**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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**ORDER AND ORDER ON RECONSIDERATION**

**Adopted: December 23, 2003 Released: December 24, 2003**

By the Wireline Competition Bureau:

# introduction

1.  In this Order, consistent with action taken in the past,[^1] we
    update line counts and other input data used in the Commission's
    forward-looking economic cost model for purposes of calculating and
    targeting non-rural high-cost support beginning January 1, 2004. In
    the attached Order on Reconsideration, we deny a petition filed by
    the Maine Public Utilities Commission and the Vermont Public Service
    Board seeking reconsideration of the Wireline Competition Bureau's
    (Bureau) *2002 Line Counts Update Order*.

# Background

2.  In the *First Report and Order*, the Commission established criteria
    that the model must satisfy for purposes of calculating support
    based on forward-looking economic costs.[^2] Among other things, the
    Commission required that the model must estimate the "cost of
    providing service for all businesses and households within a
    geographic region," including "the provision of multi-line business
    services, special access, private lines, and multiple residential
    lines."[^3] The Commission reasoned that this requirement was
    necessary to ensure that the model reflects the economies of scale
    of serving all lines within a geographic area.[^4] Consistent with
    this criterion, the model uses as inputs estimates of the number of
    voice-grade or DS-0 equivalent lines representing residential lines,
    switched business lines, payphone lines, and special access
    lines.[^5] The number of special access lines is based on the number
    of high-capacity lines (DS-1 and DS-3 lines) reported by non-rural
    carriers on a DS-0 equivalent basis as part of the annual Automated
    Reporting Management Information System (ARMIS) reporting.[^6] To
    determine the number of DS-0 equivalent high-capacity lines, the
    carriers calculate DS-0 equivalents on a per-channel basis.[^7] The
    model calculates the average cost per line for each wire center by
    dividing total cost by the sum of residential, switched business,
    payphone, and special access lines.

3.  In the *2001* and *2002 Line Counts Update Orders*, consistent with
    the framework adopted in the Commission's *Twentieth Reconsideration
    Order*, the Bureau updated the model's switched access line counts
    with year-end data reported by non-rural carriers pursuant to
    sections 36.611 and 54.307 of the Commission's rules.[^8] The Bureau
    concluded that line counts must be updated to account for cost
    changes and reflect economies of scale, consistent with the
    Commission criterion discussed above.[^9] The Bureau allocated
    updated switched lines to the classes of service used in the model
    in the same proportion as the lines reported by non-rural carriers
    for each wire center in response to the *1999 Data Request*.[^10]
    The Bureau concluded that this approach was preferable to requiring
    non-rural carriers to disaggregate their year-end line counts by
    class of service, because it was reasonably accurate and avoided
    imposing burdensome reporting requirements on non-rural
    carriers.[^11] The Bureau also updated special access lines in the
    model using annual ARMIS special access line data.[^12] The Bureau
    allocated updated ARMIS special access lines among wire centers
    based on the *1999 Data Request*, concluding that this was a
    reasonable approach to estimating special access line growth for
    purposes of calculating and targeting non-rural high-cost
    support.[^13]

4.  The Bureau did not update line counts in the model for purposes of
    calculating and targeting non-rural high-cost support beginning
    January 1, 2003, because of the pendency of the *Ninth Report and
    Order* remand proceeding.[^14] In the interim, the Bureau sought
    comment on updating model input data consistent with the *2001* and
    *2002 Line Counts Update Orders*.[^15] Several commenters raised
    concerns about the use of special access line count data in the cost
    model.[^16] They argued generally that the cost model is not
    designed to estimate demand for high-capacity special access lines
    accurately and that this flaw, combined with recent line growth
    trends,[^17] causes it to understate the cost of providing supported
    services in rural and high-cost areas.[^18] In addition, the Maine
    Public Utilities Commission and the Vermont Public Service Board
    (Joint Commenters) submitted an analysis comparing model cost
    estimates based on (1) Verizon data reflecting the number of
    high-capacity special access lines in each Maine and Vermont wire
    center served by Verizon at the end of 2001 and (2) year 2000 ARMIS
    special access line count data allocated to the same wire centers
    using the Bureau's allocation methodology.[^19] As discussed below,
    they contend that their analysis reveals a significant bias existing
    in the Bureau's special access line allocation methodology.[^20]

5.  In light of the concerns raised by commenters, the Bureau sought
    comment on alternative methods for treating special access lines in
    the model. [^21] In particular, the Bureau sought comment on
    removing special access demand from the cost model on an interim
    basis until the Commission resolves the underlying model design
    issues in a comprehensive proceeding.[^22] In response, Qwest states
    that removing special access demand on an interim basis represents a
    "fair and expeditious" solution to the concerns raised by
    commenters.[^23] Verizon states, however, that it cannot determine
    whether doing so will produce reasonable results, "or whether more
    fundamental changes to the model platform are required," without
    analyzing the impact on support amounts in each state.[^24] On the
    other hand, AT&T and MCI contend that the Bureau should continue to
    estimate the cost of providing special access as it has in the
    past.[^25] In particular, AT&T argues that removing special access
    demand would be inappropriate due to the cost interdependence
    between switched and non-switched services and the growing demand
    for non-switched services.[^26] In this regard, AT&T maintains that
    the model actually overstates the costs of providing supported
    services because of its failure to estimate costs associated with
    "*all* non-switched demand --- especially the burgeoning demand for
    packet data services, such as digital subscriber lines."[^27]
    According to AT&T, "\[w\]hile the current methodology may be
    imperfect, it will necessarily produce a more accurate result than
    the proposed alternative of zeroing out special access lines
    altogether."[^28] AT&T and MCI also contend that the Bureau should
    continue to allocate updated ARMIS special access line count data to
    wire centers based on the *1999 Data Request*.[^29]

# Discussion

## Switched Line Count Updates

6.  Consistent with the framework adopted in the *Twentieth
    Reconsideration Order* and the *2001* and *2002 Line Counts Update
    Orders*, we conclude that the cost model should use year-end 2002
    line counts filed July 31, 2003, as input values for purposes of
    estimating average forward-looking costs and determining support for
    non-rural carriers beginning January 1, 2004.[^30] We will adjust
    support amounts every quarter to reflect the lines reported by
    non-rural carriers.[^31] In addition, we will allocate switched
    lines to the classes of service used in the model by dividing
    year-end 2002 lines into business lines, residential lines, payphone
    lines, and single-line business lines for each wire center in the
    same proportion as the lines filed pursuant to the *1999 Data
    Request.*[^32]

7.  We disagree with BellSouth that line counts should not be updated
    unless the Bureau also updates road and customer location data.[^33]
    Updated line count data are readily available, whereas updated road
    and customer location data are not.[^34] As we have explained in the
    past, line count data must be updated to reflect cost changes and
    economies of scale associated with changes in line counts,
    consistent with the Commission's forward-looking cost criteria
    established in the *First Report and Order*.[^35] Line count data
    also should be updated to avoid increasing the lag between such data
    and the quarterly line count data used to adjust non-rural high-cost
    support amounts.[^36] We are not persuaded that updating line counts
    is inappropriate because it may fail to reflect certain costs
    associated with serving new customer locations.[^37] The model's use
    of road surrogate data to determine customer locations ensures that
    the structure costs associated with serving new customer locations
    are reflected in model cost estimates unless such locations are
    along new roads.[^38] BellSouth contends that recent switched line
    decreases and new housing growth in its service territory undermine
    the assumption that most new lines are either placed at existing
    customer locations or along existing cable routes, but it submits no
    data in support of this contention.[^39] Switched lines nationwide
    decreased by 3.3 percent in 2002, and Commission data indicate that
    households increased by approximately one percent.[^40] Based on
    these data, we cannot conclude that the trends identified by
    BellSouth justify not updating line count data. On balance, we find
    that updating line count data is the best approach for estimating
    forward-looking costs and determining non-rural high-cost support
    amounts for 2004.

