telecommunications services in all
regions of the nation be provided at reasonably comparable "rates." The
majority, however, recommends continuing the practice of using costs
rather then rates to determine federal support. I am not convinced that
a mechanism based solely on [costs]{.underline} would meet the statutory
mandate requiring a comparison of [rates]{.underline}.

Moreover, I fear that the recommended decision may be either arbitrary
or not fully thought through. If the Joint Board is confident that a
cost-based support system satisfies our statutory obligation to produce
reasonably comparable rates, then why does it propose establishing an
entirely new support mechanism based on rate comparisons? Similarly, if
the Commission were to adopt the Joint Board's recommended "supplemental
rate comparability review," why should it not abandon the cost-based
support mechanism and instead rely solely on the rate-based support
mechanism? If we need the supplemental rate comparison to meet our
statutory obligation, would it not be simpler to have only one mechanism
rather than two? These questions seem to remain unanswered by the
majority.

The majority's rejection of rate-based distribution and support for a
cost-based mechanism is based on two arguments: (i) an analysis of
disparate local rate design practices throughout the nation remains too
difficult a task; and (ii) the use of costs reflects the federal
government's primary obligation to support only those states that "do
not have the resources within their borders to support all of their high
cost lines."[^519] In my view, both of these arguments fail to support
the Joint Board's position.

First, in response to the argument that such an analysis is too
difficult, the majority appears to create just such an analysis in its
"supplemental rate comparability review." The majority also fails to
note or even address the fact that many of the issues and data necessary
to perform a rate-based comparison will be needed in the context of
initiating the proposed catch all "supplemental rate comparability
review." On its face, one well-defined support mechanism based on rate
comparisons would appear to present an equal or lesser administrative
burden for the Commission, the states and carriers compared to the dual
[cost-based and rate-based]{.underline} mechanisms recommended by the
majority today.

The majority's recommendation also contains an inherent presumption that
the federal government's role in establishing a support mechanism is
apparently limited to equalizing cost discrepancies between states but
not equalizing rate discrepancies between rural and urban areas.[^520] I
disagree. The statute is clear. Our job is to ensure that services in
rural and high cost areas are "available at rates that are reasonably
comparable to rates charged for similar services in urban areas."[^521]
The 10^th^ Circuit explicitly rejected the FCC's contention that it had
no duty to ensure the reasonable comparability of rural and urban rates
and stated that we are "obligated to formulate policies so as to achieve
the goal of reasonable comparability..."[^522]

In my view, if the Commission is only going to address discrepancies
between and among states, then there must be a requirement that states
address such discrepancies within their borders. Whether such a
requirement compels rate averaging within states or requires that a
state universal service mechanism be in place, such action must address
differences in cost between rural and urban areas. Yet this decision
fails to require that such inequities between urban and rural rates be
addressed.[^523]

The proposed expanded rate certification mechanism is insufficient.
Under the proposed certification process, states would be permitted to
report rates that are not "reasonably comparable" according to the
benchmark. Such rates could eventually be allowed to meet the
"reasonably comparable" standard if a state demonstrates "additional
services included in the basic service rate" or by outlining "the method
in which the state has targeted existing universal service
support."[^524] In my view, such a certification process is insufficient
without a standard enunciating the allowable discrepancy for intrastate
rates.

[Sufficiency of High-Cost Support under the National Average Cost
Benchmark]{.underline}

Even if costs can be used as a surrogate, I question the majority's
recommendation to use the 135% benchmark to ensure that rural rates are
"reasonably comparable."

In deciding to proceed with a cost-based methodology to ensure
reasonably comparable "rural" and "urban" rates, we should compare
"rural" costs to average "[urban]{.underline}" costs. The Commission
certainly has data readily available to perform this comparison. Under
the Synthesis Cost model, cost data can be produced by density zone or
at the wire center level. Yet, the majority summarily rejects the
concept of an "urban benchmark," setting a benchmark at 135 percent of
[national]{.underline} average cost. In the process, the decision
sidesteps the question of whether the benchmark produces sufficient
support in light of the existing disparity between national average cost
and the lower average urban cost.

As Commissioner Rowe notes, the majority's rejection of the urban
benchmark is "confusing and unpersuasive."[^525] The majority never
tackles the uncomfortable fact that the 135 percent benchmark is too
high because [national]{.underline} average costs are already higher
than urban costs because they include in the national average the very
rural areas at issue. In other words, the high costs associated with
serving rural areas are used twice: once to raise the national average
and again in comparison.

Let me illustrate my concern with a simple example. If half of the
country lived in an urban area with costs of \$10 and the other half of
the country lived in a rural area with costs of \$30, the difference
between the costs of the average urban area and average rural area would
be \$20. But if a national average were taken, including the costs of
the rural areas, the national average cost would be \$20. If support
were then based on the difference between the rural cost (\$30) and 135%
of the [national]{.underline} average (1.35 x \$20=\$27), each rural
resident would have costs of \$27 (\$30-\$3 of support) and each urban
resident would have costs of \$13 (\$10 + \$3 of support). I do not
believe that such a methodology sufficiently addresses the reasonable
comparability of rural and urban costs. The inclusion of rural costs in
the average along with the adoption of a 135% benchmark systematically
underestimates the costs of rural areas.[^526]

Instead, the majority finds fault with the use of an urban benchmark
based on the fact that it "substitutes costs for rates" and "compares
statewide average costs to nationwide urban costs."[^527] The majority's
criticism appears strangely out of place given that its own
recommendation is also based on a cost-based support system. I find it
ironic that the majority can justify its "existing system on the ground
that costs equal rates, and at the same time rejects all changes on the
ground that costs do not equal rates."[^528]

It also rejects the urban benchmark because it would "require more
funding or a higher benchmark level because urban average costs are
lower than national average costs."[^529] I fail to see how the
potential for greater funding levels should prevent us from adopting a
support system that meets our statutory obligation.[^530] Indeed, I fear
that this reasoning reflects an analysis that concluded first that there
would be no additional funding for rural areas and second adopted a
mechanism to assess "reasonable comparability" that achieved that
result. I believe our statutory obligation was to achieve reasonably
comparable urban and rural rates even if that "requires more funding"
than the current system provides.

Nor do I understand how the majority reaches the conclusion that the
urban cost benchmark fails to "better satisfy the statutory comparison
of urban and rural rates."[^531] I join Commissioner Rowe in questioning
how the majority finds that additional "incremental support would be
ineffective at producing comparable rates, but existing support passes
the test."

In addition, I question the use of forward-looking costs as the basis
for distributing universal service support. Today, rates are set in most
states through the use of actual costs not hypothetical replacement
costs. Forward- looking costs have little, if any, nexus to the
establishment of end user retail rates. Use of these costs for
calculating universal service support results in support being provided
to some areas with low end user rates while certain areas that have high
rates receive insufficient support. In my view, we could better achieve
comparability of rates if we based our universal service support system
on actual rather than forward looking costs.

Finally, the majority cites three studies/analyses in support of its
decision to continue using the 135 percent benchmark. I disagree with
the majority's conclusion that these studies support its decision to
retain the benchmark. First, the majority points to the General
Accounting Office (GAO) study to show that national averages of rural,
suburban and urban rates are affordable and reasonably comparable. The
majority, however, fails to acknowledge serious deficiencies in the GAO
study that fail to support the use of the benchmark for non-rural
carriers.[^532] For example, the GAO study includes data from areas
served by rural carriers, areas that are not relevant to the
establishment of non-rural carrier support system. In addition, GAO's
rate comparison ignores whether rates in different service areas apply
to comparable services. Moreover, [national]{.underline} averages cited
by GAO do not assist the Commission in addressing our core
responsibility of whether rates in certain rural or high cost areas are
comparable to rates in urban areas, or even whether rates vary
significantly from state-to-state. To the contrary, as Commissioner Rowe
points out, GAO's data demonstrates a vast disparity on state rates
(e.g., residential rates at two Wyoming locations exceeding \$40 versus
residential rates in Roaring Springs, Texas of \$7.10).[^533]

I also join Commissioner Rowe's dissent asserting that a standard
deviation analysis fails to justify the current benchmark.[^534] I find
it particularly troubling that the majority arbitrarily raises the
benchmark to 135 percent even in light of its own analysis demonstrating
that 2.0 standard deviation above the national mean results in a 132
percent benchmark. The majority offers no reasoned basis why states
should be denied the additional \$.50 per customer per month of support
that would result by applying the results of the majority's own standard
deviation analysis.

[Supplementary Rate Review]{.underline}

The majority, in today's recommendation, sets forth an additional
supplemental process for rate comparison. It recommends adopting a new
and vaguely defined supplemental mechanism. Rather than provide a
clearly defined mechanism the majority instead offers an ad hoc process
where the specific mechanisms will apparently develop on a case-by-case
basis.[^535] The majority envisions a process where States seeking
additional federal support will be required to provide a "rate
analysis," and will have "great flexibility" in demonstrating that rates
are not reasonably comparable.[^536]

In my view, the majority's "supplementary rate review" is striking
similar to the state-by-state cost study approach the Commission had
originally rejected in order to pursue its flawed nation-wide universal
service cost model approach. Under the recommended state-by-state
approach, each state would have significant latitude to suggest its own
procedures for adjusting rates. Without specific guidelines or a clearly
defined standard, this approach appears to invite the potential for
uneven and potentially discriminatory results.

I am troubled that majority fails to offer any specific guidance on
critical areas of its newly proposed process. The item is silent, for
example, on whether states should alter rates to take into account the
scope of certain local calling areas or differing calling plans. In my
view, without an established standard or guidance for states in this
area, the poorly defined "supplementary rate review" will most likely
provide results, if any, that are highly susceptible to legal challenge.

Finally, Commissioner Rowe is correct in questioning whether the
proposed "supplementary rate review" would "create perverse incentives
for carriers."[^537] One of the reasons the Commission adopted the
forward-looking cost model was because it believed that an embedded-cost
support system promotes inefficient investment that would inhibit
competitive entry. I find it ironic that the majority now seeks to adopt
a rate-based mechanism that inherently relies on local rates which are
typically based on embedded costs.

[^1]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Ninth Report and Order and Eighteenth Order on
    Reconsideration, 14 FCC Rcd 20432 (1999) (*Ninth Report and Order*),
    *remanded*, *Qwest Corp. v. FCC*, 258 F.3d 1191 (10th Cir. 2001)
    (*Qwest*); *Federal-State Joint Board on Universal Service*, CC
    Docket No. 96-45, Recommended Decision,17 FCC Rcd 20716 (2002)
    (*Recommended Decision*). The term "non-rural carriers" refers to
    incumbent local exchange carriers that do not meet the statutory
    definition of a rural telephone company. *See* 47 U.S.C. § 153(37).
    Under this definition, rural telephone companies are incumbent
    carriers that either serve study areas with fewer than 100,000
    access lines or meet one of three alternative criteria. *Id.* Thus,
    "non-rural carriers" are principally defined by study area size.
    Non-rural carriers serve the majority of access lines nationwide,
    including lines in rural, insular, and high-cost areas. Rural
    carriers serve fewer than twelve percent of lines nationwide, and
    their operations tend to be focused in high-cost areas. "Non-rural
    support" refers to high-cost universal service support for non-rural
    carriers.

[^2]: As discussed below, the purposes of the rate and cost benchmarks
    are different. The cost benchmark is used to determine the amount of
    high-cost support non-rural carriers in each state will receive,
    whereas the rate benchmark will be used in determining whether a
    state's rural rates are reasonably comparable to urban rates
    nationwide.

[^3]: *See Federal‑State Joint Board on Universal Service,
    Multi‑Association Group (MAG) Plan for Regulation of Interstate
    Services of Non‑Price Cap Incumbent Local Exchange Carriers and
    Interexchange Carriers*, Fourteenth Report and Order, Twenty‑Second
    Order on Reconsideration, and Further Notice of Proposed Rulemaking
    in CC Docket No. 96‑45, Report and Order in CC Docket No. 00‑256, 16
    FCC Rcd 11244, 11249, para. 11 (2001) (*Rural Task Force Order*)
    (recognizing that "\[o\]ur universal service rules cannot remain
    static in a dynamic marketplace.").

[^4]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996) (1996 Act). The 1996 Act amended the Communications Act of
    1934. 47 U.S.C. §§ 151, *et seq*. (Communications Act or Act).
    References to section 254 in this Order and Further Notice of
    Proposed Rulemaking refer to the universal service provisions of the
    1996 Act, which are codified at 47 U.S.C. § 254 of the Act. 47
    U.S.C. § 254; *see also* 47 U.S.C. § 214(e).

[^5]: 47 U.S.C. § 254. *See also Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Notice of Proposed Rulemaking and
    Order Establishing Joint Board, 11 FCC Rcd 18092 (1996).

[^6]: 47 U.S.C. § 254(b)(3).

[^7]: 47 U.S.C. § 254(e).

[^8]: *See infra* part IV.E.

[^9]: *Ninth Report and Order*, 14 FCC Rcd 20432; *Federal-State Joint
    Board on Universal Service, Forward-Looking Mechanism for High Cost
    Support for Non-Rural LECs*, CC Docket Nos. 96-45, 97-160, Tenth
    Report and Order, 14 FCC Rcd 20156 (1999) (*Tenth Report and
    Order*), *affirmed*, *Qwest*, 258 F.3d 1191.

[^10]: *Ninth Report and Order*, 14 FCC Rcd 20432; *Tenth Report and
    Order*, 14 FCC Rcd 20156. The cost model estimates the
    forward-looking costs of providing supported services for non-rural
    carriers. The Commission selected input values for the model in the
    *Tenth Report and Order*, and found the model provides reasonably
    accurate cost estimates.

[^11]: *Qwest*, 258 F.3d at 1202. *See infra* part IV.B.1.

[^12]: *Qwest*, 258 F.3d at 1202-03. *See infra* part IV.C.1.

[^13]: *Qwest*, 258 F.3d at 1204. *See infra* part IV.D.1.

[^14]: *Qwest*, 258 F.3d at 1205. *See infra* part IV.E.

[^15]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Notice of Proposed Rulemaking and Order, 17 FCC Rcd 2999,
    3004-10, paras. 12-24 (2002) (*Remand Notice*).

[^16]: *See* *id.* at 3011, para. 26. The Commission did not refer to
    the Joint Board the issue of how the non-rural mechanism relates to
    other funding mechanisms. *See also id.* at 3010-11, para. 25.

[^17]: *Recommended Decision*, 17 FCC Rcd at 20723-24, para. 15. *See
    infra* part IV.B.1

[^18]: *Recommended Decision*, 17 FCC Rcd at 20724, para. 16. *See
    infra* part IV.B.1.

[^19]: *Recommended Decision*, 17 FCC Rcd at 20724-26, paras. 18-21.
    *See infra* part IV.A.1.

[^20]: *Recommended Decision*, 17 FCC Rcd at 20727-28, paras. 24-27.
    *See infra* part IV.A.1.

[^21]: *Recommended Decision*, 17 FCC Rcd at 20729, para. 34. The
    *Recommended Decision* printed in the FCC Record is missing two
    pages, from near the end of paragraph 29 to the middle of paragraph
    34. To read these paragraphs, see the *Recommended Decision* located
    at
    [www.fcc.gov/wcb/universal_service/highcost.html](http://www.fcc.gov/wcb/universal_service/highcost.html)
    under "October 2002 Releases." On Westlaw, the missing pages are
    identified as being on page 28. *See infra* part IV.C.1.

[^22]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50. *See
    infra* parts IV.B.1, IV.D.1.

[^23]: *Recommended Decision*, 17 FCC Rcd at 20736-40, paras. 50-56.
    *See infra* part IV.D.1.

[^24]: *Recommended Decision*, 17 FCC Rcd at 20722, 36-37, paras. 10,
    50. *See infra* part IV.D.1.

[^25]: *Recommended Decision*, 17 FCC Rcd at 20736-38, paras. 50 &
    n.125, 52-53. *See infra* IV.D.1, V.

[^26]: *Comment Sought on the Recommended Decision of the Federal-State
    Joint Board on Universal Service Regarding the Non-Rural
    High-Cost-Support Mechanism*, Public Notice, CC Docket 96-45, DA
    02-2976 (rel. Nov. 5, 2002), 67 Fed. Reg. 71,121 (2002).

[^27]: As stated above, we also seek comment on several specific aspects
    of the rate review process in the attached Further Notice. *See
    infra* part V.

[^28]: *Texas Office of Public Utility Counsel v. FCC*, 183 F.3d 393,
    421, 424, 446-48 (5^th^ Cir. 1999).

[^29]: *See First Report and Order*, 12 FCC Rcd at 8784, para. 10. This
    proceeding concerns high-cost support mechanisms generally designed
    to keep rates in high-cost areas affordable by ensuring that rates
    in these areas are reasonably comparable to rates in low-cost areas.
    The Commission and most states also have programs designed to make
    service affordable for low-income consumers.

[^30]: *See id.* at 8784-85, paras. 10-12.

