Connect America Fund, ETC Annual Reports and Certifications, Establishing Just and Reasonable Rates for Local Exchange Carriers, Developing a Unified Intercarrier Compensation Regime, 4711-4733 [2019-01827]
Download as PDF
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
impracticable, unnecessary, and
contrary to public interest because it is
based on removing obsolete
information. This rule implemented
Executive Order 12637, ‘‘Productivity
Improvement Program for the Federal
Government,’’ which was revoked by
Executive Order 13048, ‘‘Improving
Administrative Management in the
Executive Branch,’’ on June 10, 1997.
The DoD-level program was
discontinued in 2010, and the
corresponding internal DoD guidance
was canceled. Any associated reporting
was sunset thereafter. The content of the
rule is obsolete and should be removed.
This rule is not significant under
Executive Order (E.O.) 12866,
Regulatory Planning and Review,
therefore, the requirements of E.O.
13771, Reducing Regulation and
Controlling Regulatory Costs do not
apply.
List of Subjects in 32 CFR Part 162
Armed forces, Arms and munitions,
Government contracts.
PART 162—[REMOVED]
Accordingly, by the authority of 5
U.S.C. 301, 32 CFR part 162 is removed.
■
Dated: February 12, 2019.
Shelly E. Finke,
Alternate OSD Federal Register Liaison
Officer, DoD.
[FR Doc. 2019–02619 Filed 2–15–19; 8:45 am]
BILLING CODE 5001–06–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 32, 54, and 65
[WC Docket Nos. 10–90, 14–58, 07–135, CC
Docket No. 01–92; FCC 18–176]
Connect America Fund, ETC Annual
Reports and Certifications,
Establishing Just and Reasonable
Rates for Local Exchange Carriers,
Developing a Unified Intercarrier
Compensation Regime
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission
(Commission) continues its efforts to
bridge the digital divide. The
Commission addresses the challenges
that rate-of-return carriers face by taking
steps to promote broadband
deployment, ensure the efficient use of
resources, and provide sufficient and
predictable support necessary to
increase broadband deployment. The
tkelley on DSKBCP9HB2PROD with RULES
SUMMARY:
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Commission also denies three petitions
seeking reconsideration of its decision
directing the Wireline Competition
Bureau (Bureau) to offer additional
support up to $146.10 per-location to all
carriers that accepted the revised offers
of model-based support.
DATES: Effective March 21, 2019, except
for the amendments to §§ 54.313 and
54.316, which contain information
collection requirements that have not
been approved by OMB—the FCC will
publish a document in the Federal
Register announcing the effective date
of those amendments awaiting OMB
approval—and except for the
amendments to §§ 32.1410, 32.2680,
32.2681, 32.2682, 32.3400, 32.3410,
32.4130, 32.4200, 32.4300, 32.7500,
54.643, and 65.450, which are effective
January 1, 2020.
FOR FURTHER INFORMATION CONTACT:
Suzanne Yelen, Wireline Competition
Bureau, (202) 418–7400 or TTY: (202)
418–0484.
SUPPLEMENTARY INFORMATION: This is a
summary of the Commission’s Report
and Order and Order on
Reconsideration in WC Docket Nos. 10–
90, 14–58, 07–135, CC Docket No. 01–
92; FCC 18–176, adopted on December
12, 2018 and released on December 13,
2018. 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://docs.fcc.gov/public/
attachments/FCC-18-176A1.pdf. The
Further Notice of Proposed Rulemaking
(FNPRM) that was adopted concurrently
with the Report and Order and Order on
Reconsideration will be published
elsewhere in this issue of the Federal
Register.
I. Introduction
1. In the Report and Order, the
Commission continues its efforts to
bridge the digital divide. According to
the Commission’s most recently
available data, about 30% of rural
Americans lack access to fixed,
terrestrial high-speed internet of at least
25 Mbps download/3 Mbps upload (25/
3 Mbps), the Commission’s current
speed benchmark, which reflects
consumer demand for high-speed
broadband services. In urban areas, that
number is 2%. The gap between
broadband access in rural and urban
areas is unacceptable. The Commission
must do better. The Commission has
made progress in bringing broadband
service to rural Americans living in
areas served by our nation’s largest
telecommunications companies, and
PO 00000
Frm 00035
Fmt 4700
Sfmt 4700
4711
will realize additional gains as the
winners of the Connect America Fund
(CAF) Phase II auction begin to deploy
25/3 Mbps or higher speed service to
approximately 713,176 locations. But
the rules governing smaller, communitybased providers—rate-of-return
carriers—have not kept pace, making it
more difficult for these carriers to bring
25/3 Mbps service to rural America. The
Report and Order addresses the
challenges that rate-of-return carriers
face by taking steps to promote
broadband deployment, ensure the
efficient use of resources, and provide
sufficient and predictable support
necessary to increase broadband
deployment.
2. By improving access to modern
communications services, the
Commission can help provide
individuals living in rural America with
the same opportunities that those in
urban areas enjoy. Broadband access is
critical to economic opportunity, job
creation, education, and civic
engagement. And as important as these
benefits are in America’s cities, they can
be even more important in America’s
more remote small towns and rural and
insular areas. Rural Americans deserve
to reap the same benefits of the
internet—and not run the risk of falling
yet further behind.
3. The Report and Order marks a
significant next step in closing the
digital divide. The Commission
recognizes that access to 25/3 Mbps
broadband service is not a luxury for
urban areas, but important to Americans
wherever they live. To that end, the
Commission adopts additional measures
toward its goal of expanding the
availability of affordable broadband
service to rural America. First, the
Commission makes another model offer
to those rate-of-return carriers currently
receiving Alternative Connect America
Cost Model (A–CAM) support for
additional funding if they commit to
building out to additional locations at
speeds of 25/3 Mbps. Second, the
Commission makes a new model offer to
those on legacy support in return for
specifically tailored obligations to build
out broadband networks providing
speeds of 25/3 Mbps. Third, for those
rate-of-return carriers remaining on
legacy support that do not take the new
model offer, the Commission adopts a
new budget based on uncapped 2018
claims that will be increased by
inflation annually, as well as new
deployment obligations that require
speeds of 25/3 Mbps rather than 10/1
Mbps. Fourth, the Commission adopts
measures to mitigate the regulatory
burden on providers and encourage the
E:\FR\FM\19FER1.SGM
19FER1
4712
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
tkelley on DSKBCP9HB2PROD with RULES
efficient use of universal service
support.
4. In the Order on Reconsideration,
the Commission denies three petitions
seeking reconsideration of the
Commission’s decision directing the
Bureau to offer additional support up to
$146.10 per-location to all carriers that
accepted the revised offers of modelbased support.
I. Report and Order
5. To promote additional broadband
deployment in areas served by existing
A–CAM carriers, the Commission
initiates a new set of revised model
offers which would provide support up
to $200 per month, per location. These
revised offers, in effect, fund the initial
offers extended by the Bureau on
August 3, 2016, before those offers were
reduced for budgetary reasons. To
ensure these revised offers are in the
public interest, the Commission
conditions them on increased
deployment obligations. These
increased deployment obligations will
further advance the Commission’s goal
of widespread availability of 25/3 Mbps
service throughout the nation.
6. Discussion. The Commission
authorizes additional support up to
$200 per location to all carriers that are
currently authorized to receive A–CAM
support. Increasing support
immediately will result in substantial
additional broadband deployment,
while balancing overall budgetary
constraints. This increase does not affect
funding available to those carriers on
legacy support.
7. The record uniformly supports
increasing the funding cap for A–CAM
to $200, as long as doing so does not
adversely affect carriers receiving legacy
support. With additional funding,
parties have made clear the economic,
educational, and healthcare benefits that
will directly follow.
8. Consistent with the Commission’s
goal of realizing widespread
deployment of 25/3 Mbps service, it
increases the deployment obligations
associated with this revised offer. In
adopting the speed obligations in the
2016 Rate-of-Return Reform Order, 81
FR 24282, April 25, 2016, the
Commission noted that ‘‘our minimum
requirements for rate-of-return carriers
will likely evolve over the next decade.’’
The Commission acknowledged, in
particular, NTCA’s argument that ‘‘a
universal service program premised on
achieving speeds of 10/1 Mbps risks
locking rural America into lower service
levels.’’ Although the Commission
agreed that ‘‘our policies should take
into account evolving standards in the
future,’’ it required carriers electing A–
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
CAM to deploy 25/3 Mbps service to
only a fraction of their fully funded
eligible locations. The Commission’s
recent experience with the CAF Phase II
auction, which resulted in more than
99.7% of new locations being served by
25/3 Mbps service, affirms its
conclusion that a higher standard of
service is achievable.
9. Therefore, the Commission
increases the 25/3 Mbps deployment
obligations associated with the revised
offer. Carriers receiving A–CAM under
the existing offers must deploy 25/3
Mbps service to a number of eligible
locations equal to at least 25%, 50%, or
75% of the number of fully funded
locations, depending on the density of
the population in the carrier’s service
territory. The Commission increases the
25/3 Mbps service requirement to 50%
of fully funded locations for low density
carriers, 65% of fully funded locations
for medium density carriers, and 85% of
fully funded locations for high density
carriers consistent with ITTA’s
proposal. ITTA’s proposal assumes that
carriers will devote the additional
support from the revised offer entirely
to capital expenses associated with the
deployment of new broadband, and
estimates the number of locations that
carriers in each band would, on average,
be able to reach with 25/3 Mbps service
as a result. The Commission finds that
ITTA’s proposal provides a reasonable
estimate of how many additional
locations a carrier could be expected to
serve with 25/3 Mbps service and
ensure that all new fully funded
locations based on this offer will receive
25/3 Mbps service.
10. The Commission notes that the
revised offer will be made available to
all carriers that accepted the first
A–CAM offer, including those carriers
whose offer of model-based support is
less than their legacy support (referred
to as glide path carriers). Although this
will not provide any additional support
to glide path carriers during the eight
remaining years of the original
authorization, it would provide an
opportunity for the glide path carriers to
receive an additional two years of
A–CAM support, through the end of the
term of this revised offer, in
consideration for additional obligations
to deploy 25/3 Mbps service. Glide path
carriers currently receive approximately
$51 million per year in A–CAM support
(excluding transitional support) and
would be required to deploy 25/3 Mbps
service to over 8,300 additional eligible
locations if all companies accepted.
11. If all eligible carriers accept the
revised offer, this deployment obligation
would increase the number of locations
to which carriers would be required to
PO 00000
Frm 00036
Fmt 4700
Sfmt 4700
offer 25/3 Mbps service by more than
100,000 locations. This exceeds the
more than 39,000 partially funded
locations, currently required to be
served with 4/1 Mbps or only upon
reasonable request, that would be fully
funded and would be required to be
served by at least 10/1 Mbps service.
The Commission further notes that the
number of locations subject to the
reasonable request standard would be
reduced by more than 26,000. The
Commission finds that these higher
deployment obligations justify the
potential $67 million per year cost of
funding to the $200 per location cap.
12. In the absence of the increased
deployment obligations, the
Commission does not believe a revised
offer for the existing A–CAM carriers
with a $200 per-location funding cap
would provide a sufficient value for its
limited universal service resources.
Absent the higher deployment
obligations, in contrast to the increased
deployment figures noted above, the
revised offer could increase the number
of locations that would receive 25/3
Mbps over the course of the support
term by only 17,800, with only another
21,678 locations receiving 10/1 Mbps
(while still reducing the number of
locations subject to provision of
broadband service only on reasonable
request by more the 26,000). Given a
$67 million per year price tag, the
Commission does not believe that this
result, without more, achieves sufficient
‘‘bang for the buck.’’
13. The Commission declines to adopt
ITTA’s request to count existing
locations towards the deployment
obligations of existing A–CAM carriers.
Specifically, ITTA proposes that a
carrier should be permitted to satisfy its
deployment obligations by providing
service to locations that were ineligible
in the original offer because they were
in census blocks in which the carrier or
its affiliate already served with fiber-tothe-premises or cable facilities. The
Commission does not believe this
modification would be in the public
interest. In most cases, the otherwise
eligible locations that were excluded
because they were already served by the
carrier with fiber-to-the-premises or
cable facilities are likely to be relatively
less costly to serve than other eligible
locations. As a result, ITTA’s proposal
would allow A–CAM carriers to meet
their deployment obligations by serving
locations that are, in many cases, far less
costly to serve than the ones on which
their A–CAM support offers were
calculated. Further, by definition, some
of these locations are already served by
fiber-to-the-premises or cable
technology, so making these areas
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
eligible for deployment would limit the
amount of deployment to additional
unserved locations. Finally, the
Commission notes that this approach
would make it much more difficult for
the Commission to monitor and verify
whether any built out locations are
actually new.
14. The Commission declines to adopt
Gila River’s proposal to apply a Tribal
Broadband Factor, as it does with the
new model offer, in the following, to
existing A–CAM recipients. In the new
model offer, the Commission includes a
Tribal Broadband Factor to reflect that
the assumptions made about the amount
of end-user revenues in the model may
not be reasonable for Tribal lands. When
the existing A–CAM carriers accepted
the model offer, they implicitly
accepted that the end-user revenue
assumptions were sufficiently
reasonable for them to meet the
deployment obligations associated with
the model offer. Accordingly, the
Commission does not believe that
existing A–CAM carriers require the
adjustment that it adopts for the new
model offer.
15. To provide carriers accepting this
revised A–CAM offer sufficient time to
meet the increased deployment
obligations, the Commission adopts a
modified term of support and
deployment milestones for those
carriers. The term of the revised offer
will be ten years, beginning January 1,
2019, and running until December 31,
2028. Effectively, this revised term
extends A–CAM by two years for
carriers that elect this revised offer.
Carriers electing this revised offer will
be obligated to meet the deployment
milestones to which they previously
agreed with respect to 10/1 Mbps
service. In addition, they will be
required to meet similar milestones to
deploy 25/3 Mbps service to the
required number of eligible locations on
a ten-year schedule beginning January 1,
2019. In other words, each carrier will
be required to serve at least 40% of the
requisite number of eligible locations by
end of the 2022, 50% by the end of
2023, 60% by the end of 2024, 70% by
the end of 2025, 80% by the end of
2026, 90% by the end of 2027, and
100% by the end of 2028.
16. The Commission directs the
Bureau to release a public notice
announcing the revised model-based
support amounts and corresponding
deployment obligations and providing
carriers that have previously been
authorized to receive A–CAM support
with 30 days to confirm that they will
accept the revised offer. Any such
election shall be irrevocable. USAC
shall begin disbursing this revised
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
model support the month following a
Bureau public notice authorizing those
carriers that accept this revised offer.
17. The Commission extends a new
model offer, or A–CAM II, to legacy rateof-return carriers that did not previously
elect model support or support pursuant
to the Alaska Plan. This offer will reopen a voluntary path for legacy rate-ofreturn carriers to receive model-based
support in exchange for deploying
broadband-capable networks to a
predetermined number of eligible
locations. Expanding the number of
carriers receiving model-based support
will advance the Commission’s
longstanding objective to provide highcost support based on a carrier’s
forward-looking, efficient costs and will
help spur additional broadband
deployment in rural areas. As described
in the following, this new model offer
retains many elements of the original A–
CAM offer but makes several critical
adjustments to encourage new carriers
to take advantage of model-based
support and accelerate deployment of
broadband networks.
18. Discussion. The Commission
adopts a new model offer, A–CAM II, as
described in detail in the following.
This new model offer of up to $200 per
location will be available to all existing
legacy carriers, including those
previously excluded because they had
deployed 10/1 Mbps service to more
than 90% of eligible locations. The new
model offer will include a Tribal
Broadband Factor, rely on broadband
coverage data from the most recent FCC
Form 477 (which the Commission
anticipates will be data as of December
2017), and include census blocks where
the carrier or its affiliates have deployed
fiber-to-the-premises or cable. It will
exclude census blocks served by an
unsubsidized competitor only when the
competitor offers voice and 25/3 Mbps
or faster broadband service. In addition
to the deployment requirements
previously required of A–CAM
recipients, carriers accepting the new
model offer will be required to deploy
25/3 Mbps service to a number of
locations equal to the number of eligible
fully funded locations in their service
area. The new model offer will be fully
funded up to the $200 per-location cap,
and it will not affect the budget for rateof-return carriers remaining on legacy
support. To the extent the Report and
Order is silent regarding the terms and
conditions of the new model offer, the
Commission adopts the terms of the
original A–CAM offer.
19. While a few commenters
unconditionally supported a new model
offer to all legacy carriers, many
commenters supported the broader new
PO 00000
Frm 00037
Fmt 4700
Sfmt 4700
4713
model offer only on the condition that
the Commission address the budgetary
concerns of carriers remaining on legacy
support. Because the new model offer
has no impact on funds available for
rate-of-return carriers receiving legacy
support, the Commission believes they
have satisfied the primary concerns of
these parties.
20. The Commission also is not
persuaded by the Broadband Alliance’s
argument that any new model offer
should be deferred until the
Commission has gathered evidence
about the efficacy of the existing A–
CAM program as compared to legacy
support. The Broadband Alliance
suggests that legacy support may
possibly be more effective because its
members have ‘‘already deployed [fiberto-the-home] to 70 percent of their
network, on average,’’ but that modelbased companies ‘‘will not reach’’ that
same milestone until 2024. However,
the Broadband Alliance contradictorily
argues that whether legacy support or
A–CAM offers better results cannot be
empirically known for a number of
years. In any event, the Commission
disagrees with their argument. First, the
Commission notes that Broadband
Alliance ignores the difference between
eligible locations (on which A–CAM
recipients’ deployment obligations are
based) and all locations (on which
Broadband Alliance’s deployment
percentage is based). Second, the
Broadband Alliance seems to assume
that A–CAM carriers will not deploy
service before they are required to do so,
but deployment submissions to the High
Cost Universal Broadband (HUBB)
portal show that there are A–CAM
carriers deploying at faster rates than
required by the Commission’s rules.
Further, the fixed amount of modelbased support guaranteed to the carriers
provides enormous benefits to carriers
in planning capital spending, allowing
them to deploy broadband to areas they
would not have otherwise deployed
than if they needed to base decisions on
varying levels of legacy-based support.
21. $200 per-location funding cap.
Consistent with the original A–CAM
offer and with the new offer to existing
A–CAM carriers described in this
document, the Commission sets the perlocation cap at $200. The Commission
does not limit the amount of support
available through this offer and does not
adopt any provision to reduce the
funding cap based on the amount of
support resulting from carrier elections
of this offer. Most commenters
supported funding the new model offer
up to a $200 per-location cap, rather
than the proposed $146.10 per-location
cap.
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4714
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
22. The Commission declines to make
further adjustments to the per-location
funding cap. Specifically, the
Commission rejects WISPA’s request to
reduce significantly the per-location cap
to account for changes in technologies
and business models that reflect that not
all deployments are fiber. While WISPA
advocates for an ad hoc change in the
way cost estimates are used to calculate
support, the rationale for WISPA’s
proposal implies a major
reconsideration in the model’s
methodology for estimating the costs of
deployment. The Commission specified
the use of a wireline network
architecture to estimate model costs in
the USF/ICC Transformation Order, 76
FR 73830, November 29, 2011, and
rejected arguments that the model
should also estimate wireless costs.
Moreover, there is no evidence in the
record to support how to construct a
model based on the costs of deploying
broadband with wireless technologies.
Without a rigorous method of estimating
the alternative costs of serving specific
areas, considering their specific
topography and other characteristics,
the Commission cannot determine
whether WISPA’s suggested cost savings
would even be achievable for any
particular carrier. For example, the cost
savings may be associated
disproportionately with locations that
are above the funding threshold by a
relatively small amount. In that case,
lowering the funding cap would have no
effect on locations that could be costeffectively served with wireless
technologies, while reducing funding
for model locations that could not be.
23. Carriers Eligible for New Model
Offer. The new model offer will be
extended to all carriers that currently
receive legacy support, i.e., CAF BLS
and HCLS, and do not receive A–CAM
or Alaska Plan support. Expanding the
number of carriers receiving modelbased support will advance the
Commission’s longstanding objective to
provide high-cost support based on
forward-looking efficient costs to help
spur additional broadband deployment
in rural areas. Model-based support,
backed by significant, verifiable
deployment obligations, provides the
appropriate incentives for carriers to
serve their rural and high-cost
communities efficiently with modern
broadband networks. For that reason,
the Commission believes it is in the
public interest to make the new model
offer available to all carriers, including
those that were not previously eligible.
