11632 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 36, 54, 61, 64, and 69 

[WC Docket Nos. 10–90, 07–135, 05–337, 

03–109; GN Docket No. 09–51; CC Docket 

Nos. 01–92, 96–45; FCC 11–13] 

Connect America Fund; Developing a 

Unified Intercarrier Compensation 

AGENCY: Federal Communications 

Commission. 

ACTION: Proposed rule. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) proposes several specific, 

near-term steps that will accelerate 

broadband investment in unserved areas 

and set the Universal Service Fund and 

Intercarrier Compensation system on a 

path that is consistent with the 

principles the Commission has 

proposed; the Commission then 

describes alternatives for completing the 

reform process over the longer term. The 

Commission intends to monitor the 

progress of the near-term reforms and 

adjust course as necessary as the 

Commission completes the reform 

process from among the longer-term 

options. 

DATES: Comments are due on or before 

April 18, 2011 and reply comments are 

due on or before May 23, 2011. See 

Supplementary Information section for 

additional comment dates. 

ADDRESSES: You may submit comments, 

identified by WC Docket Nos. 10–90, 

07–135, 05–337, 03–109; GN Docket No. 

09–51; CC Docket Nos. 01–92, 96–45, by 

any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Web Site: http:// 

fjallfoss.fcc.gov/ecfs2/. Follow the 

instructions for submitting comments. 

• People with Disabilities: Contact the 

FCC to request reasonable 

accommodations (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: FCC504@fcc.gov 

or phone: (202) 418–0530 or TTY: (202) 

418–0432. 

• In addition to filing comments with 

the Secretary, a copy of any comments 

on the Paperwork Reduction Act 

information collection requirements 

contained herein should be submitted to 

the Federal Communications 

Commission via e-mail to PRA@fcc.gov 

and to Cathy.Williams@fcc.gov and to 

Nicholas A. Fraser, Office of 

Management and Budget, via e-mail to 

Nicholas_A._Fraser@omb.eop.gov or via 

fax at 202–395–5167. 

For detailed instructions for 

submitting comments and additional 

information on the rulemaking process, 

see the SUPPLEMENTARY INFORMATION

section of this document. 

FOR FURTHER INFORMATION CONTACT: 

Patrick Halley, Wireline Competition 

Bureau, (202) 418–7550 or Jennifer 

Prime, Wireline Competition Bureau, 

(202) 418–2403 or TTY: (202) 418–0484. 

For additional information concerning 

the Paperwork Reduction Act 

information collection requirements 

contained in this document contact 

Cathy Williams on (202) 418–2918. 

SUPPLEMENTARY INFORMATION: This is a 

synopsis of the Commission’s Notice of 

Proposed Rulemaking and Further 

Notice of Proposed Rulemaking (NPRM) 

in WC Docket No. 10–90, GN Docket No. 

09–51, WC Docket No. 07–135, WC 

Docket No. 05–337, CC Docket No. 01– 

92, CC Docket No. 96–45, and WC 

Docket No. 03–109, FCC 11–13, adopted 

February 8, 2011, and released February 

9, 2011. The complete text of this 

document is available for inspection 

and copying during normal business 

hours in the FCC Reference Information 

Center, Portals II, 445 12th Street, SW., 

Room CY–A257, Washington, DC 20554. 

The document may also be purchased 

from the Commission’s duplicating 

contractor, Best Copy and Printing, Inc., 

445 12th Street, SW., Room CY–B402, 

Washington, DC 20554, telephone (800) 

378–3160 or (202) 863–2893, facsimile 

(202) 863–2898, or via the Internet at 

http://www.bcpiweb.com. It is also 

available on the Commission’s Web site 

at http://www.fcc.gov. 

Pursuant to §§ 1.415 and 1.419 of the 

Commission’s rules, interested parties 

may file comments and reply comments 

on or before the dates indicated on the 

first page of this document. Comments 

may be filed using: (1) The 

Commission’s Electronic Comment 

Filing System (ECFS); (2) the Federal 

Government’s eRulemaking Portal; or (3) 

by filing paper copies. See Electronic 

Filing of Documents in Rulemaking 

Proceedings, 63 FR 24121, May 1, 1998. 

• Electronic Filers: Comments may be 

filed electronically using the Internet by 

accessing the ECFS: http://www.fcc.gov/ 

cgb/ecfs/ or the Federal eRulemaking 

Portal: http://www.regulations.gov. 

Filers should follow the instructions 

provided on the Web site for submitting 

comments. 

Æ For ECFS filers, if multiple docket 

or rulemaking numbers appear in the 

caption of this proceeding, filers must 

transmit one electronic copy of the 

comments for each docket or 

rulemaking number referenced in the 

caption. In completing the transmittal 

screen, filers should include their full 

name, U.S. Postal Service mailing 

address, and the applicable docket or 

rulemaking number. Parties may also 

submit an electronic comment by 

Internet e-mail. To get filing 

instructions, filers should send an email to ecfs@fcc.gov, and include the 

following words in the body of the 

message, ‘‘get form.’’ A sample form and 

directions will be sent in response. 

Æ Paper Filers: 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, filers must submit two 

additional copies for each additional 

docket or rulemaking number. 

• Filings can be sent by hand or 

messenger delivery, by commercial 

overnight courier, or by first-class or 

overnight U.S. Postal Service mail 

(although we continue to experience 

delays in receiving U.S. Postal Service 

mail). All filings must be addressed to 

the Commission’s Secretary, Office of 

the Secretary, Federal Communications 

Commission. 

Æ The Commission’s contractor will 

receive hand-delivered or messengerdelivered paper filings for the 

Commission’s Secretary at 236 

Massachusetts Avenue, NE., Suite 110, 

Washington, DC 20002. The filing hours 

at this location are 8 a.m. to 7 p.m. All 

hand deliveries must be held together 

with rubber bands or fasteners. Any 

envelopes must be disposed of before 

entering the building. 

Æ Commercial overnight mail (other 

than U.S. Postal Service Express Mail 

and Priority Mail) must be sent to 9300 

East Hampton Drive, Capitol Heights, 

MD 20743. 

Æ U.S. Postal Service first-class, 

Express, and Priority mail should be 

addressed to 445 12th Street, SW., 

Washington, DC 20554. 

In addition, one copy of each pleading 

must be sent to the Commission’s 

duplicating contractor, Best Copy and 

Printing, Inc, 445 12th Street, SW., 

Room CY–B402, Washington, DC 20554; 

Web site: http://www.bcpiweb.com; 

phone: 1–800–378–3160. Furthermore, 

three copies of each pleading must be 

sent to Charles Tyler, 

Telecommunications Access Policy 

Division, Wireline Competition Bureau, 

445 12th Street, SW., Room 5–A452, 

Washington, DC 20554; e-mail: 

Charles.Tyler@fcc.gov. 

Filings and comments are also 

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. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11633 

Copies may also be purchased from the 

Commission’s duplicating contractor, 

BCPI, 445 12th Street, SW., Room CY– 

B402, Washington, D.C. 20554. 

Customers may contact BCPI through its 

Web site: http://www.bcpiweb.com, by 

e-mail at fcc@bcpiweb.com, by 

telephone at (202) 488–5300 or (800) 

378–3160 (voice), (202) 488–5562 (tty), 

or by facsimile at (202) 488–5563. 

To request materials in accessible 

formats for people with disabilities 

(Braille, large print, electronic files, 

audio format), send an e-mail to 

fcc504@fcc.gov or call the Consumer & 

Governmental Affairs Bureau at (202) 

418–0530 (voice) or (202) 418–0432 

(TTY). Contact the FCC to request 

reasonable accommodations for filing 

comments (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: FCC504@fcc.gov; 

phone: (202) 418–0530 or TTY: (202) 

418–0432. 

To view or obtain a copy of this 

information collection request (ICR) 

submitted to OMB: (1) Go to this OMB/ 

GSA web page: http://www.reginfo.gov/ 

public/do/PRAMain, (2) look for the 

section of the web page called 

‘‘Currently Under Review,’’ (3) click on 

the downward-pointing arrow in the 

‘‘Select Agency’’ box below the 

‘‘Currently Under Review’’ heading, (4) 

select ‘‘Federal Communications 

Commission’’ from the list of agencies 

presented in the ‘‘Select Agency’’ box, 

(5) click the ‘‘Submit’’ button to the right 

of the ‘‘Select Agency’’ box, and (6) 

when the list of FCC ICRs currently 

under review appears, look for the OMB 

control number of this ICR as shown in 

the Supplementary Information section 

below (or its title if there is no OMB 

control number) and then click on the 

ICR Reference Number. A copy of the 

FCC submission to OMB will be 

displayed. 

For further information regarding this 

proceeding, contact Patrick Halley, 

Attorney Advisor, Wireline Competition 

Bureau at (202) 418–7389, 

Patrick.Halley@fcc.gov, or Jennifer 

Prime, Attorney Advisor, Wireline 

Competition Bureau at (202) 418–2403, 

jennifer.prime@fcc.gov. 

Initial Paperwork Reduction Act of 

1995 Analysis: This document contains 

proposed information collection 

requirements. The Commission, as part 

of its continuing effort to reduce 

paperwork burdens, invites the general 

public and the Office of Management 

and Budget (OMB) to comment on the 

information collection requirements 

contained in this document, as required 

by the Paperwork Reduction Act of 

1995, Public Law 104–13. Public and 

agency comments are due May 2, 2011. 

Comments on the proposed 

information collection requirements 

should address: (a) Whether the 

proposed collection of information is 

necessary for the proper performance of 

the functions of the Commission, 

including whether the information shall 

have practical utility; (b) the accuracy of 

the Commission’s burden estimates; (c) 

ways to enhance the quality, utility, and 

clarity of the information collected; and 

(d) ways to minimize the burden of the 

collection of information on the 

respondents, including the use of 

automated collection techniques or 

other forms of information technology. 

In addition, pursuant to the Small 

Business Paperwork Relief Act of 2002, 

Public Law 107–198, see 44 U.S.C. 

3506(c)(4), we seek specific comment on 

how we might further reduce the 

information collection burden for small 

business concerns with fewer than 25 

employees. 

OMB Control Number: 3060–0298. 

Title: Part 61, Tariffs (Other than 

Tariff Review Plan). 

Form Number: N/A. 

Type of Review: Revision of a 

currently approved collection. 

Respondents: Business or other for 

profit. 

Number of Respondents and 

Responses: 630 respondents; 1,210 

responses. 

Estimated Time per Response: 50 

hours. 

Obligation to Respond: Required to 

obtain or retain benefits. The statutory 

authority for this information collection 

is contained in sections 1–5, 201–205, 

208, 251–271, 403, 502, and 503 of the 

Communications Act of 1934, as 

amended, 47 U.S.C. 151–155, 201–205, 

208, 251–271, 403, 502, and 503. 

Frequency of Response: One-time, on 

occasion and biennial reporting 

requirements. 

Total Annual Burden: 63,000 hours. 

Annual Cost Burden: $986,150. 

Privacy Act Impact Assessment: No 

impacts. 

Nature and Extent of Confidentiality: 

The Commission is not requesting that 

the respondents submit confidential 

information to the FCC. Respondents 

may, however, request confidential 

treatment for information they believe to 

be confidential under 47 CFR 0.459 of 

the Commission’s rules. 

Needs and Uses: Sections 201, 202, 

203, 204 and 205 of the 

Communications Act of 1934, (‘‘Act’’) as 

amended, 47 U.S.C. 201, 202, 203, 204 

and 205, require that common carriers 

establish just and reasonable charges, 

practices and regulations which must be 

filed with the Commission which is 

required to determine whether such 

schedules are just, reasonable and not 

unduly discriminatory. 

Part 61 of the Commission’s rules, 47 

CFR part 61, establishes the procedures 

for filing tariffs which contain the 

charges, practices and regulations of the 

common carriers, supporting economic 

data and other related documents. The 

supporting data must also conform to 

other parts of the Commission’s rules 

such as 47 CFR parts 36 and 69. Part 61 

prescribes the framework for the initial 

establishment of and subsequent 

revisions to tariffs. Tariffs that do not 

conform to Part 61 may be required to 

post their schedules or rates and 

regulations, 47 CFR 61.72. 

In this Notice of Proposed 

Rulemaking and Further Notice of 

Proposed Rulemaking (FCC 11–13), the 

Commission proposes revised rules that 

would require incumbent rate-of-return 

and competitive local exchange carriers 

to file revised tariffs if they engage in 

revenue sharing arrangements. We 

estimate that this could result in a onetime increase in the frequency of 

response of up to 50 carriers because 

they would have to make the necessary 

tariff filing within 45 days of the final 

rules becoming effective. Any 

subsequent tariffing requirements 

should be encompassed in the ongoing 

estimates for this information collection. 

I. Summary 

A. Legal Authority To Support 

Broadband 

1. Additional Section 254(b) Principle 

1. We propose to adopt the principle, 

as recommended by the Federal-State 

Joint Board on Universal Service in 

November 2010, ‘‘that universal service 

support should be directed where 

possible to networks that provide 

advanced services, as well as voice 

services,’’ pursuant to section 254(b)(7), 

and seek comment on that proposal. If 

we adopt the proposed principle, how 

should we apply it with respect to the 

other criteria in section 254? 

2. Commission Authority To Support 

Broadband 

2. We have express statutory authority 

to extend universal service support to 

broadband services that providers offer 

as telecommunications services. We 

believe we also have authority to extend 

universal service support to broadband 

services offered as information services 

under section 254, section 706 and/or 

our ancillary authority. In any event, we 

believe we have clear authority to 

condition awards of universal service 

support on a recipient’s commitment to 

offer broadband service. We seek 

comment on these issues, as well as any 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11634 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

other approaches that would buttress 

our legal authority. 

a. Section 254 

3. We seek comment on whether, read 

as a whole, section 254 may reasonably 

be interpreted to authorize the 

Commission to support broadband 

service. Could we provide support to 

information service providers consistent 

with section 254(e) and 214(e)? If not, 

under what mechanism could we 

designate and offer support to 

information service providers? What 

role would the states play in designating 

eligible information service providers? 

Would disbursement of support to 

information service providers comport 

with federal appropriations laws? We 

seek comment on these and other 

pertinent issues. 

4. In the event we interpret section 

254 to authorize support of broadband, 

we also seek comment on adding 

broadband to the supported services list. 

Before modifying the list of supported 

services, the Commission must 

‘‘consider the extent to which such 

telecommunications services—(1) are 

essential to education, public health, or 

public safety; (2) have, through the 

operation of market choices by 

customers, been subscribed to by a 

substantial majority of residential 

customers; (3) are being deployed in 

public telecommunications networks by 

telecommunications carriers; and (4) are 

consistent with the public interest, 

convenience, and necessity.’’ 

5. In 2007, the Joint Board also 

recommended that the Commission 

revise the definition of supported 

services to include mobility, concluding 

that both broadband and mobility 

satisfied the four part criteria and 

should be eligible for federal universal 

service support. 

6. The Commission currently requires 

ETCs to provide all of the supported 

services. If we were to add broadband 

and/or mobility to the list of supported 

services, should we create separate 

designations for each supported service 

(voice, broadband, and mobility) so that 

a provider does not need to offer all of 

the supported services to be eligible for 

support, as the Joint Board 

recommended in 2007? We seek 

comment on this proposal. We also ask 

what would be the impact of such an 

approach on Lifeline providers, who 

today also are required to offer all 

supported services. 

b. Section 706 

7. We seek comment on whether 

sections 706(a) and (b), alone or in 

concert with sections 254 and 214(e), 

grant us authority to provide universal 

service support for broadband 

information services. We believe that 

providing universal service support for 

broadband would ‘‘remove barriers to 

infrastructure investment’’ by supplying 

financial incentives to invest in areas 

where it may otherwise be uneconomic 

to do so. We seek comment on this 

issue. Would providing support for 

broadband information services under 

section 706 be inconsistent with the 

definition of universal service in section 

254(c) or the limitation of support to 

ETCs in section 254(e)? If we act 

pursuant to section 706 alone, would we 

have authority to collect universal 

service contributions and disburse them 

to eligible recipients under the current 

universal service mechanisms, or 

should we develop a separate 

mechanism under our section 706 

authority? Would the collection and 

disbursement of funds comport with 

federal appropriations laws? What 

criteria should we use to determine who 

is eligible to receive support? What role 

should states play? We seek comment 

on these and other relevant issues. 

c. Title I Ancillary Authority 

8. We seek comment on whether the 

Commission could rely on its ancillary 

authority in Title 1 to support 

broadband information services. Would 

providing support for broadband be 

reasonably ancillary to the 

Commission’s statutory responsibilities 

under section 254(b)? Similarly, would 

supporting broadband be reasonably 

ancillary to section 706 as a ‘‘specific 

delegation of legislative authority’’ to 

encourage deployment of advanced 

telecommunications capability to all 

Americans? We seek comment on 

whether these provisions or others 

provide a sufficient statutory basis for 

exercising ancillary authority. As with 

other theories described above, we also 

seek comment on what criteria should 

be used to designate eligible recipients, 

and on who should perform the 

designations. We also seek comment on 

whether adopting the competitive 

bidding process in the first phase of the 

CAF and permanent CAF programs 

pursuant to our ancillary authority 

would be consistent with federal 

appropriations laws. We invite 

comment on these and any other 

relevant issues. 

d. Conditional Support 

9. We believe the Commission also 

has authority to direct high-cost or CAF 

support toward broadband-capable 

networks by conditioning awards of 

universal service support on a 

recipient’s commitment to offer 

broadband service alongside supported 

voice services. We see no reason why 

conditioning the receipt of support on 

offering broadband is not permissible 

under the Commission’s general 

authority to promulgate general rules 

related to universal service. We invite 

comment on this approach. 

e. Other Approaches 

10. Forbearance. We seek comment 

on whether we should exercise our 

section 10 forbearance authority, alone 

or in combination with any of the 

theories described above, to facilitate 

use of funding to support broadband 

information services. For example, 

could we forbear from applying section 

254(c)(1), which defines universal 

service as an evolving level of 

telecommunications services? Could we 

likewise forbear from applying sections 

254(e) and 214(e), which restrict 

universal service support to ETCs? Are 

the statutory criteria for forbearance 

from these provisions met? Are there 

any other provisions from which we 

should forbear? If we grant forbearance, 

may we adopt rules that are broader 

than the statutory provisions? We seek 

comment on these issues. 

11. Classifying Interconnected VoIP. 

We also invite comment on whether we 

should consider classifying 

interconnected voice over Internet 

protocol as a telecommunications 

service or an information service. If the 

Commission were to classify 

interconnected VoIP as a 

telecommunications service, this would 

enable the Commission to support 

networks used to provide 

interconnected VoIP, including 

broadband networks. We seek comment 

on this issue. Does interconnected VoIP 

have characteristics that warrant 

classifying it as a telecommunications 

service or an information service? If the 

Commission classified interconnected 

VoIP as a telecommunications service, 

should we forbear from applying any 

provisions in Title II to the service? We 

request comment. 

12. We invite parties to comment on 

these and any other legal theories that 

they believe will provide a sound legal 

basis for providing universal service 

support for broadband. 

B. Setting American on a Path to Reform 

1. National Goals and Priorities for 

Universal Service 

13. We propose the following four 

priorities for the federal universal 

service high-cost program: (1) To 

preserve and advance voice service; 

(2) to ensure universal deployment of 

modern networks capable of supporting 

necessary broadband applications as 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11635 

well as voice service; (3) to ensure that 

rates for broadband service are 

reasonably comparable in all regions of 

the nation, and rates for voice service 

are reasonably comparable in all regions 

of the nation; (4) to limit the 

contribution burden on households. 

14. We ask that commenters consider 

the reform proposals in light of these 

reform priorities, and ask commenters to 

suggest additional or alternative 

priorities, and how to prioritize them. 

We ask whether advancing the 

deployment of mobile networks should 

be its own independent priority. We 

seek comment on other priorities, 

including competitive neutrality and 

technology neutrality, and whether our 

proposed reforms are consistent section 

254(b)(5) that support ‘‘should be 

specific, predictable, and sufficient.’’ 

2. Encouraging State Action To Advance 

Universal Service 

15. We seek comment generally on the 

role of the states in preserving and 

advancing universal service as we 

transition from the current programs to 

the Connect America Fund. We 

welcome the input of the state members 

of the Joint Board on these and other 

important questions. 

16. We seek comment on what level 

of financial commitment should be 

expected from the states and territories 

to advance broadband, and on how to 

address the different features of states, 

and the various state efforts to preserve 

and advance universal service. We seek 

comment on how to encourage or 

require additional commitments to 

support universal service by states in 

partnership with the federal 

government. 

3. Eligible Telecommunications Carrier 

Requirements 

17. We seek comment on how the 

Commission can best interpret existing 

ETC requirements to achieve our goals 

for reform. We also seek comment on 

whether (and if so how) we should 

modify the ETC requirements. How 

would we provide incentives for state 

commissions to apply any Commissionadopted requirements to ETCs 

designated by states? Alternatively, we 

seek comment on whether the 

Commission could or should forbear 

from requiring that recipients be 

designated as ETCs at all, and if so, in 

particular whether the Commission 

could forbear from applying section 

254(e) to entities that are not 

telecommunications carriers to allow 

their receipt of universal service support 

to serve rural, insular and high-cost 

areas under the Act. If we do forbear 

from this requirement, what if any 

requirements should replace it? How 

should we transition from existing to 

any new requirements? How should 

existing ETCs be treated during such a 

transition? 

4. Public Interest Obligations of Fund 

Recipients 

18. We seek comment on what public 

interest obligations should apply to 

ETCs going forward, as we reform and 

modernize the existing high-cost 

program to advance broadband. We ask 

commenters to address whether the 

public interest obligations proposed 

below should vary, depending on 

whether broadband is a supported 

service, or alternatively, if support is 

provided to voice recipients 

conditioned on their deployment of 

broadband-capable facilities. We 

propose that public interest obligations 

apply generally to all funding 

recipients. We ask commenters to what 

extent, if any, should the obligations 

vary for recipients under the current 

high-cost funding programs, recipients 

of funding in the first phase of CAF 

funding, and Long-Term CAF recipients. 

We ask commenters to consider and 

explain whether (and if so how) each of 

the obligations discussed below should 

apply under what circumstances, 

recognizing that it may be appropriate to 

tailor obligations to avoid unfunded 

mandates. We also ask commenters to 

address specifically whether the duties 

and responsibilities of ETCs should 

differ depending on whether they are 

also the state-mandated carrier of last 

resort in a particular area. We seek 

comment on how best to balance the 

costs and burdens associated with the 

monitoring of, enforcement of, and 

compliance with the proposed public 

interest obligations with our principles 

of fiscal responsibility and 

accountability and our goal of rapidly 

increasing broadband deployment in 

unserved areas. 

a. Characteristics of Voice Service 

19. We propose to simplify how we 

describe core voice service 

functionalities into one term: ‘‘voice 

telephony service.’’ Should we preserve 

the definition of ‘‘voice grade access’’ to 

the public switched network in § 54.101 

of the Commission’s rules? Parties that 

support a different definition should 

provide analysis and data supporting 

such a definition. Parties should also 

explain whether such a definition 

would be technology-neutral and if not, 

the basis for adopting a definition that 

is not technology-neutral. 

b. Voice Obligations 

20. We propose that recipients must 

provide ‘‘voice telephony service’’ 

throughout their designated service 

areas. We propose that recipients be 

permitted to partner with another voice 

provider to provide ‘‘voice telephony 

service.’’ We propose that recipients be 

required to offer voice telephony service 

as a standalone service. We propose that 

recipients continue to be subject to any 

applicable baseline state or federal 

requirements for the provision of voice 

service by ETCs. We seek comment on 

how to create incentives for states to reevaluate and harmonize the 

requirements they impose on the ETCs 

that they designate to be consistent with 

any new federal requirements. Should 

there be any additional obligations 

imposed on recipients serving areas in 

which the telephone penetration rate 

historically has been substantially lower 

than the national average (e.g., on Tribal 

lands and in Native communities)? 

Given that we envision a transition to an 

integrated voice-broadband network in 

the future, how should voice universal 

service public interest obligations 

change over time? In the future, will 

there be a need for separate voice and 

broadband public interest obligations? 

c. Characteristics of Broadband Service 

21. We propose to adopt metrics for 

broadband using specific performance 

characteristics that would apply to the 

CAF and also to the existing high-cost 

program, until it is transitioned into the 

CAF. We seek comment on whether 

there are reasons to adopt technologyspecific minimum standards that would 

depend on the technology deployed. We 

seek comment on whether we should 

characterize broadband by its speed, 

functional attributes, or in some other 

way. Commenters should discuss 

additional ways of measuring 

broadband services provided to 

consumers, such as throughput, latency, 

jitter, or packet loss, for purposes of 

establishing performance requirements 

for recipients. We seek comment on the 

National Broadband Plan 

recommendation of 4 Mbps actual 

download/1 Mbps actual upload, or, 

alternatively, of 3 Mbps of actual 

download speed/768 kbps of actual 

upload speed, or a different speed 

requirement. We seek comment on 

whether there are other metrics we 

should consider that are unrelated to 

speed or service quality, such as 

mobility. 

