High-Cost Universal Service Support; Federal-State Joint Board on Universal Service, 37882-37891 [E8-14897]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 73, Number 128 (Wednesday, July 2, 2008)]
[Rules and Regulations]
[Pages 37882-37891]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-14897]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 36 and 54

[WC Docket No. 05-337; CC Docket No. 96-45; FCC 08-122]


High-Cost Universal Service Support; Federal-State Joint Board on 
Universal Service

AGENCY: Federal Communications Commission.

ACTION: Order.

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SUMMARY: In this Order, the Commission takes action to rein in the 
explosive growth in high-cost universal service support disbursements. 
As recommended by the Federal-State Joint Board on Universal Service, 
the Commission adopts an interim, emergency cap on the amount of high-
cost support that competitive eligible telecommunications carriers 
(ETCs) may receive. Specifically, as of the effective date of this 
Order, total annual competitive ETC support for each state will be 
capped at the level of support that competitive ETCs in that state were 
eligible to receive during March 2008 on an annualized basis. The 
Commission also adopts two limited exceptions from the specific 
application of the interim cap. The interim cap will remain in place 
only until the Commission adopts comprehensive high-cost universal 
service reform. In addition, the Commission resolves most of the 
petitions for ETC designation currently pending before the Commission.

DATES: This Order will be effective August 1, 2008.

FOR FURTHER INFORMATION CONTACT: Ted Burmeister, Telecommunications 
Access Policy Division, Wireline Competition Bureau, 202-418-7389 or 
TTY: 202-418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Order 
in WC Docket No. 05-337 and CC Docket No. 96-45, adopted on April 29, 
2008, and released on May 1, 2008. 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 
e-mail at https://www.bcpiweb.com. It is also available on the 
Commission's Web site at https://www.fcc.gov.
    Final Paperwork Reduction Act of 1995 Analysis: This document 
contains new information collection requirements subject to the 
Paperwork Reduction Act of 1995 (PRA). Paperwork Reduction Act of 1995, 
Public Law 104-13, 109 Stat. 163 (1995). It will be submitted to the 
Office of Management and Budget (OMB) for review under section 3507(d) 
of the PRA. OMB, the general public, and other federal agencies are 
invited to comment on the new information collection requirements 
contained in this proceeding. In addition, we note that, pursuant to 
the Small Business Paperwork Relief Act of 2002, we previously sought 
specific comment on how the Commission might ``further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees.'' Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, 116 Stat. 729 (2002); 44 U.S.C. 3506(c)(4).
    In this present document, we have assessed the effects of 
demonstrating compliance with the exception to the interim cap, and 
find that there may be an increased administrative burden on businesses 
with fewer than 25 employees. We have taken steps to minimize the 
information collection burden for small business concerns, including 
those with fewer than 25 employees. First, we note that compliance with 
the exception is voluntary--small business concerns are not required to 
comply with the information collection. In addition, compliance with 
the exception will be elected by carriers on a study area by study area 
basis. Carriers need only provide additional information on the study 
areas for which they elect to rely on the exception to the interim cap.

Synopsis of the Order

Introduction

    1. In this Order, we take action to rein in the explosive growth in 
high-cost universal service support disbursements. As recommended by 
the Federal-State Joint Board on Universal Service (Joint Board), we 
adopt an interim, emergency cap on the amount of high-cost support that 
competitive eligible telecommunications carriers (ETCs) may receive. 
See High-Cost Universal Service Support; Federal-State Joint Board on 
Universal Service, WC Docket No. 05-337, CC Docket No. 96-45, 
Recommended Decision, 22 FCC Rcd 8998 (Fed.-State Jt. Bd. 2007) 
(Recommended Decision). Specifically, as of the effective date of this 
Order, total annual competitive ETC support for each state will be 
capped at the level of support that competitive ETCs in that state were 
eligible to receive during March 2008 on an annualized basis. We also 
adopt two limited exceptions from the specific application of the 
interim cap. First, a competitive ETC will not be subject to the 
interim cap to the extent it files cost data demonstrating that its 
costs meet the support threshold in the same manner as the incumbent 
local exchange carrier (LEC). Second, we adopt a limited exception for 
competitive ETCs serving tribal lands or Alaska Native regions. The 
interim cap will remain in place only until the Commission adopts 
comprehensive high-cost universal service reform. The Commission plans 
to move forward on adopting comprehensive reform measures in an 
expeditious manner. The Commission commits to completing a final order 
on comprehensive reform as quickly as feasible after the comment cycle 
is completed on the pending Commission Notices regarding comprehensive 
reform. Finally, we resolve most of the petitions for ETC designation 
currently pending before the Commission.

Background

    2. For the past several years, the Joint Board has been exploring 
recommending modifications to the

[[Page 37883]]