The Commission discusses some
notable elements of this broad
eligibility.
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
24. First, the Commission will extend
the offer to carriers that have reported
deploying 10/1 Mbps service to more
than 90% of eligible locations. All
commenters addressing this question
support this approach. The Commission
recognizes that the high-cost of
maintaining networks in rural America
means that the deployment of 10/1
Mbps does not end the need for highcost support. Further, the model is an
appropriate tool for determining highcost support even when a carrier has
fully deployed broadband service. The
model’s cost module, which calculates
the cost of deploying and maintaining
the network, estimates the static, life
cycle cost of a network fully deploying
fiber-to-the-premises, and does not
distinguish between carriers that have
already deployed broadband and those
that have not. As such, the model
appropriately estimates the forwardlooking costs of a carrier that is
maintaining a broadband network and
replacing its depreciated assets. Finally,
because the Commission’s deployment
obligations require significant
deployment of 25/3 Mbps service, it is
likely that A–CAM II support will, in
fact, spur deployment of higher speeds,
even for carriers that were previously
excluded due to their reported 10/1
Mbps deployment. The Commission
therefore finds that it is appropriate to
extend the model offer to all rate-ofreturn carriers receiving legacy support,
regardless of the existing deployment.
25. Second, the Commission extends
the offer of support to all legacy carriers,
even those that would receive more
annual support from the model than
under legacy rate-of-return support
mechanisms. The model and its
associated deployment obligations
provide effective incentives for efficient
and widespread deployment of highquality, 25/3 Mbps broadband service. If
the model indicates that a carrier should
receive additional support, then that
suggests the carrier may require
additional support to deploy or
maintain its broadband network. And
the Commission believes that providing
the long-term funding certainty to such
carriers, along with verifiable
deployment obligations, outweighs the
additional costs to the Fund. Although
some commenters would prefer to limit
the new model offer to carriers willing
to accept lower payments than they
have historically received, they rely on
the rationale that doing so would enable
the Commission to provide additional
funding to other legacy and A–CAM
carriers. As the Commission explains in
the following, it delinks the legacy
budget from the model budgets,
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
ensuring that its decisions here do not
impact those carriers that remain on
legacy support mechanisms.
26. The Commission declines to adopt
Shawnee and Moultrie’s proposal to
limit the loss of support for each glide
path carrier to a specified percentage of
its current legacy support, essentially
setting carrier-specific funding caps.
Under Shawnee and Moultrie’s
proposal, some carriers could have
funding caps well in excess of $200 per
location, by virtue of their current high
levels of legacy support. The
Commission does not believe, at this
time, that using model-based support to
fund those very high cost locations is an
effective use of universal service
resources.
27. Third, the Commission declines to
exclude carriers from eligibility for the
new model offer if the offer would
include no fully funded locations. In
other words, a carrier may elect the offer
even if it would be required to deploy
only 4/1 Mbps or on reasonable request.
The Commission notes, however, that
new model offers meeting this criterion
would represent a very small number of
carriers and very little support;
moreover, these carriers can always
exceed the minimum obligation.
28. Revising Model Parameters. The
Commission adopts revised model
parameters for the purpose of extending
the new model offer. The revised
parameters will encourage carriers to
take advantage of model-based support.
29. First, for reasons similar to those
for which the Commission permits
carriers with more than 90%
deployment to participate, it finds that
the new model offer should include
census blocks where fiber-to-thepremises or cable has already been
deployed by the incumbent or its
affiliate. ITTA, WTA, and USTelecom
support this modification, and no
commenter opposed it. Including census
blocks which already have some fiberto-the-premises will promote more and
higher speed deployment to locations in
those census blocks that do not
currently have 25/3 Mbps or better
service. Moreover, the Commission has
previously recognized that areas with
partially or fully-deployed fiber-to-thepremises may still require high-cost
support to maintain existing service.
The cost module of the model does not
distinguish between those areas that
have or have not had 25/3 Mbps service,
and the model fairly estimates the costs
of providing service even if that service
has already been deployed.
30. Second, the Commission adjusts
the model so that it excludes locations
presumed to be served by unsubsidized
competitors only when the
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
unsubsidized competitor provides voice
and at least 25/3 Mbps service.
Previously, the model excluded areas
served by unsubsidized competitors
only if they provided voice and 10/1
Mbps or faster service. Based on the
Commission’s recent experience with
the CAF Phase II auction, it believes that
a higher standard of service is
achievable. Given the Commission’s
commitment to using model-based
support to achieve widespread
deployment of 25/3 Mbps service, the
Commission finds it necessary to
exclude locations from eligibility only
when a competitor provides a
comparable level of service. NTCA, in
particular, has emphasized the need for
deployment of networks capable of
providing 25/3 Mbps or greater service
throughout rural areas. Simultaneously
asking carriers to deploy 25/3 Mbps
service while excluding from eligibility
locations served by competitors with
inferior service would consign many
more rural locations to lower quality
service for at least the term of the new
model offer.
31. The Commission is not persuaded
by WISPA’s arguments that the model
should exclude locations presumed to
be served by unsubsidized competitors
when the unsubsidized competitor
provides at least 10/1 Mbps, rather than
25/3 Mbps. WISPA argues that there is
‘‘inherent inequity’’ in providing
A–CAM II support to rate-of-return
carriers in areas where they provide 10/
1 Mbps but excluding areas from A–
CAM II only if an unsubsidized
competitor provides 25/3 Mbps. The
Commission finds no such
inconsistency in these model
parameters. Rate-of-return carriers that
have already deployed 10/1 Mbps
currently receive high-cost support
pursuant to legacy mechanisms and
likely require support in areas where the
model indicates their forward-looking
costs exceed their reasonable end-user
revenues. Providing A–CAM II modelbased support that requires them to
widely deploy 25/3 Mbps service is not
inconsistent with the separate
consideration that A–CAM II support is
not required in areas where an
unsubsidized competitor already
provides 25/3 Mbps service.
32. WISPA further argues that the
Commission’s universal service
resources would be better used if
A–CAM II excluded areas where an
unsubsidized competitor provides
service of at least 10/1 Mbps because
that unsubsidized competitor may
provide 25/3 Mbps service at a future
date or because the current service may
be closer to 25/3 Mbps than 10/1 Mbps.
To create a functional model offer the
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Commission must have a brightline
threshold for whether an unsubsidized
competitor’s service is sufficient to
make an area ineligible for A–CAM II
support. WISPA’s proposal to address
hypothetical future unsubsidized
services, or services that do not meet the
threshold, would effectively lower the
threshold. The Commission concludes
that reducing the threshold does not
appropriately drive deployment of the
25/3 Mbps service that is the new
service standard.
33. Finally, WISPA notes that the
25/3 Mbps unsubsidized competitor
standard harms service providers that
have invested in reliance on ‘‘the
Commission’s representations that the
establishment of 10/1 Mbps service
would be sufficient to avoid
government-funded subsidies flowing to
competitors.’’ WISPA does not cite with
specificity any such representations,
and the Commission finds that such
reliance would be misplaced in any
event. Congress explicitly defined
universal service as ‘‘an evolving level
of telecommunications services . . .
taking into account advances in
telecommunications and information
technologies and services.’’ The
Commission has previously stated that
broadband speeds would be subject to
an evolving standard, which indicates
that higher speed thresholds would
likely be established at a later time.
Indeed, the Commission first
determined that advanced
telecommunications capability required
25/3 Mbps in 2015. Further, the areas
subject to the new model offer currently
receive high-cost support from legacy
mechanisms that support rate-of-return
carriers without regard to whether a
competitor provides 10/1 service, except
in the rare case where a competitive
provider has completely overbuilt the
incumbent provider.
34. Third, the Commission modifies
the model by updating the broadband
coverage data with the most recent
publicly available FCC Form 477 data
(which the Commission anticipates will
be data as of December 2017) prior to
any additional offer of support. This
broadband coverage data is used to
determine which census blocks are
served by unsubsidized competitors
providing 25/3 Mbps broadband service,
so that universal service resources can
be effectively targeted to areas that
require high-cost support. NCTA and
WISPA support the use of FCC Form
477 data to identify areas of competitive
overlap. Relying on the certified FCC
Form 477 data will permit us to avoid
a time-consuming and administratively
burdensome challenge process. In the
challenge process for the first A–CAM
PO 00000
Frm 00039
Fmt 4700
Sfmt 4700
4715
offer, the Bureau granted only 61
challenges of the more than 250 requests
to change A–CAM coverage. Even that
low success rate may overstate the
consequences of the granted challenges
because those particular census blocks
still would not be considered
‘‘unserved’’ if there were other
unsubsidized providers reporting
service in those census blocks. Further,
given the Commission’s decision to
adjust the model so that it will only
exclude locations presumed to be served
by unsubsidized competitors providing
at least 25/3 Mbps service, the
Commission believes that even fewer
locations will be excluded based on
competitive overlap, and many fewer
will be linked to the type of false
positives that the challenge process is
intended to address.
35. The Commission’s reliance on
FCC Form 477 data is consistent with
the process the Commission used in the
Connect America Phase II auction
proceeding. There, the Commission
found that FCC Form 477 data
superseded the results of the prior
Connect America Phase II model
support proceeding. The Commission
further did not require the Bureau ‘‘to
entertain challenges from parties
seeking to establish that a block
reported as served on a certified FCC
Form 477 . . . is unserved.’’ In other
words, the Connect America Phase II
auction proceeding did not permit the
type of challenges at issue here. In
declining to permit such challenges, the
Commission found that the Phase II
model support process ‘‘was very timeconsuming and administratively
burdensome for all involved.’’ The
Commission specifically found that it is
‘‘difficult for the incumbent provider to
prove a negative—that a competitor is
not serving an area. . . .’’ This burden
of proving a negative is precisely the
burden that possible electors of a new
model offer would carry in their
challenge process.
36. Several commenters argue in favor
of retaining a challenge process.
Although a challenge process might
make some modest improvement to the
quality of the data, the Commission
remains unconvinced that the challenge
process represents a significant
improvement over the FCC Form 477
data, such that the benefits of the
improved data would outweigh the
significant administrative burdens of
conducting a challenge process.
37. The Blooston Rural Carriers
(Blooston), while conceding that the
challenge process is administratively
burdensome and that only 20% were
granted in the past, argue that the
‘‘volume of [challenges] . . . clearly
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4716
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
demonstrates the inaccuracy of [the 477]
data.’’ Blooston does not explain why
the absolute number of challenges is
more relevant than the low success rate
of the challenges, nor does it try to
quantify in any way the supposed
benefit of the challenge process.
Blooston further cites two Mobility
Fund proceedings in which the
Commission did not rely on FCC Form
477 data to suggest the ‘‘importance of
a bona fide challenge process used in
connection with Form 477 data.’’ The
Commission does not find the two
Mobility Fund proceedings cited by
Blooston informative here. The Mobility
Fund Phase I process did not rely on
FCC Form 477 data (which did not
collect the relevant broadband
deployment information at that time),
and instead used commercially
available data to preliminarily identify
eligible areas. In the Mobility Fund
Phase II proceeding, the Commission
ultimately decided to adopt an industry
consensus proposal to perform a onetime data collection very specifically
tailored to identify qualified 4G LTE
coverage for the purposes of Mobility
Fund II. Identifying qualified 4G LTE
coverage is a significantly more complex
issue than determining whether
qualified broadband service is offered in
a census block, and there is no industry
consensus surrounding an alternative
data collection process in this
proceeding. Neither case provides any
useful data regarding the benefits or
burdens of a challenge process for the
FCC Form 477 data. Similarly, to
demonstrate the supposed inadequacies
of FCC Form 477 data, TCA points to
the Commission’s review of study areas
receiving legacy high-cost support to
identify study areas 100% overlapped
by unsubsidized competitors but that
proceeding uses a much higher standard
for competitive coverage than is used to
determine A–CAM eligibility.
38. WTA and Granite State support
the use of a challenge process, but
specifically do so as a means of setting
a higher standard for when a census
block would be deemed ineligible for
the new model offer. WTA argues
specifically that the challenge process
should be based on the ‘‘actual
availability’’ of service ‘‘throughout the
census block.’’ Granite State argues in
favor of ‘‘a challenge process similar to
the one adopted for the 100 percent
overlap and rate-of-return challenge
process where the competitor has the
burden of proof.’’ The Commission
declines to adopt their proposals.
Neither proposal includes sufficient
detail to determine how the challenge
process would work in the model offer
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
context. Moreover, both proposals
would appear to make locations eligible
for model support even if they are
served by unsubsidized competitors
providing comparable service, on the
grounds that the unsubsidized
competitors do not provide service
throughout the census block. Providing
model support for such locations would
be inconsistent with the Commission’s
policy, adopted in the USF/ICC
Transformation Order, to condition
Connect America Fund broadband
obligations on not spending the funds in
areas already served by an unsubsidized
competitor.
39. Finally, to address the unique
challenges of deploying high-speed
broadband to rural Tribal communities,
the Commission incorporates a Tribal
Broadband Factor into the model.
Specifically, A–CAM incorporates
nationwide assumptions about take
rates and potential average revenues per
subscriber to estimate a reasonable
amount of end-user revenues per
location that form the basis of the
$52.50 per location funding threshold.
Those assumptions may be unrealistic
given the ‘‘high concentration of lowincome individuals [and] few business
subscribers’’ in many rural, Tribal areas.
By reducing the funding threshold by
25% for locations in Indian country—in
other words, by setting a high-cost
funding benchmark of $39.38 on Tribal
lands—the revised model directly
addresses the lower expected end-user
revenues in rural, Tribal areas and by
improving the business case will spur
further broadband deployment there.
The Commission believes that 25% is a
reasonable approximation of the
additional funding needed in Tribal
areas. Because A–CAM support is
calculated at the census block level, the
Tribal Broadband Factor will efficiently
target support to carriers that serve
significant Tribal lands, as well as those
carriers that serve only a minimal
amount of Tribal lands or a small
number of housing units on Tribal lands
in their study area. For the purpose of
this revised parameter, the Commission
adopts the definition of ‘‘Tribal lands’’
that was used in the USF/ICC
Transformation Order and later
modified in the 2015 Lifeline Reform
Order, 80 FR 40923, July 14, 2015.
Several commenters support this
revised parameter.
40. To fully effectuate this Tribal
Broadband Factor, the Commission also
raises the funding cap for Tribal lands
to $213.12 per location to reflect the
additional funding arising from the
lower threshold. The Commission notes
that this approach is consistent with
Sacred Wind’s proposal to adopt
PO 00000
Frm 00040
Fmt 4700
Sfmt 4700
another tier of model support for
carriers serving Tribal lands.
41. The Commission declines to adopt
alternatives to the Tribal Broadband
Factor proposed by the National Tribal
Telecommunications Association
(NTTA) and Gila River
Telecommunications, Inc. (Gila River).
Both propose a different tribal
broadband factor that would be applied
to increase support (both A–CAM and
legacy) provided to carriers serving
Tribal lands by 25%. Providing
additional legacy support, without any
particular correlation to circumstances
faced by carriers serving Tribal lands,
would not be an effective use of
universal service resources in support of
broadband deployment. Hypothetically,
a carrier receiving high (but permissible)
universal service support could receive
enough additional support from this
proposed factor that it could meet its
revenue requirement without any
subscribers and could receive more than
an additional dollar of support for each
additional dollar it spent. In contrast,
the Tribal Broadband Factor the
Commission adopts here makes modelbased support more attractive for
carriers serving Tribal lands by
addressing a very specific element of
model support—the estimated end-user
revenues. NTTA further argues that,
even with the Tribal Broadband Factor,
most carriers serving Tribal lands are
estimated to receive less support than
they currently do under legacy support
mechanisms. The Commission notes
that some carriers have elected to
receive A–CAM despite a reduction in
support due to the stability of support
and improved incentives for efficiently
offering service.
42. Term of Support. The Commission
adopts a ten-year term of support for
carriers that elect the new model offer,
beginning January 1, 2019. The
Commission concludes carriers electing
the new model offer should have tenyear terms to maximize broadband
deployment. A ten-year term will also
permit the Commission to align the
deployment obligations of those
accepting the new model offer with the
terms set for the existing A–CAM
carriers without adjusting the new
model offer to a shorter term. Further,
beginning the new model period on
January 1, 2019 will reduce the shortterm burden on the Fund; an earlier date
would require the possible upfront
payment of true-ups associated with a
prior start date.
43. A ten-year term for the new model
offer will align the termination of the
term of the new model offer with
existing A–CAM carriers that accept the
revised offer adopted above. Multiple
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
commenters supported aligning the
terms of support, and none opposed it.
Carriers that decline the revised offer
will have terms that end prior to the
term of the new model offer. The
Commission anticipates that it will take
into account the different termination
dates in a subsequent rulemaking to
determine how support will be awarded
at the end of the 10-year term and
develop a plan that addresses them.
44. Transition. The Commission
adopts the same three-tiered transition
process for carriers that receive less
A–CAM support than they had received
under legacy support mechanisms as the
Commission used for existing A–CAM
recipients. Specifically, the Commission
bases the transition payments on the
percentage difference between model
support and legacy support, as
described in the 2016 Rate-of-Return
Reform Order. In that Order, the
Commission found that ‘‘a tiered
transition is preferable because it
recognizes the magnitude of the
difference in support for particular
carriers. At the same time, the transition
is structured in a way that prevents
carriers for whom legacy support is
greater than [A–CAM] support from
locking in higher amounts of support for
an extended period of time.’’
USTelecom and Concerned Rural LECs
support the tiered transition process.
45. Several commenters propose
alternatives to the transition payments
that focus on capping reductions to a
specific percentage of current support
levels. The Commission declines to
adopt these proposals. Permanently
locking carriers into specified levels of
support based on the legacy
mechanisms, higher than what the
model would provide, is inconsistent
with the Commission’s goal of moving
carriers toward more rational, efficient
levels of support.
46. As in the 2016 Rate-of-Return
Reform Order, if the difference between
legacy and model-based support is 10%
or less, the carrier will have a one-year
transition; if greater than 10% but not
more than 25%, then the transition
period will be four years; and if the
difference is greater than 25%, then the
transition will occur over the full-term
of the plan, with no extra transition
support only in the final year of the
term.
47. For carriers electing the new
model offer, the Commission adopts
2018 claims as the base year for
calculating transitional support. This is
the most recent year for which complete
data will be available when the new
model offers are likely to be released.
48. Deployment Obligations. The
Commission adopts robust obligations
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
for carriers accepting the new model
offer to deploy 25/3 Mbps to all fully
funded locations. This requirement is
consistent with the Commission’s goal
of realizing widespread deployment of
25/3 Mbps service throughout rural
America. In adopting the speed
obligations in the 2016 Rate-of-Return
Reform Order, the Commission noted
that ‘‘our minimum requirements for
rate-of-return carriers will likely evolve
over the next decade.’’ The Commission
acknowledged, in particular, NTCA’s
argument that ‘‘a universal service
program premised on achieving speeds
of 10/1 Mbps risks locking rural
America into lower service levels.’’
Although the Commission agreed that
‘‘our policies should take into account
evolving standards in the future,’’ it
required carriers electing A–CAM to
deploy 25/3 Mbps service to only a
fraction of their fully funded eligible
locations. The Commission’s recent
experience with the CAF Phase II
auction, which resulted in more than
99.7% of new locations being served by
25/3 Mbps service, affirms its
conclusion that a higher standard of
service is achievable. Accordingly, the
Commission does not adopt the same
speed requirement as are used for
existing A–CAM carriers, as urged by
several commenters. The Commission
instead requires carriers electing model
support to maintain voice and existing
broadband service as of December 31,
2018, and to offer 25/3 Mbps or higher
service to at least the number of
locations fully funded by the model by
the end of the support term.
49. Consistent with the previous A–
CAM offer, the Commission also
requires carriers electing model support
to offer at least 4/1 Mbps to a defined
number of locations that are not fully
funded by the end of the support term.
Carriers with a density of more than 10
housing units per square mile will be
required to offer at least 4/1 Mbps to
50% of all capped locations; and
carriers with a density of 10 or fewer
housing units per square mile will be
required to offer at least 4/1 Mbps to
25% of all capped locations. The
remaining capped locations will be
subject to the reasonable request
standard.