[^31]: The cost of providing telephone service is largely a function of
    population density and distance. Sparsely populated, rural areas
    generally are more expensive to serve than urban areas because rural
    areas have longer telephone loops, the most expensive portion of the
    telephone network, and costs are spread among fewer customers. Prior
    to the implementation of the non-rural high-cost support mechanism
    adopted in the *Ninth* and *Tenth Report and Orders*, the
    Commission's high-cost loop support mechanism provided support to
    non-rural carriers, as well as to rural carriers.

[^32]: *See First Report and Order*, 12 FCC Rcd at 8784-86, paras. 11,
    14.

[^33]: *See* *id.* at 8784-85, paras. 10-12.

[^34]: *See Ninth Report and Order*, 14 FCC Rcd at 20441-42 para. 16;
    *see also Federal-State Joint Board on Universal Service, Access
    Charge Reform*, Seventh Report & Order and Thirteenth Order on
    Reconsideration in CC Docket No. 96-45, Fourth Report & Order in CC
    Docket No. 96-262, and Further Notice of Proposed Rulemaking, 14 FCC
    Rcd 8078, 8081-82 paras. 7-8 (1999) (*Seventh Report and Order*).

[^35]: *See* 47 U.S.C. § 254(e); S. Conf. Rep. No. 230, 104^th^ Cong.,
    2d Sess. 131 ("To the extent possible, the conferees intend that any
    support mechanisms continued or created under new section 254 should
    be explicit, rather than implicit as many support mechanisms are
    today.").

[^36]: *See* 47 U.S.C. § 254(b)(5); *Qwest*, 258 F.3d at 1203 ("The
    Telecommunications Act plainly contemplates a partnership between
    federal and state governments to support universal service.")
    (citing 47 U.S.C. §§ 254(b)(5), 254(f), 254(k)).

[^37]: 47 U.S.C. § 254(b)(5).

[^38]: *See* 47 U.S.C. § 152(b). Section 2(b) states that, except as
    provided in certain designated sections, "nothing in this Act shall
    be construed to apply or to give the Commission jurisdiction with
    respect to (1) charges, classifications, practices, services,
    facilities or regulations for or in connection with intrastate
    communication service by wire or radio of any carrier." Section 2(b)
    predated the 1996 Act and was not amended by that legislation.

[^39]: *Texas Office of Public Utility Counsel v. FCC*, 183 F.3d at 421,
    424, 446-48.

[^40]: *See Ninth Report and Order*, 14 FCC Rcd at 20454, para. 38.

[^41]: *See id.* at 20457-58, paras. 45-46.

[^42]: *Qwest*, 258 F.3d at 1203.

[^43]: *Id.* at 1203.

[^44]: *Id.* at 1203.

[^45]: *Id.* at 1202 n.9. The petitioner argued that support should be
    based on a comparison of wire center costs, rather than a comparison
    of statewide average costs. Although the court rejected the
    Commission's justification for the 135% national average cost
    benchmark, the court noted that "\[i\]f, however, the FCC's 135%
    benchmark actually produced urban and rural rates that were
    reasonably comparable . . . we likely would uphold the mechanism."
    *Id.* at 1202.

[^46]: *Recommended Decision*, 17 FCC Rcd at 20727, para. 24.

[^47]: *Id.* at 20727, para. 25.

[^48]: *See* 47 U.S.C. § 254(b)(5) ("There should be specific,
    predictable, and sufficient Federal and State mechanisms to preserve
    and advance universal service.").

[^49]: *See* S. Rep. No. 23, 104^th^ Cong., 1^st^ Sess. 25. (". . . the
    Committee intends that States shall continue to have the primary
    role in implementing universal service for intrastate services . .
    .").

[^50]: *See Ninth Report and Order*, 14 FCC Rcd at 20458, para. 46.

[^51]: *Id.* at 20458, para. 46 (quoting the *Seventh Report and Order*,
    14 FCC Rcd at 8101, para. 46). The Commission explained in the
    *Ninth Report and Order* that the non-rural high-cost support
    mechanism "has the effect of shifting money from relatively low-cost
    states to relatively high-cost states," by identifying states whose
    average costs are significantly above the national average and
    providing federal support to those high-cost states. *Id.* at 20457,
    para. 45. The non-rural high-cost support mechanism does not
    directly shift funds from low-cost to high-cost states. Rather,
    contributions to universal service are based on interstate
    telecommunications revenues, and interstate carriers typically pass
    these charges onto their customers. More populous states, which tend
    to be low-cost, have more interstate customers than sparsely
    populated states, which tend to be high-cost, so that customers in
    more populous states effectively bear the cost of funding universal
    service. As the Joint Board and the Commission have previously
    noted, only the federal jurisdiction can shift funds among states.
    *See id.* at 20458, para. 47; *Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Recommended Decision,13 FCC
    Rcd 24754, 24760, para. 37 (1998) (*Second Recommended Decision*).

[^52]: *Qwest*, 258 F.3d at 1204. *See also* AT&T Comments at 9 ("If
    Congress had felt there was a need for significant new subsidies to
    achieve "reasonably comparable" rates, it would have explicitly
    authorized such a program through express statutory command.").

[^53]: *Qwest*, 258 F.3d at 1203. Contrary to SBC's assertion, the court
    did not "direct\[\] the Commission on remand to take responsibility
    for the sufficiency of funding in all 'areas,' including those that
    fall within states that have unexceptional statewide averages."
    *See* SBC Reply Comments at 2.

[^54]: *See Recommended Decision*, 17 FCC Rcd at 20727, para. 24.

[^55]: For example, in response to a survey of state commissions
    conducted by the United States General Accounting Office (GAO), 21
    states report having programs that provide assistance to high-cost
    local exchange carriers. *See* United States General Accounting
    Office, *Telecommunications: Federal and State Universal Service
    Programs and Challenges to Funding* at 39 (GAO-02-187, Feb. 4, 2002)
    (GAO Report). Fourteen states report having programs that provide
    assistance to small local exchange carriers. *Id.* at 40. In most
    states, rates for residential customers of the largest local
    exchange carriers are geographically averaged, either throughout the
    company's service territory, in broad geographic areas, or in areas
    with similar geographic size and number of access lines. *Id.* at
    36. In states where non-rural carriers have multiple geographic
    areas over which rates are averaged, more than half report using
    value-of-service pricing to establish relative rates for different
    geographic areas, which results in lower rates in rural, less
    populous areas relative to rates in urban areas. *Id.* at 15, 36.
    *See also* Wisconsin Comments at 6. In all but one state,
    residential rates are lower than single-line business rates in the
    same geographic area. GAO Report at 37. About half the states report
    setting intrastate long distance access charges above cost to
    subsidize basic local service. *Id.* at 37.

[^56]: *See Seventh Report and Order*, 14 FCC Rcd at 8110 para. 65
    (1999). *See also First Report and Order*, 12 FCC Rcd at 8888-89,
    para. 202 ("We believe that existing levels of implicit intrastate
    support are substantial. We find, however, that states, acting
    pursuant to section 254(f) and 253 of the Act, must in the first
    instance be responsible for identifying implicit intrastate
    universal service support.").

[^57]: Although this belief does not constitute a directive to do so,
    the Commission has stated its belief that, "as competition develops,
    states may be compelled by marketplace forces to convert implicit
    support to explicit, sustainable mechanisms consistent with section
    254(f)." *First Report and Order*, 12 FCC Rcd at 8888-89, para. 202.

[^58]: The Joint Board found that the GAO Report supported a finding
    that current rates are affordable and reasonably comparable. *See
    Recommended Decision*, 17 FCC Rcd at 207329, para. 34, *supra* note
    Error: Reference source not found. As discussed below, based on
    further analysis of the GAO Report data, rural rates in most states
    would be presumed to be reasonably comparable to the national urban
    rate benchmark adopted in this Order. *See infra* part IV.C. As also
    discussed below, we adopt in this Order the Joint Board's
    recommendation to implement a procedure that will induce states to
    achieve reasonably comparable rates and enable the Commission to
    take additional action, if necessary, to achieve comparable rates.
    *See Recommended Decision*, 17 FCC Rcd at 20736, para. 50; *infra*
    part IV.D.

[^59]: *See Recommended Decision*, 17 FCC Rcd at 20725-26, paras. 19-20.
    Most commenters agree that support should be based on a comparison
    of costs, not rates. *See, e.g.,* AT&T Comments at 13-14; California
    Comments at 6; Maine Comments at 6-9, 19; Montana/Vermont Comments
    at 40-44; New York Comments at 3; Verizon Comments 5-6; Verizon
    Reply Comments at 3 ("There is general agreement among the
    commenters, even those opposing the Joint Board's recommended
    decision, that universal service support should be based on
    comparisons of costs, not rates.").

[^60]: *See Second Recommended Decision*, 13 FCC Rcd at 24754, para. 19;
    *Ninth Report and Order*, 14 FCC Rcd at 20453-54, paras. 36-38;
    *Recommended Decision*, 17 FCC Rcd at 20724-26, paras, 17-21.

[^61]: For example, a state could decide as a policy matter that
    universal service should include intrastate toll services and fund
    such services by increasing local telephone rates to levels that are
    not comparable to rates in other states. If this state were thereby
    eligible for more federal support, it would burden the federal
    universal service support mechanism. Pursuant to section 254(f) of
    the Act, the state could expand its definition of universal service
    to include intrastate toll services, but it would be required to
    fund these additional services through its own universal service
    mechanisms without relying on federal support. *See* 47 U.S.C. §
    254(f). *See also* California Comments at 13; Verizon Reply Comments
    at 3 (arguing that a direct comparison of rates is an unreliable
    indicator of a state's need for federal support).

[^62]: *See* Surewest Comments at 6-7.

[^63]: *Cf. Qwest*, 258 F.3d at 1202 ("As noted above, the FCC has
    substituted a comparison of national and statewide \[cost\] averages
    for the statutory comparison of urban and rural rates. If, however,
    the FCC's 135% \[cost\] benchmark actually produced urban and rural
    rates that were reasonably comparable, . . . we likely would uphold
    the mechanism.").

[^64]: *See infra* part IV.C.2

[^65]: *See Recommended Decision*, 17 FCC Rcd at 20727, para. 24.

[^66]: Although average costs are used to determine total statewide
    non-rural support amounts, support is targeted to wire centers based
    on relative cost. *Ninth Report and Order*, 14 FCC Rcd at 20470-73,
    paras. 68-76.

[^67]: *See Ninth Report and Order*, 14 FCC Rcd at 20460, para. 49; *see
    also supra* note Error: Reference source not found.

[^68]: *See Recommended Decision*, 17 FCC Rcd at 20728, para. 28.

[^69]: *See First Report and Order*, 12 FCC Rcd at 8936, para. 294.

[^70]: *See* Rural Task Force, White Paper 2: The Rural Difference 11
    (January 2000).

[^71]: *See* 47 C.F.R. § 36.631(c)-(d). Prior to the 1996 Act, both
    rural and non-rural carriers were eligible for federal support under
    the Commission's high-cost loop support mechanism. That mechanism
    provides gradually more support for costs that exceed the national
    average cost by certain percentages. For example, carriers with
    200,000 or fewer lines receive support for 65% of the costs above
    115% percent of the national average cost, and for 75% of the costs
    above 150%. Carriers with more than 200,000 lines receive support
    for 10% of the costs above 115% percent of the national average
    cost, 30% for costs above 160%, 60% for costs above 200%, and 75%
    for costs above 250%. These percentages are based on Joint Board
    recommendations from the 1980's that the Commission increase
    high-cost assistance for study areas with 200,000 lines or fewer and
    decrease assistance for larger study areas from previous levels. The
    Joint Board premised its recommendation on the assumption that
    larger companies have greater flexibility in how they recover
    above-average costs than smaller companies. *See MTS and WATS Market
    Structure, Amendment of Part 67 of the Commission's Rules and
    Establishment of a Joint Board*, Recommended Decision and Order, CC
    Docket Nos. 78-72, 80-286, 2 FCC Rcd 2324, 2334 (1987).

[^72]: *See Rural Task Force Order*, 16 FCC Rcd at 11310, para. 169;
    *Remand Notice*, 17 FCC Rcd at 3011-12, paras. 27-28.

[^73]: *See, e.g.,* CUSC Comments at 12 ("Rather than approving and
    continuing to rely on such a monopoly-based policy as statewide
    averaging, the Commission should work with the states to phase out
    and ultimately eliminate such implicit subsidies."); SBC Comments at
    6 ("\[T\]he *Recommended Decision* tacitly endorses the use of
    implicit subsidies as a legitimate way for states to support
    universal service, even though implicit subsidy mechanisms are
    unsustainable and contrary to the requirements of section 254.");
    Qwest Comments at 9 ("It appears that a state could certify that
    rates within its borders are reasonably comparable, even if such
    comparability depends on continued existence of implicit
    subsidies.").

[^74]: *See e.g.,* SBC Comments at 17 (arguing that the Commission
    "should immediately initiate a proceeding to establish inducements
    or agreements for states to establish residential pricing structures
    that would allow prices for residential local service to rise to
    levels that are self-supporting"); Qwest Comments at 8 (arguing that
    many "states are unlikely to replace implicit subsidies until they
    have reached a crisis point where these subsidies have been
    virtually eliminated"). Although we do not agree with SBC and Qwest
    that substantial increases in federal support are warranted, we seek
    comment in the attached Further Notice of Proposed Rulemaking
    whether we should make some additional targeted federal support
    available for high-cost wire centers in states that implement
    explicit universal service mechanisms. *See generally* SBC Comments;
    Qwest Comments; *infra* part V.D.

[^75]: *See, e.g.,* SBC Comments at 11 ("the Joint Board appears to
    accept that implicit subsidies can continue unabated,
    notwithstanding the plain language of section 254"); SBC Comments at
    24 ("the elimination of implicit subsidies is a statutory
    imperative").

[^76]: Several commenters agree with our analysis. *See, e.g.,* NASUCA
    Comments at 3-5, Verizon Reply Comments at 16.

[^77]: *See Seventh Report and Order*, 14 FCC Rcd at 8102, para. 45
    (1999).

[^78]: *See* 47 U.S.C. § 254(e).

[^79]: *See* 47 U.S.C. § 254(f) (emphasis added).

[^80]: *See* 47 U.S.C. § 152(b); *see also supra* para. 17. SBC claims
    that the Commission has the authority to end state reliance on
    implicit subsidies by establishing general universal service pricing
    standards and setting a deadline for state compliance. SBC Comments
    at 17, 19. A similar process is used to implement the local
    competition provisions of the 1996 Act, in which the Commission sets
    pricing guidelines and the states set specific rates. This process
    was upheld by the Supreme Court. *See AT&T v. Iowa Utilities Board*,
    525 U.S. 366, 377-386 (1999). We need not decide at this time
    whether or not the Commission would have the authority to set
    pricing standards because, as discussed below, we do not agree that
    rates must be rebalanced without delay. *See infra* para. 77; *see
    also* Wisconsin Comments at 7 (noting that a significant competitive
    presence in residential markets has been seen only in recent years
    and competitive impact has not been geographically ubiquitous).

[^81]: The Commission also has not attempted to identify existing
    state-determined intrastate implicit universal service support
    effectuated through intrastate rates or other state decisions.
    Attempting to identify, compare, and evaluate implicit support
    mechanisms in each state arguably could result in the Commission
    second-guessing state ratemaking decisions.

[^82]: *See generally*, Maine Comments; Montana and Vermont Comments;
    Maine Reply Comments.

[^83]: *See* Montana and Vermont Comments at 16-18.

[^84]: *See* Maine Reply Comments at 2. As previously noted, prior to
    the 1996 Act, both rural and non-rural carriers were eligible for
    federal support under the Commission's high-cost loop support
    mechanism, which provides support based on embedded costs. That
    mechanism provides gradually more support for costs that exceed the
    national average cost by certain percentages and provides greater
    levels of support for carriers serving 200,000 or fewer lines than
    for carriers serving more than 200,000 lines. *See* 47 C.F.R. §
    36.631, *supra* note Error: Reference source not found. Vermont had
    a request for waiver of this rule pending before passage of the Act
    requesting that Verizon-Vermont (formerly New England Telephone and
    Telegraph), serving 270,000 lines, receive the amount of high-cost
    loop it would have received if it had served 200,000 or fewer lines.
    *See* Petition for Waiver of Section 36.631 of the Commission's
    Rules Governing the Universal Service Fund, filed by the Vermont
    Department of Public Service and the Vermont Public Service Board,
    September 21, 1993, AAD 93-103. Maine claims that the 1996 Act
    established funding standards that made Vermont's petition moot.
    *See infra* note Error: Reference source not found and accompanying
    text.

[^85]: *See* AT&T Comments at 2, 9.

[^86]: *See* 47 U.S.C. § 254(g); S. Conf. Rep. No. 230, 104^th^ Cong.,
    2d Sess. 132 (citing *Integration of Rates and Services for the
    Provision of Communications by Authorized Common Carriers between
    the United States Mainland and the Offshore Points of Hawaii,
    Alaska, and Puerto Rico/Virgin Islands* (61 FCC2d 380 (1976))). The
    conference report references another Commission proceeding with
    regard to section 254(a): "the conferees do not view the existing
    proceeding under Common Carrier Docket 80-286 (regarding amendment
    of Part 36 of the Commission's Rules and appointment of a Joint
    Board) as an appropriate foundation on which to base the proceeding
    required by new section 254(a)." *See* 47 U.S.C. § 254(a); S. Conf.
    Rep. No. 230, 104^th^ Cong., 2d Sess. 131.

