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 Federal  Communications  Commission  FCC  02-  41 
 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 

 NOTICE  OF  PROPOSED  RULEMAKING  AND  ORDER 
 Adopted:  February  13,  2002  Released:  February  15,  2002 
 Comment  Date:  30  days  from  publication  in  the  Federal  Register.  Reply  Comment  Date:  45  days  from  publication  in  the  Federal  Register. 

 By  the  Commission: 
 TABLE  OF  CONTENTS  Paragraph 

 I.  INTRODUCTION...............................................................................................................................  1 
 II.  BACKGROUND.................................................................................................................................  2 
 A.  THE  1996  ACT  ...................................................................................................................................  2  B.  NINTH  REPORT  AND  ORDER................................................................................................................  4 

 C.  TENTH  REPORT  AND  ORDER  ...............................................................................................................  8  D.  TENTH  CIRCUIT  REMAND..................................................................................................................  9 

 III.  ISSUES  FOR  COMMENT...........................................................................................................  12 
 A.  DEFINITIONS  OF  REASONABLY  COMPARABLE  AND  SUFFICIENT  .............................................  13  B.  BENCHMARK  ISSUES  .......................................................................................................................  18 

 C.  STATE  INDUCEMENTS  .....................................................................................................................  22 
 IV.  THE  COMMISSIONS  PLAN  FOR  UNIVERSAL  SERVICE  AND  JOINT  BOARD  REFERRAL...................................................................................................................................  25 

 V.  PROCEDURAL  ISSUES..................................................................................................................  29 
 A.  EX  PARTE  PRESENTATIONS.............................................................................................................  29  B.  INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS  ..............................................................................  30 

 C.  COMMENT  FILING  PROCEDURES.....................................................................................................  42  D.  FURTHER  INFORMATION  .................................................................................................................  48 

 VI.  ORDERING  CLAUSES  ...............................................................................................................  50 
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 I.  INTRODUCTION 
 1.  In  this  Notice  of  Proposed  Rulemaking  and  Order  (NPRM),  we  seek  comment  on  the  issues  from  the  Ninth  Report  and  Order  1  remanded  by  the  United  States  Court  of  Appeals  for 

 the  Tenth  Circuit.  2  The  Ninth  Report  and  Order  established  a  federal  high-  cost  universal  service  support  mechanism  for  non-  rural  carriers  based  on  forward-  looking  economic  costs.  The  court 
 remanded  the  Ninth  Report  and  Order  to  the  Commission  for  further  consideration  and  explanation  of  its  decision.  3  Specifically,  the  court  remanded  the  Ninth  Report  and  Order  to  the 
 Commission  to  establish  an  adequate  legal  and  factual  basis  for  the  Ninth  Order  and,  if  necessary,  to  reconsider  the  operative  mechanism  promulgated  in  that  Order.  4  In  particular,  the 
 court  concluded  that  the  Commission  did  not  (1)  define  adequately  the  key  statutory  terms  reasonably  comparable  and  sufficient;  (2)  adequately  explain  setting  the  funding  benchmark 
 at  135  percent  of  the  national  average;  (3)  provide  inducements  for  state  universal  service  mechanisms;  or  (4)  explain  how  this  funding  mechanism  will  interact  with  other  universal 
 service  programs.  5  We  seek  comment  on  the  first  three  issues  and  refer  the  record  collected  in  this  proceeding  to  the  Federal-  State  Joint  Board  on  Universal  Service  (Joint  Board)  for  a 
 recommended  decision.  6  As  part  of  this  referral,  we  also  ask  the  Joint  Board  to  begin  a  comprehensive  review  of  the  non-  rural  high-  cost  support  mechanism.  In  light  of  the  need  to  act 
 expeditiously  on  these  issues,  we  will  delay  initiation  of  a  proceeding  to  consider  future  action  on  the  rural  high-  cost  support  mechanism. 

 II.  BACKGROUND 
 A.  The  1996  Act 
 2.  The  Telecommunications  Act  of  1996  codified  the  Commissions  historical  commitment  to  promote  universal  service  in  order  to  help  ensure  that  consumers  in  all  regions  of 

 the  nation  have  access  to  affordable,  quality  telecommunications  services.  7  In  section  254  of  the  Act,  Congress  directed  the  Commission,  after  consultation  with  the  Joint  Board,  to  establish 
 specific,  predictable,  and  sufficient  support  mechanisms  to  preserve  and  advance  universal  service.  8  In  addition,  in  section  254(  b),  Congress  provided  a  list  of  principles  upon  which  the 

 1  Federal-  State  Joint  Board  on  Universal  Service,  Ninth  Report  &  Order  and  Eighteenth  Order  on 
 Reconsideration,  14  FCC  Rcd.  20432  (1999)  (Ninth  Report  and  Order).  2 
 Qwest  Corp.  v.  FCC,  258  F.  3d  1191  (10  th  Cir.  2001).  3 
 Id.  at  1195.  4 
 Id.  at  1205.  5 
 Id.  at  1201.  6 
 As  explained  in  part  IV  below,  the  Commission  will  address  the  fourth  issue  on  remand,  explaining  how  the  funding  mechanism  will  interact  with  other  universal  service  programs,  at  a  later  date. 

 7  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996)  (1996  Act).  The  1996  Act 
 amended  the  Communications  Act  of  1934.  47  U.  S.  C.    151,  et  seq.  (Communications  Act  or  Act).  References  to  section  254  in  this  NPRM  refer  to  the  universal  service  provisions  of  the  1996  Act,  which  are  codified  at  47  U.  S.  C.   

 254  of  the  Act.  8 
 47  U.  S.  C.    254  (a),  (b)(  5),  (d),  (e).  See  also  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Notice  of  Proposed  Rulemaking  and  Order  Establishing  Joint  Board,  11  FCC  Rcd  18092  (1996)  (Universal 

 Service  NPRM). 
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 Commission  must  base  policies  for  the  preservation  and  advancement  of  universal  service.  9  Among  other  things,  section  254  states  that  consumers  in  high  cost  areas  should  have  access  to 
 telecommunications  services  at  rates  that  are  reasonably  comparable  to  rates  charged  for  similar  services  in  urban  areas.  10 

 3.  A  major  objective  of  universal  service  is  to  help  ensure  affordable  access  to  telecommunications  services  to  consumers  living  in  areas  where  the  cost  of  providing  such 
 services  would  otherwise  be  prohibitively  high.  11  This  objective  has  been  achieved  in  the  past  by  providing  both  implicit  and  explicit  high-  cost  support  to  incumbent  local  exchange  carriers  to 
 enable  them  to  serve  high-  cost  customers  at  below-  cost  rates.  12  In  order  to  sustain  the  competitive  marketplace  envisioned  by  the  1996  Act,  Congress  directed  the  Commission  to  take 
 steps  necessary  to  establish  explicit  support  mechanisms  to  ensure  the  delivery  of  affordable  telecommunications  service  to  consumers  in  all  regions  of  the  nation.  13 

 B.  Ninth  Report  and  Order 
 4.  Based  on  recommendations  from  the  Joint  Board  and  building  on  the  framework  set  forth  by  the  Commission  in  prior  orders,  14  on  October  21,  1999,  the  Commission  adopted  the 

 Ninth  Report  and  Order,  establishing  a  federal  high-  cost  universal  service  support  mechanism  for  non-  rural  carriers  based  on  forward-  looking  costs.  15  With  the  Ninth  Report  and  Order,  the 
 Commission  sought  to  adopt  a  new  specific  and  predictable  forward-  looking  mechanism  that  will  provide  sufficient  support  to  enable  affordable,  reasonably  comparable  intrastate  rates  for 
 customers  served  by  non-  rural  carriers.  16 
 5.  The  forward-  looking  mechanism  implemented  in  the  Ninth  Report  and  Order  determines  the  amount  of  federal  support  to  be  provided  to  each  state  by  comparing  the  statewide 

 average  cost  per  line  for  non-  rural  carriers  to  a  nationwide  cost  benchmark.  The  Commission  determined  that  the  statewide  averaging  approach  was  most  consistent  with  the  federal  role  of 
 providing  support  for  intrastate  universal  service  to  enable  the  states  to  ensure  reasonable 

 9  47  U.  S.  C.    254  (b). 
 10  47  U.  S.  C.    254(  b)(  3). 
 11  Ninth  Report  and  Order,  14  FCC  Rcd  at  20439  para.  12. 
 12  Id. 
 13  47  U.  S.  C.    254(  e). 
 14  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Report  and  Order,  12  FCC  Rcd 
 8776  (1997),  as  corrected  by  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Erratum,  FCC  97-  157  (rel.  June  4,  1997),  affd  in  part,  revd  in  part,  remanded  in  part  sub  nom.  Texas  Office  of  Public  Utility 