50. The Commission will require
carriers electing the new model offer to
provide a minimum usage allowance of
the higher of 170 GB per month or one
that reflects the average usage of a
majority of consumers, using Measuring
Broadband America data or a similar
data source. In addition, the
Commission will require carriers
electing to receive model support to
certify that 95% or more of all peak
PO 00000
Frm 00041
Fmt 4700
Sfmt 4700
4717
period measurements of round-trip
latency are at or below 100
milliseconds. This latency standard will
apply to all locations that are fully
funded. As stated previously, the
Commission ‘‘recognize[s] there may be
need for relaxed standards in areas that
are not fully funded, where carriers may
use alternative technologies to meet
their public interest obligations.’’
Therefore, the Commission adopts the
high-latency metric used in the CAF
Phase II auction proceeding for any
capped locations served by a nonterrestrial technology. Under the highlatency standard, carriers are required to
certify that 95% or more of all peak
period measurements of round-trip
latency are at or below 750
milliseconds, and with respect to voice
performance, a score of four or higher
using the Mean Opinion Score (MOS).
51. The Commission adopts the same
deployment milestones that the
Commission required for existing
A–CAM recipients, except delayed by
two years to reflect the later start of the
ten-year term. Specifically, companies
accepting the new model offer will be
required to offer at least 25/3 Mbps
service to 40% of fully funded locations
by the end of 2022, to 50% of the
requisite number of funded locations by
the end of 2023, an additional 10% each
year thereafter, and 100% by 2028. In
addition, by the end of 2028, these
carriers will be required to offer 4/1
Mbps to the requisite percentage of
locations depending on density. The
Commission also provides the same
flexibility afforded other A–CAM
recipients to deploy to only 95% of the
required number of fully funded
locations by the end of the term of
support.
52. Consistent with existing
obligations, the Commission requires
carriers to report geocoded location
information for all newly deployed
locations that are capable of delivering
broadband meeting or exceeding the
speed tiers. The Commission also
adopts defined deployment milestones
so that the same previously adopted
non-compliance measures would apply.
53. Election Process. The Commission
adopts a single-step process whereby
electing carriers make an irrevocable
acceptance of the offered amount
because no support adjustments will
need to be made to address budget
targets. The Commission directs the
Bureau to release a public notice
announcing the new model-based
support amounts and corresponding
deployment obligations and providing
carriers with 45 days to confirm that
they will accept the revised offer. Any
such election shall be irrevocable.
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4718
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
54. To ensure sufficient and
predictable support for legacy carriers
and spur additional deployment of
25/3 Mbps broadband service, the
Commission increases the budget and
make corresponding adjustments to
carriers’ buildout obligations. A budget
designed to spur the deployment of 4/
1 Mbps broadband to rural America is
no longer sufficient or appropriate for
deploying the high-speed broadband
capable networks of at least 25/3 Mbps
that consumers living in rural America
demand. Moreover, fluctuations in
support reductions make it more
challenging to engage in capital
planning, potentially resulting in
reduced broadband deployment that, in
turn, could harm consumers. The
Commission therefore establishes a
minimum threshold of support for each
carrier and establish a budget for legacy
carriers that is independent of the
fluctuating needs of other rate-of-return
support streams. Commensurate with
the Commission’s changes to provide a
sufficient and predictable support
mechanism, the Commission adopts
measurable deployment obligations that
will spur the availability of 25/3 Mbps
broadband service throughout rural
America.
55. The Commission also adopts
further reforms to the legacy program to
streamline its rules where possible and
promote further predictability and
efficiency. For example, the
Commission eliminates the capital
investment allowance and revise the
budget control mechanism to simplify
its rules and promote greater certainty.
Further, to ensure the efficient use of
the Commission’s limited funding, it
reduces the maximum support that a
legacy provider can obtain on a per-line
basis and revise the Commission’s
methodology for allocating support to
those areas that are close to 100%
overlapped by unsubsidized
competitors. Finally, the Commission
addresses a number of technical
changes, including revising line count
reporting requirements and updating
accounting rules.
56. To spur broadband deployment,
the Commission adopts a budget for
legacy rate-of-return carriers based on
2018 unconstrained claims, including
an inflationary factor to increase the
budget annually. The Commission also
establishes a minimum threshold of
support for rate-of-return carriers.
57. Discussion. The Commission
addresses the concerns raised by
Congress and the industry by adopting
a budget that provides sufficient and
predictable support to legacy carriers,
while meeting its responsibilities as
stewards of public funds. The
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Commission also adopts a minimum
threshold of support for legacy carriers
to ensure that they receive sufficient
and predicable funding to meet their
revised deployment obligations. In
adopting this budget for legacy carriers,
the Commission continues the progress
and adherence towards the
Commission’s universal service reform
principles and goals.
58. The Commission adopts a new
budget for legacy carriers based on 2018
uncapped claims—approximately $1.42
billion—increased annually by inflation.
59. The increased legacy budget
demanded by the industry and Congress
is consistent with the Commission’s
requirement to base its policies on
making services in ‘‘rural, insular, and
high cost areas . . . reasonably
comparable to those services provided
in urban areas and that are available at
rates that are reasonably comparable to
rates charged for similar services in
urban areas.’’ Consumers demand
higher speeds as they realize the
benefits that come with them, and the
Commission cannot leave consumers in
rural areas behind. Providing legacy
carriers an increased budget will
provide the means and the certainty
necessary to spur investments to meet
demand and help achieve the
Commission’s universal service goals.
Without increasing the budget for legacy
carriers, the Commission could expect
increasing rates, diminishing
deployment, and a growing gap between
rural and urban areas in broadband
availability.
60. The Commission determines that
using 2018 unconstrained claims as the
basis to reset the budget is sufficient and
will help spur broadband deployment in
rural areas. Since the budget control
mechanism became effective, the
Commission has authorized repaying
legacy carriers all support reductions
since July 1, 2017. The Commission
now takes 2018 support claims, i.e.,
what the carriers are spending today,
and increase that by inflation annually
going forward. Claims for 2018 reflect a
time when legacy carriers are fully
engaged in deploying and/or
maintaining broadband capable
networks. Accordingly, the Commission
finds it is a reasonable timeframe from
which to establish a budget better
tailored for today’s broadband needs.
Furthermore, by basing the budget on
2018 unconstrained claims, the
Commission is using a figure beneficial
to meeting consumers’ demand because,
based on the Commission’s claims data,
2018 unconstrained claims are the
highest since the USF/ICC
Transformation Order.
PO 00000
Frm 00042
Fmt 4700
Sfmt 4700
61. Also, with a higher overall budget
and a budget control mechanism that
does not include a per-line reduction
(discussed in the following), the
Commission expects a higher degree of
predictability for each carrier
individually—predictability that over
time will increase as carriers become
more familiar with the process. A
budget also helps with the overall
predictability of the fund, which is
financially prudent and in the public
interest.
62. To mitigate any harmful effects of
having a lower 2018 budget, the
Commission will reimburse all support
reductions due to the budget control
mechanism from July 1, 2018 through
December 31, 2018, or the effective date
of this Report and Order, whichever is
later. In addition, there will be no
reductions to legacy support from
January 1, 2019 through June 30, 2019,
as the Commission anticipates claims to
increase only slightly over 2018 claims
during this time.
63. In addition, rather than awarding
legacy support based on the budget
remaining once other rate-of-return
recipients have been funded under the
overall $2 billion budget, the
Commission establishes this budget for
legacy providers separate and apart from
the other programs. In doing so, the
Commission provides greater certainty
and predictability for legacy providers.
The Commission agrees that separate
budgets ‘‘enable proponents of the two
support mechanisms [legacy and
A–CAM] to focus on how best to
efficiently maximize broadband
deployment under each paradigm.’’
Furthermore, the Commission agrees
that ‘‘each should be afforded a budget
analysis on its own bona fides without
regard to the other,’’ which will allow
us in the future to better evaluate ‘‘each
support mechanism on its own merits.’’
The Commission also agrees with
ITTA’s proposal to remove CAF ICC
from the budget equation and
administer it outside of the legacy
budget and A–CAM support
mechanism.
64. In establishing a separate budget
for legacy carriers, the Commission
declines to adopt the joint industry
proposal to adopt an overall budget for
all the rate-of-return support
mechanisms. The Commission finds
that an all-encompassing rate-of-return
budget is no longer appropriate, given
the different obligations and terms of
the various rate-of-return funding
streams. In light of how other high cost
support streams have evolved, the
Commission sees no reason going
forward why the support amounts for
A–CAM, Alaska Plan, and CAF ICC
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
should affect total legacy support.
Legacy carriers should have their own
budget—a budget that is suited to allow
small, rural carriers to meet consumers’
demands in rural areas in furtherance of
universal service goals.
65. The Commission finds that a
budget in general for legacy carriers is
in the public interest. In contrast to
other rate-of-return support
mechanisms, legacy support is based on
carriers’ costs, i.e., claims made for
support, and support claims from legacy
carriers have continued to increase
since the Commission adopted a budget
in 2011. The industry and NECA
forecast continued increases. As the
Commission noted in the 2018 Rate-ofReturn Reform Order and NPRM, 83 FR
18951, May 1, 2018 and 80 FR 17968,
April 25, 2018, rate-of-return regulation
provides incentives for companies to
operate inefficiently by ‘‘padding’’
operating expenses and over-investing
in capital projects to increase profits.
Some portion of the continually
increasing claims may be due to those
incentives. Although commenters
contend that there is no evidence to
show rate-of-regulation provides
incentives to operate inefficiently, that
carriers lack the means to over spend/
invest as a practical matter, and that the
Commission’s rules already counteract
these alleged incentives, basic economic
theory confirms that such motivations
exist. The Commission also recognizes,
however, that network improvements to
meet demand have led to increased
claims.
66. Setting a budget cap for legacy
carriers is financially prudent and in the
public interest. The Commission must
be mindful of its obligation to ensure
that scarce public resources are spent
judiciously. Moreover, as courts have
recognized, too much subsidization
could affect the affordability of
telecommunications services for those
that pay for universal service support, in
violation of section 254(b). An annual
budget cap for a support mechanism
that funds carriers’ claims—claims that
have continually increased at varying
rates—helps us meet that obligation. A
budget that constrains spending
encourages efficiency and
resourcefulness, and it ensures a
relatively greater level of predictability
for the overall CAF. Finally, the
Commission notes that the record
supports some form of a budget.
67. The Commission will adjust the
new budget for legacy carriers based on
2018 uncapped claims increased
annually by inflation—the United States
Department of Commerce’s Gross
Domestic Product-Chained Price Index
(GDP–CPI). The Commission notes that
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
industry supports budget adjustments
using some type of inflationary factor.
While NTCA suggests using the
Employment Cost Index (ECI) because it
recognizes that labor is a key component
in rising costs, the ECI only accounts for
one specific cost input. However, of the
two, the Commission finds that GDP–
CPI is more appropriate as it measures
price changes in goods and services
purchased by consumers, businesses,
and governments, and is the inflationary
factor the Commission has used for
many years in other legacy support
mechanisms.
68. Further, in using an inflationary
factor to annually increase the overall
budget for legacy carriers, the
Commission is not conceding that
broadband deployment and
maintenance costs increase over time
commensurate with inflation. In the
development of the Connect America
Cost Model (CAM), Commission staff
found that in the remote, modelsupported areas the Commission is
subsidizing, costs are unlikely on
average to rise going forward; roughly
speaking, this is because rising labor
costs are offset by falling equipment
costs and productivity gains. Some
commenters have echoed the belief that
new equipment may lower costs.
Nonetheless, other parties argue that
their costs for labor and equipment have
increased or that deployment costs have
not been offset by increased
productivity or lower equipment costs.
Therefore, the Commission adopts an
inflationary escalator to increase the
budget and note that this increased
support will be included in the revised
calculation of mandatory deployment
obligations. The Commission uses the
GDP–CPI to address inflation in other
high-cost support mechanisms and see
no reason to deviate from that precedent
here. Moreover, the Commission
declines the industry’s request to
increase the entirety of the high-cost
USF program to reflect inflation or the
overall rate-of-return budget. As noted
in this document, the Commission
believes that giving legacy carriers a
separate, independent budget is more
appropriate at this time, and the
Commission declines to make legacy
carrier support dependent on the A–
CAM, the Alaska Plan, CAF ICC, or
other high-cost support.
69. The Commission addresses issues
raised regarding the effect that the
increasing number of conversions to
broadband-only lines are having on the
budget. Several parties have raised the
concern that as carriers convert voice
and voice/broadband lines to
broadband-only lines there will be
additional pressure on the universal
PO 00000
Frm 00043
Fmt 4700
Sfmt 4700
4719
service budget because federal support
for broadband-only lines is typically
greater than for voice and voice/
broadband lines. This circumstance is in
large part because the costs of a
broadband-only line are all interstate
whereas a voice or voice/broadband line
has a portion of its costs recovered
through intrastate sources. The
Commission believes that increases in
support caused by these conversions
will be offset through the approach it is
taking to account for support for those
carriers taking the new model offer.
70. Although the Commission
currently has insufficient data to
quantify this increase, it concludes that
7% is a reasonable estimate that will
promote stability for legacy rate-ofreturn carriers. The Commission notes
that carriers expecting above average
numbers of broadband-only conversions
(and thus greater funding increases
under the legacy mechanism) are more
likely to remain on legacy support than
those expecting below average
conversion rates, putting pressure on
the legacy rate-of-return budget. A 7%
increase balances the Commission’s
interest in accounting for expected
increases without unduly increasing the
rate-of-return budget while it considers
long-term means of addressing these
conversions, as discussed in the
concurrently adopted FNPRM. To
account for this increase, the
Commission adjusts how it allocates
funding for those carriers accepting the
new model offer. For carriers that accept
a new model offer that will receive more
model support than their uncapped
claims, USAC shall take those claims
out of the legacy budget. However, for
carriers accepting a new model offer
that will receive less model support
than their unconstrained claims (glidepath carriers), USAC shall take only the
carriers’ model support amounts out of
the budget cap. The Commission
anticipates that a sufficient number of
glide-path carriers will accept modelbased support and that the amount of
increase to the legacy budget will
therefore be at least 7% of the budget
cap (as adjusted for those taking modelbased support), if not greater. However,
to ensure that this is the case, the
Commission will increase the budget in
July 2019 by 7%. Once the Commission
has determined which carriers are
accepting the new model offer, if,
because of the number of glide-path
carriers accepting model support, the
legacy budget increases by more than
7%, legacy carriers will benefit from
that entire increase in the budget going
into effect in July 2020. This will be a
one-time increase.
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4720
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
71. This approach will also ensure
that if carriers whose legacy support is
decreasing choose model-based support,
the funding that would have been
available to other legacy carriers will
continue to be available to those carriers
that remain on legacy support. For the
same reasons, after any future overlap
auctions, the Commission will also
leave any resulting savings in the legacy
budget. Although the Commission
believes that the new budget will
account for any support demand
increases due to conversions to
broadband-only lines, the Commission
seeks comment on whether additional
measures are needed in the concurrently
adopted FNPRM.
72. The Commission recognizes that
by setting the budget at 2018
unconstrained claims initially, it is not
setting it as high as the industry
requests. The industry requests an
overall amount that will ‘‘fully fund’’
the entire high-cost program so that
there is no budget constraint. Universal
service support is paid by ratepayers,
however, and increasing funding
demands on those ratepayers could
affect the affordability of
telecommunications services, in
violation of section 254(b). By adopting
an overall budget for legacy carriers
based on today’s support claims and
then limiting future budget increases,
the Commission minimizes unexpected
increases in the contributions required
from ratepayers.
73. Moreover, the Commission still is
providing sufficient and appropriate
funding for the rate-of-return high-cost
program. A–CAM carriers will receive
up to $200 per location and all
transition payments; Alaska Plan
carriers will continue to receive their
authorized amounts; CAF ICC will
receive its full amounts; and for legacy
carriers the Commission will reimburse
all support cuts to date due to the
budget control mechanism. To
encourage efficient and resourceful
spending and help minimize
contribution burdens, going forward,
starting in July 2019, the Commission
establishes a budget for the legacy
carriers, but to help meet demands and
obligations, it still allows for gradual
and predictable annual increases.
Furthermore, as explained in the
following, the Commission revises
deployment obligations based on the
projected funding that carriers will
receive. As the Tenth Circuit stated in
upholding the budget adopted in 2011,
‘‘the FCC quite clearly rejected any
notion that budgetary ‘sufficiency’ is
equivalent to ‘complete’ or ‘full’ funding
for carrying out the broadband and other
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
obligations imposed upon carriers who
are voluntary recipients of USF funds.’’
74. In addition to the new budget
described in this document, the
Commission also adopts a minimum
threshold of support for each carrier.
The uncapped threshold will be based
on a five-year CAF BLS forecast to be
developed by NECA for establishing the
carrier-specific deployment obligation,
but any amounts greater than that may
be subject to a budget control
mechanism. Thus, no legacy carrier will
receive less support, i.e., HCLS plus
CAF BLS, as a result of budget
constraints than predicted in this CAF
BLS forecast. The Commission links this
minimum threshold of support for each
carrier to its minimum deployment
obligation so that carriers will receive at
a minimum, the amount of support that
went into determining minimum
deployment obligations. This new fiveyear forecast will be calculated using
the budget adopted in this Report and
Order, including the annual inflation
adjustment, and will be used to
calculate each legacy carrier’s new
mandatory deployment obligations. In
conjunction with the new budget, this
minimum threshold will provide legacy
carriers the sufficiency and
predictability that they have argued did
not exist under the previous budget. In
addition, to the extent any support
adjustments may be appropriate, by
eliminating the per-line reduction
component of the budget control
mechanism, the Commission expects
that no carrier will see drastic
reductions from the budget control
mechanism relative to other carriers.
75. While commenters support the
general concept of using unconstrained
claims for a support ‘‘floor,’’ there is no
consensus on how any such ‘‘floor’’
should be established. Although some
commenters express concerns with this
approach, the Commission finds that a
minimum threshold based on a revised
NECA five-year forecast, in combination
with the revised budget amounts
adopted herein, will ensure that carriers
can meet their deployment obligations.
The Commission disagrees with NTTA’s
suggestion that it prioritizes Tribal
areas, the highest-cost areas, and then
all other areas because it lacks any
justification of how such a proposal is
consistent with the goals of the highcost program, and in particular how it
would further bringing broadband to all
high-cost areas of the country. And the
Commission disagrees with a recent
industry proposal to use each carrier’s
‘‘unconstrained costs over the prior
three years’’ as a minimum. Such a
proposal would essentially require the
elimination of the budget constraint
PO 00000
Frm 00044
Fmt 4700
Sfmt 4700
mechanism entirely while guaranteeing
more support for each carrier than that
tied to its deployment obligations.
Indeed, this proposal would negate the
overall predictability for the fund that a
budget provides. The ‘‘floor’’ for each
carrier would be dependent upon each’s
spending behavior, which can change
annually or even quarterly. As the
‘‘floor’’ changes for each carrier, the
Commission would be required to adjust
the overall budget accordingly. In other
words, the Commission could not know
with as much predictability how much
of the ratepayers’ money it would be
collectively spending each year on the
high-cost program—a situation that as
stewards of public funds the
Commission aims to avoid.
Consequently, the Commission declines
to adopt this industry proposal.
76. In the 2018 Rate-of-Return Reform
Order and NPRM, the Commission
sought comment on when it should next
revisit the budget. Commenters support
various timeframes. NTCA, WTA,
USTelecom, and the Broadband
Alliance suggest that the new budget
should be in effect until 2026. ADTRAN
recommends the Commission assess the
budget four years after adoption, and
FWA advocates reviewing the budget no
later than three years after adoption. By
fully funding A–CAM, the Alaska Plan,
and CAF ICC, and adopting a legacy
budget that annually adjusts for
inflation, the Commission expects that
rate-of-return carriers will have stable
and sufficient budgets for at least the
next five years. Although the
Commission does not expect to review
the budget prior to 2024, it may be
appropriate to revisit the budget at the
end of five years to reevaluate whether
any changes to the budget are
appropriate.
77. By May 1, 2019, the Commission
directs USAC, in consultation with
Bureau, to publish a new legacy budget
cap along with the new budget
adjustment factor. USAC will calculate
2018 actual unconstrained legacy
support claims plus one year of inflation
using GDP–CPI, as reported by NECA in
the most recent October annual filing.
The budget cap will be that total
increased by 7%. USAC, in consultation
with the Bureau, will calculate the
budget adjustment factor using that
budget cap pursuant to sections
54.901(f) and 54.1310(d), as modified in
this Report and Order to eliminate the
per-line reduction calculation. The
budget adjustment factor USAC
publishes by May 1, 2019 will be in
effect from July 1, 2019 to June 30, 2020.
