**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Federal-State Joint Board on )

Universal Service: ) CC Docket No. 96-45

Promoting Deployment and )

Subscribership in Unserved )

and Underserved Areas, Including )

Tribal and Insular Areas )

**FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted: August 5, 1999 Released: September 3, 1999**

**Comments Due: 60 days after publication in the Federal Register**

**Reply Comments Due:** **90 days after publication in the Federal
Register**

By the Commission: Commissioner Furchtgott-Roth approving in part,
dissenting in part, and issuing a statement; Commissioner Tristani
issuing a statement.

# TABLE OF CONTENTS {#table-of-contents .unnumbered}

I. INTRODUCTION [2](#introduction)

II\. Current Levels of Deployment and Subscribership
[8](#current-levels-of-deployment-and-subscribership)

A. Penetration Rates [8](#penetration-rates)

B. Availability and Cost of Telecommunications Services
[9](#availability-and-cost-of-telecommunications-services)

C. Impediments to Increased Penetration
[12](#impediments-to-increased-penetration)

III\. Tribal Lands [16](#tribal-lands)

A. Jurisdiction [17](#jurisdiction)

B. Defining "Tribal Lands" [23](#defining-tribal-lands)

C. High-cost Support Mechanisms [25](#high-cost-support-mechanisms)

D. Revisions to Lifeline [30](#revisions-to-lifeline)

IV\. DESIGNATING Eligible Telecommunications Carriers Pursuant to
Section 214(e)(6)
[33](#designating-eligible-telecommunications-carriers-pursuant-to-section-214e6)

V. Unserved Areas \-- Implementation of Section 214(e)(3)
[38](#unserved-areas----implementation-of-section-214e3)

A. Overview [38](#overview)

B. Defining "Unserved Area" [39](#defining-unserved-area)

C. Determining When a Community is Unserved
[40](#determining-when-a-community-is-unserved)

D. Determining When No Common Carrier Will Provide Service
[40](#determining-when-no-common-carrier-will-provide-service)

E. Identifying Carrier or Carriers Best Able to Serve Unserved Areas
[40](#identifying-carrier-or-carriers-best-able-to-serve-unserved-areas)

F. Ordering Carriers to Provide Service
[48](#ordering-carriers-to-provide-service)

VI\. Underserved Areas [49](#underserved-areas)

A. Defining "Underserved Area" [49](#defining-underserved-area)

B. Expanding LinkUp to Include Facilities-Based Charges
[49](#expanding-linkup-to-include-facilities-based-charges)

C. Support for Intrastate Toll Calling
[51](#support-for-intrastate-toll-calling)

D. Expanded Availability of Toll Limitation Devices
[51](#expanded-availability-of-toll-limitation-devices)

E. Publicizing Availability of Low-Income Support
[52](#publicizing-availability-of-low-income-support)

F. Support for Rural Health Care Infrastructure
[53](#support-for-rural-health-care-infrastructure)

VII\. Insular Areas [56](#insular-areas)

A. Defining "Insular Area" [56](#defining-insular-area)

B. Rural Health Care Support [58](#rural-health-care-support)

C. Access to Toll-Free Services in Insular Areas
[60](#access-to-toll-free-services-in-insular-areas)

VIII\. Procedural Matters [62](#procedural-matters)

A. Ex Parte Procedures [62](#ex-parte-procedures)

B. Comment Filing Procedures [62](#comment-filing-procedures)

C. Initial Regulatory Flexibility Act Analysis
[63](#initial-regulatory-flexibility-act-analysis)

IX\. Ordering clauses [63](#ordering-clauses)

APPENDIX A: COMMISSION MEETINGS ON INDIAN TELECOMMUNICATIONS ISSUES --
LIST OF ATTENDEES [65](#__RefHeading___Toc460144423)

APPENDIX B: OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS −COMMISSION HEARINGS [67](#__RefHeading___Toc460144424)

APPENDIX C: OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS -- PARTIES FILING COMMENTS
[69](#__RefHeading___Toc460144425)

APPENDIX D: COMPETITIVE BIDDING PROPOSALS AND EXAMPLES
[71](#__RefHeading___Toc460144426)

APPENDIX E: ARIZONA PROPOSAL CONCERNING UNIVERSAL SERVICE SUPPORT FOR
INITIAL CONNECTION CHARGES [83](#__RefHeading___Toc460144427)

APPENDIX F: INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS
[84](#__RefHeading___Toc460144428)

# INTRODUCTION

1.  An important goal of the Telecommunications Act of 1996[^1] is to
    preserve and advance universal service in a competitive
    telecommunications environment.[^2] The 1996 Act mandates that
    "consumers in all regions of the Nation, including low-income
    consumers and those in rural, insular, and high\[-\] cost areas,
    should have access to telecommunications and information services .
    . . ."[^3] Congress also directed that the support mechanisms
    employed by the Commission for this task should be "specific,
    predictable and sufficient."[^4] Through decisions adopted over the
    past two years, the Commission has been striving to ensure that
    federal universal service support mechanisms for high-cost areas,
    low-income consumers, schools and libraries, and rural health care
    providers, enable consumers to obtain telecommunications services
    that would otherwise be prohibitively expensive.[^5]

2.  The absence of telecommunications service in a home puts its
    occupants at a tremendous disadvantage in today's society. Parents
    cannot be reached when urgent situations arise at school. Job
    seekers cannot offer prospective employers a quick and convenient
    means of communication. People in immediate need of emergency
    services cannot contact police departments, fire departments, or
    medical providers. In short, telephone service provides a vital link
    between individuals and society as a whole. Given the importance of
    telephone service in modern society, it is imperative that the
    Commission take swift and decisive action to promote the deployment
    of facilities to unserved and underserved areas and to provide the
    support necessary to increase subscribership in these areas.

3.  The Commission took additional steps in the Thirteenth Order on
    Reconsideration toward realizing Congress's goal of bringing
    telecommunications services to all regions of the nation.[^6]
    Specifically, in consultation with the Federal-State Joint Board on
    Universal Service (Joint Board), we adopted the framework for a new,
    forward-looking high-cost support mechanism for non-rural
    carriers.[^7] This new high-cost support mechanism is intended to
    ensure that high-cost areas receive support that is specific,
    predictable, and sufficient, even as local competition develops.
    Moreover, we believe that the forward-looking methodology, as
    opposed to a methodology based on book costs, will encourage
    efficient entry and investment in high-cost areas because
    forward-looking costs drive market decisions.

4.  In addition to adopting the methodology for the new high-cost
    support mechanism for non-rural carriers, the Thirteenth Order on
    Reconsideration also sought comment on certain issues regarding the
    implementation of the new mechanism.[^8] The Commission intends to
    resolve these implementation issues in the fall of 1999, so that the
    new high-cost support mechanism will begin providing support to
    non-rural carriers beginning on January 1, 2000.[^9] In addition,
    the Commission reaffirmed its intention that rural carriers[^10]
    will receive support based on the forward-looking costs of providing
    supported services, but not before January 1, 2001, and only after
    further review by the Commission, the Joint Board, and a Rural Task
    Force appointed by the Joint Board.[^11] In the meantime, rural
    carriers will continue to receive high-cost support based on the
    existing mechanism until the Commission adopts an appropriate
    forward-looking mechanism for determining rural support. [^12]

5.  The Commission has also recognized that, despite the steps it had
    taken to achieve the universal service goals of the 1996 Act, some
    areas of the nation remain unserved or inadequately served.[^13] In
    the *First Report and Order,* the Commission stated that it would
    revisit certain issues pertaining to the availability of service in
    unserved areas[^14] and universal service support in insular
    areas.[^15] In its *Second Recommended Decision,* the Joint Board
    recommended that the special needs of unserved areas be investigated
    and subjected to a more comprehensive evaluation in a separate
    proceeding.[^16] Telephone penetration rates among low-income
    consumers, and in insular, high-cost, and tribal lands lag behind
    the penetration rates in the rest of the country.[^17] Indeed, while
    approximately 94.2 percent of all households in the United States
    have telephone service today,[^18] subscribership levels for very
    low income households (78.3 percent),[^19] insular areas,[^20]
    certain high-cost areas,[^21] and tribal lands (46.6 percent),[^22]
    are significantly lower than the national average. The Commission
    has stated that these low penetration rates are largely the result
    of "income disparity, compounded by the unique challenges these
    areas face by virtue of their location."[^23]

6.  The Commission has been particularly concerned that Indians[^24] on
    reservations, in comparison to other Americans, have less access
    even to basic telecommunications services. In 1998, the Commission
    began formally examining its relationship with Indian tribes and the
    unique issues involved in providing access to telephone service for
    Indians on reservations. As a first step, Commissioners and staff
    met with many tribal leaders and other Indian representatives to
    obtain their input. In meetings on April 30, 1998, and July 7, 1998,
    Commissioners and staff heard from a variety of tribal leaders,
    tribal telephone company representatives, academics, government
    personnel, and others with experience and expertise in the
    deployment of telecommunications services on reservations. [^25]
    Experts discussed problems ranging from geographic isolation to lack
    of information to economic barriers. These meetings provided an
    unprecedented opportunity for the Commission to hear about the
    variety of interrelated obstacles that have resulted in the lowest
    penetration rates in the country.[^26] Following these meetings,
    several of the experts returned in the fall of 1998, to provide a
    tutorial on Indian law for Commission staff.

7.  Based on this informal dialogue with experts, the Commission
    determined that it would conduct public hearings to explore further
    the reasons for the lack of telephone service and to determine what
    specific actions the Commission could take that would improve access
    to telephone service on Indian reservations. The hearings, entitled
    "Overcoming Obstacles to Telephone Service for Indians on
    Reservations," BO Docket No. 99-11, provided an opportunity to
    obtain formal testimony and comments on the range of problems the
    Commission had begun to identify. The first field hearing was held
    on January 29, 1999 at the Indian Pueblo Cultural Center in
    Albuquerque, New Mexico.[^27] The second field hearing was held on
    March 23, 1999 at the Gila River Indian Community in Chandler,
    Arizona.[^28] Each hearing consisted of three panels representing
    tribal authorities and tribal telephone companies, industry, and
    government and consumer groups.[^29] The Commission heard extensive
    testimony on issues including the costs of delivering services to
    remote areas having very low population densities; the impact of the
    size and extent of local calling areas on affordability of service;
    the quality of telephone service on reservations; the complexities
    of governmental jurisdiction and sovereignty issues; and the effects
    on telephone service of low incomes and high unemployment on
    reservations. Transcripts of the hearings and comments filed by
    interested parties are available on the Commission's website.[^30]
    Comments filed in BO Docket Number 99-11 will be incorporated, where
    relevant, into the record of this proceeding.

8.  Further, in connection with each of the field hearings,
    Commissioners and staff made site visits to Indian reservations and
    tribally-owned telephone companies. These included visits to the
    Rosebud Reservation, the Santa Domingo, Jemez, and Picuris Pueblos,
    and to Saddleback Communications, the Gila River Telephone Company,
    the Salt River Pima-Maricopa Reservation, the Navajo Nation, the
    Hopi Reservation, and the Havasupai Reservation. These site visits
    provided an opportunity for Commissioners and staff to observe
    firsthand the state of telephone service in these reservations and
    pueblos and to hear directly from tribal members about their
    experiences. For example, Commissioners and staff visited the home
    of an elderly couple who could not afford the cost of installing a
    telephone in their home. The husband of the couple explained that he
    was suffering from a chronic illness, but was unable to reach the
    hospital or his doctor by telephone to schedule medical appointments
    and discuss his treatment. During another site visit, a tribal
    member stated that a relative had died during a medical emergency
    when his family was unable to call an ambulance in time when
    critical medical attention was needed. In addition, the trips to
    Saddleback Communications and the Gila River Telephone Company
    enabled Commission staff to view the successful operations of some
    tribally-owned telephone companies.

9.  In this Further Notice of Proposed Rulemaking (Further Notice), the
    Commission addresses the unique issues that may limit
    telecommunications deployment and subscribership in the unserved or
    underserved regions of our Nation, including on tribal lands and in
    insular areas. In particular, the Commission seeks comment on
    current levels of deployment and subscribership in unserved, tribal
    and insular areas, including penetration rates, availability of
    telecommunications services, and possible impediments to increased
    deployment and penetration. With respect to tribal areas, the
    Commission seeks comment on issues that may be affecting the
    availability of universal service in tribal areas, including the
    assignment of jurisdiction, designation of eligible
    telecommunications carriers, and possible modifications to federal
    high-cost and low-income support mechanisms that may be necessary to
    promote deployment and subscribership in these areas. In particular,
    the Commission seeks comment on the possibility of allowing carriers
    to establish separate tribal study areas, raising the cap on the
    high-cost fund to allow for growth based on separate tribal study
    areas, and revisions to its Lifeline rules. In a companion Notice of
    Proposed Rulemaking we are adopting today, we seek comment on the
    potential of wireless technology to provide basic telephone service
    to tribal lands.[^31]

10. With respect to unserved areas, the Commission seeks further comment
    regarding the implementation of section 214(e)(3) of the Act, which
    permits the Commission or state commissions to order a carrier to
    provide service to an unserved community, including the possibility
    of adopting a competitive bidding mechanism to identify the carrier
    or carriers best able to serve an unserved area. The Commission also
    seeks comment on possible modifications to the federal low-income
    and rural health care support mechanisms in underserved areas,
    including tribal and insular areas, including the possibility of
    expanding LinkUp to include facilities based charges, and providing
    support for intrastate toll-calling and rural health care
    infrastructure. The Commission seeks comment on rule changes
    designed to enhance the availability of support for rural health
    care providers in insular areas, including determining the urban
    rate and the nearest large city. Through these efforts, we seek to
    ensure that unserved and underserved areas have access to
    telecommunications services. With respect to tribal lands, we also
    seek to ensure that our efforts are consistent with principles of
    tribal sovereignty, the federal trust relationship, and support for
    tribal self-determination.

# Current Levels of Deployment and Subscribership

11. In this section, we seek to gain a better understanding of the
    characteristics of unserved and underserved areas, including insular
    and tribal lands, which by their very nature are difficult to
    assess. We also seek comment on specific factors preventing
    deployment of telecommunications services in unserved areas and
    causing unusually low subscribership rates in underserved areas. We
    seek to determine which of these factors are common among rural,
    insular, high-cost, and tribal lands, and which are unique to
    specific types of areas. We ask commenters to support their comments
    with empirical evidence, in addition to anecdotal evidence, to the
    extent possible.

## Penetration Rates

12. The Industry Analysis Division of the Common Carrier Bureau
    publishes a Subscribership Report three times per year.[^32] The
    data in this report is based on the Current Population Survey (CPS),
    conducted monthly by the Census Bureau to keep track of the
    unemployment rate and other socio-economic conditions. The survey,
    however, is based on information from only 50,000 households
    nationwide and does not identify geographic areas with fewer than
    100,000 people. Because many unserved, tribal and insular areas fall
    below this population threshold, the CPS cannot be used to estimate
    penetration rates for these areas. In addition, this data does not
    include areas of the United States that are not states, including
    Puerto Rico and the Virgin Islands. The long form of the decennial
    census, which is delivered to millions of households, contains a
    question about telephone subscribership. As a result, the census
    data can be used to estimate telephone penetration for smaller
    geographic areas. This data, however, is collected only every ten
    years and it takes the Census Bureau one year to compile results.

13. We seek detailed information, to the extent that it is available, on
    penetration rates in high-cost areas, insular areas, tribal lands,
    and any other areas considered to be underserved. By the term
    penetration rate, we mean the percentage of households within a
    specified area that have telephone service in the housing unit.[^33]
    We seek this information on a national level, on a state-by-state or
    territory-by-territory level, and on an area-by-area level. To the
    extent possible, we encourage commenters to provide the following
    additional information in each of the areas, and on each of the
    levels, where they measure penetration rates: (1) total
    population; (2) population density; (3) average annual income;
    and (4) average unemployment rate. We also ask that commenters
    briefly explain the methods by which they gather their data (*e.g.*,
    census data, statistical sampling, etc.). We also seek comment on
    the difficulty of getting such information, such as the difficulty
    of mapping a telephone service territory onto the census territories
    (such as census block groups) because the boundaries may not always
    coincide, and questions concerning the definitions of the terms
    "household" and "telephone service."

## Availability and Cost of Telecommunications Services

14. In each of the areas, and on each of the levels described above in
    section above, we seek to determine the nature of the
    telecommunications services available and the costs of such
    services. In particular, we seek comment on the extent to which
    these areas receive the following service, if any: basic telephone
    service, services included within the definition of universal
    service,[^34] and/or advanced telecommunications services.[^35] We
    also seek comment on whether any carrier is providing the following
    services and the approximate number of households served by each
    service: wireline, wireless, Basic Exchange Telecommunications Radio
    Systems (BETRS),[^36] or other telecommunications services; cable
    television; direct broadcast satellite service; other satellite
    services that provide voice and data, such as those provided through
    VSAT networks; Internet service; and electric service. In addition,
    we seek comment on the monthly rate for each of these services. With
    specific regard to basic telephone service, we seek comment on the
    average monthly bill for local service, local toll service, and
    long-distance service.

15. To the extent that underserved, high-cost, insular, and/or tribal
    lands have basic telephone service, we seek comment on whether the
    local calling area includes the nearest metropolitan area or other
    area where the nearest medical, government, cultural or
    entertainment facilities exist, *i.e*., the "community of interest."
    For unserved areas, and in particular tribal lands, we also seek
    comment to determine whether these areas fall within the designated
    service area of existing carriers, regardless of whether such
    carriers are providing service to the area.

16. We seek comment on the extent to which existing facilities currently
    used to provide other services (*e.g*., radio broadcast towers,
    cable television plant, electrical poles and satellite
    infrastructure) could be adapted to provide the services included
    within the definition of universal service.[^37] We also seek
    comment on whether specific services included within the definition
    of universal service could not be provided via these facilities. We
    seek comment on the extent to which facilities used to provide
    telecommunications service to customers outside the unserved or
    underserved areas exist adjacent to or nearby the unserved or
    underserved areas. In particular, we seek comment on whether
    railroad tracks, or towers used for the placement of antennas, are
    found in these adjacent areas. We seek comment on what role the
    Commission might play in encouraging the use of these other
    facilities to provide service in underserved areas. For example, we
    seek comment on whether the Commission, or some other entity, should
    develop a database to maintain information about facilities that
    could be used to provide service in currently unserved or
    underserved areas, including tribal lands and insular areas.

17. We also seek comment on the possible shared use of existing federal
    telecommunications infrastructure, facilities or other resources,
    including government rights-of-way, to provide service in unserved
    or underserved areas, including tribal and insular areas. We seek
    comment on whether federal telecommunications resources could be
    made available in the short term to serve as connecting backbone
    infrastructure for health and safety telecommunications in unserved
    areas. We encourage federal entities with government owned
    telecommunications resources, particularly the Bureau of Indian
    Affairs, to comment on this issue.

18. Individuals from Indian communities, state agencies and the
    telecommunications industry have commented that satellite and
    terrestrial wireless systems may represent practical and
    cost-effective alternatives for providing service in unserved areas,
    including tribal lands.[^38] In the pending 2 GHz proceeding, which
    proposes policies and rules for licensing and operation of the 2 GHz
    mobile satellite service (MSS) systems in the United States,[^39]
    the Commission sought comment on incentives and policies to
    encourage provision of satellite services to unserved, rural,
    insular or economically isolated areas.[^40] The commenters
    generally support the Commission's tentative conclusion that
    satellites represent an excellent technology for providing basic and
    advanced telecommunications services to unserved areas, including
    tribal lands.[^41] Several commenters stated that the Commission
    should take positive steps to encourage access to Universal Service
    Funds by satellite operators or service providers. Several
    commenters also requested that the Commission should identify
    express and implicit regulatory provisions that may prevent
    satellite providers from seeking universal support subsidies and
    reform those provisions, or forbear from imposing these provision,
    so that MSS providers can fully participate in the Universal Service
    Support initiative.[^42]

19. Satellite networks, used either on a stand alone basis or in
    combination with a terrestrial wireless network, may offer a cost
    advantage over wireline or other alternatives in remote areas where
    a limited population may not provide the economies of scale to
    support the deployment of wireline or other networks for each
    community.[^43] Because satellites have large coverage areas, and in
    many cases, can reach an entire nation, satellite providers may
    achieve greater economies of scale in serving isolated areas since
    the costs of deployment could be spread across a number of
    communities.[^44] The basic build-out required to obtain satellite
    service is for earth stations to transmit and receive satellite
    signals.[^45] We seek comment on why satellite or terrestrial
    wireless systems have not been used more extensively to serve these
    areas.[^46] Specifically, we seek comments regarding the particular
    characteristics of satellite or terrestrial wireless systems that
    render these technologies suited for serving unserved areas, the
    costs associated with deployment, the availability of federal
    universal service support, and any other impediments to deployment.
    To the extent that costs deter satellite and terrestrial wireless
    deployment, we seek comment on what actions the Commission should
    take to support the establishment and maintenance of satellite and
    terrestrial wireless services.[^47] We ask parties to comment on
    whether specific aspect of our universal service rules may deter
    both current and future satellite services providers from providing
    service to rural, insular, and other unserved communities, and what
    specific steps the Commission can undertake to encourage the use of
    universal service support by satellite service providers. We also
    seek comment on any other actions the Commission should take to
    encourage the deployment of the most cost-effective, practical
    solution in these geographically extreme areas.

## Impediments to Increased Penetration

20. An important step in increasing low penetration in unserved or
    underserved high-cost, insular, and tribal lands is understanding
    the impediments to higher penetration rates. Accordingly, in this
    section, we seek comment on the nature of such impediments. To
    facilitate discussion, we have divided this issue into the
    categories described below. These categories are not intended to be
    exhaustive, however, and we encourage commenters to discuss any
    additional impediments to increased penetration that they are able
    to identify.

21. In addition to identifying impediments to increased penetration
    rates, we also ask commenters to discuss potential solutions for
    overcoming those impediments. We do not reach tentative conclusions
    on any of the proposals discussed below. Instead, we seek comment on
    the need for the Commission to address the specific concerns set
    forth below and the costs and benefits of the proposals discussed.
    We seek comment on how the Commission should measure its success in
    satisfying the mandate in the 1996 Act that consumers in all regions
    of the nation have access to telecommunications services.[^48] We
    seek comment on what measure we could use, other than penetration
    rates, to evaluate our success in achieving this goal.

### Demographic Factors

22. In section above, we ask commenters to supply data for high-cost,
    insular, and tribal lands regarding: (1) total population; (2)
    population density; (3) average annual income; and (4) average
    unemployment rate. Bureau of Census data indicates that income and
    education levels greatly affect telephone penetration rates and that
    geographic location can also make a difference.[^49] In this
    section, we seek specific comments on how these demographic factors
    affect penetration rates. For example, do income levels have a
    greater effect on penetration rates than population density? Do the
    combined effects of low income and low population density have an
    exponential effect on penetration rates? We seek comment on whether
    other demographic factors significantly affect penetration rates in
    high-cost, insular, and tribal lands, *e.g.*, education levels.

### Geographic Factors

23. One of the more obvious explanations for low penetration rates in
    high-cost, insular, and tribal lands is that these areas are
    unusually expensive to serve. Distance appears to be one reason line
    extension charges are so high. During the New Mexico and Arizona
    Field Hearings, several tribes testified about the remoteness of
    their locations and the challenges that remote locations presented
    in terms of telecommunications services.[^50] For example, in 1997,
    the Navajo Communications Company issued 72 line extension charge
    estimates that averaged more than \$40,000, including eight over
    \$100,000 and one over \$157,000.[^51] The cost for installation of
    a line on the Salt River Pima-Maricopa Indian Community (located in
    the heart of metropolitan Phoenix) is \$5,000.[^52] We seek comment
    on the general terrain, including the existence of mountains,
    plains, swamps, water, plateaus, canyons, etc., that create
    challenges in providing telecommunications services. We also seek
    comment on the extent to which the absence of necessary
    infrastructure, for example roads or electrical capacity,
    constitutes a barrier to deployment in rural, insular, high-cost,
    and tribal lands[^53].

### Financial Factors 

24. We seek comment on whether difficulties in obtaining access to
    financing limits the ability of carriers to provide service in
    unserved or underserved rural, insular, high-cost, and tribal lands.
    We seek comment on any specific provisions in loan agreements that
    serve to deter deployment in these areas. We also seek comment on
    any measures the Commission could take that would diminish the risks
    faced by investors and would enhance the ability of carriers to
    attract financing necessary to provide service in unserved or
    underserved rural, insular, high-cost, and tribal lands. We also
    seek comment on the availability and utility of existing programs
    that may provide funding and assistance to carriers seeking to
    provide telecommunications service in unserved areas and underserved
    areas, including tribal and insular areas,[^54] including whether
    the availability of existing sources of funding and assistance is
    adequately publicized. [^55]

### Cultural Factors

25. We seek comment on the extent to which cultural values or lifestyle
    preferences deter consumer interest in subscribing to
    telecommunications services in unserved or underserved areas.[^56]
    For example, we seek comment on whether concerns about cultural
    preservation, religion, identity, and values may affect the
    willingness of tribal authorities to allow or promote the
    availability of telecommunications services in their
    communities.[^57] Similarly, we seek comment on whether there are a
    significant number of individuals that simply do not want
    telecommunications services because of personal lifestyle choices.
    We also seek comment on the extent to which carriers justify the
    lack of deployment in unserved or underserved rural, insular,
    high-cost, and tribal lands based on concerns for cultural
    preservation and whether these concerns are legitimate. In addition,
    we seek comment on whether the Commission's efforts to promote
    deployment and subscribership in unserved and underserved areas
    should be constrained by the cultural choices expressed by tribal
    authorities or other local leadership.

### Regulatory Factors

26. In this section, we seek comment on impediments imposed by various
    laws, regulations or practices that may deter carriers from
    providing service to unserved or underserved areas, including
    federal, state, tribal or insular authorities.

27. *Federal Regulatory Impediments.* We seek comment on the current
    process for obtaining access to rights-of-way on tribal lands and to
    what extent this process deters carriers from providing service on
    tribal lands.[^58] Under the Right-of-Way Act of 1948, there are
    three critical components for obtaining rights-of-way over tribal
    land: (1) the Secretary of the Interior through the Bureau of Indian
    Affairs must grant the easement for the right-of-way;[^59] (2)
    compensation of not less than fair market value, as determined by
    the Secretary, plus severance damages must be paid to the property
    owner;[^60] and (3) tribal consent must be obtained.[^61] The first
    of these requires a service provider to undergo environmental
    assessments and secure cultural and archaeological clearances from
    the Bureau of Indian Affairs.[^62] The second component requires the
    service provider to obtain the standard appraisal it would for any
    easement but under standards set by Bureau of Indian Affairs.[^63]
    Finally, the service provider must also meet any conditions imposed
    by the particular tribe because the tribe has the ultimate authority
    to accept or reject the right-of-way. Carriers have indicated that
    this process is a significant barrier to entry.[^64] Tribal
    authorities have expressed concern about the ability of carriers to
    use existing rights-of-way to establish new terrestrial networks
    without obtaining the consent of the tribal authority.[^65] In
    addition, carriers and tribal authorities appear to have concerns
    concerning appropriate compensation for use of rights-of-way in
    tribal lands.[^66] To the extent rights-of-way management issues
    pose a barrier to entry on tribal lands,[^67] we seek comment on
    what role, if any, the Commission could play in addressing these
    issues.[^68]

28. We also seek comment on whether any aspect of our universal service
    rules deters carriers from providing service to unserved and
    underserved areas. For example, does the definition of supported
    services deter terrestrial wireless or satellite service providers
    from providing services in these areas? In our ongoing proceeding to
    reform the high-cost universal service support mechanism for
    non-rural carriers, several parties representing rural carriers have
    filed comments asking that we adjust or eliminate the cap on the
    high-cost loop fund to coincide with the anticipated transition of
    non-rural carriers to a new forward-looking support mechanism on
    January 1, 2000.[^69] We observe that the cap on the existing
    high-cost fund properly allows for growth based on the rate of
    growth in the total number of working loops nationwide. We also
    observe that carriers do invest in facilities in an amount greater
    than that which is supported through federal universal service
    support mechanisms.[^70] We seek comment regarding the extent to
    which the interim cap on the high-cost fund is a factor contributing
    to the lack of deployment in unserved areas, including tribal and
    insular areas.

29. We comment on whether existing LATA[^71] boundaries prevent calls
    from unserved or underserved areas, including tribal lands, to the
    nearest metropolitan area or community of interest from being
    included in local service. We seek comment on any other federal
    rules or Commission regulations which may deter carriers from
    providing service to unserved or underserved areas. We also observe
    that issues specific to wireless providers will be addressed in a
    separate proceeding.[^72]

30. *State Regulations.* We also seek comment on regulations or actions
    at the state level that may impact deployment and subscribership in
    unserved and underserved areas.[^73] We seek comment on the extent
    to which statewide rate-averaging requirements or limited local
    calling areas may make the costs of telecommunications service
    unaffordable to low-income consumers living in unserved or
    underserved areas. We also seek comment on existing state programs
    designed to ensure that rates in remote and tribal lands are
    affordable.

31. *Tribal / Insular Regulatory Impediments.* We seek comment on any
    regulations or requirements imposed by tribal or insular authorities
    that may deter entry in tribal lands or in insular areas. For
    example, we seek comment on whether local governments own or operate
    the local exchange carrier in their areas and what impact this may
    have on competitive entry from other cost-effective wireline,
    terrestrial wireless, or satellite service providers. We seek
    comment on whether government ownership or operation affects the
    provision of services supported by universal service mechanisms in
    these areas. We seek comment on any ownership or employment
    requirements imposed by tribal authorities that may impair the
    ability of carriers to provide service and/or compete with
    tribally-owned carriers. For example, we seek comment on the extent
    to which tribes require an ownership interest in a carrier as a
    prerequisite to allowing the carrier to provide service on tribal
    lands. We seek comment on the impact such requirements may have on
    the deployment of telecommunications facilities and services on
    tribal lands.

#  Tribal Lands

32. For our universal service support mechanisms to be effective on
    tribal lands, we seek to promote active involvement and
    collaboration between the Commission and tribal authorities. As a
    general matter, we seek comment on how we can increase Indian
    participation in the Commission's decision-making process.[^74] At a
    more specific level, we seek comment throughout this section on
    issues unique to tribal lands that may affect the goals and
    incentives of federal universal service support mechanisms and
    consider additional, targeted assistance the Commission may want to
    provide to promote deployment and subscribership on tribal lands. As
    described below, the trust relationship between the federal
    government and Indians as well as principles of tribal sovereignty
    suggest that the federal government may have the authority to
    implement particularized measures to address the factors causing the
    unusually low subscribership on tribal lands. We emphasize that
    these proposals are not meant to imply that the states have not, or
    will not, do their share in promoting the availability of universal
    service on tribal lands. In fact, many states have made significant
    efforts in this area. We commend them for doing so and we encourage
    them to continue. In this proceeding, however, we consider measures
    the Commission may take to fulfill its obligation to address
    telecommunications needs on tribal lands.

## Jurisdiction

### Background

33. As noted above, one of our goals in this proceeding is to identify
    and address the unique issues that may limit telecommunications
    deployment and subscribership in unserved or underserved regions of
    our Nation, including insular areas and tribal lands and to consider
    what changes in our universal service rules would best address these
    issues. Our jurisdiction to make these changes springs from our
    obligation under section 254 of the Act to develop policies and
    rules for the preservation and advancement of universal service.
    With respect to tribal lands, our exercise of this section 254
    authority must be informed by our exploration of the jurisdiction of
    states and Indian tribes to regulate and provide telecommunications.
    Our jurisdiction to alter our universal service rules in ways
    targeted to benefit unserved tribal lands must also be informed by
    the principles of Indian law that stem from the unique relationship
    of the federal government with Indian tribes.[^75]

34. This relationship is set forth in the Constitution of the United
    States, treaties, statutes, Executive Orders and court decisions.
    Historically, the United States has recognized the special trust
    relationship between the federal government and tribal authorities,
    the unique sovereign status of Indian tribes, and the federal
    obligation to guarantee the right of Indian tribes to
    self-government.

35. *Trust Relationship*. Federal courts have long recognized a
    "distinctive obligation of trust incumbent upon the Government in
    its dealings with these dependent and sometimes exploited
    people."[^76] The formation of a trust relationship evolved out of a
    recognition of the unequal bargaining power of Indian tribes in the
    formation of the treaties governing their rights and obligations.
    Over 150 years ago, Chief Justice Marshall acknowledged the special
    status of Indian tribes in the seminal case of *Cherokee Nation v.
    State of Georgia*, describing them as "domestic dependent
    nations."[^77] Since that time, the courts have routinely observed
    the federal government's unique relationship with Indian
    tribes,[^78] and as recently as June 14, 1999, the Supreme Court
    again recognized the "special federal interest in protecting the
    welfare of Native Americans."[^79] The Supreme Court has stated
    that, through this special trust relationship, the federal
    government "has charged itself with moral obligations of the highest
    responsibility and trust. Its conduct, as disclosed in the acts of
    those who represent it in dealings with the Indians, should
    therefore be judged by the most exacting fiduciary standards."[^80]

36. *Tribal Sovereignty*. The Constitution of the United States
    recognizes the sovereign status of Indian tribes by classing Indian
    treaties as among the "Supreme Law of the land" and establishes
    Indian affairs as a unique area of federal concern. Indian tribes
    retain important sovereign powers over "their members and their
    territory" subject to the plenary power vested in Congress by the
    Constitution of the United States. Under the tribal sovereignty
    doctrine, \"Indian tribes are unique aggregations possessing
    attributes of sovereignty over both their members and their
    territory.\"[^81] Under this doctrine, tribes have retained \"a
    semi-independent position . . . not as States, not as nations, . . .
    but as a separate people with the power of regulating their internal
    and social relations . . ..\"[^82] The foundation of Indian
    sovereignty over the reservation and tribal members was first
    recognized by Chief Justice John Marshall, who described the Indian
    tribes as \"distinct political communities, having territorial
    boundaries within which their authority is exclusive, and having a
    right to all lands within those boundaries, which is not only
    acknowledged but guaranteed by the United States.\"[^83] The
    tradition of tribal sovereignty has persisted since Chief Justice
    Marshall\'s early decisions construing the status of Indian tribes.
    As the Supreme Court has acknowledged \"traditional notions of
    Indian self-government are so deeply ingrained in our jurisprudence
    that they have provided an important \'backdrop\' against which
    vague or ambiguous federal enactment must always be measured.\"[^84]
    Congress recently declared that the trust relationship "includes the
    protection of the sovereignty of each tribal government."[^85]

37. *Tribal Self-determination*. Through the enactment of various
    statutes, Congress has demonstrated an "overriding goal of
    encouraging tribal self-sufficiency and economic development."[^86]
    For example, the Indian Financing Act of 1974 provides in pertinent
    part that: "\[i\]t is hereby declared to be the policy of Congress .
    . . to help develop and utilize Indian resources, both physical and
    human, to a point where the Indians will fully exercise
    responsibility for the utilization and management of their own
    resources and where they will enjoy a standard of living from their
    own productive efforts comparable to that enjoyed by non-Indians in
    neighboring communities."[^87]

### Issues for Comment

38. We recognize that principles of Indian law, including the trust
    relationship between the federal government and Indian tribes,
    tribal sovereignty, and tribal self-determination, must apply with
    equal force in the area of telecommunications.[^88] With respect to
    telecommunications services provided by tribal carriers on or off
    the reservation or by non-tribal carriers within tribal lands (all
    of which are referred to jointly as "tribal telecommunications") the
    parameters of federal, state and tribal authority, however, are not
    always clear. The Supreme Court, itself, has acknowledged that
    "generalizations on this subject have become treacherous."[^89]
    Nonetheless, some of the proposals presented in this Further Notice
    necessitate an effort to evaluate these jurisdictional
    relationships. In this Further Notice, we seek comment to determine
    how best to give effect to principles of Indian law in the context
    of rule changes intended to benefit unserved and underserved tribal
    lands.

39. *State Jurisdiction.* Three of the proposals detailed later in this
    Further Notice deal with provisions of sections 254 and 214 of the
    Act, and of our existing rules that are triggered when the state
    lacks jurisdiction over a carrier providing telephone exchange or
    access service in a particular area. First, as described in section
    IV, the determination of whether a state has jurisdiction over a
    common carrier providing telephone exchange service and exchange
    access is key in determining whether the Commission is required to
    designate telecommunications carriers as eligible to receive federal
    universal service support in high-cost areas. Second, as detailed in
    section V, in unserved areas where the state lacks jurisdiction the
    Commission, pursuant to section 214(e)(3) shall determine which
    common carrier or carriers are best able to provide service. Third,
    in section 1, we propose that revisions to our Lifeline rules to
    address the situation faced by carriers not subject to state
    jurisdiction.