22. Measuring the Attributes of 

Broadband. We propose that recipients 

test their broadband networks for 

compliance with whatever metrics 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11636 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

ultimately are adopted and report the 

results to USAC on a quarterly basis, 

and that these results be subject to 

audit. Alternatively, should we instead 

require that recipients provide a specific 

speed (e.g., 4/1 Mbps) at a ‘‘reasonable 

service quality,’’ and rely on customer 

complaints regarding the quality of their 

broadband as a means of enforcing 

service quality? We propose that the 

attributes be measured on each 

broadband provider’s access network 

from the end-user interface (modem) to 

the closest peering point between the 

broadband provider and the public 

Internet. 

23. Evolution. We seek comment on 

how often we should re-evaluate our 

broadband requirements, and what 

would be the appropriate procedural 

vehicle (e.g., the Commission’s annual 

section 706 inquiry). 

d. Broadband Obligations 

24. We propose that all existing highcost funding recipients going forward 

and all future CAF recipients must offer 

broadband service that meets or exceeds 

the minimum metrics prescribed by the 

Commission, assuming they receive 

funding for that purpose. We propose 

that all recipients should be subject to 

an annual certification regarding 

compliance with any obligations that we 

ultimately adopt for the provision of 

USF-supported broadband services. 

(i) Service, Coverage, and Deployment 

25. Service Requirement. We seek 

comment on whether to impose a 

service requirement, which would 

specify that a recipient must provide 

service upon request within a 

reasonable period of time, or a service 

requirement and a coverage requirement 

on recipients. We also seek comment on 

whether to adopt specific requirements 

to ensure providers are meeting a 

service requirement. 

26. Coverage Requirement. We seek 

comment on whether to adopt a 

coverage requirement (e.g., recipients 

must cover 99 percent of all housing 

units in an area) in addition to a service 

requirement, and whether to adopt a 

specific timeframe or specific 

milestones for a deployment schedule. 

We propose that recipients be permitted 

to partner with another broadband 

provider to provide broadband service 

in areas where the recipient has not yet 

built its network, and seek comment on 

whether we should limit the number of 

housing units in a given service area 

that can be served by a partnering 

arrangement with a satellite provider in 

order to most efficiently leverage the 

capacity of satellite throughout the 

unserved high-cost areas across the 

nation. Alternatively, we seek comment 

on whether support recipients should be 

allowed to carve out from the coverage 

requirement a small percentage of 

housing units that may be served by 

high-speed Internet access service that 

may not meet the minimum 

performance metrics adopted by the 

Commission. We seek comment on how 

recipients should demonstrate 

compliance with a coverage 

requirement. 

(ii) Affordable and Reasonably 

Comparable Rates 

27. We propose that recipients must 

offer voice and broadband (individually 

and together) at rates that are affordable 

and reasonably comparable to rates in 

urban areas, whether or not broadband 

is a supported service, and seek 

comment on how to measure 

‘‘affordable’’ and ‘‘reasonably 

comparable.’’ We seek comment on how 

the Commission should obtain data on 

voice and broadband pricing to develop 

possible rate benchmarks for supported 

voice and/or broadband service. 

(iii) Additional Considerations 

28. Joint Infrastructure Use. We seek 

comment on the costs and benefits of 

applying policies to encourage sharing 

of infrastructure, including by 

residential and anchor institution users. 

29. We also seek comment on how 

USF can best achieve synergies with the 

connectivity objectives for schools, 

libraries, and rural health care facilities 

in section 254 of the Act. Where build 

out is required to connect these 

particular types of community anchor 

institutions, should this construction be 

supported through the CAF, E-rate, or 

Rural Health Care programs, 

individually or in combination? Should 

USF recipients have any obligations to 

serve anchor institutions in the 

communities in which they serve 

residential customers? 

30. Other Public Interest Obligations. 

We seek comment on whether any 

additional public interest obligations 

should apply to USF recipients, such as 

marketing of broadband service or 

providing customers with the option to 

subscribe to a basic broadband service 

on a stand-alone basis, or prohibiting 

term commitments or early termination 

penalties. We also seek comment on 

public interest requirements that should 

apply to carriers providing service on 

Tribal lands, such as requiring 

recipients to provide broadband to 

Tribal and Native community 

institutions. 

31. Evolution. We propose that we 

periodically re-evaluate the broadband 

public interest obligations, and seek 

comment on whether they should be reevaluated at the same time the 

Commission re-evaluates its broadband 

metrics, or less frequently. We seek 

comment on the effect that changing the 

obligations would have on program 

administration and on funding 

recipients. We propose that the 

Commission re-examine funding levels 

each time it re-evaluates the public 

interest obligations. 

32. Remedies for Non-Compliance. 

We seek comment on remedies for 

failure to meet any public interest 

obligations, including but not limited to 

loss of universal service funding and 

repayment of funds already disbursed. 

We propose that USAC recover funds 

through its normal processes in 

instances where an audit or 

investigation finds that a recipient has 

failed to comply with certain CAF 

program rules and requirements. 

33. Waiver. We propose to allow those 

carriers that are unable to meet an 

adopted deployment schedule to seek a 

waiver of the requirement from the 

Commission, and seek comment on 

what the criteria should be for such a 

waiver. 

34. Role of States and Tribal 

Governments. We seek comment on the 

role of states and Tribal governments in 

enforcing these federally defined public 

interest obligations and whether states 

or Tribal governments may impose 

additional obligations on funded 

providers. 

C. Near-Term Universal Service Reforms 

1. Rationalizing Loop Support, Local 

Switching Support, and Interstate 

Common Line Support 

35. In October 2010, we issued the 

Mobility Fund NPRM, 75 FR 67060, 

November 1, 2010, which proposed a 

Mobility Fund intended to spur build 

out of advanced mobile wireless 

networks in areas not served by currentgeneration mobile networks. We now 

continue our reform efforts in this 

proceeding by proposing steps to spur 

broadband build out, whether fixed or 

mobile, in unserved areas, which exist 

in every state as well as the territories. 

We propose to do this by transitioning 

funds from less efficient uses to more 

efficient uses, including through the 

creation of the CAF. We also seek 

comment on other measures to reduce 

inefficiencies, extend broadband, and 

increase the accountability of 

companies receiving support. 

36. Three components of the high-cost 

program primarily support smaller 

carriers regulated under ‘‘rate-of-return’’ 

rules: High-cost loop support (HCLS), 

which provided $1 billion for 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11637 

incumbents in 2010; local switching 

support (LSS), which provided $276 

million for incumbents in 2010; and 

interstate common line support (ICLS), 

which provided $1.1 billion for 

incumbents in 2010. As currently 

structured, these funding mechanisms 

provide poor incentives for rate-ofreturn carriers to operate and invest 

efficiently. While individual carriers 

may act in the best interests of their own 

customers and communities, excessive 

spending by any one community limits 

opportunities for consumers in other 

communities and may not be in the best 

interests of the nation as a whole. HCLS, 

for example, creates incentives for 

companies to outspend their peers in 

order to receive more funding under the 

current capped formula. For all three 

programs, there are few, if any, 

benchmarks for determining whether 

network investment is justified or 

appropriate, allowing a company to 

spend millions of dollars to build a 

state-of-the art network that may serve 

only a few customers. LSS was 

originally created to help small 

telephone companies that lack 

economies of scale to afford large 

switches, but since then the industry 

has moved to software-based routers 

and switches which can be more easily 

scaled to a company’s size and even 

shared among companies. LSS now 

provides perverse incentives for 

companies not to realize efficiencies by 

combining service areas. We seek 

comment on a suite of reforms to these 

components, which will increase 

accountability and start rate-of-return 

carriers on the path towards marketdriven, incentive-based regulation. 

37. Specifically, we seek comment on 

the following reforms to be 

implemented beginning in 2012: 

38. Modification of HCLS. We 

propose to reduce the reimbursement 

rates for rural incumbent LECs to 55% 

and 65%, from 65% and 75%, in order 

to encourage more efficient operations 

and to facilitate more equitable 

distribution of HCLS under the HCLS 

cap. We propose to eliminate from the 

rules, HCLS for rural incumbent LECs 

with more than 200,000 loops because 

there are no rural incumbent LECs with 

more than 200,000 lines receiving 

support and such incumbent LECs are 

well below the qualifying threshold. We 

propose to eliminate the ‘‘safety net 

additive’’ because it is not working as 

intended. Many carriers are qualifying 

because of the loss of lines, not because 

of significant increased investment. 

39. Modification of LSS. We propose 

to eliminate LSS because LSS was 

designed when small incumbent LECs 

had to buy expensive mechanical 

switches, however, today’s soft switches 

are more scalable to small operations. 

Alternatively, we propose to combine 

HCLS and LSS into one high-cost 

mechanism that would flow to areas 

with above-average costs in the same 

manner as HCLS does now. 

40. Modification or Elimination of 

Corporate Operations Expense 

Eligibility for Universal Service 

Support. We propose to reduce or 

eliminate the eligibility of corporate 

operations (overhead) expenses for 

purposes of universal service support. 

Currently, corporate operations 

eligibility is limited for HCLS, but no 

limited for LSS and ICLS. We desire to 

focus finite universal service funds 

more directly to investments in network 

build-out, maintenance, and upgrades— 

not highly discretionary expenses. 

41. Limits on Reimbursable Capital 

and Operating Costs. We propose to 

improve incentives for efficient 

operations by establishing benchmarks 

for reasonable capital and operating 

costs for universal service support 

purposes. The benchmarks would be 

based on a simplified model taking into 

account key drivers of cost (such as 

population density, topography, soil 

type, etc.). Capital or operating costs 

above the benchmarks would not be 

eligible for reimbursement through 

high-cost universal service mechanisms. 

We also seek comment regarding 

whether above-benchmark costs should 

be reimbursable based on a showing that 

such costs are justifiable and alternative 

means of recovering above-benchmark 

costs from other revenue sources. 

42. Limits on Total per Line High-Cost 

Support. We propose to cap total annual 

support per line for all companies 

operating within the continental United 

States, e.g., $3,000 per line annually. 

Eighteen companies currently receive 

more than $3,000 per line annually, five 

receive more than $10,000 per line 

annually, and one receives $20,000 per 

line annually. We seek comment 

whether companies receiving more than 

the cap should be able to make a 

showing that additional support is in 

the public interest. 

2. Reducing Barriers to Operating 

Efficiencies 

43. Study area waiver process. We 

propose to streamline the study area 

waiver process that would deem the 

waiver granted 60 days after the end of 

the comment cycle, absent any further 

action by the Bureau. We propose to 

eliminate the one-percent standard in 

evaluating study area waivers and focus 

evaluation on the number of lines at 

issue, projected USF support per line, 

and whether such a grant would result 

in consolidation of study areas that 

facilitates reductions in cost by taking 

advantage of economies of scale. 

44. Revising the ‘‘Parent Trap’’ Rule, 

§ 54.305 of the Commission’s rules. We 

propose to eliminate the parent trap rule 

five years after grant of the relevant 

study area waiver and if a certain 

minimum percentage of the acquired 

lines, e.g., 30% are unserved by 768 

kbps broadband. Section 54.305(b) of 

the Commission’s rules provides that a 

carrier acquiring exchanges from an 

unaffiliated carrier shall receive the 

same per-line levels of high-cost 

universal service support for which the 

acquired exchanges were eligible prior 

to their transfer. This proposal is to 

encourage carriers subject to § 54.305 of 

the Commission’s rules to invest in 

modern communications networks in 

unserved areas. We seek comment on 

revising § 54.305 of the Commission’s 

rules so that rural incumbent LECs, 

subject to § 54.305 of the Commission’s 

rules, would receive either the lesser of 

the support pursuant to § 54.305 of the 

Commission’s rules or the support based 

on their own actual costs. Some rural 

incumbent LECs currently receive 

support pursuant to § 54.305 of the 

Commission’s rules, that would not 

receive any support or would receive 

lesser support based upon their own 

costs. 

3. Transitioning Interstate Access 

Support (IAS) to the CAF 

45. We propose to phase out IAS for 

both incumbent price cap carriers and 

competitive eligible 

telecommunications carriers (ETCs) over 

a period of a few years. In 2010, IAS 

totaled $545 million. Originally created 

in 2000 as part of a five-year transitional 

reform plan, IAS has long outlived its 

intended lifespan. The comments 

received in response to the USF Reform 

NOI/NPRM, 75 FR 26906, May 13, 2010, 

suggest that this fund is not critical to 

ensuring rural voice service, and we 

believe the funds could be more 

productively used to support the 

deployment of broadband to unserved 

areas. We seek comment on 

transitioning IAS to the CAF and the 

consequences of doing so. 

4. Rationalizing Competitive ETC 

Support Through Elimination of the 

Identical Support Rule 

46. We propose to eliminate the 

‘‘identical support’’ rule and to 

transition available competitive ETC 

support to the CAF over a several-year 

period. Under the Commission’s 

identical support rule, competitive ETCs 

(mostly wireless carriers) receive, 

subject to an interim cap, the same perVerDate Mar<15>2010 17:21 Mar 01, 2011 Jkt 223001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 E:\FR\FM\02MRP3.SGM 02MRP3

emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11638 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

line high-cost support as incumbent 

carriers serving the same area regardless 

of actual costs or needs. As a result, the 

funding is poorly targeted—in some 

areas, as many as four or more providers 

are receiving redundant ETC funding, 

while other areas lack even a single 

provider of broadband or mobile voice. 

Two of the largest ETCs have 

voluntarily agreed to relinquish their 

ETC support in the context of 

transactions, and the USF Reform NOI/ 

NPRM record supports the conclusion 

that current levels of competitive ETC 

support are unnecessary to ensure fixed 

or mobile voice service in many areas of 

the country that receive support today. 

At the same time, we recognize the 

importance of mobile voice and mobile 

broadband coverage in all areas of the 

country and seek comment on how to 

balance the desire for universal mobile 

coverage with other USF priorities. Our 

proposal in the Mobility Fund 

proceeding was intended to provide a 

one-time infusion to expand mobile 

coverage. We seek comment here on 

how best to factor the need for mobility 

into the reforms proposed in this 

proceeding to achieve our universal 

service objectives. Specifically, we seek 

comment on transitioning available 

competitive ETC support to the CAF, 

over what schedule such transition 

should occur, and whether waivers or 

exceptions should be made, such as for 

competitive ETCs serving Tribal lands 

or when immediate transition of support 

to the CAF would disrupt the 

availability of wireless service in area. 

47. Taken together, the proposed 

changes to the high-cost program will 

enable significant funds to be used to 

support fixed and mobile broadband, as 

discussed below, and potentially a 

recovery mechanism associated with 

ICC reform, where necessary, as 

summarized below. 

5. First Phase of the Connect America 

Fund 

48. In the first phase of the CAF, we 

propose to award, through a reverse 

auction process, non-recurring support 

for broadband areas identified in 

unserved areas, as determined by the 

forthcoming National Broadband Map 

and/or our Form 477 data collection 

(i.e., areas without broadband 

advertised as providing download 

speeds of at least 768 kbps). That 

targeted funding will supplement, not 

replace, other support provided through 

the high-cost program in its current 

form or as modified as part of the 

reforms proposed above. 

(i) Basic Framework for the Connect 

America Fund Phase I 

49. We seek comment on our 

authority to establish a program under 

which non-recurring support would be 

provided, based on a competitive 

bidding system, to a single entity to 

deploy and provide broadband service. 

50. We propose to design the first 

phase of the CAF to use funds 

efficiently to expand broadband to as 

many unserved housing units—that 

would be unlikely to be served soon or 

at all without public investment—as 

possible. We propose to fund the first 

phase of the CAF with savings realized 

from certain carriers’ voluntary 

relinquishment of USF support along 

with savings realized from other 

proposed reforms to existing high-cost 

mechanisms. 

51. We propose to use auctions to 

determine the entities that will receive 

support under the first phase of the CAF 

and the amount of support they will 

receive. We propose to award a fixed 

amount of support, paid out in 

installments, based on the lowest bid 

amounts submitted in a reverse auction. 

We seek comment generally on how to 

design a competitive process to 

determine recipients and support 

amounts in light of our goals. 

52. We propose to fund no more than 

one auction winner per unserved area. 

We propose to exclude satellite 

providers from bidding in the auction 

but to permit them to partner with a 

terrestrial (wireless or wireline) 

provider. We propose to compare bids 

across the country, rather than 

comparing them within certain subsets 

of otherwise eligible areas. 

(ii) Identifying Unserved Areas Eligible 

for Support 

53. We propose to use the National 

Broadband Map to determine what areas 

are unserved, and seek comment on 

how to use the Map for this purpose; 

alternatively, should we rely on 

information from an updated Form 477. 

We propose to identify unserved areas 

on a census-block basis, but seek 

comment on whether another unit of 

geographic area would better serve our 

goals. 

54. We propose to evaluate bids on an 

‘‘amount per unserved unit’’ basis. We 

propose to use unserved housing units 

to establish a baseline number of 

unserved units per census block. We 

seek comment on whether the number 

of unserved units should be adjusted to 

reflect community anchor institutions 

and the like, and, if so, how we would 

obtain the necessary data to be able to 

determine with a sufficient level of 

accuracy the number of businesses and 

other institutions in a given area. 

55. We seek comment on whether we 

should limit support—or provide 

bidding credits—to bidders in states that 

have taken or are taking measures to 

reduce intrastate switched access rates. 

We seek comment on whether we 

should prioritize support for states that 

have created state high-cost USF 

programs. We seek comment on whether 

we should take into account states’ 

actions relating to municipal 

broadband—e.g., whether there should 

be bidding credits for projects in states 

where municipal broadband is 

permitted. 

56. We seek comment on whether we 

should reserve funds for Tribal areas, or 

provide bidding credits for bidders, 

including Tribally owned bidders, who 

wish to deploy on Tribal lands. We 

further seek comment on whether any 

funds reserved for Tribal lands that 

remain unawarded should be treated 

any differently from unreserved funds 

that remain unawarded after the 

auction. We further seek comment on 

how to design the first phase of the CAF 

to include Tribal governments to ensure 

efficient operation on Tribal lands. In 

addition, we seek comment on whether 

we should reserve funds for insular 

areas, or provide bidding credits for 

those who wish to deploy in insular 

areas. 

(iii) Pre-Existing Deployment Plans 

57. We seek comment on how to 

structure the program to avoid outcomes 

that would be inconsistent with the goal 

of increasing broadband deployment in 

unserved rural and high-cost areas, not 

funding existing facilities or 

deployment to which a carrier has 

already committed to federal or state 

regulators. 

(iv) Public Interest Obligations 

58. We propose to have a 

Commission-defined coverage 

requirement. In the alternative, we 

could use bidder-defined coverage 

requirements. We seek comment on 

both. 

59. We propose that recipients build 

networks of at least 4 Mbps 

(downstream) and 1 Mbps (upstream). 

We seek comment on this proposal and 

whether the speed requirement should 

evolve. 

60. We propose that recipients deploy 

within 3 years of funding. We propose 

that obligations last for a specified 

period of years, such as 5, after 

completion of buildout. We seek 

comment on whether to require support 

recipients to meet interim deployment 

milestones. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11639 

61. Given the ongoing nature of our 

reform efforts, we seek comment on 

whether, upon the completion of 

comprehensive universal service reform, 

recipients that ultimately receive 

support should be relieved of their 

obligations under the first phase of the 

CAF, with those obligations being 

replaced by any public interest 

obligations imposed on ultimate CAF 

recipients. We seek comment on what 

should happen to a recipient’s 

obligations in the first phase of the CAF 

once someone in the area (either the 

recipient of support in the first phase of 

the CAF or another carrier) receives 

long-term CAF support. 

(v) Eligibility Requirements for the First 

Phase of the CAF 

62. We propose that recipients in the 

first phase of the CAF be designated (or 

have applied for designation) ETCs by a 

state (or the FCC, as appropriate), as 

required by the Act; alternatively, we 

seek comment on whether to forbear 

from that requirement. 

63. We seek comment on permitting 

carriers to apply for ETC designation on 

a conditional basis, so that they are not 

required to satisfy ETC obligations 

where they don’t get any funding. 

64. We propose that an applicant 

must be a terrestrial wireline or wireless 

service provider and hold, or have 

access to, any required authorization to 

provide the required services. 

65. We propose to limit participation 

in the auction to those applicants able 

to certify that they have submitted all 

requested broadband deployment data 

as part of the State Broadband Data and 

Deployment program. Parties that have 

not been requested to provide such data 

would be permitted to certify that they 

have provided all data requested. We 

seek comment on this proposal 

generally, and on whether such a 

limitation should apply to Tribal areas. 

(vi) Auction Process 

66. We propose rules for and seek 

comment on certain elements of the 

auction process, including the 

application and bidding process. 

67. We propose a two-stage 

application process similar to the one 

we use in spectrum license auctions. 

Based on the eligibility requirements for 

support in the first phase of the CAF, we 

would require a pre-auction ‘‘shortform’’ application to establish eligibility 

to participate in the auction, relying 

primarily on disclosures as to identity 

and ownership and applicant 

certifications, and perform a more 

extensive, post-auction review of the 

winning bidders’ qualifications based 

on required ‘‘long-form’’ applications. 

68. Short Form Application. We 

propose generally that the short form 

application will include basic 

ownership information about the carrier 

and information about any partnerships 

the carrier has entered for the first phase 

of the CAF; identification of areas where 

the carrier might possibly bid; and 

certification that the bidder is qualified 

to participate in the auction. 

69. Auction Design and Bidding 

Process. We seek comment on the best 

auction design to maximize the 

deployment of broadband to housing 

units where there is no broadband now. 

We also seek comment on alternative 

methods of establishing coverage 

requirements in areas for which support 

is received. We seek comment on how 

to encourage bidders to go beyond their 

Commission- or bidder-defined coverage 

requirement. 

70. We propose to select winning 

bidders and award support based on 

bids that state a price at which the 

bidder would meet our minimum 

performance requirements for the 

number of housing (or other) units 

covered by the bid, ranking bids by 

price per unit covered. We seek 

comment on whether we should use 

weighted criteria or bidding credits to 

adjust the bids to account for 

commitments to exceed our minimum 

requirements and to account for other 

benefits, such as higher speed, lower 

latency, mobility, or a better upgrade 

path. We could also use such credits/ 

adjustments to allow tradeoffs, such as 

allowing a provider to bid to provide 

service that does not meet our speed 

standard but does offer mobility. 

71. We propose that bidders should be 

able to aggregate census blocks together 

to bid on a package, and seek comment, 

generally, on how we should design the 

auction to accommodate package 

bidding. 

(vii) Post-Auction Process and 

Administration for the First Phase of the 

CAF 

72. We propose that, following the 

auction, identified winning bidders 

submit long form applications within 10 

days. 

73. We seek comment on the specific 

information and showings that should 

be required of winning bidders on the 

long-form application before they can be 

certified to receive support and before 

actual disbursements in the first phase 

of the CAF can be made to them. We 

propose that an applicant be required to 

confirm ownership information 

provided in its pre-auction short-form 

application or to update that 

information, as appropriate. We further 

seek comment on whether we should 

require applicants in the first phase of 

the CAF to provide any other ownership 

information. 

74. We propose that an applicant 

provide detailed information about the 

network it intends to deploy and seek 

comment on what else we should 

require. 

(viii) Guarantee of Performance 

75. We propose that a winning bidder 

should post financial security, such as 

a letter of credit, and seek comment on 

whether there is an alternative that 

would provide adequate protection; we 

also seek comment on whether some 

carriers should be exempt from this 

requirement. 

(ix) Disbursing Support 

76. We propose that payments be 

made over time as milestones are 

reached; for example, 50 percent paid 

after winning the bid, then 25 percent 

paid after 50 percent deployment, and 

the final 25 percent paid on completion. 

77. We propose to disburse money in 

a manner consistent with the 

Antideficiency Act, which means that if 

we auction off support that we do not 

already have on hand, only the first 

payment would be guaranteed, the other 

payments would be made only on a 

determination by the Commission that 

payment was appropriate. The 

Commission’s compliance with the 

Antideficiency Act is currently assured 

under the terms of an exemption, 

scheduled to expire December 31, 2011, 

which permits the Commission to 

obligate certain universal service funds 

before they are collected. We seek 

comment, however, on how to assure 

compliance in the event the exemption 

is permitted to lapse. 

(x) Liabilities for Failure To Deploy and 

Ensuring Compliance 

78. We seek comment on what kinds 

of penalties are appropriate if a carrier 

fails to deploy as promised. We propose 

to require carriers to agree that support 

in the first phase of the CAF is 

contingent upon completion (or 

substantial completion) of the buildout 

in accordance with specified 

performance requirements. We seek 

comment on, among other things, 

whether carriers should be subject to 

additional liabilities and/or security 

requirements (such as letters of credit or 

performance bonds) to provide them 

with incentives to perform and to 

protect the CAF in case they fail to 

perform as required. 