8.  We also disagree with AT&T's argument that we should use projected
    lines for the end of the 2004 funding year, rather than the most
    recent reported year-end lines (end of 2002), to match the line
    count data used to estimate forward-looking costs with the quarterly
    line count data used to adjust non-rural high-cost support
    amounts.[^41] AT&T has not proposed a methodology for projecting
    lines. Verizon argues that any such methodology would be complex,
    difficult, and overly burdensome for purposes of estimating
    forward-looking costs.[^42] We also note that, as stated above,
    switched lines have declined recently, suggesting the difficulty of
    accurately projecting lines based on historical data.[^43]
    Consistent with the *2001* and *2002 Line Counts Orders*, we find
    that year-end 2002 line counts are the appropriate data to use for
    updating the cost model's input values at this time.[^44]

## Special Access Line Count Updates

9.  Consistent with the *2002* and *2001 Line Counts Update Orders*, we
    will use year 2002 ARMIS special access line count data as model
    inputs to estimate forward-looking costs and determine non-rural
    high-cost support amounts in 2004. On balance, we conclude that this
    approach is consistent with the Commission's criteria for estimating
    forward-looking costs and with applicable universal service
    principles. We also will continue to divide the updated special
    access lines among wire centers in the same proportion as the
    special lines from the *1999 Data Request*. As discussed below, we
    conclude that this methodology is a reasonable approach for
    estimating special access line growth to determine non-rural
    high-cost support amounts in 2004.

10. Based on our examination of the record, we continue to find that it
    is appropriate to update special access lines for purposes of
    determining non-rural high-cost support in 2004. The *First Report
    and Order* requires that the model reflect the economies of scale of
    serving all business and residential lines, including special access
    lines.[^45] Consistent with this criterion, the Bureau always has
    included special access line count data within its cost
    estimates.[^46] Removing special access line count data from the
    model's cost calculations would ignore the demand for special access
    services.[^47] We find that removing special access lines would be
    inconsistent with the Commission's criteria requiring that the model
    reflect the economies of scale of serving all business and
    residential lines, including special access lines.[^48]

11. We also conclude that updating special access line count data for
    purposes of determining non-rural high-cost support in 2004 is
    consistent with the principle set forth in section 254(b)(5) of the
    Act that the universal service support mechanism should be specific
    and predictable.[^49] Because different states have different
    percentages of special access lines, removing them has differential
    effects on costs and, therefore, support among states. We decline to
    adopt an interim approach to estimating costs that would
    significantly change support in some states outside the context of a
    Commission proceeding to address the underlying model design issues
    raised by commenters. We conclude that it would be more appropriate
    to maintain continuity of support until these issues can be
    addressed comprehensively in a future Commission proceeding.[^50]

12. The current record is insufficient to permit us to reach a
    conclusion as to what adjustments may be needed, if any, to the
    model's process for counting high-capacity special access lines.
    Although some commenters argue that the model understates costs by
    counting high-capacity lines as voice-grade equivalents,[^51] it may
    overstate costs by deploying high-capacity lines on copper instead
    of fiber. Some commenters also argue that the model overstates costs
    because it does not include inputs for non-switched services such as
    digital subscriber lines.[^52] In other words, to the extent that
    adjustments to the model may be needed, such adjustments may
    increase some costs and reduce others.[^53] Consequently, we believe
    that the most prudent approach is to wait for further action by the
    Commission to consider several model improvements, specifically
    including the process for estimating special access demand. In the
    meantime, we conclude that updating special access line count data
    for purposes of determining non-rural high-cost support in 2004 is
    consistent with the Commission's forward-looking cost criteria and
    with applicable universal service principles.[^54]

13. We reject BellSouth's contention that special access line count data
    should be removed from the model's cost calculations for purposes of
    determining non-rural high-cost support based on the Bureau's
    decision to remove special access demand to set unbundled network
    element (UNE) prices in the Virginia arbitration proceeding.[^55]
    Different rules and principles apply in this proceeding that warrant
    a different approach. In that proceeding, the Bureau was faced with
    two proposals for accounting for special access lines and their
    associated costs in setting Verizon Virginia, Inc.'s UNE rates.[^56]
    Under total element long range incremental cost (TELRIC) principles,
    the Bureau had to choose the methodology which would result in UNE
    rates within a range of reasonableness.[^57] Here, in contrast, we
    must determine how to treat special access lines for purposes of
    calculating non-rural high-cost support. Whereas the Bureau's
    decision in the Virginia arbitration proceeding affected UNE rates
    in one state, non-rural high-cost support is determined based on the
    relationship between each state's average cost per line and the
    nationwide average. Because different states have different
    percentages of special access lines, removing special access lines
    from the model's cost calculations may significantly change support
    in some states. Our decision here is guided in part by the section
    254(b)(5) principle that universal service support should be
    specific and predictable.[^58] Under the circumstances, we conclude
    that a different approach is warranted for the purpose of
    determining non-rural high-cost support.

14. We also reject Verizon's request that we publish model cost
    estimates with and without special access demand at the study-area
    level before deciding this issue. Verizon argues that it cannot
    determine whether zeroing out special access lines would produce
    reasonable results because the Commission has not provided adequate
    data to allow interested parties to "run the latest version of the
    model to remove special access demand."[^59] Contrary to Verizon's
    claim, the Commission provides all the necessary tools and data to
    run the model without special access lines.[^60] Specifically, both
    the model and ARMIS special access line data are made available to
    the public on the Commission's web site.[^61] Further, switched line
    count data are available to the public under a protective
    order.[^62]

15. We also will continue to divide the updated special access lines
    among wire centers in the same proportion as the special access
    lines from the *1999 Data Request*. We conclude that allocating year
    2002 ARMIS special access lines based on the *1999 Data Request*
    remains a reasonable approach for estimating special access line
    growth for purposes of calculating and targeting non-rural high-cost
    support for 2004. In this regard, we have analyzed the Verizon data
    submitted by the Joint Commenters.[^63] Based on our analysis, we
    are not persuaded that the Bureau's allocation methodology is
    unreliable or produces biased results.

16. As stated above, the Joint Commenters submitted an analysis
    comparing model cost estimates based on (1) Verizon data reflecting
    the number of high-capacity special access lines in each Maine and
    Vermont wire center served by Verizon at the end of 2001 and (2)
    year 2000 ARMIS data allocated to wire centers using the Bureau's
    methodology. They contend that their analysis demonstrates that the
    Bureau's allocation methodology produces "significant errors"
    (defined as line count data requiring a correction of 25 percent or
    more) for 78 percent of the wire centers.[^64] They further contend
    that this methodology overestimates special access lines within 83
    percent of wire centers with less than 3,000 switched lines,[^65]
    and underestimates special access lines in 67 percent of wire
    centers with more than 10,000 switched access lines.[^66] As a
    result, they claim that the data used by the Bureau to allocate
    special access lines are "unreliable for both urban and rural
    areas."[^67] The Joint Commenters also calculated an "average cost
    correction" for wire centers in five size groups (based on switched
    access lines). They contend that the correction factors vary
    according to wire center size, and that their application to 2002
    support amounts increases support by \$0.49 per line for Maine and
    by \$0.50 per line for Vermont.[^68] They argue that the Bureau
    should use special access line count data used to estimate costs for
    the 2000 funding year, or provide non-rural carriers with the
    greater of the amount calculated with updated data *or* the amount
    provided in 2000.[^69]

17. As an initial matter, we disagree with the premise of the Joint
    Commenters' analysis that the goal of the allocation methodology is
    to achieve an exact correspondence between the lines assigned to a
    given wire center in the model and the actual number of lines
    served. Rather, the goal is to achieve reasonable results that are
    consistent with the Commission's forward-looking cost criteria using
    the best available data.[^70] For example, the *1999 Data Request*
    required carriers to report intrastate "private lines" with special
    access lines, pursuant to the criterion that the model estimate the
    cost of serving all businesses and households, including the cost of
    special access and private lines.[^71] The Commission has never used
    the number of private lines as model inputs, however, because
    nationwide private line data had not been available until this
    year.[^72] The Bureau's methodology assigns updated ARMIS special
    access lines to a wire center based on the proportion of special
    access *and* private lines reported for that wire center in the
    *1999 Data Request*. Thus, we would expect differences between the
    number of lines the allocation methodology assigns to a given wire
    center in the model and the number of special access lines a carrier
    serves in that wire center.

