Wireline Competition Bureau Seeks Comment on the Lifeline Biennial Audit Plan, 68061-68073 [2013-27184]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 78, Number 219 (Wednesday, November 13, 2013)]
[Notices]
[Pages 68061-68073]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27184]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 11-42; DA 13-2016]


Wireline Competition Bureau Seeks Comment on the Lifeline 
Biennial Audit Plan

AGENCY: Federal Communications Commission.

ACTION: Notice; solicitation of comments.

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SUMMARY: In this Public Notice, the Wireline Competition Bureau (the 
Bureau), in conjunction with the Office of Managing Director (OMD), 
seeks to develop standard procedures for independent biennial audits of 
carriers drawing $5 million or more annually from the low-income 
program, by establishing uniform audit procedures

[[Page 68062]]

to review the internal controls and processes of the largest recipients 
of Lifeline support, which will increase oversight and prevent waste, 
fraud of abuse in the Lifeline program.

DATES: Comments are due on or before December 13, 2013. Reply comments 
are due on or before December 30, 2013.

ADDRESSES: Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or 
before December 13, 2013 and reply comments on or before December 30, 
2013. Comments are to reference WC Docket No. 11-42 and DA 13-2016 and 
may be filed using the Commission's Electronic Comment Filing System 
(ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 
63 FR 24121 (1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    [cir] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes must be disposed of before 
entering the building.
    [cir] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    [cir] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    In addition, we request that one copy of each pleading be sent to 
each of the following:
    [cir] Garnet Hanly, Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A346, 
Washington, DC 20554; email: Garnet.Hanly@fcc.gov; and
    [cir] Charles Tyler Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A452, 
Washington, DC 20554; email: Charles.Tyler@fcc.gov.
     People with Disabilities: To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an email to fcc504@fcc.gov or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (tty).

FOR FURTHER INFORMATION CONTACT: Garnet Hanly, Telecommunications 
Access Policy Division, Wireline Competition Bureau at (202) 418-0995 
or TTY (202) 418-0484; or Gina Spade, Office of the Managing Director, 
at (202) 418-7105. For detailed instructions for submitting comments 
and additional information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's Public Notice in WC Docket No. 11-42; DA 13-2016, 
released September 30, 2013. The complete text of this document is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street SW., 
Room CY-A257, Washington, DC 20554. The document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via the Internet at https://www.bcpiweb.com.

I. Introduction and Summary

    1. The Commission, in the Lifeline Reform Order, FCC 12-11, 
directed the Wireline Competition Bureau (WCB), in conjunction with the 
Office of Managing Director (OMD), to develop standard procedures for 
independent biennial audits of carriers receiving $5 million or more 
annually from the low-income universal service support program. By 
establishing uniform audit procedures to review the internal controls 
and processes of Lifeline service providers, WCB is implementing 
another major reform established by the Commission to protect the 
federal universal service fund (USF) from waste, fraud and abuse. We 
seek comment on the proposed Lifeline Biennial Audit Plan. The 
appendices to the Biennial Audit Plan are available for public 
inspection at https://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-13-2016A1.pdf and FCC Headquarters at 445 12th St. SW., Washington, DC 
20554.
    2. Every eligible telecommunications carrier (ETC) providing 
Lifeline services and that receives $5 million or more from the USF 
annually must conduct a biennial audit. Each ETC that meets these 
requirements must hire an independent audit firm to assess the ETC's 
overall compliance with the Lifeline program's rules and requirements. 
The independent audit firms conducting the audits must be licensed 
certified public accounting firms and must conduct the audits 
consistent with Generally Accepted Government Auditing Standards 
(GAGAS). The audits shall be performed as agreed-upon procedures (AUP) 
attestations.
    3. The Lifeline Biennial Audit Plan is intended to provide standard 
procedures for the independent auditors performing the AUP engagements, 
and focuses on the company's overall compliance and internal controls 
regarding the Commission's low-income program requirements as 
implemented on a nationwide basis. To maximize the administrative 
efficiency and benefit to the Commission of these audits, the Lifeline 
Biennial Audit Plan identifies the key risk areas and specific audit 
program requirements that the independent auditors must audit for 
compliance. Specifically, independent audits will review carrier 
processes and procedures related to: (1) Carriers' obligation to offer 
Lifeline; (2) consumer qualification for Lifeline; (3) subscriber 
eligibility determination and certification; and (4) annual 
recertification and recordkeeping.
    4. WCB and OMD will review the comments filed in response to this 
Public Notice and issue a final Lifeline Biennial Audit Plan. 
Independent auditors must plan their engagements by using the approved 
procedures outlined in the Lifeline Biennial Audit Plan. In addition, 
to ensure compliance with the Commission's Lifeline requirements, the 
Universal Service Administrative Company will conduct training for 
independent auditors performing the AUP engagements to ensure that the 
audits are performed in accordance with the Lifeline Biennial Audit 
Plan. The independent auditors will be required to collect from the 
ETCs specific documents and completed questionnaires, which the 
independent auditors will inspect before conducting fieldwork testing 
and then preparing Attestation Reports.

II. Biennial Audit Plan

A. Introduction

    5. The Wireline Competition Bureau (Bureau), in conjunction with 
the Office of Managing Director (OMD), sets forth the standard 
procedures for the Lifeline program biennial audits (audits).

[[Page 68063]]

    6. As described in the Federal Communications Commission's 
(Commission's or FCC's) Lifeline Reform Order, the audits must be 
performed once every two years, unless otherwise directed by the 
Commission or Bureau. Every eligible telecommunications carrier (ETC or 
carrier) providing Lifeline services and receiving $5 million or more 
from the low-income program in the aggregate annually, as determined on 
a holding company basis taking into account all operating companies and 
affiliates, is subject to the biennial audit requirement. Each ETC that 
meets the requisite universal service fund (USF) support threshold for 
Lifeline support is required to hire an independent audit firm to 
assess the ETC's overall compliance with the Lifeline program's rules 
and requirements. The independent audit firms conducting the audits 
must be licensed certified public accounting (CPA) firms. These audits 
shall be conducted consistent with Generally Accepted Government 
Auditing Standards (GAGAS) and follow the audit guidelines described 
below.
    7. Agreed-Upon Procedures Attestation Audit. In the Lifeline Reform 
Order, the Commission directed the Bureau and OMD to set out standards 
for ETCs that are engaging auditors to perform agreed-upon procedures 
(AUP) attestations. To that end, all hired auditors shall follow the 
standard procedures contained in this Biennial Audit Plan regarding 
ETCs' compliance with key Lifeline program requirements. If an auditor 
subsequently identifies an area of ambiguity regarding Commission 
requirements, the issue should be reported to the Universal Service 
Administrative Company (USAC), and if the ambiguity with Commission 
requirements continues (e.g., USAC indicates the issue will require 
Commission guidance), the audit firm shall submit to the Commission any 
requests for rule interpretations necessary to complete the audit. In 
all instances where an auditor contacts USAC for guidance regarding 
Commission requirements, USAC will notify all outside auditors so that 
the issue in question will not be treated as a negative finding until 
guidance has been provided by USAC or the Bureau.
    8. Focus of Audit. The Biennial Audit Plan is focused on an ETC's 
corporate-wide compliance rather than an ETC's performance on a 
specific day in a particular study area. In other words, the audits 
will focus on a company's overall compliance with the Lifeline rules 
and assess whether the company has internal controls necessary to 
comply with the Lifeline rules. For instance, when an ETC has an 
automated system to verify initial and ongoing eligibility, the audit 
should focus on whether the methods and procedures of such automated 
systems are appropriately structured to ensure compliance with Lifeline 
program rules and requirements. The Biennial Audit Plan also calls for 
sample testing in limited instances, to ensure that such policies, 
procedures and methods are being appropriately implemented as described 
below.
    9. Submission of Attestation Report. Within 60 days after 
completion of the field work as described in the Fieldwork Testing 
Procedures section, but prior to finalization of the report, the third-
party auditor shall submit a draft of the Attestation Report to the 
Commission and USAC. Comments to the draft report may be provided by 
the ETC to the audit firm prior to submission of the draft and final 
reports to the Commission and USAC. The Commission directs the audited 
ETCs to provide the Attestation Reports to the Commission, USAC, and 
relevant state and Tribal governments within 30 days of issuance of the 
final report, which is due no later than one year from release of the 
final Biennial Audit Plan, and biennially thereafter, unless otherwise 
directed by the Bureau. The Commission and USAC will be deemed 
authorized users of the reports.