78. By May 1, 2020, the Commission
directs USAC to publish the next legacy
budget cap along with the next budget
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
adjustment factor to be in effect from
July 1, 2020 to June 30, 2021. The
budget cap will be set at the previous
year’s budget cap, i.e., July 1, 2019 to
June 30, 2020, plus inflation using GDP–
CPI, which will be published in the
October 2019 filing by NECA. USAC
shall then account for the new model
offers as follows. For carriers that accept
the new model offer, USAC shall deduct
those carriers’ 2018 actual
unconstrained claims plus the two years
of inflation out of the legacy budget. For
glide-path carriers, USAC shall calculate
the total amount by which their 2018
actual unconstrained claims plus two
years of inflation exceeds their model
support. If that number is greater than
7% of the 2020 budget, USAC shall
increase the budget by the amount in
excess of 7%. In addition, prior to
publishing the results of the 2020
budget cap, USAC shall compare the
capped amount for each carrier with the
CAF BLS five-year forecast adopted in
this Report and Order. If the cap for any
individual study area falls below the
CAF BLS forecast for that study area in
that year, USAC shall raise the cap for
that study area to the amount of the CAF
BLS forecast. Thus, carriers are assured
of receiving at least the amount of
support that will be identified in the
forecast.
79. Going forward, for the 2021
budget and beyond, USAC shall
annually increase the previous year’s
budget cap by inflation using GDP–CPI.
Each year USAC shall use the budget
cap to calculate the budget adjustment
factor for that budget year, July 1 to June
30. Also, each year, for CAF BLS, USAC
shall calculate the pro rata reductions
once per year, and for HCLS, USAC
shall calculate the pro rata reductions
semiannually, which allows the
reduction factor to reflect the new rural
growth factor for HCLS that goes into
effect January 1 of each calendar year.
As noted above, if the cap for any
individual study area falls below the
CAF BLS forecast for that study area in
that year, USAC shall raise the cap for
that study area to the amount of the CAF
BLS forecast. Based on the
Commission’s experience in
implementing the budget control
mechanism, it believes that it will
enhance predictability with no
discernable cost by setting the budget
adjustment factor semiannually rather
than quarterly.
80. To maximize the benefit resulting
from the Commission’s new legacy
budget, it revises the deployment
obligations for legacy carriers
commensurate with the minimum
threshold of support that will not be
subject to the budget constraint. The
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Commission also revises the minimum
speed obligation to 25/3 Mbps, up from
10/1 Mbps.
81. Discussion. The Commission
revises the deployment obligations for
legacy carriers commensurate with the
revised budget and minimum threshold
of support adopted in this Report and
Order. The Commission also resets the
five-year deployment term and revise
the minimum speed obligation to 25/3
Mbps, up from 10/1 Mbps. By
increasing the budget for legacy carriers,
the Commission expects those carriers
to do more to meet consumer demand
and its obligations than they did when
the budget was first adopted in 2011.
82. Under the Commission’s rules, a
carrier’s deployment obligations are
based, in part, on its five-year forecasted
CAF BLS. The original five-year
obligations were based on forecasted
CAF BLS pursuant to the budget and
rules in effect at the time, and also thencurrent data. Now that the Commission
resets the budget for the legacy carriers
and adopt a minimum level of support
of no less than a carrier’s revised CAF
BLS five-year forecast, those original
forecasts are outdated, and the Bureau
must update them. The Commission
disagrees with USTelecom and Blooston
to the extent they do not support
changing deployment obligations at this
time. As NTCA stated, buildout
obligations should correspond to the
level of support; given that the
Commission is increasing the amount of
support, broadband deployment
obligations should increase as well. The
assumptions in the five-year forecast of
the total CAF BLS support for each rateof-return legacy study area for the
purposes of determining deployment
obligations were provided in Appendix
D of the Order.
83. The Commission further finds that
it is necessary to provide carriers
revised CAF BLS deployment
obligations at the time it expects to
make the new model offers so that
carriers can properly evaluate their
options. Because the Commission
expects the new offers in early 2019 and
actual 2018 claims will not be available
until March 2019, projected claims for
2018 may be used for calculating
forecasted CAF BLS.
84. In addition to forecasted CAF BLS,
part of the calculation for determining
deployment obligations is a cost-perlocation figure based on one of two
methodologies. The Commission
updates both methodologies to reflect
that 25/3 Mbps is the Commission’s new
broadband standard. The methodologies
also factor in the per-line, per-month
cap, which the Commission revises in
the Report and Order.
PO 00000
Frm 00045
Fmt 4700
Sfmt 4700
4721
85. Revising deployment obligations
at this junction is also consistent with
the precedent established in the 2016
Rate-of-Return Reform Order. There, the
Commission appropriately decided that
at the end of the five-year deployment
term, ‘‘carriers with less than 80 percent
deployment of broadband service
meeting then-current standards in their
study areas will be required to utilize a
specified percentage of their five-year
forecasted CAF BLS to deploy
broadband service meeting the
Commission’s standards where it is
lacking in subsequent five-year
periods.’’ Because the Commission is
increasing the budget for legacy carriers,
setting a minimum threshold of support,
and implementing the current
broadband standard of 25/3 Mbps, the
Commission is replacing the prior fiveyear, 10/1 Mbps deployment obligations
with new obligations that reflect the
increased budget and broadband speed.
Therefore, allowing carriers a full five
years—rather than the remaining three
years of the original deployment term—
to complete deployment is warranted.
86. To ensure that consumers in rural
areas enjoy a reasonably comparable
quality of broadband as those in urban
areas, the Commission revises the
deployment obligations to require
recipients of CAF BLS to offer
broadband service at actual speeds of at
least 25/3 Mbps. Broadband of at least
25/3 Mbps is now the Commission
standard, and deployment obligations
for its legacy program must reflect that.
87. To be consistent with CAF BLS
deployment obligations being based on
a five-year term, the deployment term
will run from the effective date of the
Report and Order until December 31,
2023. For administrative convenience,
the Commission bases this new term on
the calendar year starting January 1,
2019. Further, the Commission will
count towards the new five-year
obligation any locations CAF BLS
carriers deployed to with at least 25/3
Mbps since May 25, 2016, regardless of
whether the carriers had defined
deployment obligations in the original
term. CAF BLS carriers that have not
had HUBB portal reporting obligations
will be provided an opportunity to
certify as needed 25/3 Mbps or higher
locations deployed to since May 25,
2016. The Commission also maintains
the Commission’s prohibition on
deploying ‘‘terrestrial wireline
technology in any census block if doing
so would result in total support per line
in the study area to exceed’’ the perline, per-month cap, as revised in this
Report and Order.
88. In the 2016 Rate-of-Return Reform
Order, the Commission did not set
E:\FR\FM\19FER1.SGM
19FER1
4722
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
mandatory deployment obligations for
those carriers that had deployed
broadband of 10/1 Mbps to 80% or more
of their study areas, as determined by
FCC Form 477. Rather, the Commission
stated that it would monitor the
deployment progress of legacy carriers
without defined buildout obligations
and could ‘‘revisit this framework in the
future if such carriers do not continue
to make reasonable progress on
extending broadband.’’ Although those
carriers with 80% or greater deployment
of 10/1 Mbps have in many cases
reported additional deployment, the
Commission is unable to evaluate their
progress without an understanding of
how this new deployment relates to the
mandatory obligations it has set for
other carriers. Therefore, the
Commission finds that all legacy
carriers should be subject to deployment
obligations.
89. As the Commission did in 2016,
it finds that carriers’ mandatory
deployment obligations should be
determined based on a percentage their
CAF BLS, with those carriers with
greater deployment devoting a lower
percentage of support to new
deployment and those with relatively
lower levels of deployment devoting a
higher percentage to new deployment.
Therefore, legacy rate-of-return carriers
with less than 20% deployment of
25/3 Mbps broadband service in their
entire study area, based on the most
recently available FCC Form 477 data,
will be required to use 35% of their fiveyear forecasted CAF BLS support
specifically for the deployment of 25/3
Mbps broadband service where it is
currently lacking. Rate-of-return carriers
with 20% or greater but less than 40%
deployment of 25/3 Mbps broadband
service in their entire study areas, will
be required to use 25% of their five-year
forecasted CAF BLS support specifically
for the deployment of 25/3 Mbps
broadband service where it is currently
lacking. Rate-of-return carriers with
40% or greater deployment of 25/3
Mbps broadband service in their entire
study areas, will be required to use 20%
tkelley on DSKBCP9HB2PROD with RULES
From
9/2016
1/2017
7/2017
7/2018
.................................
.................................
.................................
.................................
of their five-year forecasted CAF BLS
support specifically for the deployment
of 25/3 Mbps broadband service where
it is currently lacking. Once a carrier has
deployed broadband service of 25/3
Mbps to all locations within the study
area, it has satisfied its deployment
obligation, although the Commission
encourages such carriers to continue to
look for ways to increase the speed and
reduce the latency of their services.
Because all legacy carriers will have
defined deployment obligations, all will
be required to report their locations
deployed in the HUBB portal.
90. The Commission finds that the
capital investment allowance should be
eliminated because its burdens and
inefficiencies outweigh any benefits.
91. Discussion. The Commission finds
that the capital investment allowance
should be eliminated because the
burdens it imposes outweigh the
benefits. To show compliance with the
capital investment allowance, legacy
carriers must track every capital
expenditure and allocate it to locations
affected by that expenditure—something
carriers were not required to do
previously. While carriers always
account for their capital expenditures,
the requirement to tie these
expenditures to particular locations is
difficult and time consuming. In
addition, the capital investment
allowance may discourage marginal
capital expenditures that are
economically efficient. For instance, the
capital investment allowance, which
limits the total amount a carrier can
spend on a project, may prevent a
carrier from deploying broadband to an
additional location or locations as part
of an existing project if such
expenditures would exceed the capital
investment allowance. Accordingly, the
Commission agrees with commenters
that the capital investment allowance
does not encourage efficient spending
and is creating unnecessary burdens.
Moreover, the Commission has found no
evidence that the capital investment
allowance has encouraged additional
capital investment by those carriers
below the average level of broadband
Average
reduction
(%)
To
12/2016 ..............................
6/2017 ................................
6/2018 ................................
6/2019 ................................
Standard
deviation
(%)
5.3
9.7
13.6
17.0
deployment. Because the burdens and
disincentives on deployment in the
current capital investment allowance
outweigh the purported benefits, the
Commission finds that elimination of
the capital investment allowance is
appropriate.
92. The Commission declines to adopt
NTCA’s proffer of an engineer’s
certification and record retention.
Carriers are already required to retain
documentation for auditing purposes so
that USAC can determine whether
support is being used for its intended
purpose, and NTCA’s proposal appears
to increase the paperwork burden on
carriers without much benefit.
93. In this section, the Commission
modifies sections 54.901(f) and
54.1310(d) and eliminate the per-line
reduction calculation that is part of the
budget control mechanism.
94. Discussion. The Commission
eliminates the per-line reduction
calculation that is part of the budget
control mechanism. The previous
Commission adopted the per-line and
pro rata calculation on grounds that it
struck a ‘‘fair balance among differentlysituated carriers.’’ Although NTCA
argues that incorporating the per-line
reduction is part of a ‘‘carefully
designed balance’’ or ‘‘carefully struck
balance’’ between larger and smaller
rate-of-return incumbent local exchange
carriers (LECs), the Commission finds
that this two-part calculation has
resulted in some carriers bearing an
unreasonably large share of the support
limit.
95. When adopting the budget control
mechanism with both the per-line and
pro rata mechanisms, the Commission
expected a ‘‘fair balance’’ among the
legacy carriers, large and small. Data
since adoption of this mechanism show,
however, that the per-line reduction has
resulted in an increasingly wide
variation of cuts to carriers’ support.
The table in the following details across
all legacy carriers over different time
periods reductions in support due to the
budget control mechanism with the perline reduction.
5th Percentile
(%)
95th Percentile
(%)
3.5
6.6
9.1
11.5
8.2
14.0
20.2
24.9
2.3
4.4
4.0
6.3
Number of Legacy Study Areas: 654.
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
PO 00000
Frm 00046
Fmt 4700
Sfmt 4700
E:\FR\FM\19FER1.SGM
19FER1
Weighted
average
reduction
(%)
4.6
8.7
12.3
15.5
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
96. What started as a relatively narrow
variation has become significantly
wider, and now ranges (between the 5th
and 95th percentile) from 11.5% to
24.9% reductions in claimed support.
The Commission thus concludes that
the per-line reduction has not, over
time, resulted in the ‘‘fair balance’’ that
the Commission originally anticipated.
The carriers collectively are exceeding
their budget, but in applying the budget
control mechanism, the Commission
cuts some carriers significantly more
than others. Given the large variations
the Commission has now seen, it
believes that it is more equitable for
each carrier to have the same percentage
reduction across the board. Accordingly,
the Commission eliminates the per-line
reduction calculation that is part of the
budget control mechanism.
97. In addition to making the budget
control mechanism more equitable,
eliminating the per-line reduction will
make it simpler to implement
administratively. Eliminating the perline calculation will make it easier for
carriers to determine what their specific
support reduction will be and make
application of the budget control
mechanism more transparent.
98. The Commission amends its rules
to reduce the monthly per-line limit on
support from $250 to $225, effective
July 1, 2019, and then to $200, effective
July 1, 2021. The Commission finds that
reducing the presumptive cap on
support will advance the Commission’s
goal of implementing responsible fiscal
limits on universal service support.
99. Discussion. The Commission’s
experience indicates that a lower limit
is justified and will be useful in
mitigating wasteful spending. Currently,
approximately 14 study areas are
affected by the monthly per-line limit.
However, carriers serving only 10 of
those study areas have petitioned the
Commission to justify higher support
amounts, and some withdrew their
requests following requests for further
supporting information. To date, the
Commission has awarded relief to only
two companies. Further, the
Commission’s experience reviewing the
waiver petitions that have been filed
suggests that some companies cannot
justify their high expenses. Based on
this history, the Commission finds that
the $250 per-line monthly limit has
been neither too restrictive nor likely to
have a negative impact on the ability of
carriers to provide service. Moreover,
the Commission notes that a reduction
to $200 will currently affect
approximately 30 study areas that are
not already subject to the $250 per-line
monthly limit, and the same waiver
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
process would be available to all
affected study areas.
100. The Commission is unpersuaded
by the arguments of those opposing this
change. Contrary to NTCA and SCC’s
claims, the Commission’s experience
suggests that, while some carriers
legitimately incur high expenses, some
of the highest supported carriers have
been found to have wasteful or abusive
expenses and/or improper accounting
procedures. In the Adak
Reconsideration Order, for example, the
Commission denied relief of the $250
cap, affirming findings that the
company had ‘‘excessive and
unreasonable’’ operating expenses,
unwarranted executive compensation,
and had engaged in improper affiliate
transactions. The Commission similarly
identified noncompliance in evaluating
Allband’s request for waiver of the $250
cap, finding that Allband’s consistent
misapplication of its cost allocation
rules rendered its cost accounting
‘‘unreliable.’’ Finally, the Commission
uncovered improper support payments
of more than $27 million in connection
with its review of Sandwich Isles
Communications, finding that the
carrier had misclassified costs and
received support for inflated and
ineligible expenses. Other carriers may
not seek waiver of the $250 monthly
per-line limit because they wish to
avoid scrutiny. Indeed, despite NTCA’s
arguments, other existing controls to
promote the efficient distribution of
support have not been sufficient to
prevent the reporting of wasteful or
abusive expenses by the highest cost
carriers. The Commission does not find
that its waiver process is unreasonable
and burdensome. Rather, the
Commission’s review of previously filed
waivers has shown that it is more likely
that carriers would not be able to justify
their high expenses and sought to avoid
embarrassing scrutiny. In the
Commission’s experience, carriers have
contributed to the time it has taken to
resolve the waiver petitions because of
their own reluctance to provide
supporting data and the number of
violations of the Commission’s
accounting rules that it has discovered.
101. The Commission does not agree
that the budgetary relief that would be
provided by this reduction is
insignificant or that possible reductions
in support will be crippling. Even if the
budgetary relief is small, the
Commission has an interest in
eliminating waste, fraud, and abuse that
will be served by the reduction in the
monthly per-line cap. Moreover, any
carrier entitled to support above the
$250 cap can avoid support reductions
by justifying its support needs through
PO 00000
Frm 00047
Fmt 4700
Sfmt 4700
4723
cost studies and accounting done
consistent with our rules.
102. TCA provides no data or even
anecdotal evidence in support of its
assertion that carriers reduced or slowed
deployment to avoid triggering a cap or
limitation on support. Further, the
Commission notes that it has invited
carriers to use the waiver process
specifically as an avenue to justify their
necessary spending in the type of cases
that TCA identifies. If investment is
necessary to deploy service, then the
expenses will be justifiable in the
waiver process.
103. South Park’s alternate proposal
to modify the operation of the monthly
per-line cap or to exempt carriers
subject to monthly per-line cap from the
budget constraint mechanism would
tend to undermine the effect of the rule
by exempting some support without
regard for whether the underlying
expenses have been justified. Exempting
carriers subject to the monthly per-line
cap from the budget constraint’s
operation would undermine the budget
constraint’s purpose of limiting the size
of the fund.
104. The Commission declines to
adopt, as Allband requests in its
comments, a streamlined waiver process
to review any requests that Allband
might file of the monthly per-line cap,
because it previously was granted relief.
Allband maintains that a streamlined
process would allow it to ‘‘redirect
financial resources from such filings to
provide expanded lines and services’’ to
the areas it serves. Although the
Commission is mindful of minimizing
regulatory burdens in order to maximize
the benefit of limited universal service
support, the Commission must balance
that goal with our responsibility as
stewards of the Fund. The Commission
does not believe it is appropriate at this
time to take further action to reduce
Allband’s evidentiary burdens in light
of its prior misallocation of costs and
need for corrective action.
105. Finally, the Commission notes
that its decision to reduce the monthly
cap in two steps addresses the
possibility that a sudden influx of many
petitions for waiver will be
administratively difficult to manage. By
our estimates, only an additional 10
carriers would currently be impacted by
the intermediate $225 monthly per-line
cap. The two years prior to the further
reduction of the cap to $200 should be
sufficient to address any petitions for
waiver arising from the $225 monthly
per-line cap. Both reductions to $225
and $200 will be implemented on July
1, to ease administrative considerations
associated with the calculation of the
budget constraint mechanism.
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4724
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
106. In this section, the Commission
finds that the 100% overlap process the
Commission has used to ensure that
federal funding is not being used to
compete with unsubsidized competitors
has not lived up to its promise.
Accordingly, the Commission ends that
process and replace it with competitive
auctions for legacy service areas that are
nearly entirely overlapped by
unsubsidized competitors. In the
concurrently adopted FNPRM, the
Commission seeks further comment on
several auction-related issues.
107. Discussion. The Commission
finds that an auction mechanism in
certain legacy study areas would be an
efficient, market-based way to distribute
any high-cost support that may be
necessary. In a study area that is 100%,
or almost entirely, overlapped by
unsubsidized competitors, there may
still be some locations within census
blocks that do not have access to
broadband, i.e., although a block is
partially served by an unsubsidized
provider not all of the locations in that
block are served. As the Commission
has noted previously, competitive
bidding can result in more efficient
levels of support by providing
incentives to bid less than current levels
of support in the area. The Commission
agrees with WISPA in general that an
auction in competitive areas ‘‘recognizes
that when a competing provider is
serving a critical mass of nearby areas,
the incumbent carrier is no longer
uniquely capable of rolling out new
service to locations within the study
area that remain unserved.’’ While an
auction would also require
administrative resources, an auction
would help move the CAF towards
market-based solutions rather than
sorting through documentary evidence
in hopes of determining whether
locations are in fact served by
competitors. The Commission also has
now seen the success of the CAF II
auction, which ‘‘unleashed robust price
competition’’ so that ‘‘more locations
will be served at less cost.’’ The total
locations awarded support had an initial
reserve price (maximum amount) of $5
billion over ten years, but the amount
awarded to cover these locations is only
$1.488 billion.