 Counsel  v.  FCC,  183  F.  3d  393  (5  th  Cir.  1999),  petition  for  stay  granted  in  part  (Sept.  28,  1999),  petitions  for  rehearing  and  rehearing  en  banc  denied  (Sept.  28,  1999)  (First  Report  and  Order).  Federal-  State  Joint  Board  on 
 Universal  Service,  Access  Charge  Reform,  CC  Docket  Nos.  96-  45,  96-  262,  Seventh  Report  &  Order  and  Thirteenth  Order  on  Reconsideration  in  CC  Docket  No.  96-  45,  Fourth  Report  &  Order  in  CC  Docket  No.  96-  262,  and  Further 
 Notice  of  Proposed  Rulemaking,  14  FCC  Rcd  8077  (1999),  petition  for  review  filed  sub  nom.  Vermont  Department  of  Public  Service  v.  FCC,  No.  99-  60530  (5  th  Cir.,  filed  June  23,  1999)  (Seventh  Report  and  Order). 
 15  Ninth  Report  and  Order,  14  FCC  Rcd  at  20434  para.  2. 
 16  Id.  at  20451  para.  34. 
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 comparability  of  rural  and  urban  rates.  17  The  Commission  acknowledged  that  states  set  intrastate  rates  and,  therefore,  hold  the  primary  responsibility  of  ensuring  reasonable  comparability  of  rates 
 within  their  borders.  18  The  federal  mechanism  operates  by  transferring  funds  among  jurisdictions  and  has  the  effect  of  shifting  money  from  relatively  low-  cost  states  to  relatively 
 high-  cost  states.  19  No  state  with  costs  greater  than  the  national  benchmark  would  be  forced  to  keep  rates  reasonably  comparable  without  the  benefit  of  federal  support.  20 

 6.  The  mechanism  provides  support  for  the  percentage  of  the  costs  per  line  allocated  to  the  intrastate  jurisdiction  that  exceed  a  national  benchmark  of  135  percent.  21  The  Commission 
 concluded  in  the  Ninth  Report  and  Order  that  a  benchmark  of  135  percent  of  the  national  average  balanced  various  goals  under  the  statute,  including  sufficiency,  specificity  and 
 predictability,  as  well  as  the  need  to  achieve  rate  comparability.  22  In  addition,  the  Commission  attempted  to  ensure  that  the  fund  would  be  no  larger  than  necessary  in  order  to  minimize  burdens 
 on  carriers  and  consumers  contributing  to  universal  service  mechanisms.  23 
 7.  Finally,  the  Commission  determined  that  the  support  mechanism  should  examine  underlying  costs  of  carriers  instead  of  their  rates  charged  to  consumers,  reasoning  that  states 

 generally  have  rate  structures  designed  to  keep  rates  comparable,  although  costs  may  not  be  comparable.  24  State  rate  designs  have  provided  implicit  high-  cost  support  flowing  from  urban  to 
 rural  areas,  business  to  residential  customers,  vertical  services  to  basic  service,  and/  or  long  distance  service  to  local  service.  25  As  competition  develops,  however,  above-  cost  rates  will  not 
 be  sustainable.  26  The  Commission  concluded  that  comparing  costs  in  different  states,  rather  than  rates,  allows  the  federal  mechanism  to  provide  sufficient  support  to  enable  reasonably 
 comparable  rates  without  having  to  evaluate  the  myriad  state  policy  choices  that  affect  those  rates.  27 

 17  Id.  at  20457-  58  paras.  45-  46 
 18  Id.  at  20458  para.  46. 
 19  Id.  at  20457  para.  45. 
 20  Id.  at  20457  para.  45. 
 21  See  id.  at  20467-  68  para.  63.  The  federal  high-  cost  universal  service  support  mechanism  for  non-  rural  carriers 
 provides  support  for  76  percent  of  the  costs  that  are  above  the  national  benchmark.  The  forward-  looking  mechanism  calculates  support  based  on  75  percent  of  forward-  looking  loop  costs  and  85  percent  of  forward-  looking  port  costs, 

 as  well  as  100  percent  of  all  other  forward-  looking  costs  determined  by  the  Commissions  forward-  looking  high-  cost  model.  Based  on  the  percentage  of  forward-  looking  costs  that  the  intrastate  portion  of  each  of  the  items  represents, 
 the  Commission  determined  that  together  the  items  represent  76  percent  of  total  forward-  looking  costs.  Id.  22 
 Id.  at  20464  para.  55.  23 
 Id.  at  20464  para.  55.  24 
 Id.  at  20447  para.  25.  25 
 Id.  at  20441  para.  15.  26 
 Id.  at  20441  para.  16.  27 
 Id.  at  20438,  n.  19;  Seventh  Report  and  Order,  14  FCC  Rcd  at  8092-  93  paras.  32-  33. 
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 C.  Tenth  Report  and  Order 
 8.  In  the  Tenth  Report  and  Order,  the  Commission  finalized  the  model  platform  used  to  estimate  the  forward-  looking  costs  of  a  non-  rural  carrier's  operations  under  the  high-  cost 

 universal  service  support  mechanism  adopted  in  the  Ninth  Report  and  Order.  28  Specifically,  the  Commission  selected  inputs  (e.  g.,  the  cost  of  network  components  such  as  cables  and  switches, 
 customer  locations,  and  line  counts)  for  the  model  platform.  29  The  Commission  also  reaffirmed  the  Common  Carrier  Bureaus  authority  to  make  changes  to  the  model  platform  as  necessary 
 and  appropriate  to  ensure  that  it  operates  as  designed  by  the  Commission.  30 
 D.  Tenth  Circuit  Remand 
 9.  The  court  remanded  the  Ninth  Report  and  Order  to  the  Commission  and  affirmed  the  Tenth  Report  and  Order.  31  In  its  remand  of  the  Ninth  Report  and  Order,  the  court 

 determined  that  the  Commission  did  not  adequately  explain  its  decision  in  certain  respects.  32  The  court  observed  that  the  Commission  must  base  its  universal  service  policies  on  the  principles 
 listed  in  section  254(  b).  In  particular,  the  court  found  two  principles  in  section  254(  b)  most  relevant  to  the  case:  section  254(  b)(  3),  which  states  that  consumers  in  rural,  insular,  and  high 
 cost  areas  should  have  access  to  services  that  are  available  at  rates  that  are  reasonably  comparable  to  rates  charged  for  similar  services  in  urban  areas,  33  and  section  254(  b)(  5),  which 
 states  that  [  t]  here  should  be  specific,  predictable  and  sufficient  Federal  and  State  mechanisms  to  preserve  and  advance  universal  service.  34  The  court  also  noted  section  254(  e),  which  states  that 
 any  federal  support  for  universal  service  should  be  explicit  and  sufficient  to  achieve  the  purposes  of  this  section.  35  The  court  noted  that  the  Commission  may  exercise  its  discretion  in 
 balancing  the  principles  in  the  1996  Act  against  one  another,  but  may  not  depart  from  the  principles  as  a  whole  in  order  to  achieve  some  other  goal.  36  In  addition,  the  court  recognized  that 
 competing  principles  may  exist  in  section  254  of  the  Act.  37  For  example,  the  court  states, 
 28  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  (1999)  affirmed,  Qwest  Corp.  v.  FCC,  258  F.  3d  1191  (10th  Cir.  2001)  (Tenth  Report  and  Order). 

 29  Id.  at  20159  para.  2.  The  model  platform  was  adopted  in  the  Fifth  Report  and  Order.  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,  Fifth  Report  and  Order,  13  FCC  Rcd  21323  (1998)  (Fifth  Report  and  Order). 