B. Engagement Plan

    10. Engagement Period. The AUP engagement shall cover 6 months of 
Lifeline service being offered by the ETC. The biennial audit scope may 
include all Low Income support disbursed from the USF by the 
Administrator, USAC, as detailed below.
    11. Conditions of Engagement. Audits shall be performed in 
accordance with GAGAS issued by the Comptroller General of the United 
States (as amended) as an Agreed-Upon Procedures Attestation 
Engagement. The audit test period will be from November 1 through April 
30 (hereinafter, the audit period). The audit firm leading the AUP 
engagement shall be a licensed CPA firm. All members of the team 
performing the engagement shall be familiar with the GAGAS standards 
established for an Agreed-Upon Procedures Attestation Engagement, have 
a sufficient general understanding of the relevant Commission's 
Lifeline program rules and requirements, as reflected in Compliance 
Requirements section and the requirements for and objectives of the AUP 
engagement. The team performing the engagement shall also be 
independent as defined by the GAGAS. The audit firm shall disclose in 
its engagement letter to the carrier how the audit team will comply 
with the GAGAS independence requirements.
    12. In addition, to the extent that the auditor determines that 
procedures included in this Biennial Audit Plan are unclear with 
respect to any Commission rules and requirements, the audit firm shall 
contact USAC, and submit to the Commission any requests for rule 
interpretations necessary to complete the audit. If the audit firm 
identifies or becomes aware of any situation that indicates waste, 
fraud, or abuse of the Lifeline program or of any other USF program 
while performing the audit, the audit firm has an obligation to 
immediately notify the Commission and USAC, as required by GAGAS 
paragraphs 5.58 and 5.59.
    13. For all references in this document to send information to 
USAC, please send to Karen Majcher, USAC Vice President, High Cost & 
Low Income Division at LifelineBiennial@usac.org. For all references in 
this document to send information to the Bureau and/or Commission, 
please send to Charles Tyler, Telecommunications Access Policy 
Division, Wireline Competition Bureau, 445 12th Street SW., Room 5-
B521, Washington, DC 20554; email: Charles.Tyler@fcc.gov. Any changes 
to contact information will be published in a public notice.
    14. The auditor's use of internal auditors/employees provided by 
the ETC shall be limited to the provision of general assistance and the 
preparation of schedules and gathering of data for use in the 
engagement. Under no circumstances shall the internal auditors of the 
ETC subject to the engagement perform any of the procedures contained 
in this document.
    15. Engagement Process. The general standard procedures contained 
herein are intended to identify areas of audit work coverage and 
uniformity of audit work among each audit firm performing the 
engagement. The standards identified throughout this document are not 
legal interpretations of any rules or requirements. To the extent that 
these standards or procedures conflict with any Commission rules and 
requirements, the audit firm should contact USAC to seek guidance as 
stated in the Conditions of Engagement section.
    16. Upon engagement by an ETC, the audit firm shall plan the 
engagement by using the procedures as listed in the Audit Planning 
section below. The section requires the audit firm to gain an 
understanding of the applicable rules that will be used to test 
compliance, which are listed in Appendix G. USAC

[[Page 68064]]

will conduct training for auditors performing the AUP engagements to 
ensure that the audits are performed in accordance with the Biennial 
Audit Plan. The audit firm will perform the planning procedures to help 
in gaining an understanding of how the ETC complies with applicable 
requirements. The Audit Planning section of this Biennial Audit Plan 
includes a list of items the ETC shall provide to the auditor to begin 
fieldwork testing. The auditor, however, can request additional 
documentation from the ETC during the course of the audit in response 
to information collected in Appendices B and C.
    17. The specific audit objectives and procedures for compliance 
testing for applicable rules are provided in the Fieldwork Testing 
Procedures section. The audit firm is expected to complete and report 
on all applicable procedures except where noted. Certain procedures 
pertain to ETCs offering Lifeline universal service support to 
subscribers on Tribal lands. If the ETC does not receive any Tribal 
support, those procedures should be omitted.
    18. Upon completion of the Fieldwork Testing Procedures, the audit 
firm will draft an Attestation Report in the format detailed in the 
Attestation Report section. The reporting section describes the process 
for issuing draft and final reports.
    19. Timetables. In order to complete the engagement in a timely 
manner, the following time schedule for completion of certain tasks is 
provided:
    (a) Within 60 days after completion of the fieldwork as described 
in the Fieldwork Testing Procedures section, but prior to finalization 
of the report, the independent auditor shall submit a draft of the 
Attestation Report to the Commission and USAC. ETCs have the option of 
submitting comments in response to the findings noted in the draft 
report.
    (b) Comments to the draft Attestation Report may be provided by the 
Commission, USAC or the ETC to the audit firm prior to submission of 
the final report.
    (c) The final Attestation Report shall be filed with the Commission 
and USAC no later than one year after release of this Biennial Audit 
Plan, and biennially hereafter unless otherwise specified by the 
Bureau.
    (d) The audited entity shall provide the Attestation Report to the 
Commission, USAC and relevant state and Tribal governments within 30 
days of issuance of the final report. The Commission and USAC shall be 
deemed authorized users of such reports.
    20. Attestation Report. Consistent with the GAGAS standards for AUP 
engagements, the audit firm must present the results of performing the 
procedures in the form of findings, as appropriate and detailed within 
the Fieldwork Testing Procedures section, resulting from application of 
the procedures. The presentation of findings related to each of the 
specified procedures shall include sufficient detail and specificity 
that a reader may draw a reasonable conclusion as to whether the 
respective objective has or has not been met. The audit firm must avoid 
vague or ambiguous language in reporting the findings and shall 
describe in the draft and final reports all instances of noncompliance 
with applicable Commission rules or its related implementing orders 
that were noted by the audit firm in the course of the engagement, or 
that were disclosed by the ETC during the engagement and not covered by 
the performance of these procedures. Where samples are used to test 
data, the report shall identify the size of the sample, and results 
from testing the procedures. The draft and final reports shall list the 
procedures with the results of the test-work performed, and any related 
findings, the ETC's responses to the findings, and if applicable, the 
audit firm's reply comments. Upon request by the Commission or USAC, 
the auditor shall provide its work papers. If there are no findings, 
the audit firm must indicate such by stating, ``No Exceptions Noted.'' 
The auditor's report must also contain the following elements:
    (a) A title that includes the word independent;
    (b) Identification of the specified parties in the engagement;
    (c) Identification of the subject matter (or the written assertion 
related thereto) and the character of the engagement;
    (d) Identification of the FCC, USAC, and the ETC as the responsible 
parties;
    (e) A statement that the procedures performed were those contained 
in this document or as directed by the Bureau, as specified in 
Conditions of the Engagement section;
    (f) A statement that the AUP attestation engagement was conducted 
in accordance with attestation standards established by the Government 
Accountability Office;
    (g) A statement that the sufficiency of the procedures is solely 
the responsibility of the specified parties and a disclaimer of 
responsibility for the sufficiency of those procedures;
    (h) A list of the procedures performed, the results of the testwork 
performed, and any related findings, the ETC's responses to the 
findings, and if applicable, the audit firm's reply comments;
    (i) A statement that the audit firm was not engaged to and did not 
conduct an examination of the subject matter, the objective of which 
would be the expression of an opinion, a disclaimer of opinion on the 
subject matter, and a statement that if the practitioner had performed 
additional procedures, other matters might have come to his or her 
attention that would have been reported;
    (j) A statement that this report becomes a matter of public record 
when the audit firms file the final report with the FCC; and
    (k) A description of any limitations imposed on the audit firm by 
the carrier or any other affiliate, or other circumstances that might 
affect the audit firm's findings.
    21. The report must NOT include any subscriber phone numbers, 
names, addresses, birthdates, social security numbers, tribal 
identification numbers, or any other personally identifiable 
information or customary proprietary network information.
    22. Audit Planning. To initiate the audit, the audit firm shall use 
the following documents to plan the audit engagement: (1) The Requested 
Documents (Appendix A); (2) Background Questionnaire (Appendix B); and 
(3) Internal Control Questionnaire (Appendix C). These documents should 
be provided to the ETC with the audit announcement. For Appendix A, 
Item 1, the audit firm shall randomly select one month during the audit 
period to test all of the carrier's study areas (i.e., the same month 
must be selected for each study area).
    23. Upon receipt and review of completed questionnaires and 
submission of the Requested Documents, the audit firm will then provide 
Requested Documentation Form 555 & One-Per-Household Worksheet Sample 
(Appendix D) and Requested Documentation: Subscriber Sample (Appendix 
E) to the ETC so that the ETC can provide the additional documentation 
necessary to complete the procedures. The Requested Documentation: USAC 
Program Management (Appendix F) will be sent to USAC so that USAC can 
provide data to the audit firm for testing. As part of engagement, the 
audit firm shall:
    (a) Inspect the completed Background Questionnaire and note in the 
Attestation Report any areas that are not in compliance with the FCC 
Lifeline rules set forth in Appendix G.
    (b) Inspect the completed Inspect the completed Internal Control 
Questionnaire and note in the

