Federal-State Joint Board on Universal Service, 29960-29979 [05-10231]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Rules and Regulations]
[Pages 29960-29979]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10231]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 05-46]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission addresses the minimum 
requirements for a telecommunications carrier to be designated as an 
``eligible telecommunications carrier'' or ``ETC,'' and thus eligible 
to receive federal universal service support. Specifically, consistent 
with the recommendations of the Federal-State Joint Board on Universal 
Service (Joint Board), we adopt additional mandatory requirements for 
ETC designation proceedings.

DATES: Effective June 24, 2005 except for Sec. Sec.  54.202 and 54.209 
which contain information collection requirements that have not been 
approved by the Office of Management Budget (OMB). The Commission will 
publish a document in the Federal Register announcing the effective 
date of those sections. Written comments by the public on the new and/
or modified information collection requirements are due July 25, 2005.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Marlene H. Dortch, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, SW., Washington, DC 20554. In addition to 
filing comments with the Office of the Secretary, a copy of any 
comments on the Paperwork Reduction Act information collection 
requirements contained herein should be submitted to Judith B. Herman, 
Federal Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to Judith-B.Herman@fcc.gov. 
Parties should also send three paper copies of their filings to Sheryl 
Todd, Telecommunications Access Policy Division, Wireline Competition 
Bureau, Federal Communications Commission, 445 12th Street, SW., Room 
5-B540, Washington, DC 20554. See Supplemental Information for further 
filing instructions.

FOR FURTHER INFORMATION CONTACT: Mark Seifert, Assistant Chief, 
Wireline Competition Bureau, Telecommunications Access Policy Division, 
(202) 418-7400, TTY (202) 418-0484. For additional information 
concerning the information collection(s) contained in this document, 
contact Judith B. Herman at (202) 418-0214, or via the Internet at 
Judith-B.Herman@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, in CC Docket No. 96-45, FCC 05-46, released March 17, 2005. 
The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 12th Street, SW., Washington, DC 20554.

I. Introduction

    1. This Report and Order addresses the minimum requirements for a 
telecommunications carrier to be designated as an ``eligible 
telecommunications carrier'' or ``ETC,'' and thus eligible to receive 
federal universal service support. Specifically, consistent with the 
recommendations of the Federal-State Joint Board on Universal Service 
(Joint Board), we adopt additional mandatory requirements for ETC 
designation proceedings in which the Commission acts pursuant to 
section 214(e)(6) of the Communications Act of 1934, as amended (the 
Act). In addition, as recommended by the Joint Board, we encourage 
states that exercise jurisdiction over ETC designations pursuant to 
section 214(e)(2) of the Act, to adopt these requirements when deciding 
whether a common carrier should be designated as an ETC. We believe 
that application of these additional requirements by the Commission and 
state commissions will allow for a more predictable ETC designation 
process.
    2. We also believe that because these requirements create a more 
rigorous ETC designation process, their application by the Commission 
and state commissions will improve the long-term sustainability of the 
universal service fund. Specifically, in considering whether a common 
carrier has satisfied its burden of proof necessary to obtain ETC 
designation, we require that the applicant: (1) Provide a five-year 
plan demonstrating how high-cost universal service support will be used 
to improve its coverage, service quality or capacity in every wire 
center for which it seeks designation and expects to receive universal 
service support; (2) demonstrate its ability to remain functional in 
emergency situations; (3) demonstrate that it will satisfy consumer 
protection and service quality standards; (4) offer local usage plans 
comparable to those offered by the incumbent local exchange carrier 
(LEC) in the areas for which it seeks designation; and (5) acknowledge 
that it may be required to provide equal access if all other ETCs in 
the designated service area relinquish their designations pursuant to 
section 214(e)(4) of the Act. In addition, we make these additional 
requirements applicable on a prospective basis to all ETCs previously 
designated by the Commission, and we require these ETCs to submit 
evidence demonstrating how they comply with this new ETC designation 
framework by October 1, 2006, at the same time they submit their annual 
certification filing. As explained in greater detail below, however, we 
do not adopt the Joint Board's recommendation to evaluate separately 
whether ETC applicants have the financial resources and ability to 
provide quality services throughout the designated service area because 
we conclude the objective of such criterion will be achieved through 
the other requirements adopted in this Report and Order.
    3. In this Report and Order, we also set forth the analytical 
framework the Commission will use to determine whether the public 
interest would be served by an applicant's designation as an ETC. We 
find that, under the statute, an applicant should be designated as an

[[Page 29961]]

ETC only where such designation serves the public interest, regardless 
of whether the area where designation is sought is served by a rural or 
non-rural carrier. Although the outcome of the Commission's Sec.  
214(e)(6) analysis may vary depending on whether the area is served by 
a rural or non-rural carrier, we clarify that the Commission's public 
interest examination for ETC designations will review many of the same 
factors for ETC designations in areas served by non-rural and rural 
incumbent LECs. In addition, as part of our public interest analysis, 
we will examine the potential for creamskimming effects in instances 
where an ETC applicant seeks designation below the study area level of 
a rural incumbent LEC. We also encourage states to apply the 
Commission's analysis in determining whether or not the public interest 
would be served by designating a carrier as an ETC.
    4. In addition, we further strengthen the Commission's reporting 
requirements for ETCs in order to ensure that high-cost universal 
service support continues to be used for its intended purposes. An ETC, 
therefore, must submit, among other things, on an annual basis: (1) 
Progress updates on its five-year service quality improvement plan, 
including maps detailing progress towards meeting its five-year 
improvement plan, explanations of how much universal service support 
was received and how the support was used to improve service quality in 
each wire center for which designation was obtained, and an explanation 
of why any network improvement targets have not been met; (2) detailed 
information on outages in the ETC's network caused by emergencies, 
including the date and time of onset of the outage, a brief description 
of the outage, the particular services affected by the outage, the 
geographic areas affected by the outage, and steps taken to prevent a 
similar outage situation in the future; and (3) how many requests for 
service from potential customers were unfulfilled for the past year and 
the number of complaints per 1,000 handsets or lines. These annual 
reporting requirements are required for all ETCs designated by the 
Commission. We encourage states to require these reports to be filed by 
all ETCs over which they possess jurisdiction.
    5. As explained below, we do not adopt the recommendation of the 
Joint Board to limit high-cost support to a single connection that 
provides access to the public telephone network. Section 634 of the 
2005 Consolidated Appropriations Act prohibits the Commission from 
utilizing appropriated funds to ``modify, amend, or change'' its rules 
or regulations to implement this recommendation. Nevertheless, we 
believe the rigorous ETC designation requirements adopted above will 
ensure that only ETCs that can adequately provide universal service 
will receive ETC designation, thereby lessening fund growth 
attributable to the designation and supporting the long-term 
sustainability of the universal service fund.
    6. We also agree with the Joint Board's recommendation that changes 
are not warranted in our rules concerning procedures for redefinition 
of service areas served by rural incumbent LECs. In addition, in this 
Report and Order, we grant several petitions for redefinition of rural 
incumbent LEC service areas. Moreover, we direct the Universal Service 
Administrative Company (USAC), in accordance with direction from the 
Wireline Competition Bureau, to develop standards as necessary for the 
submission of any maps that ETCs are required to submit to USAC under 
the Commission's rules. We also modify the Commission's annual 
certification and line count filing deadlines so that newly designated 
ETCs are permitted to file that data within sixty days of their ETC 
designation date. This will allow high-cost support to be distributed 
as of the date of ETC designation. In addition, to enable price cap 
LECs and/or competitive ETCs that miss the June 30 annual interstate 
access support (IAS) certification deadline to receive IAS support, we 
modify the quarterly certification schedule for the receipt of IAS 
support. These carriers may file their certification after June 30 in 
order to receive IAS support in the second calendar quarter after the 
certification is filed. Finally, we decline to define mobile wireless 
customer location in terms of ``place of primary use,'' as defined by 
the Mobile Telecommunications Sourcing Act (MTSA), for universal 
service purposes.

