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 Federal  Communications  Commission  DA  00-  2729 
 1 
 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 


 ORDER 
 Adopted:  December  7,  2000  Released:  December  8,  2000 
 By  the  Common  Carrier  Bureau: 
 I.  INTRODUCTION 
 1.  In  this  Order,  we  update  line  count  input  values  for  the  new  high-  cost  universal  service 
 support  mechanism  for  non-  rural  carriers  for  purposes  of  calculating  and  targeting  support  amounts  for  the 
 year  2001.  Specifically,  we  shall  use  updated  line  count  data  in  the  universal  service  cost  model  to  estimate 
 non-  rural  carriers  forward-  looking  economic  costs  of  providing  the  services  supported  by  the  federal  high-cost 
 mechanism.  In  addition,  we  clarify  that  non-  rural  support  amounts  will  continue  to  be  adjusted  each 
 quarter  to  account  for  line  growth  based  on  the  wire  center  line  count  data  reported  quarterly  by  non-  rural 
 carriers. 


 II.  BACKGROUND 
 2.  New  High-  Cost  Mechanism.  On  October  21,  1999,  the  Commission  adopted  two  orders 
 completing  implementation  plans  for  a  new  high-  cost  universal  service  support  mechanism  for  non-  rural 
 carriers.  1  The  new  mechanism  provides  support  based  on  the  forward-  looking  economic  cost  of  providing 
 the  services  eligible  for  support,  2  as  determined  by  the  Commissions  universal  service  cost  model.  3  The 


 1  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  96-  45,  Ninth  Report  and  Order  and 
 Eighteenth  Order  on  Reconsideration,  14  FCC  Rcd  20432  (1999)  (Ninth  Report  and  Order);  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)  (Tenth  Report  and  Order). 


 2  The  services  eligible  for  federal  universal  service  support  are  listed  in  section  54.101  of  the  Commissions 


 rules.  47  C.  F.  R.    54.101. 
 3  The  cost  model  consists  of:  (1)  a  model  platform,  which  contains  a  series  of  fixed  assumptions  about  network 


 design  and  engineering;  and  (2)  input  values  for  the  model  platform,  such  as  the  cost  of  network  components, 
 e.  g.,  cables  and  switches,  as  well  as  various  capital  cost  parameters.  The  Commission  adopted  the  model 
 platform  in  the  Fifth  Report  and  Order  released  in  October  1998.  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).  In  the  Tenth 
 Report  and  Order,  the  Commission  adopted  the  input  values  to  be  used  in  the  model.  See  Tenth  Report  and 
 (continued.) 
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 forward-  looking  support  mechanism  takes  the  costs  generated  by  the  cost  model,  compares  them  to  a 
 national  benchmark,  and  provides  support  for  costs  exceeding  that  benchmark.  Specifically,  for  each  state, 
 the  cost  model  calculates  the  average  forward-  looking  cost  per  line  incurred  by  non-  rural  carriers  to 
 provide  supported  services.  The  forward-  looking  support  mechanism  provides  support  to  non-  rural 
 carriers  in  those  states  that  have  a  statewide  average  forward-  looking  cost  per  line  greater  than  the  national 
 benchmark,  which  is  set  at  135  percent  of  the  national  average  forward-  looking  cost  per  line.  4 


 3.  Targeting.  To  ensure  that  support  is  provided  to  the  areas  that  need  it  most,  the 
 Commission  determined  that  both  forward-  looking  support  and  hold-  harmless  support  for  non-  rural 
 carriers  should  be  targeted  to  high-  cost  wire  centers.  5  Under  the  targeting  approach,  the  amount  of  support 
 available  in  a  particular  wire  center  depends  on  the  relative  costs  in  that  wire  center,  as  estimated  by  the 
 cost  model. 


 4.  Model  Lines  and  Reported  Lines.  Line  counts  are  used  for  two  general  purposes  in  the 
 high-  cost  support  mechanism  for  non-  rural  carriers.  First,  line  counts  are  used  in  the  universal  service  cost 
 model  to  estimate  the  forward-  looking  costs  of  providing  supported  services.  Second,  line  counts  are  used 
 to  calculate  support  based  on  those  costs.  Both  model  lines  and  reported  lines  are  used  in  targeting  support 
 to  high-  cost  areas.  Model  lines  are  used  to  determine  the  relative  costs  among  wire  centers  and  reported 
 lines  are  used  to  determine  the  portable  per-  line  support  amounts  available  in  high-  cost  wire  centers. 


 5.  Support  for  the  Year  2000.  In  the  Twentieth  Reconsideration  Order,  the  Commission 
 clarified  that  the  cost  model  would  use  the  line  count  input  values  adopted  by  the  Commission  in  October 
 1999,  that  is,  year-  end  1998  line  counts,  for  purposes  of  determining  and  targeting  support  for  the  year 
 2000.  6  The  Commission  also  clarified  that  support  would  be  calculated  using  wire  center  line  count  data  (Continued  from  previous  page) 


 Order,  14  FCC  Rcd  20156.  In  the  Ninth  Report  and  Order,  the  Commission  adopted  the  methodology  for 
 calculating  support  amounts  based  on  these  forward-  looking  costs.  See  Ninth  Report  and  Order,  14  FCC  Rcd 
 20432.  The  cost  model  is  available  for  downloading  from  the  Commissions  web  site  at 
 http://  www.  fcc.  gov/  ccb/  apd/  hcpm. 


