[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Proposed Rules]
[Pages 11632-11663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4399]



[[Page 11631]]

Vol. 76

Wednesday,

No. 41

March 2, 2011

Part IV





 Federal Communications Commission





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47 CFR Parts 36, 54, 61, et al.



Connect America Fund; Developing a Unified Intercarrier Compensation; 
Proposed Rule

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

[[Page 11632]]


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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.

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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:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web Site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#e1a7a2a2d4d1d5a1878282cf868e97"><span class="__cf_email__" data-cfemail="61272222545155210702024f060e17">[email protected]</span></a> or phone: (202) 
418-0530 or TTY: (202) 418-0432.
    <bullet> 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 <a href="/cdn-cgi/l/email-protection#affffdeeefc9cccc81c8c0d9"><span class="__cf_email__" data-cfemail="98c8cad9d8fefbfbb6fff7ee">[email protected]</span></a> and to 
<a href="/cdn-cgi/l/email-protection#256644514d5c0b724c49494c444856654346460b424a53"><span class="__cf_email__" data-cfemail="a4e7c5d0ccdd8af3cdc8c8cdc5c9d7e4c2c7c78ac3cbd2">[email protected]</span></a> and to Nicholas A. Fraser, Office of Management 
and Budget, via e-mail to <a href="/cdn-cgi/l/email-protection#5917303a313635382a061877061f2b382a3c2b1936343b773c3629773e362f"><span class="__cf_email__" data-cfemail="da94b3b9b2b5b6bba9859bf4859ca8bba9bfa89ab5b7b8f4bfb5aaf4bdb5ac">[email protected]</span></a> 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 Sec. Sec.  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.
    <bullet> 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.
    [cir] 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 e-mail to <a href="/cdn-cgi/l/email-protection#6104020712210702024f060e17"><span class="__cf_email__" data-cfemail="97f2f4f1e4d7f1f4f4b9f0f8e1">[email protected]</span></a>, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    [cir] 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.
    <bullet> 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.
    [cir] The Commission's contractor will receive hand-delivered or 
messenger-delivered 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.
    [cir] 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.
    [cir] 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: <a href="/cdn-cgi/l/email-protection#094a61687b656c7a275d70656c7b496f6a6a276e667f"><span class="__cf_email__" data-cfemail="97d4fff6e5fbf2e4b9c3eefbf2e5d7f1f4f4b9f0f8e1">[email protected]</span></a>.
    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.

[[Page 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 <a href="/cdn-cgi/l/email-protection#cfa9acac8fadacbfa6b8aaade1aca0a2"><span class="__cf_email__" data-cfemail="5f393c3c1f3d3c2f36283a3d713c3032">[email protected]</span></a>, 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 <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="4f292c2c7a7f7b0f292c2c61282039">[email protected]</a> 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: <a href="/cdn-cgi/l/email-protection#1e585d5d2b2e2a5e787d7d30797168"><span class="__cf_email__" data-cfemail="eaaca9a9dfdadeaa8c8989c48d859c">[email protected]</span></a>; 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, <a href="/cdn-cgi/l/email-protection#3e6e5f4a4c575d5510765f52525b477e585d5d10595148"><span class="__cf_email__" data-cfemail="207041545249434b0e68414c4c4559604643430e474f56">[email protected]</span></a>, or Jennifer Prime, Attorney Advisor, 
Wireline Competition Bureau at (202) 418-2403, <a href="/cdn-cgi/l/email-protection#38525d5656515e5d4a16484a51555d785e5b5b165f574e"><span class="__cf_email__" data-cfemail="ea808f8484838c8f98c49a9883878faa8c8989c48d859c">[email protected]</span></a>.
    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 one-time 
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

[[Page 11634]]

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

[[Page 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 Commission-adopted 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 Sec.  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 re-evaluate 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 technology-specific 
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

[[Page 11636]]

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 high-cost 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 re-evaluated 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 
current-generation 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

[[Page 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-of-return 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 market-driven, 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, Sec.  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 Sec.  54.305 of the 
Commission's rules to invest in modern communications networks in 
unserved areas. We seek comment on revising Sec.  54.305 of the 
Commission's rules so that rural incumbent LECs, subject to Sec.  
54.305 of the Commission's rules, would receive either the lesser of 
the support pursuant to Sec.  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 Sec.  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 per-

[[Page 11638]]

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.

