Lifeline and Link Up Reform and Modernization, Telecommunications Carriers Eligible for Universal Service Support, Connect America Fund, 40923-40936 [2015-17186]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 80, Number 134 (Tuesday, July 14, 2015)]
[Rules and Regulations]
[Pages 40923-40936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17186]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 11-42, 09-197, 10-90; FCC 15-71]


Lifeline and Link Up Reform and Modernization, Telecommunications 
Carriers Eligible for Universal Service Support, Connect America Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Federal Communications Commission (the 
Commission) seeks to rebuild the current framework of the Lifeline 
program and continue its efforts to modernize the Lifeline program so 
that all consumers can utilize advanced networks.

DATES: This Order on Reconsideration and Second Report and Order is 
effective August 13, 2015. The amendments to these rules contain 
information collection requirements that are subject to Paperwork 
Reduction Act that have not yet been approved by the Office of 
Management and Budget (OMB). Upon OMB approval of the information 
collection requirements, the Commission will publish a document in the 
Federal Register announcing the effective date of the regulations.

FOR FURTHER INFORMATION CONTACT: Jonathan Lechter, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration and Second Report and Order (Order on Recon and 2nd 
R&O) in WC Docket Nos. 11-42, 09-197, 10-90; FCC 15-71, adopted on June 
18, 2015 and released on June 22, 2015. 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://www.fcc.gov/document/fcc-releases-lifeline-reform-and-modernization-item.

I. Introduction

    1. For nearly 30 years, the Lifeline program has ensured that 
qualifying low-income Americans have the opportunities and security 
that voice service brings, including being able to find jobs, access 
health care, and connect with family. As the Commission explained at 
the program's inception, ``[i]n many cases, particularly for the 
elderly, poor, and disabled, the

[[Page 40924]]

telephone [has] truly [been] a lifeline to the outside world.'' Thus, 
``[a]ccess to telephone service has [been] crucial to full 
participation in our society and economy which are increasingly 
dependent upon the rapid exchange of information.'' In 1996, Congress 
recognized the importance and success of the program and enshrined its 
mission into the Telecommunications Act of 1996 (1996 Act). Over time, 
the Lifeline program has evolved from a wireline-only program, to one 
that supports both wireless and wireline voice communications. 
Consistent with the Commission's statutory mandate to provide consumers 
in all regions of the nation, including low-income consumers, with 
access to telecommunications and information services, the program must 
continue to evolve to reflect the realities of the 21st Century 
communications marketplace in a way that ensures both the beneficiaries 
of the program, as well as those who pay into the universal service 
fund (USF or Fund), are receiving good value for the dollars invested. 
The purpose of the Lifeline program is to provide a hand up, not a hand 
out, to those low-income consumers who truly need assistance connecting 
to and remaining connected to telecommunications and information 
services. The program's real success will be evident by the stories of 
Lifeline beneficiaries who move off of Lifeline because they have used 
the program as a stepping stone to improve their economic stability.
    2. Over the past few years, the Lifeline program has become more 
efficient and effective through the combined efforts of the Commission 
and the states. The Lifeline program is heavily dependent on effective 
oversight at both the Federal and the state level and the Commission 
has partnered successfully with the states through the Federal-State 
Joint Board on Universal Service (Joint Board) to ensure that low-
income Americans have affordable access to voice telephony service in 
every state and territory. In addition to working with the Commission 
on universal service policy initiatives on the Joint Board, many states 
administer their own low-income programs designed to ensure that their 
residents have affordable access to telephone service and connections. 
These activities provide the states the opportunity and flexibility to 
develop new and innovative ways to make the Lifeline program more 
effective and efficient, and ultimately bring recommendations to the 
Commission for the implementation of improvements on a national scale. 
As the Commission continues to modernize the Lifeline program, it 
deeply values the input of the states as it, among other reforms, seeks 
to streamline the Lifeline administrative process and enhance the 
program.
    3. The Commission's 2012 Lifeline Reform Order, 77 FR 12951, March 
2, 2012, substantially strengthened protections against waste, fraud, 
and abuse; improved program administration and accountability; improved 
enrollment and consumer disclosures; and took some preliminary steps to 
modernize the program for the 21st Century. These reforms provided a 
much needed boost of confidence in the Lifeline program among the 
public and interested parties, increased accountability, and set the 
Lifeline program on an improved path to more effectively and 
efficiently provide vital services to the Nation's low-income 
consumers. In particular, the reforms have resulted in approximately 
$2.75 billion in savings from 2012 to 2014 against what would have been 
spent in the absence of reform. Moreover, in the time since the reforms 
were adopted, the size of the Lifeline program has declined steadily. 
In 2012, the Universal Service Administrative Company (USAC), the 
Administrator of the Fund, disbursed approximately $2.2 billion in 
Lifeline support payments compared to approximately $1.6 billion in 
Lifeline support payments in 2014. These reforms have been 
transformational in minimizing the opportunity for Lifeline funds to be 
used by anyone other than eligible low-income consumers. The Commission 
is pleased that its previous reforms have taken hold and sustained the 
integrity of the Fund. However, the Commission's work is not complete. 
In light of the realities of the 21st Century communications 
marketplace, the Commission must overhaul the Lifeline program to 
ensure that it advances the statutory directive for universal service. 
At the same time, the Commission must ensure that adequate controls are 
in place as while implementing any further changes to the Lifeline 
program to guard against waste, fraud, and abuse. Therefore the 
Commission, among other things, seek to revise our documentation 
retention requirements and establish minimum service standards for any 
provider that receives a Lifeline subsidy. The Commission also seeks to 
focus our efforts on targeting funding to those low-income consumers 
who really need it while at the same time shifting the burden of 
determining consumer eligibility for Lifeline support from the 
provider. The Commission further seek to leverage efficiencies from 
other existing federal programs and expand our outreach efforts. By 
rebuilding the existing Lifeline framework, the Commission hopes to 
more efficiently and effectively address the needs of low-income 
consumers. The Commission ultimately seeks to equip low-income 
consumers with the necessary tools and support system to realize the 
benefits of broadband independent of Lifeline support.
    4. Three years ago, the Commission took important steps to reform 
the Lifeline program. The reforms, adopted in the 2012 Lifeline Reform 
Order, focused on changes to eliminate waste, fraud, and abuse in the 
Lifeline program by, among other things: Setting a savings target; 
creating a National Lifeline Accountability Database (NLAD) to prevent 
multiple carriers from receiving support for the same household; and 
confirming a one-per-household rule applicable to all consumers and 
Lifeline providers in the program. It also took preliminary steps to 
modernize the Lifeline program by, among other things: Adopting express 
goals for the program; establishing a Broadband Adoption Pilot Program; 
and allowing Lifeline support for bundled service plans combining voice 
and broadband or packages including optional calling features. Now, 30 
years after the Lifeline program was founded, the Commission believes 
it is past time for a fundamental, comprehensive restructuring of the 
program.
    5. In the Order on Recon, the Commission grants in part a petition 
for reconsideration filed by TracFone of the Commission's 2012 Lifeline 
Reform Order and requires Lifeline providers to retain documentation 
demonstrating subscriber eligibility. In the 2nd R&O, the Commission 
takes further steps to adopt rules and procedures in response to 
proposals on which the Commission sought comment in the 2012 Lifeline 
FNPRM, and other outstanding issues regarding administration of the 
program to root out waste, fraud, and abuse. The Commission also takes 
further actions to put in place measures that increase accountability, 
efficiency, and transparency in the program. Specifically, the 
Commission:
     Establishes a uniform ``snapshot'' date each month for 
Lifeline providers to calculate their number of subscribers for the 
purpose of reimbursement;
     Eliminates the requirement that incumbent local exchange 
carriers (LECs) must resell retail Lifeline-discounted service, and 
limit reimbursement for Lifeline service to Lifeline providers directly 
serving Lifeline customers;

[[Page 40925]]

     Interprets ``former reservations in Oklahoma,'' as 
provided in the Commission's rules, as the geographic boundaries 
reflected in the Historical Map of Oklahoma 1870-1890 (Oklahoma 
Historical Map); and
     Waives, on the Commission's motion, the requirement to 
conduct desk audits on first-year ETCs for two Lifeline providers in 
order to maximize the use of audit program resources.

