Connect America Fund; A National Broadband Plan for Our Future; Establishing Just and Reasonable Rates for Local Exchange Carriers; High-Cost Universal Service Support, 30904-30915 [2012-12544]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 77, Number 101 (Thursday, May 24, 2012)]
[Rules and Regulations]
[Pages 30904-30915]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12544]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 10-90, 07-135, 05-337, 03-109; GN Docket No. 09-51; CC 
Docket Nos. 01-92, 96-45; WT Docket No. 10-208; FCC 12-52]


Connect America Fund; A National Broadband Plan for Our Future; 
Establishing Just and Reasonable Rates for Local Exchange Carriers; 
High-Cost Universal Service Support

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) reconsiders and clarifies certain aspects of the USF/ICC 
Transformation Order in response to various petitions for 
reconsideration and/or clarification. We grant in part and deny in part 
petitions relating to certain aspects of eligible telecommunications 
carrier (ETC) reporting obligations, while maintaining our overall 
framework for ETC accountability. We also grant in part and deny in 
part a petition relating to universal service support adjustments for 
carriers with artificially low local rates, making a minor adjustment 
in the timing for the sampling of rates to be used in calculating any 
such adjustments. We also clarify certain implementation details for 
both the reporting requirements and the rate floor requirement. In 
addition, we make a minor adjustment to the rule relating to the 
calculation of baseline support for competitive carriers serving remote 
areas of Alaska. We also clarify that the framework established for 
rate-of-return companies to extend broadband upon reasonable request 
would take into account any unique circumstances, such as backhaul 
costs, that may impact the ability of such companies, in Alaska or 
elsewhere, to extend broadband to their customers. We also deny a 
number of other requests relating to support for carriers serving 
Alaska. We deny a request to reconsider which 12 months of revenues 
will be considered for purposes of defining Eligible Recovery. Finally, 
we deny a request to reconsider the use of tariff forecasts for 
calculating the baseline for rate-of-return carriers.

DATES: Effective June 25, 2012, except for the amendments made to Sec.  
54.313(h) in this document, which contain information collection 
requirements that are not effective until approved by the Office of 
Management and Budget. The Federal Communications Commission will 
publish a document in the Federal Register announcing the effective 
date for that section.

FOR FURTHER INFORMATION CONTACT: Alexander Minard, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484 and Victoria Goldberg, 
Wireline Competition Bureau, (202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Third 
Order on Reconsideration in WC Docket Nos. 10-90, 07-135, 05-337, 03-
109; GN Docket No. 09-51; CC Docket Nos. 01-92, 96-45; WT Docket No. 
10-208; FCC 12-52, released on May 14, 2012. 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. Or at the following Internet address: https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0514/FCC-12-52A1.pdf.

I. Introduction

    1. In this Order, we reconsider and clarify certain aspects of the 
USF/ICC Transformation Order, 76 FR 73830, November 29, 2011, in 
response to various petitions for reconsideration and/or clarification. 
The USF/ICC Transformation Order represents a careful balancing of 
policy goals, equities, and budgetary constraints. This balance was 
required in order to advance the fundamental goals of universal service 
and intercarrier compensation reform within a defined budget while 
simultaneously providing sufficient transitions for stakeholders to 
adapt. While reconsideration of a Commission's decision may be 
appropriate when a petitioner demonstrates that the original order 
contains a material error or omission, or raises additional facts that 
were not known or did not exist until after the petitioner's last 
opportunity to present such matters, if a petition simply repeats 
arguments that were previously considered and rejected in the 
proceeding, due to the balancing involved in this proceeding, we are 
likely to deny it.
    2. With this standard in mind, in this Order we take several 
limited actions stemming from reconsideration petitions. We grant in 
part and deny in part petitions relating to certain aspects of eligible 
telecommunications carrier (ETC) reporting obligations, while 
maintaining our overall framework for ETC accountability. We also grant 
in part and deny in part a petition relating to universal service 
support adjustments for carriers with artificially low local rates, 
making a minor adjustment in the timing for the sampling of rates to be 
used in calculating any such adjustments. We also clarify certain 
implementation details for both the reporting requirements and the rate 
floor requirement. In addition, we make a minor adjustment to the rule 
relating to the calculation of baseline support for competitive 
carriers serving remote areas of Alaska. We also clarify that the 
framework established for rate-of-return companies to extend broadband 
upon reasonable request would take into account any unique 
circumstances, such as backhaul costs, that may impact the ability of 
such companies, in Alaska or elsewhere, to extend broadband to their 
customers. We also deny a number of other requests relating to support 
for carriers serving Alaska. We deny a request to reconsider which 12 
months of revenues will be considered for purposes of defining Eligible 
Recovery. Finally, we deny a request to reconsider the use of tariff 
forecasts for calculating the baseline for rate-of-return carriers.

[[Page 30905]]

II. Reporting Requirements

A. Reporting Requirements for State-Designated ETCs

    3. In the USF/ICC Transformation Order, we extended the annual 
reporting requirements to all recipients of high-cost/Connect America 
Fund (CAF) support. Previously, our rules required annual reports only 
from federally-designated ETCs. A number of petitioners oppose 
requiring state-designated ETCs to file Sec.  54.313 annual reports. 
The Rural Associations argued in their petition that we should respect 
the rights and discretion of the states. Petitioners also argued that 
it would be unfair to require state-designated ETCs to report in 2012 
on information they were not previously required to maintain. USTelecom 
and other commenters asked that we clarify that we intended to preempt 
state reporting requirements. Finally, USTelecom argued that the 
Commission violated the Paperwork Reduction Act (PRA) by not seeking 
approval from the Office of Management and Budget for the expanded 
application of the requirements in Sec.  54.313(a)(1) through (a)(6) to 
state-designated ETCs and because ``[t]he new reporting requirements 
amount to a scatter-shot data collection effort--in many cases with no 
potential to add any value to Commission decision-making.''
1. No Exemption for State-Designated ETCs
    4. Rural Associations assert that the USF/ICC Transformation Order 
``provides no evidence of inadequate, negligent or otherwise 
unsatisfactory monitoring of state-designated ETCs by state commissions 
during the more than 14 years that they have been responsible for that 
task.'' This assertion ignores the discussion in the Order, 76 FR 
76623, December 8, 2011, of the GAO's criticism of the lack of 
accountability for recipients of high-cost support due to lack of 
uniformity in reporting requirements among the states. As NCTA noted in 
its comments, ``reporting is an essential element of every government 
subsidy program'' We decline to exempt state-designated ETCs from the 
reporting requirements imposed by new Sec.  54.313. Petitioners have 
neither presented new evidence nor raised new arguments that persuade 
us to reconsider including state-designated ETCs within Sec.  54.313's 
purview.
2. No Preemption of State Reporting Requirements
    5. We next deny USTelecom's request to clarify that we intended to 
preempt state reporting requirements when we implemented new Sec.  
54.313. As we stated in the USF/ICC Transformation Order, the federal 
reporting requirements in Sec.  54.313 are intended to ``serve as a 
baseline requirement for all ETCs.'' Indeed, Congress expressly 
provided the states a regulatory role in this area. We did not preempt 
the states from imposing state-specific reporting requirements, as long 
as those additional reporting requirements do not create burdens that 
thwart achievement of the universal service reforms adopted by the 
Commission. Parties have provided no evidence that the states will act 
in a way that burdens the federal support mechanism in response to the 
changes implemented by the USF/ICC Transformation Order and thus have 
neither presented new evidence nor raised arguments that persuade us to 
reconsider our decisions in this regard.
    6. We also note that we do not expect state-designated ETCs to 
report to the Commission information in their 2012 filing that they 
were not previously required to collect. As the Wireline Competition 
Bureau stated in the Clarification Order, it would be impossible for 
entities that were not previously required to collect and report the 
information required by Sec.  54.313 with respect to their provision of 
voice service in 2011 to report such information to the Commission. But 
if a state-designated ETC is subject to a state requirement to report 
some or all of this information annually to the state, then the ETC 
should file a copy of any relevant information with the Commission in 
2012. Requiring a state-designated ETC to file with the Commission the 
same information it already reports to a state commission imposes at 
most a minimal burden.
3. Paperwork Reduction Act Procedural Requirements
    7. We disagree with the premise of USTelecom's argument that the 
Commission has violated the PRA by extending Sec.  54.313(a)(1) through 
(a)(6)'s new reporting requirements to state-designated ETCs. In fact, 
the Commission sought and has received OMB approval for these 
provisions. Nor are we persuaded by USTelecom's general argument that 
the reporting requirements add no value to Commission decision making. 
As we explained in the USF/ICC Transformation Order, these requirements 
are necessary and appropriate ``to ensure the continued availability of 
high-quality voice services and monitor progress in achieving our 
broadband goals and to assist the FCC in determining whether the funds 
are being used appropriately.'' We find that Petitioners have neither 
presented new evidence nor raised arguments that persuade us to 
reconsider our decisions in this regard.