[[Page 68065]]

Attestation Report any questions that were vague, not answered, or 
answered other than ``Yes'' and any comments provided by the ETC.
    24. Representation Letters. The audit firms shall obtain two types 
of representation (assertion) letters. The first type of representation 
letter shall address all items of an operational nature (Operational 
Representation Letter). The second type of representation letter shall 
address applicable Commission rules and requirements as detailed below 
(Compliance Representation Letter). The following paragraphs detail the 
contents of each type of representation letter.
    25. The Operational Representation Letter shall be signed by the 
Chief Operating Officer, or the equivalent, of the audited entity and 
shall include the following:
    (a) The audited entity has made available all records in its 
control, as a participant in the Lifeline program under the federal 
USF, necessary to successfully execute the Lifeline agreed-upon 
procedures attestation engagement.
    (b) Carrier is responsible for complying, and has complied, with 
requirements relating to 47 CFR Part 54 Subparts B and E of the 
Commission rules governing the administration of the USF for the 
Lifeline Program.
    (c) Pursuant to Commission's Lifeline rules, the audited entity has 
only received reimbursement for each qualifying low-income consumer 
served, and that the reimbursement amount equals the federal support 
amount, including amounts described in 47 CFR 54.403(a) and (c).
    (d) The audited entity has no knowledge of any fraud or suspected 
fraud by management/employees of the ETC related to the administration 
of the Lifeline Program.
    (e) The audited entity has responded fully to all inquiries 
submitted by the auditor in the agreed-upon procedures attestation 
engagement.
    (f) The audited entity has reviewed the draft Attestation Report 
findings and management letter comments, where applicable, and concur 
that all non-compliance identified therein are included in the reports 
or management letters.
    (g) The audited entity has no knowledge of any events subsequent to 
the period of the subject matter being reported on that would have a 
material effect on the subject matter, or more specifically, the report 
opinions provided by the auditor, except as has been disclosed.
    (h) There have been no notices of action from state or federal 
regulatory agencies, including the Federal Communications Commission or 
state public utilities commission that would affect the subject matter, 
or, more specifically, the report observations provided by the audit 
firm.
    26. The Compliance Representation Letter shall be signed by the 
Chief Operating Officer, or the equivalent, of the audited entity and 
shall include the following:
    [cir] Report of Management on Compliance with Applicable 
Requirements of 47 CFR Part 54 of the Federal Communications 
Commission's Rules, Regulations and Related Orders.
    [cir] Management of (name of telecommunications carrier) is 
responsible for ensuring that the carrier is in compliance with 
applicable requirements of the Federal Communications Commission (FCC) 
rules at 47 CFR 54.101, 54.201, and 54.400-54.417 as well as related 
FCC Orders.
    [cir] Management has performed an evaluation of the carrier's 
compliance with the applicable requirements of FCC rules at 47 CFR 
54.101, 54.201, and 54.400-54.417, and related FCC Orders with respect 
to providing discounts to eligible low income consumers and seeking 
reimbursement from the Universal Service Fund (USF) during the period 
November 1, 20XX through April 30, 20XX (audit period).
    The Carrier makes the following assertions with respect to the 
provision of Lifeline service during the audit period:
    (A) Carrier Obligation to Offer Lifeline--the (name of 
Telecommunications Carrier) asserts that it:
    (1) Is an eligible telecommunications carrier (ETC) (47 CFR 
54.201(a); Definition of eligible telecommunications carriers, 
generally, which discusses carrier eligibility) and provides the 
services required for eligibility (Sec.  54.101(a): Services designated 
for support, and (b) of the Commission's rule: Requirement to offer all 
designated services; which describe the services that an eligible 
carrier must offer to receive federal universal service support)
    (2) Makes available Lifeline service, as defined in Sec.  54.401 of 
the Commission's rules, to qualifying low-income consumers (47 CFR 
54.405(a): Carrier obligation to offer lifeline, which discusses 
carriers' obligations to offer, publicize, notify and allow lifeline 
services)
    (3) Publicizes the availability of Lifeline service in a manner 
reasonably designed to reach those likely to qualify for the service. 
(47 CFR 54.405(b): Carrier obligation to offer lifeline.) (47 CFR 
54.201(d)(2): Definition of eligible telecommunications carriers, 
generally, which requires the advertising of the availability of 
services)
    (4) Indicates on all materials describing the service, using easily 
understood language, that it is a Lifeline service, that Lifeline is a 
government assistance program, the service is non-transferable, only 
eligible consumers may enroll in the program, and the program is 
limited to one discount per household. For the purposes of this 
section, the term ``materials describing the service'' includes all 
print, audio, video, and web materials used to describe or enroll in 
the Lifeline service offering, including application and certification 
forms. (47 CFR 54.405 (c): Carrier obligation to offer lifeline.)
    (5) Discloses the name of the eligible telecommunications carrier 
on all materials describing the service. (47 CFR 54.405(d): Carrier 
obligation to offer lifeline.)
    (B) Consumer Qualification for Lifeline--the (name of 
Telecommunications Carrier) asserts that it: Maintains policies and 
procedures that are effectively implemented to review and certify 
consumer eligibility for Lifeline, and Toll Limitation services. (47 
CFR 54.409: Consumer Qualification for Lifeline, which discusses the 
certification and verification requirements) This includes that an 
officer of the carrier:
    [cir] Asserts that the carrier has implemented policies and 
procedures for ensuring that their Lifeline subscribers are eligible to 
receive Lifeline services. (47 CFR 54.410: Subscriber eligibility 
determination and certification, which also requires compliance with 
state certification procedures to document consumer eligibility)
    (C) Submission of Lifeline Worksheet (Form FCC 497)--the (name of 
Telecommunications Carrier asserts that it: Submitted properly 
completed FCC Forms 497 for each month, representing discounts actually 
provided to subscribers, for the audit period, and has the required 
supporting documentation for the number of subscribers, rates and other 
information provided on the Form (47 CFR 54.407: Reimbursement for 
offering Lifeline, which discusses carrier reimbursement for providing 
Low Income Program support and requires the carrier to keep accurate 
records in the form directed by USAC and provide the records to USAC)
    (D) General Recordkeeping and Annual Certification Requirements--
the