II. Order on Reconsideration

A. Retention of Eligibility Documentation

    6. In the Order on Recon, the Commission requires ETCs to retain 
documentation demonstrating subscriber eligibility for the Lifeline 
Program as well as documentation used in NLAD processes and revise 
Sec. Sec.  54.404 and 54.410 of the rules. In doing so, the Commission 
grants in part a petition and supplement filed by TracFone, which 
requests reconsideration of the prohibition on retention of eligibility 
documentation. The Commission takes these actions as another important 
step to significantly reduce waste, fraud, and abuse in the Lifeline 
program.
    7. In the Lifeline Reform Order, the Commission adopted uniform 
eligibility criteria for the federal Lifeline program. Consumers must 
qualify based on either their income or their participation in at least 
one of a number of federal assistance programs. The Commission required 
eligible telecommunications carriers (ETCs) to examine certain 
documentation to verify a consumer's program or income based 
eligibility, but prohibited ETCs from retaining copies of the 
documentation. Instead, the Commission directed ETCs to review the 
documentation and keep accurate records detailing how the consumer 
demonstrated his or her eligibility. In support of its decision to 
prohibit the retention of eligibility documents, the Commission cited 
to comments that raised concerns such as the risk related to retaining 
sensitive subscriber eligibility documentation and the burden on ETCs.
    8. Subsequent to the Lifeline Reform Order, TracFone filed a 
petition for reconsideration and supplement. In its petition for 
reconsideration, TracFone argues that the Commission should not have 
required consumers to produce documentation to prove eligibility. In 
its late-filed supplement to its petition for reconsideration, TracFone 
argues that given that the Commission had not reconsidered the new rule 
requiring proof of eligibility, the Commission should require all ETCs 
to retain the program eligibility documentation for not less than three 
years, in accordance with the rules on record retention. Recently, in a 
petition for waiver, TracFone broadened its original request to allow 
ETCs to retain documentation related to both program and income-based 
eligibility.
    9. Procedural Issues. Section 1.429 of the Commission's rules 
states that late filed supplements to petitions for reconsideration are 
not considered, ``except upon leave granted pursuant to a separate 
pleading stating the grounds for acceptance of the supplement.'' 
TracFone filed a separate pleading requesting that the Commission 
accept and consider the late-filed supplement because the arguments 
raised in the supplement are a logical outgrowth of the issues raised 
in the 2011 Lifeline NPRM. TracFone notes that its proposal was subject 
to public comment and all but one of the commenters supported its 
position to permit retention of eligibility documentation. The 
Commission finds that TracFone has stated adequate grounds to justify 
consideration of its supplement. The Commission view the argument 
raised in TracFone's supplement as an alternative argument to 
Tracfone's petition for reconsideration. The Commission also notes that 
both the petition for reconsideration and the supplement were the 
subject of public comment, and that the issue of eligibility 
documentation retention was directly discussed in the Lifeline Reform 
Order. The Commission therefore accepts TracFone's supplement to its 
petition for reconsideration and discuss the substantive issues below.
    10. Substantive Issues. In its petitions, TracFone argues that 
retention of eligibility information is necessary to prevent waste, 
fraud, and abuse because the current rules do not provide the 
Commission or USAC with a way to verify through an audit or other 
mechanism whether an ETC has in fact reviewed the eligibility 
documentation provided by the Lifeline applicant. TracFone argues that 
by prohibiting ETCs from retaining documentation, the Commission 
created an opportunity for ETCs to fabricate records which indicate 
that they have reviewed valid documentation. In a related petition, 
TracFone argues that ETCs should retain documentation reviewed to 
verify the identity or information of a subscriber as part of the NLAD 
dispute resolution process for the NLAD. For these reasons, TracFone 
argues in its petitions that the Commission should change its rules to 
require ETCs to retain eligibility documentation in accordance with 
Commission retention rules.
    11. All but one of the commenters filed in support of the TracFone 
petitions, asserting among other things that retention of documentation 
is in the public interest, and that requiring the retention of 
eligibility documents will curb waste, fraud, and abuse in the Lifeline 
program. Commenters also agree that the current requirement is 
difficult to audit. They explain that there is uncertainty in the 
industry with respect to what an ETC's records must contain and what 
auditors would consider when finding that an ETC is or is not compliant 
with the rules. Commenters agree that ETCs have methods to securely 
maintain customer eligibility documentation in an encrypted, electronic 
format and to limit access to such documentation to only certain 
employees. Some commenters also note that the administrative costs 
associated with retaining the documentation are minimal and, in all 
events, justified by the protection afforded against waste, fraud, and 
abuse.
    12. Retention of Subscriber Eligibility Documentation. Based on the 
record, the Commission grants in part TracFone's request for 
reconsideration and require carriers to retain both program and income-
based eligibility documentation. Under Sec.  1.429 of the Commission's 
rules, petitions for reconsideration will only be granted when the 
petitioner shows that the facts or arguments relied on have changed 
since the last opportunity to present such matters, the facts or 
arguments were not known at the time of the last opportunity to present 
such matters, or the Commission determines that consideration of the 
facts or arguments relied on is required in the public interest. For 
the reasons set forth below, the Commission finds that TracFone has 
demonstrated that ``consideration of the facts or arguments relied on 
is required in the public interest.''
    13. Based upon the record before us and for the reasons set forth 
below, the Commission finds that the overall benefits of requiring the 
retention of eligibility documentation outweigh the costs. The 
Commission thus revises Sec.  54.410 of the rules to require retention 
of eligibility documentation. The Commission concludes that reversal of 
the eligibility documentation prohibition is in the public interest 
because it will improve the auditability and enforceability of our 
rules, significantly reduce falsified records, and provide certainty in 
the industry regarding the documents that need to be retained in the 
event of an audit or investigation.
    14. The Commission also finds that the concerns that led us to 
prohibit such

[[Page 40926]]

retention in 2012, while still relevant, are largely overshadowed by 
the enormous benefits of requiring ETCs to retain eligibility 
documentation. For example, while the Commission is still concerned 
with the privacy and security of subscriber information, most ETCs 
themselves argue that there are IT and access security measures that 
can be taken to minimize the risks associated with maintaining 
sensitive subscriber eligibility documentation. In fact, in the General 
Accounting Office (GAO)'s recent report on the Lifeline Program, the 
ETCs interviewed reiterated their comments that subscriber information 
can be protected using multiple measures such as, but not limited to, 
firewalls and other boundary protections to prevent unauthorized 
access, authentication requirements for users, and usage restrictions 
for authorized users. Furthermore, while there still will be an 
additional burden on ETCs to retain eligibility documentation, the 
majority of ETCs contend that the burden is worth the benefits to the 
program and the Commission agrees. The Commission finds that the 
burdens of retention can be mitigated with electronic storage 
capabilities and the Commission concludes that the burden is outweighed 
by the benefits to the integrity of the program. While the Commission 
seeks comment on establishing a national verifier for the program, 
overall, the Commission finds that the Fund will be better protected, 
if at this time, ETCs are required to both retain and present the 
eligibility documentation to the Commission or USAC and that the 
revised rules will prevent significant waste, fraud, and abuse in the 
Lifeline program.
    15. Retention of Documentation Used in the NLAD Resolution 
Processes. For the reasons set forth above, the Commission revises 
Sec.  54.404 of the rules and also require ETCs to retain documentation 
that was reviewed to verify subscriber information for the NLAD dispute 
resolution process. The NLAD dispute resolution process requires ETCs 
to review additional documentation to verify the identity or 
information of a subscriber who has failed the third-party 
identification verification, and address or age check for the NLAD. All 
but one of the comments received support TracFone's position that ETCs 
should be allowed to retain documents reviewed for NLAD processes. In 
addition to the record support for this action, the Commission also 
finds that there is overlap between the documents reviewed by ETCs for 
the NLAD dispute resolution process and the eligibility documents 
listed in Sec.  54.410. Furthermore, the Commission's rules on record 
retention mandate that ETCs retain documents demonstrating compliance 
with federal Lifeline requirements.
    16. Therefore the Commission revises Sec. Sec.  54.404 and 54.410 
of the Commission's rules and requires that all ETCs retain 
documentation demonstrating subscriber income-based or program-based 
eligibility for participation in the Lifeline program for the purposes 
of production during audits or investigations or to the extent required 
by NLAD processes, including the dispute resolution processes that 
require verification of identity, address, or age of subscribers. The 
Commission reminds ETCs that pursuant to Section 222 of the Act, they 
have a duty to protect ``the confidentiality of proprietary 
information'' of customers. In this context, this includes all 
documentation submitted by a consumer or collected by an ETC to 
determine a consumer's eligibility for Lifeline service, as well as all 
personally identifiable information contained therein.
    17. The Act's requirement that such practices be ``just and 
reasonable,'' also imposes a duty on ETCs related to document retention 
security practices. Accordingly, the Commission expects ETCs to live up 
to the assurances made in their comments in this proceeding that they 
can take appropriate measures to protect this data. In particular, the 
Commission expects that, at a minimum, ETCs must employ the following 
practices to secure any subscriber information that is stored on a 
computer connected to a network: firewalls and boundary protections; 
protective naming conventions; user authentication requirements; and 
usage restrictions, to protect the confidentiality of consumers' 
proprietary personal information retained for this or other allowable 
purposes. However, if the facts warrant further investigation, the 
Commission will still evaluate the security measures employed by ETCs 
on a case by case basis.
    18. The Commission sought comment on extending to ten years the 
record retention requirement generally in the 2012 Lifeline FNPRM. The 
Commission does not take action on that proposal at this time. 
Therefore, Lifeline providers must retain documentation demonstrating 
compliance with the Commission's rules for three years. Documentation 
required by Sec. Sec.  54.404(b)(11), 54.410(b), 54.410(c), 54.410(d) 
and (f) must be retained for as long as the subscriber receives 
Lifeline service from the ETC, but no less than three calendar years. 
Documents covered under Sec. Sec.  54.404(b)(11), 54.410(b), and 
54.410(c) are those documents in existence as of the effective date of 
this rule.
    19. Finally, given the Commission's decision in the Second Report 
and Order to limit Lifeline support to ETCs directly serving Lifeline 
customers, the Commission also amends Sec.  54.417 to require non-ETCs 
that have provided Lifeline service through resale to retain records 
establishing compliance with state and federal rules for at least three 
calendar years. Non-ETCs should also retain documentation required by 
Sec. Sec.  54.404(b)(11), 54.410(b), 54.410(c), 54.410(d) and (f) for 
as long as the subscriber receives Lifeline service from the ETC, but 
no less than three calendar years. Such retention will allow the 
Commission to verify non-ETCs' past compliance with the Lifeline rules.