B. Reporting Requirements for Carriers Whose Support Is Being Phased 
Down

    8. Certain petitioners and commenters argue that it is unreasonable 
to impose the new reporting obligations on competitive ETCs whose 
support is being phased down. In the USF/ICC Transformation Order, we 
stated that such ETCs ``will not be required to submit any of the new 
information or certifications below related solely to the new broadband 
public interest obligations, but must continue to submit information or 
certifications with respect to their provision of voice service.'' As 
the Bureau clarified in the USF/ICC Clarification Order, competitive 
ETCs that have been designated by the Commission are required to file 
information with respect to their provision of voice service during 
2011, as previously required by Sec.  54.209 of the Commission's rules. 
These competitive ETCs, who have been subject to these reporting 
obligations since Commission designation, are not subject to new 
reporting obligations, and we therefore do not find it unreasonable to 
continue to impose this reporting obligation. More generally, all 
competitive ETCs are required to offer voice service throughout the 
designated study area, and the Commission has an obligation to ensure 
these ETCs, who will continue to receive support until the completion 
of the phase down, are complying with this requirement. Moreover, many 
state-designated competitive ETCs are already subject to reporting 
obligations related to the provision of USF-supported voice service. 
For these reasons, we conclude it is reasonable to require competitive 
ETCs to comply with annual reporting obligations during their phase-
down, and we deny the request for reconsideration. Those filings will 
be due on the same date as reports filed by other ETCs, as discussed 
more fully below.

C. Filing Deadline

    9. In the USF/ICC Transformation Order, we established a filing 
deadline of April 1 for annual reports pursuant to new Sec.  54.313, 
with reporting under a number of those subsections not beginning until 
2013 or later. A number of petitioners and commenters argued that April 
1 was an unrealistic deadline for the new financial reporting imposed 
by Sec.  54.313(f)(2). These petitioners and

[[Page 30906]]

commenters argue that: (1) Many of the affected carriers have never 
been audited before; (2) some carriers do not close their books until 
the end of the first quarter; (3) many carriers are often still 
awaiting various financial documents on April 1; and (4) RUS Form 479 
filings are not due until April 30. AT&T also argued that ETCs 
operating in multiple states would have difficulty meeting an April 1 
deadline. Most of those petitioners argued that a filing deadline of 
July 1 or later would be reasonable. Additionally, USTelecom noted in 
its Petition that states do not need a six-month lead time in order to 
complete their section 254(e) annual certifications. On 
reconsideration, we conclude that moving the annual filing deadline 
three months later in the year would be appropriate. Because we are 
moving the filing deadline from April 1 to July 1, we decline to 
provide the automatic 60-day extension sought by the Alaska Rural 
Coalition.
    10. We hereby revise the filing deadline under Sec.  54.313 to July 
1. We do not, however, change the years in which the various filings 
begin to be due. Many states do not require annual reporting until on 
or after July 1, and they still have sufficient time to provide the 
annual section 254(e) certifications to the Commission by October 1.
    11. We also revise the filing deadline in Sec.  54.1009(a) for 
annual reports required of recipients of Mobility Fund Phase I support. 
In the USF/ICC Transformation Order, the Commission established April 1 
as the deadline for Mobility Fund Phase I recipients to submit their 
annual reports. In establishing the same filing deadline as that 
required for submission of annual reports pursuant to new Sec.  54.313, 
the Commission aimed to minimize the administrative burden on Mobility 
Fund recipients that are subject to the new ETC annual reporting 
requirements under Sec.  54.313 by permitting them to satisfy their 
Mobility Fund reporting requirements in a separate section of their 
report filed under Sec.  54.313. Consequently, in order to maintain the 
uniform deadline for filing of these annual reports, we also move the 
Mobility Fund annual report filing deadline from April 1 to July 1.
    12. We also revise the penalty deadlines in Sec.  54.313(j). The 
Rural Associations argue in their petition that the penalties imposed 
by Sec.  54.313(j) are ``far more onerous than similar prior rules that 
applied to individual high-cost support mechanisms because it reduces 
an ETC's entire USF and CAF support.'' In fact, however, the Commission 
merely extended existing rules that applied to federally designated 
ETCs to all ETCs. These mechanisms are necessary because they ``incent 
prompt filing of requisite certifications and information necessary to 
calculate support amounts * * * [and] to ensure that support is being 
used for the intended purposes.'' By moving the filing deadline from 
April 1 to July 1, carriers will have sufficient time to file their 
annual reports. ETCs that are unable to file their annual reports in a 
timely manner without cause will receive reduced levels of support 
commensurate with the lateness of their filings. Thus, a carrier that 
files late will not immediately lose all support. Rather, that support 
will be prorated for each quarter the filing is late. Those carriers 
that need more time can request a waiver, as needed, pursuant to the 
Commission's rules.
    13. We also take this opportunity to clarify that federally 
designated ETCs should file their Sec.  54.313 annual reports with the 
commissions of the states in which they operate and with the Tribal 
authorities, as appropriate. As the Commission noted in the USF/ICC 
Transformation Order, states are not required to file certifications 
with the Commission with respect to carriers that do not fall within 
their jurisdiction. However, consistent with the partnership between 
the Commission and the states to preserve and enhance universal 
service, and our recognition that states will continue to be the first 
place that consumers may contact regarding consumer protection issues, 
in the Order we encouraged states to bring to our attention issues and 
concerns about all carriers operating within their boundaries, 
including information regarding non-compliance with our rules by 
federally-designated ETCs. We also stated in the Order that we 
encourage Tribal governments, where appropriate, to report to the 
Commission any concerns about non-compliance with our rules by all 
recipients of support operating on Tribal lands. Ensuring that the 
relevant Tribal government has access to the annual reports of any ETC 
operating on Tribal lands is a critical component of the trust 
relationship with those Tribal governments.

D. Document Retention Period

    14. In the USF/ICC Transformation Order, we imposed a 10-year 
document retention period on all ETCs receiving high-cost support. 
USTelecom and CenturyLink argued that we should reduce the new 10-year 
document retention period and reinstate the original 5-year retention 
period previously contained in Sec.  54.202(e). We are not persuaded, 
as we conclude that a longer period of time is necessary for purposes 
of litigation under False Claims Act cases. Thus, we decline to revise 
the 10-year document retention period set forth in Sec.  54.320. 
USTelecom further argued in its Petition that, should the Commission 
decline to reconsider the new ten-year retention period, the rule 
should apply only to ``records accumulated from the effective date of 
the rule going forward.'' While we agree that Sec.  54.320 should apply 
prospectively only, we disagree with US Telecom on what constitutes 
prospective application. The new retention period shall apply to all 
covered documents in existence as of the effective date of Sec.  
54.320. The rule as so interpreted is a permissible, prospective 
application of a new rule because it does not affect or penalize past 
behavior but instead affects only conduct going forward.