108. The Commission determines that
support in legacy study areas identified
by FCC Form 477 data as entirely or
almost entirely overlapped with voice
and 25/3 Mbps broadband by an
unsubsidized competitor or group of
competitors will be awarded through a
competitive bidding process. When
there are competitors, competitive
bidding can be an efficient, marketbased way to distribute high-cost
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
support. By auctioning off support in
study areas that are entirely or almost
entirely overlapped at 25/3 Mbps, the
Commission expects to see significant
savings relative to current legacy claims
in those areas. Competitive bidding will
result in a market-based allocation of
limited funding in areas where support
is overwhelmingly not needed to
achieve our universal service goals as
evidenced by the amount of
unsubsidized competition. And the
Commission will dedicate those savings
to increasing the overall budget for
legacy carriers—shifting support to
areas where it is needed most.
Currently, there are eight legacy study
areas with 100% overlap and seven
additional legacy study areas with at
least 95% overlap with approximately
$12 million in unconstrained projected
claims for 2018 respectively. The
Commission expects an auction to shift
a large portion of that support to other
study areas not entirely or almost
entirely overlapped.
109. Consequently, the Commission
eliminates the current 100% overlap
rule and process. By replacing the
existing process, the Commission
eliminates the resources used to sort
through documentary evidence; and if
that evidence shows even one location
in the study area is not served by
unsubsidized competition, the entire
process results in zero savings.
Although the Commission recognizes
that an auction could theoretically
result in more funding in an area
entirely or almost entirely overlapped
by unsubsidized competitors than the
existing process, the existing process
has yielded almost no tangible results
and instead allowed incumbent carriers
almost entirely overlapped by
unsubsidized competitors to continue to
receive support for locations also being
served by unsubsidized providers. The
Commission believes that it would be
better to allow such incumbent carriers
to compete against their unsubsidized
competitors for federal funds and to use
a competitive bidding process to reduce
funding to a more competitive level
rather than to continue with the status
quo.
110. The Commission declines to
formally codify a rule for this process
until it resolves certain issues it seeks
comment on in the concurrently
adopted FNPRM, including ensuring the
Commission properly addresses issues
raised by the incumbent LECs in their
comments. In the meantime, the
Commission will reserve sections
54.319(a)–(c) of the Commission’s rules.
The Commission declines to adopt the
proposals of WISPA and NCTA to
auction study areas that are at least 50%
PO 00000
Frm 00048
Fmt 4700
Sfmt 4700
overlapped but seek further comment in
the concurrently adopted FNPRM on
how to determine which study areas are
almost entirely overlapped.
111. The Commission adopts two
changes to our rules governing the filing
of line count data by rate-of-return
carriers on FCC Form 507.
112. Discussion. The Commission
adopts its proposal to change the date
for mandatory line count filings for CAF
BLS to March 31 of each year but to
continue to require line counts as of
December 31 (i.e., reduce the lag until
filing to 3 months). This change will
ensure that recent line counts are used
to apply the monthly cap and
administer the budget control
mechanism. Currently, when USAC
performs the necessary calculations in
April of each year, it typically must rely
on the carrier’s FCC Form 507 from the
prior July, which in turn reports line
counts as of the prior December 31. In
other words, these calculations are
based on line counts that are more than
15 months old. By changing the
collection date to March 31, USAC will
be able to use line count data that is
much more recent—only three months
old—in determining the monthly cap
and administering the budget control
mechanism.
113. The Commission declines to
make any changes to the HCLS line
count filing at this time. When the
Commission sought comment regarding
whether to modify the FCC Form 507
line filing schedule, it noted that HCLS
line counts are currently collected on
the same schedule as FCC Form 507,
and asked whether conforming changes
to the HCLS line count filing would be
appropriate. The Commission finds that
such changes would not be appropriate
because HCLS line counts are collected
at the same time as HCLS cost data, and
it believes that carriers will find it less
burdensome to make the HCLS line
count and cost data filing on the same
schedule.
114. The Commission also adopts a
requirement for rate-of-return carriers
that do not receive CAF BLS (i.e.,
carriers that have elected A–CAM or
Alaska Plan support) to file line counts
annually on FCC Form 507. Line count
data is essential for monitoring and
analyzing high-cost universal service
programs. Carriers that elected A–CAM
were required to file line count data on
FCC Form 507 prior to the
implementation of A–CAM because they
received ICLS, which they no longer do.
Likewise, carriers authorized for Alaska
Plan were also required to file line
count data on FCC Form 507 prior to the
implementation of the Alaska Plan.
Requiring the A–CAM and Alaska Plan
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
carriers to continue to provide line
count information will allow the
Commission to maintain a frequently
used data set for assessing whether the
Commission’s rules are achieving its
universal service goals, while being a
minimal burden. To lessen what the
Commission considers to be an already
minimal the burden associated with this
data collection, it requires carriers to file
this data on July 1 of each year to
coincide with other filing dates.
115. The Commission incorporates
into its Part 32 accounting rules, the
updated lease accounting standards
adopted in 2016 by the Financial
Accounting Standards Board (FASB and
the FASB lease accounting standards).
In so doing, the Commission eliminates
the need for incumbent LECs to account
for leases under different standards in
order to comply with our rules and with
the FASB lease accounting standards.
To expedite the effectiveness of these
changes and ease administrative
burdens, the Commission also waives its
Part 32 rules to the extent necessary, to
permit an incumbent LEC to use the
FASB standards immediately.
116. Discussion. The Commission
agrees with TDS telecom that
‘‘maintaining two sets of lease accounts,
by its nature,’’ imposes burdens on
carriers subject to our Part 32 rules. The
Commission also agrees that there is no
benefit to requiring such carriers to
maintain two sets of lease accounts that
reflect different accounting procedures
for regulated purposes and for financial
reporting. Importantly, the amendments
the Commission makes to its Part 32
rules will have no impact on a carrier’s
rates or on the amount of universal
service support it receives. The
Commission therefore amends its Part
32 rules to conform them to the FASB
lease accounting standards, so that
carriers can maintain a single set of
lease accounts that is consistent with
both our rules and the FASB standards.
117. The Commission adopts the
definition of a lease as contained in the
FASB lease accounting standards,
which define a lease as a contract, or
part of a contract, that conveys the right
to control the use of identified property,
plant and equipment (an identified
asset) for a period of time in exchange
for consideration. As a result of this
definitional change, in order to comply
with our Part 32 rules, a carrier will
need to determine whether a contract is
or contains a lease because lessees are
required to recognize lease assets and
lease liabilities for all leases (financing
or operating) other than short-term (less
than 12 months) leases. Furthermore,
the FASB lease accounting standards
require an entity to separate the lease
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
components from the non-lease
components (for example, maintenance
services or other activities that transfer
a good or service to the customer) in a
contract. With respect to operating and
finance leases, our rules allow carriers
to use subsidiary accounts as they deem
necessary to most efficiently process the
transactions.
118. Lessee Accounting for Operating
Leases. To be consistent with the FASB
lease accounting standard’s approach,
the Commission amends its rules to
require that when a lessee enters into an
operating lease longer than one year, it
records the net present value of the
lease payments. As the lease term runs,
the lessee must recognize the lease
expense as a straight-line amortization
over the life of the lease.
119. Lessor Accounting for Operating
Leases. The FASB lease accounting
standards do not require substantial
modifications to our current rules
governing a lessor’s accounting for
operating leases. A lessor will continue
to report the capital asset that it is
leasing to another entity and to apply
the required standards to the asset, such
as recording depreciation expense and
disclosing changes in the amount of the
asset during the fiscal year. The
Commission does, however, amend its
rules to make clear that a lessor must
recognize a long-term lease receivable in
Account 1410 ‘‘Other Non-current
Assets,’’ measuring the amount in
generally the same manner as a lessee
liability. Pursuant to our amended rules,
a lessor must also recognize a deferred
inflow of resources equal to the lease
receivable plus any up-front payments
the lessor received from the lessee that
relate to future periods in Account 4300
‘‘Other long-term liabilities and deferred
credits.’’
120. The Commission also amends its
rules to require that when a carrier, that
is a lessor, enters into an operating lease
longer than one year, it records the
present value of the lease receivables in
each account. The lessor must
determine the present value of the lease
and recognize a deferred inflow of
resources equal to the lease receivable
plus any up-front payments the lessor
received from the lessee that relate to
future periods.
121. As the lease term runs, the lessor
in the normal course will recognize
lease revenue and a credit to the
deferred lease account, which will be
done as a straight-line amortization over
the life of the lease. The actual amount
recorded under our amended rules
could vary from what would have been
recorded under the previous Part 32
rules. Over the length of the lease,
PO 00000
Frm 00049
Fmt 4700
Sfmt 4700
4725
however, the lease revenues recognized
under either approach will be the same.
122. Finance Leases. Other than
referring to capital leases as finance
leases, no additional changes are
necessary to the sections of our Part 32
rules governing finance leases. As with
operating leases, carriers may employ
subsidiary accounts to facilitate FASB
reporting requirements.
123. Ratemaking and universal
service considerations. Our revisions to
Part 32 do not raise any ratemaking or
universal service concerns. While there
may be slight differences in the timing
of certain entries, the overall effect over
the length of the lease will not create
any material disruptions to the
ratemaking and universal service
processes.
124. Effective date. Section 220(g) of
the Act provides that the Commission
shall give notice of alterations in the
manner or form of the keeping of
accounts at least six months before the
alterations are to take effect. Thus, the
earliest the rules the Commission adopts
in this document could become effective
would be mid-2019. Because most
accounting systems are based on a
calendar year, the Commission makes
the revised rules effective on January 1,
2020. That is also the first month in
which the FASB lease accounting
standards are applicable to all entities
that use GAAP accounting. For those
carriers that must comply with the
FASB lease accounting standards before
January 1, 2020 and for those that elect
an earlier date to conform their accounts
to the FASB lease accounting standards,
the Commission grants a waiver of Part
32 as described in the following to cover
the time period between now and
January 1, 2020.
125. Waiver. Generally, the
Commission’s rules may be waived for
good cause shown. The Commission
may exercise its discretion to waive a
rule where the specific facts make strict
compliance inconsistent with the public
interest. Waiver of the Commission’s
rules is therefore appropriate only if
special circumstances warrant a
deviation from the general rule and such
deviation will serve the public interest.
126. On the Commission’s own
motion, it grants incumbent LECs
subject to Part 32 a waiver allowing
them to employ the revised procedures
adopted herein effective upon release of
this Report and Order. Absent such
relief, the six-month notice required by
Section 220(g) of the Act would require
those incumbent LECs subject to the
FASB lease accounting standards to
have two sets of lease accounts until the
revised rules become effective. The
Commission finds good cause exists to
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4726
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
grant this waiver to preclude the
imposition of duplicative accounting
requirements. To encourage efficient use
of carrier resources, the Commission
extends this waiver to any carrier
electing to follow the FASB lease
accounting standards before January 1,
2020.
127. The Commission declines to
make any changes to the rural growth
factor or the application of the HCLS
cap.
128. Discussion. The Commission
declines to make any changes to the
rural growth factor or the application of
the HCLS cap. Commenters fail to
address that HCLS support should be
declining as customers switch to
broadband-only services, which are
supported through CAF BLS. The rural
growth factor, which accounts for line
loss, results in a declining HCLS cap
and a decline in the overall amount of
HCLS. When there are fewer lines to be
supported, the amount of support
should decrease. The Commission also
notes that because 100% of the cost
above the revenue imputation is
available under CAF BLS, relative to
HCLS, more support is available to the
carrier when that loop becomes a
standalone broadband loop.
129. Although the Commission seeks
to preserve and advance universal
availability of voice service, it also
strives to ensure universal availability of
modern networks capable of providing
voice and broadband service to homes,
businesses, and community anchor
institutions. Increasing HCLS support
provides a disincentive for legacy
carriers to deploy broadband capable
networks. Freezing the HCLS cap or
increasing it by removing line loss from
the rural growth factor would provide
carriers with an incentive to maintain
voice-only loops, and discourage the
deployment of broadband.
130. While in the past the
Commission spoke of limiting increases
to HCLS because at that time the
number of lines was typically
increasing, the Commission noted that
‘‘using a rural growth factor will more
accurately reflect changes in the number
of rural lines over time.’’ Even though
the number of voice lines is now
typically decreasing, the mechanism
adopted by the Commission is still
effectively aligning HCLS support
appropriately with the number of lines.
For these reasons, the Commission does
not adopt any changes to the rural
growth factor or the application of the
HCLS cap.
131. At this time, the Commission
finds that no changes to the rate-ofreturn operating expense (opex)
limitation are needed.
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
132. Discussion. The Commission
declines to make any changes to the
opex limitation at this time. The opex
limitation has been in effect for only a
limited period of time and was recently
adjusted to account for inflation. The
Commission finds it prudent to
continue to monitor the effects of this
modified limitation before adopting any
further changes. The Commission also
declines to adopt any changes to
account for business locations as the
Concerned Rural LECs and NTCA
recommend. As NTCA notes, the
Commission does not have ‘‘public
availability of business location data.’’
Although future consideration of this
issue may be warranted, NTCA’s
suggestion that the Commission apply
‘‘some kind of factor’’ does not provide
a sufficient basis or means for us to
move forward with any modifications.
133. The Commission directs USAC to
collect contributions based on projected
demand in order to minimize the
universal service burden on consumers
and businesses, while ensuring
sufficient support to implement the
high-cost program.
134. Discussion. The Commission
concludes that its traditional approach,
which bases collections on actual
projected demand, will best serve our
goals of minimizing the universal
service burden on consumers and
businesses while ensuring sufficient and
predictable support to implement the
high-cost program. While the uniform
collection may have served a useful
purpose when the CAF program was
first getting underway, the Commission
has largely implemented the CAF
program now that the Phase II auction
has ended and associated support
amounts have been determined.
Moreover, now that the Commission has
concluded its budget review through
this Report and Order, the Commission
expects a fairly predictable and stable
budget for the high-cost program for the
next several years. Finally, collecting
only enough support to meet demand
enhances transparency and promotes
accountability in the high-cost program.
The Commission therefore directs USAC
to discontinue uniform collections for
the high-cost program and going
forward to collect contributions based
on projected demand.
135. There is no need for us to do a
‘‘full accounting’’ of the high-cost
support available as SCC recommends.
The Commission and USAC always
have a full accounting of the amount of
high-cost support needed and how
much has been collected in excess of
this total. There is currently no excess
cash in USAC’s high-cost account;
USAC will need to collect additional
PO 00000
Frm 00050
Fmt 4700
Sfmt 4700
funds to meet the requirements of the
high-cost program, including the
allocations adopted in this Report and
Order. The Commission further declines
to address SCC’s recommendation to
‘‘allocate any unencumbered excess’’
from other universal service programs to
HCLS and CAF BLS at this time.
II. Order on Reconsideration
136. Introduction. In the Order on
Reconsideration, the Commission
denies three petitions purportedly
seeking reconsideration of the
Commission’s decision in the 2018
Rate-of-Return Reform Order and NPRM
to increase A–CAM support by
approximately $36.5 million annually—
increasing support up to $146.10 per
location for all A–CAM carriers
authorized on January 24, 2017. Grand
River Mutual Telephone Corporation
(Grand River) requests additional A–
CAM support for 747 locations. Clarity
Telecom, LLC (Clarity) requests
additional A–CAM support for 2,167
locations. Hamilton County Telephone
Co-op (Hamilton) (collectively,
Petitioners) requests additional A–CAM
support for 2,444 locations. The
petitions for reconsideration ‘‘relate to
matters outside the scope of the order
for which reconsideration is sought.’’
Accordingly, the Commission denies
them.
137. Discussion. The Commission
denies all three petitions for
reconsideration because they ‘‘relate to
matters outside the scope of the order
for which reconsideration is sought.’’
While on their face, the Petitioners are
asking for an additional increase of A–
CAM support, in effect, they are
requesting that the Commission
reconsiders what locations (census
blocks) are eligible for A–CAM support.
In other words, to increase the amount
of support as Petitioners request, the
Commission would have to first direct
the Bureau to revise the A–CAM eligible
census blocks, which was not at issue in
the 2018 Rate-of-Return Reform Order
and NPRM. Rather, the Commission
made the determination regarding
eligible census blocks in the 2016 Rateof-Return Reform Order. Since that 2016
order, the Commission has not sought
comment on or otherwise indicated in
any way that would allow changes,
modifications, or adjustments to funded
locations for authorized A–CAM
carriers. Finally, the Commission finds
that Petitioners’ requests as they phrase
them and as they argue pertain only to
them and do not justify a change of any
rule of general applicability based on
their pleadings. Accordingly, the
Commission denies the three petitions
for reconsideration.
E:\FR\FM\19FER1.SGM
19FER1
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
138. Even were the Commission to
address the petitions for reconsideration
on their merits, the arguments raise
nothing new to consider and are
identical to petitions the Bureau
rejected in the 2016 Orders and A–CAM
Challenge Process Order. With respect
to Hamilton, its attempt to introduce
‘‘new evidence’’ falls short. The ‘‘new
evidence’’ is that since Hamilton
accepted its A–CAM offer, Wisper ISP
updated its FCC Form 477 and reduced
the number of census blocks that
‘‘knocked out many’’ locations.
Hamilton also claims that Wisper ISP
decommissioned a tower that ‘‘would
have supposedly served some of the
locations that were rendered ineligible
from the A–CAM funding.’’ Hamilton
then claims that it ‘‘knows without a
doubt’’ Wisper ISP will not provide
service in the area.
139. Regarding the decommissioned
tower and Wisper ISP’s lack of intention
to provide service in the area, Hamilton
provides no support or evidence to back
its claims. In addition, Hamilton’s
petition lacks clarity on the number of
locations that should be funded due to
Wisper ISP’s updated FCC Form 477
and its decommissioned tower. Wisper
ISP apparently still serves some of the
area, so the Commission can surmise
that not all of Hamilton’s 2,444
locations would be funded. Based on
the record before the Commission,
however, it cannot determine an exact
number. Accordingly, Hamilton’s
petition is unpersuasive on the merits.
140. As to Clarity and Grand River,
the Commission agrees with the
Bureau’s decision not to waive the date
for determining FTTP and cable
deployment. As the Bureau determined,
administrative closure on the data set
for incumbent study areas ‘‘at a specific
moment in time’’ was necessary for
‘‘efficient implementation of the overall
reform effort.’’ Moreover, as the Bureau
recognized, the Commission clearly
stated that under the terms of their
offers, ‘‘carriers may not resubmit their
previously filed data to reduce their
reported FTTP or cable coverage.’’
tkelley on DSKBCP9HB2PROD with RULES
IV. Procedural Matters
A. Paperwork Reduction Act Analysis
141. The Report and Order adopted
herein contains new or modified
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 will be invited to
comment on the new or modified
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
information collection requirements
contained in this proceeding. In
addition, the Commission notes that
pursuant to the Small Business
Paperwork Relief Act of 2002, Public
Law 107–198, see 44 U.S.C. 3506(c)(4),
it previously sought specific comment
on how the Commission might further
reduce the information collection
burden for small business concerns with
fewer than 25 employees. In this present
document, the Commission has assessed
the effects of the new and modified
rules that might impose information
collection burdens on small business
concerns, and find that they either will
not have a significant economic impact
on a substantial number of small entities
or will have a minimal economic impact
on a substantial number of small
entities.
B. Congressional Review Act
142. The Commission will send a
copy of this Report and Order and Order
on Reconsideration to Congress and the
Government Accountability Office
pursuant to the Congressional Review
Act, see 5 U.S.C. 801(a)(1)(A).
143. The Regulatory Flexibility Act of
1980 (RFA) requires that an agency
prepare a regulatory flexibility analysis
for notice and comment rulemakings,
unless the agency certifies that ‘‘the rule
will not, if promulgated, have a
significant economic impact on a
substantial number of small entities.’’
Accordingly, the Commission has
prepared a FRFA concerning the
possible impact of the rule changes
contained in the Report and Order on
small entities. The FRFA is set forth in
the following.