 4  Ninth  Report  and  Order,  14  FCC  Rcd  at  20438-  38,  20463-  64.  The  forward-  looking  support  mechanism 


 provides  support  for  all  intrastate  costs  in  states  in  which  the  average  cost  exceeds  the  benchmark.  Ninth  Report 
 and  Order,  14  FCC  Rcd  at  20466-  86.  Intrastate  costs  account  for  76  percent  of  all  forward-  looking  costs 
 estimated  by  the  model.  Therefore,  the  forward-  looking  mechanism  provides  support  for  76  percent  of  the 
 forward-  looking  costs  that  exceed  the  benchmark.  Ninth  Report  and  Order,  14  FCC  Rcd  at  20467-  68.  In 
 addition  to  the  new  forward-  looking  high-  cost  support  mechanism  for  non-  rural  carriers,  the  Commission  also 
 adopted  an  interim  hold-  harmless  provision.  Under  this  transitional  provision,  no  non-  rural  carrier  will  receive 
 less  support  under  the  forward-  looking  mechanism  than  it  would  have  received  if  we  had  continued  to  provide 
 support  under  the  previous  high-  cost  support  mechanism  based  on  a  carriers  book  (embedded)  costs.  Ninth 
 Report  and  Order,  14  FCC  Rcd  at  20474-  79.  On  June  30,  2000,  the  Federal-  State  Joint  Board  on  Universal 
 Service  released  a  recommended  decision  for  phasing  down  the  interim  hold-  harmless  provision  of  the  new, 
 forward-  looking  high-  cost  universal  service  support  mechanism  for  non-  rural  carriers.  See  Federal-  State  Joint 
 Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Recommended  Decision,  FCC  00J-  1  (rel.  June  30,  2000). 


 5  Ninth  Report  and  Order,  14  FCC  Rcd  at  20471-  73,  20476-  78. 


 6  Federal-  State  Joint  Board  on  Universal  Service,  Twentieth  Order  on  Reconsideration,  CC  Docket  No,  96-  45, 
 FCC  00-  126  (rel.  April  7,  2000)  (Twentieth  Reconsideration  Order).  These  wire  center  line  counts  were 
 generated  by  PNR  Associates  (PNR)  and  were  trued-  up  to  study  area  access  line  counts  provided  by  the  carriers 
 in  their  1998  ARMIS  (Automated  Reporting  and  Management  Information  System)  filings.  See  Tenth  Report 
 and  Order,  14  FCC  Rcd  at  20186. 
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 reported  by  the  carriers  on  a  quarterly  basis.  7  Under  this  approach,  for  each  state,  the  average  per-  line 
 support  amounts  are  determined  using  the  forward-  looking  cost  estimates  generated  with  the  October  1999 
 line  count  inputs.  The  Universal  Service  Administrative  Company  (USAC)  then  determines  statewide 
 forward-  looking  support  amounts  by  multiplying  the  average  per-  line  support  amount  by  the  number  of 
 lines  reported  by  non-  rural  carriers  each  quarter.  8  While  the  average  per-  line  support  amount  does  not 
 change  from  quarter  to  quarter,  the  total  statewide  forward-  looking  support  amounts  change  quarterly  as 
 the  number  of  lines  reported  changes.  9 


 6.  After  statewide  forward-  looking  support  amounts  are  determined,  USAC  uses  the  cost 
 estimates  generated  by  the  model  to  determine  the  relative  costs  among  wire  centers  and  uses  these  relative 
 costs  to  determine  the  support  amounts  targeted  to  the  high-  cost  wire  centers.  10  After  the  total  wire  center 
 support  amounts  are  determined,  USAC  determines  the  portable  per-  line  support  amounts  available  in  each 
 wire  center.  To  ensure  that  all  non-  rural  carriers  in  a  wire  center  receive  the  same  per-  line  support  for  the 
 lines  they  serve,  the  total  wire  center  support  amount  is  divided  by  the  number  of  reported  lines  in  that  wire 
 center.  11 


 7.  Support  for  the  Year  2001.  On  July  24,  2000,  we  sought  comment  on  updating  the  line 
 counts  used  in  the  model  for  purposes  of  calculating  support  for  the  year  2001.  12  Non-  rural  carriers  filed 
 year-  end  1999  wire  center  line  count  data  on  July  31,  2000.  13  We  sought  comment  on  whether  the 
 Commission  should  update  the  line  count  input  values  used  in  the  cost  model  with  these  year-  end  1999  data 


 7  Non-  rural  carriers  began  filing  quarterly  wire  center  line  counts  for  the  first  time  on  December  30,  1999. 
 These  line  counts  reflected  a  carriers  lines  as  of  June  30,  1999. 
 8  Non-  rural  carriers  are  now  required  to  file  line  count  data  by  wire  center,  rather  than  by  study  area.  See  47 


 C.  F.  R.    36.611,  36.612,  54.307.  Prior  to  December  30,  1999,  non-  rural  incumbent  local  exchange  carriers  and 
 competitive  eligible  telecommunications  carriers  seeking  to  receive  support  were  required  to  file  line  count  data 
 at  the  study  area  level  pursuant  to  sections  36.611  and  54.307  of  the  Commissions  rules. 