 30  Tenth  Report  and  Order,  14  FCC  Rcd  at  20167  para.  20  (quoting  Fifth  Report  and  Order,  13  FCC  Rcd  21329 
 para.  13).  31 
 Qwest  Corp.  v.  FCC,  258  F.  3d  1191  (10  th  Cir.  2001).  The  court  consolidated  three  petitions  for  review  filed  under  the  Ninth  Report  and  Order  and  the  Tenth  Report  and  Order.  The  court  granted  the  petitions  for  review  of  the 

 Ninth  Report  and  Order  and  reversed  and  remanded  the  Ninth  Report  and  Order  to  the  Commission,  but  denied  the  petition  for  review  of  the  Tenth  Report  and  Order  and  affirmed  that  order. 
 32  Id. 
 33  47  U.  S.  C.    254(  b)(  3). 
 34  47  U.  S.  C.    254(  b)(  5). 
 35  47  U.  S.  C.    254(  e). 
 36  Qwest  Corp.  v.  FCC,  258  F.  3d  1191,  1199  (10  th  Cir.  2001). 
 37  Id.  at  1200. 
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 Arguably    245(  b)(  1)  encompasses  the  principle  that  long-  distance  services,  as  well  as  universal  services,  should  be  kept  affordable,  and  thus  excessive  subsidization  of  universal  services  by 
 long  distance  may  violate  the  principal  found  in    254(  b)(  1).  38 
 10.  The  court  determined  that,  although  the  Ninth  Report  and  Order  may  have  met  relevant  statutory  goals,  the  Commission  did  not  provide  an  adequate  explanation  for  its  decision 

 that  the  federal  high-  cost  universal  service  support  mechanism  for  non-  rural  carriers  achieved  the  statutory  principles  codified  in  section  254  of  the  Act.  39  Without  such  an  explanation,  the  court 
 could  not  review  the  rationality  of  the  Ninth  Report  and  Order.  40  The  court  remanded  the  Ninth  Report  and  Order  to  the  Commission  to  establish  an  adequate  legal  and  factual  basis  for  the 
 Ninth  Order  and,  if  necessary,  to  reconsider  the  operative  mechanism  promulgated  in  that  Order.  41  In  particular,  the  court  concluded  that  the  Commission  did  not  (1)  define  and  apply 
 adequately  the  key  statutory  terms  reasonably  comparable  and  sufficient;  (2)  sufficiently  explain  setting  the  funding  benchmark  at  135  percent  of  the  national  average;  (3)  provide 
 inducements  for  the  state  universal  service  mechanisms;  or  (4)  explain  how  this  funding  mechanism  will  interact  with  other  universal-  service  programs.  42 

 11.  In  the  same  opinion,  the  court  reviewed  and  upheld  the  forward-  looking  cost  model  finalized  by  the  Commission  in  the  Tenth  Report  and  Order.  43  First,  the  court  determined 
 that  the  computer  model  at  issue  is  in  the  nature  of  a  rate-  making  and  deserves  strong  deference  to  agency  expertise.  44  As  such,  the  court  deferred  to  the  Commissions  decision-  making  in  such 
 matters.  45  Second,  the  court  upheld  the  cost  models  estimates  of  the  forward-  looking  cost  of  operation  for  non-  rural  companies.  46  Finally,  the  court  stated  that  the  Commission  is  not 
 required  to  initiate  a  new  notice-  and-  comment  period  when  making  minor  technical  amendments  to  the  cost  model  to  bring  it  into  compliance  with  Commission  decisions.  47 

 III.  ISSUES  FOR  COMMENT 
 12.  We  seek  comment  on  a  number  of  issues  that  will  enable  the  Commission  to  better  explain  or  modify  the  forward-  looking  high-  cost  universal  service  support  mechanism 

 implemented  in  the  Ninth  Report  and  Order  consistent  with  the  courts  decision.  Specifically, 
 38  Id.  See  also  Alenco  Communications  v.  FCC,  201  F.  3d  608,  620  (5  th  Cir.  2000).  ([  E]  xcessive  funding  may 
 itself  violate  the  sufficiency  of  the  Act  .[  E]  xcess  subsidization  in  some  cases  may  detract  from  universal  service  by  causing  rates  unnecessarily  to  rise,  thereby  pricing  some  consumers  out  of  the  market.) 

 39  Qwest,  258  F.  3d  at  1202. 
 40  Id.  at  1205. 
 41  Id. 
 42  Id.  at  1201. 
 43  Id.  at  1207. 
 44  Id.  at  1206. 
 45  Id. 
 46  Id. 
 47  Id.  ([  T]  he  FCC  is  not  required  to  begin  a  new  notice-  and-  comment  period  every  time  it  fixes  a  technical  bug 
 in  its  computer  program.). 
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 we  seek  comment  on:  (1)  how  the  Commission  should  define  certain  key  statutory  terms;  (2)  whether,  in  light  of  the  interpretation  of  those  key  statutory  terms,  the  Commission  can  and 
 should  maintain  the  previously  established  benchmark  or,  in  the  alternative,  should  adopt  a  new  benchmark  or  benchmarks;  and  (3)  how  the  Commission  should  induce  states  to  implement  state 
 universal  service  policies. 
 A.  Definitions  of  Reasonably  Comparable  and  Sufficient 
 13.  Background.  The  court  remand  requires  the  Commission  to  define  the  terms  reasonably  comparable  and  sufficient  more  precisely  and  then  assess  whether  the  funding 

 mechanism  will  be  sufficient  to  make  rural  and  urban  rates  reasonably  comparable.  48  The  court  determined  that  the  Commission  failed  to  explain  how  the  funding  mechanism  would  achieve  the 
 statutory  principles  under  section  254.  In  particular,  the  court  concluded  that  the  Commission  failed  to  provide  definitions  of  reasonably  comparable  and  sufficient  to  enable  the  court  to 
 determine  reasonable  comparability  of  rates  between  urban  and  rural  areas,  as  required  under  section  254(  b)(  3)  of  the  Act,  and  sufficiency  of  the  mechanism  to  preserve  and  advance  universal 
 service,  under  sections  254(  b)(  5)  and  (e).  49 
 14.  The  court  determined  that  the  Commissions  definitions  of  reasonably  comparable  and  sufficient  were  inadequate.  50  The  court  concluded  that  the  definitions 

 provided  by  the  Commission  simply  substitute  different  standards  and  fail  to  illuminate  the  questions  that  arise  concerning  reasonable  comparability  and  sufficiency.  51  The  Commission 
 previously  provided  at  least  two  definitions  of  reasonably  comparable.  In  the  Seventh  Report  and  Order,  the  Commission  adopted  the  Joint  Boards  recommendation  of  reasonably 
 comparable  as  a  fair  range  of  urban/  rural  rates  both  within  a  states  borders,  and  among  states  nationwide.  52  The  Commission  further  elaborated  on  this  definition  in  the  Seventh  Report  and 
 Order  by  interpreting  the  goal  of  maintaining  a  fair  range  of  rates  to  mean  that  support  levels  must  be  sufficient  to  prevent  pressure  from  high  costs  and  the  development  of  competition  from 
 causing  unreasonable  increases  in  rates  above  current,  affordable  levels.  53  In  the  Ninth  Report  and  Order,  the  Commission  determined  that  reasonably  comparable  must  mean  some 
 reasonable  level  above  the  national  average  forward-  looking  cost  per  line,  i.  e.,  greater  than  100  percent  of  the  national  average.  54  The  court  rejected  these  definitions  of  reasonably  comparable 
 because  it  did  not  find  them  to  be  reasonable  interpretations  of  the  statutory  language,  which  calls  for  reasonable  comparability  between  rural  and  urban  rates.  55 

 48  Id.  at  1202. 
 49  See  47  U.  S.  C.    254(  b)(  3)  and  (5). 
 50  Qwest,  258  F.  3d  at  1202. 
 51  Id.  at  1201. 
 52  Seventh  Report  and  Order,  14  FCC  Rcd  at  8092  para.  30. 
 53  Id. 
 54  Ninth  Report  and  Order,  14  FCC  Rcd  at  20463  para.  54. 
 55  Qwest,  258  F.  3d  at  1201. 
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 15.  The  court  also  concluded  that  the  Commission  asserted  without  explanation  that  the  mechanism  implemented  under  the  Ninth  Report  and  Order  would  be  sufficient,  as  required 
 in  section  254  of  the  Act.  56  The  court  declared  the  statement  conclusory  and,  thus,  inadequate  to  enable  appellate  review  of  the  sufficiency  of  the  federal  mechanism.  57  As  with  reasonably 
 comparable,  the  court  required  the  Commission  on  remand  to  define  sufficient  more  precisely  so  that  the  term  can  be  reasonably  related  to  the  statutory  principles,  and  then  assess  whether  the 
 funding  mechanism  will  be  sufficient  for  the  principle  of  making  all  rates  reasonably  comparable  to  rates  in  urban  areas.  58 

 16.  Issues  for  Comment.  We  seek  comment  on  how  the  Commission  should  define  reasonably  comparable  for  the  purpose  of  achieving  reasonable  comparability  of  rates.  Section 
 254  of  the  Act  suggests  that  rates  in  rural,  insular  and  high  cost  areas  should  be  compared  to  rates  in  urban  areas  to  determine  reasonable  comparability.  59  We  make  a  two  step  inquiry.  First, 
 when  determining  whether  rates  are  reasonably  comparable,  we  seek  comment  on  what  should  be  compared.  For  example,  such  a  comparison  could  be:  urban  rates  compared  to  all  other 
 rates,  rural  rates  compared  to  all  other  rates,  or  specifically  defined  urban  and  rural  rates  compared  to  each  other.  We  seek  comment  on  appropriate  definitions  of  urban  and  rural.  60  If 
 commenters  suggest  that  urban  and/  or  rural  should  be  defined  by  geographical  areas,  we  request  comment  on  the  particular  breakdown  of  such  areas.  For  example,  urban  and  rural  could  be 
 defined  in  terms  of  population  density.  Urban  and  rural  also  could  be  defined  by  number  of  lines  per  wire  center.  If  the  line  count  per  wire  center  is  used,  would  small  wire  centers  in  large  cities 
 be  defined  as  rural?  61  Is  it  possible  to  adequately  define  reasonable  comparability  without  adopting  a  definition  for  urban  and  rural?  Second,  we  seek  comment  on  what  a  fair  range  of 
 rates  would  be  to  determine  whether  rates  are  reasonably  comparable.  The  court  suggested  that  rates  differing  70  to  80  percent  would  not  be  within  a  fair  range  of  rates  that  could  be  considered 
 reasonably  comparable.  62  In  this  regard,  we  note  that  costs  in  rural  areas  may  be  one  hundred  times  greater  than  costs  in  urban  areas.  63  Taking  into  account  such  cost  differences,  what  is  a 