[^87]: The 1996 Act explicitly preserves the traditional authority of
    the Commission and the states to impose carrier-of-last-resort
    obligations on carriers and to generally promote universal service.
    *See* 47 U.S.C. §§ 214(e), 254.

[^88]: *See First Report and Order*, 12 FCC Rcd at 8926-34, paras.
    273-90. For example, high-cost loop support previously was funded
    only by interexchange carriers. Section 254(e) requires that all
    telecommunications carriers providing interstate service contribute
    to the universal service support mechanisms and the Commission
    changed its funding mechanisms accordingly. *See* 47 U.S.C. §
    254(e). In addition, whereas high-cost support previously was
    available only to incumbents and was averaged over an entire study
    area, the Commission made high-cost support competitively neutral,
    portable, and targeted to high-cost areas. *See First Report and
    Order*, 12 FCC Rcd at 8932-34, paras. 286-90; *Ninth Report and
    Order*, 14 FCC Rcd at 20470-73, paras. 68-76. *See also*
    *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Order, 17 FCC Rcd 22642 (2002) (*Referral Order*); *infra*
    part IV.E.

[^89]: For the reasons discussed in paragraph 27, we do not agree that
    mere passage of the 1996 Act rendered Vermont's petition moot.
    Subsequent actions by the Commission in implementing the 1996 Act,
    however, did make Vermont's petition moot. Specifically, in the
    *First Report and Order*, the Commission determined support should
    be based on forward-looking economic costs, rather than embedded
    costs, and that larger, non-rural carriers would transition to
    forward-looking support before smaller, rural carriers. Pursuant to
    the rules adopted in the *Ninth Report and Order*, beginning January
    1, 2000, Verizon-Vermont and other non-rural carriers began
    receiving support based on forward-looking costs. The rule
    challenged by Vermont currently applies only to rural carriers and
    non-rural carriers receiving hold-harmless support.

[^90]: *See Recommended Decision*, 17 FCC Rcd at 20,733-34, para. 39-41.
    *See supra* paras. 21-22. *See also* AT&T Reply Comments at 2
    ("\[B\]asing the benchmark on urban cost is inappropriate when
    designing the *federal* high-cost support mechanism, because it
    ignores the fact that states must use intrastate resources in the
    first instance to make rates comparable.")(emphasis in original).

[^91]: *See* Verizon Reply Comments at 4. Proponents of the urban cost
    benchmark concede that the same result could be achieved by lowering
    the nationwide benchmark. *See* Montana and Vermont Comments at 48.
    Thus, we see no merit to the argument that comparing statewide
    average costs to a nationwide cost benchmark is a fundamentally
    different exercise than comparing statewide average costs to an
    urban cost benchmark. Both methodologies identify states with high
    average costs. *See* Maine Comments at 9 (arguing that any support
    system "must support those states with high average costs").

[^92]: *See infra* part IV.C.2.

[^93]: As explained in more detail below, using an urban cost benchmark
    would exaggerate the need for federal support to ensure rate
    comparability. *See infra* paras. 68-69. *See also* Verizon Reply
    Comments at 6 ("\[A\]n urban cost benchmark would produce more
    support than is necessary to enable states to maintain reasonably
    comparable rates, and the excessive size of a fund based on an urban
    benchmark would be adverse to other universal service principles of
    sufficiency and affordability."). AT&T points out that Maine and
    Vermont, proponents of the urban cost benchmark, have two of the
    highest penetration rates in the country, and that the non-rural
    carrier in those states, Verizon, opposes any increase in federal
    non-rural support. *See* AT&T Reply Comments at 6.

[^94]: *See supra* para. 21. *See also Ninth Report and Order*, 14 FCC
    Rcd at 20455, para. 57 ("\[W\]e do not believe it would be equitable
    to expect the federal mechanism -- and thus ratepayers nationwide --
    to provide support to replace implicit state support that has been
    eroded by competition if the state possesses the resources to
    replace that support through other means at the state level.");
    Verizon Comments at 10; Wisconsin Comments at 2.

[^95]: *See infra* parts IV.B., IV.C.

[^96]: As discussed below in part IV.D.2.a, we adopt the Joint Board's
    recommendation to establish a national urban rate benchmark based on
    the most recent average urban residential rate in the Bureau's
    annual rate survey.

[^97]: *See* Industry Analysis and Technology Division, Wireline
    Competition Bureau, *Reference Book of Rates, Price Indices, and
    Household Expenditures for Telephone Service* (July 2003) (*2003
    Reference Book*).

[^98]: 47 U.S.C. § 254(b); *Qwest*, 258 F.3d at 1199.

[^99]: 47 U.S.C. § 254(b)(3).

[^100]: 47 U.S.C. § 254(b)(5).

[^101]: 47 U.S.C. § 254(e).

[^102]: *Ninth Report and Order*, 14 FCC Rcd at 20464, para. 56.

[^103]: *Seventh Report and Order*, 14 FCC Rcd ­­­­­at 8092, para. 30
    (adopting the Joint Board's interpretation in the *Second
    Recommended Decision*, 13 FCC Rcd at 24753, para. 18); *see also
    Ninth Report and Order*, 14 FCC Rcd at 20461, para. 54.

[^104]: *Seventh Report and Order*, 14 FCC Rcd ­­­­­at 8092 para. 30; *see
    also Ninth Report and Order*, 14 FCC Rcd at 20446, para. 24.

[^105]: *Ninth Report and Order*, 14 FCC Rcd at 20463 para. 54; *see
    also Seventh Report and Order*, 14 FCC Rcd ­­­­­at 8092, para. 30.

[^106]: *Qwest*, 258 F. 3d at 1201.

[^107]: *Id.* Petitioners clarify in their comments filed in this
    proceeding that the 70-80% discrepancy relates to cost differences,
    not rate differences. *See* Maine Comments at 6 n.4; Montana and
    Vermont Comments at 3 n.6.

[^108]: *Qwest*, 258 F. 3d at 1201.

[^109]: *Id.*

[^110]: *Id.* *See* *Ninth Report and Order*, 14 FCC Rcd at 20464, para.
    56.

[^111]: *Qwest*, 258 F.3d at 1201.

[^112]: *Id.* at 1202.

[^113]: *Recommended Decision*, 17 FCC Rcd at 20723-24, para. 15.

[^114]: *Id.* at 20723-24, para. 15.

[^115]: *Id.*

[^116]: *Id.* at 20724, para.16.

[^117]: *Id.* at 20736-37, para. 50. *See infra* part IV.D.1.

[^118]: *See 2003 Reference Book* at 1-10. The average rate in the most
    recent *Reference Book* survey includes a monthly charge for
    flat-rate service, federal and state subscriber line charges,
    additional monthly charges for touch-tone service, and taxes, 911
    and other charges. *See id*. at 3. *See also Recommended Decision*,
    17 FCC Rcd at 20736-38, para. 49 & n.124, para. 52.

[^119]: *See Recommended Decision*, 17 FCC Rcd at 20738, para. 52.

[^120]: *See id.* at 20737, para. 50.

[^121]: *See id.* at 20723-24, para. 15.

[^122]: *Ninth Report and Order*, 14 FCC Rcd at 20434-35, para. 2.

[^123]: *See Recommended Decision*, 17 FCC Rcd at 20724, para. 16. *See
    also* *Ninth Report and Order*, 14 FCC Rcd 20465 para. 58.

[^124]: *See, e.g.,* AT&T Comments at 12; California Comments at 5
    ("California agrees with the Commission that a mechanism that
    produces a federal universal service fund at or near the existing
    level produces affordable rates, balances the interests of
    contributor and recipient states, and therefore satisfies the goal
    of universal service."); NASUCA Comments at 8 ("NASUCA supports the
    Joint Board's recognition that "sufficient" implies "no more than
    sufficient."); Verizon Comments at 5 ("A fund that is too large
    would increase costs for all consumers and impair the ability of
    some customers to continue subscribing to telephone service.").

[^125]: *Recommended Decision*, 17 FCC Rcd at 20724, para. 16. *See also
    Second Recommended Decision*, 13 FCC Rcd at 24756 para. 3 ("The
    transition to a competitive environment requires us to be mindful of
    two competing goals: (1) supporting high cost areas so that
    consumers there have affordable and reasonably comparable rates; and
    (2) maintaining a support system that does not, by its sheer size,
    over-burden consumers across the nation.").

[^126]: *See Rural Task Force Order,* 16 FCC Rcd at 11257, para. 27. As
    the Fifth Circuit explained, "\[b\]ecause universal service is
    funded by a general pool subsidized by all telecommunications
    providers -- and thus indirectly by customers -- excess
    subsidization in some cases may detract from universal service by
    causing rates unnecessarily to rise, thereby pricing some consumers
    out of the market." *Alenco Communications, In. v. FCC*, 201 F.3d
    608, 619 (5^th^ Cir. 2000).

[^127]: The Tenth Circuit suggested that excessive subsidization
    arguably may violate the affordability principle in section
    254(b)(1). *Qwest*, 258 F.3d at 1200.

[^128]: *See, e.g.,* Montana and Vermont Comments at 5; SBC Reply
    Comments at 13-15.

[^129]: AT&T argues that we should adopt an explicit principle, pursuant
    to section 254(b)(7), stating that the burden on contributors to
    universal service should be minimized. *See* AT&T Comments at 11-12.

[^130]: *See 2003 Reference Book*. The Bureau's *Reference Book*
    includes an annual survey of local telephone rates in 95 cities that
    the Bureau has conducted for the past 17 years. As discussed below,
    based on the most recent Bureau data, the rate benchmark level
    presently is \$32.28, or 138% of the national average urban rate.
    *See infra* para. 41; part IV.D.2.

[^131]: Several commenters interpret the Joint Board's recommendation as
    a definition of reasonably comparable rates. *See e.g.,* NASUCA
    Comments at 6-8; *but see* Sprint Comments at 5 ("\[T\]he Joint
    Board's recommendation does not define reasonably comparable rates,
    but merely provides a conclusion of same . . ..").

[^132]: The Joint Board emphasized that the rate benchmark is meant
    simply as a "safe harbor." *See Recommended Decision*, 17 FCC Rcd at
    20738, para. 53.

[^133]: For example, a state could show that due to other factors, such
    as additional services included in the basic service rate, its rates
    should be considered to be reasonably comparable even though they
    are above the benchmark. Alternatively, a state could show that its
    rates should not be considered to be reasonably comparable even
    though they are below the benchmark, because, for example, the
    services included in its basic rate are not comparable to services
    in other states or the calling scopes are significantly different.

[^134]: *See Recommended Decision*, 17 FCC Rcd at 20729, para. 35 &
    n.88; AT&T Comments at 8; Verizon Comments at 8. As discussed
    herein, we are not persuaded by commenters who argue that the 1996
    Act required the Commission to require or induce all states to
    immediately remove implicit subsidies and rebalance rates. *See
    supra* para. 26; *infra* para. 77; *see also, e.g.*, Qwest Comments
    at 7; SBC Comments at 1-2, 24. Nor do we agree that we should
    establish a rate floor. *See* Sprint Comments at 4.

[^135]: *See* AT&T Comments at 9.

[^136]: *See* S. Conf. Rep. No. 230, 104^th^ Cong., 2^nd^ Sess. 232.
    ("State authority with respect to universal service is specifically
    preserved under new section 254(f)."); *see also* 47 U.S.C. §152(b).

[^137]: *See* 47 U.S.C. § 254(b) ("The Joint Board and the Commission
    shall base policies for the preservation and advancement of
    universal service on the following principles."); 47 U.S.C. §
    254(b)(5) ("There should be specific, predictable and sufficient
    Federal and State mechanisms to preserve and advance universal
    service."). During the Senate debate, Senator Pressler, the Chairman
    of the Committee on Commerce, Science, and Transportation (Commerce
    Committee), stated that "the need to preserve widely available and
    reasonably priced services is a fundamental concern addressed" in
    the legislation. 141 Cong. Rec. S7893 (June 7, 1995). "To smaller
    cities and rural communities and others who depend upon universal
    service," Senator Pressler said, "nothing is changed. They continue
    to enjoy affordable access to phone service as before." 141 Cong.
    Rec. S7893-94 (June 7, 1995). After calling universal service the
    most important objective and criticizing airline deregulation,
    Senator Hollings, Ranking Member of the Commerce Committee, said he
    wanted to make sure that deregulation did not "mess up . . . the
    wonderful telecommunications service that we have had." 141 Cong.
    Rec. S7894 (June 7, 1995). Senator Hollings said that "\[s\]pecial
    provisions in the legislation address universal service in rural
    areas to guarantee that harm to universal service is avoided there."
    141 Cong. Rec. S7895 (June 7, 1995). Senator Stevens, a key sponsor
    of the universal service provisions, said that the "concept \[of
    universal service\] is preserved in \[the legislation\] in a new
    manner. It opens up the local market to competition while still
    preserving the concept of universal service." 141 Cong. Rec. S7900
    (June 7, 1995).

[^138]: Section 254 explicitly defines universal service as an "evolving
    level of telecommunications services" to take into account advances
    in telecommunications and information technology. 47 U.S.C. §
    254(c); *see also* S. Conf. Rep. No. 230, 104^th^ Cong., 2d Sess.
    131.

[^139]: Under the high-cost support mechanisms in place in 1996, the
    non-rural companies received support if their average loop costs
    exceeded the national average loop cost by certain cost benchmarks.
    *See supra* notes Error: Reference source not found, Error:
    Reference source not found. *See also Recommended Decision*, 17 FCC
    Rcd at 20729, para. 35 & n.88.

[^140]: These rates are as of October 1, 1995. Because the Senate and
    House considered and passed telecommunications legislation in 1995
    and adopted the 1996 Act in February 1996, these rates are closer in
    time to Congress' deliberations that the rates surveyed for 1996. As
    of October 1, 1996, residential urban rates ranged from \$13.04 to
    \$28.65, and the highest urban rate was 220 percent of the lowest
    urban rate and 144 percent of the average urban residential rate
    (\$19.95). *See 2003 Reference Book* at Tables 1.2, 1.4; *infra*
    Appendix B.

[^141]: *See 2003 Reference Book* at Tables 1.2, 1.4; *infra* Appendix
    B.

[^142]: The Joint Board suggested that it might be appropriate to use
    135% for the safe harbor benchmark. *See Recommended Decision*, 17
    FCC Rcd at 20740, para. 52.

[^143]: *See 2003 Reference Book* at Table 1.3; *infra* Appendix B.

[^144]: *2003 Reference Book* at Tables 1.1, 1.3; *infra* Appendix B.

[^145]: *See infra* para. 80.

[^146]: *See infra* para. 81.

[^147]: *See* Surewest Comments at 6-10. The national urban rate
    benchmark does not directly address the relationship to each other
    of rural and urban rates within a state that are below the
    benchmark. Urban and rural rates within a state may diverge
    significantly. For example, Surewest asserts that in California,
    Roseville's average monthly basic residential service rate is
    \$31.24 and SBC's in a neighboring jurisdiction is \$10.69. We note
    that, for reasons described above, we do not agree with Surewest
    that such a rate discrepancy represents a problem of insufficient
    federal support. *See supra* paras. 21-22.

[^148]: *See* GAO Report at Appendix IV.

[^149]: If a state were not able to maintain rural rates below the rate
    benchmark, it would be required to provide additional information to
    us, as discussed below in part IV.D. Rate comparisons within the
    state would then be useful in assessing the reason for the high
    rural rates. For example, if the states' urban rates were also above
    the benchmark, it may be that the federal support mechanism should
    be adjusted. If, on the other hand, the state's urban rates were
    much lower than its rural rates, the state should have the resources
    to lower its rural rates without additional support.

[^150]: *See* Maine Comments at 23.

[^151]: *See supra* para. 40.

[^152]: *Qwest v. FCC*, 258 F.3d at 1201. Intervenors' assertion before
    the Tenth Circuit that some rural rates could be 70-80% higher than
    urban rates under the non-rural mechanism was based on their claim
    that *costs* were 70-80% higher in rural areas than in urban areas.
    Intervenors submitted cost data, but not rate data, to the court.
    Accordingly, the court's statement actually was based on *cost*
    rather than rate data.

[^153]: *See infra* Appendix B.

[^154]: As discussed below, the definition of reasonably comparable
    rates is primarily designed to evaluate the comparability of rates
    among states. In most cases, it will also effectively measure
    comparability of rates within states, because rural and urban rates
    in most states vary less than urban rates vary among states
    nationwide. In some cases, however, if urban rates in a state were
    very low, rural rates could be below the benchmark but further from
    the urban rates in that state than they are from the nationwide
    urban rate. Surewest, for example, argues that Roseville's
    residential rates are 85% higher than SBC's rates in California.
    *See* Surewest Comments at 8-9. We note that Roseville's rate of
    \$31.24 is below the benchmark we adopt, currently \$32.28.