Commission's high-cost universal service support rules. In 2002, the 
Commission asked the Joint Board to review certain of the Commission's 
rules related to the high-cost universal service support mechanisms. 
See Federal-State Joint Board on Universal Service, CC Docket No. 96-
45, Order, 67 FR 70703 (2002). Among other things, the Commission asked 
the Joint Board to review the Commission's rules relating to high-cost 
universal service support in study areas in which a competitive ETC 
provides service. In response, the Joint Board made a number of 
recommendations concerning the designation of ETCs in high-cost areas, 
but declined to recommend that the Commission modify the basis of 
support (i.e., the methodology used to calculate support) in study 
areas with multiple ETCs. Instead, the Joint Board recommended that it 
and the Commission continue to consider possible modifications to the 
basis of support for competitive ETCs as part of an overall review of 
the high-cost support mechanisms for rural and non-rural carriers.
    3. In 2004, the Commission asked the Joint Board to review the 
Commission's rules relating to the high-cost universal service support 
mechanisms for rural carriers and to determine the appropriate rural 
mechanism to succeed the plan adopted in the Rural Task Force Order. 
See Federal-State Joint Board on Universal Service, CC Docket No. 96-
45, Order, 69 FR 48232, para. 1 (2004) (Rural Referral Order); Federal-
State Joint Board on Universal Service; Multi-Association Group (MAG) 
Plan for Regulation of Interstate Services of Non-Price Cap Incumbent 
Local Exchange Carriers and Interexchange Carriers, Fourteenth Report 
and Order, Twenty-Second Order on Reconsideration, and Further Notice 
of Proposed Rulemaking in CC Docket No. 96-45, and Report and Order in 
CC Docket No. 00-256, 66 FR 30080 (2001) (Rural Task Force Order); see 
also Federal-State Joint Board on Universal Service; High-Cost 
Universal Service Support, CC Docket No. 96-45, WC Docket No. 05-337, 
Order, 71 FR 30298 (2006) (extending the Rural Task Force Order plan). 
In August 2004, the Joint Board sought comment on issues the Commission 
referred to it related to the high-cost universal service support 
mechanisms for rural carriers. See Federal-State Joint Board on 
Universal Service Seeks Comment on Certain of the Commission's Rules 
Relating to High-Cost Universal Service Support, CC Docket No. 96-45, 
Public Notice, 69 FR 53917 (Fed.-State Jt. Bd. 2004). The Joint Board 
also specifically sought comment on the methodology for calculating 
support for ETCs in competitive study areas. Since that time, the Joint 
Board has sought comment on a variety of specific proposals for 
addressing the issues of universal service support for rural carriers 
and the basis of support for competitive ETCs, including proposals 
developed by members and staff of the Joint Board, as well as the use 
of reverse auctions (competitive bidding) to determine high-cost 
universal service funding to ETCs. See Federal State Joint Board on 
Universal Service Seeks Comment on Proposals to Modify the Commission's 
Rules Relating to High-Cost Universal Service Support, CC Docket No. 
96-45, Public Notice, 20 FCC Rcd 14267 (Fed.-State Jt. Bd. 2005); 
Federal-State Joint Board on Universal Service Seeks Comment on the 
Merits of Using Auctions to Determine High-Cost Universal Service 
Support, WC Docket No. 05-337, CC Docket No. 96-45, Public Notice, 21 
FCC Rcd 9292 (Fed.-State Jt. Bd. 2006).
    4. On May 1, 2007, the Joint Board recommended that the Commission 
adopt an interim cap on high-cost universal service support for 
competitive ETCs while the Joint Board considered proposals for 
comprehensive reform. See Recommended Decision, 22 FCC Rcd at 8999-
9001, paras. 4-7. Specifically, the Joint Board recommended that the 
Commission cap competitive ETC support at the amount of support 
received by competitive ETCs in 2006. The Joint Board recommended that 
the cap on competitive ETC support be applied at the state level. 
Finally, the Joint Board recommended that the interim cap apply until 
one year from the date that the Joint Board makes its recommendation 
regarding high-cost universal service reform. On May 14, 2007, the 
Commission released a Notice of Proposed Rulemaking, seeking comment on 
the Joint Board's recommendation. High-Cost Universal Service Support; 
Federal-State Joint Board on Universal Service, WC Docket No. 05-337, 
CC Docket No. 96-45, Notice of Proposed Rulemaking, 72 FR 28936 (2007) 
(Notice). On November 19, 2007, the Joint Board submitted to the 
Commission recommendations for comprehensive reform of high-cost 
universal service support. High-Cost Universal Service Support; 
Federal-State Joint Board on Universal Service, WC Docket No. 05-337, 
CC Docket No. 96-45, Recommended Decision, 22 FCC Rcd 20477 (2007) 
(Comprehensive Reform Recommended Decision). On January 29, 2008, the 
Commission released three notices of proposed rulemaking addressing 
proposals for comprehensive reform of the high-cost universal service 
support program. High-Cost Universal Service Support; Federal-State 
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No. 
96-45, Notice of Proposed Rulemaking, 73 FR 11580 (2008) (Identical 
Support Rule NPRM); High-Cost Universal Service Support; Federal-State 
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No. 
96-45, Notice of Proposed Rulemaking, 73 FR 11591 (2008) (Reverse 
Auctions NPRM); High-Cost Universal Service Support; Federal-State 
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No. 
96-45, Notice of Proposed Rulemaking, 73 FR 11587 (2008) (Joint Board 
Comprehensive Reform NPRM) (collectively Reform Notices). Comments on 
the Reform Notices were due by April 17, 2008 and reply comments were 
due by May 19, 2008. High-Cost Universal Service Support; Federal-State 
Joint Board on Universal Service, CC Docket No. 96-45; WC Docket No. 
05-337, Order, DA 08-674 (rel. Mar. 24, 2008) (extending comment and 
reply comment dates); High-Cost Universal Service Support; Federal-
State Joint Board on Universal Service, CC Docket No. 96-45; WC Docket 
No. 05-337, Order, DA 08-1168 (rel. May 15, 2008) (extending reply 
comment date).

Discussion

    5. We adopt, with limited modifications, the Joint Board's 
recommendation for an emergency, interim cap on high-cost support for 
competitive ETCs. This action is necessary to halt the rapid growth of 
high-cost support that threatens the sustainability of the universal 
service fund. As described below, annual support for competitive ETCs 
in each state will be capped at the level of support that competitive 
ETCs in that state were eligible to receive during March 2008, on an 
annualized basis. As further discussed below, we also create a limited 
exception to the cap to allow competitive ETCs that serve tribal lands 
or Alaska Native regions to continue to receive support at uncapped 
levels.

Need for a Cap on Competitive ETC Support

A Cap on Competitive ETC Support Is Required To Preserve the 
Sustainability and Sufficiency of Universal Service
    6. We agree with the Joint Board's assessment that the rapid growth 
in high-cost support places the federal universal service fund in dire 
jeopardy. In 2007, the universal service fund

[[Page 37884]]