18. In addition, because it compares model lines and Verizon lines from
    two different time periods, the analysis is not the
    "apples-to-apples" comparison that the Joint Commenters set out to
    achieve. The Joint Commenters compared model lines based on year
    2000 ARMIS special access line count data with year 2001 special
    access lines obtained from Verizon. Furthermore, the analysis
    focuses on the number of special access lines assigned to wire
    centers, rather than the percentages of lines in a study area that
    are assigned to wire centers. Even if the Joint Commenters had
    compared model and Verizon data from the same year, as explained
    above, we would not expect the number of special access lines
    assigned to a wire center to be the same. The Bureau's methodology
    assigns special access lines to wire centers using fractions
    calculated based on the *1999 Data Request*.[^73] Thus, a more
    appropriate comparison for evaluating the Bureau's methodology would
    be to compare the *percentage* of special access lines in a study
    area that are assigned to a wire center using the Bureau's
    methodology with the percentage of total special access lines in the
    study area that are identified in the Verizon data as serving that
    wire center.

19. After analyzing the two data sets on which the Joint Commenters base
    their analysis, we cannot conclude that the Bureau's allocation
    methodology produces unreliable or biased results. We first analyzed
    the data sets for differences between the percentages of total
    special access lines assigned to individual wire centers, using the
    Joint Commenters' wire center size categories. We found that for the
    45 wire centers with less than 3,000 lines, the Bureau's methodology
    assigns a higher percentage of lines than Verizon's special access
    lines in most cases (consistent with the Joint Commenters'
    contention), but the average difference between the model
    percentages and the Verizon percentages is very small -- only -0.1
    percent.[^74] For the 24 wire centers with over 10,000 switched
    lines, we found that the Bureau's methodology assigns a lower
    percentage of lines than the Verizon data in only 33 percent of the
    wire centers. Contrary to the Joint Commenters' findings, the
    Bureau's methodology assigns a higher percentage of lines than the
    Verizon data in most wire centers from this group.[^75] We also
    analyzed the correlation between wire center size and percentage
    differences between model lines and Verizon lines. As shown on
    Attachment A, although we found an overall correlation of +0.541,
    this correlation is caused mainly by two outlier data points.[^76]
    Thus, although our analysis reveals differences between model lines
    and Verizon's special access lines that are on average negative in
    small wire centers and positive in large wire centers, the
    differences are very small -- less than 1 percent -- and do not
    reveal a pattern that supports the Joint Commenters' allegation of
    substantial systematic bias.

20. Furthermore, our analysis of the Joint Commenters' cost results does
    not show a consistent pattern in the data that would support their
    allegation of bias. Again, for purposes of our analysis, we used the
    Joint Commenters' wire center size categories. As stated above, they
    contend that the differences in model cost estimates based on
    Verizon lines and model lines correlate to wire center size:
    higher-density (urban) wire centers have lower costs and
    lower-density (rural) wire centers have higher costs based on
    Verizon lines. Although this is true, on average, most of the wire
    centers within their groups do not conform to this pattern. For
    small wire centers with 0 to 1,000 lines, the Joint Commenters found
    that the average difference was +\$0.11.[^77] Twenty-eight of the 34
    wire centers in this group have lower costs using Verizon data,
    however. For wire centers with 1,000 to 2,500 lines, the Joint
    Commenters found that the average difference was +\$0.23,[^78] but
    57 out of the 77 wire centers in this group have lower costs using
    Verizon data. Thus, the majority of small, rural wire centers show
    differences that are counter to the Joint Commenters' allegation of
    bias.[^79]

21. We also analyzed the cost results when the Verizon data are adjusted
    to match the vintage of the other line count data used in the Joint
    Commenters' analysis. As discussed above, they compared two vintages
    of special access lines: year 2000 ARMIS line count data and 2001
    line count data obtained from Verizon.[^80] To obtain cost results,
    they used these data in combination with year-end 2000 switched line
    counts. The Bureau runs the model using switched and special access
    lines from the same year, however, which is important for purposes
    of analyzing cost results because it allows one to distinguish
    between effects due to changes in the overall number of lines and
    changes due to the allocation of lines.[^81] Accordingly, Bureau
    staff factored down the Verizon year 2001 special access data to
    reflect the total year 2000 ARMIS special access line data, and
    combined this data with year-end 2000 switched line count data to
    obtain adjusted cost results.[^82] Comparing these adjusted results
    to results based on model lines, we again found that although the
    average differences were consistent with the Joint Commenters'
    findings, most wire centers showed differences counter to the
    allegation of bias.[^83] As shown in Attachment B, the overall
    result of our analysis of the relationship between wire center size
    and differences in cost results based on adjusted Verizon lines and
    model lines was a slight statistical correlation of -0.085
    percent.[^84] Given the slight correlation between costs and size in
    the two states and the various directions of cost corrections for
    wire centers within each group, we cannot conclude that the Joint
    Commenters' cost correction factors are reliable. In sum, therefore,
    we conclude that allocating year 2002 ARMIS special access lines
    based on the *1999 Data Request* remains a reasonable approach for
    estimating special access line growth for purposes of calculating
    and targeting non-rural high-cost support for 2004, and that the
    Joint Commenters' analysis does not establish that this methodology
    is unreliable or produces biased results.

22. Finally, the Joint Commenters do not establish an alternative
    methodology that would provide fairer or more reasonable results.
    Even if their cost correction factors were reliable for Maine and
    Vermont, there is no reason to believe the same factors would be
    reliable nationwide. The differences in costs based on special
    access lines and costs based on model lines are likely to differ
    significantly by state given the diversity of terrain, population
    density, and size. Because support is determined in relationship to
    the nationwide average cost, we would have concerns about applying
    cost correction factors derived from two states to the nation as a
    whole.[^85] Moreover, if state-specific cost correction factors were
    used, it is not clear that the states of Maine and Vermont would see
    a "substantial" increase in support.[^86] Depending upon the
    "corrected" costs in other states, their support could also
    decrease.

23. In the absence of new data, the Joint Commenters urge the Commission
    to revert to the special access line counts used to distribute
    support in 2000, that is, year 1998 ARMIS special access lines.[^87]
    Using these lines counts would provide demonstrably less reliable
    results than the current methodology for two reasons. Prior to ARMIS
    reporting year 2000, some carriers were under-reporting their
    special access lines by reporting special access circuits
    terminating at multiple customer premises as a single special access
    line, rather than as multiple special access lines.[^88] As part of
    its ongoing effort to improve data consistency, the Bureau
    subsequently clarified how special access lines should be reported
    in a consistent fashion.[^89] As a result, Verizon's special access
    lines increased substantially between year 1999 ARMIS reports and
    year 2000 ARMIS reports.[^90] Second, the method used to allocate
    special access lines to wire centers in the model's first year of
    operation was not as reliable as our current method. Because we had
    not yet developed a methodology to use the *1999 Data Request* to
    allocate lines to wire centers, we used the only data available at
    the time to allocate lines: the wire center line counts developed by
    PNR Associates, trued-up to year 1998 ARMIS line counts.[^91] The
    allocations in the *1999 Data Request* are more reliable because the
    data were filed by the carriers, rather than being estimated by
    PNR's National Access Line Model.