[^155]: *See* SBC Comments at 15.

[^156]: *See, e.g., First Recommended Decision*, 12 FCC Rcd at 150-54,
    paras. 125-133; *First Report and Order*, 12 FCC Rcd at 8837-46,
    paras. 108-26; *Seventh Report and Order*, 14 FCC Rcd at 8095-97,
    paras. 36-40.

[^157]: *See First Report and Order*, 12 FCC Rcd at 8842, para. 118;
    s*ee also First Recommended Decision*, 12 FCC Rcd at 153, para. 131.

[^158]: *See First Report and Order*, 12 FCC Rcd at 8837, 8842, paras.
    108, 118; *see also First Recommended Decision*, 12 FCC Rcd at 154,
    para. 131.

[^159]: *See First Report and Order*, 12 FCC Rcd at 8841, para. 115.

[^160]: *See id.* at 8842, para. 118; *Seventh Report and Order*, 14 FCC
    Rcd at 8096, para. 38.

[^161]: *See Seventh Report and Order*, 14 FCC Rcd at 8097, para. 39.

[^162]: *See* Maine Comments at 6-8; Montana and Vermont Comments at
    4-5; 26-29.

[^163]: *See* Maine Comments at 8; Montana and Vermont Comments at 26.

[^164]: *See* Montana and Vermont Comments at 30.

[^165]: *See Qwest*, 258 F.3d at 1201 (Commission's cost-based
    definitions of "reasonably comparable" are not reasonable
    interpretations of the statutory language because "\[t\]he Act calls
    for reasonable comparability between rural and urban rates; these
    definitions simply substitute different standards."). *See also*
    *Recommended Decision*, 17 FCC Rcd at 20729, para. 34; *supra* note
    Error: Reference source not found ("As the court observed, although
    non-rural high-cost support is distributed based on a comparison of
    national and statewide average costs, the benchmark must be
    ultimately based on attainment of the statutory principle of
    reasonable comparability of urban and rural rates.").

[^166]: As noted earlier, the rate benchmark we adopt here for purposes
    of defining "reasonable comparability" has a different purpose than
    the cost benchmark we discuss below in part IV.C. The cost benchmark
    is used to measure the amount of federal high-cost support non-rural
    carriers in each state may receive, and it is set at a level
    intended to ensure that all states have relatively equal abilities
    to achieve rate comparability in light of their resources based on
    average costs. The rate benchmark we adopt here will be used to
    gauge the success of combined federal and state efforts to ensure
    rate comparability by measuring whether individual rural rates are
    reasonably comparable to nationwide urban rates.

[^167]: For example, a state may permit carriers to recover part of the
    cost of providing a particular service, such as residential
    telephone service, from revenues received for other services, such
    as call waiting, caller ID, or intrastate toll services. In
    particular, the cost of serving a high-cost wire center is not
    likely be a good proxy for rates in that specific area. To keep
    rates from being prohibitively high in high-cost areas, states
    generally require below-cost rates in high-cost areas and permit the
    carrier to recover some of these costs with above-cost rates in
    other areas. *See supra* para. 15.

[^168]: *See supra* para. 23.

[^169]: Montana and Vermont argue that the Commission cannot condition
    federal support on a state's certification that is has established
    reasonably comparable rates in rural and urban areas within its
    borders. They claim in a hypothetical example that a state with
    \$100 rural rates and \$10 urban rates "deserves" federal support as
    much as states that have equalized rural and urban rates by either
    rate averaging or explicit support. *See* Montana and Vermont
    Comments at 36-37.

[^170]: *See Qwest v. FCC*, 258 F.3d at 1202.

[^171]: *See* NASUCA Comments at 7.

[^172]: *First Report and Order*, 12 FCC Rcd at 8831, para. 98.

[^173]: *Id.* at 8833, para. 101.

[^174]: *Qwest v. FCC*, 258 F.3d at 1202; *see infra* part IV.D.

[^175]: *Qwest v. FCC*, 258 F.3d at 1201.

[^176]: *Id.* at 1204.

[^177]: *See infra* part IV.D.2.

[^178]: The urban rate benchmark adopted in this Order, in contrast,
    will be used to gauge the success of combined federal and state
    efforts to ensure rate comparability by measuring whether individual
    rural rates are reasonably comparable to nationwide urban rates.

[^179]: *Ninth Report and Order*, 14 FCC Rcd at 20463-6, paras. 55-59.

[^180]: *Id.* at 20467, para. 63. The non-rural high-cost support
    mechanism provides support for 76 percent of statewide average costs
    that are above the national benchmark. The mechanism calculates
    support based on 75 percent of forward-looking loop costs and 85
    percent of forward-looking port costs, as well as 100 percent of all
    other forward-looking costs determined by the cost model. The
    percentage of forward-looking costs that the intrastate portion of
    each of the items represents is equivalent to 76 percent of total
    forward-looking costs. *Id.*

[^181]: *Id.* at 20464, para. 55. *See also* *Second Recommended
    Decision*, 13 FCC Rcd at 24761-2, para. 43.

[^182]: *Ninth Report and Order*, 14 Rcd at 20464, para. 55. Prior to
    the *Ninth Report and Order*, both rural and non-rural carriers were
    eligible for federal support under the Commission's high-cost loop
    support mechanism. That mechanism provides gradually more support
    for costs that exceed certain thresholds or "steps" above the
    national average based on carriers' loop costs, as reflected in
    their books. *Id.* at 20440, para. 13. The Commission explained in
    the *Ninth Report and Order* that the 135 percent benchmark was
    "near the midpoint of the range" of the high-cost loop support
    mechanism, which "begins providing support for costs between 115 and
    160 percent of the national average cost per line, ... and the vast
    majority of non-rural carriers receive all their current support for
    costs in this range." *Id.* at 20464, para. 55.

[^183]: *Id.* at 20464, para. 55.

[^184]: *Id.* at 20465, para. 58; see *Seventh Report and Order*, 14 FCC
    Rcd at 8102, 8112, para. 48 and 70 ("Given that telephone service
    currently is largely affordable, and any significant increase in the
    size of federal support for local rates appears unnecessary, we
    conclude that we should limit the size of the federal mechanism, as
    recommended by the Joint Board.")(citation omitted).

[^185]: *Qwest*, 258 F.3d at 1202.

[^186]: *Id.*

[^187]: *Id.* ("That recognition might justify arbitrarily picking a
    point within a narrow range, but does not justify doing so in the
    wide range present here.")

[^188]: *Id*.

[^189]: *Id.* at 1203.

[^190]: *Recommended Decision*, 17 FCC Rcd at 20728-29, para. 34,
    *supra* note Error: Reference source not found.

[^191]: *Id.*; citing *Qwest*, 258 F.3d at 1202.

[^192]: *See* United States General Accounting Office,
    *Telecommunications: Federal and State Universal Service Programs
    and Challenges to Funding* (GAO-02-187, Feb. 4, 2002) (GAO Report).
    The GAO's objectives were to report on rates and examine how the
    rates and costs of providing local telephone service varied
    throughout the United States. GAO Report at 28. To do so, the GAO
    gathered data on local telephone rates in 50 states and the District
    of Columbia. The GAO collected sample rate data from three different
    categories of population density -- central city, suburban and
    rural. GAO Report at 28-29. Up to 11 samples of residential and
    business local service rates were collected from each state. See GAO
    Report at 28-30 for a further description of the process used in the
    selection of places for sample rates. The rate results of the data
    collection, which the GAO conducted from May to September 2001 and
    is explained in detail in the report, are displayed in a chart
    format in Appendix IV of the GAO Report.

[^193]: *Recommended Decision*, 17 FCC Rcd at 20728-29, para. 34; *see*
    *also id*. at 20732, para. 40 ("The GAO Report suggests that more
    federal support is not necessary because urban and rural rates are
    similar.")

[^194]: *Id.* at 20729-30, para. 35.

[^195]: Verizon reasoned that Congress's intent was that federal support
    be sufficient to maintain the range of rates existing at the time
    the 1996 Act was adopted, and that rates have not changed
    substantially since 1996, so the range of existing rates, as
    reflected in the GAO Report, should be used to determine what is
    reasonably comparable. *Id*. In a normal distribution, data points
    within two standard deviations of the mean will comprise
    approximately 95 percent of all data points. *Id .*at 20728-30,
    paras. 34, 36.

[^196]: *Id.* at 20729-30, para. 35. With the cost data used to
    determine 2002 support, a benchmark of two standard deviations above
    the mean was equivalent to 132 percent of the national average cost.
    *Id.* at 20730, para. 36 n.93.

[^197]: *Id.* at 20730, para. 36 n.91 ("We are interested in providing
    support to states with more high-cost lines, so it is appropriate to
    use the two standard deviation measurement to identify outliers even
    though this measurement may identify more than expected in a normal
    distribution. The current non-rural high-cost support mechanism
    provides support to eight out of 52 jurisdictions (50 states, the
    District of Columbia and Puerto Rico), or 15% of the
    jurisdictions.")

[^198]: *Id.* at 20730, para. 36.

[^199]: *Id.* at 20730-31, para. 37.

[^200]: *Id*. ("Specifically, states were sorted from lowest- to
    highest-cost based on statewide average cost per loop. Clusters were
    identified in this ranking if the difference in average costs
    between states was greater than 'cluster split differences' ranging
    from 2.5 to 0.5. Under this analysis, Mississippi was the first to
    break out into a separate cluster, and the second was the District
    of Columbia. The first group of states to break out into a separate
    rural, high-cost cluster included Kentucky, Maine, Alabama, Vermont,
    Montana, West Virginia and Wyoming. The remaining states, ranging
    from New Jersey to Nebraska, formed a separate urban, low-cost
    cluster. When Mississippi and the District of Columbia, the
    respective high- and low-cost 'outliers,' were combined into the two
    larger clusters, 'cluster stability' was achieved for a wide range
    of numerical values from 2.5 to 0.85. 'Cluster stability' means that
    the same clusters are maintained even as the numerical values are
    varied, indicating a strong similarity among members of the cluster
    groups.") (footnotes omitted).

[^201]: *Id.* at 20728-29, para. 34.

[^202]: *See supra* part IV.B.2; *see infra* part IV.D.2.a.

[^203]: As discussed below, the Joint Board recommended that states
    review only residential rates at this time. *See infra* part IV.D.
    In addition, consistent with the definition of rural and high-cost
    areas that we adopt below for purposes of the rate review process,
    we considered only rates identified as "Non-MSA" by the GAO. *See
    infra* part IV.D.2.b. We also limited our analysis to rates in areas
    served by non-rural carriers. Our analysis responds to criticism by
    some commenters that the Joint Board's analysis of average rates
    reported in the GAO Report failed to consider large rate differences
    between states, and that its analysis included extraneous data such
    as rates from areas served by rural carriers. *See* Maine Comments
    at 13-15; Qwest Comments at 7; Montana and Vermont Comments at 9-11.

[^204]: The Joint Board recommended that the Commission establish a
    basic service rate template including the items in the Bureau's
    annual rate survey. *See infra* part IV.D.1. We adjusted the rural
    rates from the GAO Report by adding \$8.78 to each rate to reflect
    additional charges included in the Bureau's rate survey data. Both
    the Bureau's *2003 Reference Book* and the rate data in the GAO
    Report use the monthly charge for flat-rate service, where
    available, and a "representative rate" in areas where only
    measured/message service is available. The rates in the *2003
    Reference Book* also include subscriber line charges, taxes, 911 and
    other charges, whereas the rates in the GAO Report do not. *See 2003
    Reference Book* at Table 1.1; GAO Report at 49. Thus, we adjusted
    the rates in the GAO Report to reflect these additional charges by
    adding the average 2002 charges reflected in the *2003 Reference
    Book* for federal and state subscriber line charges (\$5.64) and for
    taxes, 911, and other charges (\$3.14), for a total of \$8.78. *See
    2003 Reference Book* at Table 1.1. Although we recognize that the
    charges excluded from the GAO Report likely vary from state to
    state, we believe it is appropriate to use average adjustments in
    the absence of more specific data. We note that the rate template
    that states will use in the rate review process to compare rates
    will include the charges in the *2003 Reference Book*. *See infra*
    part IV.D.2.c. In addition, we note that the GAO rate data include
    any additional monthly charges for touch-tone service. The average
    urban residential rate in the *2003 Reference Book* of \$23.38
    includes \$0.04 to reflect the average additional charge for
    touch-tone service. *See* GAO Report at 46; *2003 Reference Book* at
    Table 1.1.

[^205]: *See infra* part IV.D.2.a.

[^206]: *See supra* part IV.B.2. Based on the *2003 Reference Book*
    survey, the national urban rate benchmark is 138 percent of the
    average urban rate, with a dollar equivalent of \$32.28. *2003
    Reference Book*, Table 1.1. The *2003 Reference Book* shows that the
    average total monthly residential rate for local service in urban
    areas in 2002 is \$23.38 and the highest rate surveyed during that
    time was \$35.19. *2003 Reference Book*, Tables 1.1, 1.3. As
    described in more detail in part IV.D.2.a., the urban rate benchmark
    is expressed as the percentage equivalent of two standard deviations
    above the average total monthly residential urban rate for local
    service in metropolitan areas surveyed in the *2003 Reference Book*.

[^207]: Based on the information before us, we believe that there are
    very different reasons for these three states to exceed the rate
    benchmark. For example, Michigan had a high monthly charge of
    \$43.95 for flat-rate service in 2001, but most customers subscribed
    to a low message-rate service of \$12.01 that includes 400 calls per
    month, considerably more calls than the "representative rate" the
    Bureau calculates when flat-rate service is not available. GAO
    Report at 59, note d. We note that the \$43.95 charge for monthly
    service in Michigan was applicable throughout the state. In Wyoming,
    rural residential rates were higher than the national urban rate
    benchmark in 2001, but single-line business rates were the same as
    residential rates, and most single-line business rates in Wyoming
    were lower than in many other states. *Id.* at 58. We discuss below
    various possible approaches for analyzing residential rates in
    states that have rebalanced their rates as Wyoming has. *See infra*
    part V.

[^208]: *See infra* part IV.D.2.e. We note that states also will be able
    to present information explaining why rates that appear to be
    reasonably comparable should not be considered reasonably
    comparable. *See id*.

[^209]: Maine Comments at 12-15; Montana and Vermont Comments at 11;
    Qwest Comments at 6-7; Wyoming Comments at 5-6.

[^210]: *See* GAO Report at 61 ("The General Accounting Office, the
    investigative arm of Congress, exists to support Congress in meeting
    its constitutional responsibilities and to help improve the
    performance and accountability of the federal government for the
    American people. GAO examines the use of public funds; evaluates
    federal programs and policies; and provides analyses,
    recommendations, and other assistance to help Congress make informed
    oversight, policy, and funding decisions.").

[^211]: *See* GAO Report at 28-30; *see also supra* note Error:
    Reference source not found and accompanying text.

[^212]: *See* *Recommended Decision*, 17 FCC Rcd at 20728-29, para. 34;
    *see supra* note Error: Reference source not found. *See also* AT&T
    Comments at 3-7; California Comments at 8-9; Verizon Reply Comments
    at 6-9.

[^213]: Maine Comments at 15; Montana and Vermont Comments at 11-12.

[^214]: *See supra* paras. 22-23.

[^215]: *Recommended Decision*, 17 FCC Rcd at 20737-38, para. 51 ("When
    state basic service rates are at or below the rate benchmark level,
    then there should be a presumption that rates in that state are
    reasonably comparable to national urban rates.").

[^216]: *See infra* part IV.D.

[^217]: Maine Comments at 15; Montana and Vermont Comments at 11-12.
    Although these commenters do not elaborate on which additional
    charges omitted in the GAO Report data are of concern, we assume
    that they refer to the list of excluded charges specifically
    described in the GAO Report. GAO Report at 49 ("the monthly tariff
    rates that we report exclude the federal Subscriber Line Change
    \[sic\]; federal, state, and local surcharges for items such as
    universal service funding, 911 service, and taxes; the federal
    excise tax; and long distance fees and associated universal service
    surcharges and other taxes.").

[^218]: *See supra* note Error: Reference source not found and
    accompanying text.

[^219]: In the future, no rate adjustment will be necessary to
    standardize the data collected as part of the state rate review and
    expanded certification process, because the basic service rate
    template used in this process will include the same elements as the
    *2003 Reference Book*. *See infra* para. 86.

[^220]: Maine Comments at 15; Montana and Vermont Comments at 11-12.

[^221]: GAO Report at 49.

[^222]: *Id.* at 53. *See also* *id.* at 59, note d.

[^223]: *Id.*

[^224]: *Recommended Decision*, 17 FCC Rcd at 20730, para. 36; *See
    also* California Comments at 8; Sprint Comments at 2-3; Verizon
    Comments at 11; Worldcom Reply Comments at 2.