provided approximately $4.3 billion per year in high-cost support. In 
contrast, in 2001, high-cost universal service support totaled 
approximately $2. 6 billion. In recent years, this growth has been due 
to increased support provided to competitive ETCs, which receive high-
cost support based on the per-line support that the incumbent LECs 
receive, rather than on the competitive ETCs' own costs. While support 
to incumbent LECs has been flat since 2003, competitive ETC support, in 
the seven years from 2001 through 2007, has grown from under $17 
million to $1. 18 billion--an average annual growth rate of over 100 
percent. We find that the continued growth of the fund at this rate is 
not sustainable and would require excessive (and ever growing) 
contributions from consumers to pay for this fund growth.
    7. We conclude that immediate action must be taken to stem the 
dramatic growth in high-cost support. Therefore, as recommended by the 
Joint Board, we immediately impose an interim cap on high-cost support 
provided to competitive ETCs until fundamental comprehensive reforms 
are adopted to address issues related to the distribution of support 
and to ensure that the universal service fund will be sustainable for 
future years. The interim cap that we adopt herein limits the annual 
amount of high-cost support that competitive ETCs can receive in the 
interim period for each state to the amount competitive ETCs were 
eligible to receive in that state during March 2008, on an annualized 
basis.
    8. We find that adopting an interim cap is consistent with the 
requirement of section 254 of the Communications Act of 1934, as 
amended (the Act), that support be ``sufficient'' to meet the Act's 
universal service purposes. Telecommunications Act of 1996, Public Law 
104-104, 110 Stat. 56 (1996) (the Act). The Commission previously has 
concluded that the statutory principle of ``sufficiency'' proscribes 
support in excess of that necessary to achieve the Act's universal 
service goals. MAG Plan Order, 66 FR 59719, paras. 131-32; Rural Task 
Force Order, 66 FR 30080, para. 27; Federal-State Joint Board on 
Universal Service, CC Docket No. 96-45, Order on Remand, Further Notice 
of Proposed Rulemaking, and Memorandum Opinion and Order, 68 FR 69627, 
paras. 36-37 (2003), remanded, Qwest Corp. v. FCC, 398 F.3d 1222 (10th 
Cir. 2005); 47 U.S.C. 254(b). Notably, the Commission has previously 
adopted cost controls, including adopting an indexed cap on the high-
cost loop support mechanism, which the U.S. Court of Appeals for the 
Fifth Circuit held to be consistent with the Act's universal service 
mandate. Alenco Communications, Inc. v. FCC, 201 F.3d 608, 620-21 (5th 
Cir. 2000) (``[t]he agency's broad discretion to provide sufficient 
universal service funding includes the decision to impose cost controls 
to avoid excessive expenditures that will detract from universal 
service'').
    9. Similarly, our action today applies interim cost controls to the 
aspect that most directly threatens the specificity, predictability, 
and sustainability of the fund: the rapid growth of competitive ETC 
support. See 47 U.S.C. 254(b)(5). A primary consequence of the existing 
competitive ETC support rules has been to promote the sale of multiple 
supported wireless handsets in given households. See Petition of Qwest 
Communications International Inc. for Forbearance from Enforcement of 
the Commission's Dominant Carrier Rules As They Apply After Section 272 
Sunsets, WC Docket No. 05-333, Memorandum Opinion and Order, 22 FCC Rcd 
5207, 5218, para. 17 (2007) (stating that a majority of presubscribed 
interexchange customers also subscribe to mobile wireless service); 
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation 
Act of 1993, Annual Report and Analysis of Competitive Market 
Conditions with Respect to Commercial Mobile Services, WT Docket No. 
07-71, Twelfth Report, 23 FCC Rcd 2241, at para. 246 (2008) (citing 
survey reporting that only approximately 11. 8 percent of U.S. 
households relied exclusively on wireless phones in 2006) (2007 
Commercial Mobile Services Report). We do not today make a final 
determination regarding the level of support to competitive ETCs that 
is sufficient, but not excessive, for achieving the Act's universal 
service goals because we expect to take further action to enact 
fundamental reform. See Alenco, 201 F.3d at 619 (``excessive funding 
may itself violate the sufficiency requirements of the Act''). Instead, 
today we take the reasonable, interim step of capping annual 
competitive ETC support for each state at the amount competitive ETCs 
in that state were eligible to receive during March 2008 on an 
annualized basis. Doing so will provide a necessary constraint on the 
growth of support until comprehensive reform is adopted.
    10. We do not find it necessary to adopt additional caps on support 
provided to incumbent LECs at this time because, as the Joint Board 
noted in its Recommended Decision, high-cost support to incumbent LECs 
has been flat and is therefore exerting less pressure on the universal 
service fund. Recommended Decision, 22 FCC Rcd at 9001, para. 5. 
Moreover, incumbent LEC high-cost loop support is already capped, and 
incumbent LEC interstate access support is subject to a targeted limit. 
See 47 CFR 36.603, 54.801(a). Incumbent LEC disbursements from other 
support mechanisms, like local switching support and interstate common 
line support, have been stable in recent years. Further, although high-
cost model support has no actual cap, it does have built-in restraints 
on growth, which derive from the fact that support is based on stable 
statewide average estimated costs. Accordingly, we limit the interim 
cap we adopt today to high-cost support provided to competitive ETCs.
    11. Some parties argue that inefficiencies in high-cost support for 
incumbent LECs are the root cause of the high-cost support growth, and 
that the Commission must address these inefficiencies to stabilize the 
fund. Although addressing inefficiencies in incumbent LEC support may 
be necessary for comprehensive reform, we disagree that such review of 
incumbent LEC support is necessary immediately to rein in the growth of 
high-cost support for an interim period. First, as we have noted, total 
incumbent LEC support has not grown in recent years and does not have 
the same potential for rapid explosive growth competitive ETC support 
does. Second, although increases in incumbent LEC high-cost support may 
contribute indirectly to growth in high-cost support for competitive 
ETCs, the interim cap on competitive ETC support we adopt today will 
eliminate that growth potential. To the extent that there may be 
inefficiencies in incumbent LEC high-cost support, we anticipate 
addressing those in the context of comprehensive universal service 
reform.
An Interim Cap on Competitive ETC Support Is Consistent With the Act
    12. We disagree with arguments that capping support for competitive 
ETCs violates the Act. As a general matter, the Commission's discretion 
to establish caps on high-cost support has been upheld. See Alenco, 201 
F.3d at 620. Moreover, as we discuss further below, we find no merit in 
the arguments raised by commenters in this proceeding that this 
particular cap violates the Act.
    13. We disagree with comments that this cap violates the Act's 
statutory principles. CTIA argues that the cap would violate the Act's 
requirements that rates in rural areas should be reasonably comparable 
to those in urban areas. CTIA, however, fails to provide

[[Page 37885]]