III. Reporting of End User Rates

    15. Discussion. We grant the request of the Independent Telephone 
and Telecommunications Alliance and the Rural Associations (Joint 
Petitioners) with regard to the sampling date for the rate filing, and 
also to permit mid-year updates to reflect changes to rates. However, 
we deny the Rural Associations' and Accipiter's petitions for 
reconsideration.
    16. As discussed above, we are changing the date that ETCs must 
file their annual Sec.  54.313 reports, including data required for the 
rate floor, from April 1 to July 1. Consistent with this broader change 
to Sec.  54.313, we also change the sampling date set forth in Sec.  
54.313(h) from January 1 to June 1. The Commission's intent in 
specifying January 1 was to select a date relatively close to the 
annual filing deadline, but with the change of the annual filing 
deadline to July 1, we conclude that a six-month gap between the 
original sampling date of January 1 and the new reporting date of July 
1 is too long. Thus, we change the sampling date to June 1. Moreover, 
this conforming rule change addresses Joint Petitioners' request that 
carriers be permitted additional time to implement rate changes to 
maintain their eligibility for support before reductions begin on July 
1, 2012.
    17. In addition, we agree that carriers should be permitted to file 
mid-year updates when their rates and/or associated fees increase in a 
way that would reduce or eliminate the amount of any associated support 
reductions. Permitting mid-year updates in such instances will ensure 
that only carriers with artificially low rates still in effect will 
face support reductions. As

[[Page 30907]]

discussed in the USF/ICC Transformation Order, the fund should not be 
used to subsidize local rates far below the national average; however, 
where carriers have raised their rates, it is appropriate for us to 
take that into account. Accordingly, we amend our rules to add an 
optional filing for carriers to report increases in their local service 
rates or applicable state fees. Specifically, such carriers may report 
their revised rates and fees, as of December 1, on January 2 of each 
year. This mid-year update will be optional for any carrier that has 
increased local service rates or applicable state fees and which, 
therefore, would have a smaller reduction in high-cost universal 
service support. If, for instance, a carrier reports rates and state 
fees as of June 1st that are below the applicable benchmark, but then 
its rates and/or fees increase on October 1st, it may report those 
increased rates and/or fees in its January 2nd update, so that USAC can 
modify the support reductions for the remainder of the year. If the 
rates and/or fees increase after the June 1st sampling date to a level 
above the applicable rate floor, such that the carrier no longer would 
be subject to any reduction due to the rate floor, it may notify USAC 
of those increased rates in the January 2nd filing. Carriers do not 
need to report these rates in subsequent annual filings, as long as 
they remain greater than or equal to the applicable benchmark for the 
rate floor. We also make a corresponding change in our rule to address 
situations where rates and/or fees are reduced after the June 1st 
annual sampling date. The mid-year update will be required for any 
carrier when local service rates and/or applicable state fees decrease 
after the June 1st sampling date, which would lead to an increased 
reduction in high-cost universal service support. The mid-year update 
is required only if the local service rate or state fee reduction 
results in a reportable rate that is below the rate floor and would 
therefore be required pursuant to the annual filing. USAC will use the 
updated local service rates and state fees to determine the support 
reduction beginning with January support payments and continue until 
the next rate floor filing. We note that collecting these mid-year 
updates will require additional approval from the Office of Management 
and Budget pursuant to the Paperwork Reduction Act. The mid-year update 
will not, therefore, take effect until the Commission has received such 
approval.
    18. In addition, we make minor corrections to our rules to make 
clear that the residential local rate needs only to be reported to the 
extent that the sum of that rate, and state regulated fees as specified 
below, is below the effective rate floor, rather than requiring the 
reporting of all rates. To the extent the local rate plus relevant fees 
is above the relevant benchmark, there is no need for USAC to have this 
information in order to calculate any support reductions for lines that 
fall before the rate floor. We note, however, that all ETCs will be 
required to report voice and broadband price offerings, which could 
include rates above the rate floor benchmark, once the Bureau specifies 
the format for the pricing and service comparability survey and obtains 
PRA approval. We also note that USAC may collect additional data, 
subject to PRA approval, as necessary to validate the carriers' rate 
floor filings. We also clarify an inadvertent inconsistency that exists 
between the text of the Order and the text of the rules regarding which 
rates must be reported. We clarify that carriers are required to report 
all rates for residential local voice service that are under the 
specified rate floor, and not just rates that are denominated ``R-1'' 
rates or ``flat'' rates. The language used in paragraph 594 of the 
Order that carriers ``must report their flat rate for residential local 
service to USAC so that USAC can calculate reductions in support levels 
for those carriers with R1 rates below the specified rate floor'' 
therefore should have read ``must report their rates for residential 
local service to USAC so that USAC can calculate reductions in support 
levels for those carriers with local residential rates below the 
specified rate floor'' to be consistent with the adopted rule. It is 
necessary to apply the rate floor to all local residential service 
rates in order to avoid subsidization of rural rates that are 
significantly lower than the nationwide urban average, as intended by 
the Commission in adopting the rate floor.
    19. In response to a petition for clarification from the Vermont 
Public Service Board, we clarify what constitutes the local rate for 
purposes of the rate floor. For local service provided pursuant to 
measured or message rate plans--in which customers do not receive 
unlimited local calling, but instead pay a per-minute or per-call 
charge for some or all calls--the local service rate reported by 
carriers should reflect the basic rate for local service plus the 
additional charges incurred for measured service, using the mean number 
of minutes or message units for all customers subscribing to that rate 
plan multiplied by the applicable rate per minute or message unit. 
Measured service plans typically, but not always, include some units 
for additional usage--whether the units are minutes or calls--beyond 
the basic plan. The local service rate to be reported for purposes of 
the rate floor should include additional charges for measured service 
only to the extent that the average number of units used by subscribers 
to that rate plan exceeds the number of units that are included in the 
plan. Where measured service plans have multiple rates for additional 
units, such as peak and off-peak rates, the calculation should reflect 
the average number of units that subscribers to the rate plan pay at 
each rate. Providers therefore should report a local rate for purposes 
of the rate floor that accurately reflects the amount that end users 
are actually paying for local service. Additionally, we clarify that 
the same methodology will apply to calculating the ``R1'' or ``1FR'' 
Rate Ceiling Component Charge that limits rate increases for end users 
associated with intercarrier compensation reforms. In particular, this 
methodology should be used by carriers that do not tariff a flat rate 
for residential local service that includes unlimited local calling, 
i.e., the local service rate reported by such carriers should reflect 
the basic rate for local service of the measured or message rate plan, 
plus the additional charges incurred for measured service, using the 
mean number of minutes or message units for all customers subscribing 
to that rate plan multiplied by the applicable rate per minute or 
message unit. For customers subscribing to bundled service, carriers 
should report the local service rate as tariffed, if applicable, or as 
itemized on end-user bills. If a carrier neither tariffs nor itemizes 
the local voice service rate on bills for bundled services, it may 
report the rate of a similar stand-alone local voice service that it 
offers to consumers in that study area. Finally, we take this 
opportunity to clarify that the only fees that may be included for 
purposes of meeting the urban rate floor are state SLCs, state 
universal service fees, and mandatory extended area service charges. As 
the Commission stated in paragraph 238 of the USF/ICC Transformation 
Order, ``we will limit high-cost support where local end-user rates 
plus state regulated fees (specifically, state SLCs, state universal 
service fees, and mandatory extended area service charges) do not meet 
an urban rate floor representing the national average of local rates 
plus such state regulated fees.'' Accordingly, other

[[Page 30908]]

state fees, such as state 911 fees, may not be included.
    20. We next deny the Rural Associations' request for 
reconsideration. Adopting a rate benchmark of two standard deviations 
below the nationwide average urban rate could result in a rate 
benchmark so low as to be meaningless. In any event, the Rural 
Associations have not provided any analysis to support its request, 
other than to note that the Commission has previously used a standard 
deviation analysis to set a different type of rate benchmark. In that 
case, the Commission used a standard deviation analysis as part of a 
framework to ensure that basic voice service rates in rural, high-cost 
areas served by non-rural carriers were not significantly higher than 
in urban areas. Here the Commission addressed a different issue--
ensuring that federal universal service does not subsidize basic voice 
service rates that are artificially low. Adopting the Rural 
Associations' proposal would undermine this goal. Moreover, the USF/ICC 
Transformation Order states that a voice rate will be presumed to be 
reasonable if it falls within two standard deviations above the 
national average. Adopting the Rural Associations' proposal would 
require us to reconsider the broader determination that it is 
inappropriate for consumers across the country to subsidize the cost of 
service for some consumers that pay local service rates that are 
significantly lower than the national urban average, which we decline 
to do.
    21. Similarly, we are unpersuaded by Accipiter's request to abandon 
the rate floor altogether. A state ratemaking authority may decide to 
exercise its discretionary authority in a manner that prevents a 
carrier from avoiding the support reduction associated with low rates, 
but that would not change the fact that the carrier has excessively low 
rates and may, in fact, be an indication that the carrier does not 
require additional subsidization to service the community. The local 
rate floor is not intended to address broadband rates or components 
within bundled rates other than voice service, and as such Accipiter's 
argument regarding its ability to offer bundled services is irrelevant; 
here, all we are looking at is the rate for local voice service. The 
Commission sought comment on issues relating to comparability of 
pricing for broadband in the Further Notice, 76 FR 78384, December 16, 
2011. Finally, we decline to eliminate the rate floor based on 
Accipiter's unsupported suggestions of possible competitive harm. We 
are not persuaded that the appropriate response to unsubsidized 
competitors with low rates is to provide greater subsidies for the 
incumbent carrier in the competitive areas. Accordingly, we deny 
Accipiter's petition for reconsideration.