## Other Issues

24. Consistent with the *2002 Line Counts Update Order*, we will update
    the model with year 2002 ARMIS data used to compute general support
    facilities (GSF) investment so that the model's cost estimates take
    into account the current costs of GSF investment associated with
    supported services.[^92] In addition, we will update the model with
    the most recent traffic parameters available from the National
    Exchange Carrier Association (NECA) to determine the percentage of
    the switch allocated to supported services and the switch port
    requirement for interoffice transport. [^93] We also will use the
    methodology employed in the *2001* and *2002 Line Counts Orders* to
    match wire centers reported by non-rural carriers in their quarterly
    line count data used to adjust non-rural high-cost support amounts
    with the wire centers found in the *1999 Data Request* and in the
    model's customer location data.[^94] Commenters generally support
    these input updates.[^95]

25. Some commenters express concerns regarding reporting of unbundled
    network element (UNE) lines that are sold or leased to competitive
    LECs for purposes of calculating and targeting non-rural high-cost
    support amounts. In particular, AT&T urges that leased lines and UNE
    lines must be reported to ensure that the model's cost estimates
    reflect the demand for total lines.[^96] The Maine and Vermont
    Commissions state that some non-rural carriers do not include UNE
    lines in their ARMIS reports, a practice which could reduce support
    amounts by exaggerating per-line costs in urban areas with
    substantial UNE-based competition relative to per-line costs in
    other areas.[^97] We clarify that the model uses lines reported to
    NECA pursuant to section 36.611 to estimate switched line demand,
    and that NECA requires that carriers report both leased lines and
    UNE lines that are sold to competitive LECs for purposes of section
    36.611 reporting.[^98]

26. AT&T urges the Commission to initiate a proceeding to consider
    improvements to the model's platform and inputs, arguing that the
    model has "well-known deficiencies" and that recent developments
    confirm the inaccuracy of certain model platform and input
    assumptions.[^99] Such a proceeding is beyond the scope of the
    Bureau's delegated authority. The Commission has expressed its
    intention to initiate a proceeding to study proposed changes to the
    model inputs and model platform in a comprehensive manner.[^100]

# pETITION for reconsideration of the *2002 line counts update order*

## Background

27. On February 25, 2002, the Maine Public Utilities Commission and the
    Vermont Public Service Board (Petitioners) filed a petition for
    reconsideration of the *2002 Line Counts Update Order*.[^101] Among
    other things, Petitioners contend that the Bureau did not provide
    adequate notice of its decision to update line count data and other
    inputs used to calculate non-rural high-cost support for 2002, and
    that the Bureau used unreliable data in estimating special access
    line counts. Petitioners request that the Commission distribute
    high-cost support for 2002 based on whichever is greater for each
    non-rural carrier, the support amount that they received in 2000, or
    the support amount received for 2002.[^102]

28. In response to the *2003 Line Counts Public Notice*, Petitioners
    filed comments that incorporated by reference their petition for
    reconsideration of the *2002 Line Counts Update Order.*[^103] In
    their comments, they argued that "the methods used last year and
    proposed again for this year would produce highly unreliable line
    counts and costs."[^104] In support of these arguments, they relied
    on their analysis of the Verizon data discussed in the foregoing
    Order.[^105]

## Discussion

29. We do not address Petitioners' arguments that the model input data
    used by the Bureau pursuant to the *2002 Line Counts Update Order*
    was unreliable, because these arguments are fully addressed in the
    foregoing Order. As demonstrated in the foregoing Order, there is no
    merit to Petitioners' contention that the Bureau's methodology for
    allocating updated special access lines in the model is unreliable
    or produces biased results.[^106] As also explained above, and
    contrary to Petitioners' assertion, it is appropriate to use data
    sources from different years in the model when these are the best
    available data to achieve reasonable results that are consistent
    with the Commission's forward-looking cost criteria and with
    applicable universal service principles. Below, we conclude that
    Petitioners' contention that the Bureau failed to provide adequate
    notice of its decision to update data in the *2002 Line Counts
    Update Order* is without merit.

30. Petitioners argue that the Bureau's *2002 Line Counts Public Notice*
    seeking comment on updating line counts for 2002 did not provide
    adequate notice that "routine updating of line counts would
    substantially reduce the support available for Verizon customers in
    their states."[^107] We disagree. The Bureau clearly stated in the
    *2002 Line Counts Update Notice* that it was considering updating
    line count data in the model using the same methodology as the
    Bureau used in the *2001 Line Counts Update Order*.[^108] In
    particular, for purposes of determining support for the year 2002,
    the Bureau sought comment on updating the switched line counts in
    the model with year-end 2000 wire center line count data, updating
    special access line counts with year 2000 ARMIS data, and using the
    Bureau's *1999 Data Request* to allocate the updated lines.[^109] In
    the *2002 Line Counts Update Order*, the Bureau then applied these
    methodologies to estimate switched line and special access line
    count growth. Therefore, the Bureau provided adequate notice in the
    *2002 Line Counts Public Notice* of the method it used to update
    model inputs in the *2002 Line Counts Update Order*.

31. As the Bureau informed the public that it was considering the same
    framework for 2002 updates as it had in the past, we also disagree
    with Petitioners that they lacked adequate notice of the potential
    impact of input updates on 2002 support distributions. Consistent
    with the Commission's criterion that "\[t\]he cost study or model
    and all underlying data, formulae, computations, and software
    associated with the model must be available to all interested
    parties for review and comment,"[^110] the model was posted on the
    Commission's website, and the input data used by the Bureau was
    available to the public either on the website or under a protective
    order or licensing agreement.[^111] Petitioners were therefore
    capable of determining the support distributions for 2002 based on
    the model's cost calculations before the *2002 Line Counts Update
    Order* was adopted. If Petitioners believed the support
    distributions were inappropriate, they had the burden of identifying
    why specific inputs should not have been updated, but Petitioners
    did not meet this burden.[^112] We therefore find that Petitioners
    had adequate notice of the potential impact on non-rural high-cost
    support amounts of the model input updates proposed in the *2002
    Line Counts Public Notice*.[^113]

32. Petitioners further argue that the *2002 Line Counts Public Notice*
    failed to notify parties that the Bureau would count special access
    lines as voice grade equivalent channels in the model's inputs,
    special access lines would increase in various non-rural wire
    centers, and updated line counts would be matched with older data
    for purposes of assigning such lines to wire centers.[^114] We
    reject these claims for the following reasons. First, in the *2002
    Line Counts Update Notice*, the Bureau stated it was considering
    updating special access lines as it had done in the past, which was
    to count special access lines as voice grade equivalent
    channels.[^115] In the comment cycle in that proceeding, Verizon
    requested that the Bureau count special access lines as facilities
    for purposes of calculating support for 2002.[^116] The Bureau,
    however, noted in the *2002 Line Counts Update Order* that such an
    alteration would require a platform change outside the scope of the
    proceeding, and deferred consideration of this issue until a future
    proceeding on possible improvements to the model platform and
    inputs.[^117] Similarly, because Petitioners were notified that
    special access lines would be updated using the same methodology as
    in the past, Petitioners could access year 2000 ARMIS special access
    filings for the non-rural carriers in their states on the
    Commission's website to find out whether special access lines
    increased or decreased for 2002 cost estimates.[^118] Consequently,
    we reject Petitioner's argument that the *2002 Line Counts Update
    Public Notice* failed to apprise interested parties of the
    methodology used to update special access lines in the *2002 Line
    Count Updates Order.* We find that the *2002 Line Counts Public
    Notice* was clear in seeking comment on whether to update the
    model's inputs consistent with past practice.

33. Petitioners also argue that the Bureau did not make available line
    count data at the time of release of the *2002 Line Counts Update
    Public Notice* due to proprietary treatment of these data.[^119]
    This claim is incorrect. In the *First Report and Order*, the
    Commission established, as one of the criteria in developing a
    forward-looking economic cost model to determine universal service
    support, that "all underlying data, formulae, computations, and
    software associated with the model should be available to all
    interested parties for review and comment."[^120] Consistent with
    this principle, the Commission has determined that line count data
    used for wire centers that receive high-cost support should be
    publicly available.[^121] In addition, line count data for wire
    centers that do not receive high-cost support are available pursuant
    to the Bureau's *Interim Protective Order*.[^122] Year-end 2000 line
    count data used to estimate high-cost support for 2002 was filed by
    non-rural carriers by July 31, 2001, and therefore was available to
    Petitioners at the time of the release of the *2002 Line Counts
    Public Notice* on September 11, 2001.[^123]

# ORDERING CLAUSES

34. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403, and 410 of
    the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154,
    201-205, 214, 218-220, 254, 303(r), 403, and 410, and section 1.108
    of the Commission's rules, 47 C.F.R. § 0.91(f), this ORDER IS
    ADOPTED.