79. We seek comment on whether 

bidders that are found to have failed to 

meet their obligations relating to the 

CAF should similarly be ineligible for 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11640 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

Commission action until they can 

demonstrate that they have complied 

with their obligations or obtained a 

waiver. 

80. We will require recipients of CAF 

support to comply with audits and 

record retention requirements. We 

propose to confirm that deployment is 

occurring through inspections in the 

field, and we seek comment on what 

kinds of verification procedures are 

appropriate. 

(xi) Delegation of Authority 

81. We propose to delegate to the 

Wireline Competition Bureau and the 

Wireless Telecommunications Bureau 

the authority to determine, subject to 

existing legal requirements such as the 

rules of the Office of Management and 

Budget, the method and procedures for 

applicants and recipients to submit 

appropriate information. 

6. Targeting Support 

a. Disaggregating Support 

82. We propose to target support more 

directly to the areas of greatest need by 

requiring rural carriers to disaggregate 

support within existing study areas 

beginning in 2012, pursuant to § 54.315 

of the Commission’s rules, and invite 

comment on the proposal. 

b. Redrawing Study Areas 

83. We seek comment on whether we 

should begin a process in the near term 

to establish new service areas that 

would be eligible for ongoing support 

under the CAF in stage two of our 

comprehensive reform. We seek 

comment on whether we should take 

steps to encourage states to redraw 

existing study area boundaries to create 

more narrowly targeted service areas for 

purposes of the CAF by a specified date, 

and what actions we may take if states 

decline to do so. We seek comment on 

issues related to the geographic scope of 

ETC obligations and ETC designations. 

7. Pending Proceedings and Other Issues 

84. We seek comment on proposals in 

the record and invite parties to update 

their proposals as appropriate. 

85. Broadband Now Plan. We seek 

comment on whether and how the 

recommendations in the Broadband 

Now Plan, submitted by a group of midsized carriers in 2009, could be 

operationalized in the context of the 

reforms proposed in this Notice. 

86. NCTA Petition for Rulemaking. 

We seek focused comment on how the 

presence of unsubsidized competition 

should be factored into our proposals 

generally. We seek comment on whether 

we should eliminate universal service in 

any study area where there is 100% 

coverage by an unsubsidized voice 

provider, or whether we should create a 

rebuttable presumption that universal 

service support is unnecessary in those 

study areas where at least 95% of the 

households can get service from an 

unsubsidized competitor, and on the 

impact of such a process on the 

incumbent and the consumers in that 

area. We also seek comment on whether 

and how to rationalize funding in 

circumstances in which a single 

company operates two or more networks 

in the same area (e.g., 

telecommunications and cable plant, or 

wireline and wireless networks). 

87. Non-regulated Revenues. We seek 

comment on how to ensure that 

universal service is not inappropriately 

subsidizing non-regulated services or 

excessively subsidizing carriers that 

have the ability to recover additional 

non-regulated revenues as a result of 

their deployment of subsidized local 

loops. We seek comment on the 

proposal to include all revenues 

(including broadband revenues) when 

evaluating the rate of return revenue 

requirement. 

88. Interstate Common Line Support 

for Price Cap Converts. We seek 

comment on Verizon’s proposal that we 

should phase down, on the same 

schedule as IAS, the ICLS that has been 

frozen on a per-line basis for the several 

carriers that converted to price cap 

regulation since the adoption of the 

CALLS Order. 

89. Freezing ICLS for Rate-of-Return 

Companies. We seek comment on 

whether, in order to restrain the growth 

of ICLS in the near term while we 

undertake more comprehensive 

universal service reform, we should cap 

ICLS either per line or per study area for 

rate-of-return companies on an interim 

basis (e.g., for two years), to take effect 

in 2012. 

90. Middle Mile Costs. We seek 

comment on whether to modify our 

universal service rules to provide 

additional support for middle mile 

costs, which a number of parties have 

suggested that middle mile costs are a 

significant component of the costs of 

serving customers in rural areas. If we 

were to do so, how could we ensure that 

support is provided for middle mile 

circuits that are offered on rates, terms, 

and conditions that are just and 

reasonable? What effect would middle 

mile support have on incentives for 

small carriers to continue to seek 

efficiencies from cooperatively 

developing regional networks to provide 

lower cost, higher capacity backhaul 

capability? 

91. Separations. We seek comment on 

how our proposed reforms may affect or 

be affected by the existing separations 

process and any future separations 

reform. We also seek comment on 

whether the Commission should treat 

loops used to provide broadband as 

exclusively interstate. 

92. Accelerated Transition for Rate-ofReturn Territories. Under what 

circumstances would it be appropriate 

to accelerate the transition proposed 

below of rate-of-return territories 

moving to an incentive regulation 

framework over the longer term, and 

adopt such measures in the near term? 

We also seek comment on whether to 

allow carriers to opt-in to any of the 

reforms on an accelerated timeframe. 

We intend to monitor progress in 

extending broadband under the nearterm reforms discussed above, and we 

reserve the right to move more quickly 

to the long-term reforms set forth below. 

D. Long-Term Vision for the Connect 

America Fund 

93. In the second stage of our 

comprehensive reform package, we 

propose to provide all funding through 

the Connect American Fund. The CAF 

would provide ongoing support to 

maintain and advance broadband across 

the country in areas that are 

uneconomic to serve absent such 

support, with voice service ultimately 

provided as an application over 

broadband networks. 

1. Supported Providers 

94. We seek comment on the National 

Broadband Plan’s recommendation that 

there should be at most one subsidized 

provider of broadband service per 

geographic area. We seek comment on 

proposals to support both fixed and 

mobile networks under the CAF, rather 

than funding only one provider in a 

given area. 

95. To the extent we provide separate, 

ongoing support for mobility within the 

CAF, we seek comment on two potential 

funding options. First, we seek 

comment on the use of a model to 

determine high-cost support for wireless 

carriers. Second, we seek comment on 

using reverse auctions to determine 

support for competitive ETCs only. 

96. To the extent we create long-term 

alternatives within CAF for mobile 

carriers, we propose to limit support 

one wireless competitive ETC per 

geographic area. To the extent we were 

to fund only one mobile wireless 

provider in a given geographic area, we 

seek comment on whether it should 

require that provider to share 

infrastructure, such as cell towers, with 

other non-supported wireless providers. 

97. We seek comment on whether and 

how funding only one wireless provider 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11641 

would impact the Commission’s E-rate, 

Rural Health Care and low-income 

programs, and whether it should 

designate ‘‘Lifeline Only’’ ETCs. 

98. We seek comment on whether any 

funding is appropriate in an area if highquality voice service and broadband 

Internet access services are provided 

today by an operator without universal 

service support. 

99. We seek comment on how to 

address situations where no entity 

wishes to serve an area, and the relative 

roles of the Commission and the states 

in determining which carriers are best 

able to provide services in unserved 

areas. 

100. To the extent that we ultimately 

provide ongoing support to only one 

provider in each geographic area where 

support is available, we seek comment 

on whether there should be exceptions, 

for example, for carriers serving Tribal 

lands. 

2. Sizing the Federal Commitment to 

Universal Service 

101. We seek comment on a proposal 

to set an overall budget for the CAF 

such that the sum of the CAF and any 

existing high-cost programs (however 

modified in the future) in a given year 

are equal to the size of the current highcost program in 2010. Alternatively, if 

the Commission were to set an overall 

budget, should it use a different year as 

the relevant baseline, and under what 

circumstances (if any) should the 

Commission adjust the baseline? We 

also seek comment on whether total 

funding should be higher or lower. We 

seek comment on what factors the 

Commission should consider in sizing 

the CAF. We seek comment on whether, 

in determining the size and role of the 

CAF, it should take into account the 

cumulative effect of the four support 

programs, acting together, to achieve the 

goals of universal service. 

3. Alternative Approaches for Targeting 

and Distribution of CAF Funds 

102. We seek comment on alternative 

approaches for determining ongoing 

CAF support that ultimately would 

replace all high-cost funding. In 

addition we seek comment on whether 

these proposals would be effective on 

Tribal lands, given the low telephone 

and broadband penetration rate and the 

associated demographic challenges. 

a. Competitive Bidding Everywhere 

103. We seek comment on using a 

competitive bidding mechanism to 

award funding to one provider per 

geographic area in all areas designated 

to receive CAF support. This 

competitive bidding mechanism would 

be designed to maximize the number of 

households passed by broadband 

networks while ensuring that Americans 

retain access to voice service, without 

exceeding any defined budget for the 

CAF. 

104. We seek comment on whether it 

should use bidding credits for bids to 

provide service exceeding the minimum 

requirements for features such as higher 

speed, latency, mobility, or upgrade 

potential, or to provide preferences to 

carriers serving Tribal lands or insular 

areas. We also seek comment on how 

competitive bidding processes may 

properly involve Tribal governments 

and what impact these processes will 

have on the provision of CAF-supported 

services on Tribal lands. 

105. We also seek comment on 

alternative competitive bidding 

mechanisms to maximize the number of 

households passed by broadband 

networks while ensuring that voice 

service remains available everywhere 

without exceeding any defined budget 

for the CAF. 

106. We seek comment on defining 

areas for bidding that are aggregations of 

census blocks. 

107. We seek comment on the role of 

satellite in serving housing units that 

are most expensive to reach via 

terrestrial technologies, and whether we 

could designate ETCs to provide service 

on a nationwide or multi-state basis. We 

seek comment on methods for 

effectively using funding for satellite, 

and on which approaches might be best 

suited to making the best use of satellite 

capacity with competitive bidding. 

While recognizing that currently 

unserved areas may be more 

economically served by satellite, we 

seek comment on how to ensure that 

consumers currently served by 

terrestrial broadband or voice services 

do not lose access to their terrestrial 

service. 

108. We seek comment on whether we 

should implement a competitive 

bidding process for ongoing CAF 

support on a phased basis, beginning 

with price cap service areas. 

b. Right of First Refusal Everywhere, 

Followed by Competitive Bidding 

Where Necessary 

109. In the alternative, we seek 

comment on an approach under which, 

in each area designated to receive CAF 

support, the Commission would offer 

the current COLR for voice services (i.e., 

most likely a wireline incumbent LEC) 

model-determined support through a 

‘‘right of first refusal’’ (ROFR) to provide 

both voice and broadband to customers 

in the area for a specific amount of 

ongoing support. We also seek comment 

on alternative ways to conduct the 

ROFR. For example, should we request 

that the COLR make an offer of the 

support level it believe it needs, which 

we will accept or reject? 

110. We would determine the amount 

of CAF support to be offered to the 

current COLR using a cost model 

developed in an open, deliberative, and 

transparent process with ample 

opportunity for interested parties to 

participate and verify model results. We 

seek comment on using a model that 

would estimate the costs of providing 

service over a wireline network or, 

alternatively, a model that would 

estimate the costs of using the lowestcost technology capable of providing the 

required minimum level of voice and 

broadband service for each area, which 

may be wireless in some areas and 

wireline in others. If it uses a wirelineonly model, we seek comment on how 

it should define forward-looking 

economic costs of a wireline broadband 

network and what types of costs it 

should include. We seek comment on 

the trade-offs of an engineering cost 

model approach relative to a regressionbased model. 

111. We previously sought comment 

on considering revenues, as well as 

costs, in determining CAF support. 

Despite the advantages of including 

demand-side metrics in the 

determination of which areas are truly 

uneconomic to serve, we recognize that 

there could be difficulties in accurately 

estimating and modeling revenues, and 

seek comment on these issues. 

112. If the COLR refuses the ROFR, a 

competitive bidding mechanism could 

be used to provide ongoing CAF support 

to at most one provider in any given 

area. Such a competitive bidding 

mechanism would simultaneously 

select the providers of both broadband 

and voice, or if necessary, voice-only 

providers that would receive CAF 

support, and, as with the auction 

approach above, would seek to 

maximize the number of households 

passed by broadband networks while 

ensuring that consumers retain access to 

voice service. We also seek comment on 

using alternative competitive bidding 

mechanisms and specifically ask 

whether there is a sequential approach 

that would first determine the least-cost 

method for ensuring that voice service 

remains available everywhere and then 

maximizes broadband coverage subject 

to a budget constraint. We seek 

comment on what factors we should 

consider when defining the geographic 

areas for the auction. 

113. We seek comment on how 

support under the existing programs 

would be transitioned to the CAF under 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11642 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

the ROFR option, and whether a 

transition is necessary or appropriate in 

all circumstances. 

114. We seek comment on whether it 

should implement a ROFR followed by 

competitive bidding on a phased basis, 

beginning with price cap service areas. 

C. Continued Rate-of-Return Reform for 

Certain Carriers 

115. We sought comment above on a 

package of proposals intended to 

improve the incentives for rational 

investment and operation by small 

companies operating in rural areas. If 

we find that the near term reforms have 

adequately improved the incentives for 

investment and operation by small, 

rural companies, we could determine 

that support for these carriers should 

remain based on reasonable actual 

investment, rather than a cost model or 

auction. 

116. Accordingly, we seek comment 

on the need for possible changes to the 

current rate-of-return system beyond 

those discussed in the previous section. 

We seek comment on capping ICLS and 

whether this would be consistent with 

rate-of-return regulation or whether we 

would need to adopt some form of 

incentive regulation to accomplish the 

objective of limiting the size of the 

Fund. We also seek comment on 

whether the same incentive regulation 

framework described below in the 

intercarrier compensation context could 

also be used to replace the ICLS 

mechanism. We seek comment on 

whether more detailed, industry-wide 

clarifications regarding what should be 

deemed ‘‘used and useful’’ would be 

helpful to ensure that excess costs are 

not recovered through universal service 

(or carriers’ rates). In addition, we seek 

comment whether it should initiate a 

proceeding to represcribe the authorized 

rate of return. 

E. Increasing Accountability and 

Measuring Progress To Ensure 

Investments Deliver Intended Results 

117. Reporting Requirements. We 

propose to require all high-cost funding 

recipients and CAF recipients to report 

to USAC on deployment, adoption, and 

pricing for both their voice and 

broadband offerings. We propose to 

require recipients to file with the 

Commission each year annual reports of 

their financial condition and operations. 

We propose that all recipients report 

intercarrier compensation revenues and 

expenses. 

118. Internal Controls. We seek 

comment on measures to strengthen 

internal controls in the areas identified 

for improvement in the GAO high-cost 

report. We seek comment on the 

December 2010 USAC Audit Report. We 

seek comment on whether high-cost and 

CAF recipients should be subject to 

additional audit requirements beyond 

current compliance audits and IPIA 

audits. We seek comment on how to 

improve the certification process to 

make it more meaningful (e.g., requiring 

additional information from recipients 

concerning how funds were used and 

specifically what information should be 

submitted). We seek comment on how 

to improve the data validation process 

to correct weaknesses identified in the 

GAO high-cost report. 

119. Additional Monitoring 

Procedures. We seek comment on what 

types of procedures we should put in 

place to ensure that recipients provide 

services they have committed to 

provide. We propose to affirmatively 

confirm, in the field, that recipients 

have complied with their deployment 

obligations. We seek comment on 

whether either state commissions or 

RUS could play a role in confirming 

deployment. What information-sharing 

mechanisms between the Commission 

and RUS would facilitate our ability to 

confirm deployment? Should we verify 

that each and every recipient has 

fulfilled its obligations, or should we 

conduct random audits? 

120. Record Retention Requirements. 

We seek comment on whether any 

additional measures are necessary to 

ensure program participants retain 

relevant documentation and provide the 

relevant and complete documentation to 

auditors upon request. 

F. Establishing Clear Performance Goals 

and Measures for Universal Service 

121. We propose that funding of 

recipients be tied to the following four 

specific performance goals for the 

current high-cost program and CAF: (1) 

To preserve and advance voice service; 

(2) To increase deployment of modern 

networks capable of supporting 

necessary broadband applications as 

well as voice service; (3) To ensure that 

rates for broadband service are 

reasonably comparable in all regions of 

the nation, and that rates for voice 

service are reasonably comparable in all 

regions of the nation; and (4) To limit 

universal service contribution burden 

on households. We seek comment on 

the appropriate output measure and 

efficiency measure for each goal. We 

also propose to review annually 

whether the program is meeting its goals 

based on the results of the performance 

measures. 

G. Intercarrier Compensation for a 

Broadband America 

122. Intercarrier compensation (ICC) 

is a system of payments between 

carriers to compensate each other for the 

origination, transport and termination of 

telecommunications traffic. Under the 

present system, the amounts service 

providers charge each other for 

completing such calls can vary 

considerably depending not on the 

service provided but on whether a call 

starts and finishes in the same state, or 

whether it crosses state lines. To 

complicate matters further, these 

charges also can vary based on what 

technology (e.g., wireline, wireless) is 

used to make a call. Industry wide, 

these charges add up to a significant 

amount of money. 

123. The Commission proposes to 

take action in the near term to reduce 

inefficiency and waste in the 

intercarrier compensation system while 

providing a framework for long-term 

reform. The same proposed principles 

that guide universal service reform also 

inform our intercarrier compensation 

reform efforts. Specifically, the changes 

to the intercarrier compensation rules 

discussed below will: (1) Modernize our 

rules to advance broadband for all 

Americans by creating the proper 

incentives to invest in new technologies 

and reduce waste and inefficiency by 

taking steps to curb arbitrage; (2) 

promote fiscal responsibility; (3) require 

accountability; and (4) implement 

market-driven and incentive-based 

policies. 

124. There are four fundamental 

problems with the current system: 

(1) The system is based on outdated 

concepts and a per-minute rate structure 

from the 1980s that no longer matches 

industry realities; (2) rates vary based on 

the type of provider and where a call 

originates and terminates, even though 

the function of originating or 

terminating a call does not change; (3) 

because most intercarrier compensation 

rates are set above incremental cost, 

they create incentives to retain old voice 

technologies and engage in regulatory 

arbitrage for profit; and (4) technological 

advances, including the rise of new 

modes of communications such as 

texting, e-mail, and wireless 

substitution have caused local exchange 

carriers’ compensable minutes to 

decline, resulting in additional 

pressures on the system and uncertainty 

for carriers. 

125. Consistent with the 

Commission’s vision to reform universal 

service and intercarrier compensation, it 

is important that intercarrier 

compensation rules create the proper 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11643 

incentives for carriers to invest in new 

broadband technologies so that 

consumers have the opportunity to take 

full advantage of the new capabilities of 

this broadband world. The Commission 

therefore seeks to comprehensively 

reform the current system to realign 

incentives and promote investment and 

innovation in IP networks. 

H. Legal Authority To Accomplish 

Comprehensive Reform 

126. The Commission seeks comment 

on its legal authority to reform 

intercarrier compensation, and 

specifically proposes two different 

transition paths for consideration. The 

Commission believes it has the 

authority to adopt either of these 

transition paths, and implement a 

transition away from per-minute 

intercarrier compensation. The 

Commission concludes that reducing 

interstate access charges falls well 

within its general authority to regulate 

interstate access under sections 201 and 

251(g), 47 U.S.C. 201, 251(g). 

127. The Commission could apply 

section 251(b)(5), 47 U.S.C. 251(b)(5), to 

all telecommunications traffic 

exchanged with local exchange carriers 

(LECs), including intrastate and 

interstate access traffic. Thus, the 

Commission could bring all 

telecommunications traffic (intrastate, 

interstate, reciprocal compensation, and 

wireless) within the reciprocal 

compensation framework of section 

251(b)(5), 47 U.S.C. 251(b)(5), and 

determine a methodology that states 

would use to establish the rate for such 

traffic. Or, the Commission could 

maintain the separate regimes of access 

charges and reciprocal compensation, 

and set a different methodology for 

traffic subject to reciprocal 

compensation. If the Commission moves 

all traffic within the section 251(b)(5), 

47 U.S.C. 251(b)(5), reciprocal 

compensation framework, the 

Commission seeks comment on the 

impact of section 251(f)(2), 47 U.S.C. 

section 251(f)(2), which permits states to 

suspend or modify the reciprocal 

compensation obligations for carriers 

with less than two percent of the 

nation’s subscriber lines. Doing so could 

undermine the proposed reforms, 

particularly if the Commission moves 

all traffic within the reciprocal 

compensation framework. The 

Commission seeks comment on whether 

it should adopt rules addressing the 

implications of suspension or 

modification under section 251(f)(2), 47 

U.S.C. 251(f)(2). 

128. The Commission also asks about 

its authority to take action to reduce 

intercarrier compensation charges paid 

by or to commercial mobile radio 

service (CMRS) or wireless providers, 

including intrastate and interstate 

access charges (which are referred to 

collectively as ‘‘wireless termination 

charges’’). The Commission seeks 

comment on its authority under sections 

201 and 332, 47 U.S.C. 201, 332, to 

regulate charges with respect to 

interstate traffic involving a wireless 

provider, as well as charges imposed by 

wireless providers regarding intrastate 

traffic. In addition, there is support for 

the proposition that section 332 of the 

Act, 47 U.S.C. 332, also gives the 

Commission authority to regulate the 

intercarrier compensation rates paid by 

wireless carriers for intrastate traffic— 

including charges that otherwise would 

be subject to intrastate access charges. 

129. Alternatively, the Commission 

could adopt a new methodology that 

would reduce reciprocal compensation 

charges, but would leave the categories 

of telecommunications traffic that are 

currently subject to the reciprocal 

compensation obligation under section 

251(b)(5), 47 U.S.C. 251(b)(5), 

unchanged. Doing so would leave 

intrastate and interstate access charges 

under their current regulatory structures 

and could permit separate glide paths 

for different types of traffic. 

130. In addition to the Commission’s 

authority to reform interstate access 

charges, wireless termination charges, 

and reciprocal compensation to 

eliminate per-minute rates, the 

Commission also believes it has 

authority to establish a transition plan 

for moving toward that ultimate 

objective in a manner that will 

minimize market disruptions. Section 

251(g), 47 U.S.C. 251, supports the view 

that the Commission has authority to 

adopt a transitional scheme with regard 

to access charges. The Commission 

seeks comment on this interpretation of 

section 251(g). 

I. Principles To Guide Intercarrier 

Compensation Reform 

131. The Commission seeks comment 

on the ultimate end-point once the 

transition away from per-minute 

intercarrier compensation rates is 

completed as well as concepts to guide 

sustainable reform. These key concepts 

include: addressing arbitrage and 

marketplace distortions; cost causation; 

providing appropriate price signals; and 

consistency with all-IP broadband 

networks. The Commission also seeks 

comment on any additional concepts 

that should guide the Commission’s 

evaluation of the appropriate end-point 

for comprehensive intercarrier 

compensation reform. 

132. The Commission seeks comment 

on possible intercarrier compensation 

methodologies that it might adopt as an 

end-point for comprehensive reform. 

The Commission seeks comment on the 

merits of a bill-and-keep methodology, 

including the scope of functions 

provided by a carrier that should be 

encompassed by the bill-and-keep 

framework, and how any bill-and-keep 

methodology could be crafted in a way 

that is sufficiently flexible to 

accommodate evolving network 

architectures. The Commission also 

seeks comment on its legal authority to 

adopt a bill-and-keep methodology 

either for particular traffic, or for all 

traffic generally. In addition, the 

Commission seeks comment on flat 

intercarrier charge proposals and asks 

whether they would make policy sense, 

and be administrable, in the present 

context as customers transition to 

broadband? Would such changes 

facilitate, or hinder, the transition from 

circuit-switched to IP networks? The 

Commission also seeks comment on its 

legal authority to implement a particular 

flat charge proposal. Finally, the 

Commission seeks comment on any 

alternative methodologies consistent 

with the guiding concepts for long-term 

reform. 

J. Selecting the Path To Modernize 

Existing Rules and Advance IP 

Networks 

133. The Commission seeks comment 

on how to begin the transition away 

from the current per-minute intercarrier 

compensation rates to facilitate carriers’ 

movement to IP networks. There are 

multiple the dimensions of the 

intercarrier compensation reform 

transition, each of which can be 

calibrated in a variety of ways. The 

Commission proposes to work in 

partnership with the states to reform 

intercarrier compensation, and seeks 

comment on two general options for 

addressing the various elements of the 

transition. 