[[Page 68066]]

(name of Telecommunications Carrier) asserts that:
    (1) It maintains records to document compliance with all Commission 
and state requirements governing the Lifeline and Tribal Link Up 
program for the three full preceding calendar years and provide that 
documentation to the Commission or Administrator upon request. 
Notwithstanding the preceding sentence, eligible telecommunications 
carriers must maintain the documentation required in Sec.  54.410(d) 
and (f) of the Commission's rules for as long as the subscriber 
receives Lifeline service from that eligible telecommunications 
carrier. (47 CFR 54.417(a))
    (2) If it provides Lifeline discounted wholesale services to a 
reseller, it must obtain a certification from that reseller that it is 
complying with all Commission requirements governing the Lifeline and 
Tribal Link Up program. (47 CFR 54.417(b))
    (3) Complied with the annual certifications by eligible 
telecommunication carriers. (47 CFR 54.416, 54.522)
    [cir] Dated [Date], 20XX
    [cir] Name: Official or Owner of Carrier and, if applicable CFO or 
Senior Official responsible for Accounting or USF Compliance
    27. Sampling. Certain procedures may require testing on a sample 
basis. To test compliance with certain key risk areas, the auditor will 
randomly select one month during the audit period and request the ETC 
to submit a subscriber list which will include all Lifeline subscribers 
for whom it requested reimbursement using the FCC Form 497s for that 
selected month (collectively, National Subscriber List). The auditor 
will randomly select subscribers from the National Subscriber List for 
the applicable procedures as described in the Fieldwork Testing 
Procedures section. To test compliance with other key risk areas, the 
auditor will randomly select a certain number of subscribers and 
request additional documentation (certification forms, re-certification 
forms, re-certification notice, termination notice, etc.) as described 
in the Fieldwork Testing Procedures section.

C. Fieldwork Testing Procedures

Objective I
    28. Carrier Obligation to Offer Lifeline. To determine if the ETC 
has procedures in place to make Lifeline services available to 
qualifying low-income consumers with mandated disclosures regarding 
requirements to participate in the Lifeline program, and procedures for 
de-enrolling subscribers when they are no longer eligible to receive 
Lifeline services.
    29. Standards. The Commission has adopted rules, set forth in 47 
CFR 54.405, requiring carriers to make available Lifeline services to 
qualifying low-income consumers using marketing materials that describe 
the service. For purposes of this rule, the term ``marketing 
materials'' includes materials in all media, including but not limited 
to print, audio, video, and Internet (including email, web, and social 
networking media) that describe the Lifeline-supported service 
offering, including application and certification forms. The Commission 
has also established requirements for de-enrollment where a Lifeline 
subscriber no longer meets the criteria to be considered a qualifying 
low-income consumer under Sec.  54.405 of the Commission's rules.
    30. Procedures:
    (1) Inquire of management and obtain carrier policies and 
procedures in response to Item 4 of Appendix A (Requested Documents) 
for offering Lifeline service to qualifying low-income consumers. 
Examine the carrier policies and procedures, and compare management 
responses and carrier policies and procedure with the Commission's 
Lifeline rules set forth in Appendix G. Note any discrepancy between 
the policies and procedures and the Commission's rules.
    (2) Inspect 10 examples of carrier marketing materials describing 
the Lifeline service (i.e., print, audio, video and web materials used 
to describe or enroll in the Lifeline service offering, including 
standard scripts used when enrolling new subscribers, application and 
certification forms), as provided in response to Items 4, 6 and 7 of 
Appendix A and note if the materials do not include the following:
    a. The service is a Lifeline service, which is a government 
assistance program;
    b. The service is non-transferable;
    c. Only eligible subscribers may enroll;
    d. Only one Lifeline discount is allowed per household; and
    e. The ETC's name or any brand names used to market the service. If 
all of the examples do not include this required information, identify 
and note the specific element(s) that are missing from each example.
    (3) Monitor 10 random incoming calls to telephone number(s) used as 
customer care for the Lifeline program, as provided in response to Item 
8 of Appendix A. Note whether: (1) The telephone number(s) involve the 
use of interactive voice response (IVR) system; (2) a live customer 
care operator is available; and (3) and the time spent using the 
customer care telephone service. Also note whether the customer care 
telephone number(s) can be used by subscribers to notify the ETC of the 
subscriber's intent to cancel service or give notification that the 
subscriber is no longer eligible to receive service.
    (4) Inspect applicable policies and procedures regarding de-
enrollment from the program, including when the ETC will de-enroll 
subscribers based on lack of eligibility, duplicative support, non-
usage, and failure to recertify, as further described below.
    a. Inspect the ETC's policy and procedures for de-enrollment where 
the ETC has information indicating that a Lifeline subscriber no longer 
meets the criteria to be considered a qualifying low-income consumer 
under 47 CFR 54.409, as provided in response to Item 4 of Appendix A. 
Note whether the policy and procedures detail the process for 
communications between the subscriber and ETC regarding de-enrollment, 
including, but not limited to: (1) Notifying subscribers of impending 
termination of service; (2) allowing subscriber to demonstrate 
continued eligibility; and (3) termination of service for failure to 
demonstrate eligibility. Identify any areas that are not in compliance 
with Sec.  54.405(e)(1) of the Commission's rules.
    b. Inspect the carrier's policy and procedures for de-enrolling 
subscribers that are receiving Lifeline service from another ETC or 
where more than one member of a subscriber's household is receiving 
Lifeline service (duplicative support). Note if the policy and 
procedures state that the ETC will de-enroll subscribers within five 
business days of receiving notification from USAC program management 
that a subscriber or a subscriber's household is receiving duplicative 
Lifeline support, as required by Sec.  54.405(e)(2) of the Commission's 
rules.
    c. Inspect the carrier's policy and procedures for de-enrolling 
subscribers for non-usage (i.e., where a Lifeline subscriber fails to 
use Lifeline service for 60 consecutive days). Using the list provided 
in response to Item 10 in Appendix A perform the following:
    (i) For accounts listed as de-enrolled or scheduled for de-
enrollment, select a sample of at least 10 accounts and request copies 
of the non-usage termination notifications sent to the subscribers.
    (ii) Examine the non-usage termination notifications to verify if 
the termination notifications explain that