 56  Qwest,  258  F.  3d  at  1201.  See  Ninth  Report  and  Order,  14  FCC  Rcd  at  20464  para.  56. 
 57  Qwest,  258  F.  3d  at  1201. 
 58  Id.  at  1202. 
 59  See  47  U.  S.  C.    254(  b)(  3). 
 60  We  note  that  the  Commission  has  defined  rural  area  for  purposes  of  the  rural  health  care  provisions  of  section 
 254(  h)(  1)(  A)  of  the  Act.  See  47  U.  S.  C.    254(  h)(  1)(  A).  A  rural  area  is  a  non-  metropolitan  county  or  county  equivalent,  as  so  defined  in  the  Office  of  Management  and  Budgets  (OMB)  Revised  Standards  for  Defining 

 Metropolitan  Areas  in  the  1990s  and  identifiable  from  the  most  recent  Metropolitan  Statistical  Area  (MSA)  list  released  by  OMB,  or  any  contiguous  non-  urban  Census  Tract  or  Block  Numbered  Area  within  an  MSA-  listed 
 metropolitan  county  identified  in  the  most  recent  Goldsmith  Modification  published  by  the  Office  of  Rural  Health  Policy  of  the  U.  S.  Department  of  Health  and  Human  Services.  47  CFR    54.  5. 
 61  For  example,  based  on  the  most  recent  line  count  data,  at  least  sixteen  wire  centers  in  New  York  City,  twelve 
 wire  centers  in  Chicago,  and  nine  wire  centers  in  Washington,  DC  have  fewer  than  50,  000  lines.  62 
 Qwest,  258  F.  3d  at  1201.  We  note  that  the  data  presented  by  petitioners  in  support  of  their  claim  that  the  mechanism  results  in  rural  costs  70  to  80  percent  above  urban  costs  defined  urban  costs  as  the  line-  weighted  average 

 cost  in  wire  centers  with  50,  000  or  more  lines,  or  in  the  alternative,  100,  000  or  more  lines.  63 
 See  Federal-  State  Joint  Board  on  Universal  Service,  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of  Interstate  Services  of  Non-  Price  Cap  Incumbent  Local  Exchange  Carriers  and  Interexchange  Carriers,  Second 

 Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  00-  256,  Fifteenth  Report  and  (continued....) 
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 reasonable  range  of  rates?  What  other  factors  should  be  considered  when  determining  reasonable  comparability  of  rates?  We  seek  empirical  evidence  of  the  range  of  rates  in  rural  and 
 urban  areas  based  on  the  definition  of  those  terms  provided  by  commenters. 
 17.  We  also  seek  comment  on  what  it  means  for  federal  support  for  universal  service  to  be  sufficient.  Specifically,  if  we  determine  that  high-  cost  support  results  in  rural  rates  that 

 are  reasonably  comparable  to  urban  rates,  is  that  level  of  support  sufficient  under  section  254  of  the  Act,  or  should  we  take  a  broader  examination  of  sufficiency?  In  establishing  the  support 
 mechanism,  the  Commission  attempted  to  balance  the  goal  of  ensuring  that  consumers  in  high-cost  areas  have  affordable  access  to  quality  service,  against  the  goal  of  ensuring  that  the  fund  is 
 no  larger  than  necessary  to  minimize  the  burdens  on  the  carriers  that  contribute.  Because  the  Commission  must  weigh  several  principles  in  determining  the  sufficiency  of  its  support,  we  seek 
 comment  on  whether  we  should  give  more  weight  to  the  principle  of  reasonable  comparability  of  rates,  or  should  we  continue  to  give  weight  equally  to  other  principles  listed  in  section  254(  b)  of 
 the  Act.  In  addition,  assuming  that  states  will  implement  mechanisms  to  support  universal  service,  as  suggested  by  the  court  and  described  below,  we  seek  comment  on  whether  sufficiency 
 should  be  determined  by  considering  federal  support  only,  or  state  support  as  well. 
 B.  Benchmark  Issues 
 18.  Background.  The  court  determined  that  the  Commission  failed  to  explain  how  its  135  percent  benchmark  would  help  achieve  the  goals  of  reasonable  comparability  or  sufficiency 

 as  required  by  section  254  of  the  Act.  64  The  court  recognized  that  the  Commissions  determination  of  a  benchmark  will  necessarily  be  somewhat  arbitrary  and  acknowledged  that 
 the  Commission  is  entitled  to  deference  when  drawing  a  line  in  the  case  of  a  reasoned  decision.  65  The  court  determined,  however,  that  the  Commission  adopted  the  135  percent  benchmark  value 
 without  establishing  that  it  made  an  informed,  rational  choice  based  on  the  record.  66 
 19.  In  its  discussion  about  the  national  benchmark  in  the  Ninth  Report  and  Order,  the  Commission  provided  several  justifications  for  setting  the  benchmark  level  at  135  percent, 

 including:  (1)  the  benchmark  falls  within  the  range  recommended  by  the  Joint  Board  of  115  percent  to  150  percent;  (2)  the  level  is  consistent  with  the  precedent  of  the  existing  support 
 mechanism  and  comments  received;  (3)  the  benchmark  is  near  the  midpoint  of  the  range  of  the  existing  mechanism;  and  (4)  the  benchmark  is  a  reasonable  compromise  of  commenters 
 proposals.  67  The  court  found  these  justifications  insufficient,  stating  that  [  m]  erely  identifying  some  range  and  then  picking  a  compromise  figure  is  not  rational  decision-  making.  68  The  court 
 directed  the  Commission  to  address  relevant  data  and  provide  adequate  record  support  and 

 (...  continued  from  previous  page)  Order  in  CC  Docket  No.  96-  45,  and  Report  and  Order  in  CC  Docket  Nos.  98-  77  and  98-  166,  FCC  01-  304  para.  45 
 (rel.  Nov.  8,  2001)  (Rate-  of-  Return  Access  Charge  Reform  Order).  64 
 Qwest,  258  F.  3d  at  1202.  65 
 Id.  66 
 Id.  67 
 Id.  at  1202.  See  Ninth  Report  and  Order,  14  FCC  Rcd  at  20464  para.  55.  68 
 Qwest,  258  F.  3d  at  1202. 
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 reasoning  on  remand.  69  Although  the  court  rejected  the  Commissions  justification  for  the  benchmark,  the  court  said  that  it  likely  would  uphold  the  mechanism  if  the  135  percent 
 benchmark  actually  produced  urban  and  rural  rates  that  are  reasonably  comparable,  however  those  terms  are  defined.  70 

 20.  Issues  for  Comment.  We  seek  comment  on  whether  we  should  adopt  a  different  benchmark  or  benchmarks  or  whether  we  should  continue  to  use  the  135  percent  benchmark.  If 
 commenters  suggest  that  we  should  adopt  a  new  benchmark  or  benchmarks,  we  seek  comment  on  how  we  should  determine  the  new  benchmark(  s).  Commenters  should  provide  both  reasoned 
 analysis  and  empirical  data  to  show  that  their  proposed  benchmarks  support  reasonable  comparability  of  rates  and  sufficient  high-  cost  support.  We  also  note  that  the  high-  cost  loop 
 support  mechanism  for  rural  carriers  does  not  use  a  single  benchmark  but,  rather,  uses  a  step  function.  71  The  step  function  has  multiple  benchmarks  with  greater  percentages  of  support 
 provided  as  costs  increase.  We  seek  comment  on  whether  we  should  adopt  a  step  function  (or  some  formula  that  provides  a  larger  percentage  of  support  as  costs  increase)  in  the  federal  high-cost 
 support  mechanism  for  non-  rural  carriers  as  well.  Commenters  should  describe  precisely  how  the  step  function  would  operate,  the  range  and  intervals  of  steps,  and  provide  the  empirical 
 support  and  analysis  for  how  such  a  function  would  support  reasonable  comparability  of  rates  and  sufficiency  of  support.  To  the  extent  commenters  advocate  that  we  should  retain  the  135 
 percent  benchmark,  commenters  should  provide  both  reasoned  analysis  and  empirical  data  to  show  that  the  135  percent  benchmark  supports  reasonable  comparability  of  rates  and  sufficiency 
 of  support.  In  this  regard,  we  note  that  the  135  percent  benchmark  is  consistent  with  an  average  of  the  benchmarks  used  in  the  high-  cost  loop  support  mechanism,  which  previously  provided 
 support  to  all  carriers  (and  currently  provides  support  to  rural  carriers).  72  We  seek  comment  on  whether  an  average  of  these  benchmarks  is  appropriate  for  the  non-  rural  high-  cost  mechanism. 