35. IT IS FURTHER ORDERED that, pursuant to sections 4, 201-205,
    218-220, 303(r), and 405 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 154, 201-205, 218-220, 303(r), and 405 of the
    Communications Act of 1934, as amended, and sections 1.106 and 1.429
    of the Commission\'s rules, 47 C.F.R. §§ 1.106, 1.429, that the
    petition for reconsideration filed February 25, 2002, by the Maine
    Public Utilities Commission and Vermont Public Service Board is
    DENIED.

    FEDERAL COMMUNICATIONS COMMISSION

    Carol E. Mattey

    Deputy Chief, Wireline Competition Bureau

#   {#section .unnumbered}

[^1]: *See Federal-State Joint Board on Universal Service*, CC Docket
    96-45, Order, 16 FCC Rcd 22418 (Com. Car. Bur. 2001) (*2002 Line
    Counts Update Order*); *Federal-State Joint Board on Universal
    Service*, CC Docket 96-45, Order, 15 FCC Rcd 23960 (Com. Car. Bur.
    2000) (*2001 Line Counts Update Order*); *Federal-State Joint Board
    on Universal Service*, CC Docket 96-45, Twentieth Reconsideration
    Order, 15 FCC Rcd 12,070 (2000) (*Twentieth Reconsideration Order*).

[^2]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, First Report and Order, 12 FCC Rcd 8776, 8915, para. 250
    (1997) (*First Report and Order*).

[^3]: *Id.* at 8915, para. 250.

[^4]: *See* *id.* at 8915, para. 250.

[^5]: *See Federal-State Joint Board on Universal Service,* CC Docket
    No. 96-45, *Forward-Looking Mechanism for High Cost Support for
    Non-Rural LECs*, CC Docket No. 97-160, Tenth Report and Order, 14
    FCC Rcd 20156, 20186, para. 61, 20327-28, paras. 392-93 (1999).

[^6]: *See generally, Revision of ARMIS Annual Summary Report, ARMIS
    USOA Report, ARMIS Joint Cost Report, ARMIS Access Report, ARMIS
    Service Quality Report, ARMIS Customer Satisfaction Report, ARMIS
    Infrastructure Report, ARMIS Operating Data Report, ARMIS Forecast
    of Investment Usage Report for Certain Class A and Tier 1 Telephone
    Companies*, Order, AAD 95-91, CC Docket No. 86-182, 15 FCC Rcd 24107
    (Wireline Compet. Bur., Accounting Safeguards Div. 2000).

[^7]: *See id.* Each DS-1 is counted as 24 DS-0 equivalent channels, and
    each DS-3 is counted as 672 DS-0 equivalent channels.

[^8]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22420-21, paras.
    7-8; *2001 Line Counts Update Order*, 15 FCC Rcd at 23694, paras.
    9-10; *see* 47 C.F.R. §§ 36.611, 54.307.

[^9]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22420-21, para. 7;
    *2001 Line Counts Update Order*, 15 FCC Rcd at 23964, para. 9.

[^10]: *See* *2002 Line Counts Update Order*, 16 FCC Rcd at 22422-23,
    paras. 13-14; *2001 Line Counts Update Order*, 15 FCC Rcd at
    23966-67, paras. 14-16. Non-rural carriers are not required to
    disaggregate switched lines by class of service pursuant to sections
    36.611 and 54.307. 47 C.F.R. §§ 36.611, 54.307. In response to the
    *1999 Data Request*, non-rural carriers reported disaggregated
    year-end 1998 lines for each wire center. *Federal-State Joint Board
    on Universal Service*, CC Docket No. 96-45, CC Docket No. 97-160,
    Forward-Looking Mechanism for High-Cost Support for Non-Rural LECs,
    Order, DA 99-1406 (Com. Car. Bur. rel. July 19, 1999) (*1999 Data
    Request*).

[^11]: *2002 Line Counts Update Order*, 15 FCC Rcd at 22422, para. 13;
    *2001 Line Counts Update Order*, 15 FCC Rcd at 23966-67, para. 15*.*

[^12]: *See 2002 Line Counts Update Order*, 16 FCC Rcd at 22423, para.
    14; *2001 Line Counts Update Order*, 15 FCC Rcd at 23966, para. 16.
    Line counts reported by non-rural carriers pursuant to sections
    36.611 and 54.307 include only switched lines.

[^13]: *See* *2002 Line Counts Update Order*, 16 FCC Rcd at 22423, para.
    14; *2001 Line Counts Update Order*, 15 FCC Rcd at 23967, para. 16.
    ARMIS lines are reported at the study-area level, rather than for
    each wire center.

[^14]: *See* *Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Order, 18 FCC Rcd 41, 46-47, para. 12 (Wireline Compet.
    Bur. 2003); *Federal-State Joint Board on Universal Service*, CC
    Docket No. 96-45, Ninth Report and Order and Eighteenth Order on
    Reconsideration, 14 FCC Rcd 20432 (1999), *remanded, Qwest Corp. v.
    FCC*, 258 F.3d 1191 (10^th^ Cir. 2001); *Federal-State Joint Board
    on Universal Service*, CC Docket No. 96-45, Order on Remand, Further
    Notice of Proposed Rulemaking, and Memorandum Opinion and Order, FCC
    03-249 (released Oct. 27, 2003). The Bureau adopted an upgraded and
    corrected version of the model in January 2003, but deferred its use
    with updated input data until after a Commission decision in the
    *Ninth Report and Order* remand proceeding, explaining that this
    action would avoid the possibility of two successive changes in
    non-rural high-cost support amounts within a relatively short period
    of time. *Id.*

[^15]: *Wireline Competition Bureau Seeks Comment on Updating Line
    Counts and Other Limited Information Used in Calculating High-Cost
    Universal Service Support for Non-Rural Carriers*, CC Docket No.
    96-45, Public Notice, DA 03-25 (rel. Jan. 7, 2003) (*2003 Line
    Counts Public Notice*).

[^16]: *See* Maine Public Utilities Commission and Vermont Public
    Service Board's Comments, filed Feb. 28, 2003, at 4-7 (Maine/Vermont
    2003 Public Notice Comments); Verizon's Comments, filed Mar. 3,
    2003, at 3 (Verizon 2003 Public Notice Comments); CC Docket No.
    96-45, BellSouth Corporation's Reply Comments, filed Mar. 12, 2003,
    at 2-4 (BellSouth 2003 Public Notice Reply Comments).

[^17]: Based on ARMIS data, special access lines have increased by
    approximately 20 percent nationwide for each of the last two years.
    *See* FCC ARMIS Report 43-08, the Operating Data Report (2002); FCC
    ARMIS Report 43-08, the Operating Data Report (2001);
    http://svartifoss2.fcc.gov/eafs/MainMenu.cfm. Switched lines have
    decreased slightly over the same time period. *See* Federal
    Universal Service Support Mechanisms Fund Size Projections for the
    Fourth Quarter of 2003, Appendix HC 05 (Universal Service
    Administrative Company, August 1, 2003); Federal Universal Service
    Support Mechanisms Fund Size Projections for the Fourth Quarter of
    2002, Appendix HC 04 (Universal Service Administrative Company,
    August 1, 2002); http://www.universalservice.org/overview/filings/.

[^18]: For example, Verizon states that the model tends to reduce
    per-line cost estimates over time "by converting the increased
    demand for high-speed special access services into voice-grade
    equivalencies, which lowers the average cost per line and which
    offsets the overall reduction in demand for voice grade residential
    service." Verizon 2003 Public Notice Comments at 3. As a result,
    Verizon maintains that updating special access line count data
    effectively phases down non-rural high-cost support without a
    deliberate decision by the Commission. *See id.* at 2-3.