[^225]: *Recommended Decision*, 17 FCC Rcd at 20730, para. 36; *See*
    Verizon Reply Comments, Declaration of Eugene J. Goldrick at 3-4,
    paras. 6-7.

[^226]: *Recommended Decision*, 17 FCC Rcd at 20730, para. 36 & n.92;
    *see also* Verizon Reply Comments at 12. For example, the Commission
    has used standard deviation analysis to create thresholds for cost
    comparability. *See Bell Operating Companies' Tariff for the 800
    Service Management System, Tariff F.C.C. No. 1 and 800 Data Base
    Access Tariffs*, 8 FCC Rcd 3242 (1993); *Local Exchange Carriers'
    Rates, Terms and Conditions for Expanded Interconnection Through
    Physical Collocation for Special Access and Switched Transport*, 12
    FCC Rcd 18730 (1997). We note that, prior to the passage of the 1996
    Act, the Commission considered setting a support benchmark in a
    universal service proceeding based on standard deviations. *In the
    Matter of Amendment of Part 36 of the Commission's Rules and
    Establishment of a Joint Board*, CC Docket No. 80-286, Notice of
    Inquiry, 9 FCC Rcd 7404 (1994); *In the Matter of Amendment of Part
    36 of the Commission's Rules and Establishment of a Joint Board*, CC
    Docket No. 80-286, 10 FCC Rcd 12309, 12333, para. 55 (1995). The
    Commission did not resolve this proceeding due to the subsequent
    passage of the 1996 Act.

[^227]: *See Qwest*, 258 F.3d at 1202-3. Sprint Comments at 3 ("standard
    deviation analysis limits the arbitrary nature of the process and
    provides a recognized approach for identifying extreme values in a
    data set, based on all the values in that data set"); California
    Commission Comments at 8; Verizon Reply Comments at 10-13; Worldcom
    Reply Comments at 2.

[^228]: The state cost per line model run data for 2001 used year end
    2000 lines.

[^229]: *See* Verizon Reply Comments, Declaration of Eugene R. Goldrick
    at 4, n.1 ("the state cost per line has a distributional asymmetry
    that is typical of data with a fixed lower bound of zero but no
    corresponding upper bound; the lower tail of the distribution is
    shorter than the upper tail. As a result, a greater proportion of
    states lie more than 2 standard deviations above the mean than lie 2
    standard deviations below it."); *see also* Maine Comments,
    Statement of Dr. William Gillis at 30; Montana and Vermont Comments,
    Statement of Dr. William Gillis at 53 ("there exists credible
    analysis showing that the data are skewed to the right."). An
    asymmetrical lognormal curve is defined as an asymmetrical bell
    shape with a long tail of high measurement values. Staff used the
    software package BestFit -- Probability Distribution Fitting for
    Windows, Version 4.5 by Palisade Corporation to confirm that the
    data forms an asymmetrical lognormal curve.

[^230]: Appendix D. The 2002 cost per line model run data used year-end
    2001 lines and the Delphi version of the cost model adopted by the
    Commission in January 2003. *See Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Order, 18 FCC Rcd 41 (2003)
    (*Delphi Order*). Upon review of the graphed data, staff also
    determined that a benchmark set at two standard deviations above the
    mean will typically identify an average of 16 percent of the
    jurisdictions as high-cost states.

[^231]: *See Recommended Decision*, 17 FCC Rcd at 20730, para. 36
    (concluding, based on standard deviation analysis, that the current
    benchmark level is a "reasonable dividing line separating high-cost
    states from the remainder of average and low-cost states.").

[^232]: *See supra* at part IV.B.; *see also* Worldcom Reply Comments at
    2.

[^233]: *Recommended Decision*, 17 FCC Rcd at 20729-30, para. 35.

[^234]: *Id.* at 20724, para. 16; *see id.* at 20732, para. 40 ("The GAO
    Report suggests that more federal support is not necessary because
    urban and rural rates are similar."); WorldCom Reply Comments at 2.

[^235]: *See* Qwest Comments, Declaration of Dr. Aniruddha Banerjee at
    6-9; Maine Comments, Statement of Dr. William Gillis at 29-31;
    Montana and Vermont Comments at 18-24; *id.*, Statement of Dr.
    William Gillis at 51-54.

[^236]: ^236^ *See* Qwest Comments, Declaration of Dr. Aniruddha
    Banerjee at 9; Maine Comments, Statement of Dr. William Gillis at
    30; Montana and Vermont Comments at 23; *see also* Verizon Reply
    Comments at 11-12; *id.*, Declaration of Eugene R. Goldrick at 4.
    Finding the standard deviation among a set of data points is a
    mathematical calculation that may be performed regardless of how the
    data are distributed. *Id*.

[^237]: *See* Verizon Reply Comments at 11-12; *id.*, Declaration of
    Eugene R. Goldrick at 3-4.

[^238]: Maine Comments, Statement of Dr. William Gillis at 29; Montana
    and Vermont Comments, Statement of Dr. William Gillis at 51. In his
    statement, Dr. Gillis states that "statistical hypothesis testing"
    may be used to decide "whether the mean value of a sample is
    significantly different from the mean value of a population or
    whether two samples may derive from the same population." *Id.*

[^239]: *Recommended Decision*, 17 FCC Rcd at 20730, n.91; *see also*
    Verizon Reply Comments, Declaration of Eugene R. Goldrick at 5-6.

[^240]: Qwest Comments, Declaration of Dr. Aniruddha Banerjee, Ph.D. at
    n.7.

[^241]: *Recommended Decision*, 17 FCC Rcd at 20730, n.91; *id.* at para
    35-6; *see also* Verizon Comments at 11.

[^242]: Montana and Vermont Comments at 21.

[^243]: *Recommended Decision*, 17 FCC Rcd at 20730, para. 36.

[^244]: *Id.* at 20731, para. 38.

[^245]: *See* *Qwest*, 258 F.3d 1191, 1203 (10^th^ Cir. 2001)
    (instructing Commission on remand to "address the relevant data").

[^246]: *See supra* paras. 62-64; *see* Montana and Vermont Comments at
    24.

[^247]: The rate review and expanded certification process will serve as
    a final check on the success of the non-rural high-cost support
    mechanism in achieving the ultimate goal of reasonably comparable
    rates. *See infra* part IV.D. Missouri Comments at 2; NASUCA
    Comments at 12. As discussed below, we may adjust the benchmark as
    necessary in the future based on analysis of the rate data.

[^248]: We note that, pursuant to its delegated authority, the Bureau
    upgraded the cost model\'s computer language and corrected
    programming errors in *Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Order, 18 FCC Rcd 41 (2003), *recons.
    pending*, but deferred calculating support using the revised version
    of the model until after this Order on Remand.  We anticipate that
    the Bureau will release an order updating line counts and other
    discrete input values used in calculating non-rural high-cost
    support following release of this Order on Remand, and that the
    revised version of the model will be used to calculate support based
    on the modified non-rural high-cost support methodology adopted
    herein beginning January 1, 2004.

[^249]: *Recommended Decision*, 17 FCC Rcd at 20730, para. 36.

[^250]: Staff performed ten trials of cluster analysis on simulated cost
    data. A random number generator was applied to the fitted lognormal
    curve, described above, to simulate ten data sets of 52 cost data
    points, representing 52 jurisdictions. *See supra* note Error:
    Reference source not found and accompanying text. Staff used
    computer program XLSTAT version 5.1 to perform the "agglomerative
    hierarchical classification" of the "single-linkage" method of
    cluster analysis on the simulated data. *See* Qwest Comments,
    Declaration of Aniruddha Banerjee, Ph.D. at 11-12 & n.11. The
    computer program produced a dendrogram, a tree of clusters whose
    root is the class that contains all of the data points, for each
    simulated data set. From the dendrograms, staff was able to identify
    high-cost clusters with cluster stability. *See* Appendix E; *see
    also supra* note Error: Reference source not found and accompanying
    text.

[^251]: We believe that the cluster analysis results generally support a
    benchmark set at two standard deviations above the mean. The
    simulated clusters on the high-cost end of the scale identify
    between three and thirteen states, with an average of six states.
    *See* Appendix E. A benchmark of two standard deviations above the
    mean using current actual data identifies ten states as having very
    high average costs for purposes of distributing non-rural high-cost
    support. This figure falls within the range of the simulated
    clusters.

[^252]: We disagree with commenters who are opposed to use of cluster
    analysis because it does not provide insight into the amount of
    support sufficient for rate comparability. *See* Maine Comments at
    16; Montana and Vermont Comments at 13. We do not believe the Joint
    Board intended to use cluster analysis as anything more than a
    verification to confirm that states with similar cost
    characteristics at the high-cost end of the spectrum receive support
    under the 135% benchmark. *See* Verizon Reply Comments at 6-7.

[^253]: *Recommended Decision*, 17 FCC Rcd at 20731-32, paras. 39-41;
    AT&T Comments at 15; California Comments at 9-10; Verizon Comments
    at 10; *see supra* paras. 27-28.

[^254]: *See* Montana and Vermont Comments at 26. The commenters
    maintain that if support is to be cost-based, the mechanism must
    provide that cost levels net of support in rural areas are
    reasonably comparable to urban areas. In using an urban cost
    benchmark, with "urban" defined by population density, the
    commenters suggest that the urban cost benchmark represents "urban"
    costs. The commenters, however, do not recommend that the Commission
    compare the urban cost benchmark to specifically-defined rural
    costs, but generally to statewide averages. *See also* Maine
    Comments at 19-23.

[^255]: These commenters include in their definition of urban average
    cost (by study area, wire center, density zone and area overlap)
    only those areas that they define as "urban." Maine Comments at
    19-23; Montana and Vermont Comments at 40-44.

[^256]: AT&T Comments at 15-16.

[^257]: *Qwest*, 258 F.3d at 1201. A 135 percent national cost benchmark
    yields roughly the same support amount and distribution as an
    average urban cost benchmark of 165 percent.

[^258]: *Id.*; Maine Comments at 18; Montana and Vermont Comments at 25
    and 47.

[^259]: *See supra* at para. 44.

[^260]: *Recommended Decision*, 17 FCC Rcd at 20724, para. 16.

[^261]: *Id*. at 20736-40, paras. 50-56.

[^262]: This rate benchmark is consistent with the definition of
    reasonable comparability that we adopt above. *See supra* paras.
    38-44.

[^263]: In the attached Further Notice of Proposed Rulemaking, we seek
    further comment on certain discrete aspects of the rate review and
    expanded certification process. *See infra* part V. We also seek
    comment on the rules, procedures and required showings for further
    federal action. *Id.*

[^264]: *Ninth Report and Order*, 14 FCC Rcd at 20454, para. 38.

[^265]: *Id.* at 20469, para. 67.

[^266]: *Id.* at 20483, para. 95.

[^267]: *Id.* at 20483, para. 97; *see* 47 C.F.R. § 54.313(a) (state
    must certify that support "will be used only for the provision,
    maintenance, and upgrading of facilities and services for which the
    support is intended").

[^268]: *Qwest*, 258 F.3d at 1203-04.

[^269]: *Id.* at 1203.

[^270]: *Id.* at 1203-04.

[^271]: *Id.* at 1204.

[^272]: *Recommended Decision*, 17 FCC Rcd at 20736-40, paras. 50-56.

[^273]: *Id.*

[^274]: *Id.* at 20736-38, para. 50, 52-53.

[^275]: *Id*. at 20736-40, paras. 50-51, 55-56.

[^276]: *Id.* at 20736-38, paras. 50-51, 53.

[^277]: For example, if its rural rates exceeded the benchmark, a state
    would be permitted to explain in its certification why its rural
    rates were reasonably comparable. *Id.* at 20736-40, paras. 50-51,
    55-56. Similarly, a state could explain in its certification that
    its rural rates were not reasonably comparable to nationwide urban
    rates, despite being within the safe harbor created by the
    nationwide urban rate benchmark. *Id.* at 20736-40, paras. 50, 53,
    55-56.

[^278]: *Id*. at 20737-38, para. 51.

[^279]: *Id.*

[^280]: *Id.* at 20736, 20738, paras. 49 & n.124, 52.

[^281]: *Id.* at 20736-38, paras. 50, 52-53.

[^282]: *Id.* at 20739, para. 54.

[^283]: *Id*. These elements include the rate for a line with access to
    the public switched network, federal subscriber line charge, state
    subscriber line charge (if any), federal universal service fund
    charge, state universal service fund charge (if any), local number
    portability charge, telecommunications relay service charge, 911
    charges, federal universal service credits (if any), state universal
    service credits (if any), and the federal excise tax. *Id.*

[^284]: *Id.* at 20736-37, para. 50 & n.125.

[^285]: *Id.* at 20738, para. 53.

[^286]: *Id*. at 20736-37, para. 50. The Joint Board also suggested that
    it may be appropriate to seek comment on whether states should
    eventually review business rates as well.

[^287]: *Id*.

[^288]: *Id*. at 20736-37, 20740, paras. 50, 56.

[^289]: *Id.* at 20740, para. 56. The Joint Board specifically noted
    that the Commission should establish a time limit for determining
    whether further federal action would be provided. *Id.*

[^290]: *See Id.* at 20737-38, para. 51; *see also* California Comments
    at 11, Missouri Comments at 2. In part V.D., below, we seek comment
    on providing additional inducements for state action to preserve and
    advance universal service through additional targeted federal
    support for high-cost wire centers in states that adopt explicit
    universal service mechanisms.

[^291]: *See supra* paras. 43, Error: Reference source not found.

[^292]: *See Ninth Report and Order*, 14 FCC Rcd at 20483, para. 97 ("As
    a regulatory safeguard, . . . we adopt rules in this Order requiring
    states that wish to receive federal universal service high-cost
    support for non-rural carriers within their territory to file a
    certification with the Commission . . . Each certification shall
    become part of the public record maintained by the Commission.").

[^293]: *See supra* para. 26. Qwest warns that, without strong
    encouragement from the Commission, states are unlikely to replace
    implicit subsidies with explicit, competitively neutral funding
    mechanisms until a crisis point where implicit subsidies have been
    virtually eliminated. *See e.g.,* Qwest Comments at 7-8. SBC
    similarly claims that many states give no sign of addressing the
    erosion of traditional cross-subsidies due to the growth of
    competition and warns that the "predictable train wreck . . . is now
    an imminent reality." *See* SBC Reply Comments at 3, 12.

[^294]: *See supra* part IV.C.

[^295]: NASUCA disputes SBC's claim that all residential rates are below
    cost and argues that for most companies residential service is
    "self-supporting." *See* NASUCA Reply Comments at 3-4. NASUCA argues
    that many non-rural carriers have the resources to ensure reasonably
    comparable rates without additional federal support, and urges the
    Commission to withhold support from carriers earning a healthy
    overall return, for example, in excess of 11.25%. *See* NASUCA
    Comments at 5, 9. NASUCA provides interstate rate of return
    information for BellSouth, Qwest, SBC, and Verizon. *See* NASUCA
    Comments, Attachment A. We agree with NASUCA that carriers claiming
    their residential rates are below cost should be required to
    substantiate their claims, but we believe that the states are in the
    best position to evaluate these claims. *See* NASUCA Reply Comments
    at 4.

[^296]: Congress thought that lower costs would be a likely result of
    increased competition. *See* S. Rep. No. 23, 104^th^ Cong., 1^st^
    Sess. 26 ("The Committee expects that competition and new
    technologies will greatly reduce the actual cost of providing
    universal service over time, thus reducing or eliminating the need
    for universal service support mechanisms as actual costs drop to a
    level that is at or below the affordable rate for such service in an
    area . . ..").

[^297]: *See* Wisconsin Comments at 4.

[^298]: *See supra* para. 22.

[^299]: Although we do not foreclose future action, we find that it
    would be inappropriate at this time to condition non-rural support
    on the achievement of rate comparability. Denying non-rural support
    to a high-cost state would have very serious effects on the rates
    paid by consumers in that state. We therefore decline to place such
    conditions on non-rural support without additional information
    regarding rate comparability and state action to achieve rate
    comparability.

[^300]: *See supra* para. Error: Reference source not found. As
    competition increases, it will be helpful to know whether more
    states are establishing explicit support mechanisms*. See, e.g.,*
    SBC Comments at 6 ("\[T\]he Joint Board and the Commission do not
    even have any information that would allow them to analyze state
    universal service mechanisms."). In the attached Further Notice, we
    seek comment on collecting additional information from the states to
    enhance our ability to assess whether or not federal and state
    mechanisms are resulting in reasonably comparable rates and to take
    appropriate action if they are not. *See infra* part V.A.

[^301]: *See infra* part V.

[^302]: *See infra* part V.D.

[^303]: *Recommended Decision*, 17 FCC Rcd at 20736-38, paras. 50-53. As
    explained above, the nationwide urban rate benchmark also will be
    used to define reasonable comparability of urban and rural rates.
    S*ee supra* paras. ***38-***42.

[^304]: In contrast, the cost benchmark, discussed above in part IV.C.,
    is used to identify the amount of federal support that, in
    combination with state action, is sufficient to achieve the Act's
    universal service goals, including reasonable comparability of rural
    and urban rates.