[[Page 68067]]

the subscriber has 30 days following the date of the impending 
termination notification to use the Lifeline service. Note if any of 
the non-usage termination notifications do not include this 
information, as required by Sec.  54.405(e)(3) of the Commission's 
rules.
    (iii) Attach a sample non-usage termination notification(s).
    d. Review the carrier's policy and procedures for de-enrolling a 
Lifeline subscriber that does not respond to the carrier's attempts to 
obtain re-certification, as part of the annual eligibility re-
certification process. For any subscribers identified in Item 9.i, j 
and m of Appendix A, select a random sample of at least 30 and request 
copies of the notice of impending de-enrollment letters and all other 
communications sent to the subscribers involving recertification and 
perform the following:
    (i) Inspect the sampled notice of impending de-enrollment letters 
and any other communications sent to the subscriber regarding re-
certification to verify if the communications explain that the 
subscriber has 30 days following the date of the notice of impending 
de-enrollment letter to demonstrate continued eligibility or the 
carrier will terminate the subscriber's Lifeline service. Note if any 
of the impending de-enrollment letters do not include this information.
    (ii) Review the de-enrollment letters, and other forms of 
communications, and the carrier's responses to the background 
questionnaire and verify through observation that the de-enrollment 
letters, if that form of communication was used, were sent by a method 
separate from the subscriber's bill (if a customer receives a bill from 
the carrier).
    (iii) Attach a random sample of at least 5 examples of the 
impending de-enrollment letters to this procedure, and attach other 
form of communications provided to the carrier.
Objective II
    31. Consumer Qualification for Lifeline. To determine if the ETC 
has procedures in place to limit Lifeline service to qualifying low-
income consumers and ensure that Lifeline service is limited to a 
single subscription per household.
    32. Standards. The Commission has adopted rules, set forth in 47 
CFR 54.409, establishing eligibility criteria for consumers to be 
qualified to receive Lifeline services and limiting Lifeline support to 
a single subscription per household. The Commission has also adopted 
rules, set forth in 47 CFR 54.407 establishing that universal service 
support for providing Lifeline shall be provided directly to an 
eligible telecommunications carrier, based on the number of qualifying 
low-income consumers it serves.
    33. Procedures:
    (1) Inquire of management and obtain carrier policies and 
procedures for limiting Lifeline support to a single subscription per 
household as provided by the carrier in response to Item 4 of Appendix 
A. Examine the policies and procedures. Compare management responses 
and carrier policies and procedures with the Commission's Lifeline 
rules set forth in Sec.  54.409(c) of the Commission's rules (Appendix 
G). Note any discrepancies between the policies and procedures and the 
Commission's rule.
    (2) Obtain the National Subscriber List in response to Item 1 of 
Appendix A. Obtain the carrier's Form 497(s) for each study area for 
the selected month as provided by USAC in response to Item 1 of 
Appendix F. Examine the number of subscribers claimed on the Form(s) 
497. Compare the number of subscribers reported on the Form 497(s) to 
the number of subscribers contained on the National Subscriber List for 
each study area. Note any discrepancies in the number of subscribers.
    (3) Using computer-assisted audit techniques, examine the National 
Subscriber List and note if there are any:
    a. Duplicate phone numbers;
    b. Duplicate addresses, same subscribers (same name, birth date, 
and last four of Social Security Number);
    c. Duplicate addresses, different subscribers;
    d. P.O. Boxes;
    e. Blanks or missing data; and
    f. Unusual notations (e.g., N/A, symbols, etc.).

    Note:  In the final report, only state the number of instances 
noted for each test item above. For example, in the final report, 
note the number of duplicate phone numbers, but do NOT include the 
actual phone number.

    (4) From the testwork completed in paragraph 33. 3) c. above, 
examine the list of duplicate addresses for different subscribers. 
Randomly select up to 30 of the duplicate addresses and perform the 
following: Request copies from the ETC of the one-per-household 
certification form for each of the selected duplicate addresses. Verify 
at least one subscriber from the duplicate addresses certified to only 
receiving one Lifeline-supported service in his/her household using the 
one-per household worksheet. Note the number of missing or incomplete 
certifications.
Objective III
    34. Subscriber Eligibility Determination and Certification. To 
determine if the ETC implemented policies and procedures for ensuring 
that their Lifeline subscribers are eligible to receive Lifeline 
services.
    35. Standards. The Commission has adopted rules, set forth in 47 
CFR 54.409 and 54.410, that require ETCs to implement policies and 
procedures for ensuring that their subscribers are eligible to receive 
Lifeline services.
    36. The Commission's rules, set forth in 47 CFR 54.409, include 
requirements for determining whether a consumer is qualified to receive 
Lifeline service. Pursuant to these rules: (1) The consumer's household 
income as defined in Sec.  54.400(f) of the Commission's rules must be 
at or below 135% of the Federal Poverty Guidelines for a household of 
that size; (2) the consumer, one or more of the consumer's dependents, 
or the consumer's household must receive benefits from one of the 
qualifying federal assistance programs; or (3) the consumer must meet 
additional eligibility criteria established by a state for its 
residents, provided that such-state specific criteria are based solely 
on income or other factors directly related to income.
    37. Procedures:
    (1) Inquire of management and obtain carrier policies and 
procedures for ensuring that its Lifeline subscribers are eligible to 
receive Lifeline services as provided by the carrier in response to 
Item 4 of Appendix A. Examine the policies and procedures. Compare 
management responses and carrier policies and procedures with the 
Commission's Lifeline rules set forth in Sec.  54.410 of the 
Commission's rules (Appendix G). Note any discrepancies between the 
policies and procedures and the Commission's rule.
    a. Inspect the ETC's policies and look for evidence as to whether 
it includes a policy that the ETC does not retain copies of 
subscribers' proof of income- or program-based eligibility. Note in the 
Attestation Report if such a policy is not included.
    b. Inspect the ETC's policies and look for evidence as to whether 
it includes a policy or procedure that the ETC must fully verify the 
eligibility of each low-income consumer prior to providing Lifeline 
service to that consumer, and that the ETC or its agents may not 
provide the consumer with an activated device intended to enable access 
to Lifeline service until that consumer's eligibility is fully verified 
and all other

[[Page 68068]]