 9  See  Twentieth  Reconsideration  Order,  FCC  00-  126  at  paras.  9-  10,  17. 


 10  See  Twentieth  Reconsideration  Order,  FCC  00-  126  at  paras.  11-  13. 
 11  See  Twentieth  Reconsideration  Order,  FCC  00-  126  at  para.  14.  Although  hold-  harmless  support  is  based  on 
 embedded  cost,  rather  than  the  models  forward-  looking  cost  estimates,  it  is  consistent  with  the  Commissions 
 decision  targeting  hold-  harmless  support  to  high-  cost  wire  centers  to  use  the  cost  estimates  generated  by  the 
 model  to  target  such  support.  See  Twentieth  Reconsideration  Order,  FCC  00-  126  at  para.  15.  Accordingly,  as 
 with  forward-  looking  support  amounts,  model  lines  are  used  to  determine  the  relative  costs  among  wire  centers 
 and  total  support  amounts  available  in  each  wire  center.  Reported  lines  are  then  used  to  determine  the  portable 
 per-  line  support  amounts  available  in  each  wire  center.  See  Twentieth  Reconsideration  Order,  FCC  00-  126  at 
 paras.  15-  16. 


 12  See  Common  Carrier  Bureau  Seeks  Comment  on  Updating  Line  Counts  for  Calculating  High-  Cost  Universal 


 Service  Support  for  Non-  Rural  Carriers  for  the  Year  2001,  Public  Notice,  CC  Docket  No.  96-  45,  DA  00-  1626 
 (rel.  July  24,  2000).  On  August  10,  2000,  the  Bureau  extended  the  pleading  cycle.  See  Common  Carrier  Bureau 
 Extends  Pleading  Cycle  for  Comment  on  Updating  Line  Counts  for  Calculating  High-  Cost  Universal  Service 
 Support  for  Non-  Rural  Carriers  for  the  Year  2001,  Public  Notice,  CC  Docket  No.  96-  45,  DA  00-  1825  (rel.  Aug. 
 10,  2000)  (Aug.  10  Public  Notice). 


 13  See  47  C.  F.  R.    36.611,  54.307. 
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 for  purposes  of  determining  support  amounts  for  the  year  2001.  14  We  also  sought  comment  on  how  these 
 line  counts,  which  are  USF  loops,  15  could  be  allocated  to  the  classes  of  service  used  in  the  model.  16  In 
 particular,  we  sought  comment  on  whether  the  Commission  should  use  wire  center  line  count  data  filed  by 
 non-  rural  carriers  pursuant  to  the  1999  Data  Request  to  allocate  lines  to  the  classes  of  service  used  in  the 
 model.  17  In  addition,  we  sought  comment  on  how  to  determine  the  number  of  special  lines  in  each  wire 
 center.  18  Now  that  carriers  file  wire  center  line  count  data,  these  line  counts  can  best  be  matched  to  the 
 wire  centers  used  in  the  model.  Accordingly,  we  also  sought  comment  on  how  to  match  the  quarterly  wire 
 center  line  counts  with  the  wire  centers  in  the  model. 


 III.  DISCUSSION 
 8.  Consistent  with  the  framework  adopted  in  the  Twentieth  Reconsideration  Order,  we 
 conclude  that  the  cost  model  should  use  the  year-  end  1999  line  counts  filed  July  31,  2000,  as  input  values 
 for  purposes  of  estimating  average  forward-  looking  costs  and  determining  support  for  the  year  2001.  We 
 also  conclude  that  line  counts  should  be  allocated  to  the  classes  of  service  used  in  the  model  based  on  the 
 line  count  data  filed  pursuant  to  the  1999  Data  Request.  We  conclude  further  that  special  access  line 
 counts  should  be  allocated  on  the  basis  of  the  1999  Data  Request  data  and  trued-  up  to  1999  43-  08  ARMIS 
 special  access  line  counts.  In  addition,  we  conclude  that  the  Bureau  and  USAC  should  use  available 
 information  to  match  reported  wire  centers  to  wire  centers  used  in  the  model.  Line  counts  in  wire  centers 
 that  cannot  be  matched  will  not  be  used  to  estimate  average  costs,  but  will  be  incorporated  in  the 
 calculation  of  support  amounts,  along  with  the  quarterly  line  counts  reported  by  carriers.  Finally,  most 
 carriers  sought  confidential  treatment  of  the  1999  Data  Request  data.  Such  data  will  be  made  available 


 14  We  noted  that,  if  line  count  input  values  are  updated,  the  average  per-  line  support  amount  in  each  state  would 
 then  be  determined  using  these  updated  input  values.  Consistent  with  the  methodology  set  forth  in  the  Twentieth 
 Reconsideration  Order,  statewide  support  amounts  would  be  determined  by  multiplying  the  updated  average 
 support  amounts  by  the  number  of  lines  reported  each  quarter  by  non-  rural  carriers  in  each  state.  See  Aug.  10 
 Public  Notice  at  3  n.  13. 