144. In the Report and Order, the
Commission adopts further changes to
universal service support mechanisms
for rate-of-return carriers to spur
broadband deployment to consumers in
rural America, promote efficiency, and
deter waste, fraud, and abuse. The
Commission authorizes an offer of up to
$200 per location for carriers currently
on A–CAM support with revised
deployment obligations, and the
Commission authorizes a new A–CAM
offer of up to $200 per location for
current legacy carriers (those carriers
receive HCLS and/or CAF BLS). The
Commission then creates a separate
budget for carriers that remain on legacy
support and set that budget at 2018
unconstrained claims, which will be
annually adjusted based on an
inflationary factor. The Commission
also sets a minimum threshold of
support for legacy carriers equal to the
five-year projection for CAF BLS. The
Commission eliminates the per-line
reduction that is part of the budget
PO 00000
Frm 00051
Fmt 4700
Sfmt 4700
4727
control mechanism, which will make
legacy support amounts more
predictable and make the budget control
mechanism less burdensome
administratively. The Commission
eliminates the capital investment
allowance, which has been deterring
economically efficient investments and
was administratively overburdensome
for the carriers. To further the
Commission’s efforts in eliminating
waste, fraud, and abuse, it reduces the
per-line, per-month cap of legacy
support from $250 to $225 and then to
$200. The Commission modifies a
reporting deadline related to line counts
so that it is using more recent data in
determining carriers subject to the perline, per-month cap. The Commission
also makes line count filings required
for all rate-of-return carriers, which
provides data it needs to effectively
monitor our high-cost program while
minimally burdening the carriers. The
Commission amends the Uniform
System of Accounts (USOA) contained
in Part 32 of the Commission’s rules to
incorporate new lease accounting
standards adopted by the Financial
Accounting Standards Board (FASB).
Amending the USOA eliminates the
need for incumbent local exchange
carriers (LECs) subject to Part 32 to
maintain two methods of accounting for
leases. The Commission updates
deployment obligations consistent with
the reset budget and rules changes
adopted in the Report and Order. The
Commission adopts changes whereby
support in certain legacy areas will be
awarded through competitive bidding.
Finally, to make sure that consumers in
rural areas have access to broadband
consistent with demand and what
services available in urban areas, the
Commission generally makes 25/3 Mbps
the minimum obligations for legacy
support.
145. There were no comments raised
that specifically addressed the proposed
rules and policies presented in the 2018
Rate-of-Return Reform Order and NPRM
IRFA. Nonetheless, the Commission
considered the potential impact of the
rules proposed in the IRFA on small
entities and generally reduced the
compliance burden for all small entities
to reduce the economic impact of the
rules enacted herein on such entities.
146. 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
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4728
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
‘‘small business’’ has the same meaning
as the term ‘‘small-business concern’’
under the Small Business Act. A smallbusiness concern’’ is one which: (1) Is
independently owned and operated; (2)
is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the Small Business
Administration (SBA).
147. Small Businesses, Small
Organizations, Small Governmental
Jurisdictions. Our actions, over time,
may affect small entities that are not
easily categorized at present. The
Commission therefore describes here, at
the outset, three broad groups of small
entities that could be directly affected
herein. First, while there are industry
specific size standards for small
businesses that are used in the
regulatory flexibility analysis, according
to data from the SBA’s Office of
Advocacy, in general a small business is
an independent business having fewer
than 500 employees. These types of
small businesses represent 99.9 percent
of all businesses in the United States
which translates to 28.8 million
businesses.
148. Next, the type of small entity
described as a ‘‘small organization’’ is
generally ‘‘any not-for-profit enterprise
which is independently owned and
operated and is not dominant in its
field.’’ Nationwide, as of Aug 2016,
there were approximately 356,494 small
organizations based on registration and
tax data filed by nonprofits with the
Internal Revenue Service (IRS).
149. Finally, the small entity
described as a ‘‘small governmental
jurisdiction’’ is defined generally as
‘‘governments of cities, counties, towns,
townships, villages, school districts, or
special districts, with a population of
less than fifty thousand.’’ U.S. Census
Bureau data from the 2012 Census of
Governments indicates that there were
90,056 local governmental jurisdictions
consisting of general purpose
governments and special purpose
governments in the United States. Of
this number there were 37,132 General
purpose governments (county,
municipal and town or township) with
populations of less than 50,000 and
12,184 Special purpose governments
(independent school districts and
special districts) with populations of
less than 50,000. The 2012 U.S. Census
Bureau data for most types of
governments in the local government
category shows that the majority of
these governments have populations of
less than 50,000. Based on this data the
Commission estimates that at least
49,316 local government jurisdictions
fall in the category of ‘‘small
governmental jurisdictions.’’
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
150. In the Report and Order, the
Commission requires all rate-of-return
carriers, not just legacy carriers, to file
line count data in the FCC Form 507,
and the Commission changes the
deadline for line count reporting. The
Commission amends the Uniform
System of Accounts (USOA) contained
in Part 32 of the Commission’s rules to
incorporate new lease accounting
standards adopted by the Financial
Accounting Standards Board (FASB).
The Commission updates deployment
obligations consistent with the reset
budget and rules changes adopted in the
Report and Order. By adopting defined
deployment obligations for all legacy
carriers, the Commission requires all of
them to report deployment in the High
Cost Universal Broadband (HUBB)
portal.
151. The RFA requires an agency to
describe any significant alternatives that
it has considered in reaching its
proposed approach, which may include
(among others) the following four
alternatives: (1) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance or reporting requirements
under the rule for small entities; (3) the
use of performance, rather than design,
standards; and (4) an exemption from
coverage of the rule, or any part thereof,
for small entities. The Commission has
considered all of these factors
subsequent to receiving substantive
comments from the public and
potentially affected entities. The
Commission has also considered the
economic impact on small entities, as
identified in comments filed in response
to 2018 Rate-of-Return Reform Order
and NPRM and IRFA, in reaching its
final conclusions and taking action in
this proceeding.
152. The rules that the Commission
adopts in the Report and Order take
steps to provide greater certainty and
flexibility to rate-of-return carriers,
many of which are small entities. The
Commission authorizes additional
support for existing A–CAM carriers.
The Commission also authorizes a new
A–CAM offer for current legacy carriers,
providing them the opportunity to
receive model-based support in
exchange for deploying broadbandcapable networks to a pre-determined
number of eligible locations. The
Commission recognizes that permitting
rate-of-return carriers to elect to receive
fix monthly support amounts over the
ten years will enhance the ability of
these carriers to deploy broadband
throughout the term and free them from
PO 00000
Frm 00052
Fmt 4700
Sfmt 4700
the administrative burdens associated
with doing cost studies to receive highcost support. For this new offer, as with
the existing A–CAM carriers, to provide
flexibility, the Commission adopts
interim milestones over the support
term and permit the carriers to meet
their obligations by deploying to 95
percent of the minimum number of
locations.
153. Furthermore, the Commission
adopts a new and separate budget for
the legacy carriers that annually adjusts
to factor in inflation and includes a
minimum threshold of support not
subject to the budget constraint. This
will increase the amount of support
available providing sufficiency and
predictability for the legacy carriers.
The Commission reimburses all support
reductions budget control mechanism.
Another action the Commission takes to
make carriers’ support more predictable
is eliminating the per-line reduction
calculation that was part of the budget
control mechanism. The Commission
also eliminates the capital investment
allowance, which provides further relief
to legacy carriers. The capital
investment allowance had been
deterring economically efficient
investments and was administratively
overburdensome for the carriers.
154. In adopting mandatory line count
reporting for all rate-of-return carriers,
the Commission notes that this is
something that all carriers were required
to do previously, and the burden is
minimal. In lowering the monthly perline support for legacy carriers, to
minimize the impact, the Commission
does it gradually—from $250 to $225,
effective July 1, 2019, and then to $200,
effective July 1, 2021. In revising the
deployment obligations for legacy
carriers, to minimize the impact, the
Commission restarts the five-year
deployment term and allow any
locations deployed to with at least
25/3 Mbps broadband in the original
term to count towards this new term.
Finally, our decision to auction off
support in legacy study areas may have
a significant economic impact on small
entities, but to reduce that impact, the
Commission limits the auction to study
areas that are significantly overlapped
with unsubsidized competition.
Moreover, while it affects incumbent
LECs, our decision to auction certain
legacy areas may have a positive impact
on other small entity providers who
currently do not receive universal
service support.
V. Ordering Clauses
155. Accordingly, it is ordered that,
pursuant to the authority contained in
sections 1–4, 5, 201–206, 214, 218–220,
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
251, 252, 254, 256, 303(r), 332, 403, and
405 of the Communications Act of 1934,
as amended, and section 706 of the
Telecommunications Act of 1996, 47
U.S.C. 151–155, 201–206, 214, 218–220,
251, 252, 254, 256, 303(r), 403, 405, and
1302, the Report and Order, Further
Notice of Proposed Rulemaking, and
Order on Reconsideration is adopted,
effective thirty (30) days after
publication of the text or summary
thereof in the Federal Register, except
for those rules and requirements
involving Paperwork Reduction Act
burdens, which shall become effective
immediately upon announcement in the
Federal Register of OMB approval, and
the rules adopted pursuant to section
III.C.8 of the Report and Order
(paragraphs 115 to 126 of this Federal
Register summary) shall become
effective on January 1, 2020. It is the
Commission’s intention in adopting
these rules that if any of the rules that
it retains, modifies, or adopts herein, or
the application thereof to any person or
circumstance, are held to be unlawful,
the remaining portions of the rules not
deemed unlawful, and the application
of such rules to other persons or
circumstances, shall remain in effect to
the fullest extent permitted by law.
156. It is further ordered that Part 32,
54, and 65 of the Commission’s rules, 47
CFR part 32, 54, and 65, are amended
as set forth in the following, and such
rule amendments shall be effective
thirty (30) days after publication of the
rules amendments in the Federal
Register, except that those rules and
requirements which contain new or
modified information collection
requirements that require approval by
the Office of Management and Budget
under the Paperwork Reduction Act will
become effective after the Commission
publishes a notice in the Federal
Register announcing such approval and
the relevant effective date, and the rules
adopted pursuant to section III.C.8 of
the Report and Order (paragraphs 115 to
126 of this Federal Register summary)
shall become effective on January 1,
2020.
157. It is further ordered that,
pursuant to the authority contained in
section 405 of the Communications Act
of 1934, as amended, 47 U.S.C. 405, and
sections 0.331 and 1.429 of the
Commission’s rules, 47 CFR 0.331 and
47 CFR 1.429, the Petition for
Reconsideration filed by GRAND RIVER
MUTUAL TELEPHONE CORPORATION
on May 2, 2018 is denied.
158. It is further ordered that,
pursuant to the authority contained in
section 405 of the Communications Act
of 1934, as amended, 47 U.S.C. 405, and
sections 0.331 and 1.429 of the
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Commission’s rules, 47 CFR 0.331 and
47 CFR 1.429, the Petition for
Reconsideration filed by CLARITY
TELECOM, LLC on May 10, 2018 is
denied.
159. It is further ordered that,
pursuant to the authority contained in
section 405 of the Communications Act
of 1934, as amended, 47 U.S.C. 405, and
sections 0.331 and 1.429 of the
Commission’s rules, 47 CFR 0.331 and
47 CFR 1.429, the Petition for
Reconsideration filed by HAMILTON
COUNTY TELEPHONE CO-OP on May
8, 2018 is denied.
160. It is further ordered, pursuant to
section 1.3 of the Commission’s rules,
47 CFR 1.3, the Commission waives Part
32 rules to the extent necessary to allow
carriers subject to those rules to employ
the revised procedures adopted in
section III.C.8 (paragraphs 115 to 126 of
this Federal Register summary).
List of Subjects
47 CFR Part 32
Communications common carriers,
Reporting and recordkeeping
requirements, Telephone, Uniform
system of accounts.
47 CFR Part 54
Communications common carriers,
Health facilities, Infants and children,
Internet, Libraries, Reporting and
recordkeeping requirements, Schools,
Telecommunications, Telephone.
47 CFR Part 65
Administrative practice and
procedure, Communications common
carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR parts 32,
54 and 65 as follows:
PART 32—UNIFORM SYSTEM OF
ACCOUNTS FOR
TELECOMMUNICATIONS COMPANIES
1. The authority citation for part 32
continues to read as follow:
■
Authority: 47 U.S.C. 219, 220 as amended,
unless otherwise noted.
2. Amend § 32.1410 by adding
paragraphs (l) and (m) to read as
follows:
■
§ 32.1410
*
PO 00000
*
Other noncurrent assets.
*
Frm 00053
*
Fmt 4700
*
Sfmt 4700
4729
(l) This account shall include
property subject to a lessee operating
lease longer than one year.
(1) An operating lease is a contract, or
part of a contract, that conveys the right
to control the use of identified property,
plant and equipment (an identified
asset) for a period of time in exchange
for consideration.
(2) The amounts recorded in this
account at the inception of an operating
lease shall be equal to the present value
not to exceed fair value, at the beginning
of the lease term, of minimum lease
payments during the lease term,
excluding that portion of the payments
representing executory costs to be paid
by the lessor, together with any profit
thereon. Amounts subject to current
treatment shall be included in Account
1350, Other current assets.
(3) Any balance in this account
relating to capitalized operating leases
shall be excluded in any ratemaking
calculations.
(m) This account shall include the
amount of lessor receivables from an
operating lease longer than one year.
(1) The amount recorded in this
account at the inception of an operating
lease shall be equal to the present value
not to exceed fair value, at the beginning
of the lease term, of minimum lease
payments during the lease term,
excluding that portion of the payments
representing executory costs to be paid
by the lessee, together with any profit
thereon. Amounts subject to current
settlement shall be included in Account
1350, Other current assets.
(2) Any balance in this account
relating to receivables associated with
capitalized operating leases shall be
excluded in any ratemaking
calculations.
■ 3. Revise § 32.2680 to read as follows:
§ 32.2680
Amortizable tangible assets.
This account shall be used by
companies to record amounts for
property acquired under finance leases
and the original cost of leasehold
improvements of the type of character
detailed in Accounts 2681 and 2682.
■ 4. Amend § 32.2681 by revising the
section heading and paragraphs (a) and
(c) to read as follows:
§ 32.2681
Finance leases.
(a) This account shall include all
property acquired under a finance lease.
A lease qualifies as a finance lease when
one or more of the following criteria is
met:
*
*
*
*
*
(c) The amounts recorded in this
account at the inception of a finance
lease shall be equal to the original cost,
E:\FR\FM\19FER1.SGM
19FER1
4730
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
if known, or to the present value not to
exceed fair value, at the beginning of the
lease term, of minimum lease payments
during the lease term, excluding that
portion of the payments representing
executory costs to be paid by the lessor,
together with any profit thereon.
■ 5. Amend § 32.2682 by revising
paragraph (a) to read as follows:
§ 32.2682
Leasehold improvements.
(a) This account shall include the
original cost of leasehold improvements
made to telecommunications plant held
under a finance or operating lease,
which are subject to amortization
treatment. This account shall also
include those improvements which will
revert to the lessor.
*
*
*
*
*
■ 6. Amend § 32.3400 by revising
paragraphs (a)(1) and (b) to read as
follows:
§ 32.3400
tangible.
Accumulated amortization—
(a) * * *
(1) The accumulated amortization
associated with the investment
contained in Account 2681, Finance
leases.
*
*
*
*
*
(b) This account shall be credited
with amounts for the amortization of
finance leases and leasehold
improvements concurrently charged to
Account 6563, Amortization expense—
tangible. (Note also Account 3300,
Accumulated depreciation—
nonoperating.)
*
*
*
*
*
■ 7. Amend § 32.3410 by revising the
section heading and paragraphs (a) and
(b) to read as follows:
tkelley on DSKBCP9HB2PROD with RULES
Other current liabilities.
*
*
*
*
(c) The current portion of obligations
applicable to property obtained under
finance leases.
*
*
*
*
*
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
Long term debt and funded debt.
(a) * * *
(5) The noncurrent portion of
obligations applicable to property
obtained under finance leases. Amounts
subject to current settlement shall be
included in Account 4130, Other
current liabilities.
*
*
*
*
*
(9) The noncurrent portion of
obligations applicable to property
subject to capitalized operating leases.
Amounts subject to current settlement
shall be included in Account 4130,
Other current liabilities. Any balance in
this account relating to capitalized
operating leases shall be excluded in
any ratemaking calculations.
*
*
*
*
*
■ 10. Amend § 32.4300 by adding
paragraph (c) to read as follows:
§ 32.4300 Other long-term liabilities and
deferred credits.
*
*
*
*
*
(c) This account shall include the
deferred obligations associated with a
capitalize operating lease longer than
one year. The amounts recorded in this
account at the inception of an operating
lease shall be equal to the present value
not to exceed fair value, at the beginning
of the lease term, of minimum lease
payments during the lease term,
excluding that portion of the payments
representing executory costs to be paid
by the lessor, together with any profit
thereon.
■ 11. Amend § 32.7500 by revising
paragraph (e) to read as follows:
Interest and related items.
*
(a) This account shall include the
accumulated amortization associated
with the investment contained in
Account 2681, Finance Leases.
(b) This account shall be credited
with amounts for the amortization of
finance leases concurrently charged to
Account 6563, Amortization expense—
tangible. (Note also Account 3300,
Accumulated depreciation—
nonoperating.)
*
*
*
*
*
■ 8. Amend § 32.4130 by revising
paragraph (c) to read as follows:
*
§ 32.4200
§ 32.7500
§ 32.3410 Accumulated amortization—
capitalized finance leases.
§ 32.4130
9. Amend § 32.4200 by revising
paragraph (a)(5) and adding paragraph
(a)(9) to read as follows:
■
*
*
*
*
(e) This account shall include the
interest portion of each finance lease
and capitalized operating lease
payment.
*
*
*
*
*
PART 54—UNIVERSAL SERVICE
12. The authority citation for part 54
continues to read as follows:
■
Authority: 47 U.S.C. 151, 154(i), 155, 201,
205, 214, 219, 220, 254, 303(r), 403, and 1302
unless otherwise noted.
13. Amend § 54.302 by adding two
sentences to the end of paragraph (a)
and revising paragraph (c) to read as
follows:
■
§ 54.302 Monthly per-line limit on universal
service support.
(a) * * * Beginning July 1, 2019, until
June 30, 2021, each study area’s
PO 00000
Frm 00054
Fmt 4700
Sfmt 4700
universal service monthly per-line
support shall not exceed $225.
Beginning July 1, 2021, each study
area’s universal service monthly perline support shall not exceed $200.
*
*
*
*
*
(c) The Administrator, in order to
limit support for carriers pursuant to
paragraph (a) of this section, shall
reduce safety net additive support, highcost loop support, safety valve support,
and Connect America Fund Broadband
Loop Support in proportion to the
relative amounts of each support the
study area would receive absent such
limitation.
§ 54.303
[Amended]
14. Amend § 54.303 by removing and
reserving paragraph (b) and removing
paragraphs (c) through (m).
■ 15. Amend § 54.308 by
■ a. Revising the first sentence of
paragraph (a)(1);
■ b. Adding paragraphs (a)(1)(iii) and
(iv); and
■ c. Revising paragraphs (a)(2)
introductory text, (a)(2)(i), (a)(2)(ii)(A)(1)
and (2), (a)(2)(ii)(B), and (a)(2)(iii).
The revisions and additions read as
follows:
■
§ 54.308 Broadband public interest
obligations for recipients of high-cost
support.
(a) * * *
(1) Carriers that elect to receive
Connect America Fund-Alternative
Connect America Cost Model (CAF–
ACAM) support pursuant to § 54.311 are
required to offer broadband service at
actual speeds of at least 10 Mbps
downstream/1 Mbps upstream to a
defined number of locations as specified
by public notice, with a minimum usage
allowance of 150 GB per month, subject
to the requirement that usage
allowances remain consistent with
median usage in the United States over
the course of the term. * * *
*
*
*
*
*
(iii) Revised A–CAM I carriers, as
defined by § 54.311(a)(2), must offer the
following broadband speeds to locations
that are fully funded, as specified by
public notice at the time of the
authorizations, as follows:
(A) Revised A–CAM I carriers with a
state-level density of more than 10
housing units per square mile, as
specified by public notice at the time of
election, are required to offer broadband
speeds of at least 25 Mbps downstream/
3 Mbps upstream to 85 percent of all
fully funded locations in the state by the
end of the term.
(B) Revised A–CAM I carriers with a
state-level density of 10 or fewer, but
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
more than five, housing units per square
mile, as specified by public notice at the
time of election, are required to offer
broadband speeds of at least 25 Mbps
downstream/3 Mbps upstream to 65
percent of fully funded locations in the
state by the end of the term.
(C) Revised A–CAM I carriers with a
state-level density of five or fewer
housing units per square mile, as
specified by public notice at the time of
election, are required to offer broadband
speeds of at least 25 Mbps downstream/
3 Mbps upstream to 50 percent of fully
funded locations in the state by the end
of the term.