necessary enrollment steps have been completed.
    (2) Examine the ETC's policies and procedures for training 
employees and agents for ensuring that the ETC's Lifeline subscribers 
are eligible to receive Lifeline services, including any policies 
regarding how the company ensures employees and agents have completed 
the training. In the report, summarize the training requirements and 
ETC policies for ensuring employees and agents are trained on the rules 
for ensuring subscribers are eligible to receive Lifeline services and 
have completed all forms necessary to receive service. Include 
information provided regarding the timing, frequency and evidence of 
completion of the initial and any subsequent Lifeline subscriber 
eligibility and certification trainings required of the ETC's 
employees.
    (3) Randomly select at least 100 subscribers from the National 
Subscriber List and for the first 50 of the sampled subscribers, the 
auditor will perform the test described below, for each of the 
subscriber's certification and recertification forms. After performing 
the tests described below for the first 50 sampled subscriber, if the 
error rate is higher than 5 percent, the auditor should apply the same 
procedure to the remaining 50 subscribers in the sample and record the 
results.
    a. Examine the subscriber certification forms, if any, to verify 
the forms contain the following information:
    (i) Lifeline is a federal benefit and that willfully making false 
statements to obtain the benefit can result in fines, imprisonment, de-
enrollment or being barred from the program;
    (ii) Only one Lifeline service is available per household;
    (iii) A household is defined, for purposes of the Lifeline program, 
as any individual or group of individuals who live together at the same 
address and share income and expenses;
    (iv) A household is not permitted to receive Lifeline benefits from 
multiple providers;
    (v) Violation of the one-per-household limitation constitutes a 
violation of the Commission's rules and will result in the subscriber's 
de-enrollment from the program;
    (vi) Lifeline is a non-transferable benefit and the subscriber may 
not transfer his or her benefit to any other person;
    (vii) Require each prospective subscriber to provide the following 
information:
    (1) The subscriber's full name;
    (2) The subscriber's full residential address;
    (3) Whether the subscriber's residential address is permanent or 
temporary;
    (4) The subscriber's billing address, if different from the 
subscriber's residential address;
    (5) The subscriber's date of birth;
    (6) The last four digits of the subscriber's social security 
number, or the subscriber's Tribal identification number, if the 
subscriber is a member of a Tribal nation and does not have a social 
security number;
    (7) If the subscriber is seeking to qualify for Lifeline under the 
program-based criteria, as set forth in Sec.  54.409 of the 
Commission's rules, the name of the qualifying assistance program from 
which the subscriber, his or her dependents, or his or her household 
receives benefits; and
    (8) If the subscriber is seeking to qualify for Lifeline under the 
income-based criterion, as set forth in Sec.  54.409 of the 
Commission's rules, the number of individuals in his or her household.
    (viii) Require each prospective subscriber to certify, under 
penalty of perjury, that:
    (1) The subscriber meets the income-based or program-based 
eligibility criteria for receiving Lifeline, provided in Sec.  54.409 
of the Commission's rules;
    (2) The subscriber will notify the ETC within 30 days if for any 
reason he or she no longer satisfies the criteria for receiving 
Lifeline including, as relevant, if the subscriber no longer meets the 
income-based or program-based criteria for receiving Lifeline service, 
the subscriber is receiving more than one Lifeline benefit, or another 
member of the subscriber's household is receiving a Lifeline benefit.
    (3) If the subscriber is seeking to qualify for Lifeline as an 
eligible resident of Tribal lands, he or she lives on Tribal lands, as 
defined in Sec.  54.400(e) of the Commission's rules;
    (4) If the subscriber moves to a new address, he or she will 
provide that new address to the ETC within 30 days;
    (5) The subscriber's household will receive only one Lifeline 
service and, to the best of his or her knowledge, the subscriber's 
household is not already receiving a Lifeline service;
    (6) The information contained in the subscriber's certification 
form is true and correct to the best of his or her knowledge,
    (7) The subscriber acknowledges that providing false or fraudulent 
information to receive Lifeline benefits is punishable by law; and
    (8) The subscriber acknowledges that the subscriber may be required 
to re-certify his or her continued eligibility for Lifeline at any 
time, and the subscriber's failure to re-certify as to his or her 
continued eligibility will result in de-enrollment and the termination 
of the subscriber's Lifeline benefits pursuant to Sec.  54.405(e)(4) of 
the Commission's rules.
    (ix) Compare the ETC's subscriber eligibility criteria on the 
certification forms to the federal eligibility criteria listed in per 
47 CFR 54.409. Note any discrepancies. Note: The ETC may list the 
eligibility criteria in its entirety or may allow the subscriber to 
note only his/her qualifying criterion on the form.
    (x) Verify the subscriber completed all the required elements as 
identified in Objective III--3 a. above, including signature and 
initialing/checkbox requirements contained in the certification form.
    (xi) Examine the subscriber's initial certification form to verify 
the initial certification form is dated prior to or on the same day as 
the Lifeline start date per the National Subscriber List.
    (xii) If applicable, verify subscribers who received Tribal 
Lifeline support certified to residing on Tribal lands.
    b. Review the list of the data source or documentation the ETC 
reviewed to confirm the subscriber's eligibility. Verify the recorded 
data sources are eligible data sources per 47 CFR 54.410, such as (1) 
income or program eligibility databases, (2) income or program 
eligibility documentation, or (3) confirmation from a state 
administrator.
Objective IV
    38. Annual Certifications and Recordkeeping by Eligible 
Telecommunications Carriers. To determine if ETCs have made and 
submitted to the Universal Service Administrative Company the required 
annual certifications, under penalty of perjury, relating to the 
Lifeline program by an officer of the company and maintained 
recordkeeping requirements.
    39. Standards. The Commission's rules, set forth in 47 CFR 54.416, 
54.422, require that an officer of the company must certify that the 
ETC has policies and procedures in place to ensure that its Lifeline 
subscribers are eligible to receive Lifeline services and ETC is in 
compliance with all federal Lifeline certification procedures. ETCs 
must make this certification annually to USAC as part of the carrier's 
submission of recertification data pursuant to the Commission's rules.
    40. The Commission also requires under its rules, set forth in 47 
CFR 54.417, that it must maintain records to document compliance with 
all Commission requirements and state requirements governing the 
Lifeline program for the three full preceding

[[Page 68069]]

calendar years and must maintain the documentation required in Sec.  
54.410(d) and (f) of the Commission's rules for as long as the 
subscriber receives Lifeline service from that eligible 
telecommunications carrier, and provide the documentation to the 
Commission or USAC upon request.
    41. Procedures:
    (1) Inquire of management and obtain carrier policies and 
procedures for ensuring that the carrier has made and submitted the 
annual certifications required under Sec. Sec.  54.416 and 54.422 of 
the Commission's rules, as provided in Item 12 of Appendix A. Examine 
the policies and procedures. Compare management responses and carrier 
policies and procedures with the Commission's Lifeline rules set forth 
in Sec. Sec.  54.416 and 54.522 of the Commission's rules (Appendix G). 
Note any discrepancies between the policies and procedures and the 
Commission's rules.
    (2) Examine the ETC's Form 555 that was filed during the audit 
period. Verify the carrier made all of the following certifications. An 
officer of each ETC must certify that s/he understands the Commission's 
Lifeline rules and requirements and that the carrier:
    a. Has policies and procedures in place to ensure that its Lifeline 
subscribers are eligible to receive Lifeline services;
    b. Is in compliance with all federal Lifeline certification 
procedures; and
    c. In instances where an ETC confirms consumer eligibility by 
relying on income or eligibility databases, as defined in 47 CFR 
54.410(b)(1)(i)(A) or (c)(1)(i)(A), the representative must attest 
annually as to what specific data sources the ETC used to confirm 
eligibility.
    (3) Examine the ETC's organizational chart provided in response to 
Item 5 of Appendix A. Verify that the certifying officer on the Form 
555 is an officer per the organizational chart or other publicly 
available documents.
    (4) Verify that the subscriber count per the Form 555 agrees with 
the total subscriber count per the applicable Form 497. Note: The Form 
555 is completed by the carrier at the state level (not the study area 
level). If the carrier has two study areas in one state, the carrier 
must combine the results of both study areas and complete one Form 555 
for that state.
    (5) Review the ETC's detailed recertification results of the 
individual subscribers reported on the Form 555, as provided in Item 9 
of Appendix A. Verify that the data reported on the Form 555 agrees 
with the detailed recertification results.
    (6) Review the ETC's detailed non-usage results of the individual 
subscribers reported on the Form 555, as provided in Item 10 of 
Appendix A. Verify that the data reported on the Form 555 agrees with 
the detailed non-usage results.
    (7) Review the carrier's annual ETC certification, as provided in 
Item 13 of Appendix A. Verify that the ETC reported all the information 
and made all the certifications required by 47 CFR 54.422(a)(b).
    (8) Review any supporting schedules related to the carrier's annual 
ETC certification, as provided in Item 13 of Appendix A. Verify that 
the data reported on the annual ETC certification agrees with the 
supporting schedules.
    (9) Inquire of management and obtain carrier policies and 
procedures for maintaining records that document compliance with the 
Lifeline program rules, as provided by the carrier in response to Item 
4 of Appendix A. Examine the policies and procedures. Compare the 
management responses and carrier policies with recordkeeping rules set 
forth in 47 CFR 54.417. Note any discrepancies between the policies and 
procedures and the Commission's rule.