any data demonstrating that, or analysis explaining why the cap would 
result in rural rates that are not comparable with those in urban 
areas. Instead, it merely asserts that ``[t]he proposed cap will deny 
customers access to reasonably equivalent rates, and to reasonably 
equivalent services.'' There simply is no support in the record for 
this contention. To the contrary, many wireless carriers that do not 
receive high-cost support compete against wireless competitive ETCs 
that do receive support, and many wireless competitive ETCs served 
high-cost territories before they were designated as eligible to 
receive support.
    14. CTIA, along with Dobson, also contends that the cap violates 
the universal service principle of sufficiency. Neither commenter, 
however, provides any support for its contentions. To the contrary, as 
we explain above, we believe that the statutory principle of 
sufficiency is not inconsistent with the interim ``cost controls'' we 
adopt herein. We find that the interim cap we adopt is consistent with 
the principle of sufficiency as defined by the court in Alenco because 
it seeks to eliminate support in excess of that necessary to ensure the 
Act's universal service goals. See Alenco, 201 F.3d at 619. Further, 
because competitive ETC support is based on the incumbent LEC's costs, 
rather than on the competitive ETC's own costs, there is no reason to 
believe--and no record data showing--that support subject to an interim 
cap would necessarily result in insufficient support levels. Dobson 
also argues that the cap will violate the universal service principle 
of predictability because the effects of the cap ``will be driven by 
factors that are not at all 'predictable'.'' Adoption of the interim 
cap, however, makes competitive ETC support more predictable, in that 
it sets an upper, definitive bound on the amount of support available 
in a state. Moreover, Dobson ignores the fact that, as the court 
concluded in Alenco, the Act's requirement of predictability requires 
only that the rules governing distribution, not the resulting funding 
amounts, must be predictable. Alenco, 201 F.3d at 623.
    15. We are not persuaded by CTIA's argument, citing Alenco, that 
the Act requires the promotion of competition in high-cost areas 
through the provision of equal per-line support amounts to all 
carriers. Rather than requiring the use of universal service support to 
subsidize competition, the court in Alenco was concerned with the 
sustainability of universal service in a competitive environment. 
Specifically, the court found that ``[t]he Commission therefore is 
responsible for making the changes necessary to its universal service 
program to ensure that it survives in the new world of competition.'' 
Alenco, 201 F.3d at 615 (citing Federal-State Joint Board on Universal 
Service, CC Docket No. 96-45, Report and Order, 62 FR 32861, paras. 1-
4, 20 (1997) (Universal Service First Report and Order) (stating that 
the Commission, through its work with the Joint Board, ``ensure[s] that 
this system is sustainable in a competitive marketplace, thus ensuring 
that universal service is available at rates that are `just, 
unreasonable [sic], and affordable' for all Americans'')). The court 
stated that the Commission ``must see to it that both universal service 
and competition are realized; one cannot be sacrificed in favor of the 
other.'' See Alenco, 201 F.3d at 615. We therefore find that our action 
today is not only consistent with, but is supported by, the court's 
holding in Alenco.
    16. Similarly, we are not persuaded by Alltel's argument that 
competitive ETCs and incumbent LECs must receive the same amount of 
support on a per-line basis. Although Alltel correctly notes that, in 
upholding the cap on high-cost loop support, the court in Alenco 
``rejected the premise that [incumbent LEC] revenue flows must be 
protected at all costs, and thus that any reductions in disbursements 
needed to prevent undue fund growth must be borne by [competitive ETCs] 
rather than [incumbent LECs],'' Alltel fails to explain why the court's 
holding requires equal per-line support for all competitors. Put 
simply, while the court rejected the idea that any reductions in 
disbursements necessary to curtail fund growth had to be borne by 
competitive ETCs and not incumbent LECs, the court did not prohibit the 
Commission from imposing reductions or limits on competitive ETC 
disbursements.
    17. CTIA argues that adoption of the interim cap would not comport 
with the court's statement in Alenco that ``the program must treat all 
market participants equally * * * so that the market, and not local or 
federal government regulators, determines who shall compete for and 
deliver service to customers.'' The cited language, however, does not 
require the Commission to continue to provide identical levels of 
support to all carriers. It merely requires that all ETCs must be 
eligible to receive support, an unremarkable conclusion given the plain 
text of the statute.
    18. Alltel and CTIA both ignore key aspects of Alenco, in which the 
court expressly found that the Commission must ensure that all 
customers be able to receive affordable basic telecommunications 
services.

    Competition necessarily brings the risk that some telephone 
service providers will be unable to compete. The Act only promises 
universal service, and that is a goal that requires sufficient 
funding of customers, not providers. So long as there is sufficient 
and competitively-neutral funding to enable all customers to receive 
basic telecommunications services, the FCC has satisfied the Act and 
is not further required to ensure sufficient funding of every local 
telephone provider as well. Moreover, excessive funding may itself 
violate the sufficiency requirements of the Act.

    Alenco, 201 F.3d at 620. Nowhere in the court's decision did it 
require that all providers must receive equal per-line support amounts.
    19. In arguing that the interim cap would not comport with the 
identical support rule because it would disburse unequal support per 
line, Alltel also cites various Commission precedents related to the 
establishment and implementation of the identical support rule, which, 
at the time, the Commission found to be consistent with its principle 
of competitive neutrality. In justifying this portability requirement, 
both the Joint Board and Commission made clear that they envisioned 
that competitive ETCs would compete directly against incumbent LECs and 
try to take existing customers from them. See Universal Service First 
Report and Order, 62 FR 32861, paras. 287, 311; Federal-State Joint 
Board on Universal Service, Recommended Decision, 61 FR 63778, para. 
296 (Fed-State Jt. Bd. 1996). The predictions of the Joint Board and 
the Commission have proven inaccurate, however.
    20. First, they did not foresee that competitive ETCs might offer 
supported services that were not viewed by consumers as substitutes for 
the incumbent LEC's supported service. Second, wireless carriers, 
rather than wireline competitive LECs, have received a majority of 
competitive ETC designations, serve a majority of competitive ETC 
lines, and have received a majority of competitive ETC support. These 
wireless competitive ETCs do not capture lines from the incumbent LEC 
to become a customer's sole service provider, except in a small portion 
of households. See 2007 Commercial Mobile Services Report, 23 FCC Rcd 
2241, at para. 246 (citing survey reporting that only approximately 11. 
8 percent of U.S. households relied exclusively on wireless phones in 
2006). Thus, rather than providing a complete substitute for 
traditional wireline service, these

[[Page 37886]]