II. Scope of Support

    7. On December 8, 2004, Congress passed the 2005 Consolidated 
Appropriations Act, which includes a provision prohibiting the 
Commission from utilizing appropriated funds to ``modify, amend, or 
change its rules or regulations for Universal Service support payments 
to implement the February 27, 2004 recommendations of the Federal-State 
Joint Board on Universal Service regarding single connection or primary 
line restrictions on universal service support payments.'' Accordingly, 
in this Report and Order, we do not consider the portion of the Joint 
Board's Recommended Decision, released February 27, 2004, related to 
limiting the scope of high-cost support to a single connection that 
provides access to the public telephone network.

III. ETC Designation Process

    8. State commissions and the Commission are charged with reviewing 
ETC designation applications for compliance with section 214(e)(1) of 
the Act. A common carrier designated as an ETC must offer the services 
supported by the federal universal service mechanisms throughout the 
designated service area. The ETC must offer such services using either 
its own facilities or a combination of its own facilities and resale of 
another carrier's services. The ETC must also advertise the supported 
services and the associated charges throughout the service area for 
which designation is received, using media of general distribution. In 
addition, an ETC must advertise the availability of Lifeline and Link 
Up services in a manner reasonably designed to reach those likely to 
qualify for those services. In this Report and Order, we adopt 
additional requirements consistent with section 214 of the Act that all 
ETC applicants must meet to be designated an ETC by this Commission. 
Further, although specific requirements set forth in this Report and 
Order may be relevant only for wireless ETC applicants and some may be 
relevant for wireline ETC applicants, this ETC designation framework 
generally applies to any type of common carrier that seeks ETC 
designation before the Commission under section 214(e)(6) of the Act.
    9. In addition, we set forth our public interest analysis for ETC 
designations, which includes an examination of (1) the benefits of 
increased consumer choice, (2) the impact of the designation on the 
universal service fund, and (3) the unique advantages and disadvantages 
of the competitor's service offering. As part of our public interest 
analysis, we also will examine the potential for creamskimming in 
instances where an ETC applicant seeks designation below the study area 
level of a rural incumbent LEC.
    10. We encourage state commissions to require ETC applicants over 
which they have jurisdiction to meet these same conditions and to 
conduct the same public interest analysis outlined in this Report and 
Order. We further encourage state commissions to apply these 
requirements to all ETC applicants in a manner that is consistent with 
the principle that universal service support mechanisms and rules be 
competitively neutral.

[[Page 29962]]