 15  Section  36.611  of  the  Commissions  rules  requires  carriers  to  file,  for  universal  service  support  purposes, 


 working  Exchange  Line  C&  WF  loops  used  jointly  for  exchange  and  message  telecommunications  service, 
 including  C&  WF  subscriber  lines  associated  with  pay  telephones  in  C&  WF  Category  1,  but  excluding  WATS 
 closed  end  access  and  TWX  service.  See  47  C.  F.  R.    36.611(  h). 


 16  To  estimate  wire  center  costs,  the  model  uses  line  counts  for  total  business  lines,  residential  lines,  special 


 lines,  payphone  lines,  and  single  line  business  lines.  See  LineCount  table  in  hcpm/  Db/  hcpm.  mdb  at 
 http://  www.  fcc.  gov/  ccb/  apd/  hcpm. 


 17  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,  Order,  DA  99-  1406  (rel.  July  19,  1999)  (1999 
 Data  Request).  The  1999  Data  Request  required  non-  rural  carriers  to  file  year-  end  1998  wire  center  line  count 
 data  for  total  business  lines,  residential  lines,  special  lines,  payphone  lines,  and  single  line  business  lines, 
 measured  as  voice  grade  equivalent  analog  or  digital  lines.  In  addition,  the  1999  Data  Request  sought 
 information  on  facility  (as  opposed  to  voice  grade  equivalent)  line  counts  for  business  and  special  lines. 


 18  The  1999  Data  Request  defined  special  lines  to  include  state  private  lines  as  well  as  interstate  special  access 


 lines.  See  1999  Data  Request  at  4-  5.  The  PNR  data  used  in  the  model  was  trued-  up  to  1998  43-  08  ARMIS 
 (Automated  Reporting  and  Management  Information  System)  access  line  counts,  which  includes  only 
 interexchange  special  access  lines. 
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 pursuant  to  the  Interim  Protective  Order  in  this  proceeding.  19 
 9.  1999  Line  Counts.  We  find  that  line  count  input  values  should  be  updated  so  that  the 
 model  will  take  into  account  changes  in  costs  that  result  from  changes  in  line  counts.  If  line  count  input 
 values  remained  static,  the  models  cost  estimates  would  fail  to  reflect  the  economies  of  scale  generated  by 
 serving  an  increasing  number  of  lines.  Absent  an  update  of  line  count  input  values,  the  use  of  reported 
 lines  in  the  support  methodology  would  cause  non-  rural  support  to  increase  indefinitely  as  reported  lines 
 increase.  20  Such  a  result  would  be  inconsistent  with  the  criteria  adopted  in  the  Universal  Service  First 
 Report  and  Order  requiring  that  the  cost  model  reflect  the  economies  of  scale  of  serving  all  lines  within  a 
 geographic  area.  21  By  updating  line  count  input  values,  the  cost  estimates  will  reflect  the  economies  of 
 scale  resulting  from  the  growth  in  the  number  of  lines  served  by  non-  rural  carriers.  22 


 10.  We  also  find  that  the  lines  reported  by  carriers  on  July  31,  2000  (year-  end  1999  line 
 counts)  are  the  appropriate  data  to  use  for  updating  the  cost  models  input  values  at  this  time.  We  are  not 
 persuaded  by  AT&  Ts  argument  that  we  should  use  as  input  values  projected  line  counts  for  the  year  in 
 which  support  is  provided.  23  Because  support  currently  is  provided  on  the  basis  of  the  lines  reported  by 
 carriers,  rather  than  line  count  projections,  AT&  Ts  proposed  solution  would  not  resolve  the  purported 
 mismatch  between  model  lines  and  reported  lines  identified  by  AT&  T.  24 


 19  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Interim  Protective  Order,  15  FCC 
 Rcd  10183  (2000)  (Interim  Protective  Order).  The  1999  Data  Request  data  has  been  compiled  in  a  single  table 
 for  purposes  of  matching  these  data  with  the  models  customer  location  data  and  the  quarterly  line  counts  filed  by 
 non-  rural  carriers.  See  infra  para.  17.  Because  the  table  contains  data  for  which  some  companies  sought 
 confidential  treatment,  the  table  will  be  made  available  pursuant  to  the  Interim  Protective  Order. 


 20  See,  e.  g.,  Worldcom  Comments  at  2  (  continuing  to  use  the  older  line  counts  in  the  model  to  compute  per  line 


 costs  while  using  the  new  line  count  to  compute  total  support  will  simply  result  in  an  ever-  increasing  fund  size); 
 Florida  PSC  Comments  at  5  (supporting  the  use  of  more  current  line  count  data  because,  [  i]  f  this  information  is 
 not  updated  on  a  timely  basis,  the  Universal  Service  Support  Mechanism  will  be  excessively  costly). 