[^305]: *Recommended Decision*, 17 FCC Rcd at 20738, para. 52.

[^306]: The most recent survey includes data as of October 15, 2002.
    *2003 Reference Book*, at 1-10.

[^307]: *See supra* para. 39. *See also* Dixon, W., and Massey, F.,
    Introduction to Statistical Analysis, Third Edition, McGraw-Hill
    Book Company, 1969. pp. 26-27 ("An important concept in statistics
    is that any average does not in itself give a clear picture of a
    distribution \[of data\]. . . . Another type of measure which helps
    to clarify the shape of the distribution is one that indicates how
    the observations are spread out from the average. Such a measure
    could be called a measure of dispersion, spread, or variability.").

[^308]: For this reason, we reject arguments by commenters that ignore
    the variation in urban rates in suggesting appropriate urban rate
    benchmarks. For example, NASUCA notes that, using a 135 percent
    urban rate benchmark, customers in rural areas could potentially pay
    rates that are up to \$7.82 per month higher than the national
    average urban rate, and concludes without further analysis that
    rates greater than this could not be found reasonably comparable.
    NASUCA Comments at 15-16. NASUCA does not address the variation of
    urban rates or the fact that some urban areas have rates higher than
    135 percent of the urban average rate. Similarly, Montana, Vermont,
    and Maine suggest that reasonably comparable rural rates must be
    within 125 percent of the nationwide average urban rate because a
    consumer would likely view price differences exceeding 25 percent as
    excessive, but fail to address how variation in urban rates
    nationwide should be reflected in the permissible variation of rural
    rates. Montana and Vermont Comments at 44-47, Maine Comments at
    23-27; *see also supra* para*.* 44.

[^309]: Based on the urban rate data in the *2003* *Reference Book*, the
    nationwide average urban rate currently is \$23.38. *See* Appendix
    B. We direct the Bureau to publish in future editions of the
    *Reference Book* both the average urban rate on which the benchmark
    will be based and the benchmark level as a dollar amount and as a
    percentage of the average, in order to facilitate the states' use of
    the benchmark in the rate review and expanded certification process.
    The 2003 and prior editions of the *Reference Book* are available on
    the Commission website at www.fcc.gov/wcb/iatd/lec.html.

[^310]: The Joint Board's suggested urban rate benchmark of 135 percent
    would place the benchmark at \$31.56, or 72 cents less than the
    benchmark we adopt. The Joint Board suggested that the Commission
    consider setting the rate benchmark at 135 percent of the average
    urban rate\--because it had also recommended a cost benchmark level
    of 135 percent of the average cost per loop\--but further develop
    the record to establish the appropriate rate benchmark. We have
    further developed the record through our analysis of rate data in
    the *Reference Book*.

[^311]: *See supra* paras. 39-40.

[^312]: Our analysis of the urban rate data in the *Reference Book*
    demonstrates that a log-logistic distribution, rather than a normal
    distribution, best fits the data. In this log-logistic distribution,
    approximately 96 percent of the total area under the log-logistic
    curve (and, therefore, 96 percent of urban rates) is to the left
    (*i.e.*, below) the average plus two standard deviations. In
    contrast, if the data were normally distributed, approximately 97.5
    percent of the total area under the normal curve would be to the
    left of the average plus two standard deviations.

[^313]: The average urban rate plus three standard deviations is also
    normally a better estimate of the highest urban rate nationwide than
    the highest rate shown in the *Reference Book*'s survey.

[^314]: *Recommended Decision*, 17 FCC Rcd at 20738, para. 53.

[^315]: Wisconsin Comments at 5.

[^316]: *Id.* We also do not agree with the Wisconsin Commission's
    suggestion that the nationwide urban rate benchmark should be
    indexed to household income levels. *Id*. at 6. As the Commission
    has previously found, using income to set an affordability benchmark
    "would over-emphasize income levels in relation to other non-rate
    factors that may affect affordability and fail to reflect the effect
    of local circumstances on the affordability of a particular rate."
    *First Report and Order*, 12 FCC Rcd at 8841, para. 115; *see supra*
    para. 45. Moreover, household income does not, in itself, provide
    probative information with regard to whether rates in rural areas
    are reasonable comparable to rates in urban areas.

[^317]: *See supra* para. 41; *see also* *Recommended Decision*, 17 FCC
    Rcd at 20738, para 52.

[^318]: Section 54.5 defines rural area as "a non-metropolitan county or
    county equivalent as defined in the Office of Management and
    Budget's (OMB) Revised Standards for Defining Metropolitan Areas in
    the 1990s and identifiable from the most recent Metropolitan
    Statistical Area (MSA) list released by OMB, or any contiguous
    non-urban Census Tract or Block Numbered Area within an MSA-listed
    metropolitan county identified in the most recent Goldsmith
    Modification published by the Office of Rural Health Policy of the
    U.S. Department of Health and Human Services." 47 C.F.R. § 54.5.

[^319]: *First Report and Order*, 12 FCC Rcd at 9113-17, paras. 646-52.

[^320]: *Id.* at 9115-16, para. 649.

[^321]: *See* Verizon Comments, filed April 10, 2002, at 3-4.

[^322]: We note that the second part of the definition of "rural area"
    currently used in the rural health care program includes a
    modification ("Goldsmith modification") to identify rural areas
    within metropolitan counties. We understand that the Office of Rural
    Health Care Policy in the Department of Health and Human Services no
    longer utilizes the Goldsmith modification and that no Goldsmith
    modification has been prepared for the 2000 Census data. When
    identifying additional areas as "rural" for purposes of determining
    whether rates in rural, high-cost areas served by non-rural carriers
    are reasonably comparable, states are free, but not required, to
    consider what areas were deemed rural in the last Goldsmith
    modification.

[^323]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50 & n.
    125. The Joint Board suggested that a definition based on this line
    density might be appropriate because, based on the data before the
    Joint Board, lower line densities were above the average national
    cost estimated by the cost model and higher line densities were
    below the average national cost. The Joint Board also recommended
    that the Commission consider whether another definition may be more
    appropriate. *Id.* at 20736-37 n.125.

[^324]: NASUCA Comments at 14 n. 37; *see also* Wyoming Comments at 7.
    We agree with NASUCA that the Joint Board's suggested definition
    inappropriately implies that any area with above-average costs is
    "high cost" and any area with below-average costs is "low cost,"
    because the Commission has traditionally treated as high-cost only
    those areas which had costs exceeding specific above-average cost
    benchmarks. NASUCA Comments, at 14 n.37.

[^325]: *Recommended Decision*, 17 FCC Rcd at 20739, para. 54. The
    elements of the basic service rate template specifically identified
    by the Joint Board are: the rate for a line with access to the
    public switched network, federal subscriber line charge, state
    subscriber line charge (if any), federal universal service fund
    charge, state universal service fund charge (if any), local number
    portability charge, telecommunications relay service charge, 911
    charges, federal universal service credits (if any), state universal
    service credits (if any), and the federal excise tax. *Id.* These
    rate elements are all currently included in the annual rate survey
    contained in the Bureau's *Reference Book*. The basic service rate
    template also includes other rate elements that are included in the
    survey. *See* Appendix F. The Joint Board recommended that in states
    where 911 fees are not established on a statewide basis, the state
    should use a statewide average 911 fee for purposes of the standard
    rate template. *Id.* at 20739 n.132. The Joint Board found, and we
    agree, that the use of a statewide average will maintain the proper
    role of federal support for state, rather than local rates, and will
    reduce the number of separate rates in states where 911 fees are set
    locally. *Id.*

[^326]: *See* New York Comments at 2.

[^327]: *See* NASUCA Comments at 7-8.

[^328]: *See supra* para. 47. Similarly, we conclude that it is not
    necessary for each state to certify separately that all of its rural
    consumers have calling areas comparable to those of the state's
    urban consumers. NASUCA Comments at 15. Each state will have the
    flexibility to include considerations like the scope of calling area
    in its determination of whether rural rates are reasonably
    comparable to urban rates. We note that some commenters challenge
    NASUCA's premise that calling area size is pertinent to rate
    comparability. *See* Sprint Comments at 7.

[^329]: *Recommended Decision*, 17 FCC Rcd at 20739, para. 55 ("For
    example, the state could show that the local calling area size is
    too small to be considered comparable service, and that toll or
    extended area service charges should be included to produce a
    reasonably comparable rate.").

[^330]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50.

[^331]: CUSC Comments at 8-10.

[^332]: *Recommended Decision*, 17 FCC Rcd at 20739-40, para. 55.

[^333]: 47 C.F.R. § 54.313(a); *see Ninth Report and Order*, 14 FCC Rcd
    at 20483, para. 97.

[^334]: Other relevant factors that might lead a state to reach this
    conclusion may include, but are not limited to, poor service quality
    or small calling areas that materially limit the value of the
    service received. *See Recommended Decision*, 17 FCC Rcd at
    20736-37, para. 50.

[^335]: For example, a state could conclude that a high degree of
    subscribership in rural areas to a non-flat rate basic service plan
    indicates that many of those subscribers in fact receive basic
    service at a rate reasonably comparable to urban rates nationwide.

[^336]: 47 U.S.C. § 254(e); 47 C.F.R. § 54.313(d)(3).

[^337]: 47 C.F.R. § 54.313(a).

[^338]: NASUCA Comments at 14.

[^339]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50.

[^340]: *Id*.

[^341]: *Recommended Decision*, 17 FCC Rcd at 20736-37, 40, paras. 50,
    56.

[^342]: The public notice will set forth the pleading schedule. *See
    also* 47 C.F.R. §§ 1.4, 1.45.

[^343]: The Commission does not anticipate acting on any state requests
    for further action while the Further Notice is pending. *See infra*
    part V.C.

[^344]: California Comments at 14, CUSC Comments at 13-14, Montana and
    Vermont Comments at 39, New York Comments at 2-3.

[^345]: *Recommended Decision*, 17 FCC Rcd at 20740, para. 56.

[^346]: Wisconsin Comments at 3-4.

[^347]: California Comments at 15; New York Comments at 2 & n.5; *see
    also* AT&T Reply at 9; Michigan Reply at 3; Worldcom Reply at 4.

[^348]: *See supra* paras. 55-61.

[^349]: Montana and Vermont Comments at 32-33.

[^350]: *Recommended Decision*, 17 FCC Rcd at 20740, para. 56, *see
    also* *supra* para. 22; NASUCA Comments at 14-15, Verizon Comments
    at 6.

[^351]: Montana and Vermont Comments, at 33-39.

[^352]: *Qwest*, 258 F.3d at 1203-04. As Verizon notes, the only
    inducements available to the Commission derive from its ability to
    condition some federal action\--whether non-rural universal service
    support or further federal action\--on a state's showing that it has
    taken the actions necessary to achieve the Act's universal service
    goals. Verizon Comments at 16-17.

[^353]: *Qwest*, 258 F.3d at 1204.

[^354]: *Id.* at 1205.

[^355]: *Id.* at 1205.

[^356]: The term "price cap carrier" refers to local exchange carriers
    (LECs) that are subject to price cap regulation of interstate
    revenues. The Commission implemented price cap regulation for the
    largest LECs in 1991. Almost all non-rural carriers are subject to
    price cap regulation.

[^357]: *See First Report and Order*, 12 FCC Rcd 8776; *Access Charge
    Reform*, CC Docket No. 96-262, First Report and Order, 12 FCC Rcd
    15982 (1997) (*Access Charge Reform First Report and Order*). Local
    switching support and high-cost loop support, previously funded
    entirely by interexchange carriers, now are funded by all
    telecommunications carriers that provide interstate
    telecommunications services on an equitable and nondiscriminatory
    basis. *See First Report and Order*, 12 FCC Rcd 8940-42, para.
    303-304; 47 U.S.C. § 254(d). In addition, the Commission adopted
    rules to make federal high-cost support available or "portable" to
    all ETCs on a competitively- and technologically-neutral basis.
    *First Report and Order*, 12 FCC Rcd at 8932-8934, paras. 286-290,
    8944-8945, paras. 311-313.

[^358]: *Access Charge Reform Order*, 12 FCC Rcd at 15998, para. 35. The
    Commission recognized that rate structure modifications alone might
    not "create a system that accurately reflects the true cost of
    service in all respects." *Id.* at 16001, para. 42. But it concluded
    that relying primarily on competition to drive access charges down
    to cost-based levels would serve the public interest better than
    prescribing rates. *Id.* at 16001-02, paras. 44-46. The Commission
    reasoned that a market-based approach was more consistent with the
    1996 Act, and that tools for accurately prescribing rates at
    economic cost levels were not yet available. The Commission also
    reasoned that, even if it were possible to identify all implicit
    subsidies in interstate access charges, immediately removing them
    might have an inequitable impact on LECs. The Commission determined
    that a phased-in approach was fully in accord with the Act.

[^359]: *See supra* para. 6.

[^360]: *Access Charge Reform, Price Cap Performance Review for LECs*,
    CC Docket Nos. 96-262 and 94-1, Sixth Report and Order, Low-Volume
    Long-Distance Users, CC Docket No. 99-249, Eleventh Report and
    Order, 15 FCC Rcd 12962, 13046, para. 201 (2000) (*CALLS Order*)
    (subsequent history omitted). In a subsequent Order on Remand in the
    CALLS proceeding, the Commission concluded, among other things, that
    the \$650 million Interstate Access Support amount included in the
    integrated CALLS plan more appropriately balanced than would a
    higher or lower support amount the Commission's various policy
    goals, including the availability of service in all areas at rates
    that are affordable and reasonably comparable to nationwide rates,
    the promotion of competition and efficient investment in rural
    America, and the facilitation of the transitional reforms of the
    access rate structure adopted in the *CALLS Order*. *Access Charge
    Reform, Price Cap Performance Review for LECs, Low-Volume Long
    Distance Users, Federal-State Joint Board on Universal Service*, CC
    Docket Nos. 96-262, 94-1, 99-249, 96-45, Order on Remand, FCC 03-164
    (released July 10, 2003).

[^361]: *See First Report and Order*, 12 FCC Rcd at 8899, 8936, paras.
    224, 294; *Access Charge Reform First Report and Order*, 12 FCC Rcd
    at 16126-27, paras. 330-332. The term "rate-of-return carrier"
    refers to LECs subject to rate-of-return regulation of interstate
    revenues. Most, but not all, rate-of-return carriers also meet the
    definition of rural telephone company. *See supra* note 1.

[^362]: *Rural Task Force Order*, 16 FCC Rcd 11244. In the *First Report
    and Order*, the Commission determined that federal high-cost support
    should be based on forward-looking economic costs, but that
    non-rural carriers would transition to forward-looking mechanisms
    first. *See First Report and Order*, 12 FCC Rcd at 8899, 8935-36,
    paras. 224, 293-294. Subsequently, the Joint Board established the
    Rural Task Force to assist in developing a forward-looking mechanism
    appropriate for rural carriers. The Rural Task Force recommended
    modifying the existing high-cost loop support mechanism for a
    five-year period, rather than attempting to modify the non-rural
    mechanism so that it could be applied to rural carriers. The Joint
    Board recommended that the Commission use the Rural Task Force
    recommendation as a foundation for implementing a universal service
    plan for rural carriers for five years, and undertake a
    comprehensive review of the high-cost support mechanisms for rural
    and non-rural carriers to ensure that both mechanisms function
    efficiently and in a coordinated fashion. *See Federal-State Joint
    Board on Universal Service*, Recommended Decision, CC Docket No.
    96-45, 16 FCC Rcd 6153, 6158, 6162, paras. 13, 21 (2000).

[^363]: *See Rural Task Force Order*, 16 FCC Rcd at 11248-49, paras.
    8-10.

[^364]: *See Rural Task Force Order*, 16 FCC Rcd at 11258, para. 28.
    Although a number of commenters argued generally that the Rural Task
    Force plan would provide support that is either inadequate or
    excessive, neither side of the debate proffered specific evidence
    supporting their positions. *Id.* at 11257-58, para. 27. The
    Commission also specifically rejected the contention that no
    increase in high-cost loop support was warranted, concluding that it
    was reasonable to modify the high-cost loop support levels
    established in 1997 for rural carriers to account for changes in
    costs and technology, in order to ensure that rural carriers can
    maintain existing facilities and make prudent facility upgrades
    until such time as a long-term rural plan is adopted. *Id.* at
    11258, para. 28.

[^365]: *See Rural Task Force Order*, 16 FCC Rcd at 11310-13, paras.
    169-177.