A. Eligibility Requirements

    11. As described above, ETC applicants must meet statutorily 
prescribed requirements before we can approve their designation as an 
ETC. Based on the record before us, we find that an ETC applicant must 
demonstrate: (1) A commitment and ability to provide services, 
including providing service to all customers within its proposed 
service area; (2) how it will remain functional in emergency 
situations; (3) that it will satisfy consumer protection and service 
quality standards; (4) that it offers local usage comparable to that 
offered by the incumbent LEC; and (5) an understanding that it may be 
required to provide equal access if all other ETCs in the designated 
service area relinquish their designations pursuant to section 
214(e)(4) of the Act. As noted above, these requirements are mandatory 
for all ETCs designated by the Commission. ETCs designated by the 
Commission prior to this Report and Order will be required to make such 
showings when they submit their annual certification filing on October 
1, 2006. We also encourage state commissions to apply these 
requirements to all ETC applicants over which they exercise 
jurisdiction. We do not believe that different ETCs should be subject 
to different obligations, going forward, because of when they happened 
to first obtain ETC designation from the Commission or the state. These 
are responsibilities associated with receiving universal service 
support that apply to all ETCs, regardless of the date of initial 
designation.
1. Commitment and Ability To Provide the Supported Services
    12. We adopt the requirement that an ETC applicant must demonstrate 
its commitment and ability to provide supported services throughout the 
designated service area: (1) By providing services to all requesting 
customers within its designated service area; and (2) by submitting a 
formal network improvement plan that demonstrates how universal service 
funds will be used to improve coverage, signal strength, or capacity 
that would not otherwise occur absent the receipt of high-cost support. 
We encourage states to adopt these requirements and, as recommended by 
the Joint Board, to do so in a manner that is flexible with applicable 
state laws and policies. For example, states that adopt these 
requirements should determine, pursuant to state law, what constitutes 
a ``reasonable request'' for service. In addition, we encourage states 
to follow the Joint Board's proposal that any build-out commitments 
adopted by states ``be harmonized with any existing policies regarding 
line extensions and carrier of last resort obligations.''
    13. First, we agree with and adopt the Joint Board recommendation 
to establish a requirement that an ETC applicant demonstrate its 
capability and commitment to provide service throughout its designated 
service area to all customers who make a reasonable request for 
service. We conclude that this requirement, which we adopted in the 
Virginia Cellular ETC Designation Order, 69 FR 8958, February 26, 2004 
and Highland Cellular ETC Designation Order, 69 FR 26097, May 11, 2004 
is appropriate as a general rule to ensure that all ETCs serve 
requesting customers in their designated service area. Therefore, 
consistent with these orders, we require that an ETC applicant make 
specific commitments to provide service to requesting customers in the 
service areas for which it is designated as an ETC. If the ETC's 
network already passes or covers the potential customer's premises, the 
ETC should provide service immediately. In those instances where a 
request comes from a potential customer within the applicant's licensed 
service area but outside its existing network coverage, the ETC 
applicant should provide service within a reasonable period of time if 
service can be provided at reasonable cost by: (1) Modifying or 
replacing the requesting customer's equipment; (2) deploying a roof-
mounted antenna or other equipment; (3) adjusting the nearest cell 
tower; (4) adjusting network or customer facilities; (5) reselling 
services from another carrier's facilities to provide service; or (6) 
employing, leasing, or constructing an additional cell site, cell 
extender, repeater, or other similar equipment. We believe that these 
requirements will ensure that an ETC applicant is committed to serving 
customers within the entire area for which it is designated. If an ETC 
applicant determines that it cannot serve the customer using one or 
more of these methods, then the ETC must report the unfulfilled request 
to the Commission within 30 days after making such determination.
    14. Second, we require an applicant seeking ETC designation from 
the Commission to submit a formal plan detailing how it will use 
universal service support to improve service within the service areas 
for which it seeks designation. Specifically, we require that an ETC 
applicant submit a five-year plan describing with specificity its 
proposed improvements or upgrades to the applicant's network on a wire 
center-by-wire center basis throughout its designated service area. The 
five-year plan must demonstrate in detail how high-cost support will be 
used for service improvements that would not occur absent receipt of 
such support. This showing must include: (1) How signal quality, 
coverage, or capacity will improve due to the receipt of high-cost 
support throughout the area for which the ETC seeks designation; (2) 
the projected start date and completion date for each improvement and 
the estimated amount of investment for each project that is funded by 
high-cost support; (3) the specific geographic areas where the 
improvements will be made; and (4) the estimated population that will 
be served as a result of the improvements. To demonstrate that 
supported improvements in service will be made throughout the service 
area, applicants should provide this information for each wire center 
in each service area for which they expect to receive universal service 
support, or an explanation of why service improvements in a particular 
wire center are not needed and how funding will otherwise be used to 
further the provision of supported services in that area. We clarify 
that service quality improvements in the five-year plan do not 
necessarily require additional construction of network facilities. 
Furthermore, as discussed infra, in connection with its annual 
reporting obligations, an ETC applicant must submit coverage maps 
detailing the amount of high-cost support received for the past year, 
how these monies were used to improve its network, and specifically 
where signal strength, coverage, or capacity has been improved in each 
wire center in each service area for which funding was received. In 
addition, an ETC applicant must submit on an annual basis a detailed 
explanation regarding why any targets established in its five-year 
improvement plan have not been met.
    15. Some commenters assert that an applicant should submit more 
detailed build-out plans than discussed above, while other commenters 
request that the build-out plans include a specific timeline, including 
start and completion dates. Our approach incorporates many commenters' 
suggestions; however, mandatory completion dates established by the 
Commission would not account for unique circumstances that may affect 
build-out, including the amount of universal service support or 
customer demand. On balance, we find that our approach allows 
consideration of fact-specific circumstances of the carrier and

[[Page 29963]]