[[Page 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 ``short-form'' 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

[[Page 11640]]

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 Sec.  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 mid-
sized 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-of-Return 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 near-term 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

[[Page 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 high-quality 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 high-cost 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 lowest-cost 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 wireline-only 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 regression-based 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

[[Page 11642]]

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

[[Page 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

[[Page 11644]]

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-of-
return 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 non-regulated 
services provided over multi-purpose 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

[[Page 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

[[Page 11646]]

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 Sec.  
61.38, 47 CFR 61.38. A carrier filing interstate exchange access 
tariffs pursuant to Sec.  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 Sec.  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 Sec.  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-of-return, 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.

[[Page 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 
high-cost 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-of-return 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-of-
return 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

[[Page 11648]]

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 Sec. Sec.  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

[[Page 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

[[Page 11650]]

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

[[Page 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

[[Page 11652]]

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 Air-Ground 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

[[Page 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 re-auctioned 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, non-exclusive 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.

[[Page 11654]]

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

[[Page 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.

[[Page 11656]]

    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 post-auction ``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 rate-of-
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

[[Page 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 
Sec.  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 two-
sentence description of the views and arguments presented is generally 
required. Additional rules pertaining to oral and written presentations 
are set forth in Sec.  1.1206(b) of the Commission's rules.

D. Filing Requirements

    239. Comments and Reply Comments. Pursuant to Sec. Sec.  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 Sec.  36.605 by revising paragraph (b) to read as follows:


Sec.  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 Sec.  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:


Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  36.631 by revising paragraphs (c)(1) and (2) and by 
removing and reserving paragraph (d) to read as follows:

[[Page 11658]]

Sec.  36.631  Expense adjustment.

* * * * *
    (c) * * *
    (1) Until December 31, 2011, sixty-five percent of the study area 
average unseparated loop cost per working loop as calculated pursuant 
to Sec.  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 Sec.  36.622(a) multiplied by the 
number of working loops reported in Sec.  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 Sec.  
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 Sec.  36.622(a) multiplied by the number 
of working loops reported in Sec.  36.611(h) for the study area; and
    (2) Until December 31, 2011, seventy-five percent of the study area 
average unseparated loop cost per working loop as calculated pursuant 
to Sec.  36.622(b) in excess of 150 percent of the national average for 
this cost as calculated pursuant to Sec.  36.622(a) multiplied by the 
number of working loops reported in Sec.  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 Sec.  
36.622(b) in excess of 150 percent of the national average for this 
cost as calculated pursuant to Sec.  36.622(a) multiplied by the number 
of working loops reported in Sec.  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 Sec.  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:


Sec.  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 Sec.  54.302 to subpart D to read as follows:


Sec.  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 Sec. Sec.  36.605, 36.631 of this chapter and 
Sec. Sec.  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 Sec.  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 Sec.  54.305 by adding a sentence at the end of paragraph 
(a) to read as follows:


Sec.  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 Sec.  54.307 by revising paragraph (a) to read as follows:


Sec.  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 Sec.  54.315 by adding a sentence at the end of paragraph 
(a) to read as follows:


Sec.  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 
Sec. Sec.  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 Sec.  54.807 by revising paragraph (a) to read as 
follows:


Sec.  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

[[Page 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 Sec.  54.901 by adding paragraph (c) to read as follows:


Sec.  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 Sec.  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 
Sec.  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


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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 post-auction 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.

[[Page 11660]]

    (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.


Sec.  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 self-defined 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 
non-public 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.


Sec.  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 post-auction 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.


Sec.  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

[[Page 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.


Sec.  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.


Sec.  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.


Sec.  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.


Sec.  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

[[Page 11662]]

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 Sec.  61.3 by adding paragraph (aaa) to read as follows:


Sec.  61.3  Definitions.

* * * * *
    (aaa) Access revenue sharing. Access revenue sharing occurs when a 
rate-of-return 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 Sec.  61.26 by revising paragraphs (b), (d) and (e) and 
adding paragraph (g) to read as follows:


Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  61.39 by revising paragraph (a) and adding 
paragraph (g) to read as follows:


Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  61.3(aaa). A carrier 
so engaged must file interstate access tariffs in accordance with Sec.  
61.38 and Sec.  69.3(e)(12)(1) of this chapter.
    18. Amend Sec.  61.58 by revising paragraph (a)(2)(i) and adding 
paragraph (a)(2)(iv) to read as follows:


Sec.  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 Sec.  61.3(aaa), that is filing pursuant to 
the provisions of Sec.  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 Sec.  64.1601 by revising paragraph (a) to read as 
follows:


Sec.  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

[[Page 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:


Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 
Sec.  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


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