40. The issue of the extent to which tribal authorities or state
    governments have authority to regulate activities occurring on
    tribal lands, whether by tribal members or not, has a long and
    complex legal history, involving considerations of whether state
    regulation is preempted by federal regulation, whether state
    regulation is consistent with tribal sovereignty and
    self-determination, and whether tribes have consented to state
    jurisdiction, either in treaties or pursuant to the Indian Civil
    Rights Act of 1968.[^90] In addition, Indian law jurisprudence finds
    state law generally inapplicable when states attempt to regulate the
    conduct of Indians directly within reservation boundaries.[^91]

41. We recognize that some state commissions have asserted jurisdiction
    over carriers seeking to provide service on tribal lands and
    regulate certain aspects of the provision of telecommunications
    service on tribal lands. We seek comment, in particular from state
    commissions as well as any other interested parties, concerning the
    extent of state and tribal regulation of telecommunications provided
    on tribal lands and by tribally-owned or operated carriers. In
    particular, we seek comment on the appropriate jurisdictional
    authority in the following situations: (1) tribally-owned or
    operated carriers providing service within the reservation (a) to
    tribal members, (b) to non-tribal members, and (c) to non-tribal
    members living on non-native fee lands (within the reservation); (2)
    non-tribally owned or operated carriers offering service both inside
    and outside of the reservation; and (3) tribally-owned or operated
    carriers offering service outside of the reservation. We refer
    parties commenting on these issues to the various ways in which
    tribal lands could be defined, as discussed below, and seek comment
    on how these definitions inform the jurisdictional analysis
    requested in this section.[^92]

42. []{#_Ref460050036 .anchor}In addition, we seek comment on the
    jurisdictional treatment of the following geographic entities, as
    classified by the Bureau of the Census: [^93] (1) American Indian
    Reservations, which are areas with boundaries established by treaty,
    statute and /or executive or court order; (2) Trust Lands, which are
    real property held in trust by the federal government that is
    associated with a specific American Indian reservation or tribe and
    which may be located within or outside the reservation; (3) Tribal
    Jurisdiction Statistical Areas, which are delineated by those
    Federally-recognized tribes in Oklahoma that no longer have a
    reservation; (3) Tribal Designated Statistical Areas, which
    encompasses federally and state-recognized tribes without
    reservation or trust lands; (4) Alaska Native Regional Corporations,
    which are corporate entities established under the Alaska Native
    Claims Settlement Act of 1972 (ANCSA) to conduct the commercial and
    nonprofit business of Alaska Natives;[^94] and (5) Alaska Village
    Statistical Areas, which are tribes, bands, clans, groups, villages,
    communities, or associations in Alaska that are recognized pursuant
    to the ANCSA.

43. We seek comment on whether there are any other kinds of tribal
    relationships that would inform our jurisdictional analysis. We seek
    comment on whether the state commission has jurisdiction over
    telecommunications in the situations described above, the legal
    authority for such jurisdiction (*e.g.* the state constitution,
    state statute, Indian treaty, etc.); and the extent to which the
    particular state commission exercises that jurisdiction. We also
    seek comment on the existence of any concurrent jurisdiction.

44. In addition, we observe that wireline telephone calls between Indian
    tribal lands and the state in which tribal land is located are
    currently treated as intrastate calls, subject to state
    jurisdiction. We seek comment on whether this treatment is
    consistent with principles of tribal sovereignty and the Indian law
    jurisprudence regarding the limits of state authority, referenced
    above. We also seek comment on whether the treatment of these calls
    as intrastate is consistent with the division of jurisdiction
    between the Commission and the states under section 2 of the Act. We
    seek comment as well on the need, impact, and Commission's authority
    to reclassify these calls as interstate for the purpose of giving
    effect to principles of tribal sovereignty.

45. We observe further that state jurisdiction may be preempted by the
    operation of federal law "if it interferes with or is incompatible
    with federal and tribal interests reflected in federal law, unless
    the state interests at stake are sufficient to justify the assertion
    of state authority."[^95] An express Congressional statement of
    preemption is not required.[^96] Instead, a preemption analysis
    "requires a particularized examination of the relevant state,
    federal and tribal interests."[^97] We seek comment on state
    interests in regulating telecommunications on tribal lands,
    including the ability to ensure reasonable rates, quality service,
    and the continued viability of local exchange carriers (LECs). We
    also seek comment from each tribal government, and any other
    interested parties, on the extent to which the state's exercise of
    jurisdiction over telecommunications on tribal lands and over tribal
    carriers that serve areas both inside and outside Indian sovereign
    territory is warranted.

46. *Tribal Regulation.* We seek comment from each tribal government,
    and any other interested parties, on the extent of tribal authority
    over regulation of telecommunications on tribal lands. As a
    threshold matter, we note that the Commission has previously spoken
    to some aspects of this issue in the *A.B. Fillins Order*, in which
    the Commission considered the extent of tribal regulatory authority
    over the provision of cellular service within a tribal
    reservation.[^98] In that order, the Commission held that under
    well-settled case law, the Communications Act applies with equal
    force to tribal reservations as to other areas, and that the
    Commission has sole authority under Title III of the Act with
    respect to management and licensing of radio spectrum in tribal
    areas.[^99] The Commission also concluded, however, that the
    Communications Act does not preempt tribal authority over access by
    telecommunications carriers to tribal lands, because the provisions
    of the Act that preempt state and local impediments to entry do not
    apply to tribal authorities.[^100]

47. In light of this statutory framework, we seek comment on the current
    extent to which tribal authorities have engaged in
    telecommunications regulation and on any future plans of tribal
    authorities to regulate telecommunications in tribal areas. We seek
    comment on the extent to which tribal authorities consider
    regulation of tribal telecommunications important to the right to
    self-government and self-determination. We also seek comment on
    whether tribal authorities should be considered as comparable to
    state authorities for purposes of regulating telecommunications
    services, and the degree to which the federal-tribal relationship on
    communications matters is similar or dissimilar to the federal-state
    relationship. Finally, while we have determined in the *A.B. Fillins
    Order* that tribal authorities are not subject to preemption under
    provisions of the Act applicable to state and local governments, we
    seek comment on what authority, if any, the Commission has to
    preempt tribal regulations that may be inconsistent with our federal
    regulatory scheme.

48. *Tribal Self-determination and Universal Service Goals.* We seek
    comment to determine how principles of Indian law and federal
    support for tribal self-determination affect the Commission's
    statutory mandate to ensure that consumers in all regions of the
    nation have access to the services supported by federal universal
    service support mechanisms. Pursuant to the Act, the Commission is
    bound by its statutory mandate to promote the availability of the
    services supported by federal universal service support mechanisms
    in all regions of the Nation.[^101] We seek comment on whether this
    statutory obligation is affected or constrained by any contrary
    interests, for cultural or other reasons, of certain tribal
    authorities. We seek comment, in particular from tribal authorities,
    to ascertain whether tribal authorities share the goals established
    by the 1996 Act, which the Commission is bound to implement. We seek
    comment on the extent to which tribal authorities seek to promote
    the availability of telecommunications services and competition
    among telecommunications providers.

49. We also seek comment on whether the services supported by federal
    universal service support mechanisms are consistent with the
    interests of tribal authorities in promoting service in tribal
    lands.[^102] We recognize that some tribal authorities may prefer a
    different mix of services to be supported. For example, some tribes
    may prefer support for terrestrial wireless or satellite services,
    rather than wireline services. Other tribes may want to prioritize
    the ability for each member to receive basic telecommunications
    service, rather than the entire package of services included in the
    definition of universal service. We seek comment on whether the
    Commission has the authority to and whether it should develop a
    procedure by which the Commission, the Joint Board and the sovereign
    Indian tribes could identify a single alternative definition of the
    services supported by federal universal service support mechanisms
    in tribal lands. We seek comment on additional administrative
    burdens that would be associated with implementing this procedure.

## Defining "Tribal Lands"

50. The definition we adopt of "tribal lands" will be used to identify
    those areas in which, for reasons based on principles of Indian
    sovereignty, the Commission seeks comment to determine whether
    possible modifications to our federal universal service policies and
    rules may be warranted. In defining tribal lands, we seek to ensure
    that we limit the reach of these proposals to those areas in which
    principles of tribal sovereignty and tribal self-determination
    apply. We also seek to balance the reasonable exercise of federal
    jurisdiction with appropriate deference to state sovereignty and
    jurisdiction.

51. We seek comment on defining tribal lands as all land within the
    limits of any Indian reservation under the jurisdiction of the
    United States Government, notwithstanding the issuance of any
    patent, and, including rights-of-way running through the
    reservation. Alternatively, we seek comment on defining tribal lands
    to have the same meaning as the term "Indian country," as that term
    is defined by the Bureau of Indian Affairs. "Indian country"
    means (a) all land within the limits of any Indian reservation under
    the jurisdiction of the United States Government, notwithstanding
    the issuance of any patent, and, including rights-of-way running
    through the reservation, (b) all dependent Indian communities within
    the borders of the United States whether within the original or
    subsequently acquired territory thereof, and whether within or
    without the limits of a state, and (c) all Indian allotments, the
    Indian titles to which have not been extinguished, including
    rights-of-way running through the same.[^103]

52. In addition, we seek comment on whether the geographic entities, as
    classified by the Bureau of the Census, should be included in the
    definition of tribal lands:[^104] (1) American Indian Reservations,
    which are areas with boundaries established by treaty, statute and /
    or executive or court order; (2) Trust Lands, which are real
    property held in trust by the federal government that is associated
    with a specific American Indian reservation or tribe and which may
    be located within or outside the reservation; (3) Tribal
    Jurisdiction Statistical Areas, which are delineated by those
    Federally-recognized tribes in Oklahoma that no longer have a
    reservation; (3) Tribal Designated Statistical Areas, which
    encompasses federally and state-recognized tribes without
    reservation or trust lands; (4) Alaska Native Regional Corporations,
    which are corporate entities established under the ANCSA[^105] to
    conduct the commercial and nonprofit business of Alaksa
    Natives;[^106] and (5) Alaska Village Statistical Areas, which are
    tribes, bands, clans, groups, villages, communities, or associations
    in Alaska that are recognized pursuant to the ANCSA.

53. We observe that, with the exception of the first category, American
    Indian Reservations, the above listed classifications used by the
    Bureau of the Census would not be encompassed in a definition of
    tribal lands that is limited to "all land within the limits of any
    Indian reservation under the jurisdiction of the United States
    Government," as set forth above. We recognize that tribes
    encompassed by these classifications may face obstacles in obtaining
    telecommunications services that are similar to those faced by
    tribes in living in American Indian Reservations. Commenters
    supporting the inclusion of any of these categories should explain
    the source of the Commission's authority to implement the additional
    measures proposed in this item with respect to these areas,
    including noting any jurisdictional arguments provided in response
    to questions raised in section 2.

## High-Cost Support Mechanisms

### Background

54. In 1984, the Commission established high-cost support mechanisms to
    promote the nationwide availability of telephone service at
    reasonable rates.[^107] The high-cost loop fund provides support by
    allowing incumbent LECs with higher than average local loop costs to
    allocate an additional portion of those costs to the interstate
    jurisdiction to be recovered from interstate revenues.[^108] This
    enables the state jurisdictions to establish lower local exchange
    rates in study areas receiving such assistance.[^109] In general, a
    study area corresponds to an incumbent LEC's entire service
    territory within a state.[^110] Typically for incumbent LECs
    operating in more than one state, each state represents a study
    area.

55. Pursuant to existing support mechanisms, high-cost loop support for
    most incumbent LECs is calculated using data provided by incumbent
    LECs pursuant to the Commission\'s cost accounting and
    jurisdictional separations rules.[^111] Non-rural carriers are
    scheduled to make the transition on January 1, 2000 to a new support
    mechanism based on forward-looking costs, while rural carriers will
    continue to receive support based on the existing mechanisms until
    at least January 1, 2001. Under the existing mechanisms, the amount
    of an incumbent LEC's high-cost loop support is based on the
    relationship of its historical loop cost for a particular study area
    to the national average loop cost. In order to determine this
    relationship, approximately half of all incumbent LECs submit their
    historical loop cost data to NECA each year pursuant to sections
    36.611 and 36.612 of the Commission\'s rules.[^112] Because the cost
    data is not submitted by carriers until seven months after the end
    of a calendar year, and because NECA requires time to analyze the
    data and make the necessary nationwide calculations of support,
    carriers generally do not receive high-cost support based on these
    data until the beginning of the second calendar year after costs are
    incurred. The impact of this rule is mitigated, however, by section
    36.612 of the rules, which allows carriers to update on a quarterly
    basis the calendar year data that they submit to NECA on July 31 of
    each year.[^113]

56. The remainder of incumbent LECs, known as \"average schedule
    companies,\" are not required to perform jurisdictionally-separated
    cost studies.[^114] Average schedule treatment historically has been
    available to companies that are presumed, because of their small
    size, to lack the resources to justify a requirement that they
    perform separations and access charge cost studies to determine
    their compensation from interstate services.[^115] NECA develops a
    schedule based on generalized industry data to reflect the costs of
    a typical small incumbent LEC. Subject to Commission approval,
    NECA's average schedule formula is used to provide support to
    average schedule companies.[^116]

57. *Study Area Freeze.* The Commission froze all study area boundaries
    effective November 15, 1984 to curtail the ability of incumbent LECs
    to place high-cost exchanges within their existing service
    territories in separate study areas to maximize the payments from
    the universal service support mechanisms.[^117] As a result, an
    incumbent LEC must apply to the Commission for a waiver of the study
    area boundary if it wishes to sell or purchase an exchange.[^118]

58. *Interim Cap on High-Cost Fund.* In 1993, the Commission became
    concerned about the rapid and erratic pattern of growth in the size
    of the high-cost loop fund and initiated an inquiry to reevaluate
    its universal service support mechanism and to consider permanent
    changes in the manner in which high-cost support would be
    provided.[^119] At that time, the Commission established an interim
    cap to the universal service fund.[^120] The cap was designed to
    moderate the growth of the fund while the Commission conducted a
    rulemaking proceeding and to allow for an orderly transition to the
    new universal service support mechanisms that would be
    adopted.[^121] Under the cap, the total fund for a given year may
    increase by no more than a percentage equal to the percentage growth
    nationwide in the number of loops for that year.[^122]

59. *May 8, 1997 First Report and Order.* In 1997, the Commission
    adopted broad revisions to its universal service support mechanisms
    consistent with the directive of the 1996 Act to ensure that
    universal service support mechanisms be explicit, sufficient, and
    sustainable as local competition develops. The Commission
    established a plan for providing high-cost support through the
    explicit federal universal service support mechanism rather than the
    interstate access charge rate structure[^123] and a methodology for
    determining high-cost support based on the forward-looking economic
    cost of providing the supported services to a particular service
    area.[^124]

60. Currently, all carriers receive high-cost support based upon the
    high-cost support mechanisms which pre-date the 1996 Act. As
    discussed above, non-rural carriers will begin receiving high-cost
    support based on forward-looking costs on January 1, 2000.[^125] The
    Commission intends that rural carriers also will receive support
    based on forward-looking costs, but only after further review by the
    Commission, the Joint Board, and the Rural Task Force appointed by
    the Joint Board, and in no event before January 1, 2001.[^126]

61. Until a carrier receives high-cost support based upon
    forward-looking costs, that carrier's support will be determined on
    the basis of whether the carrier is an incumbent LEC[^127] or a
    competitive eligible telecommunications carrier. A competitive
    eligible telecommunications carrier is defined in our rules as an
    eligible telecommunications carrier that does not meet the
    definition of incumbent LEC. A competitive eligible
    telecommunications carrier receives the same amount of support per
    customer that the incumbent LEC previously serving that customer
    received.[^128]

### Federal Share of High-Cost Support

62. As discussed above, because the trust relationship creates a unique
    relationship between the federal government and Indian tribes, the
    federal government may have authority to undertake additional
    measures to promote deployment and subscribership on tribal lands
    and to provide universal service support necessary to offset the
    particular challenges facing these areas. With respect to high-cost
    support on tribal lands, we seek comment on the extent to which
    states currently support the costs of universal service in tribal
    lands and whether the Commission should provide an additional
    portion of the universal service support calculated by the federal
    support methodology in high-cost, tribal lands. For instance, with
    regard to the forward-looking high-cost support mechanism for
    non-rural carriers, we seek comment on whether, rather than
    providing support for costs that exceed both a national cost
    benchmark and the individual state\'s resources to support those
    costs, the mechanism should provide support for all costs in
    unserved tribal lands that exceed the national benchmark.

### Separate Study Areas Option for Tribal Lands

63. In order to provide additional high-cost support to tribal lands, we
    seek comment on modifications to our study area rules. Our study
    area rules provide a mechanism through which the Commission has
    controlled the growth of the high-cost universal service support
    mechanism. Universal service support for high-cost areas is
    determined on the basis of average loop costs throughout a study
    area. Averaging costs on a study-area wide basis spreads the burden
    of serving high-cost areas among all of the telecommunications
    subscribers in that study area. As a result, however, carriers with
    relatively low average loop costs in a particular study area receive
    no support for serving additional customers in a high-cost portion
    of that study area if the loop costs in the high-cost portion do not
    raise the overall average loop costs for the study area above a
    specific national benchmark, currently 115% of the national average
    cost per loop.[^129] By freezing study area boundaries, the
    Commission sought to eliminate incentives for carriers to place
    high-cost exchanges in separate study areas in order to receive
    additional support for providing service to those study areas. As a
    result of these two policies, however, certain carriers may
    experience strong financial disincentives to serving unprofitable
    high-cost customers in their study areas and other carriers may lack
    incentives to purchase those unserved exchanges.

64. In order to promote the deployment of universal services on tribal
    lands, we seek comment on modifying our rules to permit carriers to
    treat tribal lands[^130] as a distinct study area.[^131] We seek
    comment on whether, by providing an exception to our study area
    rules, we can eliminate regulatory requirements that may deter
    carriers from serving high-cost, tribal lands. For example, one
    option may be that the tribal study area for a carrier will consist
    of all of the tribal lands served by the carrier within the borders
    of a single state. This means that carriers may have a tribal study
    area in each state in which it provides service on tribal lands. We
    seek comment on whether the tribal study area should include all of
    the tribal lands in a state (rather than, for example, a single
    nationwide tribal study area) because states use study areas for
    purposes of determining intrastate revenue requirements.

65. We emphasize that the proposal to allow tribal study areas is not
    related to the issue of the area over which costs are averaged to
    determine support using the new high-cost mechanisms, which is
    pending in the high-cost proceeding.[^132] We seek comment on how
    allowing a separate tribal study area could affect whether the
    carrier serving that area falls within the statutory definition of a
    rural carrier for providing service to that area. If a carrier
    designates the tribal lands within a state as a separate study area,
    the number of access lines or inhabitants in that newly created
    study area may qualify the carrier as a rural carrier with respect
    to that study area.[^133] We seek comment on whether this may result
    in some carriers, currently designated as non-rural, being
    considered rural for purposes of receiving universal service support
    in certain tribal study areas.

### Interim Cap on the High-Cost Fund

66. In the *First Report and Order,* the Commission concluded that it
    would maintain the cap on the existing high-cost loop support
    mechanism until all carriers receive support based on the new
    high-cost funding mechanism.[^134] The cap on the high-cost loop
    fund was initially intended as an interim measure.[^135] Commission
    rules require that if total support, based on each carrier's actual
    costs, is above the total allowed capped amount, each recipient of
    high-cost loop support will receive a reduced amount of support to
    keep the total fund at the capped amount.[^136] The cap has served
    its purpose in controlling excessive growth in the size of the fund
    during the past six years as the Commission has reformed its
    universal service support mechanisms. We have stated that the rural
    carriers will receive support based on the new high-cost funding
    mechanism no earlier than January 1, 2001. The Commission has not
    established a timetable for moving rural carriers to a
    forward-looking high-cost support mechanism. Rather, this
    undertaking is on hold pending the Rural Task Force making its
    recommendation to the Joint Board; the Joint Board may recommend
    that the Commission conduct further proceedings on certain issues.

67. Allowing carriers to designate separate tribal study areas, as
    proposed above, could mean that additional carriers may be entitled
    to a portion of the high-cost support fund. We seek comment on the
    need for the Commission to provide additional high-cost support
    under the existing mechanisms to tribal lands. In order to do so,
    the Commission may either lift the cap on the high-cost fund to
    allow for growth in the size of the fund attributable to the
    separate study area proposal or reallocate the existing funds among
    the expanded category of recipients. We seek comment on these
    options. We also seek comment on any other options that may assist
    the Commission in achieving the goal of targeting additional federal
    high-cost support to tribal lands.

## Revisions to Lifeline

68. The Commission's Lifeline support program for low-income consumers
    is designed to reduce the monthly billed cost of basic service for
    low-income consumers, which we anticipate will increase telephone
    penetration. Lifeline provides carriers with three elements of
    universal service support.[^137] The support must be passed through
    to each qualifying low-income consumer by an equivalent reduction in
    his or her monthly bill for telephone service. All carriers receive
    a baseline amount of \$3.50 per month per Lifeline customer in the
    form of a waiver of the federal subscriber line charge (SLC).[^138]
    An additional \$1.75 per month is available per Lifeline customer if
    "the state commission approves an additional reduction of \$1.75 in
    the amount paid by consumers. . . ."[^139] Finally, carriers can
    receive federal matching funds of fifty percent of the amount of
    state Lifeline support, up to a maximum of an additional \$1.75 per
    month, as long as the entire amount is passed on to
    subscribers.[^140] Federal Lifeline support per qualifying
    low-income consumer is capped at \$7.00 per month.[^141]

### State Commission Approval

69. The Commission has received petitions for waiver of our Lifeline
    rules to allow carriers not subject to the jurisdiction of a state
    commission to receive the second tier of federal support where no
    regulations issued by local authorities (including state commissions
    and tribal authorities) exist that would prevent an equivalent
    reduction in the monthly telephone bills of qualifying low-income
    consumers.[^142] In drafting our rule, we did not consider the
    situation faced by carriers not subject to the jurisdiction of a
    state commission. Based on these waiver petitions, it appears that
    our rule has given rise to certain situations that we did not
    anticipate. The requirement of state consent prior to making
    available the second tier of federal Lifeline support was intended
    to reflect deference to the states in such areas of traditional
    state expertise and authority.[^143] We did not intend to require
    carriers not subject to state commission jurisdiction to seek either
    state commission action or a Commission waiver in order to receive
    the additional \$1.75 available under federal support mechanisms,
    where that additional support would be passed through to consumers.
    For these reasons, we propose to modify our rule to state that an
    additional \$1.75 per qualifying low-income consumer will be
    provided to the carrier where the additional support will result in
    an equivalent reduction in the monthly bill of each qualifying
    low-income consumer. This proposed revision maintains deference to
    the state commission because the additional support will not be
    provided where a state commission with jurisdiction to do so has not
    permitted an equivalent reduction in the consumer's bill. The
    proposed revision is intended to eliminate the need for carriers not
    subject to the jurisdiction of a state commission to seek state
    commission action or a Commission waiver. We seek comment on the
    proposed revision.

### Federal Support on Tribal Lands

70. In addition, in keeping with principles of tribal sovereignty, we
    seek comment on modifying our rule to provide that the third tier of
    federal support, a maximum of \$1.75 per month per low-income
    consumer, is available to customers on tribal lands. As described
    above, the federal government has a special trust relationship with
    Indian tribes, and this entails special responsibilities,
    particularly where tribal reservations appear to be particularly
    disadvantaged by a lack of important resources, like
    telecommunications.[^144] With respect to tribal lands, we seek
    comment on the extent to which states currently provide the support
    necessary to qualify for matching funds for the third tier of
    Lifeline support.[^145] We also seek comment on whether the federal
    government, in light of its trust relationship with Indian tribes,
    should provide carriers serving tribal lands the third tier of
    Lifeline support, \$1.75 per qualifying Lifeline customer, as long
    as all such Lifeline customers receive an equivalent reduction in
    their bills. Unlike in other areas, this federal support amount
    would not be contingent upon the state in which the tribal lands are
    located providing support.

### Amendments to Consumer Qualification Criteria

71. We seek comment on whether the Commission should expand the consumer
    qualifications for Lifeline assistance to ensure that low income
    consumers on tribal lands are able to participate fully in the
    Lifeline assistance program. Under our current rules, in states that
    provide intrastate matching funds, a consumer must meet the criteria
    established by the state commission to receive federal Lifeline
    support.[^146] In most states, a consumer can meet the criteria by
    demonstrating or certifying that he or she participates in one of
    several narrowly targeted low income assistance programs.[^147] We
    are concerned that some state commissions have established Lifeline
    criteria that may inadvertently exclude low income consumers on
    tribal lands because the criteria do not include low income
    assistance programs that are specifically targeted toward Indians
    living on tribal lands.[^148] Similarly, in those states that do not
    provide intrastate matching funds (and thus do not establish the
    consumer qualifications for Lifeline participation), a consumer
    seeking Lifeline support must certify his or her participation in
    one of the following Commission-designated low income assistance
    programs: Medicaid; food stamps; Supplemental Security Income;
    federal public housing assistance; or Low-Income Home Energy
    Assistance Program.[^149]

72. We seek comment on how the Commission might expand the consumer
    qualifications for Lifeline support to enable low income consumers
    on tribal lands to participate in the Lifeline assistance program.
    In particular, we seek comment about whether we should amend our
    rules to allow low income consumers on tribal lands to qualify for
    Lifeline support by certifying their participation in additional
    means tested assistance programs, such as the programs administered
    by the Bureau of Indian Affairs[^150] or Indian Health
    Services.[^151] We encourage commenters to indicate whether there
    might be other suitable criteria \-- based solely on income or
    factors related to income \-- that should be used to determine
    qualification for low income members of tribal lands. We ask
    commenters to indicate whether providing Indians living on tribal
    lands with greater access to Lifeline assistance might increase
    incentives for eligible telecommunications carriers to serve these
    tribal lands. Finally, we seek comment on whether the Commission
    could apply any new criteria specifically targeted to low income
    Indians living on tribal lands both to states that do not provide
    matching funds and states that do provide such funds.

# DESIGNATING Eligible Telecommunications Carriers Pursuant to Section 214(e)(6)

73. Pursuant to section 254(e) of the 1996 Act, not all
    telecommunications providers are eligible for federal universal
    service support. For purposes of the universal service support
    mechanisms for high-cost areas and low income consumers "only an
    eligible telecommunications carrier designated under section 214(e)
    shall be eligible" to receive federal universal service
    support.[^152] To be designated as an eligible telecommunications
    carrier, a carrier must: [^153]

> \(A\) offer the services that are supported by Federal universal
> service support mechanisms under section 254(c), either using its own
> facilities or a combination of its own facilities and resale of
> another carrier\'s services (including the services offered by another
> eligible telecommunications carrier); and
>
> \(B\) advertise the availability of such services and the charges
> therefor using media of general distribution.

74. Under section 214(e), the primary responsibility for designating a
    prospective carrier as an eligible telecommunications carrier lies
    with the state commission.[^154] In a situation where there is no
    common carrier willing to provide supported services to an unserved
    community that requests such services, section 214(e)(3) states
    that:[^155]

> \[T\]he Commission, with respect to interstate services . . . or a
> State commission, with respect to intrastate services, shall determine
> which common carrier or carriers are best able to provide such service
> to the requesting unserved community or portion thereof and shall
> order such carrier or carriers to provide such service for that
> unserved community or portion thereof.

In the event that a common carrier is not subject to the jurisdiction of
a state commission, section 214(e)(6) authorizes the Commission, upon
request, to designate the carrier as an eligible telecommunications
carrier, for a service area designated by the Commission, if the carrier
meets the qualifications for eligible telecommunications carrier
status.[^156]

75. Section 214(e) of the Act states that only an "eligible
    telecommunications carrier" designated under section 214(e) shall be
    eligible to receive federal universal service support.[^157]
    Pursuant to section 214(e)(2) and (e)(5) of the Act, state
    commissions are generally responsible for designating eligible
    telecommunications carriers and for designating service areas for
    such carriers.[^158] Initially, section 214(e) did not include a
    provision for designating carriers not subject to the jurisdiction
    of a state commission. The Act was amended in 1997 to address this
    "oversight."[^159] Section 214(e)(6) authorizes the Commission to
    designate as an eligible telecommunications carrier "a common
    carrier providing telephone exchange service and exchange access
    that is not subject to the jurisdiction of a State Commission." We
    tentatively conclude that, by adding section 214(e)(6), Congress
    sought to ensure that carriers serving all regions of the United
    States have access to a mechanism that will allow them to be
    designated as eligible telecommunications carriers, if they meet the
    statutory requirements. Recognizing that the designation of eligible
    telecommunications carriers is primarily a state commission
    function, Congress granted this Commission the authority for this
    task in the event that a carrier is not subject to the jurisdiction
    of a state commission.[^160]

76. Although some of the legislative history of section 214(e)(6)
    focuses on the ability of tribally-owned carriers to be designated
    as eligible telecommunications carriers, [^161] the statutory
    language and other legislative history is not so limited. The other
    legislative history states that "the intent of this bill is to cover
    such situations where a State commission lacks jurisdiction over a
    carrier, in which case the FCC determines who is eligible to receive
    federal universal service support."[^162] The legislative history
    also makes clear that "nothing in this bill is intended to impact
    litigation regarding jurisdiction between State and federally
    recognized tribal entities" or to "expand or restrict the existing
    jurisdiction of State commissions over any common carrier or
    provider in any particular situation.\"[^163] In the following
    paragraphs, we seek comment on how section 214(e)(6) should be
    interpreted and implemented with respect to carriers (whether
    tribally owned or otherwise) that provide telecommunications
    services to tribal areas.

77. First, however, we seek comment identifying other situations in
    which carriers providing telephone exchange and exchange access
    services to areas other than tribal lands are not subject to state
    commission jurisdiction and thus must seek designation as eligible
    telecommunications carriers from the Commission. In this context, we
    seek comment on whether the Commission, rather than state
    commissions, has the jurisdiction to designate terrestrial wireless
    or satellite carriers as eligible telecommunications carriers. If
    such carriers submit applications for designation pursuant to
    section 214(e)(6) during the pendency of this proceeding, we will
    consider them on a case by case basis in light of the statutory
    language and the showings made by the affected parties. We also note
    that our analysis of the scope of the designation provision of
    section 214(e)(6) is not intended to affect any other decision with
    respect to the authority of state commissions or tribal authorities
    to regulate telecommunications on tribal lands or over terrestrial
    wireless or satellite carriers.

78. The statutory language of section 214(e)(6) is ambiguous with
    respect to when the Commission's authority to designate eligible
    telecommunications carriers is triggered. It is not clear whether
    the Commission's authority is triggered when a carrier is not
    subject to the jurisdiction of a state commission or when the
    service or access the carrier provides is not subject to the
    jurisdiction of a state commission. Thus, the initial question in
    interpreting section 214(e)(6) with respect to the provision of
    telecommunications service in tribal lands is under what
    circumstances the Commission may designate carriers as eligible
    telecommunications carriers. The title of section 214(e)(6), "Common
    Carriers not Subject to State Commission Jurisdiction," suggests
    that the triggering inquiry is whether the carrier is subject to
    state commission jurisdiction. We tentatively conclude, however,
    that the better interpretation of section 214(e)(6) is that the
    determination of whether a carrier is subject to the jurisdiction of
    a state commission depends in turn on the nature of the service
    provided (*e.g.* telephone exchange or access service provided by
    wire, satellite or terrestrial wireless) or the geographic area in
    which the service is being provided (*e.g.* tribal lands). This
    interpretation is supported by the legislative history of section
    214(e)(6). Representative Tauzin stated that "S.1354 makes a
    technical correction to the Act that will make it possible for
    telephone companies serving *areas* not subject to the jurisdiction
    of a State Commission, to be eligible to receive federal Universal
    Service support."[^164] Our tentative conclusion that the nature of
    the service or the geographic area in which the carrier provides it
    should be the basis for distinguishing between the designation
    authority of the Commission and state commission under section
    214(e)(6), is consistent with other provisions of the Act. Section 2
    of the Act similarly distinguishes between federal and state
    jurisdiction over telecommunications services based on the
    geographic area in which the service is provided. Section 332(3) of
    the Act limits state authority on the basis of the service provided
    (*i.e.* commercial and private mobile service). We seek comment on
    this analysis and on any other factors which may be relevant to this
    determination.

79. Our next question then is under what circumstances are
    telecommunications carriers providing telecommunications services on
    tribal lands subject to state commission authority? In section 2,
    above, we seek comment on the extent to which a state commission has
    jurisdiction over tribally-owned carriers seeking to provide
    telecommunications service on tribal lands and over
    non-tribally-owned carriers seeking to provide such service on
    tribal lands. The answer to these questions will determine whether
    the Commission may designate carriers seeking to provide service on
    tribal lands as eligible telecommunications carriers. With respect
    to tribally-owned carriers seeking to provide telecommunications
    service on tribal lands, we note that state law is generally
    inapplicable when states attempt to regulate the conduct of tribal
    members directly within reservation boundaries,[^165] except in
    \"exceptional circumstances.\"[^166] We seek comment on whether, for
    the purpose of eligible telecommunications carrier designation,
    tribally-owned carriers providing telecommunications services within
    tribal reservations would be subject to state regulatory authority.

80. We further recognize that when states seek to regulate non-tribal
    members and their activities conducted within a reservation, the
    appropriateness of the state\'s assertion of regulatory authority is
    determined by a \"particularized inquiry\" into the nature of the
    state, federal, and tribal interests at stake. Specifically, the
    analysis turns \"on whether state authority is pre-empted by the
    operation of federal law; and \'\[s\]tate jurisdiction is pre-empted
    . . . if it interferes or is incompatible with federal and tribal
    interests reflected in federal law, unless the state interests at
    stake are sufficient to justify the assertion of state authority.\'
    The inquiry is to proceed in light of traditional notions of Indian
    sovereignty and the congressional goal of Indian self-government,
    including its \'overriding goal\' of encouraging tribal
    self-sufficiency and economic development.\"[^167] We recognize that
    this inquiry is a particularized one, and thus specific to each
    state and the facts and circumstances surrounding the provision of
    telecommunications services by non-tribal members within those
    tribal lands. However, we seek comment on whether there are any
    general federal, state and tribal interests at stake which might
    inform the inquiry and help provide general guidance on the proper
    boundaries of state authority in this case. Specifically, we seek
    comment on the federal government\'s interest in assuming authority
    over the designation of eligible telecommunications services, and
    the extent to which state authority would be preempted by the
    operation of federal law \-- namely section 214 or other relevant
    provisions or other federal or tribal interests reflected in federal
    law.

81. We also seek comment on the states\' interests in designating
    eligible telecommunications carriers, as well as the implications of
    state designation on Indian sovereignty, self-government and "tribal
    self-sufficiency and economic development."[^168] We recognize,
    however, that some state commissions have asserted jurisdiction over
    carriers seeking to provide service on tribal lands, and that these
    commissions regulate certain aspects of a carrier's provisions of
    service on tribal lands.[^169]

82. In implementing section 214(e)(6), we are concerned that the fact
    intensiveness and the legal complexity of determining whether a
    state has jurisdiction over carriers seeking designation as an
    eligible telecommunications carrier may lead to confusion,
    duplication of efforts and needless controversy among carriers,
    tribal authorities, state commissions and this Commission, which
    could undermine efforts to achieve our universal service goals. For
    these reasons, we propose the following process to treat
    applications for the Commission's designation of eligible
    telecommunications companies eligible to receive universal service
    support for serving tribal land. Carriers seeking designation as an
    eligible telecommunications carrier from this Commission, whether to
    serve tribal lands or on the basis of other jurisdictional
    arguments,[^170] should consult with the relevant tribal authority,
    where appropriate, and the state commission on the issue of whether
    the state commission has jurisdiction to designate the carrier. In
    situations where the tribal authority and the state commission agree
    that the state has jurisdiction, we anticipate that the state would
    conduct the designation proceeding. In instances where the tribal
    authority challenges the state's exercise of jurisdiction, we
    encourage the carriers, with the support of the tribal authority, to
    apply to this Commission for designation. In the public comment
    period subsequent to a carrier's application for designation as an
    eligible telecommunications carrier, the carriers and tribal
    authorities would be expected to demonstrate why Commission
    designation is appropriate. Interested parties, including the state
    commission, that disagree with the Commission's exercise of
    jurisdiction would also be expected to raise their challenges in
    that proceeding. We seek comment on this proposal and suggestions
    for other ways in which the determination of whether the designation
    must be performed by the Commission or a state commission could be
    simplified or streamlined.

# Unserved Areas \-- Implementation of Section 214(e)(3)

## Overview

83. The federal universal service support mechanisms are designed to
    provide appropriate incentives for the deployment of facilities
    capable of providing the supported services and the promotion of
    increased subscribership. This system depends upon the complex
    interrelationship between federal mechanisms and state actions. For
    these reasons, we rely on the input of the Joint Board in making our
    decisions. In general, we are confident that the new forward-looking
    high-cost support mechanism described in the *Thirteenth Order on
    Reconsideration* will provide appropriate incentives for carriers to
    provide supported services to all Americans who need them.
    Nonetheless, we are concerned that certain areas of the nation
    remain unserved because of extraordinarily high-costs, low-incomes,
    or any other factors identified above in section above, that would
    inhibit service. In this section, we discuss a specific statutory
    provision, section 214(e)(3) of the Act, that may allow the
    Commission to accelerate the deployment of facilities and the
    provision of service in unserved areas by ordering carriers to serve
    those areas.

84. Section 214(e)(3) of the Act establishes that, in certain instances,
    the Commission or state commissions may order a common carrier to
    provide the services supported by universal service in unserved
    areas. Due to the lack of information in the record, and at the
    Joint Board's recommendation, the Commission decided in the May 8,
    1997 *First Report and Order* not to adopt particular rules to
    implement this provision at that time.[^171] As part of our current
    efforts to promote the deployment of service in unserved areas,
    insular and tribal lands, we conclude that it is time to establish a
    framework for conducting proceedings pursuant to section 214(e)(3).
    Accordingly, we seek comment, as described below, regarding the
    implementation of this provision.