 21  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Report  and  Order,  12  FCC  Rcd 


 8776,  8915  (1997)  (Universal  Service  First  Report  and  Order)  (subsequent  history  omitted)  (  The  cost  study  or 
 model  must  estimate  the  cost  of  providing  service  for  all  businesses  and  households  within  a  geographic  region. 
 This  includes  the  provision  of  multi-  line  business  services,  special  access,  private  lines,  and  multiple  residential 
 lines.  Such  inclusion  of  multi-  line  business  services  and  multiple  residential  lines  will  permit  the  cost  study  or 
 model  to  reflect  the  economies  of  scale  associated  with  the  provision  of  these  services.).  See  also  AT&  T 
 Comments  at  3  (  use  of  old  1998  line  count  data  to  compute  per-  line  support  estimates  results  in  payments  that 
 do  not  reflect  the  economies  of  scale  associated  with  operating  all  of  the  lines  that  have  been  added  since  1998). 


 22  See  Worldcom  Comments  at  2  (  Because  these  data  reflect  the  most  current  available  line  counts,  they  will 


 allow  the  cost  model  to  reflect  the  further  economies  of  scale  of  the  network  that  are  available  due  to  the  growth 
 in  the  network.). 


 23  See  AT&  T  Comments  at  4-  5.  AT&  T  concedes  that  until  the  Commission  adopts  some  method  of  projecting 


 model  line  counts  to  the  year  for  which  support  is  provided,  we  should  use  the  year-  end  line  count  data  filed  by 
 carriers  on  July  31,  2000. 


 24  AT&  T  is  mistaken  in  its  contention  that  hold-  harmless  support  amounts  increase  with  an  increase  in  reported 


 lines.  See  AT&  T  Comments  at  3-  4.  The  total  hold-  harmless  support  amount  is  divided  among  the  high-  cost 
 wire  centers  based  on  the  relative  costs  in  those  wire  centers.  Per-  line  support  amounts  are  determined  by 
 (continued.) 
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 11.  For  purposes  of  calculating  support  in  2001,  we  will  use  year-  end  1999  line  counts  in  the 
 model  and  adjust  support  amounts  every  quarter  to  reflect  the  lines  reported  by  carriers,  according  to  the 
 methodology  set  forth  in  the  Twentieth  Reconsideration  Order.  25  We  defer  to  a  future  proceeding  the  issue 
 of  how  often  line  counts  and  other  input  values  should  be  updated.  26 


 12.  We  are  not  persuaded  by  Qwests  argument  that  we  should  not  use  updated  line  count 
 data  in  the  cost  model  unless  we  also  use  updated  customer  location  data.  27  Qwest  claims  that  updating 
 only  line  counts  would  artificially  depress  the  cost  per  line,  since  the  numerator  would  remain  stagnant 
 while  the  denominator  grows.  28  This  statement  fails  to  acknowledge  how  the  model  estimates  forward-looking 
 costs.  Qwest  concedes  that  increased  line  counts  reflect  one  of  two  situations:  (1)  additional  lines 
 at  existing  locations;  and  (2)  lines  at  new  locations.  29  When  additional  lines  are  added  at  existing  locations 
 the  model  takes  into  account  additional  costs  involved,  such  as  larger  cable  sizes  and  increased  capacity 
 digital  loop  carriers.  Contrary  to  Qwests  claim,  the  numerator  (estimated  forward-  looking  cost)  would  not 
 remain  stagnant  if  the  model  uses  updated  line  count  input  values.  Moreover,  we  estimate  that 
 approximately  65  percent  of  the  increase  in  residential  lines  is  due  to  additional  lines  at  existing  locations 
 rather  than  to  lines  at  new  locations.  30  Until  the  Commission  adopts  new  customer  location  data,  all  new 
 lines  should  be  treated  as  additional  lines  at  existing  locations  in  the  model,  with  their  additional  costs 
 included  in  the  models  cost  estimates. 


 13.  Although  certain  costs  associated  with  new  locations  may  not  be  reflected  in  the  cost 
 models  estimates  until  the  Commission  adopts  new  customer  location  data,  we  agree  with  AT&  T  and  the 
 Florida  PSC  that  we  should  not  wait  until  then  to  update  line  counts.  31  First,  as  the  Florida  PSC  points  out, 
 more  current  line  count  data  will  be  used  in  determining  support  amounts  whether  or  not  the  customer 
 location  data  are  updated.  32  If  the  line  counts  used  in  the  model  are  not  updated,  the  time  lag  between  the 
 model  inputs  and  the  reported  lines  used  to  determine  support  would  continue  to  grow  without  any 
 readjustment.  Second,  because  the  model  currently  uses  road  surrogate  customer  location  data,  the 
 additional  costs  associated  with  new  locations  are  less  significant  than  implied  by  Qwests  argument.  33  If  (Continued  from  previous  page) 


 dividing  the  total  hold-  harmless  support  in  a  wire  center  by  the  number  of  lines  reported  in  that  wire  center.  See 
 Twentieth  Reconsideration  Order,  FCC  00-  126  at  paras.  15-  16. 