[^366]: *See Multi-Association Group (MAG) Plan for Regulation of
    Interstate Services of Non-Price Cap Incumbent LEC and IXCs,* Second
    Report and Order and Further Notice of Proposed Rulemaking in CC
    Docket No. 00-256, Fifteenth Report and Order in CC Docket No.
    96-45, and Report and Order in CC Docket Nos. 98-77 and 98-166, 16
    FCC Rcd 19613, 19615-16, para. 1 (2001) (*MAG Order and MAG Further
    Notice*). With limited exceptions, the interstate access charge
    reforms adopted in the 1997 *Access Charge Reform Order* applied
    only to price cap carriers. *See Access Charge Reform Order*, 12 FCC
    Rcd at 16126-27, paras. 330-332. In 1998, the Commission created a
    separate docket to undertake more comprehensive review of the issues
    and circumstances specific to rate-of-return carriers. *See Access
    Charge Reform for Incumbent Local Exchange Carriers Subject to
    Rate-of-Return Regulation*, CC Docket No. 98-77, Notice of Proposed
    Rulemaking, 13 FCC Rcd 14238, 14240, paras. 3-4 (1998). While it
    proposed reforms similar to those adopted for price cap carriers,
    the Commission recognized that differences between the two groups
    might warrant a different approach in some matters, including a
    different transition to more efficient, cost-based rates. *Id.* at
    14250-52, paras. 35-36, 39. This docket remained open when the MAG
    plan was submitted by four LEC associations in 2000.

[^367]: *See* 47 C.F.R. § 54.901. *See also MAG Order*, 16 FCC Rcd at
    19673-74, para. 142.

[^368]: *MAG Order*, 16 FCC Rcd at 19668-69, paras. 130-131. The
    Commission observed in the *CALLS Order*, which continued the
    process of access charge reform for price cap carriers, that
    "identifying an amount of implicit support in our interstate access
    charge system is an imprecise exercise." *CALLS Order*, 15 FCC Rcd
    at 13046, para. 201. The Commission explained that the "various
    implicit support flows (*e.g.*, business to residential, high-volume
    to low-volume, and geographic rate averaging) are not easily
    severable and quantifiable. Moreover, the competitive pricing
    pressures present during this transitional period between monopoly
    and competition present additional complexities in identifying a
    specific amount of implicit support." *Id.* In the *MAG Order*, the
    Commission noted that the difficulty of determining the amount of
    implicit support contained in interstate access charges is even
    greater for rate-of-return carriers than for price cap carriers,
    given their size, diversity, and regulatory history. *MAG Order*, 16
    FCC Rcd at 19668-69, para. 130.

[^369]: *See* 47 C.F.R. §§ 36.601-36.631 (high-cost loop support),
    54.301 (LSS), 54.800-809 (IAS), 54.901-54.904 (ICLS). In the *MAG
    Further Notice*, the Commission tentatively concluded that Long Term
    Support should be merged into ICLS beginning July 1, 2003. *See MAG
    Further Notice*, 11 FCC Rcd at 19725-26, para. 274. Under each of
    the federal high-cost support mechanisms, competitive ETCs serving
    customers in the incumbent carrier's service area normally receive
    the same per-line amount of support that the incumbent carrier would
    receive. 47 C.F.R. § 54.307(a). In a November 2002 *Referral Order*,
    the Commission requested that the Joint Board review and provide
    recommendations regarding the Commission's rules related to the
    calculation of support in study areas with multiple ETCs.
    *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Order, 17 FCC Rcd 22642 (2002) (*Referral Order*);
    *Federal-State Joint Board on Universal Service Seeks Comment on
    Certain of the Commission's Rules Relating to High-Cost Universal
    Service Support and the ETC Designation Process*, CC Docket No.
    96-45, Public Notice, 18 FCC Rcd 1941 (2003).

[^370]: Non-rural high-cost support is generally targeted to high-cost
    wire centers, and IAS is targeted to state-created unbundled network
    element (UNE) zones, where such zones exist. *See* 47 C.F.R. §§
    54.309, 54.803. The Commission's rules also permit disaggregation
    and targeting of high-cost loop support, LSS, and ICLS to geographic
    areas below the study-area level. *See* 47 C.F.R. §§ 54.307(a)(1);
    54.315.

[^371]: *See Federal-State Joint Board on Universal Service,
    Forward-Looking Mechanism for High Cost Support for Non-Rural LECs*,
    CC Docket Nos. 96-45, 97-160, Fifth Report and Order, 13 FCC Rcd 21,
    323, 21,335 (1998) ("Outside plant, or loop plant, rather than
    switching or interoffice transport plant, constitutes the largest
    portion of total network investment, particularly in rural areas.").

[^372]: *See* Federal Universal Service Support Mechanisms Fund Size
    Projections and Contribution Base for the Fourth Quarter 2002,
    Appendix HC 01 (Universal Service Administrative Company, August 2,
    2002).

[^373]: *See* 47 C.F.R. § 36.631. Specifically, high-cost loop support
    is available for 65% of costs exceeding 115% of the national average
    loop cost and 75% of costs exceeding 150% of the national average
    loop costs. The national average loop cost has been frozen at
    \$240.00. *See* 47 C.F.R. § 36.621. High-cost loop support is
    subject to an indexed cap which limits the growth in the total
    support available each year. *See id.* at 36.601(c). As discussed
    above, the term "rural carrier" refers to LECs that meet the "rural
    telephone company" definition in section 153(37) of the Act. 47
    U.S.C. § 153(37). *See supra* note 1.

[^374]: LSS is the product of a LEC's annual unseparated local switching
    revenue requirement multiplied by its local switching support
    factor, which is defined as the difference between the 1996 weighted
    interstate Dial Equipment Minutes (DEM) factor and the 1996
    unweighted DEM factor. *See* 47 C.F.R. § 54.301.

[^375]: *See* 47 C.F.R. § 54.901. *See also MAG Order*, 16 FCC Rcd at
    19673-74, para. 142.

[^376]: 47 C.F.R. § 54.804; *see CALLS Order*, 15 FCC Rcd at 13049-55,
    paras. 206-13. The Commission established the IAS mechanism in the
    *CALLS Order* as part of a five-year transitional access charge and
    universal service reform plan for price cap carriers. *Id.* at
    12962. The total amount of IAS is limited to \$650 million each
    year: the IAS mechanism applies mathematical formulas to apportion
    support among ETCs in price cap carrier service areas. 47 C.F.R. §
    54.801. The term "price cap CMT revenues" refers to a price cap
    carrier's common line, marketing, and transport interconnection
    charge revenues. 47 C.F.R. § 54.800.

[^377]: As discussed above, the LSS mechanism also defrays high fixed
    local switching costs for small LECs. *See supra* para. 103.

[^378]: *See* Industry and Technology Analysis Division, Wireline
    Competition Bureau, Telephone Subscribership in the United States
    (April 2003) (*Telephone Subscribership Report*). *See also* AT&T
    Comments at 11 (citing November 2002 *Telephone Subscribership
    Report*).

[^379]: *Recommended Decision*, 17 FCC Rcd at 20728-29, para. 34,
    *supra* note Error: Reference source not found. According to Bureau
    of Labor Statistics figures, urban households continue to spend more
    on telephone service, including local and long-distance service,
    than do rural households. *See Reference Book*, Table 2.1 (average
    annual expenditures on telephone service by household locations).

[^380]: In particular, the IAS mechanism has helped to reduce by \$2.6
    billion the recovery of common line costs by price cap carriers
    through inefficient rate elements containing implicit support.
    *Access Charge Reform, Price Cap Performance Review for LECs*, CC
    Docket Nos. 96-262 and 94-1, Order on Remand, 15 FCC Rcd 12962,
    13046, para. 201 (released July 10, 2003).

[^381]: *See supra* note Error: Reference source not found.

[^382]: *See supra* note Error: Reference source not found and
    accompanying text.

[^383]: *MAG Order*, 16 FCC Rcd at 19620, para. 13 ("In particular, as
    the terms of the CALLS plan and the Rural Task Force plan near their
    respective ends, we anticipate that the Commission will review
    whether the measures we adopt here continue to be consistent with
    our competitive goals for the local exchange and exchange access
    services markets, as well as with our long-term universal service
    plans.").

[^384]: *Developing a Unified Intercarrier Compensation Regime*, CC
    Docket No. 01-92, Notice of Proposed Rulemaking, 16 FCC Rcd 9610
    (2001).

[^385]: *See Rural Task Force Order*, 16 FCC Rcd at 11310, para. 169;
    *Remand Notice*, 17 FCC Rcd at 3011, paras. 27-28.

[^386]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, *1998 Biennial Regulatory Review---Streamlined
    Contributor Reporting Requirements Associated With Administration of
    Telecommunications Relay Service, North American Numbering Plan,
    Local Number Portability, and Universal Service Support Mechanisms*,
    CC Docket No. 98-171, *Telecommunications Services for Individuals
    With Hearing and Speech Disabilities, and the Americans With
    Disabilities Act of 1990*, CC Docket No. 90-571, *Administration of
    the North American Numbering Plan and North American Numbering Plan
    Cost Recovery Contribution Factor and Fund Size*, CC Docket No.
    92-327, NSD File No. L-00-72, *Number Resource Optimization*, CC
    Docket No. 99-200, *Telephone Nmber Portability*,

    CC Docket No. 95-116, *Truth-In-Billing and Billing Format*, CC
    Docket No. 98-170, Report and Order and Second Further Notice of
    Proposed Rulemaking, 17 FCC Rcd 24952 (2002); *Referral Order*, 17
    FCC Rcd 22642.

[^387]: *Rural Task Force Order*, 16 FCC Rcd at 11249, para. 11.

[^388]: *See supra* part IV.D.

[^389]: *See supra* part IV.D.2.d.

[^390]: *See supra* para. 79.

[^391]: *See* WorldCom Reply at 3.

[^392]: In its *Recommended Decision*, the Joint Board "suggest\[ed\]
    that it may be appropriate to solicit comment as to whether . . .
    residential and business rates should eventually be reviewed by the
    states." *Recommended Decision*, 17 FCC Rcd at 20738, para. 53. We
    do not seek comment at this time on whether business rates should be
    included in the rate review process. We do believe, however, that
    collecting business rate data for some period of time might prepare
    us to better address the issue of whether business rates should be
    included in the rate review or expanded certification at a later
    date.

[^393]: *See* Wyoming Comments, at 2, 8.

[^394]: In this section, non-rural areas are those areas that are not
    "rural" as defined in the foregoing Order. *See supra* paras. 83-84.

[^395]: *See supra* paras. 87 and 90.

[^396]: *See supra* para. 93; *Recommended Decision*, 17 FCC Rcd at
    20736-37, 40, paras. 50, 56.

[^397]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50.
    Several commenters raise questions in the record regarding the
    specific details of requests for further federal action, such as the
    conditions upon which further federal action would be provided and
    the means of calculating any additional targeted federal support.

[^398]: *See supra* part IV.D.2.d. Such certifications will be filed
    according to the schedule set forth in section 54.313(d) of the
    Commission's rules.

[^399]: *See infra* para. 119. Specifically, the Joint Board recommended
    that a state requesting further federal action be required to show
    that it has already taken all actions reasonably possible and used
    all available state and federal resources to make basic service
    rates in rural areas served by non-rural carriers reasonably
    comparable, but that rural rates are nonetheless not reasonably
    comparable to urban rates nationwide. *Recommended Decision*, 17 FCC
    Rcd at 20736-37, para. 50. Factors to be addressed, pursuant to the
    Joint Board's recommendation, include, but are not limited to, "rate
    analysis and a demonstration why the state contends that rates are
    not reasonably comparable; any other factors that should be
    considered in evaluating rates; and a demonstration that the state
    has taken all reasonably possible steps to develop maximum support
    from within the state." *Id.* at 20740, para. 56. The Joint Board
    also recommended that the state should fully explain how it has used
    any federal support currently received to help achieve comparable
    rates and whether the state has implemented a state universal
    service fund to support rates in high-cost areas of the state. *Id*.

[^400]: *See supra* paras. 21-22, 76, 95.

[^401]: *See supra* para. 16 and note 35.

[^402]: Qwest Comments at 7; SBC Comments at 22; Wyoming Comments at 8.

[^403]: *Recommended Decision*, 17 FCC Rcd at 20736-37, para. 50.

[^404]: *Id.* at 20740, para. 56; *see also* Wisconsin Comments at 2-4

[^405]: The Joint Board did not specify any particular method of
    calculating any additional targeted support.

[^406]: Although non-rural support is determined based on statewide
    averages, the forward-looking cost model estimates costs at the
    wire-center level\--which are then aggregated to determine the
    statewide average cost estimate\--and targets non-rural support to
    individual wire centers. *See supra* para. 24.

[^407]: Using rates to calculate any additional targeted federal support
    would require the Commission to attempt to normalize the rates in
    different states in order to compare them. California Comments at
    13-14; New York Comments at 3; AT&T Reply at 9. No specific method
    for normalizing rates has been suggested in the record.

[^408]: *See Recommended Decision*, 17 FCC Rcd at 20736-37, paras. 50 &
    n.125. The Joint Board recommended that any additional targeted
    federal support be targeted and suggested that a wire-center basis
    would be an appropriate method of identifying high-cost areas. *Id*.

[^409]: The non-rural support mechanism, as amended in the foregoing
    Order, calculates support by comparing the statewide average cost
    per line, as estimated by the Commission's cost model, to a
    nationwide benchmark of two standard deviations above the average
    cost per line.

[^410]: These results are based a run of the Delphi version of the
    model, *Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Order, 18 FCC Rcd 41 (2003), *recons. pending*, using
    2001 year-end line count data. The nationwide average cost per line
    in this model run is \$21.67. Two standard deviations above the
    average wire center cost per line is higher in percentage terms than
    two standard deviations above the average statewide cost per line
    because wire center costs are dispersed differently than the
    statewide costs on which non-rural support is based.

[^411]: We note that 48 states plus Puerto Rico have such high-cost wire
    centers.

[^412]: In Appendix G, we set forth, for exemplary purposes, the amount
    of support that each state would receive, if eligible, at various
    percentages between 5 and 25 percent.

[^413]: *See* Appendix G.

[^414]: *See* *supra* note Error: Reference source not found and
    accompanying text.

[^415]: *See supra* para. 95.

[^416]: *See Seventh Report and Order*, 14 FCC Rcd at 8102, para. 45;
    *see also supra* para. 22. As discussed above, many states have
    adopted explicit universal service support mechanisms since passage
    of the 1996 Act, but most states continue to provide at least some
    implicit support to residential customers through their rate
    designs. *See supra* note Error: Reference source not found and
    accompanying text.

[^417]: *See e.g.,* CUSC Comments at 12; SBC Comments at 4-7, 18-26;
    Qwest Comments at 7-10.

[^418]: *See*, *e.g.*, Wyoming Comments at 2-3.

[^419]: *See supra* paras. 123-124**.** We do not believe that there is
    any reason to assume that the same amounts of additional targeted
    federal support should be provided as further federal action to
    achieve rate comparability, discussed above, and to induce state
    action to adopt explicit support mechanisms.

[^420]: New Jersey, Rhode Island and the District of Columbia do not
    have any high-cost wire centers with per loop costs exceeding this
    benchmark. *See* Appendix G. In contrast, Qwest's proposal would
    provide federal non-rural support to between 47 and 49 states. *See*
    Qwest Comments at 5. Qwest's preferred proposal would provide "Tier
    1" support based on wire center costs and "Tier 2" support based on
    statewide average costs, after taking into account Tier 1 support.
    *See* Qwest Joint Board Comments at 12-20 (filed April 10, 2002). If
    the Commission continues basing support on statewide average costs,
    Qwest argues that it must lower the benchmark to include more
    states. *See* Qwest Comments at 10-16.

[^421]: We note that about half the states have established explicit
    support mechanisms, but most still rely to some extent on geographic
    rate averaging, unbalanced residential and business rates, or other
    implicit support mechanisms. The amounts of additional targeted
    federal support potentially available to each state, if it
    qualified, at several points between 5 and 25 percent of costs over
    the proposed benchmark are set forth in Appendix G.

[^422]: *See supra* para. 37.

[^423]: AT&T Petition (January 3, 2000), Puerto Rico Tel. Co. Petition
    (January 3, 2000), SBC Petition (January 3, 2000), PCIA Petition
    (January 3, 2000) and Wyoming Commission Petition (January 3, 2000).

[^424]: AT&T Petition at 1-5; *See Ninth Report and Order*, 14 FCC Rcd
    at 20480, para. 91.

[^425]: AT&T Petition at 5-6.

[^426]: AT&T Petition at 7.

[^427]: 47 C.F.R. 54.307; *see also First Report and Order*, 12 FCC Rcd
    at 8873, para. 174.

[^428]: AT&T Petition at 2-3.

[^429]: *First Report and Order*, 12 FCC Rcd at 8872-73, para. 173.

[^430]: *First Report and Order*, 12 FCC Rcd at 8933, para. 288, n.746
    ("When the support is based on the forward-looking costs of serving
    lines in a particular geographic area, the carrier that serves the
    line, either the ILEC or the CLEC, will receive the support for that
    line, sharing only if the CLEC takes the loop as an unbundled
    network element at a rate less than the universal service support
    for that line.").

[^431]: AT&T Petition at 4.

[^432]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Order, 17 FCC Rcd 22642 (2002) (*Referral Order*);
    *Federal-State Joint Board on Universal Service Seeks Comment on
    Certain of the Commission's Rules Relating to High-Cost Universal
    Service Support and the ETC Designation Process*, CC Docket No.
    96-45, Public Notice, 18 FCC Rcd 1941 (2003) (*Referral Order Public
    Notice*).