[^19]: *See* Joint Commenters 2003 Public Notice Comments at 5-6; Letter
    from Elisabeth H. Ross, Birch Horton, Bittner and Cherot to Marlene
    H. Dortch, Secretary, Federal Communications Commission, dated May
    2, 2003, at 4-5 (Maine/Vermont Ex Parte). The Joint Commenters
    obtained these data from Verizon under authority derived from state
    law. Joint Commenters 2003 Public Notice Comments at 3. Verizon
    subsequently filed the data with the Commission and requested
    confidential treatment. *See generally*, *id.*; Maine/Vermont Ex
    Parte. The wire center line count data underlying the Joint
    Commenters' analysis is available under the terms of a protective
    order. *See* *Federal-State Joint Board on Universal Service*, CC
    Docket No. 96-45, Interim Protective Order, 15 FCC Rcd 10183 (Com.
    Car. Bur. 2000).

[^20]: *See* Joint Commenters 2003 Public Notice Comments at 5-6;
    Maine/Vermont Ex Parte at 4-5; *see infra*, paras. 15-23. As
    discussed below, the Joint Commenters incorporate by reference their
    petition for reconsideration of the *2002 Line Counts Update Order*,
    arguing that their analysis of the Verizon data demonstrates that
    "the methods used last year and proposed again this year would
    produce highly unreliable line counts and costs." Joint Commenters
    2003 Public Notice Comments at 3; *see infra* para. 28.

[^21]: *Wireline Competition Bureau Seeks Further Comment on Updating
    Line Counts Used in Calculating High-Cost Universal Service Support
    for Non-Rural Carriers*, CC Docket No. 96-45, Public Notice, DA
    03-2469 (rel. July 24, 2003) (*2004 Line Counts Update Public
    Notice*).

[^22]: *See id.*

[^23]: Qwest Communications International Inc.'s Comments, filed Sept.
    2, 2003, at 4 (Qwest 2004 Public Notice Comments). Qwest also argues
    that the model's cost estimates are particularly low in areas with a
    higher-than-average proportion of special access to switched lines.
    *See* Qwest 2004 Public Notice Comments at 1.

[^24]: Verizon's Comments, filed Sept. 2, 2003, at 4 (Verizon 2004
    Public Notice Comments). Verizon asks that the Bureau publish model
    cost estimates with and without special access demand at the
    study-area level before deciding this issue, because it maintains
    that the information on the Commission's web site is insufficient to
    run the current version of the model to remove special access
    demand. *See* Verizon 2004 Public Notice Comments at 4. BellSouth
    generally concurs with Verizon's comments. BellSouth Corporations
    Reply Comments, filed Sept. 10, 2003, at 1 (BellSouth 2004 Public
    Notice Reply Comments)

[^25]: AT&T Corporation's Comments, filed Sept. 2, 2003, at 4 (AT&T 2004
    Public Notice Comments); MCI's Comments, filed Sept. 2, 2003, at 2-3
    (MCI 2004 Public Notice Comments).

[^26]: AT&T 2004 Public Notice Comments at 4.

[^27]: AT&T 2004 Public Notice Comments at 2. AT&T acknowledges that
    "properly capturing the impacts on cost of all services that utilize
    the LECs' networks but that are not explicitly modeled requires
    changes in the Synthesis Model" that are beyond the scope of this
    proceeding. AT&T 2004 Public Notice Comments at 5-6. Therefore, AT&T
    asks that the Commission open a proceeding to consider input and
    platform changes to the model. *Id.* at 6.

[^28]: AT&T 2004 Public Notice Reply Comments at 2.

[^29]: AT&T 2004 Public Notice Reply Comments at 2; MCI 2004 Public
    Notice Comments at 3.

[^30]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22420-21, paras.
    7-8; *2001 Line Counts Update Order*, 15 FCC Rcd at 23964, paras.
    9-10; *Twentieth Reconsideration Order*, 15 FCC Rcd at 12073, para.
    8.

[^31]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22421, para. 9;
    *2001 Line Counts Update Order*, 15 FCC Rcd at 23965, para. 11;
    *Twentieth Reconsideration Order*, FCC 00-126, at 12074, paras.
    9-10.

[^32]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22422-23, para.
    13; *2001 Line Counts Update Order*, 15 FCC Rcd at 23966-67, paras.
    14-15.

[^33]: *See* BellSouth 2004 Public Notice Reply Comments at 2. *See*
    *also* Joint Commenters 2003 Public Notice Comments at 8.

[^34]: This remains the case even after the release of year 2000 Census
    data, because such data do not currently exist in a format that the
    Commission could use to update customer location data. *See 2002
    Line Counts Order*, 16 FCC Rcd at 22422, para. 12.

[^35]: *2002 Line Counts Update Order*, 16 FCC Rcd at 22420, para. 7;
    *2001 Line Counts Update Order*, 15 FCC Rcd at 23964, para. 9; *see
    First Report and Order*, 12 FCC Rcd at 8915, para. 250.

[^36]: *See 2002 Line Counts Update Order*, 16 FCC Rcd at 22421-22,
    para. 11; *2001 Line Counts Order*, 15 FCC Rcd at 23965, para. 13.

[^37]: *See* BellSouth 2004 Public Notice Reply Comments at 3. Updating
    line count data without updating customer location data treats all
    line growth as occurring at existing, rather than new, customer
    locations. *See 2001 Line Counts Order*, 15 FCC Rcd at 23965, para.
    12.

[^38]: *See 2001 Line Counts Order* 15 FCC Rcd at 23965, para. 13 ("If
    the 'missing' new locations are anywhere along the road network used
    to create the surrogate locations, the outside plant structure costs
    already would be included in the model's cost estimates.").

[^39]: BellSouth 2004 Public Notice Reply Comments at 2-3 ("Clearly,
    BellSouth's number of switched access lines are declining. Also, it
    is clear that new housing starts in BellSouth's territory, as in
    much of the nation, have risen tremendously since 1996. This is
    particularly evident in the past year or so as a result of record
    low mortgage rates."); *see 2002 Line Counts Order*, 16 FCC Rcd at
    22421-22, para. 11, note 26; *2001 Line Counts Order*, 15 FCC Rcd at
    23965, para. 12.

[^40]: *Trends in Telephone Service*, Industry Analysis and Technology
    Division, Wireline Competition Bureau, Table 16-1 (Aug. 2003),
    available at
    http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/trend803.pdf.
    Commission data also indicate that since 1996, the average annual
    rate of change in the number of households is 1.2 percent. *Id.*

[^41]: AT&T 2003 Public Notice Comments at 4-5.

[^42]: Verizon's Reply Comments, filed Mar. 12, 2003, at 1-2 (Verizon
    2003 Public Notice Reply Comments).

[^43]: *See supra* note 18; Verizon 2003 Public Notice Reply Comments at
    2 ("Simple projections of past growth trends would fail to capture
    factors that cause out-of-trend changes in demand for telephone
    service, such as economic downturns or recoveries, price changes
    that stimulate or depress demand, and changes in the amount of
    bypass to competing providers.").

[^44]: The Florida Public Service Commission proposes that model cost
    estimates be updated on a quarterly basis using the same lines as
    are used to adjust quarterly support payments. *See* Florida Public
    Service Commission's Comments, filed Feb. 19, 2003, at 2. This
    proposal is inconsistent with the framework adopted in the
    *Twentieth Reconsideration Order* and, therefore, is appropriately
    addressed in a future Commission proceeding regarding model updates.
    *See Twentieth Reconsideration Order*, FCC 00-126 at paras. 5, 8.

[^45]: *See First Report and Order,*12 FCC Rcd 8776 at 8912-16, para.
    250; MCI 2004 Public Notice Comments at 3.

[^46]: *See* *2002 Line Counts Update Order*, 16 FCC Rcd at 22423, para.
    14; *2001 Line Counts Update Order*, 15 FCC Rcd at 23967, para. 16.

[^47]: *See* AT&T 2004 Public Notice Comments at 4-5.

[^48]: *See First Report and Order,*12 FCC Rcd 8776 at 8912-16, para.
    250; MCI 2004 Public Notice Comments at 3.