IV. Universal Service Support for Alaska

    22. In this section, we address petitions for reconsideration filed 
by General Communications, Inc. (GCI) and by the Alaska Rural Coalition 
relating to several universal service issues in Alaska.
    23. At the outset, however, we note that the State of Alaska has 
expressed concern with the Commission's use of the term ``Tribal 
lands'' as that term relates to areas of Alaska. In the USF/ICC 
Transformation Order, the Commission adopted a definition of ``Tribal 
lands'' for the purposes of high-cost support. Though it does not 
object to the definition of ``Tribal lands'' adopted by the Commission, 
the State of Alaska asserts that the use of the term ``Tribal lands'' 
might engender confusion in light of Alaska's unique circumstances, and 
it suggests that Commission should have used the term ``Tribal lands 
and Alaska Native Regions'' instead to reduce the possibility of such 
confusion. We decline to adopt the term proposed by the State of Alaska 
because we conclude that doing so could create more confusion than it 
might resolve, given the varying legal status of the other types of 
land included within the defined term Tribal lands. We clarify, 
however, that the use of the term Tribal lands in this context was not 
intended to alter the legal status of such lands for purposes unrelated 
to high-cost support.
    24. In the USF/ICC Transformation Order, the Commission for the 
first time established ubiquitous mobile service as a universal service 
goal. To meet this goal, the Commission established a new support 
mechanism for mobile competitive ETCs within the CAF--the Mobility 
Fund--and provided for a five-year transition away from the support 
mechanism under which such carriers previously received support. For 
most competitive ETCs, that five-year period begins on July 1, 2012. 
However, for competitive ETCs serving remote areas in Alaska, the 
Commission delayed the beginning of the five-year transition period by 
two years and further provided that any phase-down of support would 
only commence following implementation of Mobility Fund Phase II, 
including its Tribal component. During that two-year period, the 
Commission established an interim cap for remote parts of Alaska, 
modeled on the state-by-state interim cap that was established in the 
2008 Interim Cap Order, 73 FR 37882, July 2, 2008.

A. GCI's Petition for Reconsideration

    25. GCI requests that the Commission reconsider several aspects of 
how the USF/ICC Transformation Order rationalizes support for 
competitive ETCs serving remote parts of Alaska. GCI first asks that we 
reconsider the decision to transition support away from the identical 
support rule, under which competitive ETCs previously received 
universal service funding, to the Mobility Fund. GCI argues: ``Before 
commencing cuts to Remote Alaska support, the Commission should review 
the results of its Mobility Fund and Connect America Fund mechanisms, 
as well as the impact of capped support, to determine whether they, in 
fact, would provide sufficient support for Remote Alaska.''
    26. While we appreciate the significant challenges that carriers 
serving Alaska face, we are not persuaded that we should reconsider the 
transition from the prior identical support system to the Mobility Fund 
for competitive ETCs serving remote portions of Alaska. In the Order, 
the Commission concluded that ``[i]t is clear that the current system 
[of support for competitive ETCs] does not efficiently serve the 
nation.'' In particular, the Commission noted, the identical support 
rule, under which support for competitive ETCs had long been provided, 
``d[id] not provide appropriate levels of support for the efficient 
deployment of mobile services in areas that do not support a private 
business case for mobile voice and broadband.'' To the contrary, 
``support levels generated by the identical support rule bear no 
relation to the efficient cost of providing mobile voice service in a 
particular geography,'' and, as a consequence, support in some areas 
was excessive while support in other areas may have been set too low. 
And so in some areas, multiple competitive ETCs, each with its own 
facilities, might receive support, while in others, no carrier would 
seek to serve the area. For these and the many other reasons set out in 
the Order, the Commission eliminated the identical support rule.
    27. We see no persuasive reason why we should maintain the 
identical support rule in Alaska given our conclusion that it is an 
inefficient, poorly targeted mechanism for distributing support to 
competitive ETCs. Instead, we remain committed to transitioning to an 
efficient, incentive-based mechanism for ongoing support of mobile 
service. Because the Commission provided that support for carriers

[[Page 30909]]

serving remote areas of Alaska would not begin to be phased down until 
after Mobility Fund Phase II, including its Tribal component, was 
implemented, support levels for these areas in Alaska will generally 
remain unchanged until the replacement mechanism is in place. We will 
monitor the performance of all of the new support mechanisms, and, if 
circumstances warrant, we will adjust them as appropriate. But we are 
not persuaded now that they will fail to provide appropriate and 
sufficient support, and we therefore decline to modify the rules as 
requested.
    28. In the alternative, GCI proposes that we make two changes to 
the interim cap for remote areas of Alaska and revise the baseline 
amount from which carriers will be phased down after the two-year 
delay. First, GCI asks that we modify the scope of the interim cap 
adopted for remote areas of Alaska in the USF/ICC Transformation Order. 
As adopted, the delayed phase-down applies only to carriers that 
previously had elected to take advantage of the Covered Locations 
exception to the 2008 interim cap, which permitted carriers to receive 
uncapped support (i.e., to be exempt from the cap) if they certified 
that they served Tribal areas (i.e., areas ``covered'' by the 
exception). GCI requests that we modify that rule so that all 
competitive ETCs serving remote Alaska would be included in the cap, 
and that the cap be expanded to account for the support such carriers 
previously received.
    29. There is only one carrier that serves portions of remote areas 
of Alaska but did not take advantage of the Covered Locations 
exception: The competitive ETC Dobson Communications, which was 
acquired by AT&T several years ago. Under the old interim cap, carriers 
like AT&T that did not certify that they served Covered Locations 
received less support per line than carriers that did so certify. GCI 
proposes that we include AT&T in the remote Alaska mechanism, but 
continue to provide AT&T with the lower support amount per line that it 
received by virtue of not taking advantage of the Covered Location 
exception.
    30. GCI argues that including AT&T in the delayed phase-down for 
remote Alaska will improve incentives for participating carriers to 
make investments in unserved and underserved areas in remote Alaska. 
GCI notes that adding AT&T to the remote Alaska mechanism would 
increase the total size of the cap for remote Alaska and would reduce 
each carrier's relative share of the total, which means that every time 
a carrier gains a customer (relative to other carriers), the operation 
of the cap would result in more of the incremental support associated 
with that customer ``coming from'' other carriers rather than the 
carrier itself. In addition, GCI claims that excluding AT&T from the 
remote Alaska mechanism would separately reduce AT&T's incentive to 
invest in those areas.
    31. We are not persuaded that we should modify the rule as GCI 
requests. We note that GCI does not dispute that the cap mechanism 
provides incentives to make investments in unserved and underserved 
areas. Rather, GCI argues that its proposal would enhance those 
incentives. But, while GCI may be correct that, theoretically, a 
smaller pie (and larger relative shares) means less reward (and thus 
less incentive) for improving a carrier's position relative to its 
competitors, the opposite is true about the incentives to avoid losing 
relative position. That is, with a smaller pie (and larger shares), 
each carrier has a greater incentive to ensure that it does not lose 
customers relative to others (and, if others are gaining customers, to 
ensure that it gains customers proportionately). The incentive argument 
thus cuts both ways, and we do not find it compelling. Moreover, it is 
unclear how much the purported differences in incentives, over this 
time frame, would actually alter carriers' behavior.
    32. Nor are we persuaded that AT&T should be added to the remote 
Alaska mechanism in order to preserve AT&T's incentives to invest. AT&T 
did not previously take advantage of the Covered Locations exception to 
the interim cap, which would have provided it with significantly more 
support. It is speculative that including AT&T in the remote Alaska 
mechanism would have any material effect on AT&T's plans for investment 
in Alaska or its conduct vis-[agrave]-vis other competitive ETCs in the 
state. Indeed, in this regard, we note that AT&T neither sought 
reconsideration of this aspect of the Order nor responded to GCI's 
proposal. Finally, we note that including AT&T in the cap mechanism 
would increase the total cost of the cap. We are not inclined to modify 
the mechanism to make it more costly when the benefit to doing so is as 
speculative as it would be in this case. For these reasons, we decline 
to alter the remote Alaska interim cap as GCI requests. GCI 
subsequently offered an alternative proposal to mitigate the budget 
impact of including AT&T in the delayed phase-down mechanism. 
Specifically, GCI proposed that AT&T's support be calculated under the 
delayed phase-down in the manner GCI previously proposed, and then 
reduced further by the reduction factor applicable to other carriers 
(i.e., 20 percent in the first year, 40 percent in the second year, and 
so on). We decline to adopt this revised proposal as well. We note that 
it is hard to predict precisely what effect this change would have on 
the total cost of the delayed phase-down compared to our existing 
rules--it could increase the total cost if other carriers like GCI were 
to ``take away'' some of AT&T's support through the operation of the 
cap mechanism, albeit by less than including AT&T without phasing down 
AT&T's support. It would also add significant complexity to the 
calculation of support amounts. Moreover, nothing in GCI's revised 
proposal alters our assessment of GCI's arguments about the incentives 
carriers would face under its proposal
    33. Second, GCI asks that we reconsider the calculation of the 
remote Alaska interim cap amount. As adopted, the rules provide that 
the interim cap shall be equal to the sum of support carriers subject 
to the delayed phase-down received in 2011. GCI suggests that, rather 
than using the amount of support disbursed in 2011 to set the cap, we 
should set it by multiplying the number of lines such carriers report 
on March 30, 2012 (reflecting lines served as of September 30, 2011) by 
the per-line support amounts in effect on December 31, 2011. GCI 
asserts that doing so would be more consistent with the purpose of the 
delayed phase-down mechanism, ``to `preserve newly initiated services 
and facilitate additional investment in still unserved and underserved 
areas.''' GCI argues that ``[a]s written, the rules do not preserve 
funding for newly initiated services.'' As GCI explains, there is 
normally a delay of 10-12 months between the time service is provided 
and the time support is received for that service--i.e., a delay of 10-
12 months between the time a carrier adds a line and when the carrier 
gets support for that line. Accordingly, GCI asserts, ``the rules as 
written in effect cap Remote Alaska funding based on deployments as 
they existed more than a year ago, and fail to fully reflect the new 
deployments to 35 Remote Alaska villages that occurred in the spring 
and summer of 2010 and 2011.''
    34. We are not persuaded that we should alter the interim cap 
baseline as GCI suggests. The criticisms of the identical support 
rule--that, among other things, there was no reason to believe it set 
support amounts at the right level--apply to its operation in Alaska, 
as elsewhere. In the USF/ICC Transformation Order, the Commission