(iv) A–CAM II carriers, as defined by
§ 54.311(a)(3), must offer broadband
speeds of at least 25 Mbps downstream/
3 Mbps upstream to 100 percent of fully
funded locations in the state by the end
of the term, and therefore have no
additional 10/1 Mbps obligation.
*
*
*
*
*
(2) Rate-of-return recipients of
Connect America Fund Broadband Loop
Support (CAF BLS) shall be required to
offer broadband service at actual speeds
of at least 25 Mbps downstream/3 Mbps
upstream, over a five-year period, to a
defined number of unserved locations as
specified by public notice, as
determined by the following
methodology:
(i) Percentage of CAF BLS. Each rateof-return carrier is required to target a
defined percentage of its five-year
forecasted CAF BLS support to the
deployment of broadband service to
locations that are unserved with 25
Mbps downstream/3 Mbps upstream
broadband service as follows:
(A) Rate-of-return carriers with less
than 20 percent deployment of 25/3
Mbps broadband service in their study
areas, as determined by the Bureau, will
be required to use 35 percent of their
five-year forecasted CAF BLS support to
extend broadband service where it is
currently lacking.
(B) Rate-of-return carriers with more
than 20 percent but less than 40 percent
deployment of 25/3 Mbps broadband
service in their study areas, as
determined by the Bureau, will be
required to use 25 percent of their fiveyear forecasted CAF BLS support to
extend broadband service where it is
currently lacking.
(C) Rate-of-return carriers with more
than 40 percent deployment of 25/3
Mbps broadband service in their study
areas, as determined by the Bureau, will
be required to use 20 percent of their
five-year forecasted CAF BLS support to
extend broadband service where it is
currently lacking.
(ii) * * *
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
(A) * * *
(1) The weighted average unseparated
cost per loop for carriers of similar
density that offer 25/3 Mbps or better
broadband service to at least 95 percent
of locations, based on the most current
FCC Form 477 data as determined by
the Bureau, but excluding carriers
subject to the current per-line permonth cap set forth in § 54.302 and
carriers subject to limitations on
operating expenses set forth in § 54.303;
or
(2) 150% of the weighted average of
the cost per loop for carriers of similar
density, but excluding carriers subject to
the per line per month cap set forth in
§ 54.302 and carriers subject to
limitations on operating expenses set
forth in § 54.303, with a similar level of
deployment of 25/3 Mbps or better
broadband based on the most current
FCC Form 477 data, as determined by
Bureau; or
(B) The average cost per location for
census blocks lacking 25/3 Mbps
broadband service in the carrier’s study
area as determined by the A–CAM.
(iii) Restrictions on deployment
obligations. No rate-of-return carrier
shall deploy terrestrial wireline
technology in any census block if doing
so would result in total support per line
in the study area to exceed the per-line
per-month cap in § 54.302.
*
*
*
*
*
■ 16. Amend § 54.311 by adding
paragraphs (a)(1) through (3) and
revising paragraph (c) through (e) to
read as follows:
§ 54.311 Connect America Fund
Alternative-Connect America Cost Model
Support
(a) * * *
(1) For the purposes of this section,
‘‘A–CAM I’’ refers to carriers initially
authorized to receive CAF–ACAM
support as of January 24, 2017,
including any carriers that later elected
revised offers, except for carriers
described in paragraph (a)(2) of this
section. For such carriers, the first
program year of CAF–ACAM is 2017.
(2) For the purposes of this section,
‘‘Revised A–CAM I’’ refers to carriers
initially authorized to receive CAF–
ACAM support as of January 24, 2017,
and were subsequently authorized to
receive CAF–ACAM pursuant to a
revised offer after January 1, 2019. For
such carriers, the first program year of
CAF–ACAM is 2017.
(3) For the purposes of this section,
‘‘A–CAM II’’ refers to carriers first
authorized to receive A–CAM support
after January 1, 2019. For such carriers,
PO 00000
Frm 00055
Fmt 4700
Sfmt 4700
4731
the first program year of CAF–ACAM is
2019.
*
*
*
*
*
(c) Term of support. CAF–ACAM
model-based support shall be provided
to A–CAM I carriers for a term that
extends until December 31, 2026, and to
Revised A–CAM I and A–CAM II
carriers for a term that extends until
December 31, 2028.
(d) Interim deployment milestones.
Recipients of CAF–ACAM model-based
support must meet the following interim
milestones with respect to their
deployment obligations set forth in
§ 54.308(a)(1)(i) of this subpart.
Compliance shall be determined based
on the total number of fully funded
locations in a state. Carriers that
complete deployment to at least 95
percent of the requisite number of
locations will be deemed to be in
compliance with their deployment
obligations. The remaining locations
that receive capped support are subject
to the standard specified in
§ 54.308(a)(1)(ii).
(1) A–CAM I and Revised A–CAM I
carriers must complete deployment of
10/1 Mbps service to a number of
eligible locations equal to 40 percent of
fully funded locations by the end of
2020, to 50 percent of fully funded
locations by the end of 2021, to 60
percent of fully funded locations by the
end of 2022, to 70 percent of fully
funded locations by the end of 2023, to
80 percent of fully funded locations by
the end of 2024, to 90 percent of fully
funded locations by the end of 2025,
and to 100 percent of fully funded
locations by the end of 2026. By the end
of 2026, A–CAM I carriers must
complete deployment of broadband
meeting a standard of at least 25 Mbps
downstream/3 Mbps upstream to the
requisite number of locations specified
in § 54.308(a)(1)(i). For Revised A–CAM
I carriers, the deployment milestones for
10/1 Mbps service described in this
paragraph shall be based on the number
of locations that were fully funded
pursuant to authorizations made prior to
January 1, 2019.
(2) Revised A–CAM I and A–CAM II
carriers must complete deployment of
25/3 Mbps service to a number of
eligible locations equal to 40 percent of
locations required by § 54.308(a)(1) of
this subpart by the end of 2022, 50
percent of requisite locations by the end
of 2023, 60 percent of requisite locations
by the end of 2024, 70 percent of
requisite location by the end of 2025, 80
percent of requisite locations by the end
of 2026, 90 percent of requisite locations
by the end of 2027, and 100 percent of
requisite locations by the end of 2028.
E:\FR\FM\19FER1.SGM
19FER1
tkelley on DSKBCP9HB2PROD with RULES
4732
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
(e) Transition to CAF–ACAM Support.
An A–CAM I, Revised A–CAM I, or A–
CAM II carrier whose final model-based
support is less than the carrier’s legacy
rate-of-return support in its base year as
defined in paragraph (e)(4) of this
section, will transition as follows:
(1) If the difference between a carrier’s
model-based support and its base year
support, as determined by paragraph
(e)(4) of this section, is ten percent or
less, it will receive, in addition to
model-based support, 50 percent of that
difference in program year one, and
then will receive model support in
program years two through ten.
(2) If the difference between a carrier’s
model-based support and its base year
support, as determined in paragraph
(e)(4) of this section, is 25 percent or
less, but more than 10 percent, it will
receive, in addition to model-based
support, an additional transition
payment for up to four years, and then
will receive model support in program
years five through ten. The transition
payments will be phased-down 20
percent per year, provided that each
phase-down amount is at least five
percent of the total base year support
amount. If 20 percent of the difference
between a carrier’s model-based support
and base year support is less than five
percent of the total base year support
amount, the transition payments will be
phased-down five percent of the total
base year support amount each year.
(3) If the difference between a carrier’s
model-based support and its base year
support, as determined in paragraph
(e)(4) of this section, is more than 25
percent, it will receive, in addition to
model-based support, an additional
transition payment for up to nine years,
and then will receive model support in
year ten. The transition payments will
be phased-down ten percent per year,
provided that each phase-down amount
is at least five percent of the total base
year support amount. If ten percent of
the difference between a carrier’s
model-based support and its base year
support is less than five percent of the
total base year support amount, the
transition payments will be phaseddown five percent of the total base year
support amount each year.
(4) The carrier’s base year support for
purposes of the calculation of transition
payments is:
(i) For A–CAM I and Revised A–CAM
I carriers, the amount of high-cost loop
support and interstate common line
support disbursed to the carrier for 2015
without regard to prior period
adjustments related to years other than
2015, as determined by the
Administrator as of January 31, 2016
and publicly announced prior to the
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
election period for the voluntary path to
the model; and
(ii) For A–CAM II carriers, the amount
of high-cost loop support and Connect
America Fund—Broadband Loop
Support disbursed to the carrier for
2018 without regard to prior period
adjustments related to years other than
2018, as determined by the
Administrator as of January 31, 2019
and publicly announced prior to the
election period for the voluntary path to
the model.
■ 17. Amend § 54.313 by revising
paragraph (f)(1)(i) and adding paragraph
(f)(5) to read as follow:
§ 54.313 Annual reporting requirements
for high-cost recipients.
*
*
*
*
*
(f) * * *
(1) * * *
(i) If the rate-of-return carrier is
receiving support pursuant to subparts
K and M of this part, a certification that
it is taking reasonable steps to provide
upon reasonable request broadband
service at actual speeds of at least 25
Mbps downstream/3 Mbps upstream,
with latency suitable for real-time
applications, including Voice over
internet Protocol, and usage capacity
that is reasonably comparable to
comparable offerings in urban areas as
determined in an annual survey, and
that requests for such service are met
within a reasonable amount of time; if
the rate-of-return carrier receives CAF–
ACAM support, a certification that it is
meeting the relevant reasonable request
standard; or if the rate-of-return carrier
is receiving Alaska Plan support
pursuant to § 54.306, a certification that
it is offering broadband service with
latency suitable for real-time
applications, including Voice over
internet Protocol, and usage capacity
that is reasonably comparable to
comparable offerings in urban areas, and
at speeds committed to in its approved
performance plan to the locations it has
reported pursuant to § 54.316(a), subject
to any limitations due to the availability
of backhaul as specified in paragraph (g)
of this section.
*
*
*
*
*
(5) Rate-of-return carriers receiving
support pursuant to the Alternative
Connect America Model or the Alaska
Plan, that are not otherwise required to
file count data pursuant to § 54.903(a)(1)
of this subpart, must file the line count
data required by § 54.903(a)(1).
*
*
*
*
*
■ 18. Amend § 54.316 by revising
paragraphs (b)(2)(i) and (ii) and (b)(3)(i)
and (ii) to read as follows:
PO 00000
Frm 00056
Fmt 4700
Sfmt 4700
§ 54.316 Broadband deployment reporting
and certification requirements for high-cost
recipients.
*
*
*
*
*
(b) * * *
(2) * * *
(i) No later than March 1, 2021, and
every year thereafter ending on no later
than March 1, 2029, a certification that
by the end of the prior calendar year, it
was offering broadband meeting the
requisite public interest obligations
specified in § 54.308 to the required
percentage of its fully funded locations
in the state, pursuant to the interim
deployment milestones set forth in
§ 54.311(d).
(ii) No later than March 1, 2027, a
certification that as of December 31,
2026, it was offering broadband meeting
the requisite public interest obligations
specified in § 54.308(a)(1) to all of its
fully funded locations in the state and
to the required percentage of its capped
locations in the state.
(3) * * *
(i) No later than March 1, 2024, a
certification that it fulfilled the
deployment obligation meeting the
requisite public interest obligations as
specified in § 54.308(a)(2) to the
required number of locations as of
December 31, 2023.
(ii) Every subsequent five-year period
thereafter, a certification that it fulfilled
the deployment obligation meeting the
requisite public interest obligations as
specified in § 54.308(a)(2)(iv).
*
*
*
*
*
§ 54.319
[Amended]
19. Amend § 54.319 by removing and
reserving paragraphs (a) through (c).:
■ 20. Amend § 54.643 by revising
paragraph (a)(6)(iv) introductory text to
read as follows:
■
§ 54.643
Funding commitments.
(a) * * *
(6) * * *
(iv) Sustainability plans for applicants
requesting support for long-term capital
expenses: Consortia that seek funding to
construct and own their own facilities
or obtain indefeasible right of use or
finance lease interests are required to
submit a sustainability plan with their
funding requests demonstrating how
they intend to maintain and operate the
facilities that are supported over the
relevant time period. Applicants may
incorporate by reference other portions
of their applications (e.g., project
management plan, budget). The
sustainability plan must, at a minimum,
address the following points:
*
*
*
*
*
E:\FR\FM\19FER1.SGM
19FER1
Federal Register / Vol. 84, No. 33 / Tuesday, February 19, 2019 / Rules and Regulations
21. Amend § 54.901 by removing and
reserving paragraph (f)(2) and revising
paragraph (f)(3).
The revision reads as follows:
■
§ 54.901 Calculation of Connect America
Fund Broadband Loop Support.
*
*
*
*
*
(f) * * *
(3) The Administrator shall apply a
pro rata reduction to CAF BLS for each
recipient of CAF BLS as necessary to
achieve the target amount.
*
*
*
*
*
■ 22. Amend § 54.903 by revising the
first sentence of paragraph (a)(1) to read
as follows:
§ 54.903 Obligations of rate-of-return
carriers and the Administrator.
(a) * * *
(1) Each rate-of-return carrier shall
submit to the Administrator on March
31 of each year the number of lines it
served as of the prior December 31,
within each rate-of-return carrier study
area showing residential and single-line
business line counts, multi-line
business line counts, and consumer
broadband-only line counts separately.
* * *
*
*
*
*
*
■ 23. Amend § 54.1310 by revising
paragraph (d)(2) to read as follows:
§ 54.1310
Expense adjustment.
*
*
*
*
*
(d) * * *
(2) Each January 1 and July 1, the
Administrator shall apply a pro rata
reduction to High Cost Loop Support for
each recipient of High Cost Loop
Support as necessary to achieve the
target amount.
*
*
*
*
*
PART 65—INTERSTATE RATE OF
RETURN PRESCRIPTION,
PROCEDURES, AND
METHODOLOGIES
24. The authority citation for part 65
continues to read as follow:
■
Authority: 47 U.S.C. 151, 154(i), 155, 201,
205, 214, 219, 220, 254, 303(r), 403, and 1302
unless otherwise noted.
25. Amend § 65.450 by revising
paragraph (b)(1) to read as follows:
■
§ 65.450
Net income.
tkelley on DSKBCP9HB2PROD with RULES
*
*
*
*
*
(b) * * *
(1) Gains related to property sold to
others and leased back under finance
leases for use in telecommunications
services shall be recorded in Account
4300, Other long-term liabilities and
deferred credits, and credited to
Account 6563, Amortization expense—
VerDate Sep<11>2014
17:01 Feb 15, 2019
Jkt 247001
tangible, over the amortization period
established for the finance lease;
*
*
*
*
*
4733
[FR Doc. 2019–01827 Filed 2–15–19; 8:45 am]
an environmental assessment, a fishery
impact statement, a regulatory impact
review, and a Regulatory Flexibility Act
(RFA) analysis.
BILLING CODE 6712–01–P
FOR FURTHER INFORMATION CONTACT:
DEPARTMENT OF COMMERCE
Karla Gore, NMFS Southeast Regional
Office, telephone: 727–551–5753, or
email: karla.gore@noaa.gov.
National Oceanic and Atmospheric
Administration
50 CFR Parts 600, 622, 697
[Docket No. 181009921–8999–02]
RIN 0648–BI46
Fisheries of the Caribbean, Gulf of
Mexico, and South Atlantic; Coastal
Migratory Pelagics Resources in the
Gulf of Mexico and Atlantic Region;
Amendment 31
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Final rule.
AGENCY:
NMFS issued regulations to
implement management measures
described in Amendment 31 to the
Fishery Management Plan (FMP) for
Coastal Migratory Pelagics (CMP) of the
Gulf of Mexico (Gulf) and Atlantic
Region (Amendment 31), as prepared by
the Gulf of Mexico (Gulf Council) and
South Atlantic Fishery Management
Councils (South Atlantic Council)
(Councils). This final rule removes
Atlantic migratory group cobia (Atlantic
cobia) from Federal management under
the Magnuson-Stevens Fishery
Conservation and Management Act
(Magnuson-Stevens Act). At the same
time, this final rule implements
comparable regulations under the
Atlantic Coastal Fisheries Cooperative
Management Act (Atlantic Coastal Act)
to replace the existing MagnusonStevens Act based regulations in
Atlantic Federal waters. The purpose of
Amendment 31 is to facilitate improved
coordination of Atlantic cobia in state
and Federal waters, thereby more
effectively constraining harvest and
preventing overfishing and decreasing
adverse socio-economic effects to
fishermen.
SUMMARY:
This final rule is effective March
21, 2019.
ADDRESSES: Electronic copies
Amendment 31 may be obtained from
the Southeast Regional Office website at
https://www.fisheries.noaa.gov/action/
coastal-migratory-pelagics-amendment31-management-atlantic-migratorygroup-cobia. Amendment 31 includes
DATES:
PO 00000
Frm 00057
Fmt 4700
Sfmt 4700
The
coastal migratory pelagics fishery in the
Atlantic region is managed under the
FMP and includes cobia, along with
king and Spanish mackerel. The FMP
was prepared by the Councils and is
implemented by NMFS through
regulations at 50 CFR part 622 under
authority of the Magnuson-Stevens Act.
On October 11, 2018, NMFS
published a notice of availability for
Amendment 31 and requested public
comment (83 FR 51424). On November
9, 2018, NMFS published a proposed
rule for Amendment 31 and requested
public comment (83 FR 56039). The
proposed rule and Amendment 31
outline the rationale for the actions
contained in this final rule. A summary
of the management measures described
in Amendment 31 and implemented by
this final rule is provided below.
SUPPLEMENTARY INFORMATION:
Background
Through the CMP FMP, cobia is
managed in two distinct migratory
groups. The first is the Gulf migratory
group of cobia that ranges both in the
Gulf from Texas through Florida as well
as in the Atlantic off the east coast of
Florida (Gulf cobia). The second is the
Atlantic migratory group of cobia that is
managed from Georgia through New
York (Atlantic cobia). The boundary
between these two migratory groups is
the Georgia-Florida state boundary. Both
the Gulf and the Atlantic migratory
groups of cobia were assessed through
SEDAR 28 in 2013 and neither stock
was determined to be overfished or
experiencing overfishing.
The majority of Atlantic cobia
landings occur in state waters and,
despite closures in Federal water in
recent years, recreational landings have
exceeded the recreational annual catch
limit (ACL) and the combined stock
ACL. This has resulted in shortened
fishing seasons, which have been
ineffective at constraining harvest.
Following overages of the recreational
and combined stock ACLs in 2015 and
2016, Federal waters closures for
recreational harvest occurred in both
2016 (June 20) and 2017 (January 24).
Additionally, Federal waters were
closed to commercial harvest of Atlantic
cobia in 2016 (December 5) and 2017
(September 4), because the commercial
E:\FR\FM\19FER1.SGM
19FER1
Agencies
[Federal Register Volume 84, Number 33 (Tuesday, February 19, 2019)]
[Rules and Regulations]
[Pages 4711-4733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01827]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 32, 54, and 65
[WC Docket Nos. 10-90, 14-58, 07-135, CC Docket No. 01-92; FCC 18-176]
Connect America Fund, ETC Annual Reports and Certifications,
Establishing Just and Reasonable Rates for Local Exchange Carriers,
Developing a Unified Intercarrier Compensation Regime
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) continues its efforts to bridge the digital divide. The
Commission addresses the challenges that rate-of-return carriers face
by taking steps to promote broadband deployment, ensure the efficient
use of resources, and provide sufficient and predictable support
necessary to increase broadband deployment. The Commission also denies
three petitions seeking reconsideration of its decision directing the
Wireline Competition Bureau (Bureau) to offer additional support up to
$146.10 per-location to all carriers that accepted the revised offers
of model-based support.
DATES: Effective March 21, 2019, except for the amendments to
Sec. Sec. 54.313 and 54.316, which contain information collection
requirements that have not been approved by OMB--the FCC will publish a
document in the Federal Register announcing the effective date of those
amendments awaiting OMB approval--and except for the amendments to
Sec. Sec. 32.1410, 32.2680, 32.2681, 32.2682, 32.3400, 32.3410,
32.4130, 32.4200, 32.4300, 32.7500, 54.643, and 65.450, which are
effective January 1, 2020.