[^49]: *See* 47 U.S.C. § 254(b)(5); *Federal-State Joint Board on
    Universal Service*, CC Docket Nos. 96-45, 97-160, Fifth Report and
    Order, 13 FCC Rcd 21323, 21329, para. 13 (1998) (\"We must balance
    the need to provide predictability and certainty with the need to
    account for changes that inevitably will occur over time, such as
    technological advances.\").

[^50]: 47 U.S.C. § 254(b)(5); *see Delphi Order*, 18 FCC Rcd at 46-47,
    para. 12 (deferring use of upgraded, corrected version of the model
    until a decision in the *Ninth Report and Order* remand proceeding,
    to \"avoid the possibility of two successive changes in the model\'s
    calculations and support amounts within a relatively short period of
    time.\")*; see also* Verizon 2004 Public Notice Comments at 3-4;
    BellSouth 2004 Public Notice Reply Comments at 1-2.

[^51]: *See* Verizon 2004 Public Notice Comments at 1-3.

[^52]: *See, e.g*., AT&T 2004 Public Notice Comments at 5.

[^53]: *See* MCI 2004 Public Notice Reply Comments at 3 ("Correcting for
    an alleged overstatement of \[special access\] lines without at the
    same time correcting for a known understatement of \[digital
    subscriber\] lines would be inappropriate.").

[^54]: *See First Report and Order,*12 FCC Rcd 8776 at 8912-16, para.
    250. We note that certain commenters have suggested that the Bureau
    only remove DS-3 as an alternative to zeroing out all special access
    lines. *See* Verizon 2004 Public Notice Comments at 3. This
    proposal, however is not possible to implement because DS-3 lines
    are currently not reported differently from other high-capacity
    access lines in ARMIS filings and therefore cannot be separated from
    these data.

[^55]: BellSouth 2004 Public Notice Reply Comments at 3-4; *see In the
    Matter of Petition of WorldCom, Inc. Pursuant to Section 252(e)(5)
    of the Communications Act for Preemption of the Jurisdiction of the
    Virginia State Corporation Commission Regarding Interconnection
    Disputes with Verizon Virginia, Inc. and for Expedited Arbitration,
    et al*., CC Docket Nos. 00-218, 00-251, Memorandum Opinion and
    Order, DA 03-2738 (Wireline Compet. Bur. rel. Aug. 29, 2003)
    (*Virginia Arbitration Order*).

[^56]: *Virginia Arbitration Order*, DA 03-2738, at paras. 171, 210.

[^57]: *Id.* at para. 210.

[^58]: 47 C.F.R. § 254(b)(5).

[^59]: Verizon 2004 Public Notice Comments at 3.

[^60]: Specifically, in order to run the model without special access
    lines, after exporting data in the appropriate Microsoft Access
    files into Microsoft Excel spreadsheets, special access then can be
    set to zero before importing these data back into Microsoft Access
    files.

[^61]: *See* <http://www.fcc.gov/wcb/tapd/hcpm/>;
    <http://gullfoss2.fcc.gov/cgi-bin/websql/prod/ccb/armis1/forms/armis.hts>.

[^62]: *See* *Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Interim Protective Order, 15 FCC Rcd 10183 (Com. Car.
    Bur. 2000).

[^63]: *See* Joint Commenters 2003 Public Notice Comments at 3;
    Maine/Vermont Ex Parte Attachment at 1.

[^64]: *See* Joint Commenters 2003 Public Notice Comments at 4-5 & n.4.

[^65]: *See* Joint Commenters 2003 Public Notice Comments at 5;
    Maine/Vermont Ex Parte Attachment, at 4.

[^66]: *See* Joint Commenters 2003 Public Notice Comments at 5;
    Maine/Vermont Ex Parte Attachment, at 4.

[^67]: Maine/Vermont Ex Parte at 5.

[^68]: *See* Joint Commenters 2003 Public Notice Comments at 7.

[^69]: *Id.* at 9.

[^70]: *See First Report and Order*, 12 FCC Rcd at 8912-16, para. 250.

[^71]: *1999 Data Request*, DA 99-1406 at para. 7; *First Report and
    Order*, 12 FCC Rcd at 8915, para. 250.

[^72]: Private line data are now included in ARMIS reports. *See infra*
    note 89.

[^73]: The Bureau's methodology, therefore, assumes the same special
    access line growth rate across all wire centers in a study area.

[^74]: The range in differences between the Verizon data and the
    Bureau's allocation methodology based on the *1999 Data Request* is
    -0.7 to +0.6 percent. For purposes of this discussion, a negative
    sign indicates that the average number of Verizon lines is less than
    the average number of model lines, and a positive sign indicates the
    reverse.

[^75]: Thus, although the average difference is in the positive
    direction, consistent with the Joint Commenters' findings, most wire
    centers in this group show changes in the opposite (negative)
    direction. The average difference for wire centers in this group is
    +0.6 percent, but the median differences is -0.3 percent.

[^76]: Our correlation analysis is based on all of the wire centers,
    rather than the averages for the wire center categories used by the
    Joint Commenters.

[^77]: Joint Commenters 2003 Public Notice Comments at 7.

[^78]: *Id.*

[^79]: For large wire centers with over 25,000 lines, the Joint
    Commenters found that the average difference was -0.78, but one of
    the five wire centers in this group has higher costs using model
    lines.

[^80]: Joint Commenters 2003 Public Notice Comments at 3.

[^81]: *See 2002 Line Counts Update Order*, 16 FCC Rcd at 22421, 22423,
    para. 8, 14; *2001 Line Counts Update Order*, 15 FCC Rcd at 23964,
    23967, para. 10, 16.

[^82]: The Bureau factored down the Verizon 2001 special access line
    data by the ratio of total special access lines for year 2000 and
    the total special access lines for year 2001 --- approximately 0.75.

[^83]: Specifically, for wire centers with 0 to 1,000 switched access
    lines, we found a cost difference of \$0.62. However, 26 of the 34
    wire centers in that category showed negative changes in costs. For
    wire centers with 1,000 to 2,499 switched access lines, the change
    in cost was \$0.50, but 50 of the 77 wire centers showed a negative
    change in cost. Moreover, for the five large wire centers with
    25,000 or more switched access lines, we found an average change in
    cost of -\$0.30, but one wire center in that group had a positive
    change and another wire center had only a minor negative change.

[^84]: Our correlation analysis is based on all data points instead of
    the averages of the grouped data that the Joint Commenters used.

[^85]: *See e.g.*, MCI 2004 Public Notice Comments at 3.

[^86]: Joint Commenters 2003 Public Notice Comments at 7. The Joint
    Commenters do not specifically propose that we apply their cost
    correction factor nationwide, but they did so for purposes of their
    own analysis. Based on this analysis, they claim that support in
    Maine would increase from \$5.45 to \$9.56 billion and support in
    Vermont would increase from \$9.09 to \$11.26 billion. *Id.*

[^87]: Joint Commenters 2003 Public Notice Comments at 9.

[^88]: *See Revision of ARMIS Annual Summary Report, ARMIS USOA Report,
    ARMIS Joint Cost Report, ARMIS Access Report, ARMIS Service Quality
    Report, ARMIS Customer Satisfaction Report, ARMIS Infrastructure
    Report, ARMIS Operating Data Report, ARMIS Forecast of Investment
    Usage Report for Certain Class A and Tier 1 Telephone Companies*,
    Order, AAD 95-91, CC Docket No. 86-182, 15 FCC Rcd 24107, 24134
    (Com. Car. Bur., Acct. Aud. Div. 2000). After this clarification,
    Verizon reported significant increases in its special access lines
    in Maine and Vermont, among other Verizon states, which may explain
    the decreases in support in Maine and Vermont following the 2000
    funding year.

[^89]: *See id*; *see also* *Revision of ARMIS Annual Summary Report,
    ARMIS USOA Report, ARMIS Joint Cost Report, ARMIS Access Report,
    ARMIS Service Quality Report, ARMIS Customer Satisfaction Report,
    ARMIS Infrastructure Report, ARMIS Operating Data Report, ARMIS
    Forecast of Investment Usage Report*, and ARMIS Actual Usage of
    Investment Report for Certain Class A and Tier 1 Telephone
    Companies, Order, AAD 95-91, CC Docket No. 86-182, 17 FCC Rcd 25421,
    25452 (Wireline Compet. Bur., Industry Analysis and Technology Div.
    2002) (clarifying that state special access lines should be reported
    as a separate category).