the designated service area, while ensuring that high-cost support will 
be used to improve service.
2. Ability To Remain Functional in Emergency Situations
    16. We adopt the Joint Board's recommendation that we require an 
ETC applicant to demonstrate its ability to remain functional in 
emergency situations. Specifically, in order to be designated as an 
ETC, an applicant must demonstrate it has a reasonable amount of back-
up power to ensure functionality without an external power source, is 
able to reroute traffic around damaged facilities, and is capable of 
managing traffic spikes resulting from emergency situations. We believe 
that functionality during emergency situations is an important 
consideration for the public interest. Moreover, to ensure that ETCs 
continue to comply with this requirement, as discussed infra, ETCs 
designated by the Commission must certify on an annual basis that they 
are able to function in emergency situations. Because most emergency 
situations are local in nature, we anticipate that state commissions 
that choose to adopt an emergency functionality requirement may also 
identify other geographically-specific factors that are relevant for 
consideration. If states impose any additional requirements, we 
encourage them to do so in a manner that is consistent with the 
universal service principle of competitive neutrality.
    17. We also disagree with commenters that propose that the 
Commission adopt a specific benchmark requiring an ETC to maintain 
eight hours of back-up power and ability to reroute traffic to other 
cell sites in emergency situations. We believe that such a benchmark is 
inappropriate because, although an ETC may have taken reasonable 
precautions to remain functional during an emergency, the extreme or 
unprecedented nature of the emergency may render the carrier inoperable 
despite any precautions taken, including battery back-up and plans to 
reroute traffic. Furthermore, we reject suggestions that ETCs should be 
required to publish signal strength for their primary digital 
technology because signal coverage, quality, or capacity will already 
be reported on an annual basis to the Commission as part of the five-
year network improvement plan.
    18. Furthermore, as discussed infra, in connection with its annual 
reporting obligations, an ETC applicant must submit data concerning 
outages in its designated service areas on an annual basis. In 
addition, to minimize the administrative burdens that may be associated 
with such reports, these reporting requirements are modeled after the 
Commission's reporting requirements concerning outages adopted in the 
Outage Reporting Order, 69 FR 68859, November 26, 2004.
3. Consumer Protection
    19. As recommended by the Joint Board, we require a carrier seeking 
ETC designation to demonstrate its commitment to meeting consumer 
protection and service quality standards in its application before the 
Commission. We find that an ETC applicant must make a specific 
commitment to objective measures to protect consumers. Consistent with 
the designation framework established in the Virginia Cellular ETC 
Designation Order and Highland Cellular ETC Designation Order and as 
suggested by commenters, a commitment to comply with the Cellular 
Telecommunications and Internet Association's Consumer Code for 
Wireless Service will satisfy this requirement for a wireless ETC 
applicant seeking designation before the Commission. We will consider 
the sufficiency of other commitments on a case-by-case basis. We 
believe that requiring an ETC applicant to demonstrate that it will 
comply with these consumer protection requirements is consistent with 
section 254 of the Act, and with related Commission orders that require 
policies that universal service serve ``the public interest, 
convenience and necessity'' and ensure that consumers are able to 
receive an evolving level of universal service that ``tak[es] into 
account advances in telecommunications, and information technologies 
and services.'' In addition, an ETC applicant, as described infra, must 
report information on consumer complaints per 1,000 handsets or lines 
on an annual basis.
    20. We also believe that adopting state specific requirements as 
part of our ETC designation process might require the Commission to 
interpret state statutes and rules. An ETC applicant must commit to 
serve the entire service area and must provide five-year network 
improvement plans addressing each wire center for which it expects to 
receive support. We therefore conclude, given the consumer protection 
measures and other requirements adopted above and the provision in 
section 214(e)(4) of the Act that protects customers in the event that 
another ETC relinquishes designation, that it is unnecessary to impose 
additional obligations as a condition of granting ETC status to a 
competitive carrier.
    21. As with the other requirements adopted in this Report and 
Order, state commissions that exercise jurisdiction over ETC 
designations may either follow the Commission's framework or impose 
other requirements consistent with federal law to ensure that supported 
services are offered in a manner that protects consumers. Several 
commenters argue that an ETC should be required to submit to the same 
state laws concerning consumer protection that the incumbent LEC must 
follow. These include, for example, billing, collection, and mediation 
obligations. In determining whether any additional consumer protection 
requirement should apply as a prerequisite for obtaining ETC 
designation from the state--i.e., where such a requirement would not 
otherwise apply to the ETC applicant--we encourage states to consider, 
among other things, the extent to which a particular regulation is 
necessary to protect consumers in the ETC context, as well as the 
extent to which it may disadvantage an ETC specifically because it is 
not the incumbent LEC. We agree with the Joint Board's assertion that 
``states should not require regulatory parity for parity's sake.'' We 
therefore encourage states that impose requirements on an ETC to do so 
only to the extent necessary to further universal service goals.
    22. We also reject commenters' arguments that consumer protection 
requirements imposed on wireless carriers as a condition for ETC 
designation are necessarily inconsistent with section 332 of the Act. 
While section 332(c)(3) of the Act preempts states from regulating the 
rates and entry of CMRS providers, it specifically allows states to 
regulate the other terms and conditions of commercial mobile radio 
services. Therefore, states may extend generally applicable, 
competitively neutral requirements that do not regulate rates or entry 
and that are consistent with sections 214 and 254 of the Act to all 
ETCs in order to preserve and advance universal service.
4. Local Usage
    23. We adopt the Joint Board's recommendation that we establish a 
local usage requirement as a condition of receiving ETC designation. 
Specifically, we require an ETC applicant to demonstrate that it offers 
a local usage plan comparable to the one offered by the incumbent LEC 
in the service areas for which the applicant seeks designation. As in 
past orders, however, we decline to adopt a specific local usage 
threshold.
    24. The Commission requires an ETC to provide local usage in order 
to receive universal service high-cost support. In the First Report and 
Order,

[[Page 29964]]

62 FR 32862, June 17, 1997, the Commission determined that an ETC 
should provide some minimum amount of local usage as part of its 
``basic service'' package of supported services, but declined to 
specify the exact amount of local usage required. We believe the 
Commission should review an ETC applicant's local usage plans on a 
case-by-case basis. For example, an ETC applicant may offer a local 
calling plan that has a different calling area than the local exchange 
area provided by the LECs in the same region, or the applicant may 
propose a local calling plan that offers a specified number of free 
minutes of service within the local service area. We also can envision 
circumstances in which an ETC is offering an unlimited calling plan 
that bundles local minutes with long distance minutes. The applicant 
may also plan to provide unlimited free calls to government, social 
service, health facilities, educational institutions, and emergency 
numbers. Case-by-case consideration of these factors is necessary to 
ensure that each ETC provides a local usage component in its universal 
service offerings that is comparable to the plan offered by the 
incumbent LEC in the area.
    25. We encourage state commissions to consider whether an ETC 
offers a local usage plan comparable to those offered by the incumbent 
in examining whether the ETC applicant provides adequate local usage to 
receive designation as an ETC. In addition, although the Commission has 
not set a minimum local usage requirement, there is nothing in the Act, 
Commission's rules, or orders that would limit state commissions from 
prescribing some amount of local usage as a condition of ETC status.
5. Equal Access
    26. The Joint Board recommended that the Commission adopt 
guidelines that would encourage states to require an ETC be prepared to 
provide equal access if all other ETCs in that service area relinquish 
their designations pursuant to section 214(e)(4) of the Act. Although 
we do not impose a general equal access requirement on ETC applicants 
at this time, ETC applicants should acknowledge that we may require 
them to provide equal access to long distance carriers in their 
designated service area in the event that no other ETC is providing 
equal access within the service area. Specifically, we find that if 
such circumstances arise, the Commission should consider whether to 
impose an equal access or similar requirement under the Act. 
Accordingly, we will decide whether to impose any equal access 
requirements on a case-by-case basis.
    27. Under section 214(e)(4) of the Act, if an ETC relinquishes its 
ETC designation, the Commission must examine whether the customers that 
are being served by the relinquishing carrier will be served by the 
remaining ETC or ETCs. As part of that process, the Commission might 
also examine whether it is necessary to require the remaining ETC to 
provide equal access. Furthermore, under section 251(h)(2) of the Act, 
the Commission may treat another carrier as the incumbent LEC if that 
carrier occupies a position in the market that is comparable to the 
position occupied by the incumbent LEC, if such carrier has 
substantially replaced an incumbent LEC, and if such treatment is 
consistent with the public interest, convenience and necessity. One 
obligation imposed on incumbent LECs is the requirement to offer equal 
access in connection with their wireline services.
6. Adequate Financial Resources
    28. We decline to adopt the Joint Board's recommendation that an 
ETC applicant demonstrate that it has the financial resources and 
ability to provide quality services throughout the designated service 
area. We believe that compliance with the existing requirements for ETC 
designation, along with the criteria adopted above, will require an ETC 
applicant to show that it has significant financial resources. 
Specifically, an applicant must demonstrate the ability to offer all 
the supported services in the designated area by submitting detailed 
commitments to build-out facilities, abide by service quality 
standards, and provide services throughout its designated service area 
upon request. And in its annual certification and reporting 
requirements, an ETC must demonstrate that it has used universal 
service support to provide quality service throughout the designated 
area. In addition, most wireless carriers, the largest group of 
competitive ETCs that the Commission designates, are already operating 
systems within their licensed market areas, thereby demonstrating in 
practice their ability to provide such services. Since 1994, moreover, 
wireless licensees have purchased their licenses at auction, which 
evinces that they have sufficient resources to provide service. After 
obtaining a license, whether by auction or other means, wireless 
carriers must further comply with the Commission's rules by meeting 
build-out or substantial service requirements for the particular 
service. Therefore, we find additional financial requirements are 
unwarranted to demonstrate that an ETC applicant is capable of 
sustaining operations and supported services.
    29. We further disagree with commenters that argue that an ETC 
should be required to demonstrate that it has the financial capability 
to sustain operations and supported services if an incumbent LEC 
relinquishes its designation. As discussed infra, section 214(e)(4) of 
the Act already contemplates safeguards for protecting customers served 
by an ETC that relinquishes its designation.
    30. In sum, we do not believe that additional requirements 
concerning financial qualifications are necessary when determining 
whether to designate an ETC applicant. We believe that existing ETC 
obligations adequately ensure financial stability. In the event that 
state commissions do consider financial qualification factors in their 
ETC designations, we encourage them to do so in a manner that is 
consistent with the principle that universal service support mechanisms 
and rules be competitively neutral.