134. The first approach relies on the 

Commission and states to act within 

their existing roles in regulating 

intercarrier compensation, such that 

states would remain responsible for 

reforming intrastate access charges. The 

Commission would reduce interstate 

access charges, and adopt a 

methodology that states would 

implement to reduce reciprocal 

compensation rates; but the categories of 

traffic under the reciprocal 

compensation framework would remain 

unchanged. Under this option, the 

Commission would exercise its broad 

authority to determine the transition, 

stages, and future state for reforming the 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11644 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

current interstate access charge rules to 

eliminate per-minute rates, including 

any necessary cost or revenue recovery 

that might be provided through the 

CAF. Likewise, the Commission would 

create a new methodology for reciprocal 

compensation, although the scope of 

traffic encompassed by the reciprocal 

compensation framework would not 

change. In addition to interstate access 

and reciprocal compensation, there is 

support for the proposition that section 

332, 47 U.S.C. 332, of the Act gives the 

Commission authority to regulate 

wireless termination charges—that is, 

intercarrier compensation charges paid 

to wireless carriers, or paid by wireless 

carriers—including charges that 

otherwise would be subject to intrastate 

access charges. The Commission also 

seeks comment on whether the 

transition for wireless termination 

charges, if reduced separately, should be 

subject to distinct transition timing. The 

Commission seeks comment on the 

steps it should take to encourage states 

to reduce intrastate intercarrier 

compensation rates and how to do so 

without penalizing states that have 

already begun the difficult process of 

reforming intrastate rates or rewarding 

states that have not yet engaged in 

reform. For example, should the 

Commission decline to provide cost 

recovery for intrastate rate reductions or 

otherwise limit access to the CAF for 

states that have not begun intrastate 

access reform by a specific date? The 

Commission also seeks comment on 

how this option can work for states that 

lack jurisdiction over intrastate access 

rates. The Commission seeks comment 

on whether, after initially relying on 

states to act pursuant to their historical 

role, it should bring traffic within the 

reciprocal compensation framework if 

states fail to act within a specified 

period of time, such as four years. 

135. Under the second approach, the 

Commission would use the tools 

provided by sections 251 and 252, 47 

U.S.C. 251, 252, to unify all intercarrier 

rates, including those for intrastate calls, 

under the reciprocal compensation 

framework. Under this framework, the 

Commission would establish a 

methodology for intercarrier rates, 

which states then work with the 

Commission to implement. Under this 

alternative, the Commission would 

bring all traffic within the reciprocal 

compensation framework of section 

251(b)(5), 47 U.S.C. 251(b)(5), at the 

initiation of the transition, and set a 

glide path to gradually reduce all 

intercarrier compensation rates to 

eliminate per-minute charges (including 

any necessary cost or revenue recovery 

that might be provided through the 

CAF). The Commission would adopt a 

pricing methodology to govern these 

charges, which ultimately would be 

implemented by the states. The 

Commission seeks comment on the 

relative advantages and disadvantages of 

this alternative, as well as any 

implementation considerations, 

including what revisions would be 

needed to our interstate access rules 

applicable to price cap and rate-ofreturn carriers. The Commission has not 

previously used the federal universal 

service fund to offset reforms to 

intrastate access charges; rather, states 

have addressed intrastate recovery on a 

case-by-case basis. The Commission 

asks whether it has any legal obligation 

to offset reductions to intrastate 

revenues, particularly given its 

commitment to control the size of USF. 

Even so, the Commission seeks 

comment on whether it should offset 

such reductions as a policy matter. 

136. Within these approaches, the 

Commission identifies and develops a 

specific set of options for commenters to 

consider regarding the sequencing of 

reductions in specific rates. The 

Commission also seeks comment on the 

appropriate timing of the overall 

transition and proposes to complete the 

transition away from per-minute rates 

before implementing the long-term 

vision for the CAF, which will 

ultimately make explicit all subsidies 

necessary to serve an area (including 

subsidies that are currently provided 

implicitly through the intercarrier 

compensation system). In particular, the 

Commission seeks comment on whether 

it should adopt distinct transition 

timing for price cap versus rate-of-return 

carriers, and on whether it should cap 

interstate access rates during the 

transition. In discussing or proposing 

particular alternatives, the Commission 

asks commenters to discuss how 

particular approaches balance several 

potentially competing considerations: 

(a) Harmonizing rates and otherwise 

reducing arbitrage opportunities; (b) 

minimizing disruption to service 

providers, including litigation and 

revenue uncertainty; and (c) minimizing 

the impact on consumers and on the 

Commission’s ability to control the size 

of the universal service fund. 

K. Developing a Recovery Mechanism 

137. The Commission seeks comment 

on how to structure any necessary 

recovery mechanism for providers, 

including threshold questions of 

whether its evaluation should be based 

on a provider’s cost of originating, 

transporting, and terminating a call (i.e., 

cost recovery) or whether the 

Commission should focus recovery on 

replacing reduced intercarrier 

compensation revenues (i.e., revenue 

recovery), or some combination thereof. 

The Commission seeks comment on the 

objectives for any recovery mechanism 

and, relatedly, any Commission 

obligations with regard to recovery from 

both a legal and policy perspective. 

138. In adopting a recovery 

mechanism the Commission asks, as a 

threshold matter, whether it should be 

evaluating carrier costs, carrier 

revenues, or some combination thereof. 

What cost standard or cost components 

should be considered when determining 

what recovery should be allowed? If the 

Commission uses a revenue approach 

for recovery, what should the baseline 

criteria be for determining whether a 

carrier qualifies for revenue recovery? 

With regard to revenue recovery, the 

Commission recognizes that existing 

intercarrier compensation revenues may 

be a significant source of free cash flow 

and regulated revenues for some 

carriers, and the Commission requests 

data to help quantify the impact of 

intercarrier compensation reform on the 

industry and consumers. The 

Commission requests data to analyze 

existing revenues, assess the magnitude 

of the revenue reductions resulting from 

the proposed reforms, and determine 

the appropriate size and scope of a 

recovery mechanism. 

139. The Commission does not 

believe that recovery needs to be 

revenue neutral given that carriers have 

a variety of regulated (e.g., not only 

switched but also special access) and 

non-regulated revenues. The 

Commission asks whether an adequate 

opportunity for recovery already exists 

given the variety of regulated and nonregulated services provided over multipurpose networks. 

140. In evaluating the criteria for 

recovery, the Commission seeks 

comment on doing so through 

reasonable end-user charges and the 

CAF. The Commission seeks comment 

on a rate benchmark that would impute 

benchmark revenues to carriers before 

becoming eligible for additional revenue 

recovery. The Commission seeks 

comment on what elements should be 

included in a rate benchmark, the 

appropriate dollar amount for such a 

benchmark, and whether, and how, it 

should change over time. The 

Commission’s prior reforms of interstate 

access charges often allowed carriers to 

recover at least part of their costs 

through an increased interstate 

subscriber line charge or SLC, which is 

a flat-rated charge that recovers some or 

all of the interstate portion of the local 

loop from an end user. The Commission 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11645 

seeks comment on the role that 

interstate SLCs should play in 

intercarrier compensation reform and 

whether and how the SLC could be used 

for recovery purposes, including 

intrastate revenue recovery, either by 

modifying how the SLC operates or 

increasing the caps on SLCs. 

141. The Commission also recognizes 

that some high-cost, insular, and Tribal 

areas may need explicit support to 

maintain service because there may be 

no private business case to serve such 

areas. The Commission seeks comment 

on how to reform intercarrier 

compensation and universal service in 

tandem so that such areas receive any 

ongoing support necessary to ensure 

that they continue to receive quality and 

affordable services, and to ensure that 

providers serving those areas can 

continue to advance connectivity where 

it lags far behind the rest of the nation. 

As noted above, one of the proposed 

principles guiding universal service 

reform is controlling the size of the 

universal service fund and reducing 

waste and inefficiency. This proposed 

principle likewise informs the 

Commission’s intercarrier compensation 

reforms, and the Commission asks 

commenters how best to calibrate any 

intercarrier compensation recovery to be 

consistent with this principle. The 

Commission proposes that a provider 

first seek recovery through reasonable 

end-user charges, if adopted, before 

receiving support under the CAF. The 

Commission seeks comment on what 

obligations should apply to any 

universal service funding a carrier 

receives as part of intercarrier 

compensation reform. To the extent 

such funding is provided outside of the 

CAF, should there be specific public 

interest conditions and/or reporting tied 

to receipt of such universal service 

funds, such as broadband build-out 

requirements, and if so, what conditions 

would further the Commission’s goals? 

The Commission also asks whether 

there is an objective and auditable 

metric that balances the policy goal of 

a gradual migration away from the 

current intercarrier compensation 

system while not putting undue 

pressure on a provider’s ability to repay 

debt and make investment in IP 

facilities that were made in reliance on 

these revenue flows. To minimize such 

concerns, the Commission seeks 

comment on whether it should apply 

any criteria at the outset, before reform 

begins, to determine which providers 

are eligible to receive recovery from the 

CAF and which providers are not. 

142. The Commission also seeks 

comment on whether any cost or 

revenue recovery mechanism could 

provide rate-of-return carriers greater 

incentives for efficient operation. In 

light of the relative strengths and 

weaknesses of rate-of-return regulation 

and incentive regulation, and given the 

direction of proposed universal service 

reforms, we believe that it may be 

possible to adopt a recovery framework 

that provides incentives for carriers to 

operate efficiently, while still providing 

reasonable certainty and stability. The 

Commission therefore seeks comment 

on an alternative framework for 

determining such recovery, as well as 

any alternative proposals that 

commenters would recommend. 

Specifically, the Commission seeks 

comment on a possible revenue 

recovery framework for rate-of-return 

carriers that departs from traditional 

rate-of-return principles. The 

Commission also seeks comment on 

whether recovery mechanisms under 

consideration may affect and be affected 

by the existing separations process and 

any future separations reform. 

L. Reducing Inefficiencies and Waste by 

Curbing Arbitrage Opportunities 

143. The Commission seeks comment 

on proposals to address the National 

Broadband Plan recommendation that 

the Commission adopt interim rules to 

reduce arbitrage and specifically seeks 

comment on the applicability of 

intercarrier compensation to voice over 

Internet protocol (VoIP), and measures 

to address phantom traffic and access 

stimulation. 

144. The Commission believes that its 

proposals to address the treatment of 

VoIP traffic for purposes of intercarrier 

compensation and to adopt rules to 

address phantom traffic and access 

stimulation will reduce inefficient use 

of resources and promote investment 

and innovation. Service providers will 

benefit from increased certainty and 

predictability regarding future revenues 

and reduced billing disputes and 

litigation, enabling companies to direct 

capital resources toward broadband 

investment. 

145. The Commission seeks comment 

on the appropriate intercarrier 

compensation framework for VoIP 

traffic. The Commission has never 

addressed whether interconnected VoIP 

is subject to intercarrier compensation 

rules and, if so, the applicable rate for 

such traffic. Consistent with the 

National Broadband Plan 

recommendation, the Commission seeks 

comment on the appropriate treatment 

of interconnected VoIP traffic for 

purposes of intercarrier compensation. 

The Commission seeks comment on a 

range of approaches, including how to 

define the precise nature and timing of 

particular intercarrier compensation 

payment obligations. The Commission 

seeks comment on whether particular 

reform options would have retroactive 

effect, and whether such retroactivity 

would be counterproductive. Under one 

alternative, the Commission could adopt 

bill-and-keep for interconnected VoIP 

traffic. Alternatively, the Commission 

could determine that interconnected 

VoIP traffic is subject to intercarrier 

compensation charges under a regime 

unique to interconnected VoIP traffic. 

Further, the Commission could 

determine that interconnected VoIP 

traffic is subject to intercarrier 

compensation—whether standard rates 

or VoIP-specific rates—but only as of 

some future date. Another option would 

be for the Commission to determine that 

interconnected VoIP traffic is subject to 

the same intercarrier compensation 

charges—intrastate access, interstate 

access, and reciprocal compensation— 

as other voice telephone service traffic 

both today, and during any intercarrier 

compensation reform transition. The 

Commission also seeks comment on 

other approaches that have been 

proposed for addressing the intercarrier 

compensation obligations associated 

with VoIP traffic. 

146. In addition, the Commission 

proposes to amend its rules to help 

ensure that service providers receive 

sufficient information associated with 

each call terminated on their networks 

to identify the originating provider for 

the call. The Commission’s proposal 

balances a desire to facilitate resolution 

of billing disputes with a reluctance to 

regulate in areas where industry 

resolution has, in many cases, proven 

effective. The Commission proposes 

modifying its rules to require that the 

calling party’s telephone number be 

provided by the originating service 

provider and to prohibit stripping or 

altering call signaling information. The 

proposed modifications would also 

require all providers involved in 

transmitting a call from the originating 

to the terminating provider to transmit, 

unaltered, information identifying the 

calling party to the subsequent provider 

in a call path unless industry standards 

permit or require altering the 

information. For service providers using 

SS7 to pass information about traffic, 

the proposed rules require originating 

providers to populate the SS7 calling 

party number (CPN) field. The 

Commission recognizes that some 

service providers do not use SS7 

signaling, and instead rely on MF 

signaling. To the extent that the 

Commission proposes expanding its 

rules beyond SS7, it likewise proposes 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11646 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

amending the rules to require service 

providers using MF signaling to pass 

CPN information, or the charge number 

(CN) if it differs from the CPN, in the 

Multi Frequency Automatic Number 

Identification (MF ANI) field. Further, 

the proposed rules would clarify, 

consistent with industry practice, that 

populating the SS7 CN field with 

information other than the charge 

number to be billed for a call is 

prohibited. In addition, the proposed 

rules would prohibit altering or 

stripping signaling information in the 

CN as well as CPN field. The proposed 

rules would apply to all forms of traffic 

on the PSTN, including jurisdictionally 

intrastate traffic, as well as traffic 

originated or transferred using IP 

protocols. 

147. The Commission also seeks 

comment on specific revisions to its 

interstate access rules to address access 

stimulation. In broad terms, access 

stimulation is an arbitrage scheme 

employed to take advantage of 

intercarrier compensation rates by 

generating elevated traffic volumes to 

maximize revenues. Access stimulation 

occurs when, for example, a LEC enters 

into an arrangement with a provider of 

high call volume operations such as 

chat lines, adult entertainment calls, 

and ‘‘free’’ conference calls. Access 

stimulation imposes undue costs on 

consumers, inefficiently diverting the 

flow of capital away from more 

productive uses such as broadband 

deployment, and harms competition. 

148. To address access stimulation, 

the Commission proposes to adopt a 

trigger based on the existence of access 

revenue sharing arrangements. Once a 

particular LEC meets the trigger, it 

would be subject to modified access 

charge rules that would vary depending 

upon the nature of the carrier at issue. 

To address the possibility of access 

stimulation activity by a National 

Exchange Carrier Association (NECA) 

tariff participant, under the proposed 

rules, a carrier would lose eligibility to 

participate in the NECA tariffs 45 days 

after meeting the trigger, or 45 days after 

the effective date of this rule if it 

currently meets the trigger. Such a 

carrier leaving the NECA tariff would 

have to file its own tariff(s) for interstate 

switched access, pursuant to the rules 

set forth for carriers subject to § 61.38, 

47 CFR 61.38. A carrier filing interstate 

exchange access tariffs pursuant to 

§ 61.38, 47 CFR 61.38, of the 

Commission’s rules would be required 

to file a new tariff within 45 days of 

meeting the proposed trigger if the costs 

and demand arising from the new 

revenue sharing arrangement had not 

been reflected in its most recent tariff 

filing. LECs filing access tariffs pursuant 

to § 61.39, 47 CFR 61.39, of the 

Commission’s rules currently base their 

rates on historical costs and demand. 

Once such a carrier meets the relevant 

trigger under the proposed rules, it 

would lose the eligibility to file tariffs 

based on historical costs under that 

section. Instead, it would be required to 

file revised interstate access tariffs using 

the procedures set forth for carriers 

subject to § 61.38, 47 CFR 61.38, of the 

Commission’s rules, establishing its 

rates based on projected costs and 

demand. The Commission proposes that 

when competitive LECs meet the trigger, 

they would be required to benchmark to 

the rate of the BOC in the state in which 

the competitive LEC operates, or the 

independent incumbent LEC with the 

largest number of access lines in the 

state if there is no BOC in the state, if 

they are not already doing so. The 

competitive LEC would have to file a 

revised tariff within 45 days of meeting 

the relevant trigger, or within 45 days of 

the effective date of the rule if it 

currently meets the trigger. 

149. The Commission further 

proposes to require LECs that meet the 

trigger to file tariffs on a notice period 

other than the statutory seven or fifteen 

days that would result in deemed lawful 

treatment. Both competitive LECs and 

incumbent LECs would be required to 

file on not less than 16 days’ notice. The 

Commission seeks comment on this 

analysis of the deemed lawful provision 

of section 204(a)(3), 47 U.S.C. 204(a)(3), 

and its proposed filing requirements. 

Finally, if a LEC failed to comply with 

the proposed tariffing requirements, the 

Commission would find such a practice 

to be an effort to conceal its 

noncompliance with the substantive 

rules proposed above that would 

disqualify the tariff from deemed lawful 

status. Such incumbent LECs would be 

subject to refund liability for earnings 

over the maximum allowable rate-ofreturn, and competitive LECs would be 

subject to refund liability for the 

difference between the rates charged 

and the rate that would have been 

charged if the carrier had used the 

prevailing BOC rate, or the rate of the 

independent LEC with the largest 

number of access lines in the state if 

there is no BOC. 

150. The record contains other 

alternatives for addressing access 

stimulation, on which the Commission 

seeks comment, including trigger-based 

proposals, categorical approaches and 

other potential actions. The Commission 

invites parties to quantify the extent of 

traffic stimulation involving reciprocal 

compensation rates between CMRS 

providers and competitive LECs, and 

the steps that could be taken to address 

such stimulation activity. The 

Commission invites parties to comment 

on these proposals as well as on other 

regulatory and policy implications of 

access stimulation. 

151. Finally, the Commission seeks 

comment on whether the actions it 

proposes in this Notice should 

encourage incumbent LECs to move to 

IP-to-IP interconnection. The 

Commission seeks comment on several 

issues related to intercarrier 

compensation reform, including other 

steps we can take to promote IP-to-IP 

interconnection, network edges and 

points of interconnection, transiting, 

and disputes that have arisen over other 

technical issues in intercarrier 

compensation rules and carrier 

practices. For each of these issues, the 

Commission asks whether it should 

address the issue as part of 

comprehensive intercarrier 

compensation reform, and if so, at what 

stage of reform it should be addressed, 

and what actions the Commission 

should take. The Commission invites 

parties to refresh the record in this 

proceeding regarding: (1) Interpretation 

of the intraMTA rule; (2) disputes 

regarding rating and routing of traffic; 

and (3) the appropriate intercarrier 

compensation regime applicable to 

virtual central office code calls to 

distant ISPs. The Commission also seeks 

comment on whether there are any other 

outstanding technical issues related to 

intercarrier compensation reform that 

the Commission should address, and, if 

so, when and how the Commission 

should address them. 

II. Procedural Matters 

A. Initial Regulatory Flexibility Analysis 

Initial Regulatory Flexibility Analysis 

152. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(RFA), the Commission has prepared 

this 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. The 

Commission will send a copy of the 

NPRM, including this IRFA, to the Chief 

Counsel for Advocacy of the Small 

Business Administration (SBA). In 

addition, the NPRM and IRFA (or 

summaries thereof) will be published in 

the Federal Register. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11647 

1. Need for, and Objectives of, the 

Proposed Rules 

153. The NPRM seeks comment on a 

variety of issues relating to 

comprehensive reform of universal 

service and intercarrier compensation. 

As discussed in the NPRM, the 

Commission believes that such reform 

will eliminate waste and inefficiency 

while modernizing and reorienting 

these programs on a fiscally responsible 

path to extending the benefits of 

broadband throughout America. 

Bringing robust, affordable broadband to 

all Americans is the infrastructure 

challenge of the 21st century. To meet 

this challenge, the NPRM proposes to 

fundamentally modernize the 

Commission’s Universal Service Fund 

(USF) and intercarrier compensation 

system, eliminating waste and 

inefficiency. 

154. Millions of Americans live in 

areas where they cannot enjoy the 

economic, social and civic benefits of 

broadband. Meanwhile, fundamental 

inefficiencies and waste affect both USF 

and intercarrier compensation. In many 

areas of the country, USF does not target 

funding, subsidizes a competitor to a 

voice and broadband provider that 

offers service without government 

assistance, or supports several voice 

networks in a single area. Similarly, 

inefficient intercarrier compensation 

rules have led to wasteful arbitrage 

opportunities like phantom traffic and 

access stimulation. We face these 

problems because our universal service 

rules and our intercarrier compensation 

system, designed for 20th century 

networks and market dynamics, have 

not been comprehensively reassessed in 

more than a decade, even though the 

communications landscape has changed 

dramatically. Due to the 

interrelationship between USF and 

intercarrier compensation, and the 

importance of both to the nation’s 

broadband goals, reform of the two 

programs must be tackled together. 

155. In the NPRM, the Commission 

proposes to transform the existing highcost program—the component of USF 

directed toward high-cost, rural, and 

insular areas—into a new, more 

efficient, broadband-focused Connect 

America Fund (CAF). 

156. In the first stage of reform, 

beginning in 2012, the Commission 

proposes to update the public interest 

obligations that pertain to current and 

future recipients. The Commission also 

proposes to transition funds from less 

efficient uses to more efficient uses. 

Over a period of a few years, the 

Commission proposes to phase out 

Interstate Access Support (IAS) and 

funding for competitive eligible 

telecommunications carriers (ETCs), 

subject to possible exceptions. In 

addition, the Commission seeks 

comment on a set of proposals to 

eliminate waste and inefficiency, 

improve incentives for rational 

investment and operation by companies 

operating in rural areas, and set rate-ofreturn companies on the path to 

incentive-based regulation. Specifically, 

the Commission seeks comment on: (a) 

Establishing benchmarks for 

reimbursable capital and operating 

costs; (b) modifying high-cost loop 

support reimbursement percentages and 

eliminate loop support known as ‘‘safety 

net’’; (c) eliminating local switching 

support as a separate funding 

mechanism; (d) eliminating the 

reimbursement of corporate operations 

expenses; and (e) capping total high-cost 

support at $3,000 per line per year for 

carriers operating in the continental 

United States. 

157. The Commission also proposes to 

create a CAF program that would 

immediately make available support for 

broadband in unserved areas and to test 

the use of a competitive funding 

process. The Commission seeks 

comment on this proposal, including 

proposed CAF eligibility requirements, 

the proposed framework for a CAF 

auction, and post-auction process, 

administration, and management and 

oversight of the CAF program. 

158. In the second stage, the 

Commission proposes to transition all 

remaining high-cost programs to the 

CAF, which would provide ongoing 

support to maintain and advance 

broadband across the country in areas 

that are uneconomic to serve absent 

such support, with voice service 

ultimately provided as an application 

over broadband networks. The 

Commission seeks comment on options 

for determining support levels under the 

CAF, including the use of a model and/ 

or competitive bidding. The 

Commission also seeks comment on an 

alternative that would limit the full 

transition to a subset of geographic 

areas, such as those served by price cap 

companies, while continuing to provide 

ongoing support based on reasonable 

actual investment to smaller, rate-ofreturn companies. The Commission also 

seeks comment on whether USF should 

support mobile voice and/or mobile 

broadband service in all areas of the 

country. 

159. The Commission further 

proposes a variety of measures, 

including establishing performance 

goals and improving reporting 

requirements to increase accountability 

and better track performance of the 

Fund as a whole. 

160. The NPRM also seeks comment 

on proposals to comprehensively reform 

intercarrier compensation in order to 

bring the benefits of broadband to all 

Americans. The current intercarrier 

compensation system’s distorted 

incentives and wasted resources are a 

roadblock to a world-leading broadband 

ecosystem. Reform of the current morass 

of regulatory distinctions and access 

charges will help to modernize the 

Commission’s rules to advance 

broadband, reduce waste and 

inefficiency, increase accountability, 

and lead to market-driven outcomes that 

promote investment. 

161. At the outset, the NPRM seeks 

comment on the Commission’s authority 

to pursue intercarrier compensation 

reform, identifies certain goals of 

intercarrier compensation reform, and 

seeks comment on how possible 

intercarrier compensation rate 

methodologies would advance those 

goals. The NPRM also seeks comment 

on the appropriate transition away from 

the current per-minute intercarrier 

compensation rates, including two 

possible approaches. One approach 

relies on the Commission and states to 

act within their existing roles in 

regulating intercarrier compensation, 

and the other follows the federal and 

state roles established for reciprocal 

compensation under the 1996 Act. 

Within these approaches, the NPRM 

identifies a range of possible outcomes 

for the sequencing of reductions for 

specific rates and seeks comment on 

other implementation details, including 

the timing of any transition. In addition, 

the NPRM seeks comment on how the 

Commission could provide a recovery 

mechanism as part of any 

comprehensive reform and how to 

structure recovery with the appropriate 

incentives to accelerate the migration to 

IP broadband networks. 

162. The NPRM also seeks comment 

on rules intended to reduce incentives 

for wasteful arbitrage. First, to address 

existing uncertainty, the NPRM invites 

comment on the appropriate intercarrier 

compensation framework for VoIP 

traffic. Second, the NPRM seeks 

comment on: (1) Amendments to the 

Commission’s call signaling rules to 

address phantom traffic; and (2) 

amendments to the Commission’s 

interstate access rules to address access 

stimulation and to ensure that rates 

remain just and reasonable. Finally, the 

NPRM seeks comment on other issues 

related to intercarrier compensation 

reform including network edges and 

points of interconnection, transiting, 

and disputes that have arisen over 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11648 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

technical issues in intercarrier 

compensation rules and carrier 

practices. 