wireless competitive ETCs largely provide mobile wireless telephony 
service in addition to a customer's existing wireline service.
    21. This has created a number of serious problems for the high-cost 
fund, and calls into question the rationale for the identical support 
rule. Instead of competitive ETCs competing against the incumbent LECs 
for a relatively fixed number of subscriber lines, the certification of 
wireless competitive ETCs has led to significant increases in the total 
number of supported lines. Because the majority of households do not 
view wireline and wireless services to be direct substitutes, see 
Petition of Qwest Communications International Inc. for Forbearance 
from Enforcement of the Commission's Dominant Carrier Rules As They 
Apply After Section 272 Sunsets, WC Docket No. 05-333, Memorandum 
Opinion and Order, 22 FCC Rcd 5207, 5218, para. 17 (2007) (stating that 
a majority of presubscribed interexchange customers also subscribe to 
mobile wireless service); Commercial Mobile Services Report, 23 FCC Rcd 
2241, at para. 246 (2008) (citing survey reporting that approximately 
11. 8 percent of U.S. households relied exclusively on wireless phones 
in 2006), many households subscribe to both services and receive 
support for multiple lines, which has led to a rapid increase in the 
size of the fund. In addition, the identical support rule fails to 
create efficient investment incentives for competitive ETCs. Because a 
competitive ETC's per-line support is based solely on the per-line 
support received by the incumbent LEC, rather than its own network 
investments in an area, the competitive ETC has little incentive to 
invest in, or expand, its own facilities in areas with low population 
densities, thereby contravening the Act's universal service goal of 
improving the access to telecommunications services in rural, insular 
and high-cost areas. See 47 U.S.C. 254(b)(3). Instead, competitive ETCs 
have a greater incentive to expand the number of subscribers, 
particularly those located in the lower-cost parts of high-cost areas, 
rather than to expand the geographic scope of their network. The 
Commission is currently considering eliminating the identical support 
rule. Identical Support Rule NPRM, 73 FR 11580.
    22. We also find that the Commission's universal service principle 
of competitive neutrality does not preclude us from adopting an 
interim, limited cap under existing circumstances. Universal Service 
First Report and Order, 62 FR 32861, paras. 46-52 (subsequent history 
omitted) (``[W]e define this principle, in the context of determining 
universal service support, as: COMPETITIVE NEUTRALITY--Universal 
service support mechanisms and rules should be competitively neutral. 
In this context, competitive neutrality means that universal service 
support mechanisms and rules neither unfairly advantage nor 
disadvantage one provider over another, and neither unfairly favor nor 
disfavor one technology over another.''). As discussed above, high-cost 
support has increased by $1. 7 billion--more than 65 percent--from 2001 
to 2007. Continued growth at this rate would render the amount of high-
cost support unsustainable and could cripple the universal service 
fund. To avert this crisis, it is necessary to place some temporary 
restraints on the fastest-growing portion of high-cost support, i.e., 
competitive ETC support. Moreover, as discussed above, it is not clear 
that identical support has, in reality, resulted in competitive 
neutrality. We therefore find that, rather than departing from the 
principle of competitive neutrality, as a matter of policy, we instead 
are temporarily prioritizing the immediate need to stabilize high-cost 
universal service support and ensure a specific, predictable, and 
sufficient fund. See 47 U.S.C. 254(b)(5), (d).
    23. Finally, we reject arguments that the cap should not be adopted 
because it will not be truly interim in nature. The interim cap will 
remain in place only until the Commission adopts comprehensive, high-
cost universal service reform. Thus, we are satisfied that the interim 
cap's life will be of limited duration.
Cap on Competitive ETC Support Would Not Inhibit Broadband Deployment 
in Rural America
    24. Several commenters argue that the interim cap on competitive 
ETC support will inhibit the deployment of broadband services. With the 
exception of GCI, these commenters provide only anecdotal evidence of 
the possible effect of the interim cap on particular deployments, and 
do not systematically analyze the effect of the interim cap on 
broadband deployment. Moreover, although high-cost support for rural 
incumbent LECs has been capped for many years, that does not appear to 
have inhibited the deployment of broadband service to areas served by 
rural incumbent LECs. Indeed, high-cost universal service support may 
be used to invest in facilities to provide broadband service if those 
facilities are also necessary to provide voice grade access. See Rural 
Task Force Order, 66 FR 30080, paras. 199-201.
    25. In light of the foregoing, we decline to adopt specific 
requirements for competitive ETCs regarding the provision of broadband 
Internet access services. Rather, we find that the role of high-cost 
support mechanisms in promoting broadband deployment is better 
addressed in a rulemaking of general applicability. In fact, the 
Commission currently is considering proposals to provide high-cost 
support for broadband service.

Design and Implementation of the Cap

Operation of the Cap
    26. We adopt a cap on competitive ETC support for each state, as 
recommended by the Joint Board, subject to two limited exceptions 
described below. A competitive ETC cap applied at a state level will 
effectively curb growth, but, given a state's role in designating ETCs, 
will allow a state the flexibility to direct competitive ETC support to 
the areas in the state that it determines are most in need of such 
support. An interim, state-based cap on competitive ETC support also 
will avoid creating an incentive for each state to designate as many 
new ETCs as possible for the sole purpose of increasing support to that 
state at the expense of other states, which could occur had we adopted 
a single, nationwide cap. A state-based cap will require newly-
designated competitive ETCs to share funding with other competitive 
ETCs within the state.
    27. Under the state-based cap, support will be calculated using a 
two-step approach. First, on a quarterly basis, the Universal Service 
Administrative Company (USAC) will calculate the support each 
competitive ETC would have received under the existing (uncapped) per-
line identical support rule, see 47 CFR 54.307, and sum these amounts 
by state. Second, USAC will calculate a state reduction factor to 
reduce this amount to the competitive ETC cap amount. Specifically, 
USAC will compare the total amount of uncapped support to the cap 
amount for each state. Where the total state uncapped support is 
greater than the available state cap support amount, USAC will divide 
the state cap support amount by the total state uncapped amount to 
yield the state reduction factor. USAC will then apply the state-
specific reduction factor to the uncapped amount for each competitive 
ETC within the state to arrive at the capped level of high-cost 
support. Where the state uncapped support is less than the available 
state capped support amount, no reduction will be required.

[[Page 37887]]