[[Page 30910]]

did not conclude that, in order to preserve newly initiated services 
and facilitate investment, it was necessary to permit support levels to 
continue to rise to what carriers might have anticipated they might 
have received in the future under that rule. Rather, the Commission 
concluded that the appropriate means to preserve newly initiated 
services and to facilitate additional investment would be to provide a 
``slower transition path'' from current support levels--to ensure that 
the aggregate amount of support to remote areas of Alaska was not 
reduced prematurely. The Commission's chosen approach, it explained, 
``balance[d] the need to control the growth in support to competitive 
ETCs in uncapped areas and the need to provide a more gradual 
transition for the very remote and very high-cost areas in Alaska to 
reflect the special circumstances carriers and consumers face in those 
communities.'' GCI has not provided any evidence that would call the 
Commission's conclusions on these points into question. Accordingly, we 
decline to alter the rule in the manner proposed.
    35. Finally, GCI requests that we revise the rules relating to the 
calculation of each carrier's baseline of support--the amount, at the 
end of the two-year delay, from which each carrier will phase down over 
the subsequent five years. As adopted, the rules provide that the 
baseline amount from which carriers will be phased down, for carriers 
subject to the delayed transition for remote Alaska, should be equal to 
the amount each such carrier received in 2013. GCI proposes that we 
modify this baseline in two respects. First, GCI proposes that the 
baseline not be set ``until the delayed phase-down for Remote Alaska 
actually begins, i.e., the later of July 1, 2014, or the implementation 
of Mobility Fund Phase II, including its Tribal component.'' Second, 
GCI proposes, each carrier's baseline should be set ``based on the 
actual line count during the last complete month prior to the 
commencement of the support phase-down, i.e., the latest possible line 
count would be used to calculate each per-study-area support amount.'' 
GCI argues that making these modifications to the rules would improve 
the incentives for carriers subject to the delayed phase-down to 
continue to invest throughout the delay period.
    36. As GCI observes, the rule as adopted provides no incentive to 
deploy new services or add new lines after the fourth quarter of 2012 
(while beginning to mute incentives to do so even earlier), because new 
lines added at that point will not be considered as part of the 
baseline support amount from which each carrier will be phased down. On 
the other hand, by setting each carrier's phase-down baseline using 
that carrier's actual line count from the month before the phase down 
begins, as GCI proposes, carriers' incentives would be maintained until 
approximately mid-2014, when the phase-down for such carriers is 
expected to begin. Yet adopting these proposals will have no budgetary 
impact, because total support distributed to competitive ETCs serving 
remote Alaska is limited by the overall cap amount. That is, the 
specific methodology used for calculating each carrier's phase-down 
baseline determines only each carrier's relative share of the total 
amount of support available under the cap.
    37. We agree with GCI that its proposed revisions would be an 
improvement, because they would enhance the incentives for carriers to 
compete and to deploy facilities, without, as GCI notes, impacting the 
overall budget. For these reasons, we adopt GCI's proposed revisions 
and revise Sec.  54.307(e) accordingly. Specifically, we alter the rule 
governing the calculation of support for carriers serving remote Alaska 
to provide that, rather than freezing support amounts at the end of 
2013, support amounts will not be frozen under the delayed phase down 
mechanism until June 2014 or the last full month prior to the 
implementation of Mobility Fund Phase II, whichever is later; we also 
provide that the baseline amount itself shall be the annualized monthly 
support amount the carrier received for June 2014 or the last full 
month prior to the implementation of Mobility Fund Phase II, whichever 
is later. As stated previously, these changes will not affect the 
budget.

B. Alaska Rural Coalition's Petition

    38. The Alaska Rural Coalition also asks us to reconsider and 
clarify aspects of the USF/ICC Transformation Order. While the Alaska 
Rural Coalition praises the decision to delay the phase-down of support 
for competitive ETCs serving remote areas of Alaska, it argues that 
rural incumbent carriers serving remote Alaska should also be afforded 
a two-year delay before their own support is reduced. The Alaska Rural 
Coalition states that the Order places ``a significant burden on small, 
rural companies serving remote areas'' and argues that ``the same 
reasons that the Commission articulated in its delay of the national 
five year transition period [for competitive ETCs serving remote 
Alaska] also warrant a more gradual adjustment of these reforms 
[affecting incumbent carriers] for the remote areas of Alaska in order 
to reflect the special circumstances for these remote, extremely high 
cost areas.''
    39. We decline to adopt the Alaska Rural Coalition's suggestion. We 
disagree that the reasons that underlay the Commission's decision to 
delay the transition for competitive ETCs serving remote Alaska apply 
to incumbent carriers like the Coalition's members. The Commission 
adopted the delayed transition for competitive carriers in order to 
ensure that support would not be reduced until after the mechanism that 
will provide ongoing support targeted at such carriers--the Mobility 
Fund Phase II, including its Tribal component--is operational. As 
explained in the Order, the delayed phase-down would help ``preserve 
newly initiated services and facilitate additional investments in still 
unserved and underserved areas during the national transition to the 
Mobility Funds.'' In contrast, support mechanisms for rate-of-return 
carriers like the members of the Alaska Rural Coalition already exist. 
Moreover, although some rate-of-return carriers will receive less 
support based on the Commission's decision to place reasonable limits 
on expenses and to phase out mechanisms that were outdated and not 
operating as intended, other rate-of-return carriers will see little 
change in support, and yet others will see increases in support. Given 
this, we are not persuaded that a blanket delay of reforms to the 
existing mechanisms for incumbent carriers serving remote Alaska would 
serve the public interest.
    40. The Alaska Rural Coalition also asks that we reconsider and 
relax certain broadband requirements that the Commission adopted in 
this proceeding. The USF/ICC Transformation Order imposed a general 
obligation that carriers receiving high-cost universal service support 
offer broadband with defined speed, latency, and capacity 
characteristics. The Commission set an initial broadband speed 
requirement of at least 4 megabits per second downstream and 1 megabit 
per second upstream The Commission recognized, however, that these 
requirements may prove impractical for carriers reliant on satellite 
backhaul facilities and therefore relaxed those obligations for 
carriers with no access to terrestrial backhaul, instead allowing 1 
megabit per second downstream and 256 kilobit per second upstream speed 
requirement with no capacity or latency requirement. The Commission 
stated that the limited exception would not apply to carriers that do 
have access to terrestrial backhaul facilities but object to the cost