2. Legal Basis 

163. The legal basis for any action that 

may be taken pursuant to the NPRM is 

contained in sections 1, 2, 4(i), 201 

through 206, 214, 218 through 220, 251, 

252, 254, 256, 303(r), 332, 403, and 706 

of the Communications Act of 1934, as 

amended, 47 U.S.C. 151, 152, 154(i), 201 

through 206, 214, 218 through 220, 251, 

252, 254, 256 303(r), 332, 403 and 706 

and §§ 1.1 and 1.1421 of the 

Commission’s rules, 47 CFR 1.1, 1.421. 

3. Description and Estimate of the 

Number of Small Entities to Which the 

Proposed Rules Will Apply 

164. The RFA directs agencies to 

provide a description of, and where 

feasible, an estimate of the number of 

small entities that may be affected by 

the proposed rules, if adopted. The RFA 

generally defines the term ‘‘small entity’’ 

as having the same meaning as the terms 

‘‘small business,’’ ‘‘small organization,’’ 

and ‘‘small governmental jurisdiction.’’ 

In addition, the term ‘‘small business’’ 

has the same meaning as the term 

‘‘small-business concern’’ under the 

Small Business Act. A small-business 

concern’’ is one which: (1) Is 

independently owned and operated; (2) 

is not dominant in its field of operation; 

and (3) satisfies any additional criteria 

established by the SBA. 

165. Small Businesses. Nationwide, 

there are a total of approximately 27.5 

million small businesses, according to 

the SBA. 

166. Wired Telecommunications 

Carriers. The SBA has developed a 

small business size standard for Wired 

Telecommunications Carriers, which 

consists of all such companies having 

1,500 or fewer employees. According to 

Census Bureau data for 2007, there were 

3,188 firms in this category, total, that 

operated for the entire year. Of this 

total, 3,144 firms had employment of 

999 or fewer employees, and 44 firms 

had employment of 1,000 employees or 

more. Thus, under this size standard, 

the majority of firms can be considered 

small. 

167. Local Exchange Carriers (LECs). 

Neither the Commission nor the SBA 

has developed a size standard for small 

businesses specifically applicable to 

local exchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 1,307 carriers 

reported that they were incumbent local 

exchange service providers. Of these 

1,307 carriers, an estimated 1,006 have 

1,500 or fewer employees and 301 have 

more than 1,500 employees. 

Consequently, the Commission 

estimates that most providers of local 

exchange service are small entities that 

may be affected by the rules and 

policies proposed in the NPRM. 

168. Incumbent Local Exchange 

Carriers (incumbent LECs). Neither the 

Commission nor the SBA has developed 

a size standard for small businesses 

specifically applicable to incumbent 

local exchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 1,307 carriers 

reported that they were incumbent local 

exchange service providers. Of these 

1,307 carriers, an estimated 1,006 have 

1,500 or fewer employees and 301 have 

more than 1,500 employees. 

Consequently, the Commission 

estimates that most providers of 

incumbent local exchange service are 

small businesses that may be affected by 

rules adopted pursuant to the NPRM. 

169. We have included small 

incumbent LECs in this present RFA 

analysis. As noted above, a ‘‘small 

business’’ under the RFA is one that, 

inter alia, meets the pertinent small 

business size standard (e.g., a telephone 

communications business having 1,500 

or fewer employees), and ‘‘is not 

dominant in its field of operation.’’ The 

SBA’s Office of Advocacy contends that, 

for RFA purposes, small incumbent 

LECs are not dominant in their field of 

operation because any such dominance 

is not ‘‘national’’ in scope. We have 

therefore included small incumbent 

LECs in this RFA analysis, although we 

emphasize that this RFA action has no 

effect on Commission analyses and 

determinations in other, non-RFA 

contexts. 

170. Competitive Local Exchange 

Carriers (competitive LECs), Competitive 

Access Providers (CAPs), Shared-Tenant 

Service Providers, and Other Local 

Service Providers. Neither the 

Commission nor the SBA has developed 

a small business size standard 

specifically for these service providers. 

The appropriate size standard under 

SBA rules is for the category Wired 

Telecommunications Carriers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 1,442 

carriers reported that they were engaged 

in the provision of either competitive 

local exchange services or competitive 

access provider services. Of these 1,442 

carriers, an estimated 1,256 have 1,500 

or fewer employees and 186 have more 

than 1,500 employees. In addition, 17 

carriers have reported that they are 

Shared-Tenant Service Providers, and 

all 17 are estimated to have 1,500 or 

fewer employees. In addition, 72 

carriers have reported that they are 

Other Local Service Providers. Of the 

72, seventy have 1,500 or fewer 

employees and two have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of competitive local exchange 

service, competitive access providers, 

Shared-Tenant Service Providers, and 

Other Local Service Providers are small 

entities that may be affected by rules 

adopted pursuant to the NPRM. 

171. Interexchange Carriers (IXCs). 

Neither the Commission nor the SBA 

has developed a size standard for small 

businesses specifically applicable to 

interexchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 359 companies 

reported that their primary 

telecommunications service activity was 

the provision of interexchange services. 

Of these 359 companies, an estimated 

317 have 1,500 or fewer employees and 

42 have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of 

interexchange service providers are 

small entities that may be affected by 

rules adopted pursuant to the NPRM. 

172. Prepaid Calling Card Providers. 

Neither the Commission nor the SBA 

has developed a small business size 

standard specifically for prepaid calling 

card providers. The appropriate size 

standard under SBA rules is for the 

category Telecommunications Resellers. 

Under that size standard, such a 

business is small if it has 1,500 or fewer 

employees. According to Commission 

data, 193 carriers have reported that 

they are engaged in the provision of 

prepaid calling cards. Of these, an 

estimated all 193 have 1,500 or fewer 

employees and none have more than 

1,500 employees. Consequently, the 

Commission estimates that the majority 

of prepaid calling card providers are 

small entities that may be affected by 

rules adopted pursuant to the NPRM. 

173. Local Resellers. The SBA has 

developed a small business size 

standard for the category of 

Telecommunications Resellers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 213 

carriers have reported that they are 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11649 

engaged in the provision of local resale 

services. Of these, an estimated 211 

have 1,500 or fewer employees and two 

have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of local 

resellers are small entities that may be 

affected by rules adopted pursuant to 

the NPRM. 

174. Toll Resellers. The SBA has 

developed a small business size 

standard for the category of 

Telecommunications Resellers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 881 

carriers have reported that they are 

engaged in the provision of toll resale 

services. Of these, an estimated 857 

have 1,500 or fewer employees and 24 

have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of toll 

resellers are small entities that may be 

affected by rules adopted pursuant to 

the NPRM. 

175. Other Toll Carriers. Neither the 

Commission nor the SBA has developed 

a size standard for small businesses 

specifically applicable to Other Toll 

Carriers. This category includes toll 

carriers that do not fall within the 

categories of interexchange carriers, 

operator service providers, prepaid 

calling card providers, satellite service 

carriers, or toll resellers. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 284 companies 

reported that their primary 

telecommunications service activity was 

the provision of other toll carriage. Of 

these, an estimated 279 have 1,500 or 

fewer employees and five have more 

than 1,500 employees. Consequently, 

the Commission estimates that most 

Other Toll Carriers are small entities 

that may be affected by the rules and 

policies adopted pursuant to the NPRM. 

176. 800 and 800-Like Service 

Subscribers. Neither the Commission 

nor the SBA has developed a small 

business size standard specifically for 

800 and 800-like service (toll free) 

subscribers. The appropriate size 

standard under SBA rules is for the 

category Telecommunications Resellers. 

Under that size standard, such a 

business is small if it has 1,500 or fewer 

employees. The most reliable source of 

information regarding the number of 

these service subscribers appears to be 

data the Commission collects on the 

800, 888, 877, and 866 numbers in use. 

According to our data, as of September 

2009, the number of 800 numbers 

assigned was 7,860,000; the number of 

888 numbers assigned was 5,588,687; 

the number of 877 numbers assigned 

was 4,721,866; and the number of 866 

numbers assigned was 7,867,736. We do 

not have data specifying the number of 

these subscribers that are not 

independently owned and operated or 

have more than 1,500 employees, and 

thus are unable at this time to estimate 

with greater precision the number of toll 

free subscribers that would qualify as 

small businesses under the SBA size 

standard. Consequently, we estimate 

that there are 7,860,000 or fewer small 

entity 800 subscribers; 5,588,687 or 

fewer small entity 888 subscribers; 

4,721,866 or fewer small entity 877 

subscribers; and 7,867,736 or fewer 

small entity 866 subscribers. 

177. Wireless Telecommunications 

Carriers (except Satellite). Since 2007, 

the SBA has recognized wireless firms 

within this new, broad, economic 

census category. Prior to that time, such 

firms were within the now-superseded 

categories of Paging and Cellular and 

Other Wireless Telecommunications. 

Under the present and prior categories, 

the SBA has deemed a wireless business 

to be small if it has 1,500 or fewer 

employees. For this category, census 

data for 2007 show that there were 1,383 

firms that operated for the entire year. 

Of this total, 1,368 firms had 

employment of 999 or fewer employees 

and 15 had employment of 1,000 

employees or more. Similarly, according 

to Commission data, 413 carriers 

reported that they were engaged in the 

provision of wireless telephony, 

including cellular service, Personal 

Communications Service (PCS), and 

Specialized Mobile Radio (SMR) 

Telephony services. Of these, an 

estimated 261 have 1,500 or fewer 

employees and 152 have more than 

1,500 employees. Consequently, the 

Commission estimates that 

approximately half or more of these 

firms can be considered small. Thus, 

using available data, we estimate that 

the majority of wireless firms can be 

considered small. 

178. Broadband Personal 

Communications Service. The 

broadband personal communications 

service (PCS) spectrum is divided into 

six frequency blocks designated A 

through F, and the Commission has held 

auctions for each block. The 

Commission defined ‘‘small entity’’ for 

Blocks C and F as an entity that has 

average gross revenues of $40 million or 

less in the three previous calendar 

years. For Block F, an additional 

classification for ‘‘very small business’’ 

was added and is defined as an entity 

that, together with its affiliates, has 

average gross revenues of not more than 

$15 million for the preceding three 

calendar years. These standards 

defining ‘‘small entity’’ in the context of 

broadband PCS auctions have been 

approved by the SBA. No small 

businesses, within the SBA-approved 

small business size standards bid 

successfully for licenses in Blocks A 

and B. There were 90 winning bidders 

that qualified as small entities in the 

Block C auctions. A total of 93 small 

and very small business bidders won 

approximately 40 percent of the 1,479 

licenses for Blocks D, E, and F. In 1999, 

the Commission re-auctioned 347 C, E, 

and F Block licenses. There were 48 

small business winning bidders. In 

2001, the Commission completed the 

auction of 422 C and F Broadband PCS 

licenses in Auction 35. Of the 35 

winning bidders in this auction, 29 

qualified as ‘‘small’’ or ‘‘very small’’ 

businesses. Subsequent events, 

concerning Auction 35, including 

judicial and agency determinations, 

resulted in a total of 163 C and F Block 

licenses being available for grant. In 

2005, the Commission completed an 

auction of 188 C block licenses and 21 

F block licenses in Auction 58. There 

were 24 winning bidders for 217 

licenses. Of the 24 winning bidders, 16 

claimed small business status and won 

156 licenses. In 2007, the Commission 

completed an auction of 33 licenses in 

the A, C, and F Blocks in Auction 71. 

Of the 14 winning bidders, six were 

designated entities. In 2008, the 

Commission completed an auction of 20 

Broadband PCS licenses in the C, D, E 

and F block licenses in Auction 78. 

179. Advanced Wireless Services. In 

2008, the Commission conducted the 

auction of Advanced Wireless Services 

(‘‘AWS’’) licenses. This auction, which 

was designated as Auction 78, offered 

35 licenses in the AWS 1710–1755 MHz 

and 2110–2155 MHz bands (‘‘AWS–1’’). 

The AWS–1 licenses were licenses for 

which there were no winning bids in 

Auction 66. That same year, the 

Commission completed Auction 78. A 

bidder with attributed average annual 

gross revenues that exceeded $15 

million and did not exceed $40 million 

for the preceding three years (‘‘small 

business’’) received a 15 percent 

discount on its winning bid. A bidder 

with attributed average annual gross 

revenues that did not exceed $15 

million for the preceding three years 

(‘‘very small business’’) received a 25 

percent discount on its winning bid. A 

bidder that had combined total assets of 

less than $500 million and combined 

gross revenues of less than $125 million 

in each of the last two years qualified 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11650 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

for entrepreneur status. Four winning 

bidders that identified themselves as 

very small businesses won 17 licenses. 

Three of the winning bidders that 

identified themselves as a small 

business won five licenses. 

Additionally, one other winning bidder 

that qualified for entrepreneur status 

won 2 licenses. 

180. Narrowband Personal 

Communications Services. In 1994, the 

Commission conducted an auction for 

Narrowband PCS licenses. A second 

auction was also conducted later in 

1994. For purposes of the first two 

Narrowband PCS auctions, ‘‘small 

businesses’’ were entities with average 

gross revenues for the prior three 

calendar years of $40 million or less. 

Through these auctions, the 

Commission awarded a total of 41 

licenses, 11 of which were obtained by 

four small businesses. To ensure 

meaningful participation by small 

business entities in future auctions, the 

Commission adopted a two-tiered small 

business size standard in the 

Narrowband PCS Second Report and 

Order. A ‘‘small business’’ is an entity 

that, together with affiliates and 

controlling interests, has average gross 

revenues for the three preceding years of 

not more than $40 million. A ‘‘very 

small business’’ is an entity that, 

together with affiliates and controlling 

interests, has average gross revenues for 

the three preceding years of not more 

than $15 million. The SBA has 

approved these small business size 

standards. A third auction was 

conducted in 2001. Here, five bidders 

won 317 (Metropolitan Trading Areas 

and nationwide) licenses. Three of these 

claimed status as a small or very small 

entity and won 311 licenses. 

181. Paging (Private and Common 

Carrier). In the Paging Third Report and 

Order, we developed a small business 

size standard for ‘‘small businesses’’ and 

‘‘very small businesses’’ for purposes of 

determining their eligibility for special 

provisions such as bidding credits and 

installment payments. A ‘‘small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues not 

exceeding $15 million for the preceding 

three years. Additionally, a ‘‘very small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

According to Commission data, 291 

carriers have reported that they are 

engaged in Paging or Messaging Service. 

Of these, an estimated 289 have 1,500 or 

fewer employees, and two have more 

than 1,500 employees. Consequently, 

the Commission estimates that the 

majority of paging providers are small 

entities that may be affected by our 

action. An auction of Metropolitan 

Economic Area licenses commenced on 

February 24, 2000, and closed on March 

2, 2000. Of the 985 licenses auctioned, 

440 were sold. Fifty-seven companies 

claiming small business status won. 

182. 220 MHz Radio Service—Phase I 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. Phase 

I licensing was conducted by lotteries in 

1992 and 1993. There are approximately 

1,515 such non-nationwide licensees 

and four nationwide licensees currently 

authorized to operate in the 220 MHz 

band. The Commission has not 

developed a small business size 

standard for small entities specifically 

applicable to such incumbent 220 MHz 

Phase I licensees. To estimate the 

number of such licensees that are small 

businesses, we apply the small business 

size standard under the SBA rules 

applicable to Wireless 

Telecommunications Carriers (except 

Satellite). Under this category, the SBA 

deems a wireless business to be small if 

it has 1,500 or fewer employees. The 

Commission estimates that nearly all 

such licensees are small businesses 

under the SBA’s small business size 

standard that may be affected by rules 

adopted pursuant to the NPRM. 

183. 220 MHz Radio Service—Phase II 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. The 

Phase II 220 MHz service is subject to 

spectrum auctions. In the 220 MHz 

Third Report and Order, 62 FR 15978, 

April 3, 1997, we adopted a small 

business size standard for ‘‘small’’ and 

‘‘very small’’ businesses for purposes of 

determining their eligibility for special 

provisions such as bidding credits and 

installment payments. This small 

business size standard indicates that a 

‘‘small business’’ is an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues not exceeding $15 million for 

the preceding three years. A ‘‘very small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that do not 

exceed $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

Auctions of Phase II licenses 

commenced on September 15, 1998, and 

closed on October 22, 1998. In the first 

auction, 908 licenses were auctioned in 

three different-sized geographic areas: 

three nationwide licenses, 30 Regional 

Economic Area Group (EAG) Licenses, 

and 875 Economic Area (EA) Licenses. 

Of the 908 licenses auctioned, 693 were 

sold. Thirty-nine small businesses won 

licenses in the first 220 MHz auction. 

The second auction included 225 

licenses: 216 EA licenses and 9 EAG 

licenses. Fourteen companies claiming 

small business status won 158 licenses. 

184. Specialized Mobile Radio. The 

Commission awards small business 

bidding credits in auctions for 

Specialized Mobile Radio (SMR) 

geographic area licenses in the 800 MHz 

and 900 MHz bands to entities that had 

revenues of no more than $15 million in 

each of the three previous calendar 

years. The Commission awards very 

small business bidding credits to 

entities that had revenues of no more 

than $3 million in each of the three 

previous calendar years. The SBA has 

approved these small business size 

standards for the 800 MHz and 900 MHz 

SMR Services. The Commission has 

held auctions for geographic area 

licenses in the 800 MHz and 900 MHz 

bands. The 900 MHz SMR auction was 

completed in 1996. Sixty bidders 

claiming that they qualified as small 

businesses under the $15 million size 

standard won 263 geographic area 

licenses in the 900 MHz SMR band. The 

800 MHz SMR auction for the upper 200 

channels was conducted in 1997. Ten 

bidders claiming that they qualified as 

small businesses under the $15 million 

size standard won 38 geographic area 

licenses for the upper 200 channels in 

the 800 MHz SMR band. A second 

auction for the 800 MHz band was 

conducted in 2002 and included 23 BEA 

licenses. One bidder claiming small 

business status won five licenses. 

185. The auction of the 1,053 800 

MHz SMR geographic area licenses for 

the General Category channels was 

conducted in 2000. Eleven bidders won 

108 geographic area licenses for the 

General Category channels in the 800 

MHz SMR band qualified as small 

businesses under the $15 million size 

standard. In an auction completed in 

2000, a total of 2,800 Economic Area 

licenses in the lower 80 channels of the 

800 MHz SMR service were awarded. Of 

the 22 winning bidders, 19 claimed 

small business status and won 129 

licenses. Thus, combining all three 

auctions, 40 winning bidders for 

geographic licenses in the 800 MHz 

SMR band claimed status as small 

business. 

186. In addition, there are numerous 

incumbent site-by-site SMR licensees 

and licensees with extended 

implementation authorizations in the 

800 and 900 MHz bands. We do not 

know how many firms provide 800 MHz 

or 900 MHz geographic area SMR 

pursuant to extended implementation 

authorizations, nor how many of these 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11651 

providers have annual revenues of no 

more than $15 million. One firm has 

over $15 million in revenues. In 

addition, we do not know how many of 

these firms have 1500 or fewer 

employees. We assume, for purposes of 

this analysis, that all of the remaining 

existing extended implementation 

authorizations are held by small 

entities, as that small business size 

standard is approved by the SBA. 

187. Broadband Radio Service and 

Educational Broadband Service. 

Broadband Radio Service systems, 

previously referred to as Multipoint 

Distribution Service (MDS) and 

Multichannel Multipoint Distribution 

Service (MMDS) systems, and ‘‘wireless 

cable,’’ transmit video programming to 

subscribers and provide two-way high 

speed data operations using the 

microwave frequencies of the 

Broadband Radio Service (BRS) and 

Educational Broadband Service (EBS) 

(previously referred to as the 

Instructional Television Fixed Service 

(ITFS)). In connection with the 1996 

BRS auction, the Commission 

established a small business size 

standard as an entity that had annual 

average gross revenues of no more than 

$40 million in the previous three 

calendar years. The BRS auctions 

resulted in 67 successful bidders 

obtaining licensing opportunities for 

493 Basic Trading Areas (BTAs). Of the 

67 auction winners, 61 met the 

definition of a small business. BRS also 

includes licensees of stations authorized 

prior to the auction. At this time, we 

estimate that of the 61 small business 

BRS auction winners, 48 remain small 

business licensees. In addition to the 48 

small businesses that hold BTA 

authorizations, there are approximately 

392 incumbent BRS licensees that are 

considered small entities. After adding 

the number of small business auction 

licensees to the number of incumbent 

licensees not already counted, we find 

that there are currently approximately 

440 BRS licensees that are defined as 

small businesses under either the SBA 

or the Commission’s rules. The 

Commission has adopted three levels of 

bidding credits for BRS: (i) A bidder 

with attributed average annual gross 

revenues that exceed $15 million and do 

not exceed $40 million for the preceding 

three years (small business) is eligible to 

receive a 15 percent discount on its 

winning bid; (ii) a bidder with 

attributed average annual gross revenues 

that exceed $3 million and do not 

exceed $15 million for the preceding 

three years (very small business) is 

eligible to receive a 25 percent discount 

on its winning bid; and (iii) a bidder 

with attributed average annual gross 

revenues that do not exceed $3 million 

for the preceding three years 

(entrepreneur) is eligible to receive a 35 

percent discount on its winning bid. In 

2009, the Commission conducted 

Auction 86, which offered 78 BRS 

licenses. Auction 86 concluded with ten 

bidders winning 61 licenses. Of the ten, 

two bidders claimed small business 

status and won 4 licenses; one bidder 

claimed very small business status and 

won three licenses; and two bidders 

claimed entrepreneur status and won 

six licenses. 

188. In addition, the SBA’s Cable 

Television Distribution Services small 

business size standard is applicable to 

EBS. There are presently 2,032 EBS 

licensees. All but 100 of these licenses 

are held by educational institutions. 

Educational institutions are included in 

this analysis as small entities. Thus, we 

estimate that at least 1,932 licensees are 

small businesses. Since 2007, Cable 

Television Distribution Services have 

been defined within the broad economic 

census category of Wired 

Telecommunications Carriers; that 

category is defined as follows: ‘‘This 

industry comprises establishments 

primarily engaged in operating and/or 

providing access to transmission 

facilities and infrastructure that they 

own and/or lease for the transmission of 

voice, data, text, sound, and video using 

wired telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA defines a small 

business size standard for this category 

as any such firms having 1,500 or fewer 

employees. The SBA has developed a 

small business size standard for this 

category, which is: All such firms 

having 1,500 or fewer employees. 

According to Census Bureau data for 

2007, there were a total of 955 firms in 

this previous category that operated for 

the entire year. Of this total, 939 firms 

had employment of 999 or fewer 

employees, and 16 firms had 

employment of 1000 employees or 

more. Thus, under this size standard, 

the majority of firms can be considered 

small and may be affected by rules 

adopted pursuant to the NPRM. 

189. 700 MHz Band Licenses. The 

Commission previously adopted criteria 

for defining three groups of small 

businesses for purposes of determining 

their eligibility for special provisions 

such as bidding credits. The 

Commission defined a ‘‘small business’’ 

as an entity that, together with its 

affiliates and controlling principals, has 

average gross revenues not exceeding 

$40 million for the preceding three 

years. A ‘‘very small business’’ is defined 

as an entity that, together with its 

affiliates and controlling principals, has 

average gross revenues that are not more 

than $15 million for the preceding three 

years. Additionally, the Lower 700 MHz 

Band had a third category of small 

business status for Metropolitan/Rural 

Service Area (‘‘MSA/RSA’’) licenses, 

identified as ‘‘entrepreneur’’ and defined 

as an entity that, together with its 

affiliates and controlling principals, has 

average gross revenues that are not more 

than $3 million for the preceding three 

years. The SBA approved these small 

size standards. The Commission 

conducted an auction in 2002 of 740 

Lower 700 MHz Band licenses (one 

license in each of the 734 MSAs/RSAs 

and one license in each of the six 

Economic Area Groupings (EAGs)). Of 

the 740 licenses available for auction, 

484 licenses were sold to 102 winning 

bidders. Seventy-two of the winning 

bidders claimed small business, very 

small business or entrepreneur status 

and won a total of 329 licenses. The 

Commission conducted a second Lower 

700 MHz Band auction in 2003 that 

included 256 licenses: 5 EAG licenses 

and 476 Cellular Market Area licenses. 

Seventeen winning bidders claimed 

small or very small business status and 

won 60 licenses, and nine winning 

bidders claimed entrepreneur status and 

won 154 licenses. In 2005, the 

Commission completed an auction of 5 

licenses in the Lower 700 MHz Band, 

designated Auction 60. There were three 

winning bidders for five licenses. All 

three winning bidders claimed small 

business status. 