    28. For example, if, in State A, the capped amount is $90 million, 
and the total uncapped support is $130 million, the reduction factor 
would be 69.2 percent ($90/$130). In State A, each competitive ETC's 
uncapped support would be multiplied by 69.2 percent to reduce support 
to the capped amount. If, in State B, however, the capped amount is 
$100 million, and the total uncapped support is $95 million, there 
would be no reduction factor because the uncapped amount is less than 
the capped amount. Finally, if, in State C the base period capped 
amount is $0 (i.e., there were no competitive ETCs eligible to receive 
support in State C in March 2008), then no competitive ETCs would be 
eligible to receive support in that state during the interim cap. Each 
quarter, for the duration of the cap, a new reduction factor would be 
calculated for each state.
    29. Some commenters argue that, in states where there currently are 
no competitive ETCs designated, subsequently designated competitive 
ETCs will receive no high-cost support while the interim cap remains in 
place. The Act does not, however, require that all ETCs must receive 
support, but rather only that carriers meeting certain requirements be 
eligible for support. 47 U.S.C. 214(e)(1); 254(e) (emphasis added). 
Section 214(e)(1) of the Act states, ``A common carrier designated as 
an eligible telecommunications carrier * * * shall be eligible to 
receive universal service support in accordance with section 254[.]'' 
47 U.S.C. 214(e)(1) (emphasis added). Likewise, section 254(e) of the 
Act states, ``[O]nly an eligible telecommunications carrier designated 
under section 214(e) shall be eligible to receive specific Federal 
universal service support.'' 47 U.S.C. 254(e) (emphasis added). This 
language indicates that designation as an ETC does not automatically 
entitle a carrier to receive universal service support. See Universal 
Service First Report and Order, 62 FR 32861, para. 137 (``Indeed, the 
language of section 254(e), which states that `only an eligible 
telecommunications carrier designated under section 214(e) shall be 
eligible to receive' universal service support, suggests that a carrier 
is not automatically entitled to receive universal service support once 
designated as eligible.''); Alenco, 201 F.3d at 620 (``The Act only 
promises universal service, and that is a goal that requires sufficient 
funding of customers, not providers.''). Moreover, in section 254 of 
the Act, Congress distinguished between those who are merely 
``eligible'' to receive support and those who are ``entitled'' to 
receive benefits. Compare 47 U.S.C. 254(e) with 47 U.S.C. 254(h)(1)(A) 
(providing that carriers offering certain services to rural health care 
providers ``shall be entitled'' to have the difference between the 
rates charged to health care providers and those charged to other 
customers in comparable rural areas treated as an offset to any 
universal service contribution obligation); see also Transbrasil S.A. 
Linhas Aereas v. Dep't of Transp., 791 F.2d 202, 205 (D.C. Cir. 1986) 
(``[W]here different terms are used in a single piece of legislation, 
the Court must presume that Congress intended the terms have different 
meanings.''). We find that Congress's careful delineation demonstrates 
an intention to ascribe different statutory rights. Accordingly, even 
if imposition of the interim cap results in no support for some 
competitive ETCs, this result is not inconsistent with the Act.
    30. Moreover, there are advantages to obtaining and maintaining an 
ETC designation regardless of whether a competitive ETC receives high-
cost support. In particular, the ability of competitive ETCs to receive 
low-income universal service support shows value in obtaining and 
maintaining ETC designation separate and apart from high-cost support. 
Indeed, TracFone Wireless, Inc. (TracFone) sought forbearance from 
section 214(e)(1) of the Act so that it could seek designation as an 
ETC eligible only to receive universal service Lifeline support. 
TracFone took this step because ``offering prepaid plans which make 
wireless service available to low income users * * * has been a 
critical component of TracFone's business strategy since the company's 
inception.'' Other ETCs may have similar business strategies. Further, 
by offering Lifeline and Link Up service, a competitive ETC may attract 
new subscribers that may not otherwise have taken telephone service. 
This would increase a competitive ETC's base of subscribers and, 
consequently, lower its average cost of serving all of its subscribers. 
Moreover, competitive ETCs may be eligible for separate universal 
service support at the state level. See, e.g., Kan. Stat. Ann. 66-2008 
(2006) (providing for the creation of a Kansas universal service fund 
(KUSF) and requiring that carriers be designated as an ETC pursuant to 
section 214(e)(1) of the Act to receive support from the KUSF).
    31. We adopt two limited exceptions to the operation of the interim 
cap. First, consistent with the ALLTEL-Atlantis Order and the AT&T-
Dobson Order, we find it in the public interest to adopt a limited 
exception to the interim cap if a competitive ETC submits its own 
costs. See ALLTEL-Atlantis Order, 22 FCC Rcd at 19521, paras 9-10; 
AT&T-Dobson Order, 22 FCC Rcd at 20329-30, paras. 70-72. Specifically, 
a competitive ETC will not be subject to the interim cap to the extent 
that it files cost data demonstrating that its costs meet the support 
threshold in the same manner as the incumbent LEC.
    32. Second, we also adopt a limited exception to the interim cap 
for competitive ETCs that serve tribal lands or Alaska Native regions 
(the Covered Locations). We permit competitive ETCs serving Covered 
Locations to continue to receive uncapped high-cost support for lines 
served in those Covered Locations. Because many tribal lands have low 
penetration rates for basic telephone service, we do not believe that 
competitive ETCs are merely providing complementary services in most 
tribal lands, as they do generally. See Federal-State Joint Board on 
Universal Service; Promoting Deployment and Subscribership in Unserved 
and Underserved Areas, Including Tribal and Insular Areas, CC Docket 
No. 96-45, Twelfth Report and Order, Memorandum Report and Order, and 
Further Notice of Proposed Rulemaking, 65 FR 47883, para. 2 (2000) 
(concluding that ``existing universal service support mechanisms are 
not adequate to sustain telephone subscribership on tribal lands.'').
    33. Participation in this limited exception to the interim cap is 
voluntary and will be elected by the competitive ETC on a study area by 
study area basis. Therefore, any competitive ETC that does not or 
cannot opt into the limited exception, or that does not or cannot opt 
into the limited exception for a particular Covered Location, will 
remain subject to the interim cap as described herein. Support for 
competitive ETCs that do opt into the limited exception will continue 
to be provided pursuant to Sec.  54.307 of the Commission's rules, 
except that the uncapped per line support is limited to one payment per 
each residential account. 47 CFR 54.307. If a competitive ETC serves 
lines in both Covered Locations and non-Covered Locations (or only 
Covered Locations), the universal service administrator shall determine 
the amount of additional support--after application of the interim 
cap--necessary to ensure that a competitive ETC receives the same per-
line support amount as the incumbent LEC for the lines qualifying for 
the exception.
    34. Finally compliance with the terms of this limited exception 
will be verified through certification and reporting

[[Page 37888]]