III. Second Report and Order

A. Establishing a Uniform Snapshot Date Going Forward

    20. In the 2011 Lifeline NPRM, the Commission proposed to codify a 
rule that would require all ETCs to report partial or pro-rata dollar 
amounts when claiming reimbursement for Lifeline subscribers who 
received service for less than a month. The Commission reasoned that 
since ETCs are able to bill customers on a partial month basis, they 
should also be able to tell if a customer was a Lifeline subscriber for 
the full month of requested support.
    21. The majority of comments received in response to the 2011 
Lifeline NPRM opposed such a requirement and raised arguments regarding 
significant resources and cost involved if the Commission mandated pro-
rata support reporting. For example, commenters explained that 
fundamental changes to systems, such as programming updates, additional 
storage requirements, and/or creating new internal IT systems may be 
necessary to comply with such a requirement. The commenters noted that 
the Commission should not assume that ETC billing systems could readily 
implement pro-rata support calculations. In contrast, commenters noted 
that the system of using a single snapshot date to calculate support 
amounts would alleviate the need for partial support requests. Some 
commenters noted that the creation of the database, which would track 
the number of days that subscribers received service and when they were 
activated and deactivated, could solve the issue permanently.

[[Page 40927]]

    22. After reviewing the comments received, the Commission declines 
to adopt our proposal to require ETCs to calculate partial month 
support amounts. As the current FCC Form 497 does not collect pro-rata 
support requests, our actions today do not affect ETCs' FCC Form 497 
filings currently pending with USAC.
    23. Instead of requiring pro-rata support requests, at this time, 
the Commission revises Sec.  54.407 of its rules to require ETCs to use 
a uniform snapshot date to request reimbursement from USAC for the 
provision of Lifeline support. As the commenters state, the Commission 
agrees that it is possible that subscribers who initiate service may 
offset those who terminate service mid-month. The Commission finds, 
therefore, that a uniform snapshot date will reduce waste in the 
program as effectively as partial support reporting would have done, 
but at much lower administrative and compliance cost to ETCs. The 
Commission also finds that a uniform snapshot date will be efficient 
for USAC to administer and will ultimately ease future changes to 
reimbursement processes if, for example, the Commission adopts 
proposals herein to reimburse based on the NLAD.
    24. Following the 2012 Lifeline Reform Order, USAC encouraged ETCs 
to select a single ``snapshot date'' during the month (e.g., the 15th 
of every month) to determine the number of eligible consumers for which 
it would seek reimbursement for that month. As a result, the snapshot 
dates vary from ETC to ETC. The Commission now decides that ETCs should 
all use the same snapshot date to determine the number of Lifeline 
subscribers served in a given month and report that month to USAC on 
the FCC Form 497. The Commission concludes that a snapshot date will 
produce substantial benefits. First, a uniform snapshot date will 
reduce the risk that two ETCs receive full support for providing 
service for the same subscriber in the same calendar month. Second, a 
uniform snapshot date will make it easier for USAC to adopt uniform 
audit procedures. Third, a uniform snapshot date will help ease the 
transition to a reimbursement process that calculates support based on 
the number of subscribers contained in the NLAD. Given the industry 
support and comment around the establishment of a snapshot date, 
compliance with the Commission's rules will be high and the 
administrative costs associated will be low. To promote efficiency and 
ease of administration, the Commission revises Sec.  54.407 and directs 
ETCs to take a snapshot of their subscribers on the first day of the 
month.
    25. Therefore, within 180 days of the effective date of this 2nd 
R&O, ETCs should transition to using the first day of the month as the 
snapshot date. Such a transition period is appropriate to ensure that 
ETCs have sufficient time to make whatever changes are necessary to 
their billing systems to take a snapshot on the first day of the month. 
In the interim, ETCs should use the same snapshot date of their choice 
from month to month.

B. Resale of Retail Lifeline Supported Services

    26. The Commissions next attacks a potential source of waste and 
abuse in the Lifeline program by addressing issues raised by the 
Commission in the 2012 Lifeline FNPRM pertaining to resold Lifeline 
services. The Commission now finds that only ETCs providing Lifeline 
service directly to the consumer may seek reimbursement from the 
Lifeline program for the service provided. The Commission revises 
Sec. Sec.  54.201, 54.400, 54.401, and 54.407 to reflect this change. 
The Commission will no longer provide any Lifeline reimbursement to 
carriers for any wholesale services to resellers, and the Commission 
therefore forebear, to the extent discussed herein, from the incumbent 
LECs' obligation under section 251(c)(4) to offer their Lifeline 
services to resellers.
    27. By way of background, section 251(c)(4) of the Communications 
Act of 1934 as amended, states that incumbent LECs have the duty ``to 
offer for resale at wholesale rates any telecommunications service that 
the carrier provides at retail to subscribers who are not 
telecommunications carriers.'' In 1997, to encourage competition in the 
Lifeline market, the Commission concluded that resellers ``could obtain 
Lifeline service at wholesale rates that include the Lifeline support 
amounts and could pass these discounts through to qualifying low-income 
consumers.'' In its 2004 Lifeline Report and Order, the Commission 
required non-ETCs that provide Lifeline-discounted service to eligible 
consumers through resold retail service arrangements with the incumbent 
LECs to comply with all Lifeline/Link Up requirements, including 
certification and verification of subscribers. As of February 2014, 
there are approximately 46,281 lines offered to resellers for which 
incumbent LECs are seeking reimbursement.
    28. In the 2012 Lifeline Reform Order, the Commission expressed 
concerns that permitting ETCs and non-ETCs to offer Lifeline-discounted 
service through resale of retail Lifeline service posed risks to the 
Fund. In particular, the Commission was concerned with the possibility 
of over-recovery by both wholesalers and resellers seeking 
reimbursement from USAC for the same Lifeline subscriber and the lack 
of direct oversight of non-ETC resellers by state and federal 
regulators. In the case where both the wholesaler and the reseller are 
ETCs, there is currently no way for USAC to determine whether both the 
wholesaler and the reseller are seeking reimbursement for the same 
subscriber. Meanwhile, while non-ETC resellers do not pose the same 
risk of duplicate discounts, they may not be complying with federal and 
state Lifeline rules. Even though non-ETC resellers must retain records 
to demonstrate compliance with the Lifeline program rules, the 
Commission found it difficult to oversee compliance ``where the entity 
with the retail relationship with the consumer is not interfacing 
directly'' with regulators.
    29. In light of these concerns, the Commission sought comment in 
the Further Notice of Proposed Rulemaking section of the Lifeline 
Reform Order on a variety of proposals to reform or eliminate the 
resale of retail wireline Lifeline service. First, the Commission 
proposed to restrict reimbursement from the Fund to ETCs when they 
provide Lifeline-discounted service directly to retail customers. Under 
this proposal, if an ETC wholesaler provides retail telecommunications 
service to an ETC reseller for resale, only the ETC reseller can seek 
reimbursement from the Fund--the wholesaler ETC would not be permitted 
to take from the Fund on behalf of the reseller ETC. Second, the 
Commission proposed to eliminate incumbent LECs' obligation to resell 
retail Lifeline-discounted service. The Commission sought comment on 
whether it should eliminate this requirement by either reinterpreting 
the section 251(c)(4) resale obligation to exclude the resale of retail 
Lifeline-discounted service or by forbearing from the incumbent LECs' 
obligation to offer retail Lifeline service via section 251(c)(4) 
resale.
    30. Commenters overwhelmingly support eliminating the resale of 
retail Lifeline service. Parties agree that only ETCs that provide 
Lifeline-discounted service directly to subscribers should be eligible 
to receive Lifeline support from the Fund. Commenters also support the 
Commission's proposal to eliminate the incumbent LECs' obligation to 
resell retail Lifeline-discounted services. A few commenters suggest 
that if the Commission were to eliminate the resale