B. Public Interest Determinations

    31. Under section 214 of the Act, the Commission and state 
commissions must determine that an ETC designation is consistent with 
the public interest, convenience and necessity. The Commission also 
must consider whether an ETC designation serves the public interest 
consistent with section 254 of the Act. Congress did not establish 
specific criteria to be applied under the public interest tests in 
section 214 or section 254. The public interest benefits of a 
particular ETC designation must be analyzed in a manner that is 
consistent with the purposes of the Act itself, including the 
fundamental goals of preserving and advancing universal service; 
ensuring the availability of quality telecommunications services at 
just, reasonable, and affordable rates; and promoting the deployment of 
advanced telecommunications and information services to all regions of 
the nation, including rural and high-cost areas. Beyond the principles 
detailed in the Act, the Commission and state commissions have used 
additional factors to analyze whether the designation of an additional 
ETC is in the public interest.
    32. In instances where the Commission has jurisdiction over an ETC 
applicant, the Commission in this Report and Order adopts the fact-
specific public interest analysis it has developed in prior orders. 
First, the Commission will consider a variety of factors in the overall 
ETC determination, including the benefits of

[[Page 29965]]

increased consumer choice, and the unique advantages and disadvantages 
of the competitor's service offering. Second, in areas where an ETC 
applicant seeks designation below the study area level of a rural 
telephone company, the Commission also will conduct a creamskimming 
analysis that compares the population density of each wire center in 
which the ETC applicant seeks designation against that of the wire 
centers in the study area in which the ETC applicant does not seek 
designation. Based on this analysis, the Commission will deny 
designation if it concludes that the potential for creamskimming is 
contrary to the public interest. The Commission plans to use this 
analysis to review future ETC applications and strongly encourages 
state commissions to consider the same factors in their public interest 
reviews.
    33. We find that before designating an ETC, we must make an 
affirmative determination that such designation is in the public 
interest, regardless of whether the applicant seeks designation in an 
area served by a rural or non-rural carrier. In the Virginia Cellular 
ETC Designation Order, the Commission determined that merely showing 
that a requesting carrier in a non-rural study area complies with the 
eligibility requirements outlined in section 214(e)(1) of the Act would 
not necessarily show that an ETC designation would be consistent with 
the public interest in every instance. We find the public interest 
concerns that exist for carriers seeking ETC designation in areas 
served by rural carriers also exist in study areas served by non-rural 
carriers. Accordingly, we find that many of the same factors should be 
considered in evaluating the public interest for both rural and non-
rural designations, except that creamskimming effects will be analyzed 
only in rural study areas because the same potential for creamskimming 
does not exist in areas served by non-rural incumbent LECs.
    34. We note that section 214 of the statute provides that, for 
areas served by a rural incumbent LEC, more than one ETC may be 
designated if doing so would serve the public interest. In addition, 
``[b]efore designating an additional [ETC] for an area served by a 
rural telephone company, the [state Commission under section 214(e)(2) 
or Commission under section 214(e)(6)] shall find that the designation 
is in the public interest.'' In contrast, section 214 provides that 
additional ETCs shall be designated in an area served by a non-rural 
incumbent LEC. Therefore, although we adopt one set of criteria for 
evaluating the public interest for ETC designations in rural and non-
rural areas, in performing the public interest analysis, the Commission 
and state commissions may conduct the analysis differently, or reach a 
different outcome, depending upon the area served. For example, the 
Commission and state commissions may give more weight to certain 
factors in the rural context than in the non-rural context and the same 
or similar factors could result in divergent public interest 
determinations, depending on the specific characteristics of the 
proposed service area, or whether the area is served by a rural or non-
rural carrier.
1. Cost-Benefit Analysis
    35. We conclude that we will continue to consider and balance the 
factors listed below as part of our overall analysis regarding whether 
the designation of an ETC will serve the public interest. In 
determining whether an ETC has satisfied these criteria, the Commission 
places the burden of proof upon the ETC applicant.
    (1) Consumer Choice: The Commission takes into account the benefits 
of increased consumer choice when conducting its public interest 
analysis. In particular, granting an ETC designation may serve the 
public interest by providing a choice of service offerings in rural and 
high-cost areas. The Commission has determined that, in light of the 
numerous factors it considers in its public interest analysis, the 
value of increased competition, by itself, is unlikely to satisfy the 
public interest test.
    (2) Advantages and Disadvantages of Particular Service Offering: 
The Commission also considers the particular advantages and 
disadvantages of an ETC's service offering. For instance, the 
Commission has examined the benefits of mobility that wireless carriers 
provide in geographically isolated areas, the possibility that an ETC 
designation will allow customers to be subject to fewer toll charges, 
and the potential for customers to obtain services comparable to those 
provided in urban areas, such as voicemail, numeric paging, call 
forwarding, three-way calling, call waiting, and other premium 
services. The Commission also examines disadvantages such as dropped 
call rates and poor coverage.
    36. In addition, we believe that the requirements we have 
established in this Report and Order for becoming an ETC will help 
ensure that each ETC designation will serve the public interest. For 
example, the requirements to demonstrate compliance with a service 
quality improvement plan and to respond to any reasonable request for 
service will ensure designation of ETC applicants that are committed to 
using high-cost support to alleviate poor service quality in the ETC's 
service area.
    37. We disagree with commenters who contend that we should adopt a 
more precise cost-benefit test for the purpose of making public 
interest determinations. While we believe that a consideration of both 
benefits and costs is inherent in conducting a public interest 
analysis, we agree with the Joint Board's recommendation and decline to 
provide more specific guidance at this time on how this balancing 
should be performed. The specific determination, and the relative 
weight of the relevant considerations, must be evaluated on a case-by-
case basis.
    38. We also reject the assertions of several commenters that a more 
stringent analysis is necessary to determine whether an ETC designation 
is in the public interest. These commenters argue that the current ETC 
application process is not rigorous enough to meet section 214(e)(2) of 
the Act and that ETC applicants should be required to demonstrate the 
public benefit they will confer as a result of the ETC designation. We 
believe that the factors set out in the Virginia Cellular ETC 
Designation Order, as expanded in this Report and Order, allow for an 
appropriate public interest determination.
2. Potential for Creamskimming Effects
    39. As part of the public interest analysis for ETC applicants that 
seek designation below the service area level of a rural incumbent LEC, 
we will perform an examination to detect the potential for 
creamskimming effects that is similar to the analysis employed in the 
Virginia Cellular ETC Designation Order and the Highland Cellular ETC 
Designation Order. As discussed below, the state commissions that apply 
a creamskimming analysis similar to the Commission's will facilitate 
the Commission's review of petitions seeking redefinition of incumbent 
LEC service areas filed pursuant to section 214(e)(5) of the Act.
    40. When a competitive carrier requests ETC designation for an 
entire rural service area, it does not create creamskimming concerns 
because the affected ETC is required to serve all wire centers in the 
designated service area. The potential for creamskimming, however, 
arises when an ETC seeks designation in a disproportionate share of the 
higher-density wire centers in an incumbent LEC's service area. By 
serving a disproportionate share of the high-density portion of a 
service area, an ETC may receive more support than