190. In 2007, the Commission adopted 

the 700 MHz Second Report and Order, 

72 FR 48814, August 24, 2007, which 

revised the band plan for the 

commercial (including Guard Band) and 

public safety spectrum, adopted services 

rules, including stringent build-out 

requirements, an open platform 

requirement on the C Block, and a 

requirement on the D Block licensee to 

construct and operate a nationwide, 

interoperable wireless broadband 

network for public safety users. In 2008, 

the Commission conducted Auction 73 

which offered all available, commercial 

700 MHz Band licenses (1,099 licenses) 

for bidding using the Commission’s 

standard simultaneous multiple-round 

(SMR) auction format for the A, B, D, 

and E Block licenses and an SMR 

auction design with hierarchical 

package bidding (HPB) for the C Block 

licenses. For Auction 73, a bidder with 

attributed average annual gross revenues 

that did not exceed $15 million for the 

preceding three years (very small 

business) qualified for a 25 percent 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11652 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

discount on its winning bids. A bidder 

with attributed average annual gross 

revenues that exceeded $15 million, but 

did not exceed $40 million for the 

preceding three years, qualified for a 15 

percent discount on its winning bids. At 

the conclusion of Auction 73, 36 

winning bidders identifying themselves 

as very small businesses won 330 of the 

1,090 licenses, and 20 winning bidders 

identifying themselves as a small 

business won 49 of the 1,090 licenses. 

The provisionally winning bids for the 

A, B, C, and E Block licenses exceeded 

the aggregate reserve prices for those 

blocks. However, the provisionally 

winning bid for the D Block license did 

not meet the applicable reserve price 

and thus did not become a winning bid. 

191. 700 MHz Guard Band Licensees. 

In the 700 MHz Guard Band Order, 65 

FR 17594, April 4, 2000, we adopted a 

small business size standard for ‘‘small 

businesses’’ and ‘‘very small businesses’’ 

for purposes of determining their 

eligibility for special provisions such as 

bidding credits and installment 

payments. A ‘‘small business’’ is an 

entity that, together with its affiliates 

and controlling principals, has average 

gross revenues not exceeding $40 

million for the preceding three years. 

Additionally, a ‘‘very small business’’ is 

an entity that, together with its affiliates 

and controlling principals, has average 

gross revenues that are not more than 

$15 million for the preceding three 

years. An auction of 52 Major Economic 

Area (MEA) licenses commenced on 

September 6, 2000, and closed on 

September 21, 2000. Of the 104 licenses 

auctioned, 96 licenses were sold to nine 

bidders. Five of these bidders were 

small businesses that won a total of 26 

licenses. A second auction of 700 MHz 

Guard Band licenses commenced on 

February 13, 2001 and closed on 

February 21, 2001. All eight of the 

licenses auctioned were sold to three 

bidders. One of these bidders was a 

small business that won a total of two 

licenses. 

192. Cellular Radiotelephone Service. 

Auction 77 was held to resolve one 

group of mutually exclusive 

applications for Cellular Radiotelephone 

Service licenses for unserved areas in 

New Mexico. Bidding credits for 

designated entities were not available in 

Auction 77. In 2008, the Commission 

completed the closed auction of one 

unserved service area in the Cellular 

Radiotelephone Service, designated as 

Auction 77. Auction 77 concluded with 

one provisionally winning bid for the 

unserved area totaling $25,002. 

193. Private Land Mobile Radio 

(‘‘PLMR’’). PLMR systems serve an 

essential role in a range of industrial, 

business, land transportation, and 

public safety activities. These radios are 

used by companies of all sizes operating 

in all U.S. business categories, and are 

often used in support of the licensee’s 

primary (non-telecommunications) 

business operations. For the purpose of 

determining whether a licensee of a 

PLMR system is a small business as 

defined by the SBA, we use the broad 

census category, Wireless 

Telecommunications Carriers (except 

Satellite). This definition provides that 

a small entity is any such entity 

employing no more than 1,500 persons. 

The Commission does not require PLMR 

licensees to disclose information about 

number of employees, so the 

Commission does not have information 

that could be used to determine how 

many PLMR licensees constitute small 

entities under this definition. We note 

that PLMR licensees generally use the 

licensed facilities in support of other 

business activities, and therefore, it 

would also be helpful to assess PLMR 

licensees under the standards applied to 

the particular industry subsector to 

which the licensee belongs. 

194. As of March 2010, there were 

424,162 PLMR licensees operating 

921,909 transmitters in the PLMR bands 

below 512 MHz. We note that any entity 

engaged in a commercial activity is 

eligible to hold a PLMR license, and that 

any revised rules in this context could 

therefore potentially impact small 

entities covering a great variety of 

industries. 

195. Rural Radiotelephone Service. 

The Commission has not adopted a size 

standard for small businesses specific to 

the Rural Radiotelephone Service. A 

significant subset of the Rural 

Radiotelephone Service is the Basic 

Exchange Telephone Radio System 

(BETRS). In the present context, we will 

use the SBA’s small business size 

standard applicable to Wireless 

Telecommunications Carriers (except 

Satellite), i.e., an entity employing no 

more than 1,500 persons. There are 

approximately 1,000 licensees in the 

Rural Radiotelephone Service, and the 

Commission estimates that there are 

1,000 or fewer small entity licensees in 

the Rural Radiotelephone Service that 

may be affected by the rules and 

policies proposed herein. 

196. Air-Ground Radiotelephone 

Service. The Commission has not 

adopted a small business size standard 

specific to the Air-Ground 

Radiotelephone Service. We will use 

SBA’s small business size standard 

applicable to Wireless 

Telecommunications Carriers (except 

Satellite), i.e., an entity employing no 

more than 1,500 persons. There are 

approximately 100 licensees in the AirGround Radiotelephone Service, and we 

estimate that almost all of them qualify 

as small under the SBA small business 

size standard and may be affected by 

rules adopted pursuant to the NPRM. 

197. Aviation and Marine Radio 

Services. Small businesses in the 

aviation and marine radio services use 

a very high frequency (VHF) marine or 

aircraft radio and, as appropriate, an 

emergency position-indicating radio 

beacon (and/or radar) or an emergency 

locator transmitter. The Commission has 

not developed a small business size 

standard specifically applicable to these 

small businesses. For purposes of this 

analysis, the Commission uses the SBA 

small business size standard for the 

category Wireless Telecommunications 

Carriers (except Satellite), which is 

1,500 or fewer employees. Most 

applicants for recreational licenses are 

individuals. Approximately 581,000 

ship station licensees and 131,000 

aircraft station licensees operate 

domestically and are not subject to the 

radio carriage requirements of any 

statute or treaty. For purposes of our 

evaluations in this analysis, we estimate 

that there are up to approximately 

712,000 licensees that are small 

businesses (or individuals) under the 

SBA standard. In addition, between 

December 3, 1998 and December 14, 

1998, the Commission held an auction 

of 42 VHF Public Coast licenses in the 

157.1875–157.4500 MHz (ship transmit) 

and 161.775–162.0125 MHz (coast 

transmit) bands. For purposes of the 

auction, the Commission defined a 

‘‘small’’ business as an entity that, 

together with controlling interests and 

affiliates, has average gross revenues for 

the preceding three years not to exceed 

$15 million dollars. In addition, a ‘‘very 

small’’ business is one that, together 

with controlling interests and affiliates, 

has average gross revenues for the 

preceding three years not to exceed $3 

million dollars. There are approximately 

10,672 licensees in the Marine Coast 

Service, and the Commission estimates 

that almost all of them qualify as ‘‘small’’ 

businesses under the above special 

small business size standards and may 

be affected by rules adopted pursuant to 

the NPRM. 

198. Fixed Microwave Services. Fixed 

microwave services include common 

carrier, private operational-fixed, and 

broadcast auxiliary radio services. At 

present, there are approximately 22,015 

common carrier fixed licensees and 

61,670 private operational-fixed 

licensees and broadcast auxiliary radio 

licensees in the microwave services. 

The Commission has not created a size 

standard for a small business 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11653 

specifically with respect to fixed 

microwave services. For purposes of 

this analysis, the Commission uses the 

SBA small business size standard for 

Wireless Telecommunications Carriers 

(except Satellite), which is 1,500 or 

fewer employees. The Commission does 

not have data specifying the number of 

these licensees that have more than 

1,500 employees, and thus is unable at 

this time to estimate with greater 

precision the number of fixed 

microwave service licensees that would 

qualify as small business concerns 

under the SBA’s small business size 

standard. Consequently, the 

Commission estimates that there are up 

to 22,015 common carrier fixed 

licensees and up to 61,670 private 

operational-fixed licensees and 

broadcast auxiliary radio licensees in 

the microwave services that may be 

small and may be affected by the rules 

and policies adopted herein. We note, 

however, that the common carrier 

microwave fixed licensee category 

includes some large entities. 

199. Offshore Radiotelephone Service. 

This service operates on several UHF 

television broadcast channels that are 

not used for television broadcasting in 

the coastal areas of states bordering the 

Gulf of Mexico. There are approximately 

55 licensees in this service. We are 

unable to estimate at this time the 

number of licensees that would qualify 

as small under the SBA’s small business 

size standard for Cellular and Other 

Wireless Telecommunications services. 

Under that SBA small business size 

standard, a business is small if it has 

1,500 or fewer employees. 

200. 39 GHz Service. The Commission 

created a special small business size 

standard for 39 GHz licenses—an entity 

that has average gross revenues of $40 

million or less in the three previous 

calendar years. An additional size 

standard for ‘‘very small business’’ is: An 

entity that, together with affiliates, has 

average gross revenues of not more than 

$15 million for the preceding three 

calendar years. The SBA has approved 

these small business size standards. The 

auction of the 2,173 39 GHz licenses 

began on April 12, 2000 and closed on 

May 8, 2000. The 18 bidders who 

claimed small business status won 849 

licenses. Consequently, the Commission 

estimates that 18 or fewer 39 GHz 

licensees are small entities that may be 

affected by rules adopted pursuant to 

the NPRM. 

201. Local Multipoint Distribution 

Service. Local Multipoint Distribution 

Service (LMDS) is a fixed broadband 

point-to-multipoint microwave service 

that provides for two-way video 

telecommunications. The auction of the 

986 LMDS licenses began and closed in 

1998. The Commission established a 

small business size standard for LMDS 

licenses as an entity that has average 

gross revenues of less than $40 million 

in the three previous calendar years. An 

additional small business size standard 

for ‘‘very small business’’ was added as 

an entity that, together with its affiliates, 

has average gross revenues of not more 

than $15 million for the preceding three 

calendar years. The SBA has approved 

these small business size standards in 

the context of LMDS auctions. There 

were 93 winning bidders that qualified 

as small entities in the LMDS auctions. 

A total of 93 small and very small 

business bidders won approximately 

277 A Block licenses and 387 B Block 

licenses. In 1999, the Commission reauctioned 161 licenses; there were 32 

small and very small businesses 

winning that won 119 licenses. 

202. 218–219 MHz Service. The first 

auction of 218–219 MHz spectrum 

resulted in 170 entities winning licenses 

for 594 Metropolitan Statistical Area 

(MSA) licenses. Of the 594 licenses, 557 

were won by entities qualifying as a 

small business. For that auction, the 

small business size standard was an 

entity that, together with its affiliates, 

has no more than a $6 million net worth 

and, after federal income taxes 

(excluding any carry over losses), has no 

more than $2 million in annual profits 

each year for the previous two years. In 

the 218–219 MHz Report and Order and 

Memorandum Opinion and Order, 64 

FR 59656, November 3, 1999, we 

established a small business size 

standard for a ‘‘small business’’ as an 

entity that, together with its affiliates 

and persons or entities that hold 

interests in such an entity and their 

affiliates, has average annual gross 

revenues not to exceed $15 million for 

the preceding three years. A ‘‘very small 

business’’ is defined as an entity that, 

together with its affiliates and persons 

or entities that hold interests in such an 

entity and its affiliates, has average 

annual gross revenues not to exceed $3 

million for the preceding three years. 

These size standards will be used in 

future auctions of 218–219 MHz 

spectrum. 

203. 2.3 GHz Wireless 

Communications Services. This service 

can be used for fixed, mobile, 

radiolocation, and digital audio 

broadcasting satellite uses. The 

Commission defined ‘‘small business’’ 

for the wireless communications 

services (WCS) auction as an entity with 

average gross revenues of $40 million 

for each of the three preceding years, 

and a ‘‘very small business’’ as an entity 

with average gross revenues of $15 

million for each of the three preceding 

years. The SBA has approved these 

definitions. The Commission auctioned 

geographic area licenses in the WCS 

service. In the auction, which was 

conducted in 1997, there were seven 

bidders that won 31 licenses that 

qualified as very small business entities, 

and one bidder that won one license 

that qualified as a small business entity. 

204. 1670–1675 MHz Band. An 

auction for one license in the 1670–1675 

MHz band was conducted in 2003. The 

Commission defined a ‘‘small business’’ 

as an entity with attributable average 

annual gross revenues of not more than 

$40 million for the preceding three 

years and thus would be eligible for a 

15 percent discount on its winning bid 

for the 1670–1675 MHz band license. 

Further, the Commission defined a ‘‘very 

small business’’ as an entity with 

attributable average annual gross 

revenues of not more than $15 million 

for the preceding three years and thus 

would be eligible to receive a 25 percent 

discount on its winning bid for the 

1670–1675 MHz band license. One 

license was awarded. The winning 

bidder was not a small entity. 

205. 3650–3700 MHz band. In March 

2005, the Commission released a Report 

and Order and Memorandum Opinion 

and Order, 70 FR 24712, May 11, 2005, 

that provides for nationwide, nonexclusive licensing of terrestrial 

operations, utilizing contention-based 

technologies, in the 3650 MHz band 

(i.e., 3650–3700 MHz). As of April 2010, 

more than 1270 licenses have been 

granted and more than 7433 sites have 

been registered. The Commission has 

not developed a definition of small 

entities applicable to 3650–3700 MHz 

band nationwide, non-exclusive 

licensees. However, we estimate that the 

majority of these licensees are Internet 

Access Service Providers (ISPs) and that 

most of those licensees are small 

businesses. 

206. 24 GHz—Incumbent Licensees. 

This analysis may affect incumbent 

licensees who were relocated to the 24 

GHz band from the 18 GHz band, and 

applicants who wish to provide services 

in the 24 GHz band. The applicable SBA 

small business size standard is that of 

‘‘Cellular and Other Wireless 

Telecommunications’’ companies. This 

category provides that such a company 

is small if it employs no more than 

1,500 persons. We believe that there are 

only two licensees in the 24 GHz band 

that were relocated from the 18 GHz 

band, Teligent and TRW, Inc. It is our 

understanding that Teligent and its 

related companies have less than 1,500 

employees, though this may change in 

the future. TRW is not a small entity. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11654 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

Thus, only one incumbent licensee in 

the 24 GHz band is a small business 

entity. 

207. 24 GHz—Future Licensees. With 

respect to new applicants in the 24 GHz 

band, the size standard for ‘‘small 

business’’ is an entity that, together with 

controlling interests and affiliates, has 

average annual gross revenues for the 

three preceding years not in excess of 

$15 million. ‘‘Very small business’’ in 

the 24 GHz band is an entity that, 

together with controlling interests and 

affiliates, has average gross revenues not 

exceeding $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

These size standards will apply to a 

future 24 GHz license auction, if held. 

208. Satellite Telecommunications. 

Since 2007, the SBA has recognized 

satellite firms within this revised 

category, with a small business size 

standard of $15 million. The most 

current Census Bureau data are from the 

economic census of 2007, and we will 

use those figures to gauge the 

prevalence of small businesses in this 

category. Those size standards are for 

the two census categories of ‘‘Satellite 

Telecommunications’’ and ‘‘Other 

Telecommunications.’’ Under the 

‘‘Satellite Telecommunications’’ 

category, a business is considered small 

if it had $15 million or less in average 

annual receipts. Under the ‘‘Other 

Telecommunications’’ category, a 

business is considered small if it had 

$25 million or less in average annual 

receipts. 

209. The first category of Satellite 

Telecommunications ‘‘comprises 

establishments primarily engaged in 

providing point-to-point 

telecommunications services to other 

establishments in the 

telecommunications and broadcasting 

industries by forwarding and receiving 

communications signals via a system of 

satellites or reselling satellite 

telecommunications.’’ For this category, 

Census Bureau data for 2007 show that 

there were a total of 512 firms that 

operated for the entire year. Of this 

total, 464 firms had annual receipts of 

under $10 million, and 18 firms had 

receipts of $10 million to $24,999,999. 

Consequently, we estimate that the 

majority of Satellite 

Telecommunications firms are small 

entities that might be affected by rules 

adopted pursuant to the NPRM. 

210. The second category of Other 

Telecommunications ‘‘primarily 

engaged in providing specialized 

telecommunications services, such as 

satellite tracking, communications 

telemetry, and radar station operation. 

This industry also includes 

establishments primarily engaged in 

providing satellite terminal stations and 

associated facilities connected with one 

or more terrestrial systems and capable 

of transmitting telecommunications to, 

and receiving telecommunications from, 

satellite systems. Establishments 

providing Internet services or voice over 

Internet protocol (VoIP) services via 

client-supplied telecommunications 

connections are also included in this 

industry.’’ For this category, Census 

Bureau data for 2007 show that there 

were a total of 2,383 firms that operated 

for the entire year. Of this total, 2,346 

firms had annual receipts of under $25 

million. Consequently, we estimate that 

the majority of Other 

Telecommunications firms are small 

entities that might be affected by our 

action. 

211. Cable and Other Program 

Distribution. Since 2007, these services 

have been defined within the broad 

economic census category of Wired 

Telecommunications Carriers; that 

category is defined as follows: ‘‘This 

industry comprises establishments 

primarily engaged in operating and/or 

providing access to transmission 

facilities and infrastructure that they 

own and/or lease for the transmission of 

voice, data, text, sound, and video using 

wired telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA has developed a 

small business size standard for this 

category, which is: All such firms 

having 1,500 or fewer employees. 

According to Census Bureau data for 

2007, there were a total of 955 firms in 

this previous category that operated for 

the entire year. Of this total, 939 firms 

had employment of 999 or fewer 

employees, and 16 firms had 

employment of 1000 employees or 

more. Thus, under this size standard, 

the majority of firms can be considered 

small and may be affected by rules 

adopted pursuant to the NPRM. 

212. Cable Companies and Systems. 

The Commission has developed its own 

small business size standards, for the 

purpose of cable rate regulation. Under 

the Commission’s rules, a ‘‘small cable 

company’’ is one serving 400,000 or 

fewer subscribers, nationwide. Industry 

data indicate that, of 1,076 cable 

operators nationwide, all but eleven are 

small under this size standard. In 

addition, under the Commission’s rules, 

a ‘‘small system’’ is a cable system 

serving 15,000 or fewer subscribers. 

Industry data indicate that, of 1,076 

cable operators nationwide, all but 

eleven are small under this size 

standard. In addition, under the 

Commission’s rules, a ‘‘small system’’ is 

a cable system serving 15,000 or fewer 

subscribers. Industry data indicate that, 

of 6,635 systems nationwide, 5,802 

systems have under 10,000 subscribers, 

and an additional 302 systems have 

10,000–19,999 subscribers. Thus, under 

this second size standard, most cable 

systems are small. 

213. Cable System Operators. The Act 

also contains a size standard for small 

cable system operators, which is ‘‘a 

cable operator that, directly or through 

an affiliate, serves in the aggregate fewer 

than 1 percent of all subscribers in the 

United States and is not affiliated with 

any entity or entities whose gross 

annual revenues in the aggregate exceed 

$250,000,000.’’ The Commission has 

determined that an operator serving 

fewer than 677,000 subscribers shall be 

deemed a small operator, if its annual 

revenues, when combined with the total 

annual revenues of all its affiliates, do 

not exceed $250 million in the 

aggregate. Industry data indicate that, of 

1,076 cable operators nationwide, all 

but ten are small under this size 

standard. We note that the Commission 

neither requests nor collects information 

on whether cable system operators are 

affiliated with entities whose gross 

annual revenues exceed $250 million, 

and therefore we are unable to estimate 

more accurately the number of cable 

system operators that would qualify as 

small under this size standard. 

214. Open Video Services. The open 

video system (OVS) framework was 

established in 1996, and is one of four 

statutorily recognized options for the 

provision of video programming 

services by local exchange carriers. The 

OVS framework provides opportunities 

for the distribution of video 

programming other than through cable 

systems. Because OVS operators provide 

subscription services, OVS falls within 

the SBA small business size standard 

covering cable services, which is ‘‘Wired 

Telecommunications Carriers.’’ The SBA 

has developed a small business size 

standard for this category, which is: All 

such firms having 1,500 or fewer 

employees. According to Census Bureau 

data for 2007, there were a total of 955 

firms in this previous category that 

operated for the entire year. Of this 

total, 939 firms had employment of 999 

or fewer employees, and 16 firms had 

employment of 1000 employees or 

more. Thus, under this second size 

standard, most cable systems are small 

and may be affected by rules adopted 

pursuant to the NPRM. In addition, we 

note that the Commission has certified 

some OVS operators, with some now 

providing service. Broadband service 

providers (BSPs) are currently the only 

significant holders of OVS certifications 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11655 

or local OVS franchises. The 

Commission does not have financial or 

employment information regarding the 

entities authorized to provide OVS, 

some of which may not yet be 

operational. Thus, again, at least some 

of the OVS operators may qualify as 

small entities. 

215. Internet Service Providers. Since 

2007, these services have been defined 

within the broad economic census 

category of Wired Telecommunications 

Carriers; that category is defined as 

follows: ‘‘This industry comprises 

establishments primarily engaged in 

operating and/or providing access to 

transmission facilities and infrastructure 

that they own and/or lease for the 

transmission of voice, data, text, sound, 

and video using wired 

telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA has developed a 

small business size standard for this 

category, which is: All such firms 

having 1,500 or fewer employees. 

According to Census Bureau data for 

2007, there were 3,188 firms in this 

category, total, that operated for the 

entire year. Of this total, 3144 firms had 

employment of 999 or fewer employees, 

and 44 firms had employment of 1000 

employees or more. Thus, under this 

size standard, the majority of firms can 

be considered small. In addition, 

according to Census Bureau data for 

2007, there were a total of 396 firms in 

the category Internet Service Providers 

(broadband) that operated for the entire 

year. Of this total, 394 firms had 

employment of 999 or fewer employees, 

and two firms had employment of 1000 

employees or more. Consequently, we 

estimate that the majority of these firms 

are small entities that may be affected 

by rules adopted pursuant to the NPRM. 

216. Internet Publishing and 

Broadcasting and Web Search Portals. 

Our action may pertain to 

interconnected VoIP services, which 

could be provided by entities that 

provide other services such as e-mail, 

online gaming, web browsing, video 

conferencing, instant messaging, and 

other, similar IP-enabled services. The 

Commission has not adopted a size 

standard for entities that create or 

provide these types of services or 

applications. However, the Census 

Bureau has identified firms that 

‘‘primarily engaged in (1) publishing 

and/or broadcasting content on the 

Internet exclusively or (2) operating 

Web sites that use a search engine to 

generate and maintain extensive 

databases of Internet addresses and 

content in an easily searchable format 

(and known as Web search portals).’’ 

The SBA has developed a small 

business size standard for this category, 

which is: All such firms having 500 or 

fewer employees. According to Census 

Bureau data for 2007, there were 2,705 

firms in this category that operated for 

the entire year. Of this total, 2,682 firms 

had employment of 499 or fewer 

employees, and 23 firms had 

employment of 500 employees or more. 

Consequently, we estimate that the 

majority of these firms are small entities 

that may be affected by rules adopted 

pursuant to the NPRM. 

217. Data Processing, Hosting, and 

Related Services. Entities in this 

category ‘‘primarily * * * provid[e] 

infrastructure for hosting or data 

processing services.’’ The SBA has 

developed a small business size 

standard for this category; that size 

standard is $25 million or less in 

average annual receipts. According to 

Census Bureau data for 2007, there were 

8,060 firms in this category that 

operated for the entire year. Of these, 

7,744 had annual receipts of under 

$24,999,999. Consequently, we estimate 

that the majority of these firms are small 

entities that may be affected by rules 

adopted pursuant to the NPRM. 

218. All Other Information Services. 

The Census Bureau defines this industry 

as including ‘‘establishments primarily 

engaged in providing other information 

services (except news syndicates, 

libraries, archives, Internet publishing 

and broadcasting, and Web search 

portals).’’ Our action pertains to 

interconnected VoIP services, which 

could be provided by entities that 

provide other services such as e-mail, 

online gaming, web browsing, video 

conferencing, instant messaging, and 

other, similar IP-enabled services. The 

SBA has developed a small business 

size standard for this category; that size 

standard is $7.0 million or less in 

average annual receipts. According to 

Census Bureau data for 2007, there were 

367 firms in this category that operated 

for the entire year. Of these, 334 had 

annual receipts of under $5.0 million, 

and an additional 11 firms had receipts 

of between $5 million and $9,999,999. 

Consequently, we estimate that the 

majority of these firms are small entities 

that may be affected by our action. 

4. Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements for Small Entities 

219. In this NPRM, the Commission 

seeks public comment on 

comprehensive universal service and 

intercarrier compensation reform. The 

transition to reformed universal service 

programs and new intercarrier 

compensation rules could affect all 

carriers, including small entities, and 

may include new administrative 

processes. In proposing these reforms, 

the Commission seeks comment on 

various reporting, recordkeeping, and 

other compliance requirements that may 

apply to all carriers, including small 

entities. We seek comment on any costs 

and burdens on small entities associated 

with the proposed rule, including data 

quantifying the extent of those costs or 

burdens. 

220. In this NPRM, the Commission 

proposes annual data collection from 

high-cost and, ultimately, CAF 

recipients. The Commission also 

proposes to require all such recipients 

to report on deployment, adoption and 

pricing for their voice and broadband 

offerings. 

221. The Commission also proposes to 

require recipients to file an annual 

report of their financial condition and 

operations, which is audited and 

certified by an independent certified 

public accountant, and accompanied by 

a report of such audit. The report shall 

include, at a minimum, balance sheets, 

income statements, statements of cash 

flow, and notes to the financial 

statements, if available. The 

Commission further proposes that the 

information included in these 

disclosures be made available to the 

public to promote increased 

transparency and efficiency. To 

minimize the cost and reporting burden 

on carriers, the Commission proposes to 

allow those carriers that are required to 

file financial reports with the Securities 

and Exchange Commission or the Rural 

Utilities Service to satisfy this 

requirement by providing electronic 

copies of the annual reports filed with 

those agencies to the Commission so 

long as the reports meet the minimum 

information requirements imposed by 

the Commission’s rules and are filed 

with the Commission by the deadline 

imposed in accordance with this 

requirement. The Commission also 

proposes that recipients must test their 

broadband networks for specific metrics 

on a periodic basis and report the 

results to USAC. The results would be 

subject to an audit. 

222. The Commission further seeks 

comment on any additional reporting 

requirements that should be required of 

high-cost or CAF recipients. For 

example, should there be additional 

reporting requirements for providers 

serving Tribal lands and Native 

communities? The Commission also 

seeks comment on how to transition 

from the current reporting requirements 

to more comprehensive reporting 

requirements that would apply to all 

high-cost and CAF recipients. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11656 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

223. The Commission seeks comment 

on ways to target support more directly 

to areas that are uneconomic to serve, 

including by targeting support through 

disaggregation within study areas. We 

propose two options for disaggregation 

that may require recordkeeping or 

reporting: either a carrier may 

disaggregate in accordance with a plan 

approved by the appropriate regulatory 

authority, or by self-certifying to the 

appropriate regulatory authority a 

disaggregation plan. 

224. The Commission also proposes 

the creation of a CAF program, which 

includes the establishment of 

performance coverage requirements and 

possible requirements applicable to 

parties receiving support to demonstrate 

coverage and compliance with other 

possible metrics. The Commission 

proposes that all recipients of CAF 

funding comply with audit and 

recordkeeping requirements. The 

Commission proposes that parties 

seeking to participate in a CAF auction 

and receive support to meet a variety of 

eligibility criteria, which may involve 

reporting, recordkeeping or other 

compliance requirements. Further, as 

part of a CAF auction, we propose an 

auction process that would require the 

completion of a pre-auction ‘‘short-form’’ 

application by all bidders and a postauction ‘‘long-form application’’ by 

winning bidders. Finally, in the NPRM 

we seek comment on other potential 

requirements, including requirements 

designed to ensure guarantee of 

performance for winning bidders as well 

as certification requirements necessary 

to receive CAF support. 

225. Further, the Commission 

proposes to improve internal control 

mechanisms to apply to the high-cost 

program and, ultimately, to the CAF. We 

seek comment on improvements that 

can be made the section 254(e) 

certification process. We also seek 

comment on whether high-cost 

universal support recipients should be 

subject to additional audit requirements 

and data validation processes. We seek 

comment on whether to modify or adopt 

additional record retention documents 

as well as performance coverage 

requirements. 

226. In the NPRM, the Commission 

seeks comment and data on issues that 

must be addressed to comprehensively 

reform intercarrier compensation. These 

issues include the appropriate path or 

transition to modernize the existing 

rules, the ultimate end point for 

intercarrier compensation reform, if and 

how carriers should be allowed to 

recover costs or revenues that might be 

reduced by any intercarrier 

compensation reforms, and data to 

analyze the effects of proposed reforms 

and need for revenue recovery. 

227. Compliance with a transition to 

a new intercarrier compensation system 

may impact some small entities and 

may include new or reduced 

administrative processes. For carriers 

that may be affected, obligations may 

include certain reporting and 

recordkeeping requirements to 

determine and establish their eligibility 

to receive recovery from other sources 

as intercarrier compensation rates are 

reduced. Additionally, these carriers 

may need to modify some 

administrative processes relating to the 

billing and collection of intercarrier 

compensation in order to comply with 

any new or revised rules the 

Commission adopts as a result of the 

NPRM. 

228. Proposed modifications to the 

rules to address arbitrage opportunities 

also will affect certain carriers, 

potentially including small entities. To 

the extent that the Commission 

addresses the intercarrier compensation 

framework applicable to interconnected 

VoIP, providers might be required to 

modify or adopt administrative, 

recordkeeping, or other processes to 

implement that framework. Moreover, 

the NPRM considers possible rule 

modifications to require that call 

signaling information is passed 

completely and accurately to 

terminating service providers, which 

may require service providers to modify 

some administrative processes. Further, 

possible rule modifications to address 

access stimulation, if adopted, may 

affect certain carriers. For example, 

carriers that meet the revenue sharing 

trigger or other thresholds proposed in 

the NPRM may be subject to revised 

tariff filing or other requirements. 

5. Steps Taken To Minimize the 

Significant Economic Impact on Small 

Entities, and Significant Alternatives 

Considered 

229. The RFA requires an agency to 

describe any significant, specifically 

small business, 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 and reporting requirements 

under the rules for such 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 such small entities.’’ 

230. The NPRM seeks comment from 

all interested parties. The Commission 

is aware that some of the proposals 

under consideration may impact small 

entities. Small entities are encouraged to 

bring to the Commission’s attention any 

specific concerns they may have with 

the proposals outlined in the NPRM. 

231. The Commission expects to 

consider the economic impact on small 

entities, as identified in comments filed 

in response to the NPRM, in reaching its 

final conclusions and taking action in 

this proceeding. 

232. In the NPRM, the Commission 

seeks comment on several issues and 

measures that may apply to small 

entities in a unique fashion. 

Specifically, the Commission seeks 

comment on whether certain public 

interest obligations should be different 

for small entities. The Commission also 

seeks comment on whether there should 

be an exception to the proposed phase 

out of support for competitive ETCs, 

which could be based, in whole or in 

part, on the size of the provider. And 

the Commission seeks comment on 

whether to provide different transition 

periods or different reform path for 

particular classes of carriers. 

233. The Commission also seeks 

comment on the appropriate sequence 

and timing of intercarrier rate 

reductions and alternative intercarrier 

compensation methodologies that might 

be adopted as an end-point for reform, 

including bill-and-keep, flat-rated 

intercarrier charges, or other proposals. 

The Commission seeks comment on the 

impact to small entities of reduced 

intercarrier rates under intercarrier 

compensation reform transition options, 

including whether a different transition 

period might be appropriate for 

particular classes of carriers. 

234. The NPRM also seeks comment 

on the appropriate standard for recovery 

and on whether reductions in 

intercarrier compensation rates would 

impact all carriers in a similar manner. 

The Commission asks if the recovery 

approach adopted should be different 

depending on the type of carrier or 

regulation. The Commission also invites 

comment on specific recovery 

considerations for rate-of-return carriers 

and whether any cost or revenue 

recovery mechanism could provide rateof-return carriers with greater incentives 

for efficient operation. 

235. Finally, the Commission seeks 

comment on whether separate 

consideration for small entities is 

necessary or appropriate for each of the 

following issues discussed in the 

NPRM: The potential impact of rules 

governing interconnected VoIP traffic; 

the potential impact of rules related to 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11657 

call signaling; the potential impact of 

rules relating to access stimulation, 

including revised tariff-filing 

requirements; the potential impact of 

rules relating to interconnection and 

related issues. 

6. Federal Rules That May Duplicate, 

Overlap, or Conflict With the Proposed 

Rules 

236. None. 

B. Paperwork Reduction Act Analysis 

237. This document contains 

proposed new or modified information 

collection requirements. The 

Commission, as part of its continuing 

effort to reduce paperwork burdens, 

invites the general public and the Office 

of Management and Budget (OMB) to 

comment on the information collection 

requirements contained in this 

document, as required by the Paperwork 

Reduction Act of 1995, Public Law 104– 

13. In addition, pursuant to the Small 

Business Paperwork Relief Act of 2002, 

Public Law 107–198, see 44 U.S.C. 

3506(c)(4), we seek specific comment on 

how we might further reduce the 

information collection burden for small 

business concerns with fewer than 25 

employees. 

C. Ex Parte Presentations 

238. This NPRM will be treated as a 

‘‘permit-but-disclose’’ proceeding subject 

to the ‘‘permit-but-disclose’’ 

requirements under § 1.1206(b) of the 

Commission’s rules. Ex parte 

presentations are permissible if 

disclosed in accordance with 

Commission rules, except during the 

Sunshine Agenda period when 

presentations, ex parte or otherwise, are 

generally prohibited. Persons making 

oral ex parte presentations are reminded 

that a memorandum summarizing a 

presentation must contain a summary of 

the substance of the presentation and 

not merely a listing of the subjects 

discussed. More than a one- or twosentence description of the views and 

arguments presented is generally 

required. Additional rules pertaining to 

oral and written presentations are set 

forth in § 1.1206(b) of the Commission’s 

rules. 

D. Filing Requirements 

239. Comments and Reply Comments. 

Pursuant to §§ 1.415 and 1.419 of the 

Commission’s rules, interested parties 

may file comments and reply comments. 

Comments on the proposed rules are 

due on or before April 18, 2011 and 

reply comments are due on or before 

May 23, 2011. Joint Board comments are 

due on or before May 2, 2011. 

Comments on Section XV are due on or 

before April 1, 2011 and reply 

comments on Section XV are due on or 

before April 18, 2011. Written 

comments on the Paperwork Reduction 

Act proposed information collection 

requirements must be submitted by the 

public, Office of Management and 

Budget (OMB), and other interested 

parties on or before May 2, 2011. All 

filings should refer to CC Docket No 01– 

92, WC Docket Nos. 10–90, 07–135, and 

05–337 and GN Docket No. 09–51. 

Comments may be filed using: (1) The 

Commission’s Electronic Comment 

Filing System (ECFS), (2) the Federal 

Government’s eRulemaking Portal, or (3) 

by filing paper copies. 

List of Subjects 

47 CFR Part 36 

Communications common carriers, 

Reporting and recordkeeping 

requirements, Telephone, Uniform 

systems of accounts. 

47 CFR Part 54 

Communications common carriers, 

Reporting and recordkeeping 

requirements, Telecommunications, 

Telephone. 

47 CFR Parts 61 and 69 

Communications common carriers, 

Reporting and recordkeeping 

requirements, Telephone. 

47 CFR Part 64 

Communications common carriers, 

Individuals with disabilities, Reporting 

and recordkeeping requirements, 

Telecommunications, Telephone. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Proposed Rules 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission proposes to amend 47 CFR 

parts 36, 54, 61, 64, and 69 to read as 

follows: 

PART 36—JURISDICTIONAL 

SEPARATIONS PROCEDURES; 

STANDARD PROCEDURES FOR 

SEPARATING 

TELECOMMUNICATIONS PROPERTY 

COSTS, REVENUES, EXPENSES, 

TAXES AND RESERVES FOR 

TELECOMMUNICATIONS COMPANIES 

1. The authority citation for part 36 

continues to read as follows: 

Authority: 47 U.S.C. Secs. 151, 154 (i) and 

(j), 205, 221(c), 254, 403 and 410. 

2. Amend § 36.605 by revising 

paragraph (b) to read as follows: 

§ 36.605 Calculation of safety net additive. 

* * * * * 

(b) Calculation of safety net additive 

support: Until December 31, 2011, 

safety net additive support is equal to 

the amount of capped support 

calculated pursuant to this subpart F in 

the qualifying year minus the amount of 

support in the year prior to qualifying 

for support subtracted from the 

difference between the uncapped 

expense adjustment for the study area in 

the qualifying year minus the uncapped 

expense adjustment in the year prior to 

qualifying for support as shown in the 

following equation: Safety net additive 

support = (Uncapped support in the 

qualifying year ¥Uncapped support in 

the base year)¥(Capped support in the 

qualifying year ¥Amount of support 

received in the base year). For calendar 

year 2012 payments, the safety net 

additive shall be 75% of the amount 

calculated pursuant to this section. For 

calendar year 2013 payments, the safety 

net additive shall be 50% of the amount 

calculated pursuant to this section. For 

calendar year 2014 payments, the safety 

net additive shall be 25% of the amount 

calculated pursuant to this section. 

Beginning January 1, 2015, no carrier 

shall receive the safety net additive. 

* * * * * 

3. Amend § 36.621 by revising the last 

sentence of paragraph (a)(4) 

introductory text and adding three 

additional sentences at the end of 

paragraph (a)(4) introductory text to 

read as follows: 

§ 36.621 Study area total unseparated loop 

cost. 

(a) * * * 

(4) * * * Total Corporate Operations 

Expense, for purposes of calculating 

universal service support payments 

beginning July 1, 2001 and ending 

December 31, 2011, shall be limited to 

the lesser of § 36.621(a)(4)(i) or (ii). For 

purposes of calculating universal 

service support payments in calendar 

year 2012, total corporate operations 

expense shall be limited to the lesser of 

§ 36.621(a)(4)(i) or (ii) then multiplied 

by 67%. For purposes of calculating 

universal service support payments in 

calendar year 2013, total corporate 

operations expense shall be limited to 

the lesser of § 36.621(a)(4)(i) or (ii) then 

multiplied by 33%. Beginning January 

1, 2014, Corporate Operations Expense 

shall no longer be eligible for purposes 

of calculating universal service 

payments. 

* * * * * 

4. Amend § 36.631 by revising 

paragraphs (c)(1) and (2) and by 

removing and reserving paragraph (d) to 

read as follows: 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11658 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

§ 36.631 Expense adjustment. 

* * * * * 

(c) * * * 

(1) Until December 31, 2011, sixtyfive percent of the study area average 

unseparated loop cost per working loop 

as calculated pursuant to § 36.622(b) in 

excess of 115 percent of the national 

average for this cost but not greater than 

150 percent of the national average for 

this cost as calculated pursuant to 

§ 36.622(a) multiplied by the number of 

working loops reported in § 36.611(h) 

for the study area. Beginning January 1, 

2012, fifty-five percent of the study area 

average unseparated loop cost per 

working loop as calculated pursuant to 

§ 36.622(b) in excess of 115 percent of 

the national average for this cost but not 

greater than 150 percent of the national 

average for this cost as calculated 

pursuant to § 36.622(a) multiplied by 

the number of working loops reported in 

§ 36.611(h) for the study area; and 

(2) Until December 31, 2011, seventyfive percent of the study area average 

unseparated loop cost per working loop 

as calculated pursuant to § 36.622(b) in 

excess of 150 percent of the national 

average for this cost as calculated 

pursuant to § 36.622(a) multiplied by 

the number of working loops reported in 

§ 36.611(h) for the study area. Beginning 

January 1, 2012, sixty-five percent of the 

study area average unseparated loop 

cost per working loop as calculated 

pursuant to § 36.622(b) in excess of 150 

percent of the national average for this 

cost as calculated pursuant to 

§ 36.622(a) multiplied by the number of 

working loops reported in § 36.611(h) 

for the study area. 

* * * * * 

PART 54—UNIVERSAL SERVICE 

5. The authority citation for Part 54 

continues to read as follows: 

Authority: 47 U.S.C. 151, 154(i), 201, 205, 

214, and 254 unless otherwise noted. 

6. Amend § 54.301 by adding two 

sentences at the end of paragraph (a)(1) 

and by adding three sentences to the 

beginning of paragraph (c)(5) to read as 

follows: 

§ 54.301 Local switching support. 

(a) * * * 

(1) * * * Subject to specified 

exceptions, for calendar year 2012 

payments, local switching support shall 

be 67% of the amount calculated 

pursuant to this section and for calendar 

year 2013 payments, local switching 

support shall be 33% of the amount 

calculated pursuant to this section. 

Beginning January 1, 2014, no carrier 

shall receive local switching support, 

subject to specified exceptions. 

* * * * * 

(c) * * * 

(5) For calendar year 2012, for 

purposes of calculating local switching 

support, the amount of corporate 

operations expense allocated by this 

factor shall be multiplied by 67%. For 

calendar year 2013, for purposes of 

calculating local switching support, the 

amount of corporate operations expense 

allocated by this factor shall be 

multiplied by 33%. Beginning January 

1, 2014, corporate operations expense 

shall no longer be eligible for purposes 

of calculating local switching support. 

* * * 

* * * * * 

7. Add § 54.302 to subpart D to read 

as follows: 

§ 54.302 Annual per-line limit on universal 

service support. 

Subject to specified exceptions, 

beginning January 1, 2012, each study 

area in the continental United States 

shall be limited to $3,000 per-line 

annually in universal service support. 

For purposes of this section, universal 

service support is defined as the sum of 

the amounts calculated pursuant to 

§§ 36.605, 36.631 of this chapter and 

§§ 54.301, 54.305, 54.309, 54.800 

through 808 and 54.901 through 904. 

Line counts for purposes of this section 

shall be as of the most recent line counts 

reported pursuant to § 36.611(h) of this 

chapter. The fund administrator, in 

order to limit support to $3,000 for 

affected carriers, shall reduce safety net 

additive support, high-cost loop 

support, local switching support, safety 

valve support, forward-looking support, 

interstate access support, and interstate 

common line support in proportion to 

the relative amounts of each support 

mechanism to total support the study 

area would receive absent such 

limitation. 

8. Amend § 54.305 by adding a 

sentence at the end of paragraph (a) to 

read as follows: 

§ 54.305 Sale or transfer of exchanges. 

(a) * * * Five years after approval of 

the relevant study area waiver for the 

sale or transfer of exchanges, the 

provisions of this section are no longer 

applicable to acquired exchanges, if the 

acquired exchanges have more than 

30% of housing units unserved by 

broadband, as indicated on the National 

Telecommunications and Information 

Administration’s broadband map and/or 

the Commission’s Form 477 data 

collection. 

* * * * * 

9. Amend § 54.307 by revising 

paragraph (a) to read as follows: 

§ 54.307 Support to a competitive eligible 

telecommunications carrier. 

(a) Calculation of support. A 

competitive eligible 

telecommunications carrier shall receive 

universal service support to the extent 

that the competitive eligible 

telecommunications carrier captures the 

subscriber lines of an incumbent local 

exchange carrier (LEC) or serves new 

subscriber lines in the incumbent LEC’s 

service area. Subject to specified 

exceptions beginning January 1, 2016, 

no competitive eligible 

telecommunications carrier shall be 

eligible to receive universal service 

support on the basis of this section. On 

or after January 1, 2012, competitive 

eligible telecommunications carriers 

shall be eligible to receive universal 

service support pursuant to subpart L 

and subpart M of this part. 

* * * * * 

10. Amend § 54.315 by adding a 

sentence at the end of paragraph (a) to 

read as follows: 

§ 54.315 Disaggregation and targeting of 

high-cost support. 

(a) * * * On or before [60 days from 

effective date of adoption of order], all 

rural incumbent local exchange carriers 

and rate-of-return carriers for which 

high-cost universal service support 

pursuant to §§ 54.301, 54.303, and/or 

54.305, subpart K, and/or subpart F of 

Part 36 is available, that previously 

selected the disaggregation path as 

described in paragraph (b) of this 

section, must select a disaggregation 

path as described in paragraph (c) or (d) 

of this section. 

* * * * * 

11. Amend § 54.807 by revising 

paragraph (a) to read as follows: 

§ 54.807 Interstate access universal 

service support. 

(a) Each Eligible Telecommunications 

Carrier (ETC) that provides supported 

service within the study area of a price 

cap local exchange carrier shall receive 

Interstate Access Universal Service 

Support for each line that it serves 

within that study area. Subject to 

specified exceptions, eligible 

telecommunications carriers shall be 

eligible to receive Interstate Access 

Support as follows: 

(1) During the 2012 calendar year, the 

interstate access support available to 

incumbent local exchange carriers and 

competitive eligible 

telecommunications carriers shall be 

capped at 50 percent of the amount paid 

in 2011, excluding amounts paid during 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11659 

2011 for true-ups or revisions for years 

prior to 2011. Interstate access support 

payments shall be reduced, if necessary, 

by multiplying each incumbent local 

exchange carrier’s or competitive 

eligible telecommunications carrier’s 

support by the percentage factor 

necessary to reduce the aggregate 

interstate access support to the capped 

amounts. 

(2) Interstate access support shall be 

eliminated beginning January 1, 2013, 

and no eligible telecommunications 

carrier shall receive interstate access 

support, except as for true-ups and 

revisions related to prior periods. 

* * * * * 

12. Amend § 54.901 by adding 

paragraph (c) to read as follows: 

§ 54.901 Calculation of Interstate Common 

Line Support. 

* * * * * 

(c) For calendar year 2012, for 

purposes of calculating Interstate 

Common Line Support, corporate 

operations expense allocated to the 

Common Line Revenue Requirement, 

pursuant to § 69.409 of this chapter, 

shall be reduced by multiplying the 

corporate operations expense allocated 

by 67%. For calendar year 2013, for 

purposes of calculating Interstate 

Common Line Support, corporate 

operations expense allocated to the 

Common Line Revenue Requirement, 

pursuant to § 69.409 of this chapter, 

shall be reduced by multiplying the 

corporate operations expense allocated 

by 33%. Beginning January 1, 2014, 

corporate operations expense shall no 

longer be eligible for purposes of 

calculating Interstate Common Line 

Support. 

13. Add subpart M to Part 54 to read 

as follows: 

Subpart M—Competitive Bidding Program 

Sec. 

54.1001 Purpose. 

54.1002 Areas eligible for support. 

54.1003 Provider eligibility. 

54.1004 Short-form applications for 

participation in competitive bidding to 

apply for support. 

54.1005 Competitive bidding process. 

54.1006 Communications prohibited during 

the competitive bidding process. 

54.1007 Long-form application process for 

winning bidders. 

54.1008 Default. 

54.1009 Public interest obligations. 

54.1010 Disbursements. 

54.1011 Oversight. 

Subpart M—Competitive Bidding 

Program 

§ 54.1001 Purpose. 

This subpart sets forth procedures for 

competitive bidding to determine the 

recipients of universal service support 

available through the first phase of the 

Connect America Fund and the 

amount(s) of support that they may 

receive, subject to post-auction 

procedures established by the 

Commission. 

§ 54.1002 Areas eligible for support. 

(a) Support may be made available for 

specific unserved areas identified by the 

Commission. 

(b) The Commission may assign 

relative coverage units to each identified 

geographic area in connection with 

conducting competitive bidding and 

disbursing support. 

§ 54.1003 Provider eligibility. 

(a) A party applying for support must 

be designated an Eligible 

Telecommunications Carrier, or have 

applied for a designation as an Eligible 

Telecommunications Carrier, for an area 

that includes unserved area(s) with 

respect to which it applies for support. 

(b) A party applying for support must, 

if specified and required by the 

Commission, hold any necessary 

authority or conditional authorization to 

provide voice service in the unserved 

area with respect to which it applies for 

support. 

§ 54.1004 Short-form applications for 

participation in competitive bidding to apply 

for support. 

(a) Public notice of the application 

process. When conducting competitive 

bidding pursuant to this subpart, the 

Commission shall by Public Notice 

announce the dates and procedures for 

submitting applications to participate in 

related competitive bidding. 

(b) Application contents. All parties 

submitting applications to participate in 

competitive bidding pursuant to this 

subpart must provide the following 

information in their application in a 

form acceptable to the Commission. 

(1) The identity of the applicant, i.e., 

the party seeking support, including any 

information that the Commission may 

require regarding parties that have an 

ownership or other interest in the 

applicant. 

(2) The identities of up to three 

individuals designated to bid on behalf 

of the applicant. 

(3) The identities of all real parties in 

interest to any agreements relating to the 

participation of the applicant in the 

competitive bidding. 

(4) Certification that the application 

discloses all real parties in interest to 

any agreements involving the 

applicant’s participation in the 

competitive bidding. 

(5) Certification that the applicant, 

any party capable of controlling the 

applicant, and any related party with 

information regarding the applicant’s 

planned or actual participation in the 

competitive bidding will not 

communicate any information regarding 

the applicant’s planned or actual 

participation in the competitive bidding 

to any other party with an interest in 

any other applicant until after the postauction deadline for winning bidders to 

submit long-form applications for 

support, unless the Commission by 

Public Notice announces a different 

deadline. 