 25  See  Twentieth  Reconsideration  Order,  FCC  00-  126. 


 26  The  Commission  previously  recognized  the  importance  of  updating  the  inputs  in  the  model  as  technology  and 
 other  conditions  change.  See  Tenth  Report  and  Order,  14  FCC  Rcd  at  20170. 
 27  See  Qwest  Comments  at  4-  6;  Qwest  Reply  Comments  at  2-  3. 


 28  See  Qwest  Comments  at  4. 
 29  See  Qwest  Comments  at  4. 
 30  See  FCC,  Common  Carrier  Bureau,  Industry  Analysis  Division,  Trends  in  Telephone  Service:  March  2000 
 (rel.  Mar.  2000)  at  20-  6,  Table  20.4. 
 31  See  AT&  T  Reply  Comments  at  2-  5;  Florida  PSC  Reply  Comments  at  3-  4. 


 32  See  Florida  PSC  Reply  Comments  at  4. 
 33  The  customer  location  data  used  in  the  model  was  developed  using  road  network  information  to  create 
 surrogate  locations  uniformly  along  the  roads.  See  Tenth  Report  and  Order,  14  FCC  Rcd  at  20177-  80. 
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 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  models  cost  estimates.  Thus,  until  the  model 
 uses  updated  customer  location  data,  outside  structure  costs  could  be  underestimated  only  to  the  extent  that 
 new  locations  would  be  along  new  roads.  Moreover,  AT&  T  argues  that  outside  plant  costs  are  not 
 underestimated,  but  rather  are  overestimated.  AT&  T  claims  that  the  use  of  road  surrogate  data  greatly 
 overestimates  the  dispersion  in  customer  locations  and,  therefore,  greatly  exaggerates  outside  plant  costs, 
 and  hence,  per-  line  costs.  34  We  need  not  find  AT&  Ts  claim  to  be  accurate,  however,  to  find  that  it  is 
 reasonable  to  use  updated  line  counts  in  the  model  to  determine  support  for  the  year  2001.  As  explained 
 above,  all  of  the  costs  associated  with  new  lines  and  a  substantial  portion  of  the  costs  associated  with 
 new  locations  would  be  included  in  the  models  cost  estimates. 


 14.  Class  of  Service  Allocations.  We  find  that  using  the  wire  center  line  count  data  filed 
 pursuant  to  the  1999  Data  Request  is  a  reasonable  method  for  allocating  line  counts  to  the  classes  of 
 service  used  in  the  model.  All  commenters  addressing  this  issue  support  this  alternative,  although  AT&  T 
 suggests  that  it  would  be  preferable  to  require  the  local  exchange  carriers  to  disaggregate  into  service 
 classes  the  USF  loops  filed  on  July  31,  2000  (year-  end  1999  lines).  35  We  do  not  believe  that  carriers  should 
 be  subject  to  additional  reporting  requirements  at  this  time,  because  reasonably  accurate  class  of  service 
 allocations  can  be  made  easily  with  the  data  we  already  have.  We  defer  to  a  future  proceeding  how  line 
 count  data  should  be  reported  by  carriers  for  use  in  the  model  in  the  future. 


 15.  For  purposes  of  2001  support,  line  counts  shall  be  allocated  to  the  classes  of  service  used 
 in  the  model  by  dividing  the  year-  end  1999  lines  reported  by  non-  rural  carriers  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  (year-  end  1998  lines).  36  As  Worldcom  points  out, 
 although  this  method  reflects  the  overall  line  growth  specific  to  the  particular  wire  center,  it  assumes  the 
 same  growth  rate  across  service  categories  in  that  wire  center.  37  Nevertheless,  Worldcom  suggests  that  we 
 use  this  method  because  it  is  simpler  than  the  proposed  alternative,  which  makes  a  different  assumption, 


 34  See  AT&  T  Reply  Comments  at  3. 
 35  See  AT&  T  Comments  at  5-  6;  Florida  PSC  Reply  Comments  at  4;  Qwest  Comments  at  6-  7;  Woldcom 
 Comments  at  2. 
 36  For  each  wire  center  we  determine  the  fraction  of  the  USF  loops  reported  July  31,  2000,  that  should  be 


 categorized  as  business  lines,  residential  lines,  payphone  lines,  and  single  line  business  lines  for  use  in  the  model. 
 These  fractions  are  calculated  using  the  1999  Data  Request  lines  for  each  wire  center  as  follows:  (1)  the 
 numerator  is  the  relevant  category  --  business  lines,  residential  lines,  payphone  lines,  or  single  line  business 
 lines;  and  (2)  the  denominator  is  the  sum  of  business  lines,  residential  lines,  and  payphone  lines.  Single  line 
 business  lines  are  not  included  in  the  denominator  because  they  already  are  included  in  the  number  of  business 
 lines.  See  1999  Data  Request  at  4.  USF  loops  for  each  wire  center  are  then  multiplied  by  the  fractions  calculated 
 from  the  matching  wire  center  in  the  1999  Data  Request  data  to  determine  the  line  counts  inputs  for  the 
 matching  wire  center  in  the  model. 