 21.  We  also  seek  comment  on  whether  we  should  continue  to  use  a  benchmark  based  on  nationwide  average  cost  and  compare  it  to  statewide  average  costs.  Although  the  court 
 rejected  Qwests  argument  that  the  use  of  statewide  and  national  averages  is  necessarily  inconsistent  with  section  254,  the  court  suggested  that  such  a  comparison  would  not  be 
 consistent  with  the  statutory  comparison  of  urban  and  rural  rates  without  evidence  that  the  benchmark  actually  produced  comparable  rates.  73  If  we  continue  to  use  nationwide  and 

 69  Id.  at  1203. 
 70  Id.  at  1202. 
 71  See,  e.  g.,  Ninth  Report  and  Order,  14  FCC  Rcd  at  20440  para.  13. 
 72  Prior  to  the  Ninth  Report  and  Order,  the  high-  cost  support  mechanism  provided  increasing  amounts  of  explicit 
 support  for  local  loop  and  switching  costs  based  on  the  amount  an  incumbent  LECs  costs,  as  reflected  in  its  books,  exceeded  the  national  average.  In  particular,  the  mechanism  provided  support  for  incumbent  LECs  with  more  than 

 200,  000  working  loops  for  loop  costs  between  115  percent  and  160  percent,  the  initial  range,  of  the  national  average.  In  addition,  the  mechanism  provides  support  for  carriers  with  less  than  200,000  lines  with  loop  costs  between  115 
 percent  and  150  percent,  the  initial  range,  of  the  national  average.  The  mechanism  provided  gradually  more  support  for  the  portion  of  carriers  loop  costs  exceeding  the  initial  ranges  for  large  and  small  carriers.  Averages  for  the 
 initial  ranges  for  both  mechanisms,  for  carriers  with  more  than  200,  000  lines  and  less  than  200,  000  lines,  are  137.  5  percent  ((  115%  +  160%)    2)  and  132.5  percent  ((  115%  +  150%)    2)  respectively.  An  average  of  the  averages 

 results  in  135  percent  ((  137.  5%  +  132.5%)    2).  73 
 Qwest,  258  F.  3d  at  1202  &  n.  9. 
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 statewide  averages,  how  should  we  measure  reasonable  comparability  when  rural  costs  are  included  in  the  nationwide  average?  In  the  alternative,  should  we  use  a  benchmark  or 
 benchmarks  based  on  urban-  only  costs?  Will  definitions  of  urban  and  rural  be  required  to  determine  an  urban-  only  benchmark?  To  the  extent  we  decide  to  implement  a  benchmark  based 
 only  on  urban  and/  or  rural  costs,  should  this  definition  be  the  same  as  discussed  above  in  section  III.  A.?  We  also  seek  comment  on  how  the  terms  urban  and  rural  should  be  defined  --  e.  g., 
 by  wire  centers  of  a  certain  size,  by  certain  density  zones,  urban  versus  non-  urbanized  areas,  or  some  other  criterion.  74  Commenters  should  provide  empirical  support  and  analysis  showing  how 
 their  proposed  benchmark  or  benchmarks  result  in  reasonably  comparable  urban  and  rural  rates  and  define  precisely  the  statutory  terms,  urban,  rural,  and  reasonably  comparable  in  their 
 proposed  methodology. 
 C.  State  Inducements 
 22.  Background.  The  court  determined  that  the  Commission  must  develop  mechanisms  to  induce  state  action  to  preserve  and  advance  universal  service.  75  The  court  stated 

 that  the  Act  plainly  contemplates  a  partnership  between  federal  and  state  governments  to  support  universal  service  76  and  explicitly  rejected  the  argument  that  the  Commission  alone  must 
 support  the  full  costs  of  universal  service.  77  Although  the  Commission  does  not  have  jurisdiction  over  intrastate  service,  78  the  court  stated  that  it  is  appropriate  --  even  necessary  --  for  the  FCC  to 
 rely  on  state  action  in  supporting  the  cost  of  universal  service.  79  The  court  required  the  Commission  to  create  some  inducement  --  a  carrot  or  a  stick,    for  example,  or  simply  a 
 binding  cooperative  agreement  with  the  states  --  for  the  states  to  assist  in  implementing  the  goals  of  universal  service.  80  To  fulfill  the  state  inducement  requirement,  the  court  provided  the 
 examples  of  conditioning  a  states  receipt  of  federal  funds  on  the  development  of  an  adequate  state  program  or  creating  a  binding  cooperative  agreement  with  states.  81  The  court  concluded 
 that  the  Commission  must  develop  mechanisms  to  induce  adequate  state  action  in  order  to  assure  reasonably  comparable  rates  between  rural  and  urban  areas.  82 

 23.  In  the  Seventh  Report  and  Order,  the  Commission  adopted  a  federal  support  mechanism  that  would  take  into  account  the  states  ability  to  support  their  individual  universal 

 74  As  noted  above,  the  Commission  has  defined  rural  area  for  purposes  of  determining  universal  service  support 
 for  rural  health  care  providers  in  section  54.  5  of  the  Commissions  rules.  See  supra  note  60.  75 
 Qwest,  258  F.  3d  at  1204.  76 
 Id.  at  1202.  See,  e.  g.  47  U.  S.  C.    254(  b)(  5)  (  There  should  be  specific,  predictable  and  sufficient  Federal  and  State  mechanisms  to  preserve  and  advance  universal  service.);  47  U.  S.  C.    254(  f)  (  Every  telecommunications 

 carrier  that  provides  intrastate  telecommunications  services  shall  contribute,  on  an  equitable  and  nondiscriminatory  basis,  in  a  manner  determined  by  the  State  to  the  preservation  and  advancement  of  universal  service  in  that  State.). 
 77  Id.  at  1203. 
 78  Id.  See,  e.  g.,  47  U.  S.  C.    152(  b). 
 79  Qwest,  258  F.  3d  at  1203. 
 80  Id.  at  1204. 
 81  Id. 
 82  Id. 
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 service  needs.  83  Specifically,  the  Commission  proposed  imposing  a  requirement  that  each  state  assume  a  per-  line  share  of  the  support  obligation  to  ascertain  a  states  ability  to  achieve 
 reasonable  comparability  of  rates  within  its  borders.  84  The  need  for  support  in  a  state  would  be  calculated  by  comparing  costs  to  a  benchmark.  The  states  ability  to  enable  reasonably 
 comparable  rates  would  then  be  estimated  by  multiplying  the  per-  line  figure  by  the  total  number  of  non-  rural  carrier  lines  in  the  states.  If  the  perceived  support  needed  exceeded  the  estimate  of  a 
 states  own  resources,  federal  support  would  cover  the  difference  in  accordance  with  the  mechanism.  85  Subsequently,  in  the  Ninth  Report  and  Order  the  Commission  eliminated  the  state 
 share  requirement  adopted  in  the  Seventh  Report  and  Order.  86  The  Commission  determined  that  calculating  support  amounts  for  non-  rural  carriers  in  each  state  based  on  statewide  average  costs 
 would  more  accurately  reflect  a  states  ability  to  support  universal  service  with  its  own  resources.  87  The  Commission  concluded  that  the  Joint  Boards  general  recommendation  for  the 
 Commission  to  abstain  from  conditioning  federal  high-  cost  universal  service  support  on  state  action  represented  the  best  policy  choice  at  the  time.  88 

 24.  Issues  for  Comment.  We  seek  comment  on  how  the  Commission  should  induce  states  to  implement  mechanisms  to  support  universal  service.  Specifically,  we  seek  comment  on 
 whether  the  Commission  should:  (1)  implement  a  state  share  requirement,  similar  to  that  of  the  Seventh  Report  and  Order;  (2)  condition  federal  support  on  some  form  of  state  action;  (3)  enter 
 into  a  binding  cooperative  agreement  with  states  as  suggested  by  the  court;  or  (4)  adopt  some  other  form  of  state  inducement.  To  the  extent  that  commenters  suggest  the  Commission  should 
 adopt  one  of  these  options,  commenters  should  provide  specific  descriptions  of  their  proposals  and  recommendations  for  implementation.  If  the  Commission  were  to  condition  federal  support 
 on  state  action,  in  what  manner  and  to  what  extent  should  federal  support  be  so  conditioned?  We  also  seek  comment  on  what  kind  of  state  action  should  be  required.  If  the  Commission  were  to 
 enter  into  binding  cooperative  agreements  with  states,  what  form  should  the  agreements  take?  Would  the  Commission  enter  into  such  an  agreement  with  individual  states  or  with  the  states 
 collectively?  How  would  such  an  agreement  be  enforced?  In  addition,  how  would  the  Commission  induce  and  enforce  the  inducement  of  states  to  implement  universal  service  support 
 mechanisms  in  states  that  do  not  receive  federal  universal  service  support  under  the  non-  rural  high-  cost  mechanism? 