85. Section 214(e)(3) provides that:

> if no common carrier will provide the services that are supported by
> Federal universal service support mechanisms under section 254(c) to
> an unserved community or any portion thereof that requests such
> service, the Commission, with respect to interstate services or an
> area served by a common carrier to which paragraph (6) applies,[^172]
> or a State commission, with respect to intrastate services, shall
> determine which common carrier or carriers are best able to provide
> such service for that unserved community or portion thereof. Any
> carrier or carriers ordered to provide such service shall meet the
> requirements of paragraph (1) and shall be designated as an eligible
> telecommunications carrier for that community or portion thereof.
>
> The legislative history for this provision states that section
> 214(e)(3) "makes explicit the implicit authority of the Commission" to
> order a common carrier to provide services supported by the universal
> service support mechanisms.[^173]

## Defining "Unserved Area"

86. In order to determine whether an allegedly unserved community is
    eligible for relief pursuant to section 214(e)(3),[^174] we must
    first decide whether the area at issue is unserved. Only after
    making this initial determination can we proceed with the rest of
    the analysis required by section 214(e)(3). We propose defining an
    unserved area as "any area in which facilities would need to be
    deployed in order for its residents to receive each of the services
    designated for support by the universal service support mechanisms."
    In the *First Report and Order,* we identified the services that
    would be supported by universal service support mechanisms as:
    single-party service; voice grade access to the public switched
    network; DTMF signaling or its functional equivalent; access to
    emergency services; access to operator services; access to
    interexchange service; access to directory assistance; and toll
    limitation services for qualifying low-income consumers.[^175] These
    services were identified based on the statutory directive embodied
    in section 254(c)(1)(A)-(D), requiring the Joint Board and the
    Commission to \"consider the extent to which \... telecommunications
    services\" included in the definition of universal service: (1) are
    essential to education, public health, or public safety; (2) have,
    through the operation of market choices by customers, been
    subscribed to by a substantial majority of residential
    customers; (3) are being deployed in public telecommunications
    networks by telecommunications carriers; and (4) are consistent with
    the public interest, convenience and necessity.[^176]

87. The proposed definition is based on whether facilities would need to
    be deployed to provide the supported services to distinguish
    unserved areas from areas in which a large percentage of the
    population does not subscribe to available services. This definition
    is intended to help further our statutory mandate to promote the
    availability of services supported by federal universal service
    support mechanisms.[^177] We recognize that this definition may
    result in certain areas being deemed unserved, even though those
    areas are receiving some level of service that includes less than
    all of the services designated for support by the universal service
    support mechanisms. We also recognize that this definition may
    result in the existence of relatively small unserved areas within
    larger areas that are currently receiving service. We seek comment
    on whether this definition will enable us to appropriately target
    our efforts to those areas that do not receive all of the services
    supported by federal universal service support mechanisms.

88. We emphasize, however, that determining whether a particular area
    meets the definition of unserved area is only the beginning of the
    analysis under section 214(e)(3). To obtain relief pursuant to
    section 214(e)(3), each of the steps discussed below must be
    followed. We seek comment on this analysis and we invite commenters
    to propose alternative definitions.

## Determining When a Community is Unserved

89. The language "or any portion thereof" in section 214(e)(3) suggests
    that we are not meant to impose minimum size requirements on the
    number of potential subscribers needed to invoke the authority of
    section 214(e)(3). We seek comment on whether the language should be
    interpreted differently or suggests a particular definition.

## Determining When No Common Carrier Will Provide Service

90. By its terms, the relief afforded in section 214(e)(3) is not
    triggered until a determination is made that "no common carrier will
    provide" the services supported by the federal universal service
    support mechanisms. Therefore, we seek comment on the meaning of the
    phrase "no common carrier will provide" the supported services.

91. As an initial matter, section 214(e)(3) does not specify whether the
    request for service must be received from members of the unserved
    community or whether state, local, or tribal authorities must make
    an official request for service from the carrier on behalf of the
    unserved members of the community. We tentatively conclude that
    limitations on who may issue the request are not warranted by the
    terms of the statute or the goals it seeks to achieve. We seek
    comment on this tentative conclusion.

92. We tentatively conclude that the language "no common carrier will
    provide" the services supported by the federal universal service
    support mechanisms means something more than no common carrier is
    actually providing the supported services. We seek comment on how we
    can determine that no common carrier is willing to provide the
    supported services. We seek comment on which common carriers must be
    asked in order to reach the conclusion that no common carrier will
    provide the service. We seek comment on how a satellite services
    provider should be treated for this issue, given that they can
    potentially provide service to these unserved areas. We also seek
    comment on whether the reasons for the common carrier's refusal to
    provide service are relevant to a determination that the area is
    unserved. For example, what if the refusal to provide service is
    based on the poor credit histories of the individuals requesting
    service or an existing overdue debt? Given the extremely low annual
    incomes, on average, on tribal lands, it seems possible that
    inadequate credit histories of the potential customers may cause a
    carrier to be unwilling to provide service.

## Identifying Carrier or Carriers Best Able to Serve Unserved Areas

93. Section 214(e)(3) authorizes the Commission, with respect to
    interstate service or an areas served by a carrier to which section
    214(e)(6) applies, and state commissions, with respect to intrastate
    service, to determine which carrier or carriers are best able to
    provide service to the requesting, unserved community and order that
    carrier or carriers to provide service. We seek comment on the
    relative roles that the Commission and the states should play in
    determining which carriers are best able to provide the supported
    services in unserved areas, including any coordination that should
    occur in making this determination.

94. We seek comment on whether the Commission is authorized to and
    whether it should establish national guidelines by which states may
    or must make this determination, when they have jurisdiction to do
    so. We recognize that the selection of the carrier to serve some
    unserved areas pursuant to section (e)(3) of the Act is to be made
    by state commissions. We seek comment on whether a consistent,
    national approach is necessary to further the universal service
    goals of the Act or to provide certainty to carriers regarding the
    possible application of this important provision. We seek comment on
    whether, in situations where the state has jurisdiction to designate
    eligible telecommunications carriers, all aspects of this decision
    should be left to the states because states have more familiarity
    with the areas in question. We also seek comment on the role of
    tribal authorities with respect to the Commission's determination of
    the carrier or carriers best able to serve unserved, tribal lands.
    We also seek comment to determine whether the Commission's
    obligation to identify and order a carrier to provide service in
    tribal lands should be affected by the interests of the tribal
    authorities.

95. One approach for making a determination pursuant to section
    214(e)(3) would be to conduct a fact-intensive inquiry, polling
    common carriers serving nearby or surrounding areas to determine
    where existing facilities are deployed, to estimate the costs for
    each carrier to provide the supported services, and to consider
    other possible factors that may be relevant to the conclusion that a
    carrier is "best able." We tentatively conclude, however, that our
    preferred approach would be to adopt a competitive bidding mechanism
    for identifying the carrier or carriers best able to provide service
    in unserved areas for which the Commission has authority to order
    carriers to provide service. We seek comment on the use of a
    competitive bidding mechanism in section 2, below. We seek comment
    on whether it is within our authority to require states to adopt a
    competitive bidding mechanism to determine which carrier or carriers
    will be ordered to provide intrastate service in unserved areas to
    which section 214(e)(6) does not apply.

96. If the competitive bidding mechanism does not give rise to a carrier
    willing and able to provide the supported services in the unserved
    area at a reasonable cost, we seek comment on whether the Commission
    should then initiate an inquiry to determine the carrier or carriers
    best-able to provide service to the area. We seek comment on whether
    the following factors would be relevant in making that
    determination: (1) whether the area falls within the designated
    service area of an existing carrier; (2) the extent to which a
    carrier has deployed facilities capable of providing supported
    services in the surrounding area; (3) the cost for that carrier to
    build facilities capable of providing the supported services; (4)
    the quality of services that would be provided; (5) the financial
    strength of the carrier; (6) the proportionate impact serving the
    area would have on the number of lines and the geographic area
    served by the carrier; (7) the amount of time required for the
    carrier to deploy facilities; and (8) a carrier's status as either
    an incumbent LEC or a competitive eligible telecommunications
    carrier. We seek comment on any other factors that may be relevant.
    We also seek comment on whether our inquiry must be limited to
    incumbent LECs and competitive eligible telecommunications carriers
    or whether we may also include other competitive LECs, interexchange
    carriers, terrestrial wireless or satellite service providers, or
    providers of cable or electric services that would be capable of
    providing the supported services to the unserved area. We seek
    comment on whether to exclude certain carriers from consideration,
    for example, carriers that are considered small entities for
    purposes of the Regulatory Flexibility Act.[^178] Finally, we seek
    comment on whether the preferences of the unserved community for a
    particular carrier or technology should be considered in making a
    determination of which carrier is best able to provide service to
    the area.

### Background on Competitive Bidding

97. In the Notice of Proposed Rulemaking issued to implement the
    universal service provisions of the 1996 Act,[^179] the Commission
    sought comment on how to provide universal service support to rural,
    insular, and high-cost areas, generally,[^180] and asked whether
    competitive bidding could be used to set the level of support.[^181]
    The Commission sought comment on the use of a competitive bidding
    system in which eligible carriers offering all of the services
    supported by universal service mechanisms would bid on the level of
    assistance per line that they would need to provide such services at
    affordable rates, consistent with the Act. The Commission explained
    that such an approach would attempt to harness competitive forces to
    minimize the cost of universal service. In a July 1996 Public
    Notice, the Common Carrier Bureau sought further comment on a
    competitive bidding system.[^182] In addition, Commission staff
    conducted *ex parte* meetings relating to competitive bidding,
    including a March 19, 1997 forum on universal service
    auctions.[^183]

98. The Joint Board focused its recommendations regarding support for
    rural, insular, and high-cost areas on a mechanism for estimating
    the forward-looking economic cost of service for such areas. The
    Joint Board concluded that:

    \[w\]hile the record in this proceeding persuades us that a properly
    structured competitive bidding system could have significant
    advantages over other mechanisms used to determine the level of
    universal service support for high cost areas, we find that the
    information contained in the record does not support adoption of any
    particular competitive bidding proposal at this time.[^184]

99. The Joint Board cited the potential advantages of competitive
    bidding including the use of marketplace dynamics to establish the
    level of universal service support for any given area.[^185] The
    Joint Board noted that \"\[a\] properly designed competitive bidding
    system would reduce the role of regulators in determining the costs
    of providing universal service once an area becomes subject to
    bidding.\"[^186] The Joint Board also recognized that a properly
    structured competitive bidding system could reduce the amount of
    support needed for universal service by reflecting the lower costs
    of more efficient carriers and new technologies that would be used
    to set the level of universal service support for the entire
    area.[^187]

100. The Joint Board found that sections 254 and 214(e) of the Act[^188]
     and the record developed in this proceeding provide some guidance
     as to how a competitive bidding system should be structured.[^189]
     The Joint Board recommended that any carrier that meets the
     eligibility criteria for universal service support should be
     permitted to participate in the auction and that any competitive
     bidding system should be competitively neutral, favoring neither
     incumbents nor new entrants.[^190] It also recommended that the
     system adopted should minimize the ability of bidders to
     collude,[^191] and suggested that the system should either
     prescribe a minimum number of bidders or be designed to be
     effective for any number of bidders.[^192] Finally, the Joint Board
     recommended that, in determining the geographic area that carriers
     would bid to serve, any final proposed bidding plan use areas sized
     to promote competition and target universal service support
     efficiently.[^193]

101. On May 8, 1997, the Commission released its *First Report and
     Order*. In the *First Report and Order*, the Commission adopted
     most of the recommendations of the Joint Board including \"a
     specific timetable for implementation of federal universal service
     support to rural, insular, and high cost areas.\"[^194] In the
     *First Report and Order*, the Commission found that \"a compelling
     reason to use competitive bidding is its potential as a
     market-based approach to determining universal service support. . .
     .\"[^195] The Commission also found that \"a properly structured
     competitive bidding system would . . . reduce the amount of support
     needed for universal service.\"[^196] By reducing the amount of
     support provided for universal service, the Commission found that
     competitive bidding may advance the goal of affordable rates
     because carriers would be able to pass-through any reductions to
     their subscribers. The Commission concluded, however, that further
     proceedings were needed to examine issues related to the use of
     competitive bidding to set universal service support levels for
     rural, insular, and high-cost areas.[^197] Specifically, the
     Commission found that the record did not contain adequate
     discussion or analysis to enable us either to define a competitive
     bidding mechanism that would be consistent with the requirements of
     sections 214(e) and 254, or to adopt specific procedures for
     implementing a lawful competitive bidding system.[^198]

### Competitive Bidding Proposal

102. We tentatively conclude that we should adopt a competitive bidding
     mechanism to identify the carrier or carriers best able to provide
     the supported services in unserved tribal lands and to set the
     level of support provided for serving the area. We are hopeful that
     we may be able to design a competitive bidding mechanism that will
     generate public awareness of the needs of a particular area for
     service and elicit proposals from one or more carriers that could
     be compared before determining which carrier or carriers should be
     designated as an eligible telecommunications carrier for the area.
     We seek comment on this proposal.

103. We seek comment on whether the possibility that a carrier will be
     ordered to provide service pursuant to section 214(e)(3) will
     provide incentives for carriers to participate in the competitive
     bidding mechanism in order to be able to set the terms on which
     they will provide service. We seek comment on whether the
     competitive bidding mechanism could bring unserved areas to the
     attention of carriers previously unaware of the need for
     telecommunications services in those areas and thus identify
     carriers that would be willing to provide service to the area for a
     support amount equal to or lower than the amount that would be
     provided under existing federal universal service support
     mechanisms. In addition, we seek comment on possible negative
     incentives and distortions that may be created by using a
     competitive bidding mechanism. For example, we seek comment on
     whether a competitive bidding approach will likely lead carriers to
     provide the lowest-cost, lowest-quality service that meets the
     definition of supported services, unfairly depriving residents of
     higher quality or advanced services.

104. We also seek comment on whether the Commission should conduct a
     trial to determine whether a competitive bidding mechanism is the
     most efficient means of identifying the carrier or carriers best
     able to provide the supported services in unserved areas. We seek
     comment on how large a service area would be appropriate for such a
     trial. We seek comment on whether the Commission should solicit
     volunteers from Indian tribes that currently have large unserved
     areas.

#### Participants

105. We seek comment on the possible participants in a competitive
     bidding proceeding. Section 214(e)(3) states that any carrier
     ordered to provide service pursuant to this section shall meet the
     requirements necessary and be designated an eligible
     telecommunications carrier for the unserved area.[^199] We seek
     comment on whether a carrier must first be designated an eligible
     telecommunications carrier for the area prior to participating in
     the competitive bidding mechanism. We seek comment on whether any
     carrier that can demonstrate that it can meet the requirements of
     section 214(e)(1) may participate in the competitive bidding
     mechanism. We seek comment on what kind of showing is necessary to
     demonstrate that a carrier can meet the requirements of section
     214(e)(1). We seek comment on whether terrestrial wireless or
     satellite providers will be able to participate in the competitive
     bidding mechanism. We also seek comment on the number of bidders we
     should anticipate for auctions in the universal service context,
     and the extent to which we should consider that number in deciding
     the type of auction that should be used, as discussed below.

#### Number of Winners

106. We seek comment on whether the characteristics of the unserved
     tribal lands may be such that it is not economically practical to
     support more than one provider to serve unserved, tribal lands. To
     the extent that supporting a single provider is more economical,
     permitting multiple providers to receive federal universal service
     support may not be in the public interest. In addition, if all
     carriers were entitled to receive support at the level determined
     in the competitive bidding auctions, bidders would have no
     incentive to bid below the opening level; that is, competitive
     bidding would not reveal the minimum amount of support necessary to
     provide service to the area. For these reasons, we propose that
     qualified eligible telecommunications carriers bid to secure an
     exclusive right to receive universal service support for serving
     the unserved tribal area. That is, the winning bidder would be the
     only carrier designated as an eligible telecommunications carrier
     for providing the supported services to the unserved, tribal lands
     subject to competitive bidding.

107. We seek comment on whether the Commission has the authority to and
     whether we should try to attract carriers by agreeing to designate
     only one carrier to serve the unserved, tribal land or permitting
     only one carrier to receive federal universal service support for
     serving the area. We seek comment on whether a decision to limit
     support to a single carrier is consistent with the universal
     service provisions and pro-competitive goals of the Act. We observe
     that, in the case of an area served by a rural carrier, the
     Commission "may" designate more than one eligible
     telecommunications carrier but must make a specific showing that an
     additional eligible telecommunications carrier would serve the
     public interest.[^200] With respect to all other carriers, the
     Commission "shall" designate more than one common carrier as an
     eligible telecommunications carrier. We seek comment on whether
     these provisions apply with respect to an unserved area. We seek
     comment on whether the statutory language that the Commission
     "shall determine which carrier or carriers are best able to provide
     such service" indicates that the Commission may determine that a
     single carrier shall be designated. Finally, we seek comment
     concerning the ability of bidders to accurately estimate the
     possible future challenges from other carriers for the more
     profitable customers in the previously unserved, tribal lands.

108. As an alternative to a single winner, we consider the possibility
     of supporting two or more winning bidders. We generally believe
     that customers benefit most when multiple providers are available,
     because competition leads to lower prices and provides an
     alternative where service quality is unsatisfactory. Supporting two
     winning bidders means that a second carrier would be able to
     compete vigorously with the lowest bidder. We seek comment on
     whether to use the competitive bidding mechanism to identify a
     level of support which would be provided for serving the area and
     to allow any carrier with a bid within a specific range of the
     winning bidder,[^201] who also satisfies the requirements of
     section 214(e)(1) of the Act, to receive that level of support for
     providing service to the area. We seek comment on whether the
     possibility of having multiple carriers receive support for these
     previously unserved areas would substantially diminish or even
     eliminate any incentives carrier might have to participate in
     competitive bidding. We seek comment on whether providing support
     sufficient to allow competing carriers to build the necessary
     infrastructure would generate customer benefits over the long-term
     that would offset the additional cost associated with supporting
     two carriers. In making this determination, we must consider the
     duration of the service term and the rate of change in network
     technology. For example, if technological change were so rapid that
     both the new entrant and incumbent carrier would need to install
     and recover the cost of new facilities for each contract term, the
     benefits of creating competing carriers would be significantly
     reduced. We seek comment on these issues.

#### Term of Exclusivity Period

109. If the Commission determines that a bidder should win the exclusive
     right to federal universal service support, we would seek to
     establish an exclusivity period that is of an adequate length to
     provide incentives for carriers to deploy facilities yet does not
     result in unnecessary support being provided. We seek comment on
     the appropriate duration of any exclusivity period. After the
     exclusivity period has ended, we could choose to re-auction the
     service obligation and consider multiple providers if the costs of
     providing service decreased or market conditions improved so that
     multiple providers became practical. We anticipate that that the
     length of the exclusivity period will affect the bids for monthly
     support levels. In addition, the length of the exclusivity period
     will affect the average administrative and transaction costs for
     conducting the auction. Granting exclusivity periods that are too
     short could be harmful because the winning carrier is likely to
     need time to establish its network, and to amortize its
     investments. In addition, more frequent auctions entail increased
     administrative costs. Granting periods that are too long, however,
     also could be harmful. Technological advances over time can create
     more efficient means of providing communications, which would
     enable firms to offer service at a lower cost. To the extent that
     the winning bidder is shielded from competition during the
     exclusivity period, the benefits of adopting a more efficient
     technology will accrue to the carrier, rather than the
     customer.[^202] In addition, with longer contract terms, the
     carriers' prediction of their costs at later stages in the contract
     becomes more speculative, which could translate into higher bids in
     the auction. We seek comment on this analysis and the appropriate
     length of the exclusivity period. We suggest that commenters review
     the competitive bidding proposals and mechanisms summarized in
     Appendix D for examples that may assist in determining the length
     of the exclusivity requirement.

#### Bidding Process

110. We seek comment on whether to use a single-round, sealed bid
     process or a descending, multi-round auction. [^203] Each bidder
     would submit an amount of support necessary per line given our
     universal service technical specifications. We observe that the
     Commission has successfully implemented multi-round auctions in
     other contexts.[^204] We seek comment on whether a descending
     multi-round bidding system would be preferable to a single-round
     sealed bid auction.[^205]

111. We also seek comment on how to establish the reservation price --
     the highest bid that would qualify for support -- for the
     competitive bidding mechanism. One option would be to use the new
     high-cost mechanism to estimate the amount of support that would be
     available for providing the supported services in the unserved,
     tribal area and set that as the reservation price. We seek comment
     on what incentives carriers would have, if any, to bid an amount
     lower than the reservation price determined by the model.
     Alternatively, we seek comment on whether we should set a
     reservation price that is some percentage above the support amount
     determined under the new high-cost mechanisms. We seek comment on
     whether a rational percentage can be identified. We also seek
     comment on whether to conduct an auction without establishing a
     particular reservation price or specifically identifying the amount
     that would be provided under the new high-cost mechanism in an
     effort to determine the amount of support each carrier believes is
     necessary. We seek comment on whether, if we were to proceed in
     this manner, the Commission should reserve the right to conclude
     that the competitive bidding mechanism was not successful and to
     proceed to the fact-based inquiry, described in paragraph above.

#### Support Amount

112. A well-designed auction should provide incentives for carriers to
     disclose the minimum amount of support they require, even though
     this information may be competitively sensitive. We seek comment on
     how to provide incentives for carriers to reveal the minimum amount
     of support necessary to provide service to the unserved area. We
     seek comment on whether we should employ a "Second Price" or
     "Vickrey" auction, in which the successful bidder gets support at
     the level of the lowest bid made by a non-successful bidder. In
     theory, this style of auction appears to induce bidders to reveal
     their actual costs and would thereby generate the same total
     support requirements as a first price, sealed bid auction.[^206]
     Another factor relevant in setting the support level is whether the
     federal support provided constitutes the entire amount of subsidy
     available to the carrier. We tentatively conclude that we would
     need to establish that the competitive bidding mechanism for
     unserved areas would be used to determine the entire amount of
     support to be divided and the relevant share of support would be
     allocated to the federal and state authorities, in whatever
     proportion is established for the high-cost support mechanism in
     general. We seek comment on this analysis.

#### Obligations Assumed by Winning Bidder

113. We tentatively conclude that, pursuant to section 214(e), a
     successful bidder must provide the services supported by the
     universal service support mechanisms to all customers requesting
     service in the designated area and advertise the availability of
     such service throughout the service area.[^207] We seek comment on
     this tentative conclusion.

### Other Proposals and Examples of Competitive Bidding

114. A number of parties submitted competitive bidding proposals in the
     universal service docket, the most detailed of which were submitted
     by GTE,[^208] consultants to Ameritech,[^209] and Frank Kelly and
     Richard Steinberg of Cambridge University, Great Britain.[^210]
     These proposals were designed to determine the carrier or carriers
     entitled to receive universal service support and the level of
     support to be provided. In addition, other government agencies have
     used competitive bidding systems that may have features relevant to
     the market at issue here. We seek comment on these other
     competitive bidding proposals, summarized in Appendix D, because
     aspects of these proposals may be preferable to the competitive
     bidding approach proposed above.

## Ordering Carriers to Provide Service

115. We seek comment on the ramifications of ordering a carrier to
     provide service in an unserved area. We tentatively conclude that
     this requirement entails an obligation to deploy the facilities
     necessary to provide the services supported by federal universal
     service support mechanisms, to offer the services to all customers
     requesting service in the designated area, and to advertise the
     availability of such service throughout the service area. These
     requirements are consistent with the language in section 214(e)(3)
     of the Act, stating that the carrier ordered to provide service
     shall meet the requirements of section 214(e)(1) of the Act.[^211]
     We seek comment on this tentative conclusion.

116. We also seek comment whether additional measures may be necessary
     to ensure that the carrier ordered to provide service is able to
     earn an appropriate return on its investment. For example, a
     carrier may deploy facilities, advertise the availability of
     services and offer service to all customers and yet an inadequate
     number of customers may subscribe to the service, rendering the
     operation unprofitable. This result may occur due to faulty
     estimations by the carrier, but it may also be the result of
     unpredictable demand. Similarly, it is possible that carriers may
     provide services to all requesting customers, yet the customers
     might default on their bills. If the carrier is ordered to provide
     service, to what extent must it retain customers who cannot pay
     overdue debts or with poor credit records? How will the carrier
     recover its investment on the facilities deployed to provide
     service to subscribers who do not pay their bills? We seek comment
     on these issues, including the appropriate role for the Commission
     and state commissions to play in addressing these issues.

# Underserved Areas

117. In this section of the Further Notice, the Commission considers
     whether additional support for low-income consumers is necessary to
     promote subscribership in unserved and underserved areas, including
     tribal and insular areas.

## Defining "Underserved Area"

118. In the *Thirteenth Order on Reconsideration*, the Commission
     observed that there may be inadequately served areas that are
     characterized by extremely low penetration, low population density,
     and high costs.[^212] We seek comment on the need for the
     Commission to establish a definition of "underserved area" that
     would be used in targeting supplemental universal service support
     to those areas. For example, a community may be considered
     underserved if the penetration rate of the community is
     significantly below the national average. In addition to the number
     of supported services available, and the percentage of the
     population receiving those supported services, there may be other
     identifying characteristics that describe an underserved area. We
     seek comment on an appropriate definition for underserved area. For
     example, we could define underserved area as a geographic area that
     meets certain statistical benchmarks, *i.e.*, a penetration rate
     below a certain percentage, a population density below a certain
     level, costs of providing supported services above a certain level,
     etc. We also seek comment on whether there is sufficient, readily
     available statistical data to make such a definitional approach
     viable.

## Expanding LinkUp to Include Facilities-Based Charges

119. We seek comment on whether increasing federal support to offset
     initial connection charges may be necessary to increase the success
     of our universal service support mechanisms in underserved areas,
     including insular and tribal lands. In the proceeding leading up to
     the *Second Recommended Decision*, the Arizona Corporation
     Commission (Arizona Commission) submitted a proposal to use a
     portion of federal support to address the problem of unserved areas
     and the inability of low-income residents to obtain
     telecommunications service because they cannot afford to pay the
     required line extension or construction costs.[^213] The Arizona
     Commission\'s proposal was not intended to be a comprehensive
     alternative to the high-cost fund distribution model, but rather to
     address a discrete concern related to low-income residents in
     remote areas. We seek comment on the Arizona Commission\'s proposal
     and the extent to which the problem identified by the Arizona
     Commission is widespread. In particular, we seek further data on
     the cost of line extensions in rural areas and regarding the number
     of residents that are deprived of telecommunications services
     because of high line extension or construction costs and areas in
     which this problem is acute.

120. The Joint Board recognized that investments in line extensions
     historically have been an issue addressed by the states through
     intrastate proceedings that establish reasonable rates for line
     extension agreements and encourage carriers to minimize unserved
     regions of the states.[^214] The Joint Board suggested that these
     issues should continue to be dealt with by states, to the extent
     that the states are able to do so.[^215] We note that regulators
     generally require carriers to use rate averaging to reduce the
     rates for their highest-cost customers in rural and insular areas,
     but those regulators often still permit carriers to charge
     particularly isolated customers a supplementary \"initial
     connection\" charge for installing a new line. Moreover, while
     regulators also generally require carriers to amortize the cost of
     installing new lines, if there is a reasonable chance that those
     lines will not be used over their full life-span, regulators often
     permit carriers to charge most, if not all, of the initial
     connection charge up front. These charges can be prohibitive.[^216]
     We seek comment on whether states have the ability to address this
     problem, or, in the alternative, whether federal assistance, in
     some instances, may be necessary.

121. We seek comment on what role the Commission might play in trying to
     alleviate this problem. We seek comment on whether we might provide
     additional support through the LinkUp America program \-- which
     provides federal support to reduce the price of initial connection
     charges \-- at least for locations with significantly lower than
     average telecommunications penetration rates, *e.g.*, below 75
     percent.[^217] Commenters supporting such an approach should also
     explain whether support would be provided as a one-time payment or
     over a number of years. We also seek comment on what we might do to
     encourage carriers to offer installment loans for such extensions
     over a practical time frame. We seek comment on these and any other
     alternatives that might be more effective ways of addressing this
     problem. For example, we seek comment on whether the provision of
     telecommunication service to remote areas using terrestrial
     wireless or satellite technologies might allow service at lower
     cost compared to the cost of line extension or construction of
     wireline facilities. Commenters offering proposals should also
     explain how their proposals would avoid encouraging uneconomic
     investments in relatively high-cost technologies.

## Support for Intrastate Toll Calling

122. In paragraph above, we seek comment on the extent to which limited
     local calling areas impose a barrier to increased penetration in
     certain underserved areas. For example, the local calling area for
     the Jemez Pueblo in New Mexico includes only about half a dozen
     other towns. It does not include any other Pueblos or hospitals nor
     the cities of Albuquerque or Santa Fe, where most residents
     work.[^218] Similarly, the calling area for the Picuris Pueblo does
     not even include 911 calls.[^219] To the extent that limited local
     calling areas impose a barrier to increased penetration, we seek
     comment on how to remove this barrier. For example, expanding the
     local calling area to include the unserved or underserved area and
     the nearest metropolitan area or community of interest may entice
     more consumers to request service. Expanding local calling areas,
     however, would likely cause upward pressure on local rates. We seek
     comment on how expanded local calling areas would impact local
     rates, including rates for consumers living in communities outside
     of tribal lands. We seek comment on what role, if any, the
     Commission is authorized to and should play in seeking to address
     impediments caused by limited local calling areas.

123. We seek comment on whether federal universal service support
     mechanisms should provide additional support for low-income
     consumers living in remote areas or low-income consumers living on
     tribal lands. For example, the Commission could provide support for
     calls outside of the local calling area that fall within specified
     federally-designated support areas. Similarly, federal universal
     service support could be provided to pay for a foreign exchange
     (FX) line service from the remote or tribal area to the nearest
     metropolitan area or community of interest. We seek comment on
     whether such proposals would eliminate incentives for states to
     ensure affordable local rates. We also seek comment on whether the
     provision of service by terrestrial wireless or satellite providers
     would alleviate any problems associated with limited local calling
     areas.

## Expanded Availability of Toll Limitation Devices

124. Many households may forgo telecommunications service because of
     past or anticipated future problems with high telephone
     bills.[^220] The general prevalence of this bill management problem
     was documented in a GTE-Pacific Bell commissioned survey done in
     1993 by the Field Research Corp. for the California PUC.[^221] The
     Commission sought to address the problem, however, by requiring
     carriers offering low-income subscribers \"Lifeline\" service, to
     permit those subscribers to secure a \"toll limitation\" service
     \-- either toll blocking or toll control.[^222] We believe that our
     actions in this regard should alleviate this bill management
     problem.[^223] We seek comment on whether expanded options for
     toll-control or toll-blocking would make telecommunications service
     more desirable in unserved and underserved areas, including tribal
     lands. We ask that commenters identify any specific toll-control or
     toll-blocking features that would be useful, including, for
     example, the ability to require the use of a Personal
     Identification Number (PIN) in order to restrict access to toll
     calls.[^224] We also recognize that the benefits of these options
     are minimal if consumers are not aware of them. We seek comment on
     what additional measures, if any, the Commission should undertake
     to ensure consumers are educated about the availability of
     toll-limitation devices.

## Publicizing Availability of Low-Income Support

125. We observe that customers may fail to subscribe to
     telecommunications service because they are unaware of the
     Commission\'s Lifeline and LinkUp programs, which are intended to
     make service more affordable, and the availability of toll-control
     and toll-blocking, which are intended to help low-income consumers
     control the amount of their monthly bills. Although the
     Commission\'s Lifeline and LinkUp programs have been providing
     universal service support to eligible customers for more than a
     decade, we are concerned that carriers may have failed to publicize
     the programs in some areas, particularly on Indian reservations.
     Unfortunately, it appears that in markets where carriers find it
     unprofitable to provide service, they have no particular incentive
     to publicize the availability of Lifeline and LinkUp. Thus, the
     Commission found that none of the representatives of the pueblos
     testifying in the January, 1999 Albuquerque field hearings were
     aware of the Lifeline and LinkUp programs.[^225] Furthermore,
     despite the 60-percent unemployment rate in the Cheyenne River
     Sioux Telephone Authority area, only about 10-percent of the
     subscribers there receive Lifeline service.[^226]

126. We seek comment on whether the Commission should play a role in
     ensuring the spread of information on tribal lands, or in other
     low-income, underserved areas, about the availability of low-income
     support that may make telecommunications service affordable. We
     recognize that carriers already have an incentive to convince
     potential customers of the value of their service \-- assuming the
     customers will be profitable to serve. We are concerned about those
     consumers whom carriers may consider unprofitable to serve. We
     tentatively conclude that a lack of information may contribute to
     the significantly low penetration rates on tribal lands.

127. Number range level0Number range level1Number range level2Number
     range level3Number range level4Number range level5Number range
     level6Number range level7We seek comment on what options the
     Commission may have to promote awareness of low-income support
     mechanisms on tribal lands. Section 214(e)(1)(B) of the Act
     requires an eligible telecommunications carrier to "advertise the
     availability of" the services supported by federal universal
     service support mechanisms "and the charges therefor using media of
     general distribution."[^227] We seek comment on the possibility of
     amending our current universal service rules to require carriers to
     publicize the availability of Lifeline and LinkUp and
     toll-limitation options. For example, we could revise section
     54.405 of our rules[^228] by adding the following italicized
     language:

All telecommunications carriers shall *(a)* make available Lifeline
service, as defined in § 54.401, to qualifying low-income consumers*,
and (b) publicize the availability of Lifeline service in a manner
reasonably designed to reach those likely to qualify for the services.*

128. We seek comment on the costs and benefits of requiring carriers to
     publicize the availability of Lifeline, LinkUp and toll-control
     devices. Alternatively, the Commission could encourage and
     participate in other marketing and information dissemination
     efforts, such as preparing consumer information fact-sheets that
     would be distributed in local communities. We seek comment on
     whether there is, or should be, some entity that would collect and
     verify the accuracy of data on Lifeline rates for each reservation,
     the eligibility standards for Lifeline in the relevant state, and
     how individuals who desired Lifeline service could confirm their
     eligibility and how they could sign up for service. We also seek
     comment on the best ways to disseminate this information to the
     relevant audience of potential Lifeline subscribers. We seek
     comment on any research or other data that indicates the most
     effective way of marketing to this population, whether via
     broadcast, print, wireline, or other media; whether separately or
     in combination with the marketing efforts of other social programs
     seeking to reach this audience; and whether on a federal, state or
     tribal level. Commenters aware of a particularly effective program
     are requested to provide us with sufficient information to enable
     us to contact that program administrator.

## Support for Rural Health Care Infrastructure

129. In the 1996 Act, Congress ordered the Commission to provide
     universal service support for "any public or nonprofit healthcare
     provider that serves persons who reside in rural areas."[^229] It
     also directed the agency "to enhance, to the extent technically
     feasible and economically reasonable, access to advanced
     telecommunications and information services for all public and
     nonprofit . . . health care providers."[^230] In the *First Report
     and Order*, the Commission implemented these instructions by
     adopting rules to provide public or nonprofit Rural Health Care
     Providers (RHCPs) with discounts on one 1.544 bandwidth link or the
     equivalent over the distance generally necessary to reach the
     nearest urban hospital.[^231] That discount generally enables an
     RHCP to pay no more than it would pay if it were located in the
     nearest urban area.[^232] In addition eligible public and
     non-profit health care providers without local access to Internet
     service providers may also receive support for toll-free access to
     an Internet service provider.[^233]

130. Both the Joint Board and the Commission considered whether
     improvements to the public switched telephone network should be
     supported if such improvements are necessary to provide
     telemedicine and telehealth services in rural areas.[^234] In the
     *First Report and Order,* the Commission discussed the need to
     improve telecommunications infrastructure in Alaska, particularly
     so that rural health care providers can use telemedicine and
     telehealth services.[^235] The State of Alaska asserted that \"the
     major obstacle to providing telemedicine services in Alaska is that
     the public switched network is not currently capable of providing
     services in rural locations where there is significant
     need.\"[^236] The Alaska Public Utilities Commission (PUC) asserted
     that Alaska is \"heavily dependent on satellite communications to
     provide links between the majority of remote, rural health care
     providers and the few regional hospitals\" and that affordable
     satellite connectivity is often limited to bandwidth of 9.6
     kbps.[^237] Because satellite signals must be \"hopped\" through
     multiple earth stations, including antiquated analog earth
     stations, residents of Alaska are often prevented from using fax
     machines or computer modems.[^238]

131. Although the Commission\'s Advisory Committee on Telecommunications
     and Health Care[^239] recommended that universal service support be
     available to build, improve, or extend telecommunications
     infrastructure in such areas,[^240] the Commission concluded that
     \"the existing record contains insufficient information to
     determine the level of need for such infrastructure development or
     to estimate reliably the costs to support such development.\"[^241]
     In addition, the Commission concluded that it had insufficient
     information about existing federal and state programs already
     supporting infrastructure development and their success in meeting
     existing needs.[^242] The Commission found that it has authority,
     under section 254(h)(2)(A), to implement a program of universal
     service support for infrastructure development as a method of
     enhancing access to advanced telecommunications and information
     services as long as such a program is competitively neutral,
     technically feasible, and economically reasonable.[^243]

132. We seek comment on the technical limitations of the
     telecommunications services available to rural health care
     providers throughout the United States, including Alaska and
     insular areas. We ask commenters to provide as much detail as
     possible regarding the extensions or improvements needed in areas
     lacking adequate infrastructure. We ask that commenters identify
     the most urgent needs, such as those that would address threats to
     the health and safety of residents. We particularly encourage
     providers of fixed satellite services, geo-stationary satellites,
     and emerging technologies, to describe the capability of these
     technologies to serve Alaska and insular areas,[^244] and ask these
     providers to estimate the costs, provide a timetable for deploying
     particular technologies, and provide information regarding the
     capability of different technologies to support telehealth and
     telemedicine applications. We ask providers of other technologies,
     such as fixed wireless technology, to describe whether these
     technologies could effectively supplement the apparently inadequate
     infrastructure in the rural areas of Alaska, insular areas, and the
     mainland United States.