 37  Worldcom  suggests  two  methods  of  using  the  1999  Data  Request  information  to  allocate  the  year-  end  1999 


 USF  loops  to  the  classes  of  service  used  in  the  model,  [  n]  either  [of  which]  is  certain  to  be  exactly  right.  See 
 Worldcom  Comments  at  3-  4. 
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 and  both  alternatives  are  likely  to  give  similar  results  in  most  cases.  38  We  find  that  either  method  would  be 
 a  reasonable  way  to  use  the  1999  Data  Request  information  to  allocate  the  year-  end  1999  lines  to  the 
 switched  lines  categories  used  in  the  model  and  agree  that  we  should  use  the  simpler  method. 


 16.  We  use  a  somewhat  different  method  to  determine  the  number  of  special  lines  in  each  wire 
 center,  because  the  wire  center  line  counts  reported  by  non-  rural  carriers  (USF  loops)  include  only  switched 
 lines.  39  Thus,  we  cannot  simply  take  USF  loops  and  divide  them  into  the  1999  Data  Request  line  count 
 categories.  We  conclude  that,  to  determine  the  relevant  number  of  special  lines  for  each  wire  center,  we 
 shall  divide  the  1999  ARMIS  special  access  lines  among  wire  centers  in  the  same  proportion  as  the  special 
 lines  from  the  1999  Data  Request.  40  We  find  that  this  method  of  determining  special  access  lines  is 
 preferable  to  either  of  those  proposed  by  AT&  T  and  Worldcom,  which  would  include  state  private  lines  as 
 well  as  interstate  special  access  lines.  41  At  this  time,  we  find  that  only  interstate  special  access  lines  should 
 be  included,  as  was  done  in  the  past.  We  also  find  that  we  should  continue  to  count  special  lines  as  voice 
 grade  equivalents  rather  than  as  physical  pairs,  as  suggested  by  Qwest.  42  We  conclude  this  represents  a 
 reasonable  way  to  calculate  2001  support  amounts,  pending  any  future  proceedings  to  refine  input  values. 


 17.  Matching  Wire  Centers.  We  conclude  that  when  updating  line  counts  for  purposes  of 
 estimating  forward-  looking  costs,  the  wire  centers  reported  by  carriers  in  their  quarterly  line  count  filings 
 should  be  matched  with  wire  centers  found  in  the  1999  Data  Request  and  in  the  models  customer  location 
 data.  The  vast  majority  of  the  approximately  12,500  reported  wire  centers  have  matching  records  in  these 
 other  data  sets.  In  calculating  support  for  the  year  2001,  we  shall  use  information  from  other  data  sources 
 to  correct  typographical  errors,  match  wire  centers  at  identical  locations,  or  otherwise  reconcile  minor 
 discrepancies  in  the  wire  center  identifiers.  43  In  addition,  in  the  process  of  calculating  support  amounts  for 
 the  year  2000,  USAC  staff  received  additional  matching  information  from  carriers,  which  shall  be 
 incorporated  in  the  Commissions  matching  process  for  calculating  support  amounts  for  the  year  2001.  In 
 a  small  number  of  cases  no  matches  could  be  found.  We  find  that  line  counts  in  wire  centers  reported  by 


 38  The  alternative  method  identified  by  Worldcom  uses  study  area  growth  rates  for  different  service  categories, 
 developed  from  ARMIS  data,  to  adjust  the  line  counts  from  the  1999  Data  Request.  Then,  these  adjusted  line 
 counts  are  used  to  allocate  the  year-  end  1999  USF  loops.  See  Worldcom  Comments  at  3-  4. 


 39  Special  lines  are  dedicated,  non-  switched  lines. 


 40  First  we  shall  calculate  the  total  number  of  special  lines  from  the  1999  Data  Request  by  study  area.  Then,  we 
 shall  calculate  the  fraction  of  study  area  total  special  access  lines  that  are  in  each  wire  center  as  follows:  (1)  the 
 numerator  is  the  number  of  special  lines  from  the  1999  Data  Request  in  the  wire  center;  and  (2)  the  denominator 
 is  the  total  number  of  special  lines  from  the  1999  Data  Request  in  the  study  area.  These  fractions  are  multiplied 
 by  the  number  of  special  access  lines  in  the  study  area  from  1999  ARMIS  filings  to  determine  the  number  of 
 special  access  lines  by  wire  center  for  use  in  the  model. 


 41  See  AT&  T  Comments  at  6;  Worldcom  Comments  at  4. 


 42  Qwest  argues  that  we  should  use  the  physical  pairs  providing  both  special  access  lines  and  intrastate  private 
 lines,  not  the  interstate  special  access  channels  that  are  currently  used.  See  Qwest  Comments  at  6-  7;  see  also 
 Qwest  Reply  Comments  at  3-  4.  U  S  West  raised  a  similar  issue  in  criticizing  the  Commissions  methodology  for 
 estimating  certain  expense  input  values.  See  Tenth  Report  and  Order,  14  FCC  Rcd  at  20327-  28. 