(6) Certification that the applicant is 

in compliance with any and all statutory 

or regulatory requirements for receiving 

universal service support. The 

Commission may elect to accept as 

sufficient the applicant’s demonstration 

in its application that the applicant will 

be in compliance at a point in time 

designated by the Commission. 

(7) Such additional information as the 

Commission may require, including but 

not limited to applicants certifying its 

qualifications to receive support, 

providing its eligible 

telecommunications carrier designation 

status and information regarding its 

authorization to provide service, and 

specifying the unserved area applicant 

seeks to provide service to. 

(c) Demonstration of financial 

qualification. The Commission may 

require as a prerequisite to participating 

in competitive bidding pursuant to this 

subpart that applicants demonstrate 

their financial qualifications or 

commitment to provide required 

services by depositing funds, posting 

performance bonds, or any other means 

the Commission considers appropriate. 

(d) Application processing. (1) 

Commission staff shall review any 

application submitted during the period 

for submission and before the deadline 

for submission for completeness and 

compliance with the Commission’s 

rules. No applications submitted at any 

other time shall be reviewed or 

considered. 

(2) The Commission shall not permit 

any applicant to participate in 

competitive bidding pursuant to this 

subpart to do so if, as of the deadline for 

submitting applications, the application 

does not adequately identify the 

applicant or does not include required 

certifications. 

(3) The Commission shall not permit 

any applicant to participate in 

competitive bidding pursuant to this 

subpart to do so if, as of the applicable 

deadline, the applicant has not provided 

any required demonstration of financial 

qualifications that the Commission has 

required. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11660 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

(4) The Commission shall not permit 

applicants to make any major 

modifications to their applications after 

the deadline for submitting 

applications. The Commission shall not 

permit applicants to participate in the 

competitive bidding if their applications 

require major modifications to be made 

after deadline for submitting 

applications. Major modifications 

include but are not limited to any 

changes to the identity of the applicant 

or to the certifications required in the 

application. 

(5) The Commission may permit 

applicants to make minor modifications 

to their applications after the deadline 

for submitting applications. The 

Commission may establish deadlines for 

making some or all permissible 

modifications to applications and may 

permit some or all permissible 

modifications to be made at any time. 

Minor modifications include correcting 

typographical errors in the application 

and supplying non-material information 

that was inadvertently omitted or was 

not available at the time the application 

was submitted. 

(6) After receipt and review of the 

applications, the Commission shall by 

Public Notice identify all applicants that 

may participate in an auction conducted 

pursuant to this subpart. 

§ 54.1005 Competitive bidding process. 

(a) Public notice of competitive 

bidding procedures. The Commission 

shall by public notice establish detailed 

competitive bidding procedures any 

time it conducts competitive bidding 

pursuant to this subpart. 

(b) Competitive bidding procedures. 

The Commission may conduct 

competitive bidding pursuant to this 

subpart using any of the procedures 

described below. 

(1) The Commission may establish 

procedures for limiting the public 

availability of information regarding 

applicants, applications, and bids 

during a period of time covering the 

competitive bidding process. The 

Commission may by Public Notice 

establish procedures for parties to report 

the receipt of non-public information 

regarding applicants, applications, and 

bids during any time the Commission 

has limited the public availability of the 

information during the competitive 

bidding process. 

(2) The Commission may sequence or 

group multiple items subject to bidding, 

such as multiple or overlapping selfdefined geographic areas eligible for 

support, and may conduct bidding 

either sequentially or simultaneously. 

(3) The Commission may establish 

procedures for bidding on individual 

items and/or for combinations or 

packages of items. 

(4) The Commission may establish 

reserve prices, and/or lowest or 

maximum acceptable per-unit bid 

amounts, either for discrete items or 

combinations or packages of items, 

which may be made public or kept nonpublic during a period of time covering 

the competitive bidding process. 

(5) The Commission may prescribe 

the form and time for submitting bids 

and may require that bids be submitted 

remotely, by telephonic or electronic 

transmission, or in person. 

(6) The Commission may prescribe 

the number of rounds during which bids 

may be submitted, whether one or more, 

and may establish procedures for 

determining when no more bids will be 

accepted. 

(7) The Commission may require a 

minimum level of bidding activity. 

(8) The Commission may establish 

acceptable bid amounts at the opening 

of and over the course of bidding. 

(9) The Commission may establish 

procedures for ranking and comparing 

bids and specific performance 

requirements, if any, and comparing and 

determining the winning bidders that 

may become recipients of universal 

service support and the amount(s) of 

support that they may receive, subject to 

post-auction procedures established by 

the Commission. 

(10) The Commission may identify 

winning bidder(s) for any remaining 

amounts of support by considering bids 

in order of per-unit bid amount. The 

Commission may skip bids that would 

require more support than is available, 

or at its discretion, not identify winning 

bidder(s) for the remaining funds and 

instead offer such funds in a subsequent 

auction. 

(11) The Commission may permit 

bidders the limited opportunity to 

withdraw bids and, if so, establish 

procedures for doing so. 

(12) The Commission may delay, 

suspend or cancel bidding before or 

after bidding begins for any reason that 

affects the fair and efficient conduct of 

the bidding, including natural disasters, 

technical failures, administrative 

necessity or any other reason. 

(c) Apportioning package bids. If the 

Commission elects to accept bids for 

combinations or packages of items, the 

Commission may provide a 

methodology for apportioning such bids 

to discrete items within the combination 

or package when a discrete bid on an 

item is required to implement any 

Commission rule. 

(d) Public notice of competitive 

bidding results. After the conclusion of 

competitive bidding, the Commission 

shall by public notice identify the 

winning bidders that may become 

recipients of universal service support 

and the amount(s) of support that they 

may receive, subject to post-auction 

procedures established by the 

Commission. 

§ 54.1006 Communications prohibited 

during the competitive bidding process. 

(a) Prohibited communications. Each 

applicant, each party capable of 

controlling an applicant, and each party 

related to an applicant with information 

regarding an applicant’s planned or 

actual participation in the competitive 

bidding is prohibited from 

communicating any information 

regarding the applicant’s planned or 

actual participation in the competitive 

bidding to any other party with an 

interest in any other applicant to 

participate in the competitive bidding 

from the deadline for submitting 

applications to participate in the 

competitive bidding until after the postauction deadline for winning bidders to 

submit long-form applications for 

support, unless the Commission by 

Public Notice announces a different 

deadline. 

(b) Duty to report potentially 

prohibited communications. Any 

applicant or related party receiving 

communications that may be prohibited 

under this rule shall report the receipt 

of such communications to the 

Commission. 

(c) Procedures for reporting 

potentially prohibited communications. 

The Commission may by Public Notice 

establish procedures for parties to report 

the receipt of communications that may 

be prohibited under this rule. 

§ 54.1007 Long-form application process 

for winning bidders. 

(a) Application deadline. Unless 

otherwise provided by public notice, 

winning bidders for support must file a 

long-form application for support 

within 10 business days of the public 

notice identifying them as eligible to 

apply. 

(b) Application contents. (1) 

Identification of the party seeking the 

support. 

(2) Information the Commission may 

require to demonstrate that the 

applicant is legally, technically and 

financially qualified to receive support, 

including but not limited to proof of its 

designation as an Eligible 

Telecommunications Carrier for an area 

that includes the area with respect to 

which support is requested. 

(3) Disclosure of all parties with a 

controlling interest in the applicant and 

any party with a greater than ten percent 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11661 

ownership interest in the applicant, 

whether held directly or indirectly. 

(4) A detailed project description that 

identifies the unserved area applicant 

seeks to serve, describes how the 

applicant will meet public interest 

obligations and performance 

requirements, describes the anticipated 

network, identifies the proposed 

technology or technologies, 

demonstrates that the project is 

technically feasible, and describes each 

specific development phase of the 

project, e.g., network design phase, 

construction period, deployment and 

maintenance period. 

(5) A detailed project schedule that 

identifies the following project 

milestones: start and end date for 

network design; start and end date for 

drafting and posting requests for 

proposal; start and end date for selecting 

vendors and negotiating contracts; start 

date for commencing construction; end 

date for completing construction; and 

dates by which it will meet applicable 

requirements to receive the installments 

of support for which it subsequently 

qualifies. 

(6) Certifications that the applicant 

has available funds for all project costs 

that exceed the amount of support to be 

received and that the applicant will 

comply with all program requirements. 

(7) Any guarantee of performance that 

the Commission may require by Public 

Notice or other proceedings, including 

but not limited to, letters of credit, 

performance bonds, or demonstration of 

financial resources. 

(c) Application processing. (1) No 

application will be considered unless it 

has been submitted during the period 

specified by Public Notice. No 

applications submitted or 

demonstrations made at any other time 

shall be accepted or considered. 

(2) The Commission shall deny any 

application that, as of the submission 

deadline, either does not adequately 

identify the party seeking support or 

does not include required certifications. 

(3) After reviewing applications 

submitted, the Commission may afford 

an opportunity for parties to make 

minor modifications to amend 

applications or correct defects noted by 

the applicant, the Commission, or other 

parties. Minor modifications include 

changing the individuals authorized to 

bid for the applicant, correcting 

typographical errors in the application, 

and supplying non-material information 

that was inadvertently omitted or was 

not available at the time the application 

was submitted. 

(4) The Commission shall deny all 

applications to which major 

modifications are made after the 

deadline for submitting applications. 

Major modifications include any 

changes to the identity of the applicant 

or to the certifications required in the 

application. 

(5) After receipt and review of the 

applications, the Commission shall 

release a Public Notice identifying all 

applications that have been granted and 

the parties that are eligible to receive 

support. 

§ 54.1008 Default. 

Winning bidders that fail to 

substantially comply with the 

requirements for filing the post-auction 

long-form application by the applicable 

deadline shall be in default on their bids 

and subject to such measures as the 

Commission may provide, including but 

not limited to disqualification from 

future competitive bidding pursuant to 

this subpart. 

§ 54.1009 Public interest obligations. 

(a) Applicants receiving support 

under this section must perform the 

following under their public interest 

obligations: 

(1) Speed. Applicants must provide 

broadband speeds of 4 Mbps 

downstream (actual) and 1 Mbps 

upstream (actual), subject to specified 

exceptions. 

(2) Coverage requirement. Applicants 

must comply with the coverage 

requirement established by the 

Commission and must comply with all 

reasonable requests for service from end 

users in its coverage area. 

(3) Deployment and duration of 

obligation. Applicants must complete 

deployment within three years after 

receiving support and must fulfill 

provider obligations under this section 

for five years upon completion of 

deployment. 

§ 54.1010 Disbursements. 

(a) Support shall be disbursed to 

recipients in three stages, as follows: 

(1) One-half of the total possible 

support, if coverage were to be extended 

to 100 percent of the units in the portion 

of the geographic area deemed 

unserved, when a recipient’s long-form 

application for support with respect to 

a specific area is deemed granted. 

(2) One-quarter of the total possible 

support with respect to a specific 

geographic area when a recipient files a 

report demonstrating coverage of 50 

percent of the units in the portion of 

that area previously deemed unserved. 

(3) The remainder of the total possible 

support when a recipient files a report 

demonstrating coverage of 100 percent 

of the units in the portion of that area 

previously deemed unserved. 

(b) If the Commission concludes for 

any reason that coverage of 100 percent 

of the units in the portion of a specific 

geographic area previously deemed 

unserved will not be achieved, the 

Commission instead may provide 

support based on the final total units 

covered in that area. In such 

circumstances, the final disbursement 

will be the difference between the total 

amount of support based on the final 

units covered in that area and any 

support previously received with 

respect to that area. Parties accepting a 

final disbursement for a specific 

geographic area based on coverage of 

less than 100 percent of the units in the 

portions of that area previously deemed 

uncovered waive any claim for the 

remainder of support for which they 

previously were eligible with respect to 

that area. 

§ 54.1011 Oversight. 

(a) Parties receiving support are 

subject to random compliance audits 

and other investigations to ensure 

compliance with program rules and 

orders. 

(b) Parties receiving support shall 

submit to the Commission annual 

reports for eight years after they qualify 

for support. The annual reports shall 

include: 

(1) Electronic coverage maps 

illustrating the area reached by new 

services at a minimum scale of 

1:240,000; 

(2) A list of relevant census blocks 

previously deemed unserved, with total 

resident population and resident 

population residing in areas reached by 

new services (based on 2010 Census 

Bureau data and estimates); 

(3) A report regarding the services 

advertised to the population in those 

areas; and 

(4) Data received or used from speed 

tests analyzing network performance for 

new broadband services in the area for 

which support was received. 

(c) No later than two months after 

providing service or two years after 

receiving support, parties receiving 

support shall submit to the Commission 

data from broadband speed tests for 

areas in which support was received 

demonstrating broadband performance 

data to and from the network meeting or 

exceeding the 4 Mbps downstream 

(actual) and 1 Mbps upstream (actual). 

(d) Parties receiving support and their 

agents are required to retain any 

documentation prepared for or in 

connection with the recipient’s support 

for a period of not less than eight years. 

All such documents shall be made 

available upon request to the 

Commission’s Office of Managing 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
11662 Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 

Director, Wireless Telecommunications 

Bureau, Wireline Competition Bureau, 

Office of Inspector General, and the 

Universal Service Fund Administrator, 

and their auditors. 

PART 61—TARIFFS 

14. The authority citation for part 61 

continues to read as follows: 

Authority: Secs. 1, 4(i), 4(j), 201–205 and 

403 of the Communications Act of 1934, as 

amended; 47 U.S.C. 151, 154(i), 154(j), 201– 

205 and 403, unless otherwise noted. 

15. Amend § 61.3 by adding 

paragraph (aaa) to read as follows: 

§ 61.3 Definitions. 

* * * * * 

(aaa) Access revenue sharing. Access 

revenue sharing occurs when a rate-ofreturn ILEC or a CLEC enters into an 

access revenue sharing agreement that 

will result in a net payment to the other 

party (including affiliates) to the access 

revenue sharing agreement, over the 

course of the agreement. A rate-of-return 

ILEC or a CLEC meeting this trigger is 

subject to revised interstate switched 

access charge rules. 

16. Amend § 61.26 by revising 

paragraphs (b), (d) and (e) and adding 

paragraph (g) to read as follows: 

§ 61.26 Tariffing of competitive interstate 

switched exchange access services. 

* * * * * 

(b) Except as provided in paragraphs 

(c), (e), and (g) of this section, a CLEC 

shall not file a tariff for its interstate 

switched exchange access services that 

prices those services above the higher 

of: 

(1) The rate charged for such services 

by the competing ILEC or 

(2) The lower of: 

(i) The benchmark rate described in 

paragraph (c) of this section or 

(ii) The lowest rate that the CLEC has 

tariffed for its interstate exchange access 

services, within the six months 

preceding June 20, 2001. 

* * * * * 

(d) Except as provided in paragraph 

(g) of this section, and notwithstanding 

paragraphs (b) and (c) of this section, in 

the event that, after June 20, 2001, a 

CLEC begins serving end users in a 

metropolitan statistical area (MSA) 

where it has not previously served end 

users, the CLEC shall not file a tariff for 

its interstate exchange access services in 

that MSA that prices those services 

above the rate charged for such services 

by the competing ILEC. 

(e) Rural exemption. Except as 

provided in paragraph (g) of this 

section, and notwithstanding 

paragraphs (b) through (d) of this 

section, a rural CLEC competing with a 

non-rural ILEC shall not file a tariff for 

its interstate exchange access services 

that prices those services above the rate 

prescribed in the NECA access tariff, 

assuming the highest rate band for local 

switching. In addition to that NECA 

rate, the rural CLEC may assess a 

presubscribed interexchange carrier 

charge if, and only to the extent that, the 

competing ILEC assesses this charge. 

* * * * * 

(g) Notwithstanding paragraphs (b) 

through (e) of this section, a CLEC 

engaged in access revenue sharing, as 

that term is defined in § 61.3(aaa) shall 

not file a tariff for its interstate exchange 

access services that prices those services 

above the rate prescribed in the access 

tariff of the RBOC in the state, or, if 

there is no RBOC in the state, the 

incumbent LEC with the largest number 

of access lines in the state. 

(1) A CLEC engaging in access 

revenue sharing, as that term is defined 

in § 61.3(aaa) shall file revised interstate 

switched access tariffs within forty-five 

(45) days of commencing access revenue 

sharing as that term is defined in 

§ 61.3(aaa) or within forty-five (45) days 

of [the effective date of the Order] if the 

CLEC on that date is engaged in access 

revenue sharing, as that term is defined 

in § 61.3(aaa). 

(2) A CLEC shall file the revised 

interstate access tariffs required by 

paragraph (g)(1) of this section on at 

least sixteen (16) days’ notice. 

17. Amend § 61.39 by revising 

paragraph (a) and adding paragraph (g) 

to read as follows: 

§ 61.39 Optional supporting information to 

be submitted with letters of transmittal for 

Access Tariff filings effective on or after 

April 1, 1989, by local exchange carriers 

serving 50,000 or fewer access lines in a 

given study area that are described as 

subset 3 carriers in § 69.602. 

(a) Scope. Except as provided in 

paragraph (g) of this section, this section 

provides for an optional method of 

filing for any local exchange carrier that 

is described as a subset 3 carrier in 

§ 69.602 of this chapter, which elects to 

issue its own Access Tariff for a period 

commencing on or after April 1, 1989, 

and which serves 50,000 or fewer access 

lines in a study area as determined 

under § 36.611(a)(8) of this chapter. 

However, the Commission may require 

any carrier to submit such information 

as may be necessary for review of a tariff 

filing. This section (other than the 

preceding sentence of this paragraph) 

shall not apply to tariff filings of local 

exchange carriers subject to price cap 

regulation. 

* * * * * 

(g) A local exchange carrier otherwise 

eligible to file a tariff pursuant to this 

section may not do so if it is engaged in 

access revenue sharing, as that term is 

defined in § 61.3(aaa). A carrier so 

engaged must file interstate access 

tariffs in accordance with § 61.38 and 

§ 69.3(e)(12)(1) of this chapter. 

18. Amend § 61.58 by revising 

paragraph (a)(2)(i) and adding paragraph 

(a)(2)(iv) to read as follows: 

§ 61.58 Notice requirements. 

(a)* * * 

(2)(i) Except as provided in paragraph 

(a)(2)(iv) of this section, local exchange 

carriers may file tariffs pursuant to the 

streamlined tariff filing provisions of 

section 204(a)(3) of the Communications 

Act. Such a tariff may be filed on 7 days’ 

notice if it proposes only rate decreases. 

Any other tariff filed pursuant to section 

204(a)(3) of the Communications Act, 

including those that propose a rate 

increase or any change in terms and 

conditions, shall be filed on 15 days’ 

notice. Any tariff filing made pursuant 

to section 204(a)(3) of the 

Communications Act must comply with 

the applicable cost support 

requirements specified in this part. 

* * * * * 

(iv) A local exchange carrier engaging 

in access revenue sharing, as that term 

is defined in § 61.3(aaa), that is filing 

pursuant to the provisions of 

§ 69.3(e)(12)(i) of this chapter shall file 

revised tariffs on at least 16 days’ notice. 

* * * * * 

PART 64—MISCELLANEOUS RULES 

RELATING TO COMMON CARRIERS 

19. The authority citation for part 64 

continues to read as follows: 

Authority: 47 U.S.C. 154, 254(k); secs. 

403(b)(2)(B), (c), Pub. L. 104–104, 110 Stat. 

56. Interpret or apply 47 U.S.C. 201, 218, 222, 

225, 226, 228, and 254(k) unless otherwise 

noted. 

20. Amend § 64.1601 by revising 

paragraph (a) to read as follows: 

§ 64.1601 Delivery requirements and 

privacy restrictions. 

(a) Delivery. Except as provided in 

paragraphs (d) and (e) of this section: 

(1) Telecommunications providers 

and entities providing interconnected 

voice over Internet protocol services 

who originate interstate or intrastate 

traffic on the public switched telephone 

network, or originate interstate or 

intrastate traffic that is destined for the 

public switched telephone network, are 

required to transmit the telephone 

number received from, or assigned to or 

otherwise associated with the calling 

party to the next provider in the path 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3
Federal Register / Vol. 76, No. 41 / Wednesday, March 2, 2011 / Proposed Rules 11663 

from the originating provider to the 

terminating provider, where such 

transmission is feasible with network 

technology deployed at the time a call 

is originated. The scope of this 

provision includes, but is not limited to, 

circuit-switched and packetized 

transmission, such as Internet protocol 

and any successor technologies. Entities 

subject to this provision who use 

Signaling System 7 are required to 

transmit the calling party number (CPN) 

associated with every interstate or 

intrastate call in the SS7 CPN field to 

interconnecting providers, and are 

required to transmit the calling party’s 

charge number (CN) in the SS7 CN field 

to interconnecting providers for any call 

where CN differs from CPN. Entities 

subject to this provision who are not 

capable of using SS7 but who use 

multifrequency (MF) signaling are 

required to transmit CPN, or CN if it 

differs from CPN, associated with every 

interstate or intrastate call, in the MF 

signaling automatic numbering 

information (ANI) field. 

(2) Telecommunications providers 

and entities providing interconnected 

voice over Internet protocol services 

who are intermediate providers in an 

interstate or intrastate call path must 

pass, unaltered, to subsequent carriers 

in the call path, all signaling 

information identifying the telephone 

number of the calling party, and, if 

different, of the financially responsible 

party that is received with a call, unless 

published industry standards permit or 

require altering signaling information. 

This requirement applies to all SS7 

information including, but not limited 

to CPN and CN, and also applies to MF 

signaling information or other signaling 

information intermediate providers 

receive with a call. This requirement 

also applies to Internet protocol 

signaling messages, such as calling party 

identifiers contained in Session 

Initiation Protocol (SIP) header fields, 

and to equivalent identifying 

information as used in successor 

technologies. 

* * * * * 

PART 69—ACCESS CHARGES 

21. The authority citation for part 69 

continues to read as follows: 

Authority: 47 U.S.C. 154, 201, 202, 203, 

205, 218, 220, 254, 403. 

22. Section 69.3 is amended by 

revising paragraphs (e)(6) and (e)(9) and 

adding paragraph (e)(12) to read as 

follows: 

§ 69.3 Filing of access service tariffs. 

* * * * * 

(e) * * * 

(6) Except as provided in paragraph 

(e)(12) of this section, a telephone 

company or companies that elect to file 

such a tariff shall notify the association 

not later than March 1 of the year the 

tariff becomes effective, if such 

company or companies did not file such 

a tariff in the preceding biennial period 

or cross-reference association charges in 

such preceding period that will be 

cross-referenced in the new tariff. A 

telephone company or companies that 

elect to file such a tariff not in the 

biennial period shall file its tariff to 

become effective July 1 for a period of 

one year. Thereafter, such telephone 

company or companies must file its 

tariff pursuant to paragraphs (f)(1) or 

(f)(2) of this section. 

* * * * * 

(9) Except as provided in paragraph 

(e)(12) of this section, a telephone 

company or group of affiliated 

telephone companies that elects to file 

its own Carrier Common Line tariff 

pursuant to paragraph (a) of this section 

shall notify the association not later 

than March 1 of the year the tariff 

becomes effective that it will no longer 

participate in the association tariff. A 

telephone company or group of 

affiliated telephone companies that 

elects to file its own Carrier Common 

Line tariff for one of its study areas shall 

file its own Carrier Common Line 

tariff(s) for all of its study areas. 

* * * * * 

(12)(i) A local exchange carrier, or a 

group of affiliated carriers in which at 

least one carrier, is engaging in access 

revenue sharing, as that term is defined 

in § 61.3(aaa) of this chapter, shall file 

its own access tariffs within forty-five 

(45) days of commencing access revenue 

sharing, as that term is defined in 

§ 61.3(aaa) of this chapter, or within 

forty-five (45) days of [the effective date 

of the Order] if the local exchange 

carrier on that date is engaged in access 

revenue sharing, as that term is defined 

in § 61.3(aaa) of this chapter. 

(ii) Notwithstanding paragraphs (e)(6) 

and (9) of this section, a local exchange 

carrier, or a group of affiliated carriers 

in which at least one carrier, is engaging 

in access revenue sharing, as that term 

is defined in § 61.3(aaa) of this chapter, 

must withdraw from all interstate access 

tariffs issued by the association within 

forty-five (45) days of commencing 

access revenue sharing, as that term is 

defined in § 61.3(aaa) of this chapter, or 

within forty-five (45) days of [the 

effective date of the Order] if the local 

exchange carrier on that date is engaged 

in access revenue sharing, as that term 

is defined in § 61.3(aaa) of this chapter. 

(iii) Any such carrier(s) shall notify 

the association when it begins access 

revenue sharing, or on [the effective 

date of the order] if it is engaged in 

access revenue sharing, as that term is 

defined in § 61.3(aaa) of this chapter, on 

that date, of its intent to leave the 

association tariffs within forty-five (45) 

days. 

* * * * * 

[FR Doc. 2011–4399 Filed 3–1–11; 8:45 am] 

BILLING CODE 6712–01–P 


emcdonald on DSK2BSOYB1PROD with PROPOSALS3