requirements. Specifically, a competitive ETC seeking to receive high-
cost support pursuant to this limited exception must certify the number 
of lines that meet the limited exception requirements. The competitive 
ETC also must provide a specific description of how it confirmed that 
it had met the certification threshold.
    35. Even with the total amount of support provided to competitive 
ETCs being capped, continued growth in competitive ETC lines would have 
the effect of reducing the amount of interstate access support (IAS) 
received by incumbent LECs, due to the operation of the formula for 
calculating IAS. See 47 CFR 54.800-54.808. To prevent the 
implementation of the interim cap on competitive ETC support from 
having this unintended consequence on incumbent LEC support, we find it 
necessary to adjust the calculation of IAS for both incumbent LECs and 
competitive ETCs. Accordingly, we divide IAS into separate pools for 
incumbent LECs and competitive ETCs and separately cap the amount of 
IAS support for both types of carriers. The annual amount of IAS 
available for incumbent LECs shall be set at the amount of IAS that 
incumbent LECs were eligible to receive in March 2008 on an annual 
basis. This amount shall be indexed annually for line growth or loss by 
price cap incumbent LECs. The annual amount of IAS available for 
competitive ETCs shall be set at the amount of IAS that competitive 
ETCs were eligible to receive in March 2008 on an annual basis. Subject 
to these constraints, we direct USAC to calculate and distribute IAS 
for each pool to eligible carriers consistent with the existing IAS 
rules.
Length of Time
    36. In light of the harm to the sustainability of the universal 
service fund posed by the dramatic growth of support to competitive 
ETCs, we find that the cap we adopt today should become effective as 
soon as possible. The cap will, therefore, commence as of the effective 
date of this Order.
    37. We emphasize that the cap on competitive ETC support that we 
adopt here is only an interim measure to slow the current explosion of 
high-cost universal service support while the Commission considers 
further reform. We remain committed to comprehensive reform of the 
high-cost universal service support mechanisms. The Commission has 
three outstanding rulemaking proceedings that consider comprehensive 
reform of high-cost universal service support. The Commission plans to 
move forward on adopting comprehensive reform measures in an 
expeditious manner. The Commission commits to completing a final order 
on comprehensive reform as quickly as feasible after the comment cycle 
is completed on the pending Reform Notices. We therefore do not believe 
that a fixed sunset date, as proposed by some commenters, is necessary 
or provides additional benefit.
Base Period for the Cap
    38. Although we adopt the Joint Board's recommendation that the cap 
on competitive ETC support be set at the level of competitive ETC 
support actually distributed in each state, rather than set such a cap 
at the level of support actually distributed in 2006, we find it is 
more appropriate to set such a cap at the level of support competitive 
ETCs were eligible to receive during March 2008 on an annualized basis. 
Specifically, for each state, the annual interim cap shall be set at 
twelve times the level of support that all competitive ETCs were 
eligible to receive in that state for the month of March 2008. Using 
March 2008 data allows use of more recent actual support amounts than 
2006. Use of March 2008 as the base period, moreover, will ensure that 
funding levels will not undermine the expectations underlying 
competitive ETC investment decisions or result in immediate funding 
reductions. Further, consistent with our decision to cap competitive 
ETC support on an interim basis, we find it inappropriate and 
counterproductive to index the cap to a growth factor.
    39. Although the interim cap that we adopt today applies only to 
the amount of support available to competitive ETCs, it does not 
restrict the number of competitive ETCs that may receive support. In 
fact, as part of this Order, we grant, to the extent described in 
Appendix B, numerous applications for ETC designation currently pending 
before the Commission. As described in more detail in Appendix B, we 
find that the applicants have met the Commission's requirements for 
designation. We also amend an ETC designation as described in Appendix 
C. These designations, however, do not affect the amount of support 
available to competitive ETCs, which is limited by the interim cap we 
adopt in this Order.

Procedural Matters

Final Regulatory Flexibility Analysis
    40. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), See 5 U.S.C. 603, an Initial Regulatory Flexibility 
Analysis (IRFA) was incorporated in the Notice. Federal-State Joint 
Board on Universal Service, WC Docket No. 05-337, CC Docket No. 96-45, 
Notice of Proposed Rulemaking, 72 FR 28936 (2007) (Notice). The 
Commission sought written public comment on the proposals in the 
Notice, including comment on the IRFA. This Final Regulatory 
Flexibility Analysis (FRFA) conforms to the RFA. See 5 U.S.C. 604.
Need for, and Objectives of, the Proposed Rules
    41. On May 1, 2007, the Joint Board recommended that the Commission 
adopt an interim cap on high-cost universal service support for 
competitive ETCs to rein in the explosive growth in universal service. 
Recommended Decision, 22 FCC Rcd 8998 (Appendix A). We agree with the 
Joint Board's assessment that the rapid growth in high-cost support 
places the federal universal service fund in dire jeopardy. In 2006, 
the universal service fund provided approximately $4.1 billion per year 
in high-cost support. In contrast, in 2001, high-cost universal service 
support totaled approximately $2. 6 billion. In recent years, this 
growth has been due to increased support provided to competitive ETCs, 
which receive high-cost support based on the per-line support that the 
incumbent LECs receive, rather than on the competitive ETCs' own costs. 
While support to incumbent LECs has been flat, or has even declined 
since 2003, competitive ETC support, in the six years from 2001 through 
2006, has grown from under $17 million to $980 million--an average 
annual growth rate of over 100 percent. Competitive ETCs received $557 
million in high-cost support in the first six months of 2007. 
Annualizing this amount projects that they will receive approximately 
$1. 11 billion in 2007. We find that the continued growth of the fund 
at this rate is not sustainable and would require excessive (and ever 
growing) contributions from consumers to pay for this fund growth.
    42. We conclude that immediate action must be taken to stem the 
dramatic growth in high-cost support. Therefore, we immediately impose 
an interim cap on high-cost support provided to competitive ETCs until 
fundamental comprehensive reforms are adopted to address issues related 
to the distribution of support and to ensure that the universal service 
fund will be sustainable for future years. The interim cap that we 
adopt herein limits the amount of high-cost support that competitive 
ETCs can receive in the interim period to the amount they were

[[Page 37889]]