133. We seek comment on whether and to what extent improvements to the
     telecommunications network required to meet the telecommunications
     needs of rural health care providers should be supported by federal
     universal service mechanisms and whether other mechanisms exist
     that would provide support for improving infrastructure. We ask
     parties to submit detailed descriptions of any programs supporting
     infrastructure development that would assist rural health care
     providers. We specifically ask the sponsors of programs cited in
     the State Health Care Report[^245] and other commenters familiar
     with these programs to detail their scope, identify any needs that
     are unmet by existing programs, and explain why.

134. We invite commenters to submit specific proposals that they have
     already prepared for expanding the federal universal service
     support for rural health care providers to include infrastructure
     improvement costs of telecommunications carriers. Any commenter
     submitting a proposal should analyze the extent to which the
     proposal is competitively neutral, technically feasible, and
     economically reasonable, as required pursuant to section
     254(h)(2).[^246] Commenters should also file detailed cost
     information for any proposal submitted. We recognize that some
     improvements to the telecommunications network made to provide
     service to rural health care providers may also be used to provide
     commercial services. We seek comment on whether and to what extent
     we should take account of such additional revenue sources in the
     event that support is provided to extend or improve
     telecommunications networks. [^247]

# Insular Areas

135. In the *First Report and Order*, the Commission stated it would
     seek further comment in a subsequent proceeding on universal
     service issues affecting insular areas.[^248] The Commission
     recognized that, while insular areas will benefit from the federal
     universal service support mechanisms, insular areas may face unique
     problems that could limit their ability to participate in and
     benefit from all of the universal service programs.[^249] In
     particular, the Commission expressed concern about the low
     subscribership levels in insular areas, including Puerto Rico, and
     the potential need to tailor universal service support for both
     rural health care providers and telecommunications carriers in
     insular areas.[^250] The Commission also concluded that it would
     consider in a later proceeding whether and how to support
     infrastructure development needed to enhance public and
     not-for-profit health care providers\' access to advanced
     telecommunications and information services, for both insular and
     non-insular rural areas.[^251] We initiate that discussion in this
     section of the Further Notice.

## Defining "Insular Area"

136. In articulating the principle that consumers in all regions of the
     nation should have access to telecommunications services, Congress
     explicitly included insular areas within this mandate.[^252] As the
     Joint Board noted in the *Recommended Decision*, however, the Act
     does not define the phrase insular areas.[^253] We tentatively
     conclude that we should adopt a definition of insular areas to
     provide clarity regarding the availability of universal service
     support in those areas.

137. We observe that, in other statutes, the term insular area generally
     refers to the island portions of the United States that are not
     states or portions of states.[^254] In addition, we observe that in
     common usage, the term insular area means \"of, or having the form
     of an island.\"[^255] Accordingly, we propose the following
     definition of insular areas: "islands that are territories or
     commonwealths of the United States." By including the phrase
     \"territories or commonwealths,\" we intend to restrict the
     definition to areas that are populated islands that have a local
     government.[^256] We also observe that the proposed definition
     comports with publications of the Department of Interior\'s Office
     of Insular Affairs (OIA)[^257] and various provisions of the United
     States Code.[^258] We seek comment on this proposal.

138. We seek comment on whether the definition of insular areas should
     include only those areas that are subject to the laws of the United
     States, and for which carriers serving those areas would be
     required to contribute to our universal service support
     mechanisms,[^259] and, if so, we seek comment on whether the
     proposed definition satisfies this goal. We seek comment on whether
     the definition of insular areas should exclude sovereign states
     that are not subject to the laws of the United States[^260] nor
     eligible to receive universal service support under the Act,[^261]
     unpopulated islands,[^262] and insular areas subject to the
     jurisdiction of, and receiving telecommunications service from, the
     United States military.[^263] We tentatively conclude that Puerto
     Rico, American Samoa, CNMI, Guam, and the U.S. Virgin Islands are
     properly included in the definition of insular areas and seek
     comment on this tentative conclusion.

139. We seek comment on whether the Freely Associated States (FAS),
     including the Republic of the Marshall Islands, the Federated
     States of Micronesia, and the Republic of Palau, should be included
     in the definition of insular areas.[^264] These islands are
     associated with the United States through the terms of a Compact of
     Free Association, which gives the Commission authority and
     jurisdiction over various telecommunications services in the FAS,
     but carriers are not subject to universal service contribution
     requirements for the services they provide on these islands. We
     also observe that Midway Atoll is being transferred from the
     jurisdiction of the United States Navy to the U.S. Fish & Wildlife
     Service of the Department of Interior and has a population of 450
     persons. We seek comment on whether Midway Atoll should be included
     in the definition of insular areas.[^265] We invite commenters to
     provide alternative definitions of "insular areas" and to describe
     which areas would and would not be included with any alternative
     definition.

140. We seek comment on whether similarities between the historical
     experience of Indians and persons living in insular areas warrant
     the extension of federal trust-type principles, including
     supplemental measures to promote the availability of universal
     service, to insular areas.[^266]

## Rural Health Care Support

141. Parties have already submitted information to us demonstrating that
     insular areas may have few hospitals and substantial undeveloped
     terrain and that travel between insular areas and more developed
     states or countries nearest to them may be very expensive. For
     these reasons, we anticipate that telehealth and telemedicine
     initiatives may be particularly important in insular areas.[^267]
     We encourage interested parties to highlight previous comments they
     have made on this issue or present any relevant new information to
     us. We are particularly interested in the differences between the
     needs and opportunities of rural health care providers in insular
     areas and those located in the remainder of the United States.

142. *Urban Rates.* In the *First Report and Order,* the Commission
     adopted rules requiring carriers to provide rural health care
     providers with access to telecommunications services permitting
     speeds up to 1 Mbps at rates comparable to those offered in urban
     areas.[^268] Consistent with the statute, the Commission's rules
     for rural health care providers calculate support amounts on the
     basis of the difference between the "urban rate" and the "rural
     rate" for the supported service.[^269] The urban rate is determined
     with reference to the rates charged other commercial customers of a
     similar service in the nearest large city in the state.[^270] The
     nearest large city is defined as having a population of at least
     50,000 people.[^271]

143. In the *First Report and Order,* the Commission found that the
     mechanism of using urban rates as a benchmark for reasonable rates
     may be ill-suited to certain insular areas that are relatively
     rural all over.[^272] The Commission concluded that it required
     additional information about whether telecommunications rates
     differ in urban and non-urban areas or insular areas, including
     areas of the Pacific Islands [^273] and the U.S. Virgin
     Islands.[^274] Accordingly, we seek comment on whether the rules
     concerning calculation of rural health care support need
     modifications to address the geographic or demographic situation in
     insular areas.[^275] We invite commenters to propose specific
     revisions in this regard.

144. *Nearest Large City.* Consistent with the statute, the Commission's
     rules for providing universal service support to rural health care
     providers limit the length of the supported service to the distance
     between the health care provider and the point farthest from that
     provider on the jurisdictional boundary of the nearest large city
     in the state.[^276] The Governor of Guam proposed that we modify
     this rule to provide support for telecommunications services
     between an insular area\'s medical facilities and a supporting
     medical center in an urban area outside the insular area, such as
     in Hawaii or on the west coast of the continental United
     States.[^277] We seek comment on this proposal. We encourage
     commenters supporting this proposal to present detailed estimates
     of the cost of such a proposal and steps that must be taken to
     implement it. Commenters favoring this proposal should also provide
     legal analysis explaining whether it would be consistent with
     section 254 to treat insular areas differently from the remainder
     of the United States, where support is only provided based on
     intrastate distances, as section 254(h)(1)(A) appears to
     require.[^278]

145. Finally, we seek comment on whether health care providers and
     telecommunications carriers that serve insular areas face unique
     challenges that have not been documented previously in the record
     of this proceeding, and, if so, how we should tailor additional
     support mechanisms to address those problems, consistent with the
     statute.[^279] We encourage commenters to present proposals for
     additional support mechanisms through which rural health care
     providers located in insular areas could have access to the
     telecommunications services available in urban areas of the nation
     at affordable rates.

## Access to Toll-Free Services in Insular Areas

146. Because of their traditional treatment as international
     destinations, the Pacific Island areas have faced high rates for
     interexchange service and have had limited ability to obtain access
     to toll-free and advanced services.[^280] Calls between these
     insular areas and the remainder of the United States also required
     callers to use the \"011\" international access code.[^281] Recent
     changes have begun to address these problems. Specifically, the
     1996 Act requires that insular areas become subject to rate
     integration and averaging, which means that interexchange carriers
     are required to offer domestic interstate service using a uniform
     rate structure throughout the United States. [^282] In addition,
     many insular areas have been integrated into the North American
     Numbering Plan (NANP). [^283] In the *First Report and Order*, the
     Commission permitted residents of CNMI and Guam to access toll-free
     (*e.g.*, 800) services by using 880 and 881 codes and paying the
     cost of reaching Hawaii where the calls could be connected
     thereafter toll-free to the called party until July 1, 1998,[^284]
     and that date was subsequently extended indefinitely.[^285]

147. In the *First Report and Order*, the Commission determined that
     \"these changes will have a significant impact on how residents of
     the\[se\] islands place interexchange calls and the rates that
     they, and toll-free access customers, will pay for the calls they
     place.\"[^286] Based upon the recommendation of the Joint Board,
     the Commission concluded that it should delay, until after July 1,
     1998, consideration of whether the Commission should provide
     additional support for toll-free access and access to advanced and
     information services for insular areas so that the impact of rate
     integration and averaging and incorporation into the NANP could be
     evaluated.[^287] We seek comment on whether rate integration,
     rate-averaging, and incorporating insular areas into the NANP are
     leading toll‑free customers to include insular areas in their
     toll‑free calling areas. We seek comment on whether additional
     universal service support is needed to support toll-free calling
     from insular areas. We ask commenters to present any evidence that
     the marketplace will not fully solve this problem.

# Procedural Matters

## Ex Parte Procedures

148. The Further Notice is a non-restricted notice and comment
     rulemaking proceeding. *Ex parte* presentations are permitted,
     except during the Sunshine Agenda period, provided they are
     disclosed as provided in the Commission's rules.[^288]

## Comment Filing Procedures

149. Pursuant to sections 1.415 and 1.419 of the Commission's
     rules,[^289] interested parties may file comments as follows:
     comments are due 60 days after publication of the Further Notice in
     the Federal Register and reply comments are due 90 days after
     publication of the Further Notice in the Federal Register. Comments
     may filed using the Commission's Electronic Comment Filing System
     (ECFS)[^290] or by filing paper copies.

150. 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, Postal Service mailing address, and
     the applicable docket or rulemaking number. Parties may also submit
     an electronic copy 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 email address\>." A sample form
     and directions will be sent in reply.

151. 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. All paper filings must be sent to the Commission's
     Secretary, Magalie Roman Salas, Office of the Secretary, Federal
     Communications Commission, 445 Twelfth Street S.W., Room TW-A325,
     Washington, DC 20554.

152. Parties who choose to file by paper should also submit their
     comments on diskette to Sheryl Todd, Accounting Policy Division,
     Common Carrier Bureau, Federal Communications Commission, 445
     Twelfth Street SW, Room 5-A523, Washington, DC 20554. Such a
     submission should be on a 3.5 inch diskette formatted in an
     IBM-compatible format using WordPerfect 5.1 for Windows or a
     compatible software. The diskette should be accompanied by a cover
     letter and should be submitted in "read-only" mode. The diskette
     should be clearly labeled with the commenter's name, proceeding,
     including the lead docket number in the proceeding (CC Docket No.
     96-45), type of pleading (comment or reply comment), date of
     submission, and the name of the electronic file on the diskette.
     The label should also include the following phrase (Disk Copy --
     Not an Original.") Each diskette should contain only one party's
     pleadings, preferably in a single electronic file. In addition,
     commenters should sent diskette copies to the Commission's copy
     contractor, International Transcription Service, Inc., 1231 20^th^
     St. NW, Washington DC 20037.

## Initial Regulatory Flexibility Act Analysis

153. The Regulatory Flexibility Act (RFA) requires a Regulatory
     Flexibility Act analysis whenever an agency publishes a notice of
     proposed rulemaking or promulgates a final rule, unless the agency
     certifies that the proposed or final rule will not have "a
     significant economic impact on a substantial number of small
     entities," and includes the factual basis for such
     certification.[^291] Pursuant to section 603 of the RFA, the
     Commission has prepared an Initial Regulatory Flexibility Analysis
     (IRFA) of the possible significant economic impact on small
     entities by the policies and actions considered in this Further
     Notice. The text of the IRFA is set forth in Appendix F. 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 provided above in
     paragraph [149]{.mark}. The Commission will send a copy of the
     Further Notice, including the IRFA, to the Chief Counsel for
     Advocacy of the Small Business Administration.[^292] In addition,
     summaries of the Further Notice and IRFA will be published in the
     Federal Register.[^293]

# Ordering clauses

154. Accordingly, IT IS ORDERED that, pursuant to the authority
     contained in sections 1-4, 201-205, 214(e), and 254 of the
     Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154,
     201-205, 214(e), and 254, this FURTHER NOTICE OF PROPOSED
     RULEMAKING IS HEREBY ADOPTED and COMMENTS ARE REQUESTED as
     described above.

155. IT IS FURTHER ORDERED that the Commission's Office of Public
     Affairs, Reference Operations Division, SHALL SEND a copy of this
     FURTHER NOTICE OF PROPOSED RULEMAKING, including the Initial
     Regulatory Flexibility Act Analysis, to the Chief Counsel for
     Advocacy of the Small Business Administration.

     FEDERAL COMMUNICATIONS COMMISSION

     Magalie Roman Salas

     Secretary

[]{#__RefHeading___Toc460144423 .anchor}APPENDIX A: COMMISSION MEETINGS
ON INDIAN TELECOMMUNICATIONS ISSUES -- LIST OF ATTENDEES

**[April 30, 1998]{.underline}**

**Outside Parties:**

Charles Blackwell, Ambassador from the Chickasaw Nation

Jack Brown, Golden West, SD

James Casey, Morrison & Forester

Audrey Choi, Office of Vice President Gore

Darrell Gerlaugh, Gila River Telephone Inc., AZ

Steve Gigamough, Salt River Pima, AZ

Robert Gough, Intertribal Council on Utility Policy, Rosebud SD

L. Marie Guillory, NTCA

Larry Irving, NTIA

Alex Lookingelk, Standing Rock Sioux Tribe, ND

Chris McLean, Rural Utilities Service

Bill Quinn, Salt River Pima-Maricopa Indian Community

Pat Spears, Intertribal Council on Utility Policy, SD

Tony Thompson, Oneida Nation

Alice Walker, Cheyenne River Sioux Tribal Telephone Authority, CO

JD Williams, Cheyenne River Sioux, SD

**Commission Participants:**

Chairman William E. Kennard

Commissioner Susan Ness

Commissioner Gloria Tristani

John Nakahata, Chief of Staff

Ruth Milkman, Deputy Chief, Common Carrier Bureau

Catherine Sandoval, Director, Office of Communications Business
Opportunities

Staff from the Common Carrier Bureau, Wireless Telecommunications
Bureau, International Bureau, Office of Legislative and Intergovermental
Affairs, Office of Communications Business Opportunities and the Office
of General Counsel

**[July 7, 1998]{.underline}**

**Outside Parties:**

Charles Blackwell, Ambassador from the Chickasaw Nation

James Casey, Morrison and Forester

Prof. Arturo Gandara, University of California Davis Law School

Robert Gough, Intertribal Council on Utility Policy, Rosebud SD

Dr. James May, Cal. St. Univ. at Monterey Bay, CA

Roanne Robinson, NTIA

Randy Ross, SD

Pat Spears, Intertribal Council on Utility Policy, SD

**Commission Participants**

Chairman William E. Kennard

Commissioner Gloria Tristani

Rick Chessen, Senior Legal Advisor, Office of Commissioner Tristani

Paul Gallant, Legal Advisor, Office of Commissioner Tristani

Michele Ellison, Deputy General Counsel, Office of General Counsel

Catherine Sandoval, Director, Office of Communications Business
Opportunities

Staff from the Common Carrier Bureau, Wireless Telecommunications
Bureau, Mass Media Bureau, Cable Services Bureau, Office of
Communications Business Opportunities, the Office of Workplace
Diversity, and the Office of General Counsel

[]{#__RefHeading___Toc460144424 .anchor}APPENDIX B: OVERCOMING OBSTACLES
TO TELEPHONE SERVICE TO INDIANS ON RESERVATIONS −COMMISSION HEARINGS

**[Albuquerque Hearing]{.underline}**

Chairman William E. Kennard, Federal Communications Commission

Commissioner Gloria Tristani, Federal Communications Commission

The Honorable Tom Udall, United States House of Representatives

The Honorable Heather Wilson, United States House of Representatives

The Honorable Leonard Tsosie, State of New Mexico House of
Representatives

The Honorable Lynda Lovejoy, Chairwoman, State of New Mexico Public
Regulation Commission

The Honorable Eagle Rael, Governor, Picuris Pueblo

The Honorable Steve Beffort, Secretary, New Mexico General Services
Department

The Honorable Anthony O. Lucio, Councilman, Zuni Pueblo

The Honorable Raymond Gachupin, Governor, Jemez Pueblo

The Honorable Jerome Block, State of New Mexico Public Regulation
Commission

The Honorable Herb Hughes, State of New Mexico Public Regulation
Commission

The Honorable Bill Pope, State of New Mexico Public Regulation
Commission

The Honorable Arnold Cassador, President, Jicarilla Apache Tribe

Jean Whitehorse, Native American Library Project, Crownpoint, NM

The Honorable Tony Anaya, former Governor of New Mexico

Arthur Martinez, Western New Mexico Telephone Company, Inc.

Edward Lopez, New Mexico Vice President, U S West

Francis Mike, Navajo Communications Company, Inc.

Gene DeJordy, Esq., Executive Director -- Regulatory Affairs, Western
Wireless Corporation

George Arthur, Council Delegate, Navajo Nation

Godfrey Enjady, General Manager, Mescalero Apache Telephone and
Utilities Company

Karen Buller, President, National Indian Telecommunications Institute

Peter Carson, Vice-President, Business Development, ArrayComm, Inc.

Richard Weiner, Esq., State of New Mexico Office of the Attorney General

Stanley Pino, Chairman, All Indian Pueblo Council

Mr. Scholten

Henry Dodge, Ramah Navajo Chapter, NM

Mary Alice Tsosie, Native American Librarian and Special Interest Group,
NM

**[Arizona Hearing]{.underline}**

Chairman William E. Kennard, Federal Communications Commission

Commissioner Susan Ness, Federal Communications Commission

Commissioner Harold Furchtgott-Roth, Federal Communications Commission

Jim Irvin, Commissioner Chairman, Arizona Corporation Commission

The Honorable Charles Blackwell, Ambassador for the Chickasaw Nation

James Casey, Morrison and Forester

David Motycka, Utilities Division, Arizona Corporation Commission

Mark DiNunzia, Utilities Division, Arizona Corporation Commission

Maureen Scott, Arizona Corporation Commission

Patrick Black, Chief of Staff, Arizona Corporation Commission

David Redick, CA

Ed Groenhout, Northern Arizona University, AZ

Laura Lo Bianco, Iridium North America

Herman Laffoon, Jr., Colorado Indian Tribes, Parker, AZ

Alison Hughes, Associate Director, Arizona Telemedicine Program, Rural
Health Office, University of Arizona, College of Medicine

Aloa Stevens, Director, External Affairs -- West, Citizens
Communications

Carl Artman, Oneida Nation, Airadigm Communications, Inc.

Charles W. Wiese, General Manager, Tohono O\'odham Utility Authority

Christopher McLean, Deputy Administrator, Rural Utility Service, U. S.
Department of Agriculture

David Siddall, Esq., Verner, Liipfert, Bernhard, McPherson and Hand,
Chartered

Ivan Makil, President, Salt River Pima-Maricopa Indian Community

J. D. Williams, General Manager, Cheyenne River Telephone Authority

Jeff Olson, Director, Regulatory Planning and Policy for Issues
Integration/Planning and Strategy, GTE Service Corporation

Madonna Peltier Yawakie, President, NATec, Inc.

Nora Helton, Chairperson, Fort Mojave Indian Tribe

Rhonda McKenzie, President and Chief Executive Officer, Aircom
Consultants, LLC d/b/a InAirNet

Richard Watkins, General Manager, Smith Bagley, Inc. operating as
Cellular One of Northeast Arizona

The Honorable Mary Thomas, Governor, Gila River Indian Community

Vernon James, President, San Carlos Apache Telecommunications Utility,
Inc.

Walter Purnell, President and Chief Executive Officer, American Mobile
Satellite Corporation

[]{#__RefHeading___Toc460144425 .anchor}APPENDIX C: OVERCOMING OBSTACLES
TO TELEPHONE SERVICE TO INDIANS ON RESERVATIONS -- PARTIES FILING
COMMENTS

**[COMMENTS]{.underline}**

AMSC Subsidiary Corporation

Bell Atlantic Mobile

Cellular Telecommunications Industry Association

Gila River Telecommunications, Inc.

ICO Global Communications (Holding) Limited

Motorola, Inc.

National Telephone Cooperative Association

National Tribal Telecommunications Alliance

Nemont Telephone Cooperative, Inc.

North Dakota Public Service Commission

Salt River Pima-Maricopa Indian Community

SkyBridge, LLC

Southwestco Wireless, L.P.

TCA, Inc. - Telcom Consulting Associates

The Hopi Tribe

US West Communications, Inc.

Western Wireless Corporation

**[LETTERS]{.underline}**

Colorado River Indian Tribes

Daryl Towenk, Concerned People, Lewiston, NY

Eastern Nebraska Telephone Company

Ernest and Carol E. Patterson, Concerned People, Lewiston, NY

Frank L. Williams, Tuscarora Indian Reservation, NY

Mark F. Williams, Sr., Tuscarora Indian Reservation, NY

Stefan J. Levine, Red Bank, NJ

United Native American Telecommunications, Inc.

William Martin, Tuscarora Indian Reservation, NY

**[TESTIMONY]{.underline}**

Alison Hughes, Arizona Telemedicine Program

Aloa J. Stevens, Citizens Communications and Navajo Communications
Company

Arthur Martinez, Western New Mexico Telephone Company, Inc.

Carl Artman, Airadigm Communications, Inc.

Charles W. Wiese, Tohono O'odham Utility Authority

Christopher A. McLean, Deputy Administrator, Rural Utilities Service,
United States Department of Agriculture

Commissioner Chairman James Irvin, Arizona Corporation Commission

Councilman Anthony Lucio, Zuni Pueblo

David R. Siddall, Esq.

Edward J. Lopez, Jr., US West

Francis Mike, New Mexico Telephone Association and Navajo Communications
Company, Inc.

George Arthur, Navajo Nation

Godfrey Enjady, Mescalero Apache Telephone and Utilities Company

Governor Eagle Rael, Picuris Pueblo

Governor Mary Thomas, Gila River Indian Community

Governor Raymond Gachupin, Pueblo of Jemez

Ivan Makil, Salt River Pima-Maricopa Indian Community

J.D. Williams, Cheyenne River Sioux Telephone Authority

Jeff Olson, GTE Service Corporation

Karen Buller, National Indian Telecommunications Institute

Madonna Peltier Yawakie, NAtec, Inc.

Nora Helton, Fort Mojave Telecommunications, Inc.

Peter Carson, ArrayComm, Inc.

President Arnold Cassador, Jicarilla Apache Tribe

Rhonda G. McKenzie, MTG, Inc. and Aircom Consultants, LLC

Richard Watkins, Smith Bagley, Inc. (operating as Cellular One)

Stanley Pino, All Indian Pueblo Council

Steven R. Beffort, State of New Mexico, General Services Department

Walter Purnell, American Mobile Satellite Company

[]{#__RefHeading___Toc460144426 .anchor}APPENDIX D: COMPETITIVE BIDDING
PROPOSALS AND EXAMPLES

### GTE Proposal 

156. GTE proposes that there be bidding for support in geographic areas
     called Census Block Groups (CBGs).[^294] Every six months, carriers
     desiring to serve a CBG could notify the state commission with
     jurisdiction over that CBG, that they wanted to initiate an auction
     for the rights and duties of carrier of last resort (COLR)[^295] in
     that CBG.[^296] Assuming there were enough qualified bidders, the
     state would employ a single round, sealed-bid auction to set the
     per-customer support in that CBG.[^297] Bids could be no higher
     than the \"reservation\" price for each CBG. That reservation price
     would be based on the current level of support an incumbent LEC was
     receiving for that CBG, although each incumbent LEC would be
     permitted to make a one-time set of adjustments to the support
     levels for the CBGs they served as long as the total support
     received by the incumbent LEC from all the CBGs it served remained
     the same.[^298] The adjusted support levels, increased by a
     prescribed percentage, would then become the reservation prices for
     each CBG.[^299]

157. Under the GTE proposal, after submitting bids, every bidder that
     was within 15% of the low bid would be a successful bidder in the
     auction. If there were no other bidders within 15% of the low bid,
     the low bidder and next lowest bidder within 25% of the low bid
     would be a successful bidder. If no other bid was within 25% of the
     low bid, only the low bidder would be a successful bidder. Each
     successful bidder would then assume COLR obligations and receive
     per-customer support equal to the highest level of support sought
     by a carrier with a successful bid. If there were only one winner,
     the new support would be set at the reservation price, *i.e.*, the
     current support increased by the prescribed percentage.[^300]
     Starting with the lowest bidder, GTE would also allow bidders to
     withdraw from the auction after an initial set of the successful
     bidders was determined. If a bidder withdrew, there would be a new
     selection of successful bidders, treating the withdrawn bid as if
     it had never been made.[^301] If the auction resulted in a new COLR
     for the area, either in addition to the incumbent or in place of
     the incumbent, the support levels and obligations for that area
     would be frozen for three years. No new entrants could receive
     universal service support during this time, although they could
     enter and provide service without such support. After the
     three-year period, carriers could bid on the area again.[^302]

158. GTE\'s proposal would allow a COLR to transfer or sell its rights
     and obligations to any qualified carrier, as long as the number of
     COLRs in the CBG would not decrease.[^303] The GTE proposal also
     requires penalties for any carrier that defaults on its COLR
     obligations. GTE also proposes that, when the incumbent LEC desires
     to exit the market at the current level of support and no other
     carrier volunteers to serve the market with a bid at or below the
     reservation price for the service area, the level of support would
     be raised by some designated percentage. GTE also recognizes that
     contingent bids may be appropriate if there are substantial
     economies of density and proposes that this could be addressed by
     requiring each bidder to submit a two-part bid. The first element
     would reveal the amount of support it would require if it were the
     only bidder to receive support for serving the market. The second
     element would reveal what the bidder would require if it were one
     of multiple carriers receiving support for serving the
     market.[^304]

### Proposal of Ameritech Consultants

159. Jeremy Bulow and Barry Nalebuff, consultants for Ameritech, propose
     that carriers be asked to compete for a portion of a lump-sum of
     support[^305] in return for assuming COLR obligations over a subset
     of customers in a particular area. Under their proposal, all
     carriers, both COLR and non-COLR, in a particular area would assign
     customers that they did not find profitable to serve to a COLR
     pool. After the bidding (for support and associated COLR
     obligation), the \"unprofitable\" customers (those no carrier found
     it profitable to serve) would be randomly assigned to the
     successful bidders. Bulow and Nalebuff advocate a sealed-bid
     auction, in which a carrier\'s bid is the amount it would require
     to take 100 percent of the COLR pool in a particular area. The
     lowest bid wins and the carrier making that bid is awarded a
     pre-designated substantial fraction of the COLR pool, *e.g.*, 70%,
     along with an equal fraction of the total support. The second
     lowest bidder may choose to accept the remaining, smaller fraction
     of the COLR pool, along with a share of the total support equal to
     that smaller fraction.[^306] If the second lowest bidder declines,
     the third lowest bidder would be offered the same choice. If all
     other bidders decline the opportunity, the lowest bidder would be
     assigned 100 percent of the COLR pool and 100 percent of the
     successful bid (*i.e.*, support). Under this proposal, the total
     support amount would equal the amount of the lowest bid. Bulow and
     Nalebuff would allow a COLR to trade its COLR-pool customers to
     other carriers for cash or other service obligations.

160. Bulow and Nalebuff contend that if there is only one LEC in a
     region, then support should be set on a per-subscriber basis to
     provide an incentive for that carrier to serve the entire
     market.[^307] If, however, non-COLRs without subsidies compete for
     individual customers against a COLR with a per-subscriber subsidy,
     the COLR will have an unfair advantage. Because of the
     per-subscriber subsidy the COLR will be able to win certain
     customers that an unsubsidized firm could serve at lower cost.
     Bulow and Nalebuff contend that fixed-fee support avoids this
     distortion. As discussed above, a fixed-fee subsidy could be
     applied to multiple COLRs by splitting the total award among the
     winning bidders in proportion to their COLR obligations. They also
     argue that, in the presence of economies of density, competitive
     bidding could lead to unnecessarily high support, because the most
     efficient bidder would tend to bid higher than necessary to protect
     against the possibility that it would be forced to share the COLR
     customers rather than bidding lower based on the assumption that it
     would serve 100 percent of the COLR pool. Bulow and Nalebuff thus
     suggest that the lowest bidder should be awarded a large fraction
     \-- perhaps 70-75 percent \-- of the COLR pool.

161. Bulow and Nalebuff argue, as well, that their suggested approach
     removes the problem that a competitor to the incumbent LEC will try
     to \"cherry pick\" the most profitable customers, which could occur
     under the GTE competitive bidding proposal. For the GTE proposal,
     the \"cherry picking\" problem prompts the suggestion that
     competitive bidding be conducted for areas that are small enough to
     have homogeneous costs of service (*e.g.*, Census Block Groups).
     Bulow and Nalebuff argue that their approach would allow
     competitive bidding over larger and more diverse areas than the GTE
     proposal would allow, which may be administratively simpler or less
     costly. They also argue that competitive bidding over larger areas
     would be preferable if there are cost synergies among small
     markets.

### The Kelly & Steinberg Auction Proposal

162. Frank Kelly and Richard Steinberg propose that per-subscriber
     support be given to carriers serving "blocks" of customers. Under
     their proposal, a two-stage auction would set the amount of support
     over all blocks at the same time. They would base the initial
     support level for each block on either the historical cost of
     serving residential customers in the block or on a forward-looking
     economic cost mechanism\'s prediction of such service costs,
     whichever is lower.

163. In the first stage of the auction, bidders would submit a sealed
     set of \"contingent\" bids on any blocks in which they were
     interested.[^308] The contingent bids would ask for different
     levels of support depending upon the number of carriers that were
     chosen to serve the block. For example, they might ask for \$10 in
     support if they were the sole provider, \$6 if they were to share
     the block with one other carrier, and \$4.50 if they were to share
     the block with two bidders. Each bid would equal the lump-sum
     payment that the carrier sought for serving its share of customers
     in that block. The auctioneer would then determine the lowest total
     support payout for each possible number of successful bidders,
     *e.g.*, the lowest bid to be sole provider, the sum of the two
     lowest of those bids contingent on sharing the block with one other
     carrier, the sum of the three lowest of those bids contingent on
     sharing the block with two other carriers, eligible
     telecommunications carrier.[^309] The auctioneer would then adjust
     these levels of support by a preferential weighting factor that
     attempted to quantify the societal benefit of increasing the number
     of firms competing in a market.[^310] The auctioneer would then
     select the lowest adjusted support level and the associated
     successful bidder or bidders. The bidders with the lowest bids for
     the contingency of that number of successful bidders would be the
     first stage winners. For example, if the lowest payout was for two
     carriers then support would be available to the carriers with
     lowest bids for sharing support with one other carrier. If there
     were multiple winners in a block, each successful bidder would be
     assigned a proportional share of the block, *i.e.*, a
     \"sub-block.\"

164. The second stage of the auction would consist of multiple rounds of
     open combinatorial bidding in which bidders offered to serve some
     combination of blocks and sub-blocks for less support than the
     successful bidders from the first or any previous round.[^311] A
     valid combinatorial bid would consist of a list of requested
     support amounts, one support amount for each sub-block in the
     combination. The total value of the combinatorial bid would be the
     sum of these support amounts. A valid combinatorial bid would need
     to seek less total support (*i.e.*, have a lower total value of the
     bid) than previous bids by an exact amount, *i.e.*, \"bid
     increment.\" Initially it would need to improve on the combined
     bids of the first stage successful bidders. The rounds of the
     second stage would start by considering combinations across two
     blocks, and then progressively consider larger combinations.
     Bidders would not be allowed to make combinatorial bids over
     sub-blocks within a block.

165. To be eligible to bid, bidders would need to remain "active" in the
     auction, by either holding the low bid in the previous round or
     submitting an acceptable bid in the present round.[^312] How active
     a bidder was in the present round would determine how many bids it
     could place in the next round.[^313] The level of activity needed
     to be allowed to make bids in the next round would also change as
     the auction continued.[^314]

166. When second-stage bidding activity stopped, the auction would end
     and final successful bidders would be declared.[^315] The
     successful bidders would receive per-customer support base on their
     bid, for serving customers up to their designated proportion of a
     block, (*e.g.*, one-third of the customers in a block if there had
     been three successful bidders of the block at the end of the first
     stage). Multiple successful bidders within the block would then
     compete for customers within a block. Unserved customers would be
     assigned to a successful bidder not serving its full share of
     customer is the block. A successful bidder would be free to attract
     the business of all the customer in a block, but would only receive
     support for its share, *e.g.*, one-third, of the marked that it was
     assigned in the auction. Throughout the auction process, no bid
     waivers or bid withdrawals would be allowed.[^316]

### Other Competitive Bidding Proposals

167. Time Warner notes that the Act appears to preclude the grant to any
     single carrier of exclusive rights to receive universal service
     support for serving a high-cost area.[^317] Therefore, Time Warner
     proposes that to encourage low bids, we reward the successful
     bidder by granting it 100% of the high-cost support that it bids
     while all other bidders would receive a smaller percentage.[^318]
     Time Warner also asserts that a competitive system cannot work
     unless all participants have equal access to relevant information
     about the market including costs and revenues.[^319] Time Warner
     thus proposes to require incumbent LECs to disclose fully
     information about the market, including cost and revenues. Finally,
     Time Warner recommends periodic rebidding of areas to ensure that
     support levels reflect current costs and competitive
     conditions.[^320]

168. MCI proposes a bidding system only for those few areas that are not
     served or areas where a carrier becomes unwilling to serve at the
     established universal service support level.[^321] MCI suggests
     that the Commission should join with the state to conduct the
     auction that will determine the level of support available in the
     area.[^322] The state would certify the carriers eligible to
     participate in the auction, and the eligible carriers would bid the
     amount of support they require to serve the area.[^323] Any carrier
     willing to provide service in that area would then be eligible to
     receive support at the level submitted by the lowest bidder. If the
     incumbent was not a successful bidder, it would have to make its
     network available for resale at net book value to the successful
     bidder.[^324]

169. Citizens for a Sound Economy Foundation (CSE Foundation) suggests
     an open, multiple-round auction that would allow bidders to gain
     information about the costs of providing service to different areas
     as they learn what other carriers have bid on those areas.[^325] It
     suggests that higher bidders obtain reduced universal service
     support.[^326] Finally, because the need to finance an investment
     over many years is particularly important when large-scale,
     capital-intensive projects are involved, CSE Foundation contends
     that it is important that the universal service support be
     guaranteed over some period of time, perhaps five years. It
     expresses concern, however, over GTE\'s proposal to exclude from
     support any new provider during the period of time the support
     level is guaranteed. As a solution, CSE Foundation tentatively
     suggests that the right to receive support for a particular market
     be made transferable.[^327]

### Hawaii Competitive Bidding Mechanism

170. In 1995, the Hawaii legislature enacted a statute authorizing its
     PUC to select, via a competitive bidding process, single carriers
     of last resort to receive universal service funds for serving
     designated local exchange service areas.[^328] Under the statute,
     once the PUC determines the level of support that is appropriate
     for each local exchange area, it must invite telecommunications
     providers to bid on these areas for providing service.[^329] The
     successful bidder becomes the COLR for the local exchange service
     area for \"a period of time and upon conditions set by the
     commission.\"[^330] In choosing the successful bidder, the PUC is
     required to take into account \"the level of service to be
     provided, the investment commitment, and the length of the
     agreement, in addition to the other qualifications of the
     bidder.\"[^331] The PUC requires that bidders\' proposals contain
     projected rates for the initial ten-year period and expected
     subsidies and loans that will lower the rates for consumers, but
     selection of the new provider need not be made entirely on the
     basis of who submits the lowest bid; rather it may reflect a
     weighing of multiple factors, *i.e.*, \"internal and external
     strengths.\"[^332]

171. The first rural area in which the PUC authorized carriers to
     compete with the incumbent LEC, GTE Hawaiian Tel, was the Ka\'u
     area on the island of Hawaii.[^333] In April 1996, the PUC issued a
     Request for Proposal (RFP), specifying the technical, engineering,
     financial, and other requirements for bidders.[^334] The RFP also
     articulated specific \"internal strengths,\" \"external
     strengths,\" and \"miscellaneous indicia of fitness and ability\"
     on which bidders would be evaluated.[^335]

172. The PUC selected TelHawaii, Inc. to be the COLR for the Ka\'u
     area,[^336] but TelHawaii and GTE Hawaiian Tel thus far have been
     unable to conclude an agreement for the transfer or lease of GTE
     Hawaiian Tel\'s assets to TelHawaii for serving this area. GTE
     Hawaiian Tel sought reconsideration of the decision selecting
     TelHawaii as COLR, but the PUC subsequently held that it was
     necessary and in the public interest to condemn GTE Hawaiian Tel\'s
     assets and to allow TelHawaii to use these condemned assets in its
     operations as a public utility.[^337] GTE Hawaiian Tel\'s appeal of
     this decision is now pending in the Hawaii Supreme Court.[^338]

### Examples From Foreign Countries: Chile & Peru

173. In 1994, Chile\'s legislature passed a telecommunications law that
     established the Rural Telecommunications Development (RTD) Fund.
     Since 1995, Subsecretaria de Telecommunicaciones (SUBTEL), Chile\'s
     regulatory body, has allocated RTD funds[^339] to companies through
     an annual competitive bidding process. The competitive bidding
     process is initiated when SUBTEL, after consulting with local and
     regional governmental entities, issues an annual prioritized list
     of RTD projects. SUBTEL assigns an \"RTD maximum subsidy\" for each
     project and issues a public notice calling for technically
     qualified companies to submit bids for one or more RTD
     projects.[^340] RTD funds can be used by the selected companies to
     subsidize between 1/4 and 1/3 of the initial investment costs of
     rural projects. Bids are submitted in a single-round format and
     opened during a public meeting, and the bid that has the lowest RTD
     support wins. If two or more of the competing companies submit the
     same low bid, the RTD project and support are assigned by lottery.
     Companies that receive RTD funds are not given any exclusive market
     rights to profitable customers in the areas they serve.