[[Page 30911]]

of that backhaul. In addition, the Commission provided rate-of-return 
carriers like the Alaska Rural Coalition's members with flexibility in 
meeting their buildout obligations, requiring them to provide broadband 
meeting the defined service characteristics on reasonable request, 
rather than ubiquitously by a date certain.
    41. The Alaska Rural Coalition asks that we reconsider these 
requirements in two respects. First, the Alaska Rural Coalition objects 
to the requirements imposed on carriers reliant on satellite backhaul, 
claiming that it ``is not convinced that current satellite offerings 
can reliably meet'' the relaxed speed requirements for such carriers. 
The Coalition asks that ``further consideration * * * be given to the 
cost and realistic capacity of the satellites serving Alaska.'' But the 
Alaska Rural Coalition provides no information about satellite capacity 
limitations. Indeed, the Coalition does not even actually assert that 
meeting the relaxed requirements will, in fact, pose a challenge at 
all. On this record, we are not convinced that we should modify these 
requirements.
    42. The Alaska Rural Coalition also asks that we clarify or 
reconsider the Commission's conclusion that a carrier may not take 
advantage of the relaxed broadband requirements if terrestrial backhaul 
is available to the carrier, but the carrier objects to the cost of 
obtaining it. For example, the Coalition explains, terrestrial backhaul 
may be newly present in some areas of Alaska, but carriers may not be 
able to get access to it at any price, while in other areas, the cost 
may ``far exceed[] the cost of purchasing satellite backhaul, an 
already cost-prohibitive solution.'' The Alaska Rural Coalition further 
observes that the buildout requirement applicable to rate-of-return 
carriers--that they deploy broadband ``on reasonable request''--
provides some potential for flexibility, and it asks whether a request 
should be deemed unreasonable if the cost of purchasing terrestrial 
middle mile service to provide broadband service exceeds the high-cost 
support available for that line. ACS seconds the Coalition's concern, 
arguing that the Commission should clarify that backhaul is not 
``available'' if it cannot be had ``at a price reasonably comparable to 
prices for backhaul links between urban areas.''
    43. We appreciate the concerns raised by the Alaska Rural Coalition 
and ACS that it may not be cost-effective to serve certain customers 
due to the high cost of backhaul. Rather than granting a blanket 
exemption of the broadband obligations established for rate-of-return 
companies in the USF/ICC Transformation Order, we clarify, as the 
Alaska Rural Coalition requests, that our current rules provide 
sufficient flexibility to take into account any unique circumstances 
that may impact the ability of rate-of-return companies to extend 
broadband to their customers, including backhaul costs. As the 
Coalition notes, rate-of-return carriers are required to provide 
service meeting the specified characteristics on reasonable request, 
which, the Commission explained in the Order, was an obligation similar 
to the voice deployment obligation many of those carriers were already 
subject to. This obligation, enforced in the first instance by the 
relevant ETC-designating authority (generally the state), permits these 
entities to take into account backhaul costs or other unique 
circumstances that may make it cost-prohibitive to extend service to 
particular customers, in Alaska or any other area. We intend to 
carefully monitor developments in this regard and will consider making 
further clarifications or revisions if necessary.
    44. We further conclude that it would be premature to modify the 
deployment requirements applicable to price cap carriers like ACS. 
Phase I of the Connect America Fund is designed to reach a significant 
number of relatively low-cost locations for which there is nevertheless 
no business case for deployment without support. Areas that may be more 
expensive to deploy broadband to, such as those served by satellite 
backhaul, will be addressed in ongoing proceedings to implement CAF 
Phase II, which will employ a model to determine the forward-looking 
cost of providing broadband to a service area on a granular basis. We 
conclude that ACS's concerns are more properly considered in the 
context of the effort to develop appropriate support levels in CAF 
Phase II, and we therefore decline, at this time, to modify our rule 
relating to backhaul availability.
    45. The Alaska Rural Coalition also requests that we clarify that 
the new local rate benchmark, which reduces high-cost support to 
incumbent carriers that offer very low rates, applies to competitive 
ETCs in Alaska, or, if it does not already apply to such carriers, that 
we extend the rate benchmark to them. The Coalition argues that 
imposing the rate floor on all carriers receiving high-cost support is 
necessary to avoid creating a ``significant competitive disadvantage 
for anyone competing against'' a competitive ETC that is not subject to 
the rate floor.
    46. We take this opportunity to clarify that the rate floor does 
not apply to competitive ETCs; it applies only to incumbent carriers. 
To eliminate any potential confusion, we modify Sec.  54.318(c) of our 
rules accordingly. Further, we decline to extend the rate floor to 
competitive ETCs. Imposing a rate floor on competitive ETCs would be 
administratively complicated and time-consuming. Most competitive ETCs 
are mobile wireless carriers, not landline carriers, and because mobile 
wireless service is sold in different ways, it is not at all obvious 
how a rate floor could be quickly implemented for such carriers. We 
also do not find the Alaska Rural Coalition's competitive parity 
argument compelling in light of the changes that have already been made 
to support for competitive ETCs, both wireline and wireless. We note, 
for example, that existing rules provide that support for competitive 
ETCs will be phased down in most areas of the Nation. Even in remote 
areas of Alaska, funding under the identical support rule is being 
phased out, albeit on a delayed basis. Moreover, even in the near term, 
for carriers serving remote areas of Alaska competitive ETC per-line 
support will decrease as total lines increase as a result of the USF/
ICC Transformation Order's cap on such support. The Alaska Rural 
Coalition focuses on one rule in isolation, in effect arguing that the 
Commission's reform is not competitively neutral. However, as we 
discussed in the USF/ICC Transformation Order, ``[t]he competitive 
neutrality principle does not require all competitors to be treated 
alike, but `only prohibits the Commission from treating competitors 
differently in `unfair' ways.' '' Given the other rule changes that 
competitive ETCs face that rate-of-return carriers do not, the rule as 
applied to incumbents is not unfair. For these reasons, we decline to 
alter the rules as requested by the Alaska Rural Coalition.

V. Intercarrier Compensation

A. Definition of Fiscal Year for Calculation of Eligible Recovery

    47. Discussion. We deny the Rural Associations' request. The Rural 
Associations provide no explanation of why using the period July 1, 
2010 through June 30, 2011 is more ``fully and fairly representative of 
prior-year operations.'' Given the significant and ongoing decline of 
minutes of use across the industry, with minutes-of-use declining at 
rates in excess of 10 percent per year, the Rural Associations' 
proposed time period would, by basing recovery on an earlier time 
period with correspondingly greater demand, likely permit greater 
recovery from consumers,

[[Page 30912]]

through the Access Recovery Charge (ARC) and CAF, than would use of the 
Fiscal Year definition adopted in the USF/ICC Transformation Order. 
Additionally, the Rural Associations have not quantified the impact of 
their proposed change on consumers or the budget for the CAF. We are 
likewise unpersuaded that using an earlier period would provide greater 
``certainty and closure'' as the Rural Associations assert. Carriers 
currently are preparing their filings based upon the dates in the 
existing rules and changing them at this time would potentially disrupt 
that process. Accordingly, we decline to reconsider the fiscal year 
time period to be used for determining Eligible Recovery.

B. Use of Revenue Forecast

    48. Discussion. The Rural Associations fail to demonstrate that the 
use of each study area's actual 2011 interstate revenue requirements 
would produce substantially more accurate baseline amounts. We believe 
that using projected settlements associated with 2011 annual interstate 
switched access tariff filings--filings which were deemed lawful, which 
established the charges paid by consumers, and which are based on 
historical costs--sufficiently protects the interests of such carriers.
    49. Additionally, making carriers' actual 2011 interstate revenue 
requirement the basis of their recovery would create opportunity and 
incentive for carriers to manipulate their cost studies to increase 
their recovery. The actual interstate revenue requirements that the 
Rural Associations suggest we use had not been filed at the time the 
Order was adopted. Consequently, in preparing cost studies, carriers 
could adopt study procedures designed to include costs associated with 
one-time events, extraordinary depreciation, etc. that could improperly 
increase a carrier's Rate-of-Return Baseline--and thus its Eligible 
Recovery--for years to come. The Rural Associations cite ``review and 
verification by independent auditors, NECA review procedures, state 
regulators and other entities'' as sufficient to allay concerns that 
``cost studies might be manipulated * * *.'' Given the very significant 
incentives that the rural carriers' proposed approach would create to 
increase costs--allowing them to in effect ``lock in'' higher recovery 
each year for at least the next several years based upon a single cost 
study--we are not persuaded that the processes the Rural Associations 
identify provide sufficiently robust protections compared to using 
tariff forecasts filed before the USF/ICC Transformation Order was 
adopted. Moreover, we note that any carrier may petition for a Total 
Cost and Earnings Review if it believes the allowed recovery is 
insufficient. The request for reconsideration on this matter is 
therefore denied.