[^433]: 47 C.F.R. § 54.309(b) and (c); *see Ninth Report and Order*, 14
    FCC Rcd at 20473, para. 76.

[^434]: *Ninth Report and Order*, 14 FCC Rcd at 20471-72, para. 72 ("The
    cost model, by design, calculates costs at the wire center level.
    The wire center costs generated by the model can then be averaged
    together, as desired, at higher levels of aggregation, such as the
    UNE cost zone level.").

[^435]: AT&T Petition at 5.

[^436]: *See Access Charge Reform, Price Cap Performance Review for
    Local Exchange Carriers*, CC Docket Nos. 96-262 and 94-1, Sixth
    Report and Order, Low-Volume Long-Distance Users, CC Docket No.
    99-249, Report and Order, Federal-State Joint Board on Universal
    Service, CC Docket No. 96-45, Eleventh Report and Order, 15 FCC Rcd
    12962, 13054, para. 211 n.484 (holding that interstate access
    support and non-rural high-cost support need not be targeted on same
    basis in light of different goals of mechanisms).

[^437]: *Ninth Report and Order*, 14 FCC at 20472-73, para. 75.

[^438]: 47 C.F.R. § 54.313.

[^439]: *Ninth Report and Order*,14 FCC Rcd at 20482-83, para. 95.

[^440]: *Ninth Report and Order*, 14 FCC Rcd at 20476-77, para. 83
    ("states can direct carriers to spend the federal support in a
    manner consistent with section 254(e), *though not necessarily in
    the wire center to which the support was targeted*.")(italics
    added); *id.* at 20482-83, para. 95 ("Because the support that will
    be provided by the methodology described in this Order is intended
    to enable the reasonable comparability of intrastate rates, and
    states have primary jurisdiction over *intrastate* rates, we find
    that it is most appropriate for states to determine how the support
    is used to advance the goals set out in section 254(e)").

[^441]: Puerto Rico Tel. Co. Petition at 2-3.

[^442]: Puerto Rico Tel. Co. does not qualify for non-rural high-cost
    support under the methodology adopted in the *Ninth Report and
    Order*. Before the transition to forward-looking support for
    non-rural carriers, Puerto Rico Tel. Co. received over \$40 million
    annually in intrastate high-cost support based on its embedded
    costs. *See supra* n. Error: Reference source not found and
    accompanying text. The Commission included in the *Ninth Report and
    Order* an interim hold-harmless provision that provided a gradual
    transition to the non-rural high-cost support mechanism. Under the
    hold-harmless provision, no carrier was to receive less support on a
    per-line basis than it would have received under the previous
    mechanism based on embedded costs. *Ninth Report and Order*, 17 FCC
    Rcd at 20474, para. 78. In the *Thirteenth Report and Order*, the
    Commission implemented a phasedown of the hold-harmless provision.
    *See Federal-State Joint Board on Universal Service*, CC Docket
    96-45, Thirteenth Report and Order and Further Notice of Proposed
    Rulemaking, 15 FCC Rcd 24422 (2000) (*Thirteenth Report and Order*).
    We note that Puerto Rico Tel. Co. continues to receive almost \$90
    million annually in interstate support. *See* Federal Universal
    Service Support Mechanisms Fund Size Projections and Contribution
    Base for the Fourth Quarter 2002, Appendix HC 17 (Universal Service
    Administrative Company, August 1, 2003).

[^443]: Puerto Rico Tel. Co. Petition at 14-15. *See also* Puerto Rico
    Tel. Co. Petition for Reconsideration, CC Docket No. 96-45 (filed
    July 17, 1997); Proposal of Puerto Rico Telephone Company, CC Docket
    Nos. 96-45 and 97-160 (filed April 27, 1998).

[^444]: Puerto Rico Tel. Co. Petition at 8-11. Puerto Rico Tel. Co. also
    requests that the Commission clarify that Long Term Support (LTS)
    was not affected by the *Ninth Report and Order* and will continue
    to be distributed as it has been in the past. We need not address
    this issue here as the Commission subsequently addressed the status
    of LTS in the *Thirteenth Report and Order* and the *MAG Order*.
    *See* *Thirteenth Report and Order*, 15 FCC Rcd at 24426, para. 9;
    *MAG Order*, 16 FCC Rcd at 19724-26, paras. 272-276.

[^445]: *See supra* part IV.A.

[^446]: *First Report and Order,* 12 FCC Rcd at 8946, para. 315. The
    *First Report and Order* noted that Puerto Rico Tel. Co. was the
    twelfth largest company, as measured by access lines, in the United
    States at the time. *Id.* at n.791. Puerto Rico Tel. Co. is now a
    Verizon subsidiary as a result of Puerto Rico Tel. Co.'s acquisition
    by GTE and the subsequent Bell Atlantic-GTE merger to form Verizon.

[^447]: In 2000, the Commission rejected Puerto Rico Tel. Co.'s
    arguments that phasing down hold-harmless support would lead to rate
    shock in Puerto Rico, noting that the Puerto Rico Commission
    actually supported the phasedown. *Thirteenth Report and Order*, 15
    FCC Rcd at 24428-29, para. 13 & n.47.

[^448]: Letter to Marlene H. Dortch, Secretary, Federal Communications
    Commission, from Gregory J. Vogt, Counsel for Puerto Rico Telephone
    Company, Inc., CC Docket Nos. 96-45, 00-256, 98-77, 98-166 (June 6,
    2003) (*June 2003 Letter*). *See also Federal-State Joint Board on
    Universal Service: Promoting Deployment and Subscribership in
    Unserved and Underserved Areas, Including Tribal and Insular Areas*,
    CC Docket No. 96-45, Notice of Proposed Rulemaking, 14 FCC Rcd
    21177, 21232-35, paras. 135-140 (1999).

[^449]: Puerto Rico Tel. Co. Petition at 2-3.

[^450]: *See supra* at para. 6.

[^451]: Puerto Rico Tel. Co. stated in the *June 2003 Letter* that its
    subscribership has dropped slightly (from 74.5% to 71.2%) since
    2001. *June 2003 Letter* at 5. Overall subscribership in Puerto
    Rico, however, increased (from 74.2 % to 76%) from December, 1999 to
    November, 2002, apparently due to competition. *See* Centennial
    Communications Corp. Reply Comments to *Referral Order Public
    Notice*. In addition, other factors contribute to the low
    penetration rate in Puerto Rico, including the low per capita annual
    income level in Puerto Rico. *Id.* at 10.

[^452]: *Seventh Report and Order*, 14 FCC Rcd at 8097, para. 39.
    ("Affordability problems, as they relate to low-income consumers,
    raise many issues that are unrelated to the need for support in
    high-cost areas, and section 254(b)(3) reflects a legislative
    judgment that all Americans, regardless of income, should have
    access to the network at reasonably comparable rates.")

[^453]: *Rural Task Force Order*, 16 FCC Rcd at 11270, para. 59. The
    Commission found that, because the national average loop cost was
    frozen at \$240.00, NECA would no longer need to calculate the
    national average loop cost on a quarterly basis, and, thus, it would
    be unnecessary for non-rural carriers to file loop cost data on a
    quarterly basis.

[^454]: *Federal-State Joint Board on Universal Service*, CC Docket
    96-45, Twentieth Order on Reconsideration, 15 FCC Rcd 12070, 12078,
    para. 18 (2000)(*Twentieth Order on Reconsideration*).

[^455]: *Id*.

[^456]: In particular, PCIA requests that the Commission (1) allow
    wireless CETCs to self-certify that they will use non-rural
    high-cost support in a manner consistent with section 254(e), (2)
    clarify the terms "new" and "captured" in section 54.307 of the
    Commission's rules, 47 C.F.R. § 54.307, (3) address how to determine
    a mobile wireless customer's service location, and (4) define the
    term "working loop" in section 54.307, 47.C.F.R. § 54.307, as a
    working phone number with regard to wireless CETCs.

[^457]: *Referral Order*, 17 FCC Rcd 22642; *Referral Order Public
    Notice*, 18 FCC Rcd 1941.

[^458]: Wyoming Commission Petition at 4-5.

[^459]: *Id.* at 2-5.

[^460]: *Id.* at 5-9.

[^461]: *Id.* at 9-12. Specifically, Wyoming recommends that the
    Commission provide additional federal funding when a non-rural
    carrier's average forward-looking cost exceeds \$30 per month and
    the surcharge on intrastate revenues exceeds 4% for the state
    universal service fund. *See* *id.* at 11. We note that the Wyoming
    Petition also includes a request for a review of model inputs,
    specifically a review of loop lengths. *Id.* at 12-13. We do not
    address this issue at this time because it concerns the model's
    inputs adopted by the Commission in the *Tenth Report and Order*,
    which is not before us in this Order. *See Tenth Report and Order*,
    14 FCC Rcd 20156.

[^462]: *See supra* part IV.A.

[^463]: *See Qwest*, 258 F.3d at 1203-4.

[^464]: *See supra* part IV.D.

[^465]: *See supra* part V.

[^466]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601--612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^467]: *See* *Remand Notice*, 17 FCC Rcd at 3012-5, paras. 30-41.

[^468]: *See* 5 U.S.C. § 604.

[^469]: *See* Competitive Universal Service Coalition (CUSC) Comments;
    Rural Independent Competitive Alliance (RICA) Comments.

[^470]: *See* CUSC Comments at 8.

[^471]: See RICA Comments at 5.

[^472]: *See e.g.* NRTA and OPASTCO Comments.

[^473]: *Ninth Report and Order*, 14 FCC Rcd at 20439, para. 2. Rural
    telephone carriers are defined as follows:

    The term "rural telephone company" means a local exchange carrier
    operating entity to the extent that such entity \--

    \(A\) provides common carrier service to any local exchange carrier
    study area that does not include either-

    \(i\) any incorporated place of 10,000 inhabitants or more, or any
    part thereof, based on the most recently available population
    statistics of the Bureau of the Census; or

    \(ii\) any territory, incorporated or unincorporated, included in an
    urbanized area, as defined by the Bureau of the Census as of August
    10, 1993;

    \(B\) provides telephone exchange service, including exchange
    access, to fewer than 50,000 access lines;

    \(C\) provides telephone exchange service to any local exchange
    carrier study areas with fewer than 100,000 access lines; or

    \(D\) has less than 15% of its access lines in communities of more
    than 50,000 on February 8, 1996.

    47 U.S.C. § 153(37). *See also First Report and Order*, 12 FCC Rcd
    at 8944, para. 310.

[^474]: *See supra* at para. 25.

[^475]: 5 U.S.C. § 604(a)(3).

[^476]: 5 U.S.C. § 601(6).

[^477]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 5 U.S.C. § 632). Pursuant to 5 U.S.C. §
    601(3), the statutory definition of a small business 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 in the Federal Register."

[^478]: 15 U.S.C. § 632.

[^479]: *See infra* para. 157.

[^480]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 517110.

[^481]: U.S. Census Bureau, 1997 Economics Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 517110.

[^482]: *Id.* The 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 "Firms with 1,000
    employees or more."

[^483]: 13 C.F.R. § 121.201, NAICS code 517110.

[^484]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, Trends in Telephone Service, Table 5.3 (May
    2002).

[^485]: *Id.*

[^486]: *Id.*

[^487]: 13 C.F.R. § 121.201, NAICS code 517212.

[^488]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, Trends in Telephone Service, Table 5.3 (May
    2002).

[^489]: *Id.*

[^490]: 47 C.F.R. § 54.201

[^491]: 15 U.S.C. § 632.

[^492]: 5 U.S.C. § 603(c)(1)-(4).

[^493]: *See* 5 U.S.C. § 801(a)(1)(A).

[^494]: *See* 5 U.S.C. § 604(b).

[^495]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601--612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^496]: *See infra* para. 175.

[^497]: *See* 5 U.S.C. § 603(a).

[^498]: *See* 5 U.S.C. § 603(a).

[^499]: *See supra* para. 1.

[^500]: *See supra* part V.

[^501]: *See supra* part IV.D.

[^502]: *See supra* part V.D.

[^503]: 5 U.S.C. § 604(a)(3).

[^504]: 5 U.S.C. § 601(6).

[^505]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 5 U.S.C. § 632). Pursuant to 5 U.S.C. §
    601(3), the statutory definition of a small business 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 in the Federal Register."

[^506]: 15 U.S.C. § 632.

[^507]: *See supra* paras. 152-158.

[^508]: 5 U.S.C. § 603(c).

[^509]: 47 C.F.R. §§ 1.415, 1.419.

[^510]: ^?^ *See* Electronic Filing of Documents in Rulemaking
    Proceedings, 63 Fed. Reg. 24,121 (1998).

[^511]: Separate Statement of Commissioner Michael K. Powell, Concurring
    in Part, *Federal-State Joint Board on Universal Service*, Ninth
    Report and Order and Eighteenth Order on Reconsideration, CC Docket
    No. 99-45, 14 FCC Rcd. 20432 (1999).

[^512]: *Id*.

[^513]: Rural carriers continue to be governed by the Rural Task Force
    Order, which runs through 2006*. See Federal‑State Joint Board on
    Universal Service, Multi‑Association Group (MAG) Plan for Regulation
    of Interstate Services of Non-Price Cap Incumbent Local Exchange
    Carriers and Interexchange Carriers*, Fourteenth Report and Order,
    Twenty-Second Order on Reconsideration, and Further Notice of
    Proposed Rulemaking in CC Docket No. 96-45, Report and Order in CC
    Docket No. 00-256, 16 FCC Rcd 11244, 11249, para. 11 (2001) (Rural
    Task Force Order).

[^514]: Statement of Commissioner Kevin J. Martin, Approving in Part,
    Dissenting in Part, *Federal-State Joint Board on Universal Service,
    Joint Board Recommended Decision* (Oct. 16, 2002).

[^515]: See 47 U.S.C. 254(b)(3).

[^516]: See 47 U.S.C. 254(b)(5).

[^517]: *Federal-State Join Board on Universal Service,* CC Docket No.
    96-45, Ninth Report and Order and Eighteenth Order on
    Reconsideration, 14 FCC Rcd 20432(1999)(*Ninth Report and Order)*
    *remanded*, *Qwest Corp. v. FCC,* 258 F.3d 1191, 1199 (10^th^ Cir.
    2001).

[^518]: In addition to the reasons discussed below, I also agree with
    and join in many of the concerns raised in Commissioner Bob Rowe's
    thorough and thoughtful analysis in his dissent.

[^519]: Recommended Decision at paras. 19-21, 24.

[^520]: Recommended Decision at paras. 25-26. "The Commission's primary
    role is to identify those states that do not have the resources
    within their borders to support all of their high-cost lines.... The
    Commission explained in the *Ninth Report and Order* that the
    non-rural high cost support mechanism "has the effect of shifting
    money from relatively low-cost states to relatively high-cost
    states. The Commission believed that its non-rural support mechanism
    ensured that no state with costs greater than the national benchmark
    would be forced to keep rates reasonably comparable without the
    benefit of federal support....We continue to support these
    policies."

[^521]: 47 U.S.C. 254(3).

[^522]: 258 F.3d at 1200.

[^523]: See *Ninth Report and Order* at 20482-3, para. 95 (The
    Commission found it most appropriate to allow states to determine
    how non-rural cost support is used, "\[b\]ecause the support...is
    intended to enable the reasonable comparability of intrastate rates,
    and states have primary jurisdiction over intrastate rates."; *see*
    id. At 20483, para. 96 ("As long as the uses prescribed by the state
    are consistent with 254(e), we believe that states should have the
    flexibility to decide how carriers use support provided by the
    federal mechanism."). See Recommended Decision at paras. 43-56. Even
    in light of the 10^th^ Circuit remand requiring the Commission to
    consider appropriate state inducements to address reasonably
    comparable rates, the Joint Board fails to consider recommending
    either a state averaging mandate or mandatory state universal
    service mechanism requirement to address discrepancies between costs
    in rural and urban areas.

[^524]: Recommended Decision at para. 55.

[^525]: *See* Commissioner Bob Rowe's Separate Statement at 8.

[^526]: National averages could be used without a benchmark or urban
    averages could be used with a benchmark but the combination of the
    two mechanisms is arbitrary.

[^527]: Recommended Decision at para. 39.

[^528]: *See* Commissioner Bob Rowe's Separate Statement at 8.

[^529]: Id. at 40.

[^530]: The United States Department of Agriculture's Rural Utilities
    Service (RUS) recommended adoption of a benchmark tied to the
    national average urban loop cost or another statistical indicator
    more representative of urban costs, not the national average costs.
    RUS notes that 135% of the national average (urban and rural) "loop
    cost" exceed its estimate of urban "loop costs" by 233%.

[^531]: Recommended Decision at 39. (emphasis in original).

[^532]: *See also* Commissioner Rowe's Separate Statement at 2-3.

[^533]: *Id.* at 3.

[^534]: *Id.* at 5-7.

[^535]: *Id. at* 16.

[^536]: Recommended Decision at para. 56.

[^537]: *See* Commissioner Bob Rowe's Separate Statement at 18.