[[Page 40928]]

of Lifeline retail service, it should provide a transitional period 
during which non-ETC providers could attempt to obtain ETC status.
    31. To promote transparency and to protect the Fund from potential 
waste and abuse, the Commission now decides that only ETCs that provide 
Lifeline service directly to subscribers will be eligible for 
reimbursement from the Fund. The Commission will no longer provide 
reimbursement to incumbent LECs who sell Lifeline-discounted service to 
resellers. Since the Commission will not provide reimbursement to 
incumbent LECs for this purpose, the Commission now forbears from 
requiring incumbent LECs to resell retail Lifeline-discounted service 
under section 251 of the Act. The Commission's revised rules will 
effectively eliminate non-ETC resellers. Therefore, the Commission 
establishes a 180-day transition period following the effective date of 
this order during which non-ETC resellers may either obtain ETC status 
or cease providing Lifeline-discounted service after complying with 
state and federal rules on discontinuance. Following the 180-day period 
described below, the Commission will no longer provide any 
reimbursement to carriers for any wholesale Lifeline services sold to 
resellers. In the transition period section below, the Commission 
discusses potential issues such as amendments to interconnection 
agreements that may need to be resolved during the transition period 
and potential solutions for ETCs who need more time.
    32. Reimbursement Restricted to ETCs Directly Serving Lifeline 
Subscribers. The Commission first determines that ETCs can only receive 
reimbursement from the Fund in instances where they provide Lifeline 
service directly to subscribers. Pursuant to the revised rules, only a 
single entity that is registered with USAC will provide Lifeline 
service, maintain the relationship with the subscriber, seek 
reimbursement from the Fund, and be subject to state and Commission 
oversight. The Commission's decision to only reimburse ETCs that 
directly serve subscribers is consistent with the Lifeline rules, the 
majority of which deal with the ETC-subscriber relationship.
    33. In addition, this restriction will further protect the Fund 
from the risk of two ETCs seeking funds for the same subscriber. There 
is currently no way for USAC to determine if a particular service for 
which an ETC wholesaler sought reimbursement is also being used as a 
basis for reimbursement by the reseller ETC. When an incumbent LEC 
provides Lifeline retail service for resale, it provides the retail 
service for the ``wholesale rate'' discount minus the Lifeline 
discount. The incumbent LEC then seeks reimbursement from the Fund for 
that line to make itself whole for the Lifeline discount passed-through 
to the ETC reseller. Regardless of any contractual agreements that the 
wholesaler and ETC reseller may have for the reseller to forgo 
reimbursement from the Fund for that same line, the reseller could seek 
reimbursement from the Fund. Currently, there is no way for USAC or the 
incumbent LEC wholesaler to determine if the reseller has in fact 
sought reimbursement for the same subscriber. The NLAD is not able or 
intended to detect duplicate reimbursement by the wholesaler and 
reseller because the incumbent LEC's wholesale ``subscriber'' in this 
instance is the reseller, not an end-user. The NLAD only shows the 
reseller and all its customers (i.e., end-users). For the foregoing 
reasons, the Commission amends Sec. Sec.  54.201, 54.400, 54.401(a), 
and 54.407 of the rules to clarify that the ETC must have a direct 
service relationship with the qualifying low-income consumer to receive 
reimbursement from the Fund.
    34. Forbearance from the Obligation to Provide Lifeline at Resale. 
Since the Commission will no longer provide reimbursement to the 
incumbent LEC for reselling retail Lifeline services, consistent with 
Section 10 of the Act, the Commission forbears the incumbent LECs' 
obligation to provide Lifeline-discounted service at resale pursuant to 
Section 251(c)(4) of the Act.
    35. Under Section 10(a)(1) of the Act, the Commission must consider 
whether enforcement of the duty to offer Lifeline-discounted services 
at wholesale rates is necessary to ensure that the charges, practices, 
classifications, or regulations are just and reasonable and not 
unjustly or unreasonably discriminatory. Even if incumbent LECs are not 
allowed to offer for resale Lifeline-discounted services at wholesale 
rates, low-income consumers will still be able to receive Lifeline-
supported services from both wireless and wireline providers. The 
percentage of resold lines by incumbent LECs in the Lifeline program is 
minimal, and wireline CETCs have a variety of methods to offer service 
without using resold Lifeline-discounted service, such as, but not 
limited to, the use of unbundled network elements (UNEs), wholesale 
telecommunications service provided at generally available commercial 
terms, as well as non-Lifeline section 251 resale. The Commission 
therefore concludes that applying the Section 251(c)(4) requirements in 
this context is not necessary to ensure that the charges, practices, 
classifications, and regulations for Lifeline service are just and 
reasonable.
    36. Section 10(a)(2) requires the Commission to consider whether 
requiring incumbent LECs to offer Lifeline-discounted services at 
wholesale under Section 251(c)(4) is necessary to protect consumers. 
Even absent that requirement, low-income consumers will continue to 
have access to Lifeline-supported services from numerous providers. 
Furthermore, the Commission notes that, unlike ETCs, non-ETC resellers 
are not scrutinized by federal and state regulators prior to market 
entry. Non-ETC resellers are not required to obtain approval from the 
Bureau of their compliance plan nor, by definition, are they required 
to obtain an ETC designation. Therefore, following forbearance, 
consumers will be better protected because all providers of Lifeline 
will be required to comply with state and Federal Lifeline rules and be 
subject to direct USAC oversight. Requiring incumbent LECs to offer 
Lifeline-discounted services at wholesale rates is therefore not 
necessary for the protection of consumers.
    37. Finally, Section 10(a)(3) requires that the Commission 
considers whether enforcement of section (c)(4) resale requirements for 
Lifeline-discounted service is in the public interest. The Commission 
has made clear its ongoing commitment to fight waste, fraud, and abuse 
in the Lifeline program. The Commission finds that it is in the public 
interest that Lifeline-discounted service be provided only by ETCs who 
have the federal or state designations. Furthermore, by limiting 
reimbursements to carriers that are directly subject to regulation as 
ETCs, the Commission will reduce the risk of waste, fraud, and abuse of 
the program, which is in the public interest. Section 10(b) requires 
that the analysis under Section 10(a)(3) include consideration of 
whether forbearance would promote competitive market conditions. 
Although the Commission does not believe that forbearance will 
necessarily increase competition in the market for Lifeline-discounted 
services, the Commission finds that the market for Lifeline services is 
already competitive and will remain so following forbearance. Incumbent 
LECs, wireline CETCs utilizing means other than Lifeline resale to 
serve their subscribers, and wireless ETCs offer Lifeline consumers 
significant competitive choice.