VI. Procedural Matters

A. Paperwork Reduction Act

    50. This Third Order on Reconsideration contains new information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. It has been or 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.

B. Final Regulatory Flexibility Act Certification

    51. The Regulatory Flexibility Act (RFA) requires that agencies 
prepare a regulatory flexibility analysis for notice-and-comment 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' The RFA generally defines ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act. A small business 
concern is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the Small Business Administration 
(SBA).
    52. We hereby certify that the rule revisions in this Third Order 
on Reconsideration will not have a significant economic impact on a 
substantial number of small entities. This Order adopts several 
revisions to our rules. First, we modify certain of our reporting 
requirements. Second, we change the sampling date for reporting end 
user rates. Third, we create a mid-year rate filing update that is 
voluntary for carriers that increase rates and mandatory for carriers 
that reduce rates and that are otherwise subject to the annual rate 
filing requirement. Fourth, we alter our rules so that the capped 
support mechanism for competitive Eligible Telecommunications Carriers 
serving remote areas of Alaska will continue until the phase down of 
support begins, and we set each carrier's baseline amount for the phase 
down period as the carrier's support amount for the last full month 
prior to the beginning of the phase down. We conclude that these minor 
revisions, though they may possibly have some impact on some carriers, 
are not likely to have a significant economic impact on a substantial 
number of small entities. The Commission will send a copy of this 
Order, including this certification, to the Chief Counsel for Advocacy 
of the Small Business Administration. In addition, the Order (or a 
summary thereof) and certification will be published in the Federal 
Register.

C. Congressional Review Act

    53. The Commission will send a copy of this Order to Congress and 
the Government Accountability Office pursuant to the Congressional 
Review Act.

VII. Ordering Clauses

    54. Accordingly, It is ordered, pursuant to the authority contained 
in sections 1, 2, 4(i), 201-206, 214, 218-220, 251, 252, 254, 256, 
303(r), 332, and 403 of the Communications Act of 1934, as amended, and 
section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 152, 
154(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, 
1302, and Sec. Sec.  1.1 and 1.429 of the Commission's rules, 47 CFR 
1.1, 1.429, that this Third Order on Reconsideration is adopted, 
effective June 25, 2012, except for those rules and requirements 
involving Paperwork Reduction Act burdens, which shall become effective 
immediately upon announcement in the Federal Register of OMB approval.
    55. It is further ordered that part 54 of the Commission's rules, 
47 CFR part 54, is amended as set forth, and such rule amendment shall 
be effective June 25, 2012, except for those rules and requirements 
involving Paperwork Reduction Act burdens, which shall become effective 
immediately upon announcement in the Federal Register of OMB approval.
    56. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of the Commission's rules, 47 CFR 1.429, the 
Petition for Reconsideration of Alaska Rural Coalition is granted in 
part to the extent described herein, and is denied in part to the 
extent described herein.
    57. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of

[[Page 30913]]

the Commission's rules, 47 CFR 1.429, the Petition for Reconsideration 
of United States Telecom Association is granted in part to the extent 
described herein, and is denied in part to the extent described herein.
    58. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of the Commission's rules, 47 CFR 1.429, the 
Petition for Reconsideration of Rock Hill Telephone Company d/b/a 
Comporium, Lancaster Telephone Company d/b/a Comporium, Fort Mill 
Telephone Company d/b/a Comporium, PBT Telecom, Inc. d/b/a Comporium, 
and Citizens Telephone Company d/b/a Comporium is granted in part to 
the extent described herein, and is denied in part to the extent 
described herein.
    59. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  and 1.429 of the Commission's rules, 47 CFR 1.429, the 
Petition for Reconsideration of National Exchange Carrier Association, 
Inc., Organization for the Promotion and Advancement of Small 
Telecommunications Companies, and Western Telecommunications Alliance 
is granted in part to the extent described herein, and is denied in 
part to the extent described herein.
    60. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of the Commission's rules, 47 CFR 1.429, the 
January 23, 2012 Joint Petition for Clarification of the Independent 
Telephone and Telecommunications Alliance, National Exchange Carrier 
Association, National Telecommunications Cooperative Association, 
Organization for the Promotion and Advancement of Small 
Telecommunications Companies, and Western Telecommunications Alliance 
is granted.
    61. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of the Commission's rules, 47 CFR 1.429, the 
Petition for Reconsideration of Accipiter Communications Inc. is denied 
in part.
    62. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec.  1.429 of the Commission's rules, 47 CFR 1.429, the 
Petition for Reconsideration of General Communication, Inc., is granted 
to the extent provided herein and denied to the extent provided herein.
    63. It is further ordered that, pursuant to the authority contained 
in Sec.  1.3 of the Commission's rules, 47 CFR 1.3, the Petition for 
Waiver of Crocket Telephone Company Inc., Peoples Telephone Company, 
and West Tennessee Telephone Company, Inc., is dismissed.
    64. It is further ordered that, pursuant to the authority contained 
in Sec.  1.3 of the Commission's rules, 47 CFR 1.3, the Petition for 
Waiver of Shoreham Telephone Company is dismissed.
    65. It is further ordered that the Commission shall send a copy of 
this Order to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    66. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order, including the Final Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

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1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, 219, 220, 254, 
303(r), 403, and 1302 unless otherwise noted.

Subpart D--Universal Service Support for High Cost Areas

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2. Amend Sec.  54.5 by revising the definition of ``Tribal lands'' to 
read as follows:


Sec.  54.5  Terms and definitions.

* * * * *
    Tribal lands. For the purposes of high-cost support, ``Tribal 
lands'' include any federally recognized Indian tribe's reservation, 
pueblo or colony, including former reservations in Oklahoma, Alaska 
Native regions established pursuant to the Alaska Native Claims 
Settlement Act (85 Stat. 688) and Indian Allotments, see Sec.  
54.400(e), as well as Hawaiian Home Lands--areas held in trust for 
native Hawaiians by the state of Hawaii, pursuant to the Hawaiian Homes 
Commission Act, 1920, July 9, 1921, 42 Stat 108, et seq., as amended.
* * * * *

0
3. Amend Sec.  54.307 by:
0
a. Revising paragraph (e)(3)(iii);
0
b. Removing paragraph (e)(3)(iv)(A);
0
c. Redesignating paragraphs (e)(3)(iv)(B) through (F) as paragraphs 
(e)(3)(iv)(A) through (E); and
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d. Revising paragraphs (e)(3)(v) introductory text, (e)(5), and (e)(7).
    The revisions read as follows:


Sec.  54.307  Support to a company eligible telecommunications carrier.

* * * * *
    (e) * * *
    (3) * * *
    (iii) Baseline for Delayed Phase Down. For purpose of the delayed 
phase down for remote areas in Alaska, the baseline amount for each 
competitive eligible telecommunications carrier subject to the delayed 
phase down shall be the annualized monthly support amount received for 
June 2014 or the last full month prior to the implementation of 
Mobility Fund Phase II, whichever is later.
* * * * *
    (v) Interim Support for Remote Areas in Alaska. From January 1, 
2012, until June 30, 2014 or the last full month prior to the 
implementation of Mobility Fund Phase II, whichever is later, 
competitive eligible telecommunications carriers subject to the delayed 
phase down for remote areas in Alaska shall continue to receive the 
support, as calculated by the Administrator, that each competitive 
telecommunications carrier would have received under the frozen per-
line support amount as of December 31, 2011 capped at $3,000 per year, 
provided that the total amount of support for all such competitive 
eligible telecommunications carriers shall be capped pursuant to 
paragraph (e)(3)(v)(A) of this section.
* * * * *
    (5) Implementation of Mobility Fund Phase II Required. In the event 
that the implementation of Mobility Fund Phase II has not occurred by 
June 30, 2014, competitive eligible telecommunications carriers will 
continue to receive support at the level described in paragraph 
(e)(2)(iv) of this section until Mobility Fund Phase II is implemented. 
In the event that Mobility Fund Phase II for Tribal lands is not 
implemented by June 30, 2014, competitive eligible telecommunications 
carriers serving Tribal lands shall continue to receive

[[Page 30914]]

support at the level described in paragraph (e)(2)(iii) of this section 
until Mobility Fund Phase II for Tribal lands is implemented, except 
that competitive eligible telecommunications carriers serving remote 
areas in Alaska and subject to paragraph (e)(3) of this section shall 
continue to receive support at the level described in paragraph 
(e)(3)(v) of this section.
* * * * *
    (7) Line Count Filings. Competitive eligible telecommunications 
carriers, except those subject to the delayed phase down described in 
paragraph (e)(3) of this section, shall no longer be required to file 
line counts beginning January 1, 2012. Competitive eligible 
telecommunications carriers subject to the delayed phase down described 
in paragraph (e)(3) of this section shall no longer be required to file 
line counts beginning July 1, 2014, or the date after the first line 
count filing following the implementation of Mobility Fund Phase II, 
whichever is later.