III. Procedural Matters

A. Paperwork Reduction Act Analysis

    42. This document does not contain new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. In addition, therefore, it does not contain 
any new or modified information collection burden for small business 
concerns with fewer than 25 employees, pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

B. Initial Regulatory Flexibility Analysis

    43. As Required by the Regulatory Flexibility Act if 1980, as 
amended (RFA), the Wireline Competition Bureau (WCB), in conjunction 
with the Office of Managing Director (OMD), has prepared this Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on a substantial number of small entities by the 
procedures proposed in this Public Notice. Written comments are 
requested on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments on the Public 
Notice. The Commission will send a copy of the Public Notice, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the Public Notice and IRFA (or 
summaries thereof) will be published in the Federal Register.
a. Need for, and Objectives of, the Lifeline Biennial Audit Plan
    44. The Public Notice seeks comment on the standard procedures for 
independent biennial audits of carriers drawing $5 million or more 
annually from the low-income universal service support program. We seek 
comment on any costs and burdens on small entities associated with the 
proposed Biennial Audit Plan., including data quantifying the extent of 
those costs or burdens.
b. Legal Basis
    45. The Public Notice, including publication of proposed 
procedures, is authorized under sections 1,2, 4(i)-(j), 201(b), 254, 
257, 303(r), and 503 of the Communications Act of 1934, as amended, and 
section 706 of the Telecommunications Act of 1996, as amended.
c. Description and Estimate of the Number of Small Entities to which 
the Proposed Biennial Audit Plan Will Apply:
    46. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed Biennial Audit Plan. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one that: (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). Nationwide, there are a total of approximately 
29.6 million small businesses, according to the SBA. A ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of 2002, there were approximately 1.6 million small 
organizations. The term ``small governmental jurisdiction'' is defined 
generally as ``governments of cities, towns, townships, villages, 
school districts, or special districts, with a population of less than 
fifty thousand.'' Census Bureau data for 2002 indicate that there were 
87,525 local governmental jurisdictions in the United States. We 
estimate that, of this total, 84,377 entities were ``small

[[Page 68070]]

governmental jurisdictions.'' Thus, we estimate that most governmental 
jurisdictions are small.
1. Wireline Providers
    47. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. 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. Census Bureau data for 
2007, which now supersede data from the 2002 Census, show that there 
were 3,188 firms in this category that operated for the entire year. Of 
this total, 3,144 had employment of 999 or fewer and 44 firms had had 
employment of 1000 or more. According to Commission data, 1,307 
carriers reported that they were incumbent local exchange service 
providers. Of these 1,307 carriers, an estimated 1,006 have 1,500 or 
fewer employees and 301 have more than 1,500 employees. The Commission 
estimates that most providers of local exchange service are small 
entities, but a small percentage are impacted by the Biennial Audit 
Plan because it applies only to those entities that receive $5 million 
or more from the low-income program, on an annual basis, as determined 
on a holding company basis taking into account all operating companies 
and affiliates.
    48. Competitive Local Exchange Carriers (Competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate size standard under SBA rules is for 
the category Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
Census Bureau data for 2007, which now supersede data from the 2002 
Census, show that there were 3,188 firms in this category that operated 
for the entire year. Of this total, 3,144 had employment of 999 or 
fewer and 44 firms had had employment of 1,000 employees or more. Thus 
under this category and the associated small business size standard, 
the majority of these Competitive LECs, CAPs, Shared-Tenant Service 
Providers, and Other Local Service Providers can be considered small 
entities. According to Commission data, 1,442 carriers reported that 
they were engaged in the provision of either competitive local exchange 
services or competitive access provider services. Of these 1,442 
carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have 
more than 1,500 employees. In addition, 17 carriers have reported that 
they are Shared-Tenant Service Providers, and all 17 are estimated to 
have 1,500 or fewer employees. In addition, 72 carriers have reported 
that they are Other Local Service Providers. Seventy of which have 
1,500 or fewer employees and two have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive local exchange service, competitive access providers, 
Shared-Tenant Service Providers, and Other Local Service Providers are 
small entities, but a small percentage are impacted by the Biennial 
Audit Plan because it applies only to those entities that receive $5 
million or more from the low-income program, on an annual basis, as 
determined on a holding company basis taking into account all operating 
companies and affiliates.
    49. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a small business size standard specifically for providers of 
interexchange services. 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. 
Census Bureau data for 2007, which now supersede data from the 2002 
Census, show that there were 3,188 firms in this category that operated 
for the entire year. Of this total, 3,144 had employment of 999 or 
fewer, and 44 firms had had employment of 1,000 employees or more. Thus 
under this category and the associated small business size standard, 
the majority of these Interexchange carriers can be considered small 
entities. According to Commission data, 359 companies reported that 
their primary telecommunications service activity was the provision of 
interexchange services. Of these 359 companies, an estimated 317 have 
1,500 or fewer employees and 42 have more than 1,500 employees. 
Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that will not be 
affected by the Biennial Audit Plan because it applies only to those 
entities that receive $5 million or more from the low-income program, 
on an annual basis, as determined on a holding company basis taking 
into account all operating companies and affiliates.
    50. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate size standard under SBA 
rules is the category Wired Telecommunications Carriers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. Under that size standard, such a business is small if it has 
1,500 or fewer employees. Census Bureau data for 2007, which now 
supersede 2002 Census data, show that there were 3,188 firms in this 
category that operated for the entire year. Of the total, 3,144 had 
employment of 999 or fewer, and 44 firms had had employment of 1,000 
employees or more. Thus under this category and the associated small 
business size standard, the majority of these interexchange carriers 
can be considered small entities. According to Commission data, 33 
carriers have reported that they are engaged in the provision of 
operator services. Of these, an estimated 31 have 1,500 or fewer 
employees and 2 have more than 1,500 employees. Consequently, the 
Commission estimates that the majority of OSPs are small entities, but 
will not be impacted by the Biennial Audit Plan because it applies only 
to those entities that receive $5 million or more from the low-income 
program, on an annual basis, as determined on a holding company basis 
taking into account all operating companies and affiliates.
    51. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2007 show that 1,523 firms provided resale 
services during that year. Of that number, 1,522 operated with fewer 
than 1000 employees and one operated with more than 1,000. Thus under 
this category and the associated small business size standard, the 
majority of these local resellers can be considered small entities. 
According to Commission data, 213 carriers have reported that they are 
engaged in the provision of local resale services. Of these, an 
estimated 211 have 1,500 or fewer employees and two have more than 
1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities, but will not be 
impacted by the Biennial Audit Plan because it applies only to those 
entities that receive $5 million or more from the low-income program, 
on an annual basis, as determined on a holding company basis taking 
into account all operating companies and affiliates.
    52. Toll Resellers. The SBA has developed a small business size

[[Page 68071]]

standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2007 show that 1,523 firms provided resale 
services during that year. Of that number, 1,522 operated with fewer 
than 1000 employees and one operated with more than 1,000. Thus under 
this category and the associated small business size standard, the 
majority of these resellers can be considered small entities. According 
to Commission data, 881 carriers have reported that they are engaged in 
the provision of toll resale services. Of these, an estimated 857 have 
1,500 or fewer employees and 24 have more than 1,500 employees. 
Consequently, the Commission estimates that the majority of toll 
resellers are small entities, but will not be impacted by the Biennial 
Audit Plan because it applies only to those entities that receive $5 
million or more from the low-income program, on an annual basis, as 
determined on a holding company basis taking into account all operating 
companies and affiliates.
    53. Pre-paid Calling Card Providers. Neither the Commission nor the 
SBA has developed a small business size standard specifically for pre-
paid calling card providers. The appropriate size standard under SBA 
rules is for the category Telecommunications Resellers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
Census data for 2007 show that 1,523 firms provided resale services 
during that year. Of that number, 1,522 operated with fewer than 1000 
employees and one operated with more than 1,000. Thus under this 
category and the associated small business size standard, the majority 
of these pre-paid calling card providers can be considered small 
entities. According to Commission data, 193 carriers have reported that 
they are engaged in the provision of pre-paid calling cards. Of these, 
an estimated all 193 have 1,500 or fewer employees and none have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of pre-paid calling card providers are small entities, but 
will not be impacted by the Biennial Audit Plan because it applies only 
to those entities that receive $5 million or more from the low-income 
program, on an annual basis, as determined on a holding company basis 
taking into account all operating companies and affiliates.
2. Wireless Carriers and Service Providers
    54. Below, for those services subject to auctions, the Commission 
notes that, as a general matter, the number of winning bidders that 
qualify as small businesses at the close of an auction does not 
necessarily represent the number of small businesses currently in 
service. Also, the Commission does not generally track subsequent 
business size unless, in the context of assignments or transfers, 
unjust enrichment issues are implicated.
    55. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the Census Bureau has placed wireless firms within this new, 
broad, economic census category. Prior to that time, such firms were 
within the now-superseded categories of ``Paging'' and ``Cellular and 
Other Wireless Telecommunications.'' Under the present and prior 
categories, the SBA has deemed a wireless business to be small if it 
has 1,500 or fewer employees. For the category of Wireless 
Telecommunications Carriers (except Satellite), Census data for 2007, 
which supersede data contained in the 2002 Census, show that there were 
1,383 firms that operated that year. Of those 1,383, 1,368 had fewer 
than 100 employees, and 15 firms had more than 100 employees. Thus 
under this category and the associated small business size standard, 
the majority of firms can be considered small. Similarly, according to 
Commission data, 413 carriers reported that they were engaged in the 
provision of wireless telephony, including cellular service, Personal 
Communications Service (PCS), and Specialized Mobile Radio (SMR) 
Telephony services. Of these, an estimated 261 have 1,500 or fewer 
employees and 152 have more than 1,500 employees. Consequently, the 
Commission estimates that approximately half or more of these firms can 
be considered small. Thus, using available data, we estimate that the 
majority of wireless firms can be considered small.
    56. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions. The Commission auctioned geographic area licenses in 
the WCS service. In the auction, which commenced on April 15, 1997 and 
closed on April 25, 1997, seven bidders won 31 licenses that qualified 
as very small business entities, and one bidder won one license that 
qualified as a small business entity.
    57. Satellite Telecommunications Providers. Two economic census 
categories address the satellite industry. The first category has a 
small business size standard of $15 million or less in average annual 
receipts, under SBA rules. The second has a size standard of $25 
million or less in annual receipts.
    58. The category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing 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.'' Census Bureau data for 2007 show that 512 
Satellite Telecommunications firms that operated for that entire year. 
Of this total, 464 firms had annual receipts of under $10 million, and 
18 firms had receipts of $10 million to $24,999,999. Consequently, the 
Commission estimates that the majority of Satellite Telecommunications 
firms are small entities, but are unlikely impacted by the Biennial 
Audit Plan because it applies only to those entities that receive $5 
million or more from the low-income program, on an annual basis, as 
determined on a holding company basis taking into account all operating 
companies and affiliates.
    59. The second category, i.e., ``All Other Telecommunications'' 
comprises ``establishments primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. 
Establishments providing Internet services or voice over Internet 
protocol (VoIP) services via client-supplied telecommunications 
connections are also included in this industry.'' For this category, 
Census Bureau data for 2007 show that there were a total of 2,383 firms 
that operated for the entire year. Of this total, 2,347 firms had 
annual receipts of under $25 million and 12 firms had annual receipts 
of $25 million to $49, 999,999. Consequently, the Commission estimates 
that the majority of All Other Telecommunications firms are small 
entities that might be affected by our action.

[[Page 68072]]

    60. Common Carrier Paging. The SBA considers paging to be a 
wireless telecommunications service and classifies it under the 
industry classification Wireless Telecommunications Carriers (except 
satellite). Under that classification, the applicable size standard is 
that a business is small if it has 1,500 or fewer employees. For the 
general category of Wireless Telecommunications Carriers (except 
Satellite), Census data for 2007, which supersede data contained in the 
2002 Census, show that there were 1,383 firms that operated that year. 
Of those 1,383, 1,368 had fewer than 100 employees, and 15 firms had 
more than 100 employees. Thus under this category and the associated 
small business size standard, the majority of firms can be considered 
small. The 2007 census also contains data for the specific category of 
``Paging'' ``that is classified under the seven-number North American 
Industry Classification System (NAICS) code 5172101. According to 
Commission data, 291 carriers have reported that they are engaged in 
Paging or Messaging Service. Of these, an estimated 289 have 1,500 or 
fewer employees, and 2 have more than 1,500 employees. Consequently, 
the Commission estimates that the majority of paging providers are 
small entities that may be affected by our action. In addition, in the 
Paging Third Report and Order, the Commission developed a small 
business size standard for ``small businesses'' and ``very small 
businesses'' for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. A ``small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. Additionally, a ``very small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $3 million for the preceding three years. The SBA has approved 
these small business size standards. An auction of Metropolitan 
Economic Area licenses commenced on February 24, 2000, and closed on 
March 2, 2000. Of the 985 licenses auctioned, 440 were sold. Fifty-
seven companies claiming small business status won.
    61. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As noted, the SBA has developed a small business 
size standard for Wireless Telecommunications Carriers (except 
Satellite). Under the SBA small business size standard, a business is 
small if it has 1,500 or fewer employees. According to the 2008 Trends 
Report, 434 carriers reported that they were engaged in wireless 
telephony. Of these, an estimated 222 have 1,500 or fewer employees and 
212 have more than 1,500 employees. We have estimated that 222 of these 
are small under the SBA small business size standard.
3. Internet Service Providers
    62. The 2007 Economic Census places these firms, whose services 
might include voice over Internet protocol (VoIP), in either of two 
categories, depending on whether the service is provided over the 
provider's own telecommunications facilities (e.g., cable and DSL 
ISPs), or over client-supplied telecommunications connections (e.g., 
dial-up ISPs). The former are within the category of Wired 
Telecommunications Carriers, which has an SBA small business size 
standard of 1,500 or fewer employees. The latter are within the 
category of All Other Telecommunications, which has a size standard of 
annual receipts of $25 million or less. The most current Census Bureau 
data for all such firms, however, are the 2002 data for the previous 
census category called Internet Service Providers. That category had a 
small business size standard of $21 million or less in annual receipts, 
which was revised in late 2005 to $23 million. The 2002 data show that 
there were 2,529 such firms that operated for the entire year. Of 
those, 2,437 firms had annual receipts of under $10 million, and an 
additional 47 firms had receipts of between $10 million and 
$24,999,999. Consequently, we estimate that the majority of ISP firms 
are small entities.
d. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    63. As part of the effort to reduce waste, fraud, and abuse in the 
low-income program, the Commission directed the Bureau, in conjunction 
with OMD, to finalize standard procedures for independent audits of 
carriers drawing $5 million or more annually from the program. The 
Commission limited this requirement to the largest recipients in the 
program, who pose the biggest risk to the program if they lack 
effective internal controls to ensure compliance with the Commission's 
rules. For the small percentage of, if any, small entities who meet 
this $5 million revenue threshold, we seek comment on how to minimize 
the burdens of such a requirement on small entities. Accordingly, we 
seek comment on the potential economic impact of these requirements.
e. Federal Rules That May Duplicate or Conflict With Proposed Rules
    64. None.

C. Filing Requirements

    65. Filing Requirements. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments on or before December 13, 2013 and reply comments on or 
before December 30, 2013. Comments are to reference WC Docket No. 11-42 
and DA 13-2016 and may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    [cir] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes must be disposed of before 
entering the building.
    [cir] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    [cir] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    In addition, we request that one copy of each pleading be sent to 
each of the following:
    [cir] Garnet Hanly, Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A346, 
Washington, DC 20554; email: Garnet.Hanly@fcc.gov; and
    [cir] Charles Tyler Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A452, 
Washington, DC 20554; email: Charles.Tyler@fcc.gov.

[[Page 68073]]

    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to fcc504@fcc.gov or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

Federal Communications Commission.
Kimberly Scardino,
Division Chief, Telecommunication Access Policy Division, Wireline 
Competition Bureau.
[FR Doc. 2013-27184 Filed 11-12-13; 8:45 am]
BILLING CODE 6712-01-P