[^90]: We note that this increase, rather than the Bureau's allocation
    methodology, may be the "principal reason Maine and Vermont received
    reduced support in 2002." Joint Commenters 2002 Public Notice
    Comments at 2.

[^91]: *See Tenth Report and Order*, 14 FCC Rcd at 20181-82, 20186,
    para. 51, 61.

[^92]: 2002 *Line Counts Order*, 16 FCC Rcd at 22424, paras. 16-17.

[^93]: *Id.* at paras.18-19.

[^94]: *See 2002 Line Counts Order*, 16 FCC Rcd at 22423, para. 15;
    *2001 Line Counts Order*, 15 FCC Rcd at 23967, para. 17.

[^95]: AT&T 2004 Public Notice Comments at 7; Florida Public Service
    Commission 2003 Public Notice Comments at 3.

[^96]: AT&T 2004 Public Notice Reply Comments at 5.

[^97]: Joint Commenters 2003 Public Notice Comments at 8.

[^98]: *See National Exchange Carrier Association Pool Adminsitration
    Procedures, Section 5*, Common Line Pool, Traffic Sensitive Pool and
    Lifeline Assistance Reporting, Exhibit 5-2 (2003). We note that the
    Bureau recently directed carriers to identify the types of UNEs
    (e.g., "UNE-P") included in ARMIS access line data to allow the
    public and the Commission to better understand the data submitted in
    ARMIS reports. *In the Matter of Revision of ARMIS Annual Summary
    Report (FCC Report 43-01), ARMIS USOA Report (FCC Report 43-02),
    ARMIS Joint Cost Report (FCC Report 43-03), ARMIS Access Report (FCC
    Report 43-04), ARMIS Service Quality Report (FCC Report 43-05),
    ARMIS Customer Satisfaction Report (FCC Report 43-06), ARMIS
    Infrastructure Report (FCC Report 43-07), ARMIS Operating Data
    Report (FCC Report 43-08), ARMIS Forecast of Investment Usage Report
    (FCC Report 495A), and ARMIS Actual Usage of Investment Report (FCC
    Report 495B) for Certain Class A and Tier 1 Telephone Companies*,
    Order, CC Docket No. 86-182, DA 03-3912 at para. 13 (Wireline
    Compet. Bur. rel. Dec. 17, 2003).

[^99]: AT&T 2003 Public Notice Reply Comments at 8-9.

[^100]: *See Federal-State Joint Board on Universal Service,
    Forward-Looking Mechanism for High Cost Support for Non-Rural LECs*,
    Tenth Report and Order, CC Docket Nos. 96-45, 97-160, 14 FCC Rcd
    20156, 20170, para. 28 (1999) (*Tenth Report and Order*) ("We
    therefore have committed to initiating a proceeding to study how the
    model should be used in the future (*e.g.*, how inputs data should
    be updated) and how the model itself should change to reflect
    changing circumstances."). *See also 2000 Biennial Regulatory Review
    -- Comprehensive Review of the Accounting Requirements and ARMIS
    Reporting Requirements for Incumbent Local Exchange Carriers: Phase
    2*, CC Docket No. 00-199, Report and Order, 16 FCC Rcd 19911, 19929
    n. 69 (2001).

[^101]: *In the Matter of Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Maine Public Utilities Commission's
    and Vermont Public Service Board's Petition for Reconsideration,
    filed Feb. 25, 2002 (Maine/Vermont Petition).

[^102]: Maine/Vermont Petition at 27-28. As discussed *supra*,
    Petitioners maintain that the data used to determine non-rural
    high-cost support for 2000 is more reliable than the data used in
    subsequent years. *See supra* para. 23.

[^103]: Maine/Vermont 2003 Public Notice Comments at 3.

[^104]: *Id.*

[^105]: *Id.*

[^106]: *See supra* paras. 15-21.

[^107]: *See* Maine/Vermont Petition at 9.

[^108]: *See Common Carrier Bureau Seeks Comment on Updating Line Counts
    and Other Limited Information Used in Calculating High-Cost
    Universal Service Support for Non-Rural Carriers*, CC Docket No.
    96-45, Public Notice, DA 01-2107, at 3 (rel. Sept. 11, 2001) (*2002
    Line Counts Update Public Notice*).

[^109]: *2002 Line Counts Public Notice* at 3.

[^110]: *First Report and Order*, 12 FCC Rcd at 8915, para. 250.

[^111]: *See* *Federal-State Joint Board on Universal Service*, CC
    Docket No. 96-45, Interim Protective Order, 15 FCC Rcd 10183 (Com.
    Car. Bur. 2000) (*Interim Protective Order*). The customer location
    data used in the model is available through the Universal Service
    Administrative Company under a licensing agreement with PNR
    Associates.

[^112]: *See Qwest v. FCC*, 258 F.3d at 1205-06.

[^113]: We recognize that state commissions may have limited resources
    to run the model. *See* Petitioners' Reply Comments at 7-8. The
    process the Bureau employs to run the model is expressly designed to
    permit the review and input of affected parties, however, and the
    Bureau is committed to ensuring that *all* parties can run the
    model. *See* *Federal-State Joint Board on Universal Service,*
    Docket No. 96-45, Order on Reconsideration, DA 03-3867, para. 7
    (Wireline Compet. Bur. rel. Dec. 5, 2003). We note that, in addition
    to making the model and inputs available on its website, or under a
    protective order or licensing agreement, Commission staff worked
    with Petitioners in assisting them to run the model. *See*
    Petitioners' Reply Comments at 11. We are not persuaded that the
    pendency of the *Delphi Public Notice* prevented Petitioners from
    adequately commenting on the Bureau's proposal to update model input
    data for the purpose of determining support for 2002. *See*
    Maine/Vermont Petition at 9-10; *Common Carrier Bureau Seeks Comment
    on Translation of Cost Model to Delphi Computer Language and
    Announces Posting of Updated Cost Model,* CC Docket No. 96-45,
    Public Notice, 16 FCC Rcd 12630 (2001) (*Delphi Public Notice*). The
    *Delphi Public Notice* was merely an invitation for comment on
    whether the Bureau should consider using this version of the model,
    which was translated to Delphi computer language, rather than the
    Turbo-Pascal computer language version, to calculate non-rural
    high-cost support for 2002.

[^114]: *See* Maine/Vermont Petition at 10.

[^115]: *See 2002 Line Counts Update Public Notice* at 3.

[^116]: *See* Verizon Comments, filed Oct. 4, 2001, at 3-4 (Verizon 2002
    Public Notice Comments).

[^117]: *See 2002 Line Counts Update Order*, 16 FCC Rcd at 22423, n. 40.

[^118]: Year 2000 ARMIS data was filed with the Commission no later than
    April 2, 2001. These data are available at
    <http://gullfoss2.fcc.gov/cgi-bin/websql/prod/ccb/armis1/forms/armis.hts>
    on the Commission's website.

[^119]: *See* Maine/Vermont Petition at 9.

[^120]: *First Report and Order*, 12 FCC Rcd at 8915, para. 250.

[^121]: Federal-State Joint Board on Universal Service, CC Docket No.
    96-45, Order, 15 FCC Rcd 8746, 8750-51, para. 9 (2000) (*2000 Line
    Counts Confidentiality Order*).

[^122]: *Interim Protective Order,* 15 FCC Rcd at 10183, para. 1 ("This
    Protective Order is intended to facilitate and expedite review of
    line count data at the wire center level submitted pursuant to
    sections 36.611, 36.612, and 54.307 of the Commission's rules for
    wire centers not receiving high-cost universal service support.").

[^123]: *See 2002 Line Counts Update Notice*; 47 C.F.R. §§ 36.611;
    36.612; 54.307.