eligible to receive in March 2008 on an annualized basis.
Summary of Significant Issues Raised by Public Comments in Response to 
the IRFA
    43. None.
Description and Estimate of the Number of Small Entities to Which Rules 
Will Apply
    44. 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 rules, if adopted. 5 U.S.C. 604(a)(3). The RFA 
generally defines the term ``small entity'', 5 U.S.C. 601(6), as having 
the same meaning as the terms ``small business,'' 5 U.S.C. 601(3), 
``small organization,'' 5 U.S.C. 601(4), and ``small governmental 
jurisdiction.'' 5 U.S.C. 601(5). In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act, unless the Commission has developed one 
or more definitions that are appropriate to its activities. 5 U.S.C. 
601(3) (incorporating by reference the definition of ``small business 
concern'' in 5 U.S.C. 632). Under the Small Business Act, a ``small 
business concern'' is one that: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) meets 
any additional criteria established by the Small Business 
Administration (SBA). 15 U.S.C. 632. Nationwide, there are a total of 
approximately 22. 4 million small businesses, according to SBA data. 
See SBA, Programs and Services, SBA Pamphlet No. CO-0028, at 40 (July 
2002). A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' 5 U.S.C. 601(4). Nationwide, as of 2002, there 
were approximately 1. 6 million small organizations.
    45. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the number of commercial wireless entities, is the data that 
the Commission publishes in its Trends in Telephone Service report. 
FCC, Wireline Competition Bureau, Industry Analysis and Technology 
Division, Trends in Telephone Service, Table 5.3, page 5-5 (February 
2007) (Trends in Telephone Service). The SBA has developed small 
business size standards for wireline and wireless small businesses 
within the three commercial census categories of Wired 
Telecommunications Carriers, 13 CFR 121. 201, North American Industry 
Classification System (NAICS) code 517110, Paging, 13 CFR 121. 201, 
NAICS code 517211 (This category will be changed for purposes of the 
2007 Census to ``Wireless Telecommunications Carriers (except 
Satellite),'' NAICS code 517210.), and Cellular and Other Wireless 
Telecommunications. 13 CFR 21. 201, NAICS code 517212 (This category 
will be changed for purposes of the 2007 Census to ``Wireless 
Telecommunications Carriers (except Satellite),'' NAICS code 517210.). 
Under these categories, a business is small if it has 1,500 or fewer 
employees. Below, using the above size standards and others, we discuss 
the total estimated numbers of small businesses that might be affected 
by our actions.
Wireline Carriers and Service Providers
    46. We have included small incumbent local exchange carriers (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.'' 15 U.S.C. 632. 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.
    47. Incumbent LECs. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to incumbent LECs. 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 engaged in 
the provision of local exchange services. Of these 1,307 carriers, an 
estimated 1,019 have 1,500 or fewer employees, and 288 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 our action.
    48. 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, 859 carriers reported that they were engaged in the 
provision of either competitive LEC or CAP services. Of these 859 
carriers, an estimated 741 have 1,500 or fewer employees, and 118 have 
more than 1,500 employees. In addition, 16 carriers have reported that 
they are ``Shared-Tenant Service Providers,'' and all 16 are estimated 
to have 1,500 or fewer employees. In addition, 44 carriers have 
reported that they are ``Other Local Service Providers.'' Of the 44, an 
estimated 43 have 1,500 or fewer employees, and one has more than 1,500 
employees. Consequently, the Commission estimates that most competitive 
LECs, CAPs, ``Shared-Tenant Service Providers,'' and ``Other Local 
Service Providers'' are small entities that may be affected by our 
action.
Wireless Carriers and Service Providers
    49. Wireless Service Providers. The appropriate size standard for 
wireless service providers is the category of ``Wireless 
Telecommunications Carriers (except Satellite).'' Under that standard, 
the SBA deems a wireless business to be small if it has 1,500 or fewer 
employees. The data necessary to estimate the number of entities in 
this category has not been gathered since it was adopted in November 
2007. Therefore, we will use the earlier, now-superceded categories--
``Paging'' and ``Cellular and Other Wireless Telecommunications''--to 
estimate the number of entities. For the census category of ``Paging,'' 
Census Bureau data for 2002 show that there were 807 firms in this 
category that operated for the entire year. Of this total, 804 firms 
had employment of 999 or fewer employees, and three firms had 
employment of 1,000 employees or more. Thus, under this category and 
associated small business size standard, the majority of firms can be 
considered small. For the census category of ``Cellular and Other 
Wireless Telecommunications,'' Census Bureau data for 2002 show that 
there were 1,397 firms in this category that operated for the entire 
year. Of this total, 1,378 firms had employment of 999 or fewer 
employees, and 19 firms had employment of 1,000 employees or more. 
Thus, under this second category and size standard, the majority of 
firms can, again, be considered small.
    50. Wireless Telephony. Wireless telephony includes cellular, 
personal

[[Page 37890]]

communications services (PCS), and specialized mobile radio (SMR) 
telephony carriers. As noted earlier, the SBA has developed a small 
business size standard for ``Wireless Telecommunications Carriers 
(except Satellite).'' Under that SBA small business size standard, a 
business is small if it has 1,500 or fewer employees. The data 
necessary to estimate the number of entities in this category has not 
been gathered since it was adopted in November 2007. Therefore, we will 
use the earlier, now-superceded categories of ``Cellular and Other 
Wireless Telecommunications'' to estimate the number of entities. 
According to Commission data, 432 carriers reported that they were 
engaged in the provision of wireless telephony. We have estimated that 
221 of these are small under the SBA small business size standard.
Satellite Service Providers
    51. Satellite Telecommunications and Other Telecommunications. 
There is no small business size standard developed specifically for 
providers of international service. The appropriate size standards 
under SBA rules are for the two broad census categories of ``Satellite 
Telecommunications'' and ``All Other Telecommunications.''
    52. 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.'' Under this category, the SBA 
size standard is $13. 5 million or less in aveage annual receipts. For 
this category, Census Bureau data for 2002 show that there were a total 
of 371 firms that operated for the entire year. Of this total, 307 
firms had annual receipts of under $10 million, and 26 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 our action.
    53. The second category of ``All Other Telecommunications'' 
``comprises establishments primarily engaged in (1) providing 
specialized telecommunications applications, such as satellite 
tracking, communications telemetry, and radar station operations; or 
(2) providing satellite terminal stations and associated facilities 
operationally connected with one or more terrestrial communications 
systems and capable of transmitting telecommunications to or receiving 
telecommunications from satellite systems.'' The SBA size standard for 
``All Other Telecommunications'' is $23. 0 million or less in average 
annual revenues. For this category, Census Bureau data for 2002 show 
that there were a total of 332 firms that operated for the entire year. 
Of this total, 259 firms had annual receipts of under $10 million and 
15 firms had annual receipts of $10 million to $24,999,999. 
Consequently, we estimate that the majority of Other Telecommunications 
firms are small entities that might be affected by our action.
Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    54. In order to qualify for the exception to the interim cap, some 
small carriers serving tribal lands or Native Alaskan regions will be 
required to file certifications that they qualify for the exception. 
Other small carriers may qualify for an exception if they file data 
reporting their costs of serving high-cost areas for which they seek 
the exception to be applied.
Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered
    55. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance and reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or part thereof, for small 
entities. See 5 U.S.C. 603(c).
    56. In adopting the interim cap, the Commission considered several 
alternatives to minimize the cap's effect on small entites. We adopt an 
exception to the rule for carriers providing services to tribal lands. 
We also note that the Commission is examining ways to comprehensively 
reform federal high-cost universal service. The interim cap that the 
Commission adopts today is an interim measure that will be replaced by 
comprehensive reforms which will be developed in the future and which 
will minimize any economically adverse effect of the cap on small 
businesses.
Report to Congress
    57. The Commission will send a copy of the Order, including this 
FRFA, in a report to be sent to Congress pursuant to the SBREFA. See 5 
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of 
the Order, including the FRFA, to the Chief Counsel for Advocacy of the 
SBA. A copy of the Order and the FRFA (or summaries thereof) will also 
be published in the Federal Register. See 5 U.S.C. 604(b).
Paperwork Reduction Act Analysis
    58. This document contains new information collection requirements 
subject to the Paperwork Reduction Act of 1995 (PRA). Paperwork 
Reduction Act of 1995, Public Law 104-13, 109 Stat. 163 (1995). It will 
be submitted to the Office of Management and Budget (OMB) for review 
under section 3507(d) of the PRA. OMB, the general public, and other 
federal agencies are invited to comment on the new information 
collection requirements contained in this proceeding. In addition, we 
note that, pursuant to the Small Business Paperwork Relief Act of 2002, 
we previously sought specific comment on how the Commission might 
``further reduce the information collection burden for small business 
concerns with few