174. In Peru, in 1994, the Organismo Supervisor de la Inversion Privada
     de Telecommunicaciones **(**OSIPTEL), the Peruvian regulator that
     administers the Fund for Investment in Telecommunications (FITEL),
     stated that it would allocate FITEL funds through a competitive
     bidding process similar to Chile\'s.[^341] Also that year, OSIPTEL
     was designing the selection parameters for the projects.[^342]

### Spectrum Auctions

175. In the Omnibus Budget Reconciliation Act of 1993, Congress amended
     the Communications Act of 1934 by adding Section 309(j), which
     granted the Commission authority, under certain circumstances, to
     employ competitive bidding to assign licenses to use portions of
     the electromagnetic spectrum. After adopting rules to govern this
     process,[^343] the Commission began its spectrum auctions in 1994.

176. The first set of licenses to be auctioned authorized licensees to
     provide narrowband Personal Communications Services (PCS). Because
     of the likelihood that the values of these licenses were
     interdependent (*i.e.*, the value placed by a bidder on one license
     depends upon whether it also holds another license), the Commission
     chose to employ simultaneous, multiple-round auctions to assign
     these licenses. The Commission began by auctioning a relatively
     small number of licenses, 10 nationwide narrowband PCS licenses, in
     July 1994. As the Commission gained experience, it gradually
     expanded the number of licenses included in each auction.[^344]
     Thus far, the Commission has held twenty-three spectrum auctions,
     employing both simultaneous and sequential auction designs, and
     both oral outcry and electronic methods for bidding.[^345] Licenses
     for terrestrial-based mobile and fixed services (including the
     narrowband and broadband PCS services, the Specialized Mobile Radio
     Services, and the Wireless Communications Service), as well as for
     satellite broadcasting services (including the Direct Broadcast
     Satellite service and the Digital Audio Radio Service), have been
     assigned using competitive bidding.

177. To fulfill the requirements of Section 309(j), we have adopted
     general rules and procedures governing the types of auction designs
     that may be employed for spectrum auctions.[^346] We have set
     eligibility rules, requiring that prospective bidders make
     pre-auction upfront payments,[^347] and allowed alteration of
     competitive bidding mechanism details for each auction, including
     minimum levels of required bidding activity, minimum bid increments
     and stopping rules for ending the auction.[^348] These rules are
     intended to ensure that in simultaneous multiple round auctions
     only sincere bidders participate and that auctions proceed at a
     reasonable pace and can be brought to a close in a rational manner.

178. We also have adopted rules that require payments in the event of
     bid withdrawal or default, so that bidders understand that they
     will be held to the amounts of their bids.[^349] In general, a
     bidder who withdraws a high bid during the course of an auction
     will be subject to a payment calculated as the difference between
     the amount of the withdrawn bid and the amount of the successful
     bid the next time the license is offered by the Commission. Thus,
     no payment is required if the subsequent successful bid exceeds the
     withdrawn bid. If a successful bidder defaults or is disqualified
     after the close of an auction, that bidder must pay the amount
     already described and an additional three percent of the lesser of
     the defaulted bid amount and the subsequent successful bid. This
     additional payment is intended to encourage a bidder who has any
     doubt about its ability to make payment on a license to withdraw
     its bid before the auction closes, thereby giving others an
     opportunity to bid on that license.

179. Our rules concerning spectrum auctions also include anti-collusion
     provisions that were designed to work in conjunction with existing
     antitrust laws and to ensure that each bidder in a spectrum auction
     has access to the same information about all joint arrangements
     into which other bidders may have entered. These rules prohibit
     bidders from cooperating, collaborating, discussing, or disclosing
     the substance of their bids or bidding strategies with other
     bidders unless they are members of a bidding consortium or joint
     bidding arrangement that has been identified on the pre-auction
     application.[^350] In addition, consistent with objectives for
     competitive bidding detailed in Section 309(j), there are rules to
     enable small businesses and businesses owned by members of minority
     groups and women, to overcome historical difficulties in gaining
     access to capital, thereby promoting opportunities for these groups
     to participate in the provision of spectrum-based services. These
     provisions included limiting eligibility to bid on licenses in
     \"Entrepreneurs\' Blocks\" to companies below a certain size and
     making available bidding credits on certain licenses and
     installment payment plans that allow a successful bidder to spread
     out payment for a license over the license term.[^351]

180. The Commission recently initiated a proceeding in which we will
     comprehensively examine our general competitive bidding rules for
     all auctionable services to identify how they can be changed to
     make our licensing processes more efficient.[^352]

### FTS2000

181. The contract for providing telecommunications services to the
     United States government \-- called FTS2000 \-- was awarded by the
     General Services Administration (GSA) in 1988 to two different
     firms: 60% to AT&T and 40% to US Sprint. The decision to divide the
     contract between the two lowest bidders and to divide it 60%-40%
     was suggested by Congressman Jack Brooks and GSA agreed to do so.
     GSA then asked Coleman Research Corporation (CRC), an engineering
     firm, to quantify and suggest how to minimize the deleterious
     effects of splitting the contract. CRC estimated that the
     employment of a second carrier would raise actual costs by about
     eight percent, but that varying the allocation percentages would
     not have any significant effect on total costs. CRC was unable to
     estimate the likely benefits. The RFP was released in January
     1988.[^353]

182. Although the contract was for ten years, there were two points in
     time where the two successful firms (AT&T and Sprint) had an
     opportunity to rebid to secure a larger share of the total
     contract. Under this price redetermination/service reallocation
     (PR/SR) provision, 40% of the market shares of the two firms,
     *i.e.*, 24% from AT&T and 16% from Sprint, were made subject to the
     rebidding with three possible results. If the two firms made
     similar bids then each firm would retain its current market share,
     but if one firm bid significantly less than the other, than that
     firm would capture the 40% of the contract that was now available.
     AT&T and Sprint both originally bid \$.18 per minute. After the
     first rebidding both lowered their bids to \$.14 per minute. After
     the second rebidding AT&T lowered its bid to \$.07 per minute.
     Thus, when AT&T significantly underbid Sprint for the final three
     year period, AT&T captured 40% of the 40% Sprint market share
     leaving AT&T with 76% of the revenues and Sprint with only 24% of
     the revenues.[^354]

183. GSA\'s analysis of the contract found that splitting the contract
     was not as costly as they had expected because the size of the
     contract was large enough to permit multiple firms to operate at
     their minimum efficient scale. Furthermore, GSA found that one of
     the most significant reasons that AT&T had for bidding aggressively
     was to avoid the danger that it would be underbid in subsequent
     rounds and that the news of such a significant loss would be
     heavily publicized by the successful bidder, suggesting that the
     federal government no longer regarded AT&T as the best
     choice.[^355]

184. GSA is now considering how to implement the successor to FTS2000,
     so called FTS2001. GSA is considering whether it might permit as
     many as three firms to gain shares of federal revenues but, the
     number of successful bidders will depend on the differences between
     their bids.[^356]

### Cable Franchise Bidding

185. Local cable television franchising authorities in the United States
     have generally awarded cable television franchises by issuing RFPs
     which solicit competitive bids. A municipality establishes a cable
     franchise once it grants a company permission to string wires above
     or below the public streets within a set area for a set
     time-period.[^357] The RFP generally contains the area\'s minimum
     requirements for the municipality\'s desired cable service. It is
     published in a local newspaper and at least one national trade
     publication, after which companies have at least three months to
     prepare and submit their applications.[^358] An average of four to
     five companies initially submit bids. Once the bidding period is
     over, local policymakers select the most promising few bids and
     then conduct hearings on them. Remaining bidders are given the
     opportunity to amend their proposals. The competition among
     remaining bidders ensures that the quality of service is high. A
     single successful bidder is usually awarded an exclusive, renewable
     contract, usually 15 years in duration.[^359]

186. Once the contract is awarded, the successful bidders and the
     municipality commence negotiations for the unresolved issues in the
     contract. Many view this franchising relationship as akin to direct
     regulation.[^360] Critics of the cable franchising system argue
     that the selection process is political and subjective.[^361]

187. To guarantee a cable franchisee\'s obligations to the municipality
     under a franchise agreement, the municipality generally collects a
     form of collateral. It may require performance bonds or security
     deposits, partially in the form of cash or municipal bonds, the
     remainder in a letter of credit. The collateral acts as a security
     for damages, losses, or expenditures that the municipality incurs
     as a result of the successful bidder\'s failure to comply with the
     contract, or pay all the funds due to the municipality.[^362]

###  Essential Airline Service

188. To ensure that smaller communities always remain linked to the
     national transportation system after the passage of the Airline
     Deregulation Act of 1978, Congress established the Essential Air
     Service Program, which is administered by the Department of
     Transportation (Department).[^363] Under the Program, if an airline
     wishes to terminate, suspend, or reduce its service to a particular
     area, the airline must file a 90-day notice with the appropriate
     state aviation agency, officials in the affected community, and the
     Department. Before the 90-day notice period ends, other carriers
     have the opportunity to propose to replace without support the
     incumbent carrier. If no carrier expresses interest in serving the
     area without support before the 90-day notice period ends, the
     Department must solicit proposals for subsidized service.

189. Carriers submitting proposals must carefully detail the
     calculations of their support need. The Department reviews all
     proposals, meets with each applicant to finalize their proposals,
     and then solicits the opinions of the affected community\'s
     members. The Department selects a new carrier after weighing
     factors that include the following: the community preferences; the
     amount of support required; the quality of proposed service; the
     applicant\'s financial stability; the applicant\'s reputation for
     reliability; and the applicant\'s marketing relationships with
     major carriers. The Department usually chooses a carrier that is
     then eligible to provide supported service for a two-year period.
     As the end of the two-year period approaches, the Department will
     either renegotiate the support rate with the incumbent and publish
     this tentative rate in an order to show cause, or solicit new
     proposals in the same manner used for replacing an incumbent as
     previously described.[^364]

[]{#__RefHeading___Toc460144427 .anchor}APPENDIX E: ARIZONA PROPOSAL
CONCERNING UNIVERSAL SERVICE SUPPORT FOR INITIAL CONNECTION CHARGES

[]{#__RefHeading___Toc460144428 .anchor}APPENDIX F: INITIAL REGULATORY
FLEXIBILITY ACT ANALYSIS

### Objectives

190. In the 1996 Act, Congress directed the Commission to take steps to
     reform our existing universal service support mechanisms.[^365]
     Specifically, Congress directed the Commission to devise methods to
     ensure that consumers in \"all regions of the Nation," including
     "low-income consumers and those in rural, insular and high cost
     areas" have access to "telecommunications and information
     services."[^366] Through decisions adopted over the past two years,
     the Commission has been striving to ensure that federal universal
     service support mechanisms for high-cost areas, low-income
     consumers, schools and libraries, and rural health care providers,
     enable consumers to obtain telecommunications services that would
     otherwise be prohibitively expensive.[^367] Notwithstanding these
     efforts, certain areas of the nation remain unserved or
     underserved, particularly insular and Indian tribal lands.
     Telephone penetration rates and facilities deployment in certain
     high-cost areas, including tribal and insular areas, lag behind the
     penetration rates in the rest of the country. In this Further
     Notice, the Commission seeks comment on proposals designed to
     increase deployment of facilities necessary to provide the services
     supported by federal universal service support mechanisms in
     unserved and underserved areas and to increase subscribership among
     low-income consumers in certain high-cost areas.

### Legal Basis

191. The Commission, in compliance with sections 1, 4, 214, 254, and 403
     of the Act,[^368] issues this Further Notice to examine mechanisms
     to promote deployment and subscribership in unserved and
     underserved areas, including tribal and insular areas.

### Description and Estimate of the Number of Small Entities To Which the Proposed Action May Apply

192. 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 proposed rules, if adopted.[^369] The RFA generally
     defines the term \"small entity\" as having the same meaning as the
     terms \"small business,\" \"small organization,\" and \"small
     governmental jurisdiction.\"[^370] In addition, the term \"small
     business\" has the same meaning as the term \"small business
     concern\" under the Small Business Act.[^371] A small business
     concern is one that: (1) is independently owned and operated; (2)
     is not dominant in its field of operation; and (3) satisfies any
     additional criteria established by the Small Business
     Administration (SBA).[^372] A small organization is generally \"any
     not-for-profit enterprise which is independently owned and operated
     and is not dominant in its field.\"[^373] Nationwide, as of 1992,
     there were approximately 275,801 small organizations.[^374] And
     finally, \"Small governmental jurisdiction\" generally means
     \"governments of cities, counties, towns, townships, villages,
     school districts, or special districts, with a population of less
     than 50,000.\"[^375] As of 1992, there were approximately 85,006
     such jurisdictions in the United States.[^376] This number includes
     38,978 counties, cities, and towns; of these, 37,566, or 96
     percent, have populations of fewer than 50,000.[^377] The Census
     Bureau estimates that this ratio is approximately accurate for all
     governmental entities. Thus, of the 85,006 governmental entities,
     we estimate that 81,600 (91 percent) are small entities.

193. As noted, 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).[^378] The SBA has defined a small business
     for Standard Industrial Classification (SIC) categories 4812
     (Radiotelephone Communications) and 4813 (Telephone Communications,
     Except Radiotelephone) to be small entities when they have no more
     than 1,500 employees.[^379] We first discuss the number of small
     telephone companies falling within these SIC categories, then
     attempt to refine further those estimates to correspond with the
     categories of telecommunications companies that are commonly used
     under our rules.

194. The most reliable source of information regarding the total numbers
     of common carrier and related providers nationwide, including the
     numbers of commercial wireless entities, appears to be data the
     Commission publishes annually in its *Carrier Locator* report,
     derived from filings made in connection with the Telecommunications
     Relay Service (TRS).[^380] According to data in the most recent
     report, there are 3,604 interstate carriers.[^381] These carriers
     include, *inter alia*, local exchange carriers, wireline carriers
     and service providers, interexchange carriers, competitive access
     providers, operator service providers, pay telephone operators,
     providers of telephone toll service, providers of telephone
     exchange service, and resellers.

195. We have included small incumbent LECs in this present RFA analysis.
     As noted above, a \"small business\" under the RFA is one that,
     *inter alia*, meets the pertinent small business size standard
     (*e.g.*, a telephone communications business having 1,500 or fewer
     employees), and \"is not dominant in its field of
     operation.\"[^382] The SBA\'s Office of Advocacy contends that, for
     RFA purposes, small incumbent LECs are not dominant in their field
     of operation because any such dominance is not \"national\" in
     scope.[^383] We have therefore included small incumbent LECs in
     this RFA analysis, although we emphasize that this RFA action has
     no effect on FCC analyses and determinations in other, non-RFA
     contexts.

196. *Total Number of Telephone Companies Affected.* The United States
     Bureau of the Census (\"the Census Bureau\") reports that, at the
     end of 1992, there were 3,497 firms engaged in providing telephone
     services, as defined therein, for at least one year.[^384] This
     number contains a variety of different categories of carriers,
     including local exchange carriers, interexchange carriers,
     competitive access providers, cellular carriers, mobile service
     carriers, operator service providers, pay telephone operators, PCS
     providers, covered SMR providers, and resellers. It seems certain
     that some of those 3,497 telephone service firms may not qualify as
     small entities or small incumbent LECs because they are not
     \"independently owned and operated.\"[^385] For example, a PCS
     provider that is affiliated with an interexchange carrier having
     more than 1,500 employees would not meet the definition of a small
     business. It seems reasonable to conclude, therefore, that fewer
     than 3,497 telephone service firms are small entity telephone
     service firms or small incumbent LECs that may be affected by the
     decisions and actions considered in the Further Notice.

197. *Wireline Carriers and Service Providers.* SBA has developed a
     definition of small entities for telephone communications companies
     other than radiotelephone companies. The Census Bureau reports
     that, there were 2,321 such telephone companies in operation for at
     least one year at the end of 1992.[^386] According to SBA\'s
     definition, a small business telephone company other than a
     radiotelephone company is one employing no more than 1,500
     persons.[^387] All but 26 of the 2,321 non-radiotelephone companies
     listed by the Census Bureau were reported to have fewer than 1,000
     employees. Thus, even if all 26 of those companies had more than
     1,500 employees, there would still be 2,295 non-radiotelephone
     companies that might qualify as small entities or small incumbent
     LECs. Although it seems certain that some of these carriers are not
     independently owned and operated, we are unable at this time to
     estimate with greater precision the number of wireline carriers and
     service providers that would qualify as small business concerns
     under SBA\'s definition. Consequently, we estimate that there are
     fewer than 2,295 small entity telephone communications companies
     other than radiotelephone companies that may be affected by the
     decisions and actions considered in the Further Notice.

198. *Local Exchange Carriers*, *Interexchange Carriers, Competitive
     Access Providers, Operator Service Providers, and Resellers*.
     Neither the Commission nor SBA has developed a definition of small
     local exchange carriers (LECs), interexchange carriers (IXCs),
     competitive access providers (CAPs), operator service providers
     (OSPs), or resellers. The closest applicable definition for these
     carrier-types under SBA rules is for telephone communications
     companies other than radiotelephone (wireless) companies.[^388] The
     most reliable source of information regarding the number of these
     carriers nationwide of which we are aware appears to be the data
     that we collect annually in connection with the Telecommunications
     Relay Service (TRS).[^389] According to our most recent data, there
     are 1,410 LECs, 151 IXCs, 129 CAPs, 32 OSPs, and 351
     resellers.[^390] Although it seems certain that some of these
     carriers are not independently owned and operated, or have more
     than 1,500 employees, we are unable at this time to estimate with
     greater precision the number of these carriers that would qualify
     as small business concerns under SBA\'s definition. Consequently,
     we estimate that there are fewer than 1,410 small entity LECs or
     small incumbent LECs, 151 IXCs, 129 CAPs, 32 OSPs, and 351
     resellers that may be affected by the decisions and actions
     considered in the Further Notice.

199. *Wireless (Radiotelephone) Carriers.* SBA has developed a
     definition of small entities for radiotelephone (wireless)
     companies. The Census Bureau reports that there were 1,176 such
     companies in operation for at least one year at the end of
     1992.[^391] According to SBA\'s definition, a small business
     radiotelephone company is one employing no more than 1,500
     persons.[^392] The Census Bureau also reported that 1,164 of those
     radiotelephone companies had fewer than 1,000 employees. Thus, even
     if all of the remaining 12 companies had more than 1,500 employees,
     there would still be 1,164 radiotelephone companies that might
     qualify as small entities if they are independently owned are
     operated. Although it seems certain that some of these carriers are
     not independently owned and operated, we are unable at this time to
     estimate with greater precision the number of radiotelephone
     carriers and service providers that would qualify as small business
     concerns under SBA\'s definition. Consequently, we estimate that
     there are fewer than 1,164 small entity radiotelephone companies
     that may be affected by the decisions and actions considered in the
     Further Notice.

200. *Cellular, PCS, SMR and Other Mobile Service Providers.* In an
     effort to further refine our calculation of the number of
     radiotelephone companies that may be affected by the rules adopted
     herein, we consider the data that we collect annually in connection
     with the TRS for the subcategories Wireless Telephony (which
     includes Cellular, PCS, and SMR) and Other Mobile Service
     Providers. Neither the Commission nor the SBA has developed a
     definition of small entities specifically applicable to these broad
     subcategories, so we will utilize the closest applicable definition
     under SBA rules \-- which, for both categories, is for telephone
     companies other than radiotelephone (wireless) companies.[^393] To
     the extent that the Commission has adopted definitions for small
     entities providing PCS and SMR services, we discuss those
     definitions below. According to our most recent TRS data, 732
     companies reported that they are engaged in the provision of
     Wireless Telephony services and 23 companies reported that they are
     engaged in the provision of Other Mobile Services.[^394] Although
     it seems certain that some of these carriers are not independently
     owned and operated, or have more than 1,500 employees, we are
     unable at this time to estimate with greater precision the number
     of Wireless Telephony Providers and Other Mobile Service Providers,
     except as described below, that would qualify as small business
     concerns under SBA\'s definition. Consequently, we estimate that
     there are fewer than 732 small entity Wireless Telephony Providers
     and fewer than 23 small entity Other Mobile Service Providers that
     might be affected by the decisions and actions considered in the
     Further Notice.

201. *Broadband PCS Licensees.* The broadband PCS spectrum is divided
     into six frequency blocks designated A through F, and the
     Commission has held auctions for each block. The Commission defined
     \"small entity\" for Blocks C and F as an entity that has average
     gross revenues of less than \$40 million in the three previous
     calendar years.[^395] For Block F, an additional classification for
     \"very small business\" was added, and is defined as an entity
     that, together with its affiliates, has average gross revenues of
     not more than \$15 million for the preceding three calendar
     years.[^396] These regulations defining \"small entity\" in the
     context of broadband PCS auctions have been approved by SBA.[^397]
     No small businesses within the SBA-approved definition bid
     successfully for licenses in Blocks A and B. There were 90 winning
     bidders that qualified as small entities in the Block C auctions. A
     total of 93 small and very small business bidders won approximately
     40% of the 1,479 licenses for Blocks D, E, and F. However, licenses
     for Blocks C through F have not been awarded fully, therefore there
     are few, if any, small businesses currently providing PCS services.
     Based on this information, we estimate that the number of small
     broadband PCS licenses will include the 90 winning C Block bidders
     and the 93 qualifying bidders in the D, E, and F blocks, for a
     total of 183 small PCS providers as defined by SBA and the
     Commissioner\'s auction rules.

202. *SMR Licensees.* Pursuant to 47 C.F.R. § 90.814(b)(1), the
     Commission has defined \"small entity\" in auctions for geographic
     area 800 MHz and 900 MHz SMR licenses as a firm that had average
     annual gross revenues of less than \$15 million in the three
     previous calendar years. The definition of a \"small entity\" in
     the context of 800 MHz SMR has been approved by the SBA,[^398] and
     approval for the 900 MHz SMR definition has been sought. The
     proposed rules may apply to SMR providers in the 800 MHz and 900
     MHz bands that either hold geographic area licenses or have
     obtained extended implementation authorizations. We do not know how
     many firms provide 800 MHz or 900 MHz geographic area SMR service
     pursuant to extended implementation authorizations, nor how many of
     these providers have annual revenues of less than \$15 million.
     Consequently, we estimate, for purposes of this IRFA, that all of
     the extended implementation authorizations may be held by small
     entities, some of which may be affected by the decisions and
     actions considered in the Further Notice.

203. The Commission recently held auctions for geographic area licenses
     in the 900 MHz SMR band. There were 60 winning bidders who
     qualified as small entities in the 900 MHz auction. Based on this
     information, we estimate that the number of geographic area SMR
     licensees that may be affected by the decisions and actions
     considered in the Notice includes these 60 small entities. No
     auctions have been held for 800 MHz geographic area SMR licenses.
     Therefore, no small entities currently hold these licenses. A total
     of 525 licenses will be awarded for the upper 200 channels in the
     800 MHz geographic area SMR auction. The Commission, however, has
     not yet determined how many licenses will be awarded for the lower
     230 channels in the 800 MHz geographic area SMR auction. There is
     no basis, moreover, on which to estimate how many small entities
     will win these licenses. Given that nearly all radiotelephone
     companies have fewer than 1,000 employees and that no reliable
     estimate of the number of prospective 800 MHz licensees can be
     made, we estimate, for purposes of this IRFA, that all of the
     licenses may be awarded to small entities, some of which may be
     affected by the decisions and actions considered in the Further
     Notice.

204. *220 MHz Radio Service \-- Phase I Licensees*. The 220 MHz service
     has both Phase I and Phase II licenses. There are approximately
     1,515 such non‑nationwide licensees and four nationwide licensees
     currently authorized to operate in the 220 MHz band. The Commission
     has not developed a definition of small entities specifically
     applicable to such incumbent 220 MHZ Phase I licensees. To estimate
     the number of such licensees that are small businesses, we apply
     the definition under the SBA rules applicable to Radiotelephone
     Communications companies.[^399] According to the Bureau of the
     Census, only 12 radiotelephone firms out of a total of 1,178 such
     firms which operated during 1992 had 1,000 or more employees.[^400]
     Therefore, if this general ratio continues to 1999 in the context
     of Phase I 220 MHz licensees, we estimate that nearly all such
     licensees are small businesses under the SBA\'s definition.

205. *220 MHz Radio Service \-- Phase II Licensees*. The Phase II 220
     MHz service is a new service, and is subject to spectrum auctions.
     In the 220 MHz *Third Report and Order* we adopted criteria for
     defining small businesses and very small businesses for purposes of
     determining their eligibility for special provisions such as
     bidding credits and installment payments.[^401] We have defined a
     small business as an entity that, together with its affiliates and
     controlling principals, has average gross revenues not exceeding
     \$15 million for the preceding three years. Additionally, a very
     small business is defined as an entity that, together with its
     affiliates and controlling principals, has average gross revenues
     that are not more than \$3 million for the preceding three
     years.[^402] An auction of Phase II licenses commenced on September
     15, 1998, and closed on October 22, 1998.[^403] 908 licenses were
     auctioned in 3 different‑sized geographic areas: three nationwide
     licenses, 30 Regional Economic Area Group Licenses, and 875
     Economic Area (EA) Licenses. Of the 908 licenses auctioned, 693
     were sold. Companies claiming small business status won: one of the
     Nationwide licenses, 67% of the Regional licenses, and 54% of the
     EA licenses. As of January 22, 1999, the Commission announced that
     it was prepared to grant 654 of the Phase II licenses won at
     auction.[^404] A reauction of the remaining, unsold licenses was
     completed on June 30, 1999, with 16 bidders winning 222 of the
     Phase II licenses.[^405] As a result, we estimate that 16 or fewer
     of these final winning bidders are small or very small businesses.

206. *Paging*. On June 7, 1999, the Wireless Telecommunications Bureau
     announced the first in a series of auctions of paging licenses, the
     first to commence on December 7, 1999.[^406] The Bureau has
     proposed that the first auction be composed of 2,499
     licenses.[^407] The Commission utilizes a two-tiered definition of
     small businesses in the context of auctioning licenses in the
     Common Carrier Paging and exclusive Private Carrier Paging
     services.[^408] A small business is defined as either (1) an entity
     that, together with its affiliates and controlling principals, has
     average gross revenues for the three preceding years of not more
     than \$3 million, or (2) an entity that, together with affiliates
     and controlling principals, has average gross revenues for the
     three preceding calendar years of not more than \$15 million. The
     SBA has approved this definition.[^409] At present, there are
     approximately 24,000 Private Paging licenses and 74,000 Common
     Carrier Paging licenses. In addition, according to the most recent
     *Carrier Locator* data, 137 carriers reported that they were
     engaged in the provision of either paging or messaging services,
     which are placed together in the data.[^410] Because the auction
     has yet to occur, we do not have data specifying the number of
     winning bidders that will meet the above small business definition.
     Also, we will assume that there currently are 137 or fewer small
     business paging carriers.

207. *Narrowband PCS*. The Commission has auctioned nationwide and
     regional licenses for narrowband PCS. There are 11 nationwide and
     30 regional licensees for narrowband PCS. The Commission does not
     have sufficient information to determine whether any of these
     licensees are small businesses within the SBA-approved definition
     for radiotelephone companies. At present, there have been no
     auctions held for the major trading area (MTA) and basic trading
     area (BTA) narrowband PCS licenses. The Commission anticipates a
     total of 561 MTA licenses and 2,958 BTA licenses will be awarded by
     auction. Such auctions have not yet been scheduled, however. Given
     that nearly all radiotelephone companies have no more than 1,500
     employees and that no reliable estimate of the number of
     prospective MTA and BTA narrowband licensees can be made, we
     assume, for purposes of this IRFA, that all of the licenses will be
     awarded to small entities, as that term is defined by the SBA.

208. *Rural Radiotelephone Service*. The Commission has not adopted a
     definition of small entity specific to the Rural Radiotelephone
     Service.[^411] A significant subset of the Rural Radiotelephone
     Service is the Basic Exchange Telephone Radio Systems
     (BETRS).[^412] We will use the SBA\'s definition applicable to
     radiotelephone companies, *i.e.*, an entity employing no more than
     1,500 persons.[^413] There are approximately 1,000 licensees in the
     Rural Radiotelephone Service, and we estimate that almost all of
     them qualify as small entities under the SBA\'s definition.

209. *Air-Ground Radiotelephone Service*. The Commission has not adopted
     a definition of small entity specific to the Air-Ground
     Radiotelephone Service.[^414] Accordingly, we will use the SBA\'s
     definition applicable to radiotelephone companies, *i.e.*, an
     entity employing no more than 1,500 persons.[^415] There are
     approximately 100 licensees in the Air-Ground Radiotelephone
     Service, and we estimate that almost all of them qualify as small
     entities under the SBA definition.

210. *Private Land Mobile Radio (PLMR)*. PLMR systems, also known as
     Private Mobile Radio Service (PMRS) systems, serve an essential
     role in a range of industrial, business, land transportation, and
     public safety activities.[^416] These radios are used by companies
     of all sizes operating in all U.S. business categories. The
     Commission has not developed a definition of small entity
     specifically applicable to PLMR licensees due to the vast array of
     PLMR users. For the purpose of determining whether a licensee is a
     small business as defined by the SBA, each licensee would need to
     be evaluated within its own business area. The Commission is unable
     at this time to estimate the number of, if any, small businesses
     that could be impacted by the proposed rules. However, the
     Commission\'s 1994 Annual Report on PLMRs[^417] indicates that at
     the end of fiscal year 1994 there were 1,087,267 licensees
     operating 12,481,989 transmitters in the PLMR bands below 512 MHz.
     Because any entity engaged in a commercial activity is eligible to
     hold a PLMR license, the proposed rules in this context could
     potentially impact any small U.S. business that chooses to become
     licensed in this service. On July 21, 1999, the Wireless
     Telecommunications Bureau requested public comment on whether the
     licensing of PMRS frequencies in the 800 MHz band for commercial
     SMR use would serve the public interest.[^418]

211. *Fixed Microwave Services*. Microwave services include common
     carrier,[^419] private‑operational fixed,[^420] and broadcast
     auxiliary radio services.[^421] At present, there are approximately
     22,015 common carrier fixed licensees in the microwave services.
     The Commission has not yet defined a small business with respect to
     microwave services. For purposes of this IRFA, we will utilize the
     SBA\'s definition applicable to radiotelephone companies \--
     *i.e.*, an entity with no more than 1,500 persons.[^422] We
     estimate, for this purpose, that all of the Fixed Microwave
     licensees (excluding broadcast auxiliary licensees) would qualify
     as small entities under the SBA definition for radiotelephone
     companies.

212. *Offshore Radiotelephone Service*. This service operates on several
     UHF TV broadcast channels that are not used for TV broadcasting in
     the coastal area of the states bordering the Gulf of Mexico.[^423]
     At present, there are approximately 55 licensees in this service.
     We are unable at this time to estimate the number of licensees that
     would qualify as small entities under the SBA\'s definition for
     radiotelephone communications.

213. *Wireless Communications Services*. This service can be used for
     fixed, mobile, radio location and digital audio broadcasting
     satellite uses. The Commission defined \"small business\" for the
     wireless communications services (WCS) auction as an entity with
     average gross revenues of \$40 million for each of the three
     preceding years, and a \"very small business\" as an entity with
     average gross revenues of \$15 million for each of the three
     preceding years. The Commission auctioned geographic area licenses
     in the WCS service. In the auction, there were seven winning
     bidders that qualified as very small business entities, and one
     that qualified as a small business entity. We conclude that the
     number of geographic area WCS licensees that may be affected by the
     decisions and actions considered in the Further Notice includes
     these eight entities.

214. *Rural Health Care Providers*. Neither the Commission nor the SBA
     has developed a definition of small, rural health care providers.
     Section 254(h)(5)(B) defines the term \"health care provider\" and
     sets forth the seven categories of health care providers eligible
     to receive universal service support.[^424] We estimate that there
     are: (1) 625 \"post‑secondary educational institutions offering
     health care instruction, teaching hospitals, and medical schools,\"
     including 403 rural community colleges,[^425] 124 medical schools
     with rural programs,[^426] and 98 rural teaching
     hospitals;[^427] (2) 1,200 \"community health centers or health
     centers providing health care to migrants\";[^428] (3) 3,093
     \"local health departments or agencies\" including 1,271 local
     health departments[^429] and 1,822 local boards of
     health;[^430] (4) 2,000 \"community mental health
     centers\";[^431] (5) 2,049 \"not‑for‑profit hospitals\";[^432]
     and (6) 3,329 \"rural health clinics.\"[^433] We do not have
     sufficient information to make an estimate of the number of
     consortia of health care providers at this time. The total of these
     categorical numbers is 12,296. Consequently, we estimate that there
     are fewer than 12,296 health care providers potentially affected by
     the actions proposed in this Further Notice. According to the SBA
     definition, hospitals must have annual gross receipts of \$5
     million or less to qualify as a small business concern.[^434] There
     are approximately 3,856 hospital firms, of which 294 have gross
     annual receipts of \$5 million or less. Although some of these
     small hospital firms may not qualify as rural health care
     providers, we are unable at this time to estimate with greater
     precision the number of small hospital firms which might be
     affected by the proposals, if adopted. Consequently, we estimate
     that there are fewer than 294 hospital firms that might ultimately
     be affected by this Further NPRM.

### Description of Projected Reporting, Record-keeping, and Other Compliance Requirements

215. The measures under consideration in this Further Notice may, if
     adopted, result in additional reporting or other compliance
     requirements for telecommunications carriers, including small
     entities, as described below.

216. Certain measures under consideration in this Further Notice may, if
     adopted, result in increased federal universal service support
     obligations for telecommunications carriers required to contribute
     to federal universal service support mechanisms. Specifically, in
     this Further Notice, the Commission seeks comment on the
     possibility of allowing carriers to form separate tribal study
     areas;[^435] lifting the cap on the high-cost fund to allow for
     growth resulting from the use of tribal study areas;[^436] amending
     the consumer qualification criteria for determining eligibility for
     Lifeline;[^437] expanding LinkUp to include facilities based
     line-extension charges or other construction costs;[^438] providing
     support for intrastate toll-calling;[^439] and providing support
     for the deployment of infrastructure necessary to provide rural
     health care providers with access to telehealth and telemedicine
     initiatives.[^440]

217. Certain measures under consideration in this Further Notice may, if
     adopted, result in additional obligations for carriers filing
     petitions pursuant to section 214(e)(6) of the Act or subject to
     proceedings conducted pursuant to section 214(e)(6) of the Act.
     Section 214(e)(3) of the Act authorizes the Commission to designate
     carriers not subject to the jurisdiction of a state commission as
     an eligible telecommunications carriers. Specifically, carriers may
     be required to provide an analysis of the Commission's jurisdiction
     in conjunction with filing petitions under this provision. Section
     214(e)(3) of the Act authorizes the Commission to identify the
     carrier or carriers best able to provide the services supported by
     federal universal service support mechanisms in unserved areas, and
     to order that carrier or carriers to provide such service. One
     option under consideration is for the Commission to conduct a
     fact-based inquiry of the common carriers serving areas near the
     unserved area to determine where existing facilities are deployed,
     to estimate the costs for each carrier to provide the supported
     services, and to consider other factors that may be relevant to the
     determination. This proposal could result in rules requiring
     carrier to submit information to the Commission that is needed in
     making this determination.[^441]

218. Finally, certain measures raised in this Further Notice could
     result in additional compliance requirements for carriers
     designated as eligible telecommunications carriers. Specifically,
     the Commission seeks comment on the possibility of expanding the
     provision of toll limitation offerings[^442] and on requiring
     additional publicity for the availability of low-income
     support.[^443]

### Significant Alternatives To Proposed Rule Which Minimize Significant Economic Impact on Small Entities and Accomplish Stated Objectives

219. With respect to the possibility of increased universal service
     contribution requirements, the primary alternative to the proposals
     contained in the Further Notice which would minimize the economic
     impact on small entities would be to determine not to provide an
     increased amount of support. In this proceeding, the Commission
     will consider whether the alternative -- not to provide the
     additional support \-- would nevertheless accomplish its stated
     objectives. We observe that section 254(d) of the Act requires that
     all telecommunications carriers contribute to the federal universal
     service support mechanisms on "an equitable and nondiscriminatory
     basis." As a result, the Commission may not propose alternatives
     specifically designed to minimize the economic impact on small
     entities. We note, however, that the Commission has established a
     *de minimis* exception from universal service contribution
     obligations for carriers whose interstate end-user
     telecommunications revenues in a given is less than \$10,000.[^444]
     This exception should lessen the burden on telecommunications
     carriers that meet the definition of small entities.