 IV.  THE  COMMISSIONS  PLAN  FOR  UNIVERSAL  SERVICE  AND  JOINT  BOARD  REFERRAL 
 25.  The  court  also  determined  that  it  was  unable  to  assess  the  adequacy  of  support  levels  for  all  components  of  universal  service  in  light  of  the  issues  on  remand  and  certain 
 pending  policy  decisions  expected  from  the  Commission.  89  For  example,  because  the 
 83  See  Ninth  Report  and  Order,  14  FCC  Rcd  at  20469  para.  65. 
 84  See  id.  See  also  Seventh  Report  and  Order,  14  FCC  Rcd  at  8109  para.  63. 
 85  Seventh  Report  and  Order,  14  FCC  Rcd  at  8130-  31  para.  111. 
 86  Ninth  Report  and  Order,  14  FCC  Rcd  at  20469  para.  66. 
 87  Id. 
 88  Id.  at  20469  para.  67. 
 89  Qwest  Corp.  v.  FCC,  258  F.  3d  1191,  1204  (10  th  Cir.  2001). 
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 Commission  had  reserved  the  possibility  of  applying  a  different  funding  mechanism  for  rural  carriers,  the  court  concluded  that  it  could  not  evaluate  the  sufficiency  of  all  federal  universal 
 service  support.  90  Although  the  court  did  not  require  the  Commission  to  resolve  all  of  these  issues  at  once,  it  stated  that,  [  o]  n  remand,  the  FCC  will  have  an  opportunity  to  explain  further 
 its  complete  plan  for  supporting  universal  service.  91  The  Commission  now  has  largely  completed  its  universal  service  reforms  initiated  following  passage  of  the  1996  Act.  92  We 
 embark  on  the  next  stage  by  responding  to  the  courts  remand,  examining  the  current  mechanism  with  a  critical  eye,  and  determining  what  further  reforms  are  necessary. 

 26.  The  Joint  Board  has  previously  considered  and  given  recommendations  on  many  of  these  issues  in  this  docket.  We  conclude  further  Joint  Board  input  will  be  beneficial  for  our 
 consideration  of  the  issues  on  remand.  Accordingly,  we  refer  the  issues  described  in  this  NPRM,  and  the  record  developed  herein,  to  the  Joint  Board  for  a  recommended  decision.  93  Specifically, 
 we  ask  the  Joint  Board  to  provide  a  recommended  decision  on  (1)  how  the  Commission  should  define  the  key  statutory  terms  reasonably  comparable  and  sufficient;  (2)  whether,  in  light  of 
 the  interpretation  of  those  key  statutory  terms,  the  Commission  can  and  should  maintain  the  previously  established  benchmark  or,  in  the  alternative,  should  adopt  a  new  benchmark  or 
 benchmarks;  and  (3)  how  the  Commission  should  induce  states  to  implement  state  universal  service  policies.  We  intend  these  referral  issues  to  encompass  the  review  of  the  non-  rural 
 mechanism  that  the  Commission  previously  stated  would  occur  by  January  1,  2003.  94  At  their  core,  the  issues  on  remand  require  an  examination  of  the  non-  rural  mechanism.  We  direct  the 
 Joint  Board  to  base  its  recommended  decision  on  the  record  developed  from  this  NPRM  and  present  its  recommended  decision  to  the  Commission  no  later  than  August  15,  2002.  The 
 Commission  will  then  expeditiously  consider  the  Joint  Boards  recommendations  and  issue  an  order  in  response  to  the  courts  remand. 

 27.  Finally,  although  the  Commission  has  determined  that  all  carriers  will  eventually  receive  universal  service  support  based  upon  their  forward-  looking  costs,  it  has  allowed  rural 
 carriers  to  continue  to  calculate  support  under  a  modified  version  of  the  embedded  cost  mechanism  for  five  years.  95  The  Commission  previously  stated  that  it  intended  to  refer  the 

 90  Id.  The  court  also  noted  that  the  Commission  had  not  yet  completed  its  reform  of  intrastate  access  charges  to 
 remove  implicit  universal  service  support.  Id.  This  reform  was  accomplished  in  the  Commissions  recent  Rate-  of-Return  Access  Charge  Reform  Order.  Rate-  of-  Return  Access  Charge  Reform  Order,  FCC  01-  304  (rel.  Nov.  8, 

 2001).  91 
 Qwest,  258  F.  3d  at  1205.  92 
 First,  the  Commission  finalized  the  methodology  for  determining  high-  cost  support  for  non-  rural  carriers.  Second,  the  Commission  addressed  the  interstate  access  charge  and  universal  service  support  system  for  price  cap 

 carriers.  Third,  the  Commission  reformed  intrastate  high-  cost  support  for  rural  carriers.  Finally,  the  Commission  reformed  the  interstate  access  charge  structure  and  universal  support  system  for  rate-  of-  return  carriers.  See  Rate-  of-Return 
 Access  Charge  Reform  Order,  FCC  01-  304  para.  2  (rel.  Nov.  8,  2001)  (summarizing  the  Commissions  actions  concerning  universal  service  reform). 
 93  We  note,  however,  that  the  scope  of  the  referral  shall  not  include  the  Commissions  plan  for  universal  service 
 generally  described  in  the  preceding  paragraph.  94 
 See  Seventh  Report  and  Order,  14  FCC  Rcd  at  8123  para.  94.  In  the  Ninth  Report  and  Order,  the  Commission  reaffirmed  this  commitment.  See  Ninth  Report  and  Order,  14  FCC  Rcd  20478-  79  para.  88. 

 95  Federal-  State  Joint  Board  on  Universal  Service,  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of 
 Interstate  Services  of  Non-  Price  Cap  Incumbent  Local  Exchange  Carriers  and  Interexchange  Carriers,  Fourteenth  (continued....) 
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 complex  issues  surrounding  rural  high-  cost  support  to  the  Joint  Board,  no  later  than  January  1,  2002  in  order  to  begin  the  process  of  determining  what  regime  should  be  in  place  upon  the 
 expiration  of  the  Rural  Task  Force  plan.  96  The  Commission  further  stated  that,  in  the  context  of  the  Joint  Boards  consideration  of  an  appropriate  high-  cost  mechanism  for  rural  telephone 
 companies,  [it  anticipates]  conducting  a  comprehensive  review  of  the  high-  cost  support  mechanisms  for  rural  and  non-  rural  carriers  as  a  whole  to  ensure  that  both  mechanisms  function 
 efficiently  and  in  a  coordinated  fashion.  97 
 28.  In  light  of  the  need  to  expeditiously  address  the  issues  remanded  to  us  by  the  court,  we  now  believe  it  appropriate  to  delay  briefly  our  initiation  of  a  comprehensive 

 examination  of  how  the  rural  and  non-  rural  mechanisms  function  together.  We  will  refer  issues  concerning  the  rural  high-  cost  support  mechanism  and  how  that  mechanism  functions  with  the 
 non-  rural  mechanism  to  the  Joint  Board  at  a  later  date. 
 V.  PROCEDURAL  ISSUES 
 A.  Ex  Parte  Presentations 
 29.  This  is  a  permit  but  disclose  rulemaking  proceeding.  Ex  parte  presentations  are  permitted,  except  during  the  Sunshine  Agenda  period,  provided  that  they  are  disclosed  as 

 provided  in  the  Commission's  rules.  98 
 B.  Initial  Regulatory  Flexibility  Analysis 
 30.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  99  the  Commission  has  prepared  this  present  Initial  Regulatory  Flexibility  Analysis  (IRFA)  of  the 

 possible  significant  economic  impact  on  a  substantial  number  of  small  entities  by  the  policies  and  rules  proposed  in  this  NPRM.  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  NPRM  provided  in  paragraph  number  42  of  the  item.  The  Commission  will 
 send  a  copy  of  the  NPRM,  including  this  IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration  (SBA).  100  In  addition,  the  NPRM  and  IRFA  (or  summaries  thereof) 
 will  be  published  in  the  Federal  Register.  101 

 (...  continued  from  previous  page)  Report  and  Order,  Twenty-  Second  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking  in  CC 
 Docket  No.  96-  45,  Report  and  Order  in  CC  Docket  No.  00-  256,  16  FCC  Rcd  11244,  11310  para.  168  (2001)  (Rural  High-  Cost  Order).  See  also  First  Report  and  Order,  12  FCC  Rcd  at  8889  para.  203. 
 96  See  Rural  High  Cost  Order,  16  FCC  Rcd  at  11310  para.  168;  Federal-  State  Joint  Board  on  Universal  Service, 
 CC  Docket  No.  96-  45,  Recommended  Decision,  FCC  00J-  4  para.  21  (Jt.  Bd.  rel.  Dec.  22,  2000).  97 
 See  Rural  High  Cost  Order,  16  FCC  Rcd  at  11310  para.  169.  98 
 See  generally  47  C.  F.  R.    1.1202,  1.  1203,  and  1.1206.  99 
 See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601-  612,  has  been  amended  by  the  Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA),  Pub.  L.  No.  104-  11,  Title  II,  110  Stat.  857  (1996). 