[[Page 29966]]

is reflective of the rural incumbent LEC's costs of serving that wire 
center because support for each line is based on the rural telephone 
company's average costs for serving the entire service area unless the 
incumbent LEC has disaggregated its support. Because line density is a 
significant cost driver, it is reasonable to assume that the highest-
density wire centers are the least costly to serve, on a per-subscriber 
basis. The effects of creamskimming also would unfairly affect the 
incumbent LEC's ability to provide service throughout the area since it 
would be obligated to serve the remaining high-cost wire centers in the 
rural service area while ETCs could target the rural incumbent LEC's 
customers in the lowest cost areas and also receive support for serving 
the customers in these areas. In order to avoid disproportionately 
burdening the universal service fund and ensure that incumbent LECs are 
not harmed by the effects of creamskimming, the Commission strongly 
encourages states to examine the potential for creamskimming in wire 
centers served by rural incumbent LECs. This would include examining 
the degree of population density disparities among wire centers within 
rural service areas, the extent to which an ETC applicant would be 
serving only the most densely concentrated areas within a rural service 
area, and whether the incumbent LEC has disaggregated its support at a 
smaller level than the service area (e.g., at the wire center level).
    41. Because a low population density typically indicates a high-
cost area, analyzing the disparities in densities can reveal when an 
ETC would serve only the lower cost wire centers to the exclusion of 
other less profitable areas. For instance, the Commission found in the 
Virginia Cellular ETC Designation Order that designating a wireless 
carrier as an ETC in a particular service area was not in the public 
interest due to the disparity in density between the high-density wire 
center in the area that the applicant was proposing to serve and the 
wire centers within the service area that the wireless carrier was not 
proposing to serve. Even if a carrier seeks to serve both high and low 
density wire centers, the potential for creamskimming still exists if 
the vast majority of customers that the carrier is proposing to serve 
are located in the low-cost, high-density wire centers.
    42. The Commission has also determined that creamskimming concerns 
may be lessened when a rural incumbent LEC has disaggregated support to 
the higher-cost portions of the incumbent's service area. Specifically, 
under the Commission's rules, rural incumbent LECs are permitted to 
depart from service area averaging and instead disaggregate and target 
per-line high-cost support into geographic areas below the service area 
level. By doing so, per-line support varies to reflect the cost of 
service in a particular geographic area, such as a wire center, within 
the service area. By reducing per-line support in high density areas, 
disaggregation may create less incentive in certain circumstances for 
an ETC to enter only those areas. Nevertheless, although disaggregation 
may alleviate some concerns regarding creamskimming by ETCs, because an 
incumbent's service area may include wire centers with widely disparate 
population densities, and therefore highly disparate cost 
characteristics, disaggregation may be a less viable alternative for 
reducing creamskimming opportunities. This problem may be compounded 
where the cost characteristics of the rural incumbent LEC and 
competitive ETC applicant differ substantially. Thus, creamskimming may 
remain a concern where a competitive ETC seeks designation in a service 
area where the incumbent rural LEC has disaggregated high-cost support 
to the higher-cost portions of its service area.
    43. We find that a creamskimming analysis is unnecessary for ETC 
applicants seeking designation below the service area level of non-
rural incumbent LECs. Unlike the rural mechanism, which uses embedded 
costs to distribute support on a service area-wide basis, the non-rural 
mechanism uses a forward-looking cost model to distribute support to 
individual wire centers where costs exceed the national average by a 
certain amount. Therefore, under the non-rural methodology, high-
density, low-cost wire centers receive little or no high-cost support, 
thereby protecting against the potential for creamskimming.
    44. We urge state commissions to apply the Commission's 
creamskimming analysis when determining whether to designate an ETC in 
a rural service area. We reject assertions that a bright-line test is 
needed to determine whether creamskimming concerns are present. As 
demonstrated in the Virginia Cellular ETC Designation Order and 
Highland Cellular ETC Designation Order, we believe that a rigid 
standard would fail to take into account variations in population 
distributions, geographic characteristics, and other individual factors 
that could affect the outcome of a rural service area creamskimming 
effects analysis. We believe that the factors indicated above provide 
states adequate guidance in determining whether an ETC application 
presents creamskimming concerns.
3. Impact on the Fund
    45. We decline to adopt a specific test to use when considering if 
the designation of an ETC will affect the size and sustainability of 
the high-cost fund. As the Commission has found in the past, analyzing 
the impact of one ETC on the overall fund may be inconclusive. Indeed, 
given the size of the total high-cost fund--approximately $3.8 billion 
a year--it is unlikely that any individual ETC designation would have a 
substantial impact on the overall size of the fund. In addition, the 
Commission is considering in other proceedings, such as the Rural 
Referral Proceeding, 69 FR 48232, August 9, 2004, how support is 
calculated for both rural incumbent LECs and ETCs. We also find, as 
discussed below, that certain proposals examining the effect on the 
fund as part of an ETC public interest analysis may be inconsistent 
with sections 214 and 254 of the Act and related Commission orders.
    46. We find that per-line support received by the incumbent LEC 
should be one of many considerations in our ETC designation analysis. 
We believe that states making public interest determinations may 
properly consider the level of federal high-cost per-line support to be 
received by ETCs. High-cost support is an explicit subsidy that flows 
to areas with demonstrated levels of costs above various national 
averages. Thus, one relevant factor in considering whether or not it is 
in the public interest to have additional ETCs designated in any area 
may be the level of per-line support provided to the area. If the per-
line support level is high enough, the state may be justified in 
limiting the number of ETCs in that study area, because funding 
multiple ETCs in such areas could impose strains on the universal 
service fund.
    47. We decline, however, based on the record before us to adopt a 
specific national per-line support benchmark for designating ETCs. As 
the Joint Board noted, ``[m]any factors mentioned by commenters as 
relevant to the public interest determination--such as topography, 
population density, line density, distance between wire centers, loop 
lengths and levels of investment--may all affect the level of high-cost 
support received in an individual service area.'' Many commenters have 
argued that a per-line benchmark that denies entry to competitive ETCs 
in high-cost areas may prevent consumers in high-cost areas from 
receiving the benefit of competitive service offerings.