220. With respect to the information that may need to be submitted in
     conjunction with petitions filed pursuant to section 214(e)(6) and
     proceedings conducted pursuant to section 214(e)(3), the primary
     alternative would be for the Commission to determine that the
     information is not required or to conclude that it could obtain the
     information from alternative sources. In seeking comment on this
     issue, the Commission intends to develop a record to determine
     whether the information is necessary and the appropriate source for
     obtaining it. In addition, with respect to proceedings conducted
     pursuant to section 214(e)(6), the Commission seeks comment on the
     possibility of providing an exception for carriers that meet the
     definition of small entities.[^445] Moreover, the Commission seeks
     comment on the possibility of using a voluntary competitive bidding
     mechanism instead of the more cumbersome, fact-based inquiry. If
     the competitive bidding proposal adopted, the compliance
     requirements for all carriers, including carriers that meet the
     definition of small entities, could be avoided.

221. Finally, with respect to the additional compliance requirements for
     carriers designated eligible telecommunications carriers, the
     Commission does not seek comment on whether an exception for
     carriers meeting the definition of small entities is appropriate.
     In setting the standard for what services carriers designated as
     eligible telecommunications carriers must provide, the Commission
     has established a uniform, nationwide standard for the services to
     which all Americans should have access. Individual carriers,
     however, may obtain a waiver of the Commission's rules if good
     cause is shown therefor.[^446]

### Federal Rules that May Duplicate, Overlap, or Conflict With the Notice

222. None.

**SEPARATE STATEMENT OF**

**COMMISSIONER HAROLD FURCHTGOTT‑ROTH**

**DISSENTING IN PART**

*Re: Federal-State Joint Board on Universal Service: Promoting
Deployment and Subscribership in Unserved and Underserved Areas,
Including Tribal and Insular Areas*, CC Docket 96-45.

I support many of the worthwhile goals of today\'s Order. Although I
write separately to express limited concerns about this item, I commend
my colleagues and the members of the Commission staff who have worked so
diligently on this important action.

First, I object to the item\'s apparent invention of a new
classification described as \"underserved areas.\" This classification
does not appear in the Communications Act. In fact, the Act specifically
refers to a category of \"unserved areas\" for which Congress directed
the Commission and the States to take specific action. *See* Section
214(e)(3). Congress, however, did not create a category of \"underserved
areas,\" and the Commission has no authority to create one on its own
motion. I believe the Commission can achieve the goals set forth in this
item without inventing new terms and, as a result, placing at risk the
goals we seek to serve in this item.

Section 214(e)(6) directs the Commission to designate a common carrier
as an eligible telecommunications carrier for purposes of receiving
universal service support when, *inter alia*, the common carrier is not
subject to the jurisdiction of a State commission. Although the goals of
today\'s Order are worthwhile, meeting these goals should not result in
overbroad results. I thus object to the tentative conclusion that this
section should be interpreted such that the determination of whether a
carrier is subject to the jurisdiction of a State commission depends on
the geographic area in which the service is being provided (e.g. tribal
lands) *or* the nature of the service provided (e.g. satellite or
terrestrial wireless). *Supra.* at par. 78. I am concerned that such a
conclusion will ultimately lead to the federal government designating
satellite and terrestrial wireless carriers as eligible
telecommunications carriers outside of tribal areas. I dissent from this
tentative conclusion, because I do not believe that this outcome is
supported by section 214(e)(6).

Finally, I question the decision to solicit comment regarding whether
the Commission should establish national guidelines by which states must
make the determination of which carriers are best able to provide
services to unserved areas. *Supra.* at par. 93. The Fifth Circuit only
last month reversed a Commission order interpreting a very similar
statutory provision in which the Commission attempted to prohibit States
from developing their own requirements when designating carriers as
eligible for federal universal service support pursuant to section
214(e)(2).[^447] When the Commission solicits comment on a topic, it
encourages members of the public to expend resources responding to that
solicitation. I believe it is irresponsible to encourage such a use of
resources when Commission action is unlikely because a federal appeals
court has called into significant doubt the legality of the proposal at
issue.

**Separate Statement of**

**Commissioner Gloria Tristani**

*Re: Federal-State Joint Board on Universal Service: Promoting
Deployment and Subscribership in Unserved and Underserved Areas, CC
Docket No. 96-45; Extending Wireless Telecommunications Services, WT
Docket No. 99-266.*

I write separately to underscore my support for these items. Both
Notices of Proposed Rulemaking are intended to address and remedy the
dearth of telecommunications in Indian country and other unserved and
underserved areas. The facts are not in dispute. While Americans on
average enjoy a telephone subscribership rate of 94%, many communities
and areas throughout the land are not so fortunate. And Indians living
on tribal lands are the least fortunate of all. Telephone subscribership
rates on tribal lands fall under 50% in many instances and even under
30%, as in the case of the Navajo reservation.

These woeful statistics are not new, and this is not the first time that
the federal government and others have taken notice. What is new, is
that the Federal Communications Commission has not only taken notice,
but is now embarked in taking concrete action to change these
statistics. The items ask thoughtful, appropriate and insightful
questions, including questions about the scope of the problem, the
nature of the federal relationship with tribal sovereign governments,
and the extent to which the FCC should act to remedy the problem.

But, more importantly, the items posit concrete suggestions -- targeting
universal service support, bolstering and/or tailoring the Lifeline and
Linkup programs, using alternative technologies --- on how to provide
telecommunication services to Indian country and other unserved and
underserved communities. These suggestions are good first steps but I
hope commentors will not hesitate to suggest any other appropriate and
innovative measures.

Finally, while I am proud to support these items, I believe it is our
statutory and moral obligation to bring telecommunications to Indian
country. Section 254 of the Telecommunications Act mandates that we
assure that all Americans have access to telecommunications services.
The federal trust relationship between tribal sovereign governments and
the federal government suggests that we have an obligation to do even
more. But history, notions of equality, and the principles on which this
Nation was founded tell us that is unconscionable that Indians, the
first Americans, remain the last Americans to enjoy the wonders and
benefits of the Information Age. I trust that the small steps we take
today will go a long way in changing this picture.

[^1]: *See* Pub. L. No. 104-104, 110 Stat. 56 (1996) (1996 Act),
    amending the Communications Act of 1934, 47 U.S.C. § 151, *et seq.,*
    (the Act).

[^2]: 47 U.S.C. § 254(b).

[^3]: 47 U.S.C. § 254(b)(3).

[^4]: 47 U.S.C. § 254(b)(5). *See also* 47 U.S.C. § 254(d).

[^5]: *Federal-State Joint Board on Universal Service*, Notice of
    Proposed Rulemaking and Order Establishing a Joint Board, 11 FCC Rcd
    18092 (1996) (*May 1996 Notice*); Recommended Decision, 12 FCC Rcd
    87 (Jt. Bd. 1996) (*First Recommended Decision);* Report and Order,
    CC Docket No. 96-45, 12 FCC Rcd 8776 (1997), as corrected by Errata,
    CC Docket No. 96-45 (rel. June 4, 1997) (*First Report and Order*);
    Order on Reconsideration, 12 FCC Rcd 10095 (1997); Second Order on
    Reconsideration, 12 FCC Rcd 18400 (1997); Third Order on
    Reconsideration, 12 FCC Rcd 22801 (1997); Fourth Order on
    Reconsideration, 13 FCC Rcd 2372 (1997); Fifth Order on
    Reconsideration, 13 FCC Rcd 14915 (1998); Order and Order on
    Reconsideration, 13 FCC Rcd 13749 (1997); Second Recommended
    Decision, 13 FCC Rcd 24744 (1998); Sixth Order on Reconsideration,
    13 FCC Rcd 22908 (1998); Seventh Order on Reconsideration, 13 FCC
    Rcd 19397 (1998); Eighth Order on Reconsideration, 13 FCC Rcd 25058
    (1998); Ninth Order on Reconsideration, 14 FCC Rcd 377 (1998); Tenth
    Order on Reconsideration, FCC 99-46 (rel. Apr. 2, 1999); Eleventh
    Order on Reconsideration, FCC 99-49 (rel. May 28, 1999); Twelfth
    Order on Reconsideration, FCC 99-121 (rel. May 28, 1999); Thirteenth
    Order on Reconsideration, FCC 99-119 (rel. May 28, 1999); *affirmed
    in part, remanded in part and reversed in part, Texas Office of
    Public Utility Counsel v. FCC*, No. 97-60421 (5th Cir. Jul. 30,
    1999).

[^6]: *Thirteenth Order on Reconsideration, supra* n. Error: Reference
    source not found.

[^7]: This new support mechanism has a two-part methodology that
    considers both the relative costs of providing supported services
    and the states\' ability to support those costs using their own
    resources. *Thirteenth Order on Reconsideration*, FCC 99-119 at
    paras. 47-78. In the first step of the methodology, the costs
    incurred by a non-rural carrier to provide supported services are
    estimated using a single national model based on forward-looking
    costs. *Thirteenth Order on Reconsideration*, FCC 99-119 at paras.
    49-54. Those costs are then compared to a national cost benchmark to
    determine which areas have costs that exceed the benchmark, and are
    therefore in need of support. *Thirteenth Order on Reconsideration*,
    FCC 99-119 at paras. 61-62. In the second step of the methodology,
    the state\'s ability to achieve reasonably comparable rates using
    its own resources is estimated by multiplying a fixed dollar amount
    by the number of lines served by non-rural carriers in the state.
    *Thirteenth Order on Reconsideration*, FCC 99-119 at paras. 63-66.
    The federal support mechanism will provide support for costs that
    exceed both the national benchmark and the individual state\'s
    resources to support those costs. *Thirteenth Order on
    Reconsideration*, FCC 99-119 at paras. 11, 65-66.

[^8]: *Thirteenth Order on Reconsideration*, FCC 99-119 at para. 95.

[^9]: *Thirteenth Order on Reconsideration*, FCC 99-119 at para. 19.

[^10]: *Thirteenth Order on Reconsideration*, FCC 99-119 at para. 3.
    Section 3(37) of the 1996 Act defines a Rural Telephone Company as a
    local exchange carrier operating entity to the extent that such
    entity --

    > \(A\) provides common carrier service to any local exchange 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 area with fewer than 100,000 access lines; or
    >
    > \(D\) has less than 15 percent of its access lines in communities
    > of more than 50,000 on the date of enactment of the
    > Telecommunications Act of 1996.

[^11]: *Thirteenth Order on Reconsideration*, FCC 99-119 at paras. 21,
    129. *See also* *First Report and Order*, 12 FCC Rcd at 8889, 8910,
    8917-18; *Federal-State Joint Board on Universal Service Announces
    the Creation of a Rural Task Force, Solicits Nominations for
    Membership on Rural Task Force*, Public Notice, FCC 97J-1 (rel.
    Sept. 17, 1997).

[^12]: The existing high-cost support mechanism provides increasing
    amounts of support based on the percentage by which a carrier's loop
    costs exceed the national average cost per loop, beginning with loop
    costs greater than 115 percent of the national average cost per
    loop. *See* 47 C.F.R. §§ 36.631(c), (d); *Thirteenth Order on
    Reconsideration*, FCC 99-119 at para. 98. The existing mechanism
    provides support only for loop costs, while the new forward-looking
    mechanism for non-rural carriers provides support based on the
    estimated cost of all components of the network necessary to provide
    supported services.

[^13]: *Thirteenth Order on Reconsideration*, FCC 99-119 at paras.
    91-92.

[^14]: *First Report and Order,* 12 FCC Rcd at 8885-8886.

[^15]: *First Report and Order*, 12 FCC Rcd at 8897, 9109, and 9137.

[^16]: *Second Recommended Decision*, 13 FCC Rcd at 24764.

[^17]: For recent data concerning which American households have access
    to wireline telephones, computers and the Internet, see *Falling
    Through the Net: Definining the Digital Divide,* National
    Telecommunications and Information Administration (NTIA), U.S.
    Department of Commerce (July 1999) (concluding, among other things,
    that where a person lives can greatly influence the liklihood of
    telephone ownership). The full report, additional charts, and links
    to the original Census data and survey instruments are available on
    NTIA's website: [http://www.ntia.doc.gov](http://www.ntia.doc.gov/).

[^18]: *Telephone Subscribership in the United States*, Report, Table 1
    (Com. Car. Bur., rel. Feb 18, 1999).

[^19]: *Telephone Subscribership in the United States*, Report, Table 4
    (households with annual income under \$5,000).

[^20]: Telephone subscribership in Puerto Rico, for example, is 72
    percent. *First Report and Order*, 12 FCC Rcd at 8843, n.281.

[^21]: Telephone subscribership in the territory served by the Dell
    Telephone Cooperative in Texas, for example, is only about 82.8
    percent. The penetration rate derived from the 1990 census. At that
    time, the Dell Telephone Cooperative was the company with the
    highest per-loop costs in the nation.

[^22]: *See* *Housing of American Indians on Reservations -- Equipment
    and Fuels*, Statistical Brief, Bureau of the Census, SB/95, April
    1995 at 2 (based on 1990 Census data).

[^23]: *First Report and Order*, 12 FCC Rcd at 8839.

[^24]: In this Notice, we refer to \"Indians\" and \"Indian tribes.\"
    *See* The Federally Recognized Indian Tribe List Act of 1994 (Indian
    Tribe Act), Pub. L. 103-454, 108 Stat. 4791 (1994). The term
    \"Indian\" shall include \"all persons of Indian descent who are
    members of any recognized Indian tribe now under Federal
    jurisdiction, and all persons who are descendants of such members
    who were, on June 1, 1934, residing within the present boundaries of
    any Indian reservation, and shall further include all other persons
    of one-half or more Indian blood. . . . Eskimos and other aboriginal
    peoples of Alaska shall be considered Indians.\" 25 U.S.C. § 479.
    The term \"Indian tribe\" means \"any Indian or Alaska Native tribe,
    band, nation, pueblo, village or community that the Secretary of the
    Interior acknowledges to exist as an Indian tribe.\" 25 U.S.C. §
    479a(2). The Secretary of the Interior is required to publish in the
    Federal Register an annual list of all Indian tribes which the
    Secretary recognizes to be eligible for the special programs and
    services provided by the United States to Indians because of their
    status as Indians. 25 U.S.C. § 479a-1.

[^25]: For a list of participants, see Appendix A.

[^26]: In addition, in July 1998, Commissioner Gloria Tristani and Amy
    Zoslov, Chief, Auctions Division, Wireless Telecommunications
    Bureau, spoke at a three day National Native American
    Telecommunications Workshop in Albuquerque, New Mexico (*NNAT
    Workshop)*. The transcript of the workshop is available via the
    Internet:
    <http://aises.uthscsa.edu/~yawakie/Proceedings/Proceedings.html>.

[^27]: Federal Communications Commission Will Hold a Series of Public
    Hearings on Telephone Service for Indians on Reservations and Seeks
    Comment from the General Public on All Testimony and Other Evidence
    Presented Therein; *Public Notice,* BO Docket No. 99-11, DA 99-201
    (OCBO rel. Jan. 21, 1999*) (Overcoming Obstacles Proceeding:
    Albuquerque Hearing*).

[^28]: FCC to Hold Second Public Hearing in Series on Telephone Service
    for Indians on Reservations; Set for March 23 in Chandler, Arizona,
    *Public Notice*, BO Docket No. 99-11, DA 99-430 (OCBO rel. Mar. 2,
    1999) (*Overcoming Obstacles Proceeding: Arizona Hearing*); Deadline
    Extended Until June 28, 1999 for Comments on Overcoming Obstacles to
    Telephone Service for Indians on Reservations, *Public Notice,* BO
    Docket No. 99-11, DA 99-1010 (OCBO rel. May 27, 1999) (*Overcoming
    Obstacles Proceeding)*.

[^29]: For a list of participants, see Appendix B.

[^30]: [Http://www.fcc.gov/Panel_Discussions/Teleservice_reservations/](http://www.fcc.gov/Panel_Discussions/Teleservice_reservations/).
    *See* Appendix C for a list of parties filing comments BO Docket No.
    99-11.

[^31]: *Extending Wireless Service to Tribal Lands,* Notice of Proposed
    Rulemaking, WT Docket No. 99-266, FCC 99-205, (adopted Aug. 5,
    1999).

[^32]: *Telephone Subscribership in the United States*, Report, Table 1
    (Com. Car. Bur., rel. Feb 18, 1999).

[^33]: A housing unit is a place in which a household resides.

[^34]: The following services or functionalities are supported by
    federal universal service support mechanisms: single-party service;
    voice grade access to the public switched network; DTMF signaling or
    its functional equivalent; access to emergency services; access to
    operator services; access to interexchange service; access to
    directory assistance; and toll limitation services for qualifying
    low-income consumers. 47 C.F.R. § 54.101(a). *See First Report and
    Order,* 12 FCC Rcd at 8809.

[^35]: Section 706(b) of the Act defines "advanced telecommunications
    capability" as "high-speed, switched, broadband telecommunications
    capability that enables users to originate and receive high-quality
    voice, data, graphics, and video telecommunications using any
    technology." 47 U.S.C. §706(b). The Commission defined "broadband"
    as having the capability of supporting a bandwidth in excess of 200
    kbps in the last mile, both from the provider to the consumer and
    from the consumer to the provider. *See* *An Inquiry Concerning the
    Deployment of Advanced Telecommunications Capability to All
    Americans in a Reasonable and Timely Fashion, and Possible Steps to
    Accelerate Such Deployment Pursuant to Section 706 of the
    Telecommunications Act of 1998*, Report on Advanced
    Telecommunications Capability, CC Docket No. 98-146, FCC 99-5 (rel.
    Feb. 2, 1999) at para. 20.

[^36]: BETRS is a two-way channel wireless service used to provide basic
    exchange service to remote rural areas of the country. *Basic
    Exchange Telecommunications Radio Service,* Report and Order, CC
    Docket No. 86-495, 3 FCC Rcd 214 (1988). *See* 47 C.F.R. §§ 22.99,
    22.725, 22.727.

[^37]: *See* n. Error: Reference source not foundError: Reference source
    not found, *supra*.

[^38]: *See e. g.*, *Overcoming Obstacles Proceeding: Albuquerque
    Hearing,* Testimony of Gene DeJordy, Executive Director, Western
    Wireless, p. 94 (currently serves 23 Indian reservations);
    *Overcoming Obstacles Proceeding: Arizona Hearing,* Testimony of
    Carl Artman, Airadigm Communications, Inc., p. 100 (Oneida tribe
    invested in its own wireless communications because of its lower
    cost of deployment and maintenance when compared to wireline);
    *Overcoming Obstacles Proceeding: Albuquerque Hearing,* Testimony of
    Francis Mike, Navajo Communications Company, p. 84-89 (discussing
    the use of satellite services as a solution to meet Indian
    telecommunications needs)

[^39]: In the Matter of The Establishment of Policies and Service Rules
    for The Mobile Satellite Service in The 2 GHz Band, IB Docket No.
    99-81, RM-9328, Notice of Proposed Rulemaking, FCC 99-50, para. 95
    (rel. March 25, 1999) (*2 GHz Proceeding)*.

[^40]: *Id*. at para. 95.

[^41]: *See 2 GHz Proceeding:* Comments of Boeing at 16-18, Celsat at
    28-29, Constellation at 27-28, Globalstar at 44-46, ICO at 19-21,
    ICO at 19-21, ICO USA Service Group (BT NA, Hughes, Telmex, and TRW)
    at 44-46, Iridium at 41-43, MCHI at 26, and SIA at 2-3.

[^42]: *See 2 GHz Proceeding:* Comments of Globalstar at 44-46 and MCHI
    at 26; reply comments of ICO USA Service Group 44-46.

[^43]: *See, e.g., Overcoming Obstacles Proceeding:* Comments of
    Skybridge L.L.C., at p. 4 ("\[t\]he geographic and economic
    considerations that make service to reservations unattractive to
    terrestrial networks...are not an issue for providers of satellite
    telecommunications. . . .")

[^44]: *See, e.g.,* *Overcoming Obstacles Proceeding:* Comments of ICO
    Global Communications (Holding) Limited, at p. 3 (suggesting that
    with satellite service, incremental costs of adding additional
    subscribers in high-cost areas is low).

[^45]: We note that American Mobile Satellite Corporation, a GSO MSS
    licensee, is providing service to a police force in the Navajo
    Nation and to the remote community of Tortilla Flat, Arizona, and
    that General Communications, Inc., an earth station operator,
    provides voice and private line services to fifty rural Alaskan Bush
    communities.

[^46]: *See, e.g.,* *Overcoming Obstacles Proceeding: Albuquerque
    Hearing,* Testimony of George Arthur, Council Delegate, Navajo
    Nation, p. 43 (satellite services are too expensive for use in
    resolving Indian telecommunication needs). We note that in a
    companion Notice of Proposed Rulemaking adopted today, we are
    seeking comment on: (1) whether certain changes to Commission rules
    would provide greater incentives for existing wireless and satellite
    licensees to extend service to tribal lands and other unserved
    areas; and (2) ways the Commisison might encourage deployment of
    wireless and satellite-based telecommunications service to tribal
    lands and other unserved areas through the Commission\'s development
    and licensing of new wireless and satellite services. *See Extending
    Wireless Service to Tribal Lands,* Notice of Proposed Rulemaking, WT
    Docket No. 99-266, FCC 99-205, (adopted Aug. 5, 1999).

[^47]: Several commenters to the *Overcoming Obstacles Proceeding*
    expressed concern over lack of access to universal service funds.
    *See, e.g.,* Comments of the Cellular Telecommunications Industry
    Association (June 28, 1999) at p. 1 ("For wireless carriers, the
    most significant obstacle to offering basic telecommunications
    service is the Commission's present implementation of Universal
    Service support mechanisms"); *Overcoming Obstacles Proceeding:
    Arizona Hearing,* Testimony of Richard Watkins, Smith Bagley, Inc.,
    p. 111 ("\[U\]niversal service support \[must be\] made available to
    wireless carriers"). *See also*, *Overcoming Obstacles Proceeding:
    Arizona Hearing,* Testimony of Jim Irvin, Commissioner Chairman,
    Arizona Corporation Commission, p. 143-151.

[^48]: *See* 47 U.S.C. § 254(b)(3).

[^49]: Falling Through the Net II: New Data on the Digital Divide,
    National Telecommunications and Information, U.S. Department of
    Commerce (July 1998) at 2-3. This report may be found at
    <http://www.ntia.doc.gov/ntiahome/net2/falling.html>.

[^50]: *See* *Overcoming Obstacles Proceeding: Albuquerque Hearing,*
    Testimony of Arnold Cassador, President Jicarilla Apache Tribe, p.
    49 (because of remote location many people are without access to
    telephone service); Testimony of Anthony Lucio, Councilman, Zuni
    Pueblo, p. 62 (Zuni is the farthest of the 19 pueblos); Testimony of
    George Arthur, Council Delegate, Navajo Nation, at p. 1
    (implementing a telecommunications network on a remote and expansive
    reservation presents challenges).

[^51]: *See* Navajo Communications Company, response to Arizona
    Corporation Commission Data Request, ACC Docket No. T-2115-97-640
    (Unserved Areas), Jun. 19, 1998 at attachment B (placed on the
    record of CC Docket No. 96-45); *Overcoming Obstacles Proceeding:
    Arizona Hearing,* Testimony of James Irvin, Commissioner Chairman,
    Arizona Corporation Commission, p. 147.

[^52]: *Overcoming Obstacles Proceeding,* Testimony of Ivan Makil,
    President, Salt River Pima-Maricopa Indian Community, p. 1. For a
    discussion of Rural Utility Services programs, *see* *Overcoming
    Obstacles Proceeding: Arizona Hearing,* Testimony of Christopher
    McLean, Deputy Administrator, Rural Utility Service, p. 18-26; *see
    also* Testimony of Madonna Peltier Yawakie, Minnesota American
    Indian Science and Engineering Society, p. 154-157.

[^53]: *See Assessment of Technology Infrastructure in Native
    Communities, Final Report, July 1999*, College of Engineering, New
    Mexico State University, Research sponsored by the Economic
    Development Administration, U.S. Department of Commerce, at p. 20
    (*Assessment of Infrastructure*) (placed on the record of CC Docket
    No. 96-45).

[^54]: *See* Native Networking: Telecommunications and Information
    Technology and Indian Country; Benton Foundation (April 1999) at
    pages 20-39. This Report is available on the Internet at
    <http://www.benton.org/Library/Native/*>.

[^55]: *See* *Overcoming Obstacles Proceeding: Albuquerque Hearing,*
    Testimony of Anthony Lucio, Councilman, Zuni Pueblo, p. 63.

[^56]: *See Overcoming Obstacles Proceeding: Albuquerque Hearing,*
    Testimony of Stanley Pino, All Indians Pueblo Council; Office of
    Technology Assessment, United States Congress, *Telecommunication
    Technology and Native Americans: Opportunities and Challenges*,
    OTA-ITC-621 (Washington, DC: U.S. Government Printing Office,
    August, 1995).

[^57]: *See, e.g.,* *Overcoming Obstacles Proceeding: Albuquerque
    Hearing,* Testimony of Eagle Rael, Governor, Picuris Pueblo, p. 58
    (describing reluctance to bury telephone cables near ceremonial
    sites). Madonna Peltier Yawakie specifically refutes the position
    that Indians, because of cultural concerns, fail to use telephones
    or are communal in their use of telephones. *See Overcoming
    Obstacles Proceeding,* Testimony of Madonna Peltier Yawakie, at p.
    1.

[^58]: *See, e.g., Overcoming Obstacles Proceeding,* Testimony of George
    Arthur, Navajo Nation; Parker Sando, "Right of Way and Easement
    Practices," presented at AISES National Native American
    Telecommunications Workshop, July 28-30, 1998, Albuquerque, New
    Mexico, workshop transcript at 5-4 (*NNAT Workshop Transcript).*

[^59]: 25 U.S.C. § 323 (1998).

[^60]: 25 U.S.C. § 325 (1998).

[^61]: 25 U.S.C. § 324 (1998).

[^62]: Raymond Etcitty, "Right of Way and Easement Practices," *NNAT
    Workshop Transcript*, p. 5-1.

[^63]: Steve Campbell, "Right of Way and Easement Practices," *NNAT
    Workshop Transcript* , p. 5-4.

[^64]: *See, e.g*., *Overcoming Obstacles Proceeding: Albuquerque
    Hearing,* Testimony of Francis Mike, Navajo Communications, p. 87
    ("very long, difficult, and expensive Bureau of Indian Affairs and
    Navajo Nation right-of-way processes"); Testimony of Arthur
    Martinez, Western New Mexico Telephone Company, p. 92 ("permit
    process is tedious and in many cases can take up to a year to
    complete"); Testimony of Gene DeJordy, Western Wireless, p. 96;
    Testimony of Aloa Stevens, Citizens Communications, p. 94; Testimony
    of Richard Watkins, Smith Bagley, p. 115; *see also Overcoming
    Obstacles Proceeding:* Comments of US West Communications, Inc. at
    p. 5.

[^65]: *See, e.g, Overcoming Obstacles Proceeding: Albuquerque Hearing,*
    Testimony of George Arthur, Navajo Nation, p. 43.

[^66]: *See Overcoming Obstacles Proceeding: Albuquerque Hearing*,
    Testimony of Francis Mike, Navajo Communications, p. 87
    (\"exorbitant fees for right-of-way acquisition\"); Testimony of
    George Arthur, Navajo Nation, p. 43 (\"\[the carrier\] \... utilized
    the New Mexico transportation highway right of ways \... \[to\]
    avoid having to deal with the Navajo Nation.\"); Testimony of Gene
    DeJordy, Western Wireless, p. 96 (\"An additional problem \... is
    the placement and operation of antenna towers.\"); Testimony of
    Linda Lovejoy, New Mexico Public Regulations Commission, p. 115
    (\"\[T\]here are many obstacles \... \[o\]ne of these is \...
    right-of-way from the tribal authorities and federal agencies.\")
    *See also* *Overcoming Obstacles Proceeding:* Comments of US West
    Communications, Inc., at p. 5 (\"tribes resisted requests \... and
    quoted exorbitant fees for \[rights-of-way\].\")

[^67]: *See generally*, *Overcoming Obstacles Proceeding:* Response to
    Questionnaire filed by Governor Mary Thomas, Gila River Indian
    Community, pp. 4, 6.

[^68]: *See, e.g., Promotion of Competitive Networks in Local
    Telecommunications Markets*, Notice of Proposed Rulemaking and
    Notice of Inquiry, WT Docket No. 99-217, FCC 99-141 (rel. July 7,
    1999).

[^69]: In our ongoing proceeding to reform the high-cost universal
    service support mechanism for non-rural carriers, several parties
    representing rural carriers have filed comments asking that we
    adjust or eliminate the cap on the high-cost loop fund to coincide
    with the anticipated transition of non-rural carriers to a new
    forward-looking support mechanism on January 1, 2000. *See
    Federal-State Joint Board on Universal Service*, CC Docket No 96-45,
    *Access Charge Reform*, CC Docket No. 96-262, Seventh Report & Order
    and Thirteenth Order on Reconsideration in CC Docket No. 96-45,
    Fourth Report and Order in CC Docket No. 96-262, and Further Notice
    of Proposed Rulemaking, FCC 99-119 (rel. May 28, 1999); Rural
    Telephone Coalition comments at 16-21 (filed July 23, 1999); Western
    Alliance comments at 4-7 (filed July 23, 1999).

[^70]: *See*, *e.g.*, Letter from John Ricker, National Exchange Carrier
    Association (NECA), to Magalie Roman Salas (dated October 1, 1998)
    ("NECA estimates that the cap will be \$864.2 million for 1999
    payments. The individual study area expense adjustments for 1999
    total \$926.9 million based on year-end 1997 data, hence payments of
    expense adjustments will be limited \[\$62.7 million\] as a result
    of the indexed cap.")

[^71]: 47 U.S.C. § 3(25) (defining "Local Access and Transport Area.)

[^72]: *Extending Wireless Service to Tribal Lands,* Notice of Proposed
    Rulemaking, WT Docket No. 99-266, FCC 99-205, (adopted Aug. 5,
    1999).

[^73]: *See, e.g.*, Testimony of Aloa Stevens, *Overcoming Obstacles
    Proceeding: Arizona Hearing*, at 1 ("In some states the regulatory
    agencies even oppose construction to remote areas, when such line
    extensions will have the effect of eroding the earnings level, or
    will eventually raise the cost of service to all other customers.")

[^74]: *See, e.g, Federal-State Joint Board on Universal Service
    Announces Rural Task Force*, Public Notice, CC Docket No. 96-45, FCC
    98J-1 (Jt. Bd. rel. Jul. 1, 1998) (appointing Elstun Lausen II,
    Tanana Chiefs Conference, Inc. in category for "other appropriate
    representatives, including those of groups with special interest
    concerns, such as individuals or groups representing the concerns of
    Native Americans.")

[^75]: *See* note Error: Reference source not found, above, for
    definitions of Indians and Indian tribes.

[^76]: *Seminole Nation v. United States*, 316 U.S. 286, 296 (1942)
    (citing *Cherokee Nation v. State of Georgia*, 30 U.S. 1 (1831);
    *United States v. Kagama*, 118 U.S. 375 (1886); *Choctaw Nation v.
    United States*, 119 U.S. 1 (1886); *United States v. Pelican*, 232
    U.S. 442 (1914); *United States v. Creek Nation*, 295 U.S. 103
    (1935); *Tulee v. State of Washington*, 315 U.S. 681 (1942). *See
    also Ramah Navajo Chapter v. Lujan*, 112 F.3d 1455, 1462 (10^th^
    Cir. 1997) (federal government has a unique trust relationship with
    Indians.)

[^77]: *Cherokee Nation v. State of Georgia*, 30 U.S. 1 at 17 (1831).

[^78]: *See e.g., Nance v. EPA*, 645 F.2d 701, 710 (9^th^ Cir.) (cert.
    denied sub nom, *Crow Tribe of Indians Montana v. EPA,* 454 U.S.
    1081 (1981); *Inter-Tribal Council of Arizona, Inc. v. Babbit,* 51
    F.3d 199, 203 (9^th^ Cir. 1995).

[^79]: *Greater New Orleans Broadcasting Association v. United States*,
    \_\_ U.S. \_\_, 1999 WL 380810, 380812 (June 14, 1999).

[^80]: *Seminole Nation*, 316 U.S. at 297. Since 1970, Presidential
    policy has reaffirmed the unique sovereign status of Indian tribes,
    the tribal-federal trust relationship, and the federal obligation to
    promote tribal self-sufficiency. *See, e.g.,* President Richard
    Nixon, *Statement to the Congress of the United States,* The White
    House, July 9, 1970; President Ronald Reagan, *Statement by the
    President on Indian Policy,* The White House, Jan. 24, 1983;
    President George Bush, *Indian Policy Statement,* The White House,
    June 14,1991; President William Clinton, *Government-to-Government
    Relations with Native American Tribal Governments,* Memorandum of
    Apr. 29, 1994, Federal Register vol. 59, No. 85, May 4, 1994, pp.
    22951-22952 (*President Clinton's April 1994 Memorandum*); President
    William Clinton, *Executive Order on Indian Tribal Governments,* The
    White House, May 14, 1998 (*President Clinton's May 1998 Executive
    Order*.) *President Clinton's April 1994 Memorandum* requires
    executive agencies to deal with Indian tribes on a government to
    government basis, carefully consider the implications of proposed
    actions on tribes and provide tribes with the opportunity to
    participate in agency activities. Several federal agencies have
    issued policy statements that recognize the status of tribal
    governments and support tribal self-determination. *See, e.g.,* U.S.
    Department of the Interior, Memorandum from Ada E. Deer , Assistant
    Secretary for Indian Affairs to the Assistant Secretary for Fish and
    Wildlife and Parks*, Indian Fish and Wildlife Policy*, June 23,
    1994; U.S. Department of Energy, *American Indian Policy,*
    July/August 1994; U.S. Department of Agriculture, Departmental
    Regulation No. 1020-6, *Policies on American Indians and Alaska
    Natives,* Oct. 22, 1992; U.S. Department of Commerce, *American
    Indians and Alaska Native Policy of the U.S. Department of
    Commerce,* Mar. 30, 1995; U.S. Department of Justice, Office of the
    Attorney General, *Department of Justice Policy on Indian
    Sovereignty and Government-to-Government Relations with Indian
    Tribes,* June 1, 1995; U.S. Environmental Protection Agency,
    Memorandum from Carol M. Browner, Administrator, to All Employees*,
    EPA Indian Policy,* Mar. 14, 1994.

[^81]: *White Mountain Apache Tribe v. Bracker*, 448 U.S. 136, 140
    (1980), quoting *United States v. Mazurie*, 419 U.S. 544, 557
    (1975).

[^82]: *McClanahan v. Arizona State Tax Comm\'n*, 441 U.S. 164, 173
    (1973), quoting *United States v. Kagama*, 118 U.S. 375, 381-382
    (1886).

[^83]: *Worcester v. Georgia,* 6 Pet. 515, 557 (1832).

[^84]: *White Mountain Apache Tribe v. Bracker,* 448 U.S. at 143
    (internal cites omitted). *See also, McClanahan V. Arizona State Tax
    Comm\'n,* 411 U.S. 172 (1973) (\"It must always be remembered that
    the various Indian tribes were once independent and sovereign
    nations, and that their claim to sovereignty long predates that of
    our own Government.\") Tribal sovereignty, however, remains
    subordinate to Congress\' plenary power. *See Washington v.
    Confederated Tribes of Coleville Indian Reservation*, 447 U.S. 134,
    154 (1980) (recognizing that \"tribal sovereignty is dependent on,
    and subordinate to, only the Federal Government\").

[^85]: 25 U.S.C. § 3601.