 100  See  5  U.  S.  C.    603(  a). 
 101  See  id. 
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 1.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 31.  In  the  First  Report  and  Order,  the  Commission  adopted  a  plan  for  universal  service  support  for  rural,  insular,  and  high  cost  areas  to  replace  longstanding  federal  subsidies  to 

 incumbent  local  telephone  companies  with  explicit,  competitively  neutral  federal  universal  service  mechanisms.  In  doing  so,  the  Commission  adopted  the  recommendation  of  the  Joint 
 Board  that  an  eligible  carriers  support  should  be  based  upon  the  forward-  looking  economic  cost  of  constructing  and  operating  the  network  facilities  and  functions  used  to  provide  the  services 
 supported  by  the  federal  universal  service  mechanism.  In  the  Ninth  Report  and  Order  the  Commission  adopted  a  federal  high-  cost  universal  service  support  mechanism  for  non-  rural 
 carriers  based  on  forward-  looking  economic  costs.  The  U.  S.  Court  of  Appeals  for  the  Tenth  Circuit  remanded  the  Ninth  Report  and  Order  to  the  Commission  for  further  consideration  and 
 explanation  of  its  decision. 
 32.  In  this  NPRM,  we  seek  comment  on  issues  from  the  Ninth  Report  and  Order  102  remanded  by  the  United  States  Court  of  Appeals  for  the  Tenth  Circuit.  103  Specifically,  we  seek 

 comment  on:  (1)  how  the  Commission  should  define  the  key  statutory  terms  reasonably  comparable  and  sufficient;  104  (2)  whether,  in  light  of  the  interpretation  of  those  key  statutory 
 terms,  the  Commission  can  and  should  maintain  the  previously  established  benchmark  or,  in  the  alternative,  should  adopt  a  new  benchmark  or  benchmarks;  and  (3)  how  the  Commission  should 
 induce  states  to  implement  state  universal  service  policies.  The  objective  of  the  NPRM  is  to  assemble  a  record,  to  refer  the  record  collected  in  this  proceeding  to  the  Joint  Board  for  a 
 recommended  decision,  and  to  consider  the  record  and  Joint  Board  recommendations  in  formulating  a  response  to  the  courts  remand.  We  expect  that  upon  receipt  of  a  recommended 
 decision  from  the  Joint  Board,  the  Commission  will  be  able  adopt  an  order  implementing  a  high-cost  support  mechanism  that  will  be  sufficient  to  enable  non-  rural  carriers  rates  for  service  to 
 remain  affordable  and  reasonably  comparable  in  all  regions  of  the  nation. 
 2.  Legal  Basis 
 33.  This  rulemaking  action  is  supported  by  sections  1-  4,  201-  205,  214,  218-  220,  254,  303(  r),  403  and  410  of  the  Communications  Act  of  1934,  as  amended.  105 

 3.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Notice  will  Apply 
 34.  The  RFA  generally  defines  small  entity  as  having  the  same  meaning  as  the  term  small  business,  small  organization,  and  small  government  jurisdiction.  106  In  addition,  the 
 term  small  business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act,  unless  the  Commission  has  developed  one  or  more  definitions  that  are 

 102  Federal-  State  Joint  Board  on  Universal  Service,  Ninth  Report  &  Order  and  Eighteenth  Order  on 
 Reconsideration,  14  FCC  Rcd  20432  (1999)  (Ninth  Report  and  Order).  103 
 Qwest  Corp.  v.  FCC,  258  F.  3d  1191  (10  th  Cir.  2001).  104 
 See  discussion  supra  part  III.  A.  105 
 47  U.  S.  C.    154(  i),  154(  j),  201-  205,  254,  and  403.  106 
 5  U.  S.  C.    601(  6). 
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 appropriate  to  its  activities.  107  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  SBA.  108 
 35.  The  SBA  has  defined  a  small  business  for  Standard  Industrial  Classification  (SIC)  category  4813  (Telephone  Communications  Except  Radiotelephone)  to  be  a  small  entity  when  it 

 has  no  more  than  1,500  employees.  109 
 36.  We  have  included  small  incumbent  local  exchange  carriers  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.  110  The  SBAs  Office  of 
 Advocacy  contends  that,  for  RFA  purposes,  small  incumbent  local  exchange  carriers  are  not  dominant  in  their  field  of  operation  because  any  such  dominance  is  not  national  in  scope.  111 
 We  have  therefore  included  small  incumbent  local  exchange  carriers  in  this  RFA  analysis,  although  we  emphasize  that  this  RFA  action  has  no  effect  on  Commission  analyses  and 
 determinations  in  other,  non-  RFA  contexts. 
 4.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 

 37.  With  respect  to  reporting  and  recordkeeping,  the  NPRM  seeks  comment  on  issues  concerning  the  Ninth  Report  and  Order  that  have  been  remanded  by  the  court,  as  described 
 above.  Changes  in  recordkeeping,  if  any,  will  primarily  occur  in  the  area  of  benchmark  issues.  If  the  Commission  upholds  the  mechanism  adopted  in  the  Ninth  Report  &  Order,  there  will  be  no 
 changes.  If  the  Commission  changes  the  current  high-  cost  support  mechanism,  however,  adoption  of  new  rules  or  requirements  may  require  additional  recordkeeping.  For  example,  if  the 
 Commission  adopts  a  mechanism  that  compares  urban  and/  or  rural  costs  or  rates  in  order  to  determine  an  appropriate  benchmark,  additional  information  from  all  non-  rural  carriers  may  be 
 necessary,  such  as  line  count  information  for  urban  and  rural  areas. 

 107  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  5  U.  S.  C.    632). 
 Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public 

 comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition  in  the  Federal  Register. 
 108  15  U.  S.  C.    632.  See,  e.  g.,  Brown  Transport  Truckload,  Inc.  v.  Southern  Wipers,  Inc.,  176  B.  R.  82  (N.  D.  Ga. 
 1994).  109 
 13  C.  F.  R.    121.201.  The  equivalent  classification  under  the  North  American  Industry  Classification  System  (NAICS)  is  51331. 

 110  15  U.  S.  C.    632. 
 111  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). 
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 5.  Steps  Taken  To  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 
 38.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives 
 (among  others):  (1)  the  establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification, 
 consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from 
 coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  112 
 39.  The  proposals  resulting  from  this  NPRM  could  have  varying  positive  or  negative  impacts  on  telecommunications  carriers,  including  any  such  small  carriers.  Public  comments  are 

 welcomed  in  the  NPRM  that  would  reduce  any  potential  impacts  on  small  entities.  Specifically,  suggestions  are  sought  on  different  compliance  or  reporting  requirements  that  would  take  into 
 account  the  resources  of  small  entities.  Comments  are  also  sought  on  possibilities  for  clarification,  consolidation,  or  simplification  of  compliance  and  reporting  requirements  for  small 
 entities  that  would  be  subject  to  the  rules,  and  on  whether  waiver  or  forbearance  from  the  rules  for  small  entities  would  be  feasible  or  appropriate.  Comments  should  be  supported  by  specific 
 economic  analysis. 
 40.  We  do  not  believe  that  any  final  result  in  any  area  of  the  proposed  rules  under  consideration  will  have  a  differential  impact  on  small  entities.  With  the  request  for  comments  in 

 this  NPRM,  however,  the  commenters  may  present  the  Commission  with  various  proposals  that  may  have  varying  impacts  on  small  entities.  We  seek  comment  on  whether  any  proposals,  if 
 implemented,  may  result  in  an  unfair  burden. 
 6.  Federal  Rules  That  May  Duplicate,  Overlap,  or  Conflict  With  the  Proposed  Rules 