[[Page 29967]]

Although giving support to ETCs in particularly high-cost areas may 
increase the size of the fund, we must balance that concern against 
other objectives, including giving consumers throughout the country 
access to services comparable to services in urban areas and ensuring 
competitive neutrality. In addition, as a practical matter, we do not 
believe we currently have an adequate record to determine what specific 
benchmark or benchmark should be set.
    48. For similar reasons, we also decline to adopt a proposal that 
would allow only one wireline ETC and one wireless ETC in each service 
area. Such a proposal that limits the number of ETCs in each service 
area creates a practical problem of determining which wireless and 
wireline provider would be selected. We also reject the application of 
a rebuttable presumption that it is not in the public interest to have 
more than one ETC in each rural high-cost area. We believe that a more 
comprehensive public interest analysis, which considers the specific 
facts of the application, is a better approach and is consistent with 
congressional intent. We also reject arguments that we should treat 
smaller wireless rural carriers differently than larger carriers. We do 
not believe that subjecting smaller wireless carriers to an expedited 
ETC application process or a lower level of scrutiny would serve the 
public interest, and we further believe that it may be contrary to the 
principle of competitive neutrality.

C. Permissive Guidelines for State ETC Designation Proceedings

    49. We encourage state commissions to require all ETC applicants 
over which they have jurisdiction to meet the same conditions and to 
conduct the same public interest analysis outlined in this Report and 
Order. We also encourage states to impose the annual certification and 
reporting requirements uniformly on all ETCs they have previously 
designated. In doing so, we encourage states to conform these 
guidelines with any similar conditions imposed on previously designated 
ETCs in order to avoid duplicative or inapplicable eligibility criteria 
and reporting requirements. We agree with the Joint Board's 
recommendation that a rigorous ETC designation process ensures that 
only fully qualified applicants receive designation as ETCs and that 
all ETC designees are prepared to serve all customers within the 
designated service area. Additionally, a set of guidelines allows for a 
more predictable application process among the states. We believe that 
these guidelines will assist states in determining whether the public 
interest would be served by a carrier's designation as an ETC. We also 
believe that these guidelines will improve the long-term sustainability 
of the fund, because, if the guidelines are followed, only fully 
qualified carriers that are capable of and committed to providing 
universal service will be able to receive support.
    50. As suggested by commenters and the Joint Board, we encourage 
state commissions to consider the requirements adopted in this Report 
and Order when examining whether the state should designate a carrier 
as an ETC. An ETC designation by a state commission can ultimately 
impact the amount of high-cost and low income monies distributed to an 
area served by a non-rural carrier, an area served by one or more rural 
carriers, or both. A single set of guidelines will encourage states to 
develop a single, consistent body of eligibility standards to be 
applied in all cases, regardless of the characteristics of the 
incumbent carrier. As noted above, however, the public interest 
analysis for ETC applications for areas served by rural carriers should 
be more rigorous than the analysis of applications for areas served by 
non-rural carriers.
    51. We also find that states that exercise jurisdiction over ETC 
proceedings should apply these requirements in a manner that will best 
promote the universal service goals found in Sec.  254(b). While 
Congress delegated to individual states the right to make ETC 
decisions, collectively these decisions have national implications that 
affect the dynamics of competition, the national strategies of new 
entrants, and the overall size of the federal universal service fund. 
In addition, these guidelines are designed to ensure designation of 
carriers that are financially viable, likely to remain in the market, 
willing and able to provide the supported services throughout the 
designated service area, and able to provide consumers an evolving 
level of universal service. Moreover, state commissions that apply 
these guidelines will facilitate the Commission's review of petitions 
seeking redefinition of incumbent LEC service areas filed pursuant to 
section 214(e)(5) of the Act.
    52. We decline to mandate that state commissions adopt our 
requirements for ETC designations. Section 214(e)(2) of the Act gives 
states the primary responsibility to designate ETCs and prescribes that 
all state designation decisions must be consistent with the public 
interest, convenience, and necessity. We believe that Sec.  214(e)(2) 
demonstrates Congress's intent that state commissions evaluate local 
factual situations in ETC cases and exercise discretion in reaching 
their conclusions regarding the public interest, convenience and 
necessity, as long as such determinations are consistent with Federal 
and other State law. States that exercise jurisdiction over ETCs should 
apply these requirements in a manner that is consistent with section 
214(e)(2) of the Act. Furthermore, state commissions, as the entities 
most familiar with the service area for which ETC designation is 
sought, are particularly well-equipped to determine their own ETC 
eligibility requirements. Because the guidelines we establish in this 
Report and Order are not binding upon the states, we reject arguments 
suggesting that such guidelines would restrict the lawful rights of 
states to make ETC designations. We also find that federal guidelines 
are consistent with the holding of United States Court of Appeals for 
the Fifth Circuit that nothing in section 214(e) of the Act prohibits 
the States from imposing their own eligibility requirements in addition 
to those described in Sec.  214(e)(1). Consistent with our adoption of 
permissive federal guidelines for ETC designation, state commissions 
will continue to maintain the flexibility to impose additional 
eligibility requirements in state ETC proceedings, if they so choose.
    53. We reject the argument that mandatory requirements are 
necessary to prevent waste, fraud, and abuse in the distribution of 
high-cost support. We note that safeguards already exist to protect 
against the misuse of high-cost support. For example, if a state 
commission believes that high-cost support is being used by an ETC in a 
manner that is inconsistent with section 254 of the Act, the state 
commission may decline to file an annual certification or may withdraw 
an ETC's designation, which would ensure that funds are no longer 
distributed to the ETC.
    54. We also note that the Commission may institute an inquiry on 
its own motion to ensure that high-cost support is used ``only for the 
provision, maintenance, and upgrading of facilities and services'' for 
the areas in which ETCs are designated. In addition, if an ETC 
designated by the Commission fails to fulfill the requirements of 
sections 214 and 254 of the Act, the Commission has the authority to 
revoke a carrier's ETC designation. The Commission also may assess 
forfeitures for violations of Commission rules and orders. 
Consequently, we find that adequate measures exist to prevent waste, 
fraud and abuse of high-cost support by ETCs.