[[Page 40929]]

    38. Transition Period. To provide for an orderly transition period 
for ETCs, non-ETCs and their consumers to move away from Lifeline 
resale services, the changes in this order will go into effect 180 days 
after the effective date of this Order. The comments received noted 
that 180 days would be sufficient time for incumbent LEC wholesalers to 
make the necessary changes to tariffs, interconnection agreements, and 
other regulatory filings. Forbearance here may trigger change of law 
provisions in ILEC interconnection agreements. The Commission reminds 
ILECs and CETCs to negotiate in good faith to make appropriate 
amendments for such agreements. Therefore, starting 180 days after the 
effective date of this Order, incumbent LECs no longer have an 
obligation under Section 251(c)(4) of the Act to offer for resale their 
Lifeline-discounted retail offerings. Also, starting at that time, USAC 
will no longer reimburse incumbent LECs for their Section 251(c)(4) 
services. Thereafter, USAC should only reimburse ETCs who directly 
provide Lifeline service to qualified low-income consumers, in 
accordance with all of the Lifeline program rules. This transition time 
will allow affected ETCs an opportunity to utilize other means of 
providing Lifeline service (e.g., UNEs or non-Lifeline resale service). 
In order to participate in the Lifeline program, all ETCs and newly 
designated ETCs must be in compliance with all of our rules, including 
but not limited to, providing subscriber information into the NLAD, 
obtaining annual subscriber certifications, and de-enrolling 
subscribers in accordance with our rules.

C. Defining the ``Former Reservations in Oklahoma''

    39. Background. In this section, the Commission departs from the 
staff's prior informal guidance and interpret the ``former reservations 
in Oklahoma'' within Sec.  54.400(e) of the Commission's rules as the 
geographic boundaries reflected in the Historical Map of Oklahoma 1870-
1890 (Oklahoma Historical Map). The Commission is convinced that this 
map, provided to us by BIA, is illustrative of the ``former 
reservations in Oklahoma.'' To ensure all impacted parties have 
sufficient time to transition to the new map, the Commission provides a 
transition period of 180 days from the effective date of this Order. 
During this time, the Commission will actively engage in consultation 
with the Tribal Nations of Oklahoma on the operational functionality 
and use of the Oklahoma Historical Map at the local and individual 
Tribal Nation level.
    40. When the Commission first adopted Tribal Lifeline and Link Up 
support, it adopted a rule that stated consumers were eligible to 
receive enhanced support if they lived on ``Tribal lands.'' In further 
defining the term ``Tribal lands,'' the Commission stated in the 2000 
Tribal Order that the term included ``any federally recognized Tribe's 
reservation, Pueblo, or Colony, including former reservations in 
Oklahoma,'' as well as ``near reservation'' areas. The Commission, 
however, has not formally defined the boundaries of the ``former 
reservations in Oklahoma'' for the purpose of the Lifeline rules, and 
there are inconsistencies between various maps at the state and Federal 
level that define the boundaries of the former reservations in 
Oklahoma. In practice, USAC has distributed Tribal support in Oklahoma 
based on a map displayed on the OCC's Web site, which was based upon 
informal guidance provided by FCC staff in 2004.
    41. There is a vast and complicated legal history of Tribal 
property in the United States which involves ``the whole range of 
ownership forms known to our legal system.'' A large part of Oklahoma 
was once Indian Territory, and as the Tribal Nations of Oklahoma 
experienced many changes to their land tenures, Tribal lands in 
Oklahoma are an excellent example of that intricate legal history. The 
Commission's actions comport with the complex legal history within 
Oklahoma and uphold our government-to-government responsibilities to 
the Oklahoma Tribal Nations, while also improving administration of the 
Lifeline program and distribution of enhanced Tribal support.
    42. Discussion. To provide efficiency, transparency, and clarity 
within the Lifeline program, and to ensure that universal service funds 
are distributed as intended, the Commission departs from the staff's 
prior informal guidance and interpret the ``former reservations in 
Oklahoma'' as the boundaries reflected in the Oklahoma Historical Map 
180 days after the effective date of this Order. The Commission 
concludes that interpreting the ``former reservations in Oklahoma'' in 
Sec.  54.400(e) of the Commission's rules based on the Oklahoma 
Historical Map will provide clarity to both Tribal consumers and ETCs, 
and will also be an accurate reflection of Tribal lands in Oklahoma.
    43. The Tribal lands of Oklahoma and ``all land titles in Oklahoma 
stem from treaties with Indian tribes and acts of Congress vitalizing 
treaty provisions.'' The U.S. Department of Interior, through the 
delegated authorities of its Bureau of Indian Affairs, is the lead 
federal agency with respect to delivering federal services based on 
provisions of those treaties with Tribal Nations, as well as the 
administration of the federal government's trust relationship and 
responsibilities to Tribal Nations and Indians with respect to land 
titles and management. For these and other purposes, BIA maintains two 
Regional Offices in Oklahoma--the Southern Plains Regional Office in 
Anadarko, OK, and the Eastern Oklahoma Regional Office in Muscogee, OK, 
both of which have Land, Titles, and Records Departments. In inter-
agency coordination, the Commission's Office of Native Affairs and 
Policy (ONAP) and the Bureau received the Oklahoma Historical Map from 
the Land, Titles, and Records Department of the Southern Plains 
Regional Office. Therefore, to better address the difficult 
administrative and eligibility issues in Oklahoma law, and for the 
purpose of determining eligibility for enhanced Tribal Lifeline and 
Link Up support in the state of Oklahoma, the Commission identifies and 
relies upon the Oklahoma Historical Map to determine the boundaries of 
``former reservations in Oklahoma'' for purposes of Sec.  54.400(e) of 
the Commission's rules.
    44. The Commission recognizes that, given the Department of 
Interior's jurisdictional authority over many administrative trust 
responsibilities with respect to the Tribal lands in Oklahoma, adopting 
the Oklahoma Historical Map to identify the ``former reservations in 
Oklahoma'' is a more accurate representation of ``former reservations 
in Oklahoma'' than the map referenced on OCC's Web site. The Oklahoma 
Historical Map is a clear and historically accurate representation of 
``former reservations in Oklahoma'' at a time prior to Oklahoma 
statehood in 1907. While the Commission concludes here that it was not 
unreasonable for USAC, the OCC, and ETCs to rely on the OCC Web site 
map for disbursing Tribal support consistent with prior informal staff 
guidance, going forward, the Commission believes the Oklahoma 
Historical Map provides more clarity to both Tribal consumers and 
Lifeline providers to ensure that funds are allocated for the intended 
purpose of assisting those living on Tribal lands, which typically have 
lower adoption rates for telecommunications services.
    45. In addition, the Oklahoma Historical Map represents actual 
former reservation boundaries prescribed by Acts of Congress--both laws 
and treaties--as opposed to areas identified

[[Page 40930]]

for statistical purposes reflected in the Census Bureau's American 
Indians and Alaska Natives (AIAN) map of the Oklahoma Tribal 
Statistical Areas (OTSAs). Further, our inter-agency work with BIA 
reveals that the Oklahoma Historical Map is a more accurate 
representation of the individual former reservations of each Tribal 
Nation in Oklahoma. The Commission believes, therefore, that it is 
proper and accurate to adopt the Oklahoma Historical Map, and that the 
use of this map for purposes of the Lifeline program, which is a 
household based program that relies in large part on addresses for 
determining eligibility, will facilitate verification that consumers 
are in fact residing on Tribal lands. To further improve on these 
efforts, the Commission also seeks comment above on other ways for 
Lifeline providers to more accurately verify that consumers are 
residing on Tribal lands.
    46. This clarification will result in a reduction in the 
geographical scope of ``former reservations in Oklahoma.'' In basic 
terms, use of the Oklahoma Historical Map will now result in:
     Exclusion from the ``former reservations in Oklahoma'' the 
region within central Oklahoma historically and commonly known as the 
``Unassigned Lands''--referred to in the Oklahoma Historical Map as 
``Oklahoma: Opened to settlement April 22, 1889''--which includes the 
majority of the area within the Oklahoma City municipal boundaries;
     Exclusion of the ``Cherokee Outlet;''
     Continued exclusion from the ``former reservations in 
Oklahoma'' the ``Panhandle,'' also historically known as the ``Cimarron 
Strip,'' or ``Neutral Strip,''--reflected in the Oklahoma Historical 
Map as the ``Public Lands Strip''--which presently encompasses 
Cimarron, Texas, and Beaver counties; and
     Continued exclusion of the southwest corner of the state 
lying within the western bank of the North Fork of the Red River--
referred to in the map as ``Greer County: Disputed Territory''--which 
presently encompasses Greer, Harmon, and Jackson counties and includes 
the portion of Beckham county south of the North Fork of the Red River.
    47. Transition Period. To ensure all impacted parties have 
sufficient time to transition to the Oklahoma Historical Map, the 
Commission provides a transition period of 180 days from the effective 
date of this Order. While the Commission believes that the Oklahoma 
Historical Map provides an accurate reflection of the ``former 
reservations in Oklahoma'' under the Commission's rules, it adopts this 
map and directs the Bureau, in coordination with the Office of Native 
Affairs and Policy to actively seek government-to-government 
consultation with Tribal Nations in Oklahoma on the efficacy and 
appropriateness of other maps and geospatial information assets 
developed both by federal agencies and individual Tribal Nations. The 
Commission recognizes that, as rightful governmental entities, Tribal 
Nations are an important source regarding the efficacy of the mapped 
boundaries of their lands. The Commission directs the Commission's 
Office of Native Affairs and Policy to coordinate with the Bureau, and 
other Commission Bureaus and Offices, as appropriate, to engage in 
government-to-government consultation with the Tribal Nations in 
Oklahoma for the specific purposes of ensuring the accuracy and 
operational effectiveness of the boundaries as presented in the 
Oklahoma Historical Map.
    48. If, based on these consultations, the Bureau finds that the 
Oklahoma Historical Map should be departed from in any way to better 
reflect the complex legal history of the ``former reservations in 
Oklahoma'' for purposes of interpreting Sec.  54.400(e) of the rules, 
the Commission directs the Bureau, in coordination with ONAP, to 
recommend to the Commission an order based on that consultation that 
would--if adopted by the Commission--provide a further revised 
interpretation of the appropriate boundaries of the former reservations 
in Oklahoma. The Commission anticipates that any such recommended order 
would also provide impacted parties an appropriate additional 
transition period prior to the new interpretation of the boundaries 
being applied.
    49. The Commission also seeks the input of the OCC to ensure that 
the OCC and Tribal Nations in Oklahoma can work with ETCs to implement 
a seamless transition to the newly interpreted boundaries, which will 
impact those that receive enhanced Lifeline support under the 
boundaries that previously had been used in practice, but will no 
longer receive enhanced support under the Oklahoma Historical Map's 
boundaries. The Commission will work closely with Tribal Nations, the 
OCC, ETCs, and consumers to make this transition as seamless as 
possible. The Commission directs ETCs to work with the OCC to ensure 
Lifeline consumers have sufficient information regarding how the 
Oklahoma Historical Map's boundaries will affect them, so that 
consumers can adjust to any changes or alterations to the Lifeline 
service plans to which they currently subscribe.