 41.  None. 
 C.  Comment  Filing  Procedures 
 42.  We  invite  comment  on  the  issues  and  questions  set  forth  in  the  Notice  of  Proposed  Rulemaking  and  Initial  Regulatory  Flexibility  Analysis  contained  herein.  Pursuant  to  applicable 

 procedures  set  forth  in  sections  1.415  and  1.419  of  the  Commissions  rules,  113  interested  parties  may  file  comments  on  or  before  30  days  after  Federal  Register  publication  of  this  NPRM,  and 
 reply  comments  on  or  before  45  days  after  Federal  Register  publication  of  this  NPRM.  All  filings  should  refer  to  CC  Docket  No.  96-  45.  Comments  may  be  filed  using  the  Commissions 
 Electronic  Comment  Filing  System  (ECFS)  or  by  filing  paper  copies.  114 
 43.  Comments  filed  through  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to 

 112  5  U.  S.  C.    603(  c). 
 113  47  C.  F.  R.    1.  415,  1.  419. 
 114  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  63  Fed.  Reg.  24121  (1998). 
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 <http://  www.  fcc.  gov/  e-  file/  ecfs.  html>.  Generally,  only  one  copy  of  an  electronic  submission  must  be  filed.  In  completing  the  transmittal  screen,  commenters  should  include  their  full  name, 
 Postal  Service  mailing  address,  and  the  applicable  docket  number,  which  in  this  instance  is  CC  Docket  No.  96-  45.  Parties  may  also  submit  an  electronic  comment  by  Internet  e-  mail.  To 
 receive  filing  instructions  for  e-  mail  comments,  commenters  should  send  an  e-  mail  to  ecfs@  fcc.  gov,  and  should  include  the  following  words  in  the  body  of  the  message:  get  form 
 <your  e-  mail  address>.  A  sample  form  and  directions  will  be  sent  in  reply. 
 44.  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.  Parties  who  choose  to  file  by  paper  are  hereby  notified  that  effective  December  18,  2001,  the 
 Commissions  contractor,  Vistronix,  Inc.,  will  receive  hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commissions  Secretary  at  a  new  location  in  downtown  Washington,  DC. 
 The  address  is  236  Massachusetts  Avenue,  NE,  Suite  110,  Washington,  DC,  20002.  The  filing  hours  at  this  location  will  be  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries  must  be  held  together 
 with  rubber  bands  or  fasteners.  Any  envelopes  must  be  disposed  of  before  entering  the  building.  This  facility  is  the  only  location  where  hand-  delivered  or  messenger-  delivered  paper  filings  for 
 the  Commissions  Secretary  will  be  accepted.  Accordingly,  the  Commission  will  no  longer  accept  these  filings  at  9300  East  Hampton  Drive,  Capitol  Heights,  MD,  20743.  Other 
 messenger-  delivered  documents,  including  documents  sent  by  overnight  mail  (other  than  United  States  Postal  Service  (USPS)  Express  Mail  and  Priority  Mail),  must  be  addressed  to  9300  East 
 Hampton  Drive,  Capitol  Heights,  MD,  20743.  This  location  will  be  open  8:  00  a.  m.  to  5:  30  p.  m.  The  USPS  first-  class  mail,  Express  Mail,  and  Priority  Mail  should  continue  to  be  addressed  to 
 the  Commissions  headquarters  at  445  12th  Street,  SW,  Washington,  DC,  20554.  The  USPS  mail  addressed  to  the  Commissions  headquarters  actually  goes  to  our  Capitol  Heights  facility 
 for  screening  prior  to  delivery  at  the  Commission. 
 -------------------------------------------------------------------------------  If  you  are  sending  this  type  of  document  or  It  should  be  addressed  for  delivery  to... 

 using  this  delivery  method...  ------------------------------------------------------------------------------- 
 Hand-  delivered  or  messenger-  delivered  paper  236  Massachusetts  filings  for  the  Commission's  Secretary  Avenue,  NE,  Suite  110, 
 Washington,  DC  20002  (8:  00  a.  m.  to  7:  00  p.  m.) 
 -------------------------------------------------------------------------------  Other  messenger-  delivered  documents,  9300  East  Hampton  Drive, 
 including  documents  sent  by  overnight  mail  Capitol  Heights,  MD  20743  (other  than  United  States  Postal  Service  (8:  00  a.  m.  to  5:  30  p.  m.) 
 Express  Mail  and  Priority  Mail)  ------------------------------------------------------------------------------- 
 United  States  Postal  Service  first-  class  mail,  445  12th  Street,  SW  Express  Mail,  and  Priority  Mail  Washington,  DC  20554 
 ------------------------------------------------------------------------------- 
 All  filings  must  be  sent  to  the  Commissions  Acting  Secretary:  William  F.  Caton,  Office  of  the  Secretary,  Federal  Communications  Commission,  445  12th  Street,  SW,  Suite  TW-  A325, 
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 Washington,  DC,  20554. 
 45.  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  12th  Street,  SW,  Room  5-  B540,  Washington,  DC,  20554.  Such  a  submission  should  be  on  a  3.5  inch  diskette  formatted  in  an  IBM  compatible  format  using  Microsoft  Word  or 
 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  commenters 
 name,  proceeding  (including  the  docket  number,  in  this  case,  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  partys  pleading,  preferably  in  a  single  electronic  file.  In 
 addition,  commenters  must  send  diskette  copies  to  the  Commissions  copy  contractor,  Qualex  International,  Portals  II,  445  12th  Street,  SW,  Room  CY-  B402,  Washington,  DC,  20554. 

 46.  Regardless  of  whether  parties  choose  to  file  electronically  or  by  paper,  parties  should  also  file  one  copy  of  any  documents  filed  in  this  docket  with  the  Commissions  copy 
 contractor,  Qualex  International,  Inc.,  Portals  II,  445  12th  Street,  SW,  Room  CY-  B402,  Washington,  DC,  20554.  Comments  and  reply  comments  will  be  available  for  public  inspection 
 during  regular  business  hours  in  the  FCC  Reference  Center,  Room  CY-  A257,  445  12th  Street,  SW,  Washington,  DC,  20554.  In  addition,  the  full  text  of  this  document  is  available  for  public 
 inspection  and  copying  during  regular  business  hours  at  the  FCC  Reference  Information  Center,  Portals  II,  445  12th  Street,  SW,  Room  CY-  A257,  Washington,  DC,  20554.  This  document  may 
 also  be  purchased  from  the  Commissions  duplicating  contractor,  Qualex  International,  Portals  II,  445  12th  Street,  SW,  Room  CY-  B402,  Washington,  DC,  20554,  telephone  202-  863-  2893, 
 facsimile  202-  863-  2898,  or  via  e-  mail  qualexint@  aol.  com. 
 47.  Comments  and  reply  comments  must  include  a  short  and  concise  summary  of  the  substantive  arguments  raised  in  the  pleading.  Comments  and  reply  comments  must  also  comply 

 with  section  1.49  and  all  other  applicable  sections  of  the  Commissions  rules.  115  We  direct  all  interested  parties  to  include  the  name  of  the  filing  party  and  the  date  of  the  filing  on  each  page  of 
 their  comments  and  reply  comments.  All  parties  are  encouraged  to  utilize  a  table  of  contents,  regardless  of  the  length  of  their  submission.  We  also  strongly  encourage  parties  to  track  the 
 organization  set  forth  in  the  NPRM  in  order  to  facilitate  our  internal  review  process. 
 D.  Further  Information 
 48.  Alternative  formats  (computer  diskette,  large  print,  audio  recording,  and  Braille)  are  available  to  persons  with  disabilities  by  contacting  Brian  Millin  at  (202)  418-  7426  voice, 

 (202)  418-  7365  TTY,  or  bmillin@  fcc.  gov.  This  NPRM  can  also  be  downloaded  in  Microsoft  Word  and  ASCII  formats  at  http://  www.  fcc.  gov/  ccb/  universal_  service/  highcost. 

 49.  For  further  information,  contact  the  Katie  King  at  (202)  418-  7491  or  Jennifer  Schneider  at  (202)  418-  0425  in  the  Accounting  Policy  Division,  Common  Carrier  Bureau. 

 115  See  47  C.  F.  R.    1.49. 
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 Federal  Communications  Commission  FCC  02-  41 
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 VI.  ORDERING  CLAUSES 
 50.  Accordingly,  IT  IS  ORDERED  that  pursuant  to  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,  this  NOTICE  OF  PROPOSED  RULEMAKING  AND  ORDER  is  hereby  ADOPTED. 

 51.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  4(  i)  and  (j),  254,  and  410  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  154(  i),  154(  j),  254,  and  410, 
 that  the  issues  specified  herein  are  referred  to  the  Federal-  State  Joint  Board  on  Universal  Service  for  a  recommendation  to  be  received  by  the  Commission  no  later  than  August  15,  2002. 

 52.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  Information  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this  NPRM,  including  the 
 Initial  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 

 FEDERAL  COMMUNICATIONS  COMMISSION 

 William  F.  Caton  Acting  Secretary 
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