[^86]: *New Mexico v. Mescalero Apache Tribe*, 462 U.S. 324, 334-35
    (1983) (internal quotations omitted) (referencing the Indian
    Financing Act of 1974, 25 U.S.C. § 1451, *et seq*.; the Indian
    Self-Determination and Education Assistance Act of 1975, 25 U.S.C. §
    450, *et seq*.; the Indian Reorganization Act of 1934, 25 U.S.C. §
    461, *et seq*.; the Indian Civil Rights Act of 1968, 25 U.S.C. §
    1301, *et seq*.).

[^87]: 25 U.S.C. § 1451. *See Mescalero,* 42 U.S. at 334 (citing 25
    U.S.C. §1451). *See also The Indian Self-Determination and Education
    Assistance Act of 1975,* 25 U.S.C. § 450; *The Indian Reorganization
    Act of 1934,* 25 U.S.C. § 461; *The Indian Civil Rights Act of
    1968,* 25 U.S.C. § 1301; *The Indian Gaming Regulatory Act of 1988,*
    25 U.S.C. § 2701 *et seq.*; and *The Indian Tribal Justice Act of
    1993,* 25 U.S.C. § 3601 *et seq.*

[^88]: *Thirteenth Order on Reconsideration*, FCC 99-119 at para. 92,
    n.252.

[^89]: *Mescalero Apache Tribe v. Jones,* 411 U.S. 145, 148 (1973).

[^90]: 18 U.S.C. §§ 1321, 1322, 1326 (1976). Among other things, the
    Indian Civil Rights Act provides for the Constitutional rights of
    Indians (including the provisions contained in the Bill of Rights of
    the United States Constitution) and establishes jurisdiction over
    criminal and civil actions.

[^91]: *See* *White Mountain Apache Tribe v. Bracker,* 448 U.S. 136, 144
    (1980).

[^92]: *See* section B.

[^93]: The Geographic Areas Reference Manual describes in great detail
    the basic geographic entities the Census Bureau uses in its various
    data tabulations and documents the purposes, definitions, standards,
    criteria, and procedures used to select, define, delineate, and
    revise these geographic entities. *See*
    <http://www.census.gov/geo/www/garm.html>. To view or download the
    Census Bureau's listing of the American Indian and Alaska Native
    Areas by State in 1990, go to
    <http://www.census.gov/ftp/pub/geo/www/GARM/Ch5GARM.pdf>. Land Area
    and Poverty Data for American Indian and Alaska Native Areas can be
    viewed at: <http://www.census.gov/geo/www/ezstate/aianapov.html>.
    For more recent information, *see* Veronica E. Velarde Tiller,
    Tiller Research, Inc., *American Indian Reservations and Trust
    Areas* (prepared under an award from the Economic Development
    Administration, U.S. Department of Commerce, 1996).

[^94]: Public Law 92-203, as amended by Public Law 94-204.

[^95]: *New Mexico v. Mescalero Apache Tribe*, 462 U.S. 324, 334 (1983),
    *citing* *White Mountain Apache Tribe v. Bracker,* 448 U.S. 136, 144
    (1980).

[^96]: *Id.*

[^97]: *Cotton Petroleum Corp. v. New Mexico,* 490 U.S. 163, 176 (1989),
    *citing Ramah Navajo School Bd., Inc. v. Bureau of Revenue*, 458
    U.S. 832, 838 (1982).

[^98]: AB Fillins: Petition for a Declaratory Ruling Preempting the
    Authority of the Tohono O'odham Legislative Council to Regulate the
    Entry of Commercial Mobile Radio Service to the Sells Reservation
    Within the Tucson MSA, Market No. 77, *Memorandum Opinion and
    Order*, 12 FCC Rcd 11755 (1997) (*AB Fillins Order*).

[^99]: *Id.* at paras. 30-32 (*citing United States v. Farris*, 624 F.2d
    890 (9^th^ Cir. 1980), *cert. denied sub nom. Baker v. United
    States*, 449 U.S. 1111 (1981)).

[^100]: *AB Fillins* at paras. 16-18 (finding that the tribal
    legislative council's decision to prevent the location of cell sites
    on reservation lands is within its authority over the occupation and
    use of tribal lands and is not preempted by Section 253 or Section
    332(c) of the Act).

[^101]: 47 U.S.C. § 254(b)(3).

[^102]: *See* n. Error: Reference source not found, *supra.*

[^103]: 18 U.S.C. § 1151. The term "dependent Indian communities" refers
    to a limited category of Indian lands that are neither reservations
    nor allotments, that have been set aside by the federal government
    for the use of Indians as Indian land, and that are under federal
    superintendence. *Alaska v. Native Village of Venetie Tribal
    Government*, 118 S.Ct. 948, 953 (1998). Although Congress initially
    defined the term "Indian country" for purposes of federal criminal
    jurisdiction, the Supreme Court has recognized that the term also
    applies to questions of civil jurisdiction. *Alaska v. Native
    Village of Venetie Tribal Government*, 118 S.Ct. at 952, n.1;
    *California v. Cabazon Band of Mission Indians*, 480 U.S. 202, 208,
    n.5 (1987); *DeCoteau v. District County Court*, 420 U.S. 425, 427,
    n.2 (1975).

[^104]: *See* n. Error: Reference source not found for references to
    information identifying the specific tribes included within these
    classifications.

[^105]: *See* para. [20](#_Ref460050036).

[^106]: Public Law 92-203, as amended by Public Law 94-204.

[^107]: *See generally Amendment of Part 67 of the Commission\'s Rules
    and Establishment of a Joint Board*, CC Docket No. 80-286, 96 FCC 2d
    781 (1984). Pursuant to the Commission's directive, the local
    exchange carriers formed NECA to administer the high-cost support
    mechanisms. The support mechanisms include the high-cost loop fund,
    Dial Equipment Minutes (DEM) weighting assistance support and Long
    Term Support. The Commission's DEM weighting assistance mechanism
    provides support for local switching costs to telephone companies
    with 50,000 or fewer access lines. Initially, support was provided
    by allowing carriers to allocate a greater portion of their
    switching costs to the interstate jurisdiction. These costs were
    recovered through interstate access charges. In the *First Report
    and Order,* the Commission modified the program to provide that
    support attributable to DEM weighting would be recovered through the
    new universal service support mechanism. *See First Report and
    Order,* 12 FCC Rcd at 8940-4; 47 C.F.R. § 54.301. Long Term Support
    (LTS) refers to the support given to some carriers to supplement the
    part of the interstate portion of their local loop costs recovered
    through the Carrier Common Line (CCL) charge. LTS allows LECs with
    higher-than-average loop costs to charge only an average CCL rate.
    In the *First Report and Order,* the Commission determined that
    until carriers begin to receive support based on the new high-cost
    mechanism, LTS would be computed for each incumbent LEC using a
    baseline level of LTS derived from 1997 historical cost data but
    adjusted each year to reflect the annual percentage change in the
    nationwide average cost per loop and inflation. *See* 47 C.F.R. §
    54.303.

[^108]: *See* 47 C.F.R. § 36.611.

[^109]: *Id*.

[^110]: 47 C.F.R. § 36 app. (defining \"study area\"); 47 U.S.C. §
    251(h) (defining incumbent local exchange carrier). *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*, 49 Fed. Reg. 48325 (Dec. 12, 1984); *Decision and Order*, 50
    Fed. Reg. 939 (Jan. 8, 1985); *see also* Amendment of Part 36 of the
    Commission\'s Rules and Establishment of a Joint Board, *Notice of
    Proposed Rulemaking*, 5 FCC Rcd 5974 (Oct. 10, 1990).

[^111]: *See* 47 C.F.R. Parts 36 and 69.

[^112]: Incumbent LECs must submit account data to the Administrator for
    each of its study areas. *See* 47 C.F.R. § 36.611, 36.612.

[^113]: *See* 47 C.F.R. § 36.612. If a carrier files a quarterly update,
    NECA recalculates the carrier\'s high-cost support for the remainder
    of the year based on the updated data (*e.g.*, data covering the
    last nine months of the previous calendar year and the first three
    months of the current calendar year), rather than the calendar year
    data submitted on July 31. Thus, the quarterly update provision
    allows carriers to receive support earlier than the beginning of the
    second calendar year after costs are incurred.

[^114]: Section 69.605(c) of the Commission\'s rules defines an average
    schedule company as \"a telephone company that was participating in
    average schedule settlements on December 1, 1982.\" 47 C.F.R. §
    69.605(c). Prior to the adoption of the Commission\'s access charge
    rules in 1984, incumbent LEC compensation arrangements were handled
    through private contractual agreements within the telephone
    industry. The industry\'s settlement mechanism based the amount of
    incumbent LEC compensation either on cost studies or average
    schedule formulas that were used to estimate an incumbent LEC\'s
    cost of service. To facilitate implementation of its access charge
    rules, the Commission incorporated a modified version of the
    industry\'s existing average schedule arrangement. *See Proposed MTS
    and WATS Market Structure*, Third Report and Order, CC Docket No.
    78‑72, Phase I, 93 FCC 2d 241 (1983) (*Average Schedule Order)*.
    *See also National Exchange Carrier Association, Inc. Proposed
    Modifications to the 1997 Interstate Average Schedule Formulas*,
    Order on Reconsideration and Order, AAD 97-2, DA 97-2710 at para. 3
    (Comm. Carr. Bur. rel. Dec. 24, 1997).

[^115]: *See Average Schedule Order, supra* n. Error: Reference source
    not found.

[^116]: These average schedule companies may convert to \"cost
    companies\" and receive compensation from NECA based on their
    company‑specific costs. Once they make this election, however, they
    cannot later resume average schedule status. *See* 47 C.F.R. §
    69.605(c).

[^117]: *Id.*

[^118]: The Commission requires carriers to petition for a waiver
    whenever a company seeks to create or reconfigure study areas except
    under three conditions: (a) a separately incorporated company is
    establishing a study area for a previously unserved area; (b) a
    company is combining previously unserved territory with one of its
    existing study areas in the same state; and (c) a holding company is
    consolidating existing study areas in the same state. *American
    Samoa Government and the American Samoa Telecommunications
    Authority: Petitions for Waivers and Declaratory Rulings to Enable
    American Samoa to Participate in the Universal Service High Cost
    Support Program and the National Exchange Carrier Association Pools
    and Tariffs*, Order, CC Docket No. 96-45, AAD/USB File No. 98-41, DA
    99-1131 (Acct. Pol. Div., Com. Car. Bur. Rel. June 9, 1999)
    (American Samoa); *Guam Telephone Authority, Petition for
    Declaratory Ruling*, Report and Order, AAD 97-27, DA 97-595 (Acct.
    Aud. Div. rel. March 21, 1997) (*Guam Study Area Waiver Order*). In
    evaluating petitions seeking a study area waiver, the Commission
    uses a three-pronged standard: (1) the change in study area
    boundaries must not adversely affect the high-cost loop fund; (2)
    the state commission(s) having regulatory authority over the
    exchange(s) to be transferred must not object to the change; and (3)
    the public interest must support such a change. *Guam Study Area
    Waiver Order* at para. 3. With respect to not adversely affecting
    the high-cost loop fund, we have required that study area waivers
    for a single carrier shall not increase total universal service
    support by more than one percent. *See US West Communications, Inc.
    and Eagle Telecommunications, Inc, Joint Petition for Waiver of the
    Definition of "Study Area" Contained in Part 36, Appendix-Glossary
    of the Commission's Rules,* Memorandum Opinion and Order, 10 FCC Rcd
    1771, 1774 at para. 14 (1995), aff'd on recon, 12 FCC Rcd 4644
    (1997).

[^119]: *Amendment of Part 36 of the Commission's Rules and
    Establishment of a Joint Board,* Notice of Inquiry, FCC 93-435 (rel.
    Sep. 14, 1993).

[^120]: *Id.*

[^121]: *See Amendment of Part 36 of the Commission's Rules and
    Establishment of a Joint Board,* Recommended Decision, 9 FCC Rcd 334
    (1993); Report and Order, 9 FCC Rcd 303 (1993) (establishing interim
    cap); Report and Order, 11 FCC Rcd 1077 (1995) (extending cap
    through July 1, 1996); Report and Order, 11 FCC Rcd 7920 (1996)
    (extending the cap until the final rules implementing the 1996 Act
    provisions become effective).

[^122]: 47 C.F.R. § 36.601(c).

[^123]: *See First Report and Order*, 12 FCC Rcd at 8926-47.

[^124]: *First Report and Order*, 12 FCC Rcd at 8898-8926. In using the
    term \"forward-looking economic cost,\" we mean the cost of
    producing services using the least cost, most efficient, and
    reasonable technology currently available for purchase with all
    inputs valued at current prices.

[^125]: *Federal-State Joint Board on Universal Service, Access Charge
    Reform*, Seventh Report and Order and Thirteenth Order on
    Reconsideration in CC Docket 96-45; Fourth Report and Order in CC
    Docket No. 96-262; and Further Notice of Proposed Rulemaking in CC
    Docket Nos. 96-45, 96-262, FCC 99-119 (rel. May 28, 1999).

[^126]: *Thirteenth Order on Reconsideration*, FCC 99-119 at paras. 21,
    129. *See also* *First Report and Order*, 12 FCC Rcd at 8889, para.
    204, 8910, para. 245, 8917-18, paras. 252-56; *Federal-State Joint
    Board on Universal Service Announces the Creation of a Rural Task
    Force, Solicits Nominations for Membership on Rural Task Force*,
    Public Notice, FCC 97J-1 (rel. Sept. 17, 1997).

[^127]: For purposes of its universal service rules, the Commission
    adopted the Act's statutory definition of incumbent LEC. *See* 47
    C.F.R. § 54.5; 47 C.F.R. § 51.5; 47 U.S.C. § 251(h)(1). An incumbent
    LEC is defined in the Act as a LEC that, with respect to an area:
    (1) provided telephone exchange service in such area on February 8,
    1996, the date of enactment of the 1996 Act, and (2) was a member of
    NECA on February 8, 1996, or became such member\'s successor or
    assign.

[^128]: 47 C.F.R. § 54.307.

[^129]: *See Thirteenth Order on Reconsideration* at para. 98.

[^130]: For a discussion of the possible definitions of "tribal land",
    *see* para. 50, above.

[^131]: This exception would not affect the requirement that, for a
    rural carrier, its service area is defined to mean their study area.
    *See* 47 U.S.C. § 214(e)(5). Rural carriers, like other carriers,
    may have study areas in multiple states. As a result of the rule
    change, they now may have study areas in multiple states and on
    tribal lands. For rural carriers, the service area for purposes of
    determining universal service obligations and support, continues to
    be their study areas.

[^132]: *See Thirteenth Order on Reconsideration* at V.B.2.

[^133]: *See* 47 U.S.C. § 153(37) (*cited* in n. Error: Reference source
    not found, above).

[^134]: *First Report and Order,* 12 FCC Rcd at 8929-8930.

[^135]: *Amendment of Part 36 of the Commission's Rules and
    Establishment of a Joint Board*, Report and Order, 9 FCC Rcd 303
    (1993).

[^136]: Commission rules require that the national average cost per loop
    be increased by an amount that reduces each carrier's high-cost fund
    payment in order that the total fund equal the capped amount. *See*
    47 C.F.R. § 36.622 (c) and (d).

[^137]: Federal universal service support for low-income consumers is
    available only where eligibility is based solely on income or
    factors directly related to income. 47 C.F.R. § 54.409.

[^138]: 47 C.F.R. § 54.403(a)

[^139]: 47 C.F.R. § 54.403(a)

[^140]: 47 C.F.R. § 54.403(a)

[^141]: 47 C.F.R. § 54.403(a)

[^142]: *See* Petitions for Waiver of Section 54.403(a) filed by Gila
    River Telecommunications, Inc. (January 22, 1999), Tohono O'odham
    Utility Authority (January 26, 1999), San Carlos Telecommunications,
    Inc. (February 12, 1999) and Fort Mojave Telecommunications, Inc.
    (February 17, 1999).

[^143]: *First Report and Order* 12 FCC Rcd at 8963.

[^144]: *See* *supra* note Error: Reference source not found*.*

[^145]: *See Monitoring Report,* June 1999, CC Docket No. 98-202, (rel.
    Jul. 12, 1999). Section 2, Low-Income Support, contained information
    about the Lifeline and Link Up support mechanisms. Table 2.1
    Lifeline Monthly Support by State or Jurisdiction provides
    information about the amount of support in each state's programs.
    *See also* National Exchange Carrier Association, Federal Universal
    Service Programs Fund Size Projections & Contribution Base for the
    Third Quarter 1999, appendix 5. (filed April 30, 1999).

[^146]: 47 C.F.R. § 54.409(a).

[^147]: *See Universal Service Order*, 12 FCC Rcd at 8973.

[^148]: *See, e.g., Overcoming Obstacles Proceeding,* Comments of Larry
    Wetsit, Nemont Telephone Cooperative, Inc.; *Overcoming Obstacles
    Proceeding: Albuquerque Hearing,* Testimony of Jerome Block,
    Commissioner, New Mexico Public Regulation Commission, at p. 136.

[^149]: 47 C.F.R. § 54.409(b).

[^150]: *See, e.g.,* 25 C.F.R. § 20.1 *et seq.*

[^151]: *See* 42 U.S.C. 2002. *See also Overcoming Obstacles
    Proceeding,* Comments of Nemont Telephone Cooperative at p. 2
    (Indians utilize the services of the Indian Health Services \...
    which is an entitlement and not health insurance).

[^152]: 47 U.S.C. § 254(e).

[^153]: 47 U.S.C. § 214(e)(1).

[^154]: 47 U.S.C. § 214(e)(2) ("A State Commission shall upon its own
    motion or upon request designate a common carrier that meets the
    requirements of paragraph (1) as an eligible telecommunications
    carrier for a service area designated by the State Commission.")

[^155]: 47 U.S.C. § 214(e)(3).

[^156]: 47 U.S.C. § 214(e)(6).

[^157]: 47 U.S.C. § 214(e).

[^158]: 47 USC §§ 214(e)(2) and (e)(5).

[^159]: Statement of Senator McCain, 143 Cong. Rec. S115545-04, S115546
    (Oct. 31, 1997).

[^160]: *See* Procedures for FCC Designation of Eligible
    Telecommunications Carriers Pursuant to Section 214(e)(6) of the
    Communications Act, Public Notice, FCC 97-419 (rel. Dec. 29, 1997).
    Until recently, carriers seeking eligible telecommunications carrier
    designation from the Commission have been tribally owned or tribal
    cooperatives. *See* *Designation of Fort Mojave Telecommunications,
    Inc., Gila River Telecommunications, Inc., San Carlos
    Telecommunications, Inc., and Tohono O'odham Utility Authority as
    Eligible Telecommunications Carriers Pursuant to Section 214(e)(6)
    of the Communications Act*, Memorandum Opinion and Order, AAD/USB
    File. No. 98028, DA 98-392, (rel. Feb. 27, 1998); *Petition of
    Saddleback Communications for Designation as an Eligible
    Telecommunications Carrier Pursuant to Section 214(e)(6) of the
    Communications Act*, Memorandum Opinion and Order, CC Docket No.
    96-45, DA 98-2237 (rel. Nov. 4, 1998); *Cheyenne River Sioux Tribe
    Telephone Authority Seeks FCC Designation as an Eligible
    Telecommunications Carrier Pursuant to Section 214(e)(6) of the
    Communications Act,* Public Notice, AAD/USB File No. 98-21, DA
    98-150 (rel. Jan. 28, 1998).

    On June 2, 1999, however, we received a petition from a carrier that
    is not affiliated with a tribe to serve a tribal area. *Petition of
    Smith Bagley, Inc., for Designation as an Eligible
    Telecommunications Carrier: Pleading Cycle Established*, Public
    Notice, DA 99-1331 (rel. Jul. 7, 1999). We do not intend to delay
    this application pending the adoption of final rules in this
    proceeding. We will consult with the tribal authorities and relevant
    state commission prior to making a designation on how best to
    consider any input we may receive. The example is merely
    illustrative of the challenges we face in coordinating our federal
    universal service policies with tribal interests.

[^161]: *See*, *e.g.,* Statement of Senator McCain, 143 Cong. Rec.
    S115545-04, 115546 (Oct. 31, 1997) ("\[t\]ypically, States also have
    no jurisdiction over tribally owned companies which may or may not
    be regulated by a tribal authority that is not a State commission
    per se."); Statement of Representative Bliley, 143 Cong. Rec.
    H10807-02 (Nov. 13, 1997) ("some common carriers providing service
    today are not subject to the jurisdiction of a State commission;
    most notably, some carriers owned or controlled by native
    Americans"); Statement of Representative Markey, 143 Cong. Rec.
    H10807-02, H10808 (Nov. 13, 1997) ("\[t\]he bill before us today
    allows a common carrier that is not subject to the jurisdiction of a
    State commission, including those telephone companies owned by
    certain federally-recognized Indian tribes, to be designated. . .").

[^162]: Statement of Representative Bliley, 143 Cong. Rec. H10807-02,
    H10809 (Nov. 13, 1997).

[^163]: *See* Colloquy between Representatives Thune and Bliley, 143
    Cong. Rec. H10807-02, H10809 (Nov. 13, 1997).

[^164]: Statement of Representative Tauzin, 143 Cong. Rec. H10807-02,
    H10809 (Nov. 13, 1997) (emphasis added). *See also* Statement of
    Representative Bliley at H10809.

[^165]: ^?^ *See White Mountain Apache Tribe v. Bracker*, 448 U.S. 136,
    144 (1980); *New Mexico v. Mesclaero Apache Tribe*, 462 U.S. 324,
    331-332.

[^166]: *New Mexico v. Mesclaero Apache Tribe*, 462 U.S. at 331-32.

[^167]: *California v. Cabazon Band of Mission Indians*, 480 U.S. 202,
    216 quoting *New Mexico v. Mescalero* *Apache Tribe*, 462 U.S. 324,
    334-5 (1983) (internal citations omitted).

[^168]: *Calbazon Band of Mission Indians*, 480 U.S. at 216.

[^169]: *See, e.g*. The Cheyenne River Sioux Tribe Telephone Authority
    and U S West Communications, Inc., Joint Petition for Preemption
    Pursuant to section 253, CC Docket No. 98-6 (Jan. 22, 1998);
    *Cheyenne River Sioux Tribe Telephone Authority and U S West v. PUC
    of South Dakota,* 1999 WL 314108 (S.D. May 19, 1999) (affirming
    South Dakota PUC's decision to deny U S West's proposed sale of
    three exchanges to the Cheyenne River Sioux Tribe Telephone
    Authority.) In section A, we seek comment on the nature and extent
    of state and tribal regulation of telecommunications services
    provided by tribal carriers on tribal lands. We also seek comment on
    the extent to which, and on what basis, states have previously
    designated tribal and non-tribal carriers as eligible
    telecommunications carriers eligible to receive universal service
    support.

[^170]: *See, e.g., Petition of Smith Bagley, Inc., for Designation as
    an Eligible Telecommunications Carrier: Pleading Cycle Established*,
    Public Notice, DA 99-1331 (rel. Jul. 7, 1999). *See* 47 U.S.C. § 332
    ("no state or local government shall have any authority to regulate
    the entry of or the rates charged by any commercial mobile service
    or any private mobile service, except that this paragraph shall not
    prohibit a state from regulating the other terms and conditions of
    commercial mobile services . . .").

[^171]: *First Report and Order,* 12 FCC Rcd at 8885-8886. The
    Commission encouraged state commissions to file with the Common
    Carrier Bureau reports detailing the status of unserved areas in
    their states. *See, e.g,* Letter from Diane Wells, Minnesota Public
    Utilities Commission, to Valerie Yates, FCC (dated June 18, 1999)
    (enclosing information regarding a petition that the Minnesota
    Public Utilities Commission is currently processing concerning
    "unassigned territory" in Minnesota). *See also* *First Recommended
    Decision*, 12 FCC Rcd at 184.

[^172]: *See* 47 U.S.C. §214(e)(6) (authorizing the Commission to
    designate a common carrier that is not subject to the jurisdiction
    of a state commission as an eligible telecommunications carrier).
    *See also* discussion at section IV, above.

[^173]: S. Rep. No. 230, 104th Cong., 2d Sess. 131, at 141 (1996) (Joint
    Explanatory Statement).

[^174]: 47 U.S.C. § 214(e)(3).

[^175]: *First Report and Order,* 12 FCC Rcd. at 8809.

[^176]: 47 U.S.C. § 254(c)(1)(A)-(D).

[^177]: 47 U.S.C. §254.

[^178]: 5 U.S.C. § 601 *et. seq.,* amended by the Contract with America
    Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996)
    (CWAAA). Title II of the CWAAA is the Small Business Regulatory
    Enforcement Fairness Act of 1996 (SBREFA). *See* section C for the
    Initial Regulatory Flexibility Act Analysis.

[^179]: Federal-State Joint Board on Universal Service, *Notice of
    Proposed Rulemaking and Order Establishing a Joint Board*, CC Docket
    No. 96-45, 11 FCC Rcd 18092 (1996) (*May 1996 Notice*).

[^180]: *May 1996 Notice*, 11 FCC Rcd at 18101-18116.

[^181]: *May 1996 Notice*, 11 FCC Rcd at 18111.

[^182]: Public Notice, Common Carrier Bureau Seeks Further Comment on
    Specific Questions in Universal Service Notice of Proposed
    Rulemaking, DA 96-1078 (rel. July 3, 1996) (Further Comment Public
    Notice).

[^183]: We also note that the California Public Utilities Commission
    conducted a workshop on May 8-9, 1997, to develop auction mechanism
    rules for the California High-cost fund.

[^184]: *First Recommended Decision*, 12 FCC Rcd at 265.

[^185]: *First Recommended Decision*, 12 FCC Rcd at 266.

[^186]: *First Recommended Decision*, 12 FCC Rcd at 266.

[^187]: *First Recommended Decision*, 12 FCC Rcd at 266.

[^188]: 47 U.S.C. §§ 214(e), 254

[^189]: *First Recommended Decision*, 12 FCC Rcd at 267.

[^190]: *First Recommended Decision*, 12 FCC Rcd at 267.

[^191]: *First Recommended Decision*, 12 FCC Rcd at 267.

[^192]: *First Recommended Decision*, 12 FCC Rcd at 268.

[^193]: *First Recommended Decision*, 12 FCC Rcd at 268.

[^194]: *First Report and Order,* 12 FCC Rcd at 8888.

[^195]: *First Report and Order,* 12 FCC Rcd at 8948.

[^196]: *First Report and Order*, 12 FCC Rcd at 8948.

[^197]: *First Report and Order*, 12 FCC Rcd at 8951.

[^198]: *First Report and Order*, 12 FCC Rcd at 8949-8951.

[^199]: *See* 47 U.S.C. §214(e)(1). To be designated as an eligible
    telecommunications carrier, a carrier must: (A) offer the services
    that are supported by Federal universal service support mechanisms
    under section 254(c), either using its own facilities or a
    combination of its own facilities and resale of another carrier\'s
    services (including the services offered by another eligible
    telecommunications carrier); and (B) advertise the availability of
    such services and the charges therefor using media of general
    distribution.

[^200]: 47 U.S.C. § 214(e)(6). This discussion is limited to situations
    where the Commission has authority to designate eligible
    telecommunications carriers, including tribal lands.

[^201]: GTE proposes such a plan for multiple winners. *See* Appendix D.

[^202]: Allowing the benefits to accrue to the carrier may actually
    provide valuable incentives that encourage participation in the
    auction.

[^203]: For examples of procurement auctions where the low bid wins,
    s*ee* <http://www.netbidding.com/netbidding/html/netbidding.html>
    (business-to-business procurement) and
    <http://www.econ.ag.gov/epubs/pdf/aer766/index.htm> (USDA
    procurements).

[^204]: To date, the Commission has conducted 23 multi-round auctions
    for spectrum licenses in a variety of wireless services. For
    information on past Commission spectrum auctions, *see*
    <http://www.fcc.gov/wtb/auctions>.

[^205]: *See* Kelly-Steinberg proposal, summarized in Appendix D.

[^206]: In a standard, sealed-bid procurement auction, where the
    successful bidder receives the amount of the bid, a firm typically
    shades its bid by not revealing the minimum that it would require to
    supply the good or service. The firm weighs the benefits of a higher
    payment if it wins against the reduced probability of winning. For
    general information about different types of auctions, *see* Vernon
    Smith, "Auctions," in *The New Palgrave: Allocation, Information and
    Markets,* edited by J. Eatwell, M. Milgate, and P. Newman, The
    MacMillan Press Limited: Hong Kong, 1989. *See also* Paul Milgrom,
    *Auctions and Bidding: A Primer,* 3 J. Econ. Persp. 10 (1989).

[^207]: 47 U.S.C. § 214(e)(1)(B).

[^208]: We note that there had been a continuing dialogue between GTE's
    economic consultant, Stanford Professor Paul Milgrom, and
    Ameritech's economic consultants, Yale Professors Jeremy Bulow and
    Barry Nalebuff that led to modifications in the proposals submitted.
    *See, e.g., ex parte* summary from Charon Harris, GTE, to William
    Caton, FCC dated March 31, 1997 (*GTE March 31 ex parte)*. The most
    detailed and current description of the GTE proposal is probably the
    summary submitted by GTE on June 21, 1997 (*GTE June 21 ex parte)*.

[^209]: *See, e.g.,* Letter from Celia Nogales, Ameritech, to William
    Caton, FCC, dated May 2, 1997.

[^210]: Letter from Richard Steinberg, University of Cambridge, to Evan
    Kwerel, FCC, dated June 23, 1997 (A Combinatorial Auction with
    Multiple Winners for COLR, June 9, 1997) (Kelly-Steinberg). *See*
    <http://www.statslab.cam.ac.uk/~frank/AUCTION/>*.*

[^211]: 47 U.S.C. §§ 214(e)(3) and 214 (e)(1). Pursuant to section
    214(e)(1), to be designated as an eligible telecommunications
    carrier, a carrier must: (A) offer the services that are supported
    by Federal universal service support mechanisms under section
    254(c), either using its own facilities or a combination of its own
    facilities and resale of another carrier\'s services (including the
    services offered by another eligible telecommunications carrier);
    and (B) advertise the availability of such services and the charges
    therefor using media of general distribution.

[^212]: *Thirteenth Order on Reconsideration* at para. 92.

[^213]: Proposal of the Arizona Corporation Commission For Distribution
    of Federal USF Funds to Establish Service to Low-Income Customers in
    Unserved Areas, or in the Alternative, for Amendment of the May 8,
    1997 Report and Order to Provide for Federal USF Distribution for
    This Purpose; (*received* April 28, 1998) (Arizona Proposal). This
    document is attached as an Appendix to paper copies of this Further
    Notice (Appendix E). Electronic copies of the Arizona Proposal can
    be obtained through the Commission's Electronic Comment Filing
    System:
    <https://gullfoss.fcc.gov/cgi-bin/ws.exe/prod/ecfs/comsrch.hts>.

[^214]: *Second Recommended Decision*, 13 FCC Rcd at 24764-24765.

[^215]: *Second Recommended Decision.* 13 FCC Rcd at 24765.

[^216]: *See* Navajo Communications Company, response to Arizona
    Corporation Commission Data Request, ACC Docket No. T-2115-97-640
    (Unserved Areas), Jun. 19, 1998 at attachment B. This document was
    placed on the record in CC Docket No. 96-45 and is available through
    the Commission's Electronic Comment Filing System:
    <https://gullfoss.fcc.gov/cgi-bin/ws.exe/prod/ecfs/comsrch.hts>.

[^217]: LinkUp support is currently limited to a 50-percent discount on
    initial connection charges, up to a maximum of a \$30 discount.
    *See* 47 C.F.R. § 54.411.

[^218]: *See Overcoming Obstacles Proceeding: Arizona Hearing,*
    Testimony of Gov. Raymond Gachupin, Jemez Pueblo, p. 34; Testimony
    of Gov. Eagle Rael, Picuris Pueblo, p. 60; and Testimony of Anthony
    Lucio, Zuni Pueblo, at p. 63. *See also* *Overcoming Obstacles
    Proceeding: Albuquerque Hearing*, Testimony of Nora Helton, Fort
    Mojave Tribe, p. 43.

[^219]: *See Overcoming Obstacles Proceeding: Albuquerque Hearing*,
    Testimony of Gov. Eagle Rael, Picuris Pueblo, at p. 60.

[^220]: Prof. Arturo Gandara, UC Davis Law School, July 7, 1998 Meeting
    on Indian Telecommunications Issues.

[^221]: Field Research Corp., *Affordability of Telephone Service: A
    Survey of Customers and Non-Customers* (funded jointly by GTE and
    Pacific Bell for the California Public Utilities Commission). This
    document was placed on the record of CC Docket No. 96-45 on July 28,
    1999 and is available through the Commission's Electronic Comment
    Filing System:
    <https://gullfoss.fcc.gov/cgi-bin/ws.exe/prod/ecfs/comsrch.hts>.

[^222]: *See* 47 C.F.R. §§ 54.401(a)(3), 54.400.

[^223]: We are aware that at least three carriers serving Indian
    reservations in Arizona were able to offer toll blocking, but not
    toll control, and a fourth did not expect to offer either until the
    summer of 1998, but believe that that difficulty was only temporary.
    *See* *Fort Mojave Order, supra.*

[^224]: *See, e.g, Overcoming Obstacles Proceeding,* Testimony of Karen
    Buller, National Indian Telecommunications Institute at p. 2.

[^225]: *See, e.g., Overcoming Obstacles Proceeding: Albuquerque
    Hearing,* Testimony of Anthony Lucio, Zuni Pueblo, pp. 63. *See also
    id.* at pp. 72-75, 106-08.

[^226]: *See, Overcoming Obstacles Proceeding: Arizona Hearing,*
    Testimony of J.D. Williams, Cheyenne River Sioux Telephone
    Authority, Transcript at 71-72 (draft).

[^227]: 47 U.S.C. §214(e)(1)(B).

[^228]: 47 C.F.R. §54.405.

[^229]: 47 U.S.C. § 254(h)(1)(A).

[^230]: 47 C.F.R. § 254(h)(2)(A).

[^231]: 47 C.F.R. § 54.613.

[^232]: 47 C.F.R. § 54.613.

[^233]: 47 C.F.R. § 54.621 grants health care providers support of up to
    \$180 per month for up to 30 hours per month for toll charges for
    links to Internet service providers if the health care provider
    cannot obtain toll-free Internet access.

[^234]: *First Report and Order*, 12 FCC Rcd at 9108-10; *First
    Recommended Decision*, 12 FCC Rcd at 432; *see also* *First Report
    and Order*, 12 FCC Rcd at 9098-9107.

[^235]: *See First Report and Order,* 12 FCC Rcd at 9138-39.

[^236]: *Id.* (quoting Alaska Mar. 7 *ex parte,* attachment at 2-3).

[^237]: Alaska PUC universal service comments at 5. Under 1999 state
    law, the Alaska PUC ceased to exist as of June 30, 1999. Its
    responsibilities, including all open cases, were transferred to the
    new Alaska Regulatory Commission.

[^238]: *First Report and Order*, 12 FCC Rcd at 9138-39 (citing Alaska
    Mar. 7 *ex parte,* attachment at 3).

[^239]: The Advisory Committee was established on June 12, 1996 to
    advise the Commission and the Joint Board on telemedicine, and
    particularly the provisions of the Telecommunications Act of 1996
    relating to rural health care providers. The Advisory Committee,
    composed of 38 individuals with expertise and experience in the
    fields of health care, telecommunications, and telemedicine, issued
    its report on October 15, 1996.

[^240]: FCC [Advisory Committee on Telecommunications and Health
    Care,]{.smallcaps} [Findings and Recommendations]{.smallcaps}
    (October 15, 1996) at 8 (Advisory Committee Report).

[^241]: *First Report and Order*, 12 FCC Rcd at 9109-10.

[^242]: *Id.*

[^243]: *Id.* at 9109 *citing* 47 U.S.C. § 254(h)(2)(A).

[^244]: In the *First Report and Order*, the Commission recognized that
    non-wireline technologies may provide the most cost-effective manner
    of providing services to areas currently underserved or receiving
    unsatisfactory service from the use of wireline technologies. *First
    Report and Order*, 12 FCC Rcd at 9108.

[^245]: *See id.* at 9109-10 n.1668 (noting Office of Rural Health
    Policy\'s Rural Telemedicine Network Grant Program and Rural Health
    Outreach Grant Program; the Telecommunications and Information
    Infrastructure Program administered by NTIA; and the Internet
    Connections Grant Program and the High Performance Computing and
    Communications Program administered by the National Institutes of
    Health, Department of Health and Human Services and recent federal
    legislation that requires the Rural Utility Service to increase the
    capabilities of the telecommunications infrastructure installed
    pursuant to its program, which provides long-term loans to improve
    rural telecommunications infrastructure.) *See* 7 U.S.C. §
    935(d)(3)(B)(iv); 7 C.F.R. § 1751.106 *et seq*.

[^246]: 47 U.S.C. § 254(h)(2).

[^247]: *See* Advisory Committee Report at 6 (recommending adoption of a
    mechanism to allow an eligible telecommunications carrier to repay,
    from its profits, universal service support for using infrastructure
    financed by universal service support).

[^248]: *First Report and Order*, 12 FCC Rcd at 8997, 9109-10, 9137.
    *See* Letter from David L. Sieradski, Counsel for the American Samoa
    Telecommunications Authority, to Valerie Yates, FCC (dated July 9,
    1999) (encouraging the Commission to seek comment on providing
    support for telemedicine in insular areas, such as American Samoa)
    (ASTCA Letter).

[^249]: *Id.* at 8995-9001.