D. Conserving Audit Resources

    50. The Commission waives, on its own motion, the Commission's 
requirement in Sec.  54.420(b) for two ETCs in order to maximize the 
use of audit program resources. The Commission has directed USAC to 
establish an audit program for all of the universal service programs, 
including Lifeline. As part of the audit program, in the 2012 Lifeline 
Reform Order, the Commission required USAC to conduct audits of new 
Lifeline carriers within the first year of their participation in the 
program, after the carrier completes its first annual recertification 
of its subscriber base. The Commission specifically declined to adopt a 
minimum dollar threshold for those audits and instead directed USAC to 
conduct a more limited audit of smaller newly established Lifeline 
providers.
    51. USAC has indicated that two first-year Lifeline providers that 
must be audited pursuant to the Commission's rule in the near future 
have one subscriber within the scope of the audit. The carriers are 
Glandorf Telephone Company in Ohio and NEP Cellcorp Inc. in 
Pennsylvania. The Commission finds that these carriers have so few 
subscribers that an audit is not warranted and, in fact, would not 
provide a sufficient sample size for the auditor to infer compliance 
with Commission rules. The Commission also finds that delaying the 
audits until they are more useful will avoid wasting the resources of 
the Commission, of USAC and of these two providers. As such, the 
Commission waives the requirement that the audits for Glandorf 
Telephone Company and NET Cellcorp be conducted within a year of their 
receiving Lifeline support for their customers. The Commission finds 
that a waiver of our rules is in the public interest in these cases to 
more effectively and efficiently implement the Commission's overall 
audit strategy. The Commission directs OMD to work with USAC to obtain 
the data necessary for OMD to determine when these carriers should 
undergo an audit to evaluate their compliance with Commission rules, 
and USAC should conduct the audit at that time. In particular, OMD's 
determination should consider, based on the totality of the 
circumstances, when a quality audit of the relevant Lifeline provider 
would be useful considering, at a minimum, whether the Lifeline 
provider has a sufficient scope of Lifeline operations to provide a 
sufficient sample size for the

[[Page 40931]]

auditor to infer compliance with Commission rules.
    52. The Commission also delegates to OMD the authority to waive the 
deadline for audits under Sec.  54.420(b) of the Commission's rules as 
necessary in the future for similarly situated Lifeline providers, that 
is, those Lifeline providers for which OMD determine, based on a 
totality of the circumstances, that the first year audit specified in 
current Sec.  54.420(b) of the rules would not be useful. The 
Commission emphasizes that it did not intend these Lifeline providers 
to avoid being audited, but OMD should grant appropriate waivers to 
delay the audits until such time as it would be possible to conduct a 
quality and cost-effective audit, as discussed above. The Commission 
seeks comment on revising our rules accordingly.

IV. Procedural Matters

A. Final Regulatory Flexibility Analysis

    53. As required by the Regulatory Flexibility Act of 1980 (RFA), 
the Commission has prepared a Final Regulatory Flexibility Analysis 
(FRFA) relating to this Order on Reconsideration and Second Report and 
Order of the possible significant economic impact on a substantial 
number of small entities by the policies and rules proposed in the 2012 
Lifeline FNPRM in WC Docket Nos. 12-23, 11-42, 03-109, and CC Docket 
No. 96-45. The Commission sought written public comment on the 
proposals in the 2012 Lifeline FNPRM, including comment on the IRFA.

B. Paperwork Reduction Act Analysis

    54. This Order on Reconsideration and Second Report and Order 
contains new information collection requirements subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be 
submitted to the Office of Management and Budget (OMB) for review under 
section 3507(d) of the PRA. OMB, the general public, and other Federal 
agencies are invited to comment on the revised information collection 
requirements contained in this proceeding. In addition, we note that 
pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 
107-198, the Commission previously sought specific comment on how it 
might further reduce the information collection burden on small 
business concerns with fewer than 25 employees.

C. Need for, and Objectives of, the Final Rule

    55. The Commission is required by section 254 of the Communications 
Act of 1934, as amended, to promulgate rules to implement the universal 
service provisions of section 254. The Lifeline program was implemented 
in 1985 in the wake of the 1984 divestiture of AT&T. On May 8, 1997, 
the Commission adopted rules to reform its system of universal service 
support mechanisms so that universal service is preserved and advanced 
as markets move toward competition. When the Commission overhauled the 
Lifeline program in its 2012 Lifeline Reform Order, it substantially 
strengthened protections against waste, fraud and abuse; improved 
program administration and accountability; improved enrollment and 
consumer disclosures; and took preliminary steps to modernize the 
Lifeline program for the 21st Century. In light of the realities of the 
21st Century communications marketplace, the Commission must overhaul 
the Lifeline program to ensure it complies with the statutory directive 
to provide consumers in all regions of the nation, including low-income 
consumers, with access to telecommunications and information services. 
At the same time, the Commission must ensure that adequate controls are 
in place to implement any further changes to the Lifeline program to 
guard against waste, fraud and abuse. In this Order on Recon and 2nd 
R&O, the Commission thus seeks to rebuild the current framework of the 
Lifeline program and continue our effort to modernize the Lifeline 
program so that all consumers can utilize advanced networks. In doing 
so, the Commission adopts several rules that may potentially 
economically impact a substantial number of small entities. 
Specifically, the Commission: (1) Requires eligible telecommunications 
carriers (ETCs) to retain documentation demonstrating subscriber 
income-based or program-based eligibility and (2) limits reimbursement 
under the Lifeline program to ETCs for services provided directly to 
low-income consumers.
    56. Retention of Eligibility Documentation. In the 2012 Lifeline 
Reform Order, the Commission adopted uniform eligibility criteria for 
the federal Lifeline program. Consumers must qualify based on either 
their income or their participation in at least one of a number of 
federal assistance programs. The Commission required ETCs to examine 
certain documentation to verify a consumer's program or income based 
eligibility, but prohibited ETCs from retaining copies of the 
documentation. In this Order on Recon, the Commission requires that all 
Lifeline ETCs retain documentation demonstrating subscriber income-
based or program-based eligibility, including the dispute resolution 
processes which require verification of identity, address, or age of 
subscribers. The Commission finds that the concerns that led us to 
prohibit such retention in 2012, while still relevant, are largely 
overshadowed by the enormous benefits of allowing ETCs to retain 
eligibility documentation. ETCs themselves contend that the burden on 
ETCs is worth the benefits to the program and that there are 
information technology and access security measures that can be taken 
to minimize the risks associated with maintaining sensitive subscriber 
eligibility documentation. Further, the new rules allowing retention 
will significantly reduce falsified records and will provide certainty 
in the industry regarding the documents that need to be retained in the 
event of an audit or investigation. The Commission also finds that the 
burdens of retention can be mitigated with electronic storage 
capabilities. Overall, the universal service fund will be better 
protected if ETCs are required to both retain and present the 
eligibility documentation to the Commission or the Universal Service 
Administrative Company (USAC), the Administrator of the Lifeline 
program, and the new rules will prevent significant waste, fraud and 
abuse in the Lifeline program.
    57. Resale of Retail Lifeline Supported Services. In the 2012 
Lifeline Reform Order, the Commission expressed concerns that 
permitting ETCs and non-ETCs to offer Lifeline-discounted service 
through resale of retail Lifeline service posed risks to the Fund. In 
particular, the Commission was concerned with the possibility of over-
recovery by both wholesalers and resellers seeking reimbursement from 
USAC for the same Lifeline subscriber and the lack of direct oversight 
of non-ETC resellers by state and federal regulators. In light of these 
concerns, the Commission sought comment in the 2012 Lifeline FNPRM on a 
variety of proposals to reform or eliminate the resale of retail 
wireline Lifeline service. In this Second Report and Order, in order to 
promote transparency and to protect the Fund from potential waste and 
abuse, the Commission now decides that only ETCs that provide Lifeline 
service directly to subscribers will be eligible for reimbursement from 
the Fund.