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4. Amend Sec.  54.313 by revising paragraphs (a)(10) and (11), (c)(1) 
through (4), (d), (e)(3) introductory text, (f)(1) introductory text, 
(h), and (j) to read as follows:


Sec.  54.313  Annual reporting requirements for high-cost recipients.

    (a) * * *
    (10) Beginning July 1, 2013. A letter certifying that the pricing 
of the company's voice services is no more than two standard deviations 
above the applicable national average urban rate for voice service, as 
specified in the most recent public notice issued by the Wireline 
Competition Bureau and Wireless Telecommunications Bureau; and
    (11) Beginning July 1, 2013. The results of network performance 
tests pursuant to the methodology and in the format determined by the 
Wireline Competition Bureau, Wireless Telecommunications Bureau, and 
Office of Engineering and Technology and the information and data 
required by this paragraphs (a)(1) through (7) of this section 
separately broken out for both voice and broadband service.
* * * * *
    (c) * * *
    (1) By July 1, 2013. A certification that frozen high-cost support 
the company received in 2012 was used consistent with the goal of 
achieving universal availability of voice and broadband;
    (2) By July 1, 2014. A certification that at least one-third of the 
frozen-high cost support the company received in 2013 was used to build 
and operate broadband-capable networks used to offer the provider's own 
retail broadband service in areas substantially unserved by an 
unsubsidized competitor;
    (3) By July 1, 2015. A certification that at least two-thirds of 
the frozen-high cost support the company received in 2014 was used to 
build and operate broadband-capable networks used to offer the 
provider's own retail broadband service in areas substantially unserved 
by an unsubsidized competitor; and
    (4) By July 1, 2016 and in subsequent years. A certification that 
all frozen-high cost support the company received in the previous year 
was used to build and operate broadband-capable networks used to offer 
the provider's own retail broadband service in areas substantially 
unserved by an unsubsidized competitor.
    (d) In addition to the information and certifications in paragraph 
(a) of this section, beginning July 1, 2013, price cap carriers 
receiving high-cost support to offset reductions in access charges 
shall provide a certification that the support received pursuant to 
Sec.  54.304 in the prior calendar year was used to build and operate 
broadband-capable networks used to offer provider's own retail service 
in areas substantially unserved by an unsubsidized competitor.
    (e) * * *
    (3) Beginning July 1, 2014. A progress report on the company's 
five-year service quality plan pursuant to Sec.  54.202(a), including 
the following information:
* * * * *
    (f) * * *
    (1) Beginning July 1, 2014. A progress report on its five-year 
service quality plan pursuant to Sec.  54.202(a) that includes the 
following information:
* * * * *
    (h) Additional voice rate data. (1) All incumbent local exchange 
carrier recipients of high-cost support must report all of their rates 
for residential local service for all portions of their service area, 
as well as state fees as defined pursuant to Sec.  54.318(e), to the 
extent the sum of those rates and fees are below the rate floor as 
defined in Sec.  54.318, and the number of lines for each rate 
specified. Carriers shall report lines and rates in effect as of June 
1.
    (2) In addition to the annual filing, local exchange carriers may 
file updates of their rates for residential local service, as well as 
state fees as defined pursuant to Sec.  54.318(e), on January 2 of each 
year. If a local exchange carrier reduces its rates and the sum of the 
reduced rates and state fees are below the rate floor as defined in 
Sec.  54.318, the local exchange carrier shall file such an update. For 
the update, carriers shall report lines and rates in effect as of 
December 1.
* * * * *
    (j) Filing deadlines. In order for a recipient of high-cost support 
to continue to receive support for the following calendar year, or 
retain its eligible telecommunications carrier designation, it must 
submit the annual reporting information required by this section no 
later than July 1, 2012, except as otherwise specified in this section 
to begin in a subsequent year, and thereafter annually by July 1 of 
each year. Eligible telecommunications carriers that file their reports 
after the July 1 deadline shall receive support pursuant to the 
following schedule:
    (1) Eligible telecommunication carriers that file no later than 
October 1 shall receive support for the second, third and fourth 
quarters of the subsequent year.
    (2) Eligible telecommunication carriers that file no later than 
January 1 of the subsequent year shall receive support for the third 
and fourth quarters of the subsequent year.
    (3) Eligible telecommunication carriers that file no later than 
April 1 of the subsequent year shall receive support for the fourth 
quarter of the subsequent year.
* * * * *

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5. Amend Sec.  54.318 by revising paragraphs (a) through (c) and (f) 
and by adding paragraphs (h) and (i) to read as follows:


Sec.  54.318  High-cost support; limitations on high-cost support.

    (a) Beginning July 1, 2012, each carrier receiving high-cost 
support in a study area under this subpart will receive the full amount 
of high-cost support it otherwise would be entitled to receive if its 
rates for residential local service plus state regulated fees as 
defined in paragraph (e) of this section exceed a local urban rate 
floor representing the national average of local urban rates plus state 
regulated fees under the schedule specified in paragraph (f) of this 
section.
    (b) Carriers whose rates for residential local service plus state 
regulated fees offered for voice service are below the specified local 
urban rate floor under the schedule below plus state regulated fees 
shall have high-cost support reduced by an amount equal to the extent 
to which its rates for residential local service plus state regulated 
fees are below the local urban rate floor, multiplied by the number of 
lines for which it is receiving support.

[[Page 30915]]

    (c) This rule will apply only to rate-of-return carriers as defined 
in Sec.  54.5 and carriers subject to price cap regulation as that term 
is defined in Sec.  61.3 of this chapter.
* * * * *
    (f) Schedule. High-cost support will be limited where the rate for 
residential local service plus state regulated fees are below the local 
urban rate floor representing the national average of local urban rates 
plus state regulated fees under the schedule specified in this 
paragraph. To the extent end user rates plus state regulated fees are 
below local urban rate floors plus state regulated fees, appropriate 
reductions in high-cost support will be made by the Universal Service 
Administrative Company.
* * * * *
    (h) If, due to changes in local service rates, a local exchange 
carrier makes an updated rate filing pursuant to section 54.313(h)(2), 
the Universal Service Administrative Company will update the support 
reduction applied pursuant to paragraphs (b) and (f) of this section.
    (i) For the purposes of this section and the reporting of rates 
pursuant to paragraph 313(h), rates for residential local service 
provided pursuant to measured or message rate plans or as part of a 
bundle of services should be calculated as follows:
    (1) Rates for measured or message service shall be calculated by 
adding the basic rate for local service plus the additional charges 
incurred for measured service, using the mean number of minutes or 
message units for all customers subscribing to that rate plan 
multiplied by the applicable rate per minute or message unit. The local 
service rate includes additional charges for measured service only to 
the extent that the average number of units used by subscribers to that 
rate plan exceeds the number of units that are included in the plan. 
Where measured service plans have multiple rates for additional units, 
such as peak and off-peak rates, the calculation should reflect the 
average number of units that subscribers to the rate plan pay at each 
rate.
    (2) For bundled service, the residential local service rate is the 
local service rate as tariffed, if applicable, or as itemized on end-
user bills. If a carrier neither tariffs nor itemizes the local voice 
service rate on bills for bundled services, the local service rate is 
the rate of a similar stand-alone local voice service that it offers to 
consumers in that study area.

0
6. Amend Sec.  54.1009 by revising paragraph (a) introductory text to 
read as follows:


Sec.  54.1009  Annual reports.

    (a) A winning bidder authorized to receive Mobility Fund Phase I 
support shall submit an annual report no later than July 1 in each year 
for the five years after it was so authorized. Each annual report shall 
include the following, or reference the inclusion of the following in 
other reports filed with the Commission for the applicable year:
* * * * *
[FR Doc. 2012-12544 Filed 5-23-12; 8:45 a.m.]
BILLING CODE 6712-01-P