[[Page 29968]]

Nevertheless, the Commission will continue to monitor use of universal 
service funds by ETCs and develop rules as necessary to continue to 
ensure that funds are used in a manner consistent with section 254 of 
the Act.
    55. Commenters further argue that mandatory requirements are 
necessary to prevent growth of the universal service fund. As discussed 
above, the Joint Board is currently contemplating in the Rural Referral 
Proceeding how universal service support can be effectively targeted to 
rural incumbent LECs and ETCs serving high-cost areas, while protecting 
against excessive fund growth. We believe that proceeding is a more 
appropriate forum for determining ways to limit fund growth.

D. Administrative Requirements for ETC Designation Proceedings

    56. Consistent with USAC's request, we note that all future ETC 
designation orders adopted by the Commission will include: (1) The name 
of each incumbent LEC study area in which an ETC has been designated; 
(2) a clear statement of whether the ETC has been designated in all or 
part of each incumbent LEC's study area; and (3) a list of all wire 
centers in which the ETC has been designated, using either the wire 
center's common name or the Common Language Location Identification 
(CLLI) code. In addition, in instances where follow-up filings or other 
conditions have been imposed before the ETC designation is final, the 
Commission will notify USAC when the conditions have been fulfilled. We 
also encourage state commissions to follow these procedures in ETC 
orders they adopt. USAC contends, and we agree, that inclusion of this 
information in ETC designation orders will greatly facilitate USAC's 
data validation and other efforts to ensure that all carriers receive 
high-cost universal service support only in the areas in which they 
have been deemed eligible.
    57. In addition, for carriers that file ETC petitions with the 
Commission seeking designation on tribal lands, we establish procedures 
to ensure that the appropriate tribal governments and tribal regulatory 
authorities are notified and provided with an opportunity to engage in 
consultation with the Commission and to comment in the ETC designation 
proceeding. We find these procedures are consistent with the 
Commission's Tribal Policy Statement, released in June 2000, which 
commits the Commission ``to consult with tribal governments prior to 
implementing any regulatory action or policy that will significantly or 
uniquely affect tribal governments, their land and resources.'' Through 
consultation, the Commission and the tribal government have an 
opportunity to discuss how the ETC petition affects public interests of 
the particular tribal community, for example, the effects of the ETC 
designation on tribal self-determination efforts and potential economic 
opportunities, and on the tribal government's own communications 
priorities and goals, which the Commission recognizes as the sovereign 
right of tribal governments.
    58. Specifically, the Commission requires that any applicant 
seeking ETC designation on tribal lands before the Commission provide 
copies of its petition to the affected tribal governments and tribal 
regulatory authorities at the time of filing. In addition, the 
Commission will send the relevant public notice seeking comment on 
those petitions to the affected tribal governments and tribal 
regulatory authorities by overnight express mail. As with the other 
guidelines adopted herein, we encourage state commissions to follow 
these guidelines for ETC designation proceedings affecting tribal lands 
so that the appropriate tribal governments and tribal regulatory 
authorities are notified of any tribal ETC petitions, related comment 
cycles or other opportunities to consult with the state commission and 
participate in the specific ETC designation proceeding.

IV. Annual Certification and Reporting Requirements

    59. Our rules currently require all ETCs to make an annual 
certification, on or before October 1, that universal service support 
will be used for its intended purposes. As recommended by the Joint 
Board, we maintain and augment this requirement. Specifically, in order 
to continue to receive universal service support each year, we require 
each ETC over which we have jurisdiction, including an ETC designated 
by the Commission prior to this Report and Order, to submit annually 
certain information regarding its network and its use of universal 
service funds. These reporting requirements will ensure that ETCs 
continue to comply with the conditions of the ETC designation and that 
universal service funds are used for their intended purposes. This 
information will initially be due on October 1, 2006, and thereafter 
annually on October 1 of each year, at the same time as the carrier's 
certification that the universal service funds are being used 
consistent with the Act. In addition, following the effective date of 
this Report and Order, we anticipate initiating a proceeding to develop 
procedures for review of these annual reports. Moreover, we anticipate 
initiating a separate proceeding on or before February 25, 2008, to 
examine whether the requirements adopted herein are promoting the use 
of high-cost support by ETCs in a manner that is consistent with 
section 254 of the Act. We further clarify that a carrier that has been 
previously designated as an ETC under Sec.  214(e)(6) does not have to 
reapply for designation, but must comply with the annual certification 
and reporting requirements on a going-forward basis.
    60. Every