 43  For  example,  in  some  instances  the  wire  center  identifier,  known  as  a  CLLI  tm  code,  contained  a  -  in  one  list 


 and  an  _  in  another.  In  other  instances  one  letter  in  an  eight-  letter  CLLI  code  may  have  been  different  but  the 
 switch  locations  were  the  same  in  one  of  the  following:  the  LERG,  GDT,  or  Tariff  4. 
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 carriers  in  their  quarterly  filings  that  cannot  be  matched  will  not  be  used  to  estimate  average  costs.  Such 
 lines  will  be  used  in  determining  support  amounts,  however,  because  these  lines  are  included  in  the 
 quarterly  line  counts  that  are  used  to  calculate  statewide  support  amounts,  according  to  the  met  hodology 
 adopted  in  the  Twentieth  Reconsideration  Order.  We  expect  that  on  an  ongoing  basis  we  will  find 
 opportunities  to  make  additional  improvements  in  matching  wire  centers.  44 


 18.  Confidentiality.  Most  non-  rural  carriers  claim  that  their  wire  center  line  count  data  are 
 confidential.  45  In  April  2000,  the  Commission  denied  requests  for  confidential  treatment  of  quarterly  wire 
 center  line  count  data  to  the  limited  extent  that  the  number  of  lines  in  wire  centers  receiving  support  may  be 
 determined  when  the  Commission  releases  per-  line  and  total  support  amounts.  46  The  Commission  has  not 
 yet  determined  whether  the  line  count  data  of  wire  centers  that  do  not  receive  support  should  be  afforded 
 confidential  treatment  and  has  made  such  data  available  to  interested  parties  under  the  terms  of  the  Interim 
 Protective  Order.  47  We  do  not  decide,  at  this  time,  whether  the  data  submitted  pursuant  to  the  1999  Data 
 Request  should  be  afforded  confidential  treatment.  The  Commission  will  resolve  the  separate  but  related 
 issues  raised  by  these  confidentiality  requests  at  a  later  date.  Pending  resolution  of  these  issues,  the  line 
 count  data  filed  pursuant  to  the  1999  Data  Request  will  be  made  available  only  pursuant  to  the  Interim 
 Protective  Order  previously  adopted  in  this  proceeding.  48 


 IV.  ORDERING  CLAUSES 
 19.  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 


 44  For  instance,  two  commenters  addressing  this  issue  offered  their  assistance.  See  AT&  T  Comments  at  7-  8; 
 Worldcom  Comments  at  5. 
 45  Aliant,  Anchorage  Telephone  Utility,  Bell  Atlantic,  BellSouth,  Cincinnati  Bell,  Frontier,  GTE,  Puerto  Rico 


 Telephone  Company,  Roseville,  SBC,  and  Sprint  requested  confidential  treatment  of  the  1999  Data  Request  data. 
 Anchorage  Telephone  Utility,  Bell  Atlantic,  BellSouth  Corporation,  GTE,  SBC,  Sprint,  and  U  S  West  (now 
 Qwest)  requested  confidential  treatment  of  quarterly  line  count  data  at  the  wire  center  level  filed  pursuant  to 
 sections  36.611  and  36.612  of  the  Commissions  rules.  The  only  incumbent  local  exchange  carrier  raising 
 confidentiality  issues  in  response  to  the  Bureaus  request  for  comment  on  updating  line  counts  is  BellSouth, 
 which  claims  it  has  always  treated  class  of  service  information  as  confidential  business  information  and  has  not 
 publicly  disclosed  such  information.  BellSouth  has  no  objection  to  updating  line  count  information,  if  the 
 Commission  is  willing  to  maintain  the  confidentiality  of  the  data.  See  BellSouth  Comments.  AT&  T  argues  that 
 the  updated  line  count  data  for  wire  centers  that  receive  support  should  be  made  publicly  available,  but  that 
 BellSouths  concerns  could  easily  be  eliminated  by  implementing  an  appropriate  protective  order.  See  AT&  T 
 Reply  Comments  at  2. 


 46  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Order,  15  FCC  Rcd  8746  (2000) 


 (Wire  Center  Line  Count  Order). 
 47  See  Interim  Protective  Order,  15  FCC  Rcd  10,183.  On  May  12,  2000,  the  Bureau  released  a  Public  Notice 


 requesting  comment  on  the  confidential  treatment  of  wire  center  line  count  data  filed  pursuant  to  sections  36.  611 
 and  36.612  of  the  Commissions  rules.  See  Common  Carrier  Bureau  Seeks  Comment  on  Requests  for 
 Confidential  Treatment  of  Wire  Center  Line  Count  Data,  CC  Docket  No.  96-  45,  Public  Notice,  DA  00-  1068  (rel. 
 May  12,  2000)  (May  12  Public  Notice). 


 48  See  Interim  Protective  Order,  15  FCC  Rcd  10183. 
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 Federal  Communications  Commission  DA  00-  2729 
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 Commissions  rules,  47  C.  F.  R.    0.  91(  f),  this  ORDER  IS  ADOPTED. 
 FEDERAL  COMMUNICATIONS  COMMISSION 


 Dorothy  T.  Attwood 
 Chief,  Common  Carrier  Bureau 
10