[[Page 40932]]

D. Summary of Significant Issues Raised by Public Comments to the IRFA

    58. No comments specifically addressed the IRFA.

E. Description and Estimate of the Number of Small Entities to Which 
the Final Rules May Apply

    59. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one 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 
28.2 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.''
    60. Nationwide, as of 2007, 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 2007 indicate that 
there were 87,476 local governmental jurisdictions in the United 
States. We estimate that, of this total, 84,506 entities were ``small 
governmental jurisdictions.'' Thus, we estimate that most governmental 
jurisdictions are small.
61. Wireline Providers
    62. 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 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 employment of 1,000 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. 
Thus under this category and the associated small business size 
standard, the majority of these incumbent local exchange service 
providers can be considered small.
    63. 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 category for this service is the 
category Wired Telecommunications Carriers. Under the category of Wired 
Telecommunications Carriers, such a business is small if it has 1,500 
or fewer employees. Census Bureau data for 2007 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 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 that may be affected by rules adopted 
pursuant to the Notice.
    64. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a small business size standard specifically for providers of 
interexchange services. The appropriate category for Interexchange 
Carriers is 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 may be affected 
by rules adopted pursuant to the Notice.
    65. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate category for Operator 
Service Providers 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 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 that 
may be affected by the Commission's proposed action.
    66. 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 1,000

[[Page 40933]]

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 that may be affected by rules adopted 
pursuant to the Notice.
    67. Toll Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2007 show that 1,523 firms provided resale 
services during that year. Of that number, 1,522 operated with fewer 
than 1,000 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 that may be affected by the Commission's 
action.
    68. 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 1,000 
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 that may 
be affected by rules adopted pursuant to the Notice.
    69. 800 and 800-Like Service Subscribers. Neither the Commission 
nor the SBA has developed a small business size standard specifically 
for 800 and 800-like service (``toll free'') subscribers. The 
appropriate category for these services is the category 
Telecommunications Resellers. Under that category and corresponding 
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 1,000 employees and one operated with more than 1,000. Thus under 
this category and the associated small business size standard, the 
majority of resellers in this classification can be considered small 
entities. To focus specifically on the number of subscribers than on 
those firms which make subscription service available, the most 
reliable source of information regarding the number of these service 
subscribers appears to be data the Commission collects on the 800, 888, 
877, and 866 numbers in use. According to the Commission's data, as of 
September 2009, the number of 800 numbers assigned was 7,860,000; the 
number of 888 numbers assigned was 5,888,687; the number of 877 numbers 
assigned was 4,721,866; and the number of 866 numbers assigned was 
7,867,736. The Commission does not have data specifying the number of 
these subscribers that are not independently owned and operated or have 
more than 1,500 employees, and thus are unable at this time to estimate 
with greater precision the number of toll free subscribers that would 
qualify as small businesses under the SBA size standard. Consequently, 
the Commission estimates that there are 7,860,000 or fewer small entity 
800 subscribers; 5,888,687 or fewer small entity 888 subscribers; 
4,721,866 or fewer small entity 877 subscribers; and 7,867,736 or fewer 
small entity 866 subscribers. We do not believe 800 and 800-Like 
Service Subscribers will be affected by the Commission's proposed 
rules, however we choose to include this category and seek comment on 
whether there will be an effect on small entities within this category.
70. Wireless Carriers and Service Providers
    71. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular phone services, 
paging services, wireless Internet access, and wireless video services. 
The appropriate size standard under SBA rules is for the category 
Wireless Telecommunications Carriers. The size standard for that 
category is that a business is small if it has 1,500 or fewer 
employees. For this category, census data for 2007 show that there were 
11,163 establishments that operated for the entire year. Of this total, 
10,791 establishments had employment of 999 or fewer employees and 372 
had employment of 1000 employees or more. Thus under this category and 
the associated small business size standard, the Commission estimates 
that the majority of wireless telecommunications carriers (except 
satellite) are small entities that may be affected by the Commission's 
proposed action.
    72. 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 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.
    73. Satellite Telecommunications Providers. Two economic census 
categories address the satellite industry. The first category has a 
small business size standard of $32.5 million or less in average annual 
receipts, under SBA rules. The second has a size standard of $32.5 
million or less in annual receipts.
    74. 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

[[Page 40934]]

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 that might be affected by 
the Commission's action.
    75. 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.'' The SBA has developed 
a small business size standard for All Other Telecommunications, which 
consists of all such firms with gross annual receipts of $32.5 million 
or less. 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 
the Commission's action.
    76. Common Carrier Paging. As noted, since 2007 the Census Bureau 
has placed paging providers within the broad economic census category 
of Wireless Telecommunications Carriers (except Satellite).
    77. In addition, in the Paging Second Report and Order, 64 FR 
12169, March 11, 1999, the Commission adopted a size standard for 
``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. The SBA has approved this 
definition. An initial auction of Metropolitan Economic Area (``MEA'') 
licenses was conducted in the year 2000. Of the 2,499 licenses 
auctioned, 985 were sold. Fifty-seven companies claiming small business 
status won 440 licenses. A subsequent auction of MEA and Economic Area 
(``EA'') licenses was held in the year 2001. Of the 15,514 licenses 
auctioned, 5,323 were sold. One hundred thirty-two companies claiming 
small business status purchased 3,724 licenses. A third auction, 
consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in 
all but three of the 51 MEAs, was held in 2003. Seventy-seven bidders 
claiming small or very small business status won 2,093 licenses.
    78. Currently, there are approximately 74,000 Common Carrier Paging 
licenses. According to the most recent Trends in Telephone Service, 291 
carriers reported that they were engaged in the provision of ``paging 
and messaging'' services. Of these, an estimated 289 have 1,500 or 
fewer employees and two have more than 1,500 employees. We estimate 
that the majority of common carrier paging providers would qualify as 
small entities under the SBA definition.
    79. 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 2010 Trends 
Report, 413 carriers reported that they were engaged in wireless 
telephony. Of these, an estimated 261 have 1,500 or fewer employees and 
152 have more than 1,500 employees. We have estimated that 261 of these 
are small under the SBA small business size standard.
80. Internet Service Providers
    81. 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 $32.5 million or less.

F. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    82. Several of the Commission's rule changes will result in 
additional recordkeeping requirements for small entities. For those 
several rule changes, the Commission has determined that the benefit 
the rule change will bring for the program outweighs the burden of the 
increased recordkeeping requirement. The rule changes are listed below.
     Retention of Eligibility Documentation. Requiring all 
Lifeline ETCs to retain documentation demonstrating subscriber income-
based or program-based eligibility, including the dispute resolution 
processes which require verification of identity, address, or age of 
subscribers increases recordkeeping requirements and potential costs 
for ETCs. The Commission finds that any concerns related to the risk of 
retaining sensitive subscriber eligibility documentation and the burden 
on ETCs is outweighed by the enormous benefits of allowing ETCs to 
retain eligibility documentation, such as: Significantly reducing 
falsified records; providing certainty in the industry regarding the 
documents that need to be retained in the event of an audit or 
investigation; and further reducing waste, fraud and abuse in the 
Lifeline program.
     Resale of Retail Lifeline Supported Services. Limiting 
reimbursement for Lifeline service to ETCs directly serving customers 
may increase compliance requirements for ETCs by potentially requiring 
ETCs to revise their interconnections agreements and other regulatory 
filings in order to comply with our rules. For non-ETCs, it may 
increase compliance requirements by requiring them to become ETCs to 
receive Lifeline support necessitating the completion of additional 
paperwork for those non-ETCs seeking ETC designations. By ensuring that 
only ETCs that provide Lifeline service directly to subscribers are 
eligible for reimbursement from the Fund, the Commission can also 
better promote transparency. Ultimately, the Commission can more 
efficiently and effectively protect the USF and prevent significant 
waste, fraud and abuse in the Lifeline program.

G. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    83. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification,

[[Page 40935]]

consolidation, or simplification of compliance and reporting 
requirements under the rule for such small entities; (3) the use of 
performance rather than design standards; and (4) an exemption from 
coverage of the rule, or any part thereof, for such small entities.''
    84. This rulemaking could impose minimal additional burdens on 
small entities. The Commission has considered alternatives to the 
rulemaking changes that increase recordkeeping and documentation 
requirements for small entities. The Commission finds that any minimal 
burdens on small entities are outweighed by the enormous benefits of 
the rule changes. Further, the Commission has encouraged ETCs to take 
advantage of electronic storage of documents to mitigate the additional 
expense of now having to retain documentation demonstrating subscriber 
income-based or program-based eligibility, including the dispute 
resolution processes.

H. Congressional Review Act

    85. The Commission will include a copy of the Order on 
Reconsideration and Second Report and Order in a report to be sent to 
Congress and the Government Accountability Office pursuant to the 
Congressional Review Act. In addition, this document will be sent to 
Congress and the Chief Counsel for Advocacy of the SBA pursuant to the 
SBREFA.

V. Ordering Clauses

    86. ACCORDINGLY, IT IS ORDERED, that pursuant to the authority 
contained in Sections 1 through 4, 201 through 205, 254, 303(r), and 
403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 
201-205, 254, 303(r), and 403, and Section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 1302, this Second Report and 
Order is effective August 13, 2015, except to the extent expressly 
addressed below.
    87. It is further ordered, that pursuant to the authority contained 
in Sections 1 through 4, 201 through 205, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-205, 
254, 303(r), and 403, and Section 706 of the Telecommunications Act of 
1996, 47 U.S.C. 1302, part 54 of the Commission's rules, 47 CFR part 
54, is amended, as set forth below, subject to OMB approval of the 
subject information collection requirements, which will become 
effective upon announcement by the Commission in the Federal Register 
of OMB approval.
    88. It is further ordered that, pursuant to the authority contained 
in sections 1 through 5 and 254 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151-155 and 254, and Sec.  1.429 of the Commission's 
rules, 47 CFR 1.429, the Petition for Reconsideration and Clarification 
filed by TracFone Wireless, Inc. on April 2, 2012 and Supplement to its 
Petition for Reconsideration and Clarification filed on May 30, 2012 
are granted in part to the extent provided herein, and otherwise remain 
pending.
    89. It is further ordered that the Commission shall send a copy of 
the Order on Reconsideration and Second Report and Order to Congress 
and to the Government Accountability Office pursuant to the 
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    90. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Order on Reconsideration and Second Report and Order, 
including the Final Regulatory Flexibility Analysis 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.

Final Rules

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

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 is revised to read as follows:

    Authority:  Sections 1, 4(i), 5, 201, 205, 214, 219, 220, 254, 
303(r), and 403 of the Communications Act of 1934, as amended, and 
section 706 of the Communications Act of 1996, as amended; 47 U.S.C. 
151, 154(i), 155, 201, 205, 214, 219, 220, 254, 303(r), 403, and 
1302 unless otherwise noted.


0
2. Amend Sec.  54.201 by revising paragraph (a)(1) to read as follows:


Sec.  54.201  Definition of eligible telecommunications carriers 
generally.

    (a) * * *
    (1) Only eligible telecommunications carriers designated under this 
subpart shall receive universal service support distributed pursuant to 
subparts D and E of this part. Eligible telecommunications carriers 
designated under this subpart for purposes of receiving support only 
under subpart E of this part must provide Lifeline service directly to 
qualifying low-income consumers.
* * * * *

0
3. Amend Sec.  54.400 by adding paragraph (k) to read as follows:


Sec.  54.400  Terms and definitions.

* * * * *
    (k) Direct service. As used in this subpart, direct service means 
the provision of service directly to the qualifying low-income 
consumer.

0
4. Amend Sec.  54.401 by revising paragraph (a) introductory text to 
read as follows:


Sec.  54.401  Lifeline defined.

    (a) As used in this subpart, Lifeline means a non-transferable 
retail service offering provided directly to qualifying low-income 
consumers:
* * * * *

0
5. Amend Sec.  54.404 by adding paragraph (b)(11) to read as follows:


Sec.  54.404  The National Lifeline Accountability Database.

* * * * *
    (b) * * *
    (11) All eligible telecommunications carriers must securely retain 
subscriber documentation that the ETC reviewed to verify subscriber 
eligibility, for the purposes of production during audits or 
investigations or to the extent required by NLAD processes, which 
require, inter alia, verification of eligibility, identity, address, 
and age.
* * * * *

0
6. Amend Sec.  54.407 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  54.407  Reimbursement for offering Lifeline.

    (a) Universal service support for providing Lifeline shall be 
provided to an eligible telecommunications carrier, based on the number 
of actual qualifying low-income consumers it serves directly as of the 
first day of the month.
    (b) For each qualifying low-income consumer receiving Lifeline 
service, the reimbursement amount shall equal the federal support 
amount, including the support amounts described in Sec.  54.403(a) and 
(c). The eligible telecommunications carrier's universal service 
support reimbursement shall not exceed the carrier's rate for that 
offering, or similar offerings, subscribed to by consumers who do not 
qualify for Lifeline.
* * * * *

0
7. Amend Sec.  54.410 by revising paragraph (b)(1)(ii), by removing 
paragraph (b)(1)(iii), by adding

[[Page 40936]]

paragraph (b)(2)(iii), by revising paragraph (c)(1)(ii), by removing 
paragraph (c)(1)(iii), and by adding paragraph (c)(2)(iii).
    The revisions and additions read as follows:


Sec.  54.410  Subscriber eligibility determination and certification.

* * * * *
    (b) * * *
    (1) * * *
    (ii) Must securely retain copies of documentation demonstrating a 
prospective subscriber's income-based eligibility for Lifeline 
consistent with Sec.  54.417.
    (2) * * *
    (iii) An eligible telecommunications carrier must securely retain 
all information and documentation provided by the state Lifeline 
administrator or other state agency consistent with Sec.  54.417.
* * * * *
    (c) * * *
    (1) * * *
    (ii) Must securely retain copies of the documentation demonstrating 
a subscriber's program-based eligibility for Lifeline services, 
consistent with Sec.  54.417.
    (2) * * *
    (iii) An eligible telecommunications carrier must securely retain 
all information and documentation provided by the state Lifeline 
administrator or other state agency consistent with Sec.  54.417.
* * * * *

0
8. Revise Sec.  54.417 to read as follows:


Sec.  54.417  Recordkeeping requirements.

    (a) Eligible telecommunications carriers must maintain 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. Eligible telecommunications 
carriers must maintain the documentation required in Sec. Sec.  54.404 
(b)(11), 54.410(b), 54.410 (c), 54.410(d), and 54.410(f) for as long as 
the subscriber receives Lifeline service from that eligible 
telecommunications carrier, but for no less than the three full 
preceding calendar years.
    (b) Prior to the effective date of the rules, if an eligible 
telecommunications carrier 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. Beginning on the 
effective date of the rules, the eligible telecommunications carrier 
must retain the reseller certification for the three full preceding 
calendar years and provide that documentation to the Commission or 
Administrator upon request.
    (c) Non-eligible telecommunications carrier resellers that 
purchased Lifeline discounted wholesale services to offer discounted 
services to low-income consumers prior to the effective date of the 
rules, must maintain records to document compliance with all Commission 
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.

[FR Doc. 2015-17186 Filed 7-13-15; 8:45 am]
 BILLING CODE 6712-01-P