[^250]: *Id.* at 8843-44, 9136-38.

[^251]: *Id.* at 9109.

[^252]: 47 U.S.C. § 254(b)(3).

[^253]: *First Recommended Decision*, 12 FCC Rcd 87 at 93 n.8.

[^254]: *See, e.g.,* 16 U.S.C. § 1802(30) (providing for conservation
    and management of the United States\' fishery resources and defining
    \"Pacific Insular Area\" as American Samoa, Guam, the Northern
    Mariana Islands, Baker Island, Howland Island, Jarvis Island,
    Johnston Atoll, Kingman Reef, Midway Island, Wake Island, or Palmyra
    Atoll, and including all islands and reefs appurtenant to such
    islands, reefs, or atolls); 16 U.S.C. § 2503(k) (defining, for the
    purposes of the urban park and recreation recovery program,
    \"insular areas\" as Guam, the Virgin Islands, American Samoa, and
    the Northern Mariana Islands); 42 U.S.C. § 5204 (providing for
    disaster relief for insular areas and defining them as American
    Samoa, the Federated States of Micronesia, Guam, the Marshall
    Islands, the Northern Mariana Islands, the Trust Territory of the
    Pacific Islands, and the Virgin Islands as insular areas); 48 U.S.C.
    § 1469a (congressional declaration of policy regarding insular areas
    for certain grant-in-aid programs and defining them as the U.S.
    Virgin Islands, Guam, American Samoa, the Trust Territory of the
    Pacific Islands, and the Government of the Northern Mariana
    Islands); 48 U.S.C. § 1492 (congressional declaration of energy
    policy with respect to insular areas and defining them as Puerto
    Rico, the U.S. Virgin Islands, Guam, American Samoa, the Northern
    Mariana Islands, the Federated States of Micronesia, the Marshall
    Islands, and Palau). *See also* 47 C.F.R. § 2.105 (stating that the
    Caribbean insular areas comprise the Commonwealth of Puerto Rico,
    the unincorporated territory of the United States Virgin Islands;
    and Navassa Island, Quita Sueno Bank, Roncador Bank, Serrana Bank
    and Serranilla Bank; listing the Pacific insular areas in
    International Telecommunication Union Regions 2 and 3 as Johnston
    Island, Midway Island, the Commonwealth of the Northern Mariana
    Islands; the unincorporated territory of American Samoa; the
    unincorporated territory of Guam; and Baker Island, Howland Island,
    Jarvis Island, Kingman Reef, Palmyra Island, and Wake Island).

[^255]: *Id.* at 2 (citing Webster\'s New World Dictionary 731 (2d.
    College ed. 1982)).

[^256]: *Id.*

[^257]: *Id.* at 2, 3 (citing OIA\'s home page on the world wide web at
    http://www.doi.gov/territor.html and [U.S. Department of Interior,
    Office of Insular Affairs, A Report on the State of the
    Islands]{.smallcaps} (1996) ([Report on the State of the
    Islands]{.smallcaps})).

[^258]: *Id*. at 3 (citing 48 U.S.C. §§ 1469a, 1492(a)(1), (3)).

[^259]: The Universal Service Worksheet states at page 3: "\[a\]ll
    telecommunications carriers providing interstate telecommunications
    within the United States, with very limited exceptions, must file an
    FCC Form 457 Universal Service Worksheet. For this purpose, the
    United States is defined as the contiguous United States, Alaska,
    Hawaii, American Samoa, Baker Island, Guam, Howland Island, Jarvis
    Island, Johnston Atoll, Kingman Reef, Midway Island, Navassa Island,
    the Northern Mariana Islands, Palmyra, Puerto Rico, the U.S. Virgin
    Islands, and Wake Island."

[^260]: We note that some sovereign states, such as the Marshall
    Islands, have signed Compacts of Free Association with the United
    States. *See* [Report on the State of the Islands]{.smallcaps} at
    110.

[^261]: Section 254(b)(3) states the goal of providing access to those
    in insular areas, but it qualifies its coverage to "\[c\]onsumers in
    all regions of the Nation," thereby excluding consumers in other
    nations.

[^262]: The following islands are possessions or territories of the
    United States without population: Baker Island, Howland Island,
    Jarvis Island, Kingman Reef, and Navassa Island. *See*
    http://www.doi.gov/oia/oiafacts.html; *see also* Policy and Rules
    Concerning the Interstate, Interexchange Marketplace, Implementation
    of Section 254(g) of the Communications Act of 1934, as amended, CC
    Docket No. 96-61, *Memorandum Opinion and Order*, 12 FCC Rcd 11548,
    11559 (Com. Car. Bur. 1997) (*1997 Bureau Rate Integration and
    Averaging Order*) (presenting results of Common Carrier Bureau\'s
    informal investigation of insular areas). Palmyra Island has a
    permanent population of fewer than four persons and is privately
    owned. *See* <http://www.doi.gov/oia/oiafacts.html>; *1997 Bureau
    Rate Integration and Averaging Order*.

[^263]: For example, Wake Island and Johnston Atoll are military
    installations to which physical access is strictly regulated.

[^264]: *See* Letter from Robert A. Underwood, *et al,* United States
    Congress, to William E. Kennard, Federal Communications Commission
    (dated May 8, 1998.)

[^265]: None of these 450 residents are indigenous persons. In addition,
    Midway Atoll does not have a local government. *Id.*

[^266]: *See* Letter from David Sieradski, on behalf of the American
    Samoa Telecommunications Authority, to Valerie Yates, FCC (dated
    July 9, 1999) and discussion of tribal lands, at section above,
    above.

[^267]: The Joint Working Group on Telemedicine defines \"telemedicine\"
    as \"the use of telecommunications and information \[service\]
    technologies for the provision and support of clinical care to
    individuals at a distance and the transmission of information needed
    to provide that care.\" It defines \"telehealth\" as including
    clinical care, but additionally encompassing the related areas of
    \"health professionals\' education, consumer health education,
    public health, research and administration of health services.\"
    *First Report and Order*, 12 FCC Rcd at 9094, n.1557 *citing* [Joint
    Working Group on Telemedicine,]{.smallcaps} [Telemedicine Report to
    the Congress]{.smallcaps} at 90, U.S. Department of Commerce (1997).

[^268]: *See* 47 C.F.R. 54.601 et seq (subpart G).

[^269]: 47 U.S.C. § 254(h)(1)(A); 47 C.F.R. §§ 54.605-609.

[^270]: 47 U.S.C. § 254(h)(1)(A); 47 C.F.R. § 54.605.

[^271]: 47 C.F.R. § 54.607.

[^272]: *First Report and Order*, 12 FCC Rcd at 9136 (discussing this
    issue and then designating as \"urban areas\" for the purposes of
    the universal service support for rural health care providers: the
    island of Tutuila for American Samoa, the island of Saipan for CNMI,
    the town of Agana for Guam, and the town of Charlotte Amalie for the
    U.S. Virgin Islands). Based on the record, we concluded that Puerto
    Rico, like the remainder of the United States, did not require these
    additional measures. *Id.* at 9138, para. 699 (finding that Puerto
    Rico has well-defined metropolitan and non-metropolitan areas and
    that the San Juan Regional Hospital and Main Medical Center is an
    advanced health care center offering sophisticated and advanced
    health care technology and services).

[^273]: We note that American Samoa did not participate in the universal
    service proceeding. *But see,* American Samoa Government and
    American Samoa Telecommunications Authority Petition for Waivers and
    Declaratory Rulings to Enable American Samoa to Participate in the
    Universal Service High Cost Support Program and the National
    Exchange Carriers Association Pools and Tariffs, CC Docket No.
    96-45, AAD/USB File No. 98-41 (filed Feb. 1998).

[^274]: *First Report and Order*, 12 FCC Rcd at 9136, 9137.

[^275]: *See, e.g.,* ASTCA Letter ("because ASTCA maintains a single set
    of rates that apply throughout the territory, there is no difference
    in between the rates in "urban" and "rural" \[areas\] within the
    Territory.")

[^276]: 47 U.S.C. § 254(h)(1)(A); 47 C.F.R. § 54.601(c)(1).

[^277]: *See* Governor of Guam universal service comments at 2, 13. *See
    also* ASTCA Letter ("the rural telemedicine that American Samoa
    needs support for is access to the nearest U.S. *urban* area with
    advanced health care facilities -- Honolulu.") (emphasis in
    original).

[^278]: 47 U.S.C. §254(h)(1)(A).

[^279]: *See First Report and Order*, 12 FCC Rcd at 9136-37.

[^280]: *See* *id.* at 8995-900. Hawaii, Puerto Rico, and the U.S.
    Virgin Islands became rate integrated in 1976. *See* Policy and
    Rules Concerning the Interstate, Interexchange Marketplace,
    Implementation of Section 254(g) of the Communications Act of 1934,
    as amended, CC Docket No. 96-61, *Report and Order*, 11 FCC Rcd
    9564, 9586 (*1996 Rate Integration and Averaging Order*) *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, *Memorandum Opinion, Order, and
    Authorization*, 61 FCC 2d 380 (Com. Car. Bur. 1976).

[^281]: *See First Report and Order*, 12 FCC Rcd at 8995-96.

[^282]: Section 254(g) requires the Commission to \"adopt rules to
    require that the rates charged by providers of interexchange
    telecommunications services to subscribers in rural and high cost
    areas shall be no higher than the rates charged by each such
    provider to its subscribers in urban areas . . . \[and\] require
    that a provider of interstate interexchange telecommunications
    services shall provide such services to its subscribers in each
    State at rates no higher than the rates charged to its subscribers
    in any other State.\" 47 U.S.C. § 254(g). *See 1996 Rate Integration
    and Averaging Order*, 11 FCC Rcd at 9596-99 (Common Carrier Bureau
    approved, subject to certain amendments, rate integration plans for
    CNMI and Guam). American Samoa did not file its plan to comply with
    section 254(g) of the Act until October 1, 1997. *See* American
    Samoa Government\'s Proposed Rate Integration Plan for American
    Samoa, CC Docket 96‑61, filed Oct. 1, 1997. *See also 1997 Bureau
    Rate Integration and Averaging Order*, 12 FCC Rcd at 11557-59;
    Policy and Rules Concerning the Interstate, Interexchange
    Marketplace, Implementation of Section 254(g) of the Communications
    Act of 1934, as amended, *Order*, CC Docket No. 96-61, 13 FCC Rcd
    1953 (Com. Car. Bur., Comp. Pric. Div. 1997) (granting American
    Samoa until Oct. 1, 1997 to file its plan and granting parties until
    Oct. 16, 1997 to submit comments on the plan); 47 U.S.C. § 254(g).

[^283]: *First Report and Order*, 12 FCC Rcd at 8995-96 (CNMI and Guam
    were integrated into the NANP on July 1, 1997). American Samoa,
    unlike CNMI and Guam, is not yet part of the NANP*. See 1997 Bureau
    Rate Integration and Averaging Order*, 12 FCC Rcd at 11557-59.

[^284]: *First Report and Order*, 12 FCC Rcd at 8999-9001. This period
    was established to allow time for telecommunications users to adjust
    to inclusion in the NANP. *See id.* at 8999-9000. Because many
    toll-free access customers in the United States do not purchase
    toll-free access service that includes insular areas, some incumbent
    LECs in insular areas offer \"paid access\" to many toll free
    numbers using an 880 or 881 number. Under this arrangement, the
    calling party pays a charge that covers the cost of the portion of
    the call from the insular area to Hawaii, where the call is linked
    to the domestic toll-free access service. *See id.* at 8996-97.

[^285]: Federal-State Joint Board on Universal Service, Requests for
    Extension of 880/881 Transitional Dialing Plan by the Commonwealth
    of the Northern Mariana Islands and the Territory of Guam, *Order*,
    CC Docket No. 96-45, APD No. 98-2, DA 98-1299 (released June 30,
    1998).

[^286]: *First Report and Order,* 12 FCC Rcd at 8998.

[^287]: *First Report and Order,* 12 FCC Rcd at 8998-99, 9001 (stating
    that this additional time will allow the Commission to evaluate
    business decisions regarding the geographic scope of the toll-free
    services that they purchase).

[^288]: *See generally* 47 C.F.R. §§ 1.1202, 1.1203, and 1.1206(a).

[^289]: 47 C.F.R. §§ 1.415 and 1.419.

[^290]: *See Electronic Filing of Documents in Rulemaking Proceedings,*
    63 Fed. Reg. 24,121 (1998).

[^291]: 5 U.S.C. § 601 *et. seq.,* amended by the Contract with America
    Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996)
    (CWAAA). Title II of the CWAAA is the Small Business Regulatory
    Enforcement Fairness Act of 1996 (SBREFA).

[^292]: *See* 5 U.S.C. § 603(a).

[^293]: *See id.*

[^294]: Letter from W. Scott Randolph, GTE, to Mark Nadel, FCC, CC
    Docket 96-45, dated June 20, 1997 (GTE June 20 *ex parte*) at 14. A
    census block group is a geographic area defined by the Bureau of the
    Census, which contains approximately 400 households.

[^295]: GTE defines a COLR as a carrier eligible for universal service
    support that undertakes the obligations established by a state
    agency, within federal guidelines, as a condition of receipt of
    federal universal service support.

[^296]: GTE June 20 *ex parte* at 19-20.

[^297]: *Id.* at 18, 20.

[^298]: Thus a LEC could increase the level of support it received for
    serving some CBGs and decrease it for others as long as the net
    effect on support was zero. *Id.* at 16-17.

[^299]: *Id.* at 21.

[^300]: *Id.* at 21-22, 25.

[^301]: *Id.* at 26.

[^302]: *Id.* at 28.

[^303]: *Id.* at 28-29.

[^304]: *Id.* at 29-30.

[^305]: These lump-sum payments to carriers are very different from the
    block grants that Congress rejected in this area. As the Joint Board
    observed, in quoting the Senate Working Group \"\[s\]uch grants
    would be incompatible with the statute\'s architecture of discounts.
    . .\[a\]ffordability cannot be determined under a block grant
    approach.\" *First Recommended Decision* 12 FCC Rcd at 366-367
    (*citing* Senate Working Group further comments at 2). Thus, both we
    and the Joint Board have rejected them as contrary to Congressional
    intent. Lump sum payments here would merely serve to pay carriers a
    fixed amount for providing the universal service specified by the
    Commission.

[^306]: Workshop on Competitve Bidding for Universal Service Support,
    March 13, 1997, FCC, Washington, DC.

[^307]: *Id.*

[^308]: Letter from Richard Steinberg, University of Cambridge, England
    to Evan Kwerel, FCC, June 23, 1997 (*A Combinatorial Auction with
    Multiple Winners for COLR* (June 9, 1997)) (hereinafter
    Kelly-Steinberg) at 4. Note: Kelly-Steinberg are posting the current
    version of their proposal at www.statslab.cam.ac.uk/\~frank/AUCTION

[^309]: *Id.*

[^310]: *Id.*

[^311]: *Id.* at 5.

[^312]: *Id.*

[^313]: *Id.* at 5 (suggesting bidders initially should be required to
    remain active on sub-blocks covering 60 percent of the number of
    customers for which they wish to remain eligible to bid).

[^314]: *Id.* at 5-6 (suggesting that the activity requirement increase,
    as the second stage progresses, to 80 percent of the number of
    desired customers, and finally to 95 percent of such customers).

[^315]: *Id.* at 6.

[^316]: *Id.* at 7.

[^317]: Time Warner comments, CC Docket 96-45, Apr. 12, 1996 at 9-11.

[^318]: *Id.* at 11.

[^319]: Time Warner comments, Aug. 2, 1996 at 42.

[^320]: *Id.* at 42-43.

[^321]: MCI comments, Apr. 12, 1996 at 18-19.

[^322]: *Id.*

[^323]: *Id.* at 19.

[^324]: MCI comments, Aug. 2, 1996 at 21-22.

[^325]: Citizens for a Sound Economy Foundation comments, May 7, 1996 at
    8-9.

[^326]: *Id.* at 11.

[^327]: *Id.* at 13-14.

[^328]: Haw. Rev. Stat. § 269-43(a) & (b).

[^329]: Haw. Rev. Stat. § 269-43(b).

[^330]: *Id.*

[^331]: *Id.*

[^332]: Hawaii PUC Decision & Order No. 14415, released December 13,
    1995.

[^333]: *Id.*

[^334]: Hawaii PUC, Request for a Proposal to Provide Telecommunications
    Service for Ka\'u, Island of Hawaii, April 30, 1996.

[^335]: *Id.* at 12. Internal strengths include organization, financial
    backing, technical facilities, operations expertise, and management
    and administrative experience. External strengths include proposed
    rates and rate design, track record, alertness to consumer needs and
    desires, consumer preferences, impact on entities other than
    competing applicants, and local ownership control. Miscellaneous
    indicia include first-in-field status, first-in-proposal process,
    quality of proposal, ongoing regulatory control, and overall general
    fitness.

[^336]: Hawaii PUC Decision & Order No. 14789, released July 15, 1996.

[^337]: Hawaii PUC Decision & Order No. 15602 (1997).

[^338]: We also note that, in response to an August 16, 1996 petition by
    TelHawaii, the Accounting and Audits Division of the FCC\'s Common
    Carrier Bureau issued an order creating a new study area containing
    a rural telephone exchange serving approximately 2,447 access lines
    in the Ka\'u area and allowing TelHawaii to operate under
    rate-of-return regulation. In the Matter of Petition for Waivers
    filed by TelAlaska, inc. and TelHawaii, Inc., *Memorandum Opinion
    and Order*, DA 97-1508 (CCB, Acct\'g & Audits Div.), released July
    16, 1997. In this order, the Division denied TelHawaii\'s request
    for a waiver of Sections 36.611 and 36.612 of the Commission\'s
    rules to enable it to receive universal service support immediately
    upon transfer of GTE Hawaiian Tel\'s assets to TelHawaii.

[^339]: RTD funds come from the annual government budget and are
    allocated to SUBTEL. Ley General de Telecommunicaciones, No. 18.168,
    Title IV, Article 28A, \"Del Fondo de Desarollo de
    Telecommunicaciones\".

[^340]: *See* Bjorn Wellenius, Extending Telecommunications Service to
    Rural Areas -- The Chilean Experience, Viewpoint, The World Bank
    Group Note No. 105, Feb. 1997; SUBTEL de Chile. *Funcionamiento*
    *del Fondo de Desarollo de las Telecommunications*. SUBTEL document,
    February, 1997.

[^341]: FITEL funds come from a one percent tax on the gross revenues of
    all telecommunications companies. Texto Unico Ordenado de la Ley de
    Telecommunicaciones. Decreto No. 013-93-TCC. Articulo 12. *Marco
    Legal de las Telecommunicaciones*, at 13, OSIPTEL, Nov. 1994.

[^342]: The FITEL program is intended to expand universal service by
    bringing telephone service to areas not currently served by
    Telefonica de Peru, the monopoly provider of telephone service.

[^343]: *See, e.g.,* *Implementation of Section 309(j) of the
    Communications Act-Competitive Bidding*, Second Report and Order, PP
    Docket No. 93-253, 9 FCC Rcd 2348 (1994); *Implementation of Section
    309(j) of the Communications Act-Competitive Bidding*, Third Report
    and Order, PP Docket No. 93-253, 9 FCC Rcd 2941 (1994); and
    *Implementation of Section 309(j) of the Communications
    Act-Competitive Bidding*, Fifth Report and Order, PP Docket No.
    93-253, 9 FCC Rcd 5532 (1994).

[^344]: The largest auction conducted so far has been the D, E and F
    block broadband PCS auction, in which 1,479 licenses were put up for
    bid simultaneously.

[^345]: Most of the Commission\'s spectrum auctions have been conducted
    electronically, using computer software developed by the Commission
    specifically for this purpose.

[^346]: *See* Subpart Q of Part 1 of our rules, 47 C.F.R. §§ 1.2101 *et
    seq.* In addition, the Commission has adopted service-specific rules
    that govern auctions of licenses in particular services. *See,
    e.g.,* 47 C.F.R. §§ 24.701 *et seq.* (rules for broadband PCS
    auctions), and 90 C.F.R. §§ 90.801 *et seq.* (rules for 900 MHz SMR
    auctions). Since the competitive bidding for universal service
    support contemplated in the instant proceeding does not involve
    choosing from among mutually exclusive applications for licenses to
    use the electromagnetic spectrum, Section 309(j) of the Act, and the
    Commission\'s rules adopted pursuant thereto, would not apply.

[^347]: In Section 1.2106 of the Commission\'s rules, 47 C.F.R. §
    1.2106, the Commission authorized the collection of upfront payments
    and set forth general rules concerning them. Service-specific rules
    require upfront payments in particular auctions. *See, e.g.,* 47
    C.F.R. § 24.706 (upfront payment rule for broadband PCS auctions).
    *Public Notice*, Report No. AUC-94-04, released September 19, 1994
    (setting forth auction procedures, including activity requirements,
    bid increments and stopping rules, for the FCC\'s auction of A & B
    block broadband PCS licenses).

[^348]: *See* 47 C.F.R. § 1.2104. Specific bidding procedures for each
    auction are usually announced by way of a public notice issued prior
    to the auction. *See, e.g.*, *Public Notice*, Report No. AUC-94-04,
    released September 19, 1994 (setting forth auction procedures,
    including activity requirements, bid increments and stopping rules,
    for the FCC\'s auction of A & B block broadband PCS licenses).

[^349]: *See, e.g.,* 47 C.F.R. § 1.2104(g) (general competitive bidding
    rules), and 47 C.F.R. § 24.704 (bid withdrawal rule applicable to
    broadband PCS auctions).

[^350]: 47 C.F.R. § 1.2105(c).

[^351]: *See generally* 47 C.F.R. § 1.2110. Special provisions also have
    been adopted to aid \"designated entities\" in connection with
    spectrum auctions for particular services. *See, e.g.,* 47 C.F.R. §
    24.309 (narrowband PCS); 47 C.F.R. § 24.709 (broadband PCS); 47
    C.F.R. § 90.810 *et seq.* (900 MHz SMR).

[^352]: *See* Amendment of Part 1 of the Commission\'s Rules, *Order,
    Memorandum Opinion and Order, and Notice of Proposed Rule Making*,
    WT Docket No. 97-82, FCC 97-60 (rel. Feb. 28, 1997).

[^353]: Mitretek *ex parte* meeting at the Federal Communications
    Commission, Washington, DC, Aug. 12, 1997, discussion with Robert R.
    Menna and David A. Garbin (dgarbin@mitretek.org). (Mitretek Aug. 12
    *ex parte*).

[^354]: *Id.*

[^355]: *Id.*

[^356]: *Id.*

[^357]: John Thorne, Peter Huber, *Federal Broadband Law* §4.5, at 229
    (Boston: Little, Brown, 1995).

[^358]: Mark A. Zupan, *Non-Price Concessions and the Effect of
    Franchise Bidding Schemes on Cable Company Costs*, 20 Applied
    Economics 305 (1989).

[^359]: *Id.* at 305, 306.

[^360]: Mark A. Zupan, *The Efficacy of Franchise Bidding Schemes in the
    Case of Cable Television: Some Systematic Evidence*, 32 J.L. & Econ.
    401, 403 (1989).

[^361]: *See* Mark Nadel, *COMCAR: A Marketplace Cable Television
    Franchise Structure*, 20 Harv. J. On Legis. 541, 547 (1983)
    (commenting that selection procedure requires political maneuvering
    by applicants, in addition to the making of unrealistic promises for
    service by bidder).

[^362]: Daniel L. Brenner, Monroe E. Price, and Michael I. Meyerson,
    *Cable Television and Other Nonbroadcast Video, Law and Policy*, §
    3.07\[8\]\[c\], (1997).

[^363]: 49 U.S.C. §§ 41731-41742.

[^364]: 31^?^ Department of Transportation, Essential Air Service and
    Domestic Analysis Division, *What is Essential Air Service?* (May,
    1997).

[^365]: 47 U.S.C. § 254.

[^366]: 47 U.S.C. §254(b)(3).

[^367]: *Federal-State Joint Board on Universal Service*, Notice of
    Proposed Rulemaking and Order Establishing a Joint Board, 12 FCC Rcd
    18092 (1996) (*May 1996 Notice*); Recommended Decision, 12 FCC Rcd
    87 (Jt. Bd. 1996) (*First Recommended Decision);* Report and Order,
    CC Docket No. 96-45, 12 FCC Rcd 8776 (1997) (*First Report and
    Order*), as corrected by Errata, CC Docket No. 96-45 (rel. June 4,
    1997); Order on Reconsideration, 12 FCC Rcd 10095 (1997); Second
    Order on Reconsideration, 12 FCC Rcd 18400 (1997); Third Order on
    Reconsideration, 12 FCC Rcd 22801 (1997); Fourth Order on
    Reconsideration, 13 FCC Rcd 2372 (1997); Fifth Order on
    Reconsideration, 13 FCC Rcd 14915 (1998); Order and Order on
    Reconsideration, 13 FCC Rcd 13749 (1997); Second Recommended
    Decision, 13 FCC Rcd 24744 (1998); Sixth Order on Reconsideration,
    13 FCC Rcd 22908 (1998); Seventh Order on Reconsideration, 13 FCC
    Rcd 19397 (1998); Eighth Order on Reconsideration, 13 FCC Rcd 25058
    (1998); Ninth Order on Reconsideration, 14 FCC Rcd 377 (1998); Tenth
    Order on Reconsideration, FCC 99-46 (rel. Apr. 2, 1999); Eleventh
    Order on Reconsideration, FCC 99-49 (rel. May 28, 1999); Twelfth
    Order on Reconsideration, FCC 99-121 (rel. May 28, 1999); Thirteenth
    Order on Reconsideration; FCC 99-119 (rel. May 28, 1999); *affirmed
    in part, remanded in part and reversed in part, Texas Office of
    Public Utility Counsel v. FCC*, No. 97-60421 (5th Cir. Jul. 30,
    1999).

[^368]: 47 U.S.C. §§ 151, 154, 214, 254, 403, and 410.

[^369]: 5 U.S.C. § 603(b)(3).

[^370]: *Id.* § 601(6).

[^371]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. § 632). Pursuant to the RFA,
    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(s) in the Federal Register.\" 5 U.S.C. § 601(3).

[^372]: Small Business Act, 15 U.S.C. § 632.

[^373]: 5 U.S.C. § 601(4).

[^374]: 1992 Economic Census, U.S. Bureau of the Census, Table 6
    (special tabulation of data under contract to Office of Advocacy of
    the U.S. Small Business Administration).

[^375]: 5 U.S.C. § 601(5).

[^376]: U.S. Dept. of Commerce, Bureau of the Census, \"1992 Census of
    Governments.\"

[^377]: *Id*.

[^378]: 15 U.S.C. § 632. *See*, *e.g.*, *Brown Transport Truckload, Inc.
    v. Southern Wipers, Inc.*, 176 B.R. 82 (N.D. Ga. 1994).

[^379]: 13 C.F.R. § 121.201.

[^380]: FCC, *Carrier Locator: Interstate Service Providers*, Figure 1
    (Jan. 1999) (*Carrier Locator*). *See also* 47 C.F.R. § 64.601 *et
    seq.* (TRS).

[^381]: *Carrier Locator* at Fig. 1.

[^382]: 5 U.S.C. § 601(3).

[^383]: Letter *from* Jere W. Glover, Chief Counsel for Advocacy, SBA,
    *to* William E. Kennard, Chairman, FCC (May 27, 1999). The Small
    Business Act contains a definition of \"small business concern,\"
    which the RFA incorporates into its own definition of \"small
    business.\" *See* 15 U.S.C. § 632(a) (Small Business Act); 5 U.S.C.
    § 601(3) (RFA). SBA regulations interpret \"small business concern\"
    to include the concept of dominance on a national basis. 13 C.F.R. §
    121.102(b). Since 1996, out of an abundance of caution, the
    Commission has included small incumbent LECs in its regulatory
    flexibility analyses. *Implementation of the Local Competition
    Provisions of the Telecommunications Act of 1996*, CC Docket, 96-98,
    First Report and Order, 11 FCC Rcd 15499, 16144‑45 (1996).

[^384]: United States Department of Commerce, Bureau of the Census,
    *1992 Census of Transportation*, Communications, and Utilities:
    Establishment and Firm Size, at Firm Size 1‑123 (1995) (\"1992
    Census\").

[^385]: 15 U.S.C. § 632(a)(1).

[^386]: 1992 Census, *supra*, at Firm Size 1‑123.

[^387]: 13 C.F.R. § 121.201, SIC Code 4813.

[^388]: 13 C.F.R. § 121.210, SIC Code 4813.

[^389]: *See* 47 C.F.R. § 64.601 *et seq.*; *Carrier Locator* at Fig. 1.

[^390]: *Carrier Locator* at Fig. 1. The total for resellers includes
    both toll resellers and local resellers. The TRS category for CAPs
    also includes competitive local exchange carriers (CLECs) (total of
    129 for both).

[^391]: United States Department of Commerce, Bureau of the Census,
    *1992 Census of Transportation*, Communications, and Utilities:
    Establishment and Firm Size, at Firm Size 1‑123 (1995) (\"1992
    Census\").

[^392]: 13 C.F.R. § 121.201, SIC Code 4812.

[^393]: *Id.*

[^394]: *Carrier Locator* at Fig. 1.

[^395]: *See* *Amendment of Parts 20 and 24 of the Commission\'s Rules
    \-- Broadband PCS Competitive Bidding and the Commercial Mobile
    Radio Service Spectrum Cap*, Report and Order, FCC 96-278, WT Docket
    No. 96-59, ¶¶ 57-60 (June 24, 1996), 61 FR 33859 (July 1, 1996);
    *see also* 47 C.F.R. § 24.720(b).

[^396]: *Id.*, at ¶ 60.

[^397]: *Implementation of Section 309(j) of the Communications Act \--
    Competitive Bidding*, PP Docket No. 93-253, Fifth Report and Order,
    9 FCC Rcd 5532, 5581-84 (1994).

[^398]: *See Amendment of Parts 2 and 90 of the Commission\'s Rules to
    Provide for the Use of 200 Channels Outside the Designated Filing
    Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the
    Specialized Mobile Radio Pool*, PR Docket No. 89-583, Second Order
    on Reconsideration and Seventh Report and Order, 11 FCC Rcd 2639,
    2693-702 (1995); *Amendment of Part 90 of the Commission\'s Rules to
    Facilitate Future Development of SMR Systems in the 800 MHz
    Frequency Band*, PR Docket No. 93-144, First Report and Order,
    Eighth Report and Order, and Second Further Notice of Proposed
    Rulemaking, 11 FCC Rcd 1463 (1995).

[^399]: 13 C.F.R. § 121.201, SIC Code 4812. This definition provides
    that a small entity is a radiotelephone company employing no more
    than 1,500 persons.

[^400]: U.S. Bureau of the Census, U.S. Department of Commerce, 1992
    Census of Transportation, Communications, and Utilities, UC92‑S‑1,
    Subject Series, Establishment and Firm Size, Table 5, Employment
    Size of Firms; 1992, SIC code 4812 (issued May 1995).

[^401]: 220 MHz Third Report and Order, 12 FCC Rcd 10943, 11068‑70, at
    paras. 291‑ 295 (1997). The SBA has approved these definitions.
    *See* Letter from A. Alvarez, Administrator, SBA, to D. Phythyon,
    Chief, Wireless Telecommunications Bureau, FCC (Jan. 6, 1998).

[^402]: 220 MHz Third Report and Order, 12 FCC Rcd at 11068‑69, para.
    291.

[^403]: *See generally* Public Notice, \"220 MHz Service Auction
    Closes,\" Report No. WT 98‑36 (Wireless Telecom. Bur. Oct. 23,
    1998).

[^404]: Public Notice, \"FCC Announces It is Prepared to Grant 654 Phase
    II 220 MHz Licenses After final Payment is Made,\" Report No.
    AUC-18-H, DA No. 99-229 (Wireless Telecom. Bur. Jan. 22, 1999).

[^405]: Public Notice, \"Phase II 220 MHz Service Spectrum Auction
    Closes,\" Report No. AUC-99-24-E, DA No. 99-1287 (Wireless Telecom.
    Bur. July 1, 1999).

[^406]: Public Notice, \"First Paging Service Spectrum Auction Scheduled
    for December 7, 1999,\" Report No. AUC-99-26-A, DA No. 99-1103
    (Wireless Telecom. Bur. June 7, 1999).

[^407]: *Id.*

[^408]: *See* 47 C.F.R. § 20.9(a)(1) (noting that private paging
    services may be treated as common carriage services).

[^409]: *See* Letter from A. Alvarez, Administrator, SBA, to A.J.
    Zoslov, Chief, Auctions Division, Wireless Telecommunications
    Bureau, FCC (Dec. 2, 1998).

[^410]: *Carrier Locator* at Fig. 1.

[^411]: The service is defined in section 22.99 of the Commission\'s
    rules, 47 C.F.R. § 22.99.

[^412]: BETRS is defined in sections 22.757 and 22.759 of the
    Commission\'s rules, 47 C.F.R. §§ 22.757, 22.759.

[^413]: 13 C.F.R. § 121.201, SIC Code 4812.

[^414]: The service is defined in section 22.99 of the Commission\'s
    rules, 47 C.F.R. § 22.99.

[^415]: 13 C.F.R. § 121.201, SIC Code 4812.

[^416]: *See* 47 C.F.R. § 20.9(a)(2) (noting that certain
    Industrial/Business Pool service may be treated as common carriage
    service).

[^417]: Federal Communications Commission, *60th Annual Report, Fiscal
    Year 1994*, at 116.

[^418]: Public Notice, \"Wireless Telecommunications Bureau Incorporates
    Nextel Communications, Inc. Waiver Record into WT Docket No. 99-87:
    Seeks Comment on Licensing of PMRS Channels in the 800 MHz Band for
    Use in Commercial SMR Systems,\" DA 99-1431 (Wireless Telecom.
    Bureau July 21, 1999).

[^419]: 47 C.F.R. § 101 *et seq.* (formerly, Part 21 of the
    Commission\'s rules).

[^420]: Persons eligible under Parts 80 and 90 of the Commission\'s
    rules can use Private Operational-Fixed Microwave services. *See* 47
    C.F.R. Parts 80 and 90. Stations in this service are called
    operational-fixed to distinguish them from common carrier and public
    fixed stations. Only the licensee may use the operational-fixed
    station, and only for communications related to the licensee\'s
    commercial, industrial, or safety operations.

[^421]: Auxiliary Microwave Service is governed by Part 74 of the
    Commission\'s Rules. *See* 47 C.F.R. § 74 *et seq.* Available to
    licensees of broadcast stations and to broadcast and cable network
    entities, broadcast auxiliary microwave stations are used for
    relaying broadcast television signals from the studio to the
    transmitter, or between two points such as a main studio and an
    auxiliary studio. The service also includes mobile TV pickups, which
    relay signals from a remote location back to the studio.

[^422]: 13 C.F.R. § 121.201, SIC Code 4812.

[^423]: This service is governed by Subpart I of Part 22 of the
    Commission\'s Rules. *See* 47 C.F.R. §§ 22.1001 ‑ 22.1037.

[^424]: *See* 47 U.S.C. § 254(h)(5)(B).

[^425]: Letter from Kent A. Phillippe, American Association of Community
    Colleges to John Clark, FCC, dated March 31, 1997 (AACC March 31 ex
    parte at 2).

[^426]: Letter from Donna J. Williams, Ass\'n of American Medical
    Colleges, to John Clark, FCC, dated September 9, 1996 (AAMC
    September 9 ex parte).

[^427]: Letter from Kevin G. Serrin, Ass\'n of American Medical
    Colleges, to John Clark, FCC, dated September 5, 1996 (AAMC
    September 5 ex parte).

[^428]: Letter from Richard C. Bohrer, Division of Community and Migrant
    Health, HHS, to John Clark, FCC, dated March 31, 1997 (HHS March 31
    ex parte at 2).

[^429]: Telephone contact by John Clark, FCC, with Carol Brown, National
    Association of County Health Officials, May 2, 1997.

[^430]: Letter from Ned Baker, Nat\'l Ass\'n of Local Boards of Health,
    to John Clark, FCC, dated April 2, 1997 (Nat\'l Ass\'n of Local
    Boards of Health April 2 ex parte).

[^431]: Telephone contact by John Clark, FCC, with Mike Weakin, Center
    for Mental Health Services, HHS, on May 2, 1997.

[^432]: American Hospital Association Center for Health Care Leadership,
    A Profile of Nonmetropolitan Hospitals 1991‑95 at 5 (1997).

[^433]: Letter from Patricia Taylor, ORHP/HHS, to John Clark, FCC, dated
    May 2, 1997 (ORHP/HHS May 2 ex parte).

[^434]: 13 C.F.R.§ 121.201, SIC 8060.

[^435]: *See* paras. 63-65

[^436]: *See* paras. 66-67.

[^437]: *See* paras. 71-72.

[^438]: *See* paras. 118-120.

[^439]: *See* paras. 121-122.

[^440]: *See* paras. 128-133.

[^441]: *See* para. 95.

[^442]: *See* para. 123.

[^443]: *See* paras. 124-127.

[^444]: *See* 47 C.F.R. §54.705.

[^445]: *See* para. 95.

[^446]: *See* 47 C.F.R. §1.3

[^447]: *Texas Office of Public Utility Counsel, et al., v. FCC,* United
    States Court of Appeals for the Fifth Circuit, No. 97-60421, rel.
    July 30, 1999.