FOR FURTHER INFORMATION CONTACT: Suzanne Yelen, Wireline Competition
Bureau, (202) 418-7400 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order and Order on Reconsideration in WC Docket Nos. 10-90, 14-58,
07-135, CC Docket No. 01-92; FCC 18-176, adopted on December 12, 2018
and released on December 13, 2018. 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://docs.fcc.gov/public/attachments/FCC-18-176A1.pdf. The Further Notice of Proposed
Rulemaking (FNPRM) that was adopted concurrently with the Report and
Order and Order on Reconsideration will be published elsewhere in this
issue of the Federal Register.
I. Introduction
1. In the Report and Order, the Commission continues its efforts to
bridge the digital divide. According to the Commission's most recently
available data, about 30% of rural Americans lack access to fixed,
terrestrial high-speed internet of at least 25 Mbps download/3 Mbps
upload (25/3 Mbps), the Commission's current speed benchmark, which
reflects consumer demand for high-speed broadband services. In urban
areas, that number is 2%. The gap between broadband access in rural and
urban areas is unacceptable. The Commission must do better. The
Commission has made progress in bringing broadband service to rural
Americans living in areas served by our nation's largest
telecommunications companies, and will realize additional gains as the
winners of the Connect America Fund (CAF) Phase II auction begin to
deploy 25/3 Mbps or higher speed service to approximately 713,176
locations. But the rules governing smaller, community-based providers--
rate-of-return carriers--have not kept pace, making it more difficult
for these carriers to bring 25/3 Mbps service to rural America. The
Report and Order addresses the challenges that rate-of-return carriers
face by taking steps to promote broadband deployment, ensure the
efficient use of resources, and provide sufficient and predictable
support necessary to increase broadband deployment.
2. By improving access to modern communications services, the
Commission can help provide individuals living in rural America with
the same opportunities that those in urban areas enjoy. Broadband
access is critical to economic opportunity, job creation, education,
and civic engagement. And as important as these benefits are in
America's cities, they can be even more important in America's more
remote small towns and rural and insular areas. Rural Americans deserve
to reap the same benefits of the internet--and not run the risk of
falling yet further behind.
3. The Report and Order marks a significant next step in closing
the digital divide. The Commission recognizes that access to 25/3 Mbps
broadband service is not a luxury for urban areas, but important to
Americans wherever they live. To that end, the Commission adopts
additional measures toward its goal of expanding the availability of
affordable broadband service to rural America. First, the Commission
makes another model offer to those rate-of-return carriers currently
receiving Alternative Connect America Cost Model (A-CAM) support for
additional funding if they commit to building out to additional
locations at speeds of 25/3 Mbps. Second, the Commission makes a new
model offer to those on legacy support in return for specifically
tailored obligations to build out broadband networks providing speeds
of 25/3 Mbps. Third, for those rate-of-return carriers remaining on
legacy support that do not take the new model offer, the Commission
adopts a new budget based on uncapped 2018 claims that will be
increased by inflation annually, as well as new deployment obligations
that require speeds of 25/3 Mbps rather than 10/1 Mbps. Fourth, the
Commission adopts measures to mitigate the regulatory burden on
providers and encourage the
[[Page 4712]]
efficient use of universal service support.
4. In the Order on Reconsideration, the Commission denies three
petitions seeking reconsideration of the Commission's decision
directing the Bureau to offer additional support up to $146.10 per-
location to all carriers that accepted the revised offers of model-
based support.
I. Report and Order
5. To promote additional broadband deployment in areas served by
existing A-CAM carriers, the Commission initiates a new set of revised
model offers which would provide support up to $200 per month, per
location. These revised offers, in effect, fund the initial offers
extended by the Bureau on August 3, 2016, before those offers were
reduced for budgetary reasons. To ensure these revised offers are in
the public interest, the Commission conditions them on increased
deployment obligations. These increased deployment obligations will
further advance the Commission's goal of widespread availability of 25/
3 Mbps service throughout the nation.
6. Discussion. The Commission authorizes additional support up to
$200 per location to all carriers that are currently authorized to
receive A-CAM support. Increasing support immediately will result in
substantial additional broadband deployment, while balancing overall
budgetary constraints. This increase does not affect funding available
to those carriers on legacy support.
7. The record uniformly supports increasing the funding cap for A-
CAM to $200, as long as doing so does not adversely affect carriers
receiving legacy support. With additional funding, parties have made
clear the economic, educational, and healthcare benefits that will
directly follow.
8. Consistent with the Commission's goal of realizing widespread
deployment of 25/3 Mbps service, it increases the deployment
obligations associated with this revised offer. In adopting the speed
obligations in the 2016 Rate-of-Return Reform Order, 81 FR 24282, April
25, 2016, the Commission noted that ``our minimum requirements for
rate-of-return carriers will likely evolve over the next decade.'' The
Commission acknowledged, in particular, NTCA's argument that ``a
universal service program premised on achieving speeds of 10/1 Mbps
risks locking rural America into lower service levels.'' Although the
Commission agreed that ``our policies should take into account evolving
standards in the future,'' it required carriers electing A-CAM to
deploy 25/3 Mbps service to only a fraction of their fully funded
eligible locations. The Commission's recent experience with the CAF
Phase II auction, which resulted in more than 99.7% of new locations
being served by 25/3 Mbps service, affirms its conclusion that a higher
standard of service is achievable.
9. Therefore, the Commission increases the 25/3 Mbps deployment
obligations associated with the revised offer. Carriers receiving A-CAM
under the existing offers must deploy 25/3 Mbps service to a number of
eligible locations equal to at least 25%, 50%, or 75% of the number of
fully funded locations, depending on the density of the population in
the carrier's service territory. The Commission increases the 25/3 Mbps
service requirement to 50% of fully funded locations for low density
carriers, 65% of fully funded locations for medium density carriers,
and 85% of fully funded locations for high density carriers consistent
with ITTA's proposal. ITTA's proposal assumes that carriers will devote
the additional support from the revised offer entirely to capital
expenses associated with the deployment of new broadband, and estimates
the number of locations that carriers in each band would, on average,
be able to reach with 25/3 Mbps service as a result. The Commission
finds that ITTA's proposal provides a reasonable estimate of how many
additional locations a carrier could be expected to serve with 25/3
Mbps service and ensure that all new fully funded locations based on
this offer will receive 25/3 Mbps service.
10. The Commission notes that the revised offer will be made
available to all carriers that accepted the first A-CAM offer,
including those carriers whose offer of model-based support is less
than their legacy support (referred to as glide path carriers).
Although this will not provide any additional support to glide path
carriers during the eight remaining years of the original
authorization, it would provide an opportunity for the glide path
carriers to receive an additional two years of A-CAM support, through
the end of the term of this revised offer, in consideration for
additional obligations to deploy 25/3 Mbps service. Glide path carriers
currently receive approximately $51 million per year in A-CAM support
(excluding transitional support) and would be required to deploy 25/3
Mbps service to over 8,300 additional eligible locations if all
companies accepted.
11. If all eligible carriers accept the revised offer, this
deployment obligation would increase the number of locations to which
carriers would be required to offer 25/3 Mbps service by more than
100,000 locations. This exceeds the more than 39,000 partially funded
locations, currently required to be served with 4/1 Mbps or only upon
reasonable request, that would be fully funded and would be required to
be served by at least 10/1 Mbps service. The Commission further notes
that the number of locations subject to the reasonable request standard
would be reduced by more than 26,000. The Commission finds that these
higher deployment obligations justify the potential $67 million per
year cost of funding to the $200 per location cap.
12. In the absence of the increased deployment obligations, the
Commission does not believe a revised offer for the existing A-CAM
carriers with a $200 per-location funding cap would provide a
sufficient value for its limited universal service resources. Absent
the higher deployment obligations, in contrast to the increased
deployment figures noted above, the revised offer could increase the
number of locations that would receive 25/3 Mbps over the course of the
support term by only 17,800, with only another 21,678 locations
receiving 10/1 Mbps (while still reducing the number of locations
subject to provision of broadband service only on reasonable request by
more the 26,000). Given a $67 million per year price tag, the
Commission does not believe that this result, without more, achieves
sufficient ``bang for the buck.''
13. The Commission declines to adopt ITTA's request to count
existing locations towards the deployment obligations of existing A-CAM
carriers. Specifically, ITTA proposes that a carrier should be
permitted to satisfy its deployment obligations by providing service to
locations that were ineligible in the original offer because they were
in census blocks in which the carrier or its affiliate already served
with fiber-to-the-premises or cable facilities. The Commission does not
believe this modification would be in the public interest. In most
cases, the otherwise eligible locations that were excluded because they
were already served by the carrier with fiber-to-the-premises or cable
facilities are likely to be relatively less costly to serve than other
eligible locations. As a result, ITTA's proposal would allow A-CAM
carriers to meet their deployment obligations by serving locations that
are, in many cases, far less costly to serve than the ones on which
their A-CAM support offers were calculated. Further, by definition,
some of these locations are already served by fiber-to-the-premises or
cable technology, so making these areas
[[Page 4713]]
eligible for deployment would limit the amount of deployment to
additional unserved locations. Finally, the Commission notes that this
approach would make it much more difficult for the Commission to
monitor and verify whether any built out locations are actually new.
14. The Commission declines to adopt Gila River's proposal to apply
a Tribal Broadband Factor, as it does with the new model offer, in the
following, to existing A-CAM recipients. In the new model offer, the
Commission includes a Tribal Broadband Factor to reflect that the
assumptions made about the amount of end-user revenues in the model may
not be reasonable for Tribal lands. When the existing A-CAM carriers
accepted the model offer, they implicitly accepted that the end-user
revenue assumptions were sufficiently reasonable for them to meet the
deployment obligations associated with the model offer. Accordingly,
the Commission does not believe that existing A-CAM carriers require
the adjustment that it adopts for the new model offer.
15. To provide carriers accepting this revised A-CAM offer
sufficient time to meet the increased deployment obligations, the
Commission adopts a modified term of support and deployment milestones
for those carriers. The term of the revised offer will be ten years,
beginning January 1, 2019, and running until December 31, 2028.
Effectively, this revised term extends A-CAM by two years for carriers
that elect this revised offer. Carriers electing this revised offer
will be obligated to meet the deployment milestones to which they
previously agreed with respect to 10/1 Mbps service. In addition, they
will be required to meet similar milestones to deploy 25/3 Mbps service
to the required number of eligible locations on a ten-year schedule
beginning January 1, 2019. In other words, each carrier will be
required to serve at least 40% of the requisite number of eligible
locations by end of the 2022, 50% by the end of 2023, 60% by the end of
2024, 70% by the end of 2025, 80% by the end of 2026, 90% by the end of
2027, and 100% by the end of 2028.
16. The Commission directs the Bureau to release a public notice
announcing the revised model-based support amounts and corresponding
deployment obligations and providing carriers that have previously been
authorized to receive A-CAM support with 30 days to confirm that they
will accept the revised offer. Any such election shall be irrevocable.
USAC shall begin disbursing this revised model support the month
following a Bureau public notice authorizing those carriers that accept
this revised offer.
17. The Commission extends a new model offer, or A-CAM II, to
legacy rate-of-return carriers that did not previously elect model
support or support pursuant to the Alaska Plan. This offer will re-open
a voluntary path for legacy rate-of-return carriers to receive model-
based support in exchange for deploying broadband-capable networks to a
predetermined number of eligible locations. Expanding the number of
carriers receiving model-based support will advance the Commission's
longstanding objective to provide high-cost support based on a
carrier's forward-looking, efficient costs and will help spur
additional broadband deployment in rural areas. As described in the
following, this new model offer retains many elements of the original
A-CAM offer but makes several critical adjustments to encourage new
carriers to take advantage of model-based support and accelerate
deployment of broadband networks.
18. Discussion. The Commission adopts a new model offer, A-CAM II,
as described in detail in the following. This new model offer of up to
$200 per location will be available to all existing legacy carriers,
including those previously excluded because they had deployed 10/1 Mbps
service to more than 90% of eligible locations. The new model offer
will include a Tribal Broadband Factor, rely on broadband coverage data
from the most recent FCC Form 477 (which the Commission anticipates
will be data as of December 2017), and include census blocks where the
carrier or its affiliates have deployed fiber-to-the-premises or cable.
It will exclude census blocks served by an unsubsidized competitor only
when the competitor offers voice and 25/3 Mbps or faster broadband
service. In addition to the deployment requirements previously required
of A-CAM recipients, carriers accepting the new model offer will be
required to deploy 25/3 Mbps service to a number of locations equal to
the number of eligible fully funded locations in their service area.
The new model offer will be fully funded up to the $200 per-location
cap, and it will not affect the budget for rate-of-return carriers
remaining on legacy support. To the extent the Report and Order is
silent regarding the terms and conditions of the new model offer, the
Commission adopts the terms of the original A-CAM offer.
19. While a few commenters unconditionally supported a new model
offer to all legacy carriers, many commenters supported the broader new
model offer only on the condition that the Commission address the
budgetary concerns of carriers remaining on legacy support. Because the
new model offer has no impact on funds available for rate-of-return
carriers receiving legacy support, the Commission believes they have
satisfied the primary concerns of these parties.
20. The Commission also is not persuaded by the Broadband
Alliance's argument that any new model offer should be deferred until
the Commission has gathered evidence about the efficacy of the existing
A-CAM program as compared to legacy support. The Broadband Alliance
suggests that legacy support may possibly be more effective because its
members have ``already deployed [fiber-to-the-home] to 70 percent of
their network, on average,'' but that model-based companies ``will not
reach'' that same milestone until 2024. However, the Broadband Alliance
contradictorily argues that whether legacy support or A-CAM offers
better results cannot be empirically known for a number of years. In
any event, the Commission disagrees with their argument. First, the
Commission notes that Broadband Alliance ignores the difference between
eligible locations (on which A-CAM recipients' deployment obligations
are based) and all locations (on which Broadband Alliance's deployment
percentage is based). Second, the Broadband Alliance seems to assume
that A-CAM carriers will not deploy service before they are required to
do so, but deployment submissions to the High Cost Universal Broadband
(HUBB) portal show that there are A-CAM carriers deploying at faster
rates than required by the Commission's rules. Further, the fixed
amount of model-based support guaranteed to the carriers provides
enormous benefits to carriers in planning capital spending, allowing
them to deploy broadband to areas they would not have otherwise
deployed than if they needed to base decisions on varying levels of
legacy-based support.
21. $200 per-location funding cap. Consistent with the original A-
CAM offer and with the new offer to existing A-CAM carriers described
in this document, the Commission sets the per-location cap at $200. The
Commission does not limit the amount of support available through this
offer and does not adopt any provision to reduce the funding cap based
on the amount of support resulting from carrier elections of this
offer. Most commenters supported funding the new model offer up to a
$200 per-location cap, rather than the proposed $146.10 per-location
cap.
[[Page 4714]]
22. The Commission declines to make further adjustments to the per-
location funding cap. Specifically, the Commission rejects WISPA's
request to reduce significantly the per-location cap to account for
changes in technologies and business models that reflect that not all
deployments are fiber. While WISPA advocates for an ad hoc change in
the way cost estimates are used to calculate support, the rationale for
WISPA's proposal implies a major reconsideration in the model's
methodology for estimating the costs of deployment. The Commission
specified the use of a wireline network architecture to estimate model
costs in the USF/ICC Transformation Order, 76 FR 73830, November 29,
2011, and rejected arguments that the model should also estimate
wireless costs. Moreover, there is no evidence in the record to support
how to construct a model based on the costs of deploying broadband with
wireless technologies. Without a rigorous method of estimating the
alternative costs of serving specific areas, considering their specific
topography and other characteristics, the Commission cannot determine
whether WISPA's suggested cost savings would even be achievable for any
particular carrier. For example, the cost savings may be associated
disproportionately with locations that are above the funding threshold
by a relatively small amount. In that case, lowering the funding cap
would have no effect on locations that could be cost-effectively served
with wireless technologies, while reducing funding for model locations
that could not be.
23. Carriers Eligible for New Model Offer. The new model offer will
be extended to all carriers that currently receive legacy support,
i.e., CAF BLS and HCLS, and do not receive A-CAM or Alaska Plan
support. Expanding the number of carriers receiving model-based support
will advance the Commission's longstanding objective to provide high-
cost support based on forward-looking efficient costs to help spur
additional broadband deployment in rural areas. Model-based support,
backed by significant, verifiable deployment obligations, provides the
appropriate incentives for carriers to serve their rural and high-cost
communities efficiently with modern broadband networks. For that
reason, the Commission believes it is in the public interest to make
the new model offer available to all carriers, including those that
were not previously eligible. The Commission discusses some notable
elements of this broad eligibility.
24. First, the Commission will extend the offer to carriers that
have reported deploying 10/1 Mbps service to more than 90% of eligible
locations. All commenters addressing this question support this
approach. The Commission recognizes that the high-cost of maintaining
networks in rural America means that the deployment of 10/1 Mbps does
not end the need for high-cost support. Further, the model is an
appropriate tool for determining high-cost support even when a carrier
has fully deployed broadband service. The model's cost module, which
calculates the cost of deploying and maintaining the network, estimates
the static, life cycle cost of a network fully deploying fiber-to-the-
premises, and does not distinguish between carriers that have already
deployed broadband and those that have not. As such, the model
appropriately estimates the forward-looking costs of a carrier that is
maintaining a broadband network and replacing its depreciated assets.
Finally, because the Commission's deployment obligations require
significant deployment of 25/3 Mbps service, it is likely that A-CAM II
support will, in fact, spur deployment of higher speeds, even for
carriers that were previously excluded due to their reported 10/1 Mbps
deployment. The Commission therefore finds that it is appropriate to
extend the model offer to all rate-of-return carriers receiving legacy
support, regardless of the existing deployment.
25. Second, the Commission extends the offer of support to all
legacy carriers, even those that would receive more annual support from
the model than under legacy rate-of-return support mechanisms. The
model and its associated deployment obligations provide effective
incentives for efficient and widespread deployment of high-quality, 25/
3 Mbps broadband service. If the model indicates that a carrier should
receive additional support, then that suggests the carrier may require
additional support to deploy or maintain its broadband network. And the
Commission believes that providing the long-term funding certainty to
such carriers, along with verifiable deployment obligations, outweighs
the additional costs to the Fund. Although some commenters would prefer
to limit the new model offer to carriers willing to accept lower
payments than they have historically received, they rely on the
rationale that doing so would enable the Commission to provide
additional funding to other legacy and A-CAM carriers. As the
Commission explains in the following, it delinks the legacy budget from
the model budgets, ensuring that its decisions here do not impact those
carriers that remain on legacy support mechanisms.
26. The Commission declines to adopt Shawnee and Moultrie's
proposal to limit the loss of support for each glide path carrier to a
specified percentage of its current legacy support, essentially setting
carrier-specific funding caps. Under Shawnee and Moultrie's proposal,
some carriers could have funding caps well in excess of $200 per
location, by virtue of their current high levels of legacy support. The
Commission does not believe, at this time, that using model-based
support to fund those very high cost locations is an effective use of
universal service resources.
27. Third, the Commission declines to exclude carriers from
eligibility for the new model offer if the offer would include no fully
funded locations. In other words, a carrier may elect the offer even if
it would be required to deploy only 4/1 Mbps or on reasonable request.
The Commission notes, however, that new model offers meeting this
criterion would represent a very small number of carriers and very
little support; moreover, these carriers can always exceed the minimum
obligation.
28. Revising Model Parameters. The Commission adopts revised model
parameters for the purpose of extending the new model offer. The
revised parameters will encourage carriers to take advantage of model-
based support.
29. First, for reasons similar to those for which the Commission
permits carriers with more than 90% deployment to participate, it finds
that the new model offer should include census blocks where fiber-to-
the-premises or cable has already been deployed by the incumbent or its
affiliate. ITTA, WTA, and USTelecom support this modification, and no
commenter opposed it. Including census blocks which already have some
fiber-to-the-premises will promote more and higher speed deployment to
locations in those census blocks that do not currently have 25/3 Mbps
or better service. Moreover, the Commission has previously recognized
that areas with partially or fully-deployed fiber-to-the-premises may
still require high-cost support to maintain existing service. The cost
module of the model does not distinguish between those areas that have
or have not had 25/3 Mbps service, and the model fairly estimates the
costs of providing service even if that service has already been
deployed.
30. Second, the Commission adjusts the model so that it excludes
locations presumed to be served by unsubsidized competitors only when
the
[[Page 4715]]
unsubsidized competitor provides voice and at least 25/3 Mbps service.
Previously, the model excluded areas served by unsubsidized competitors
only if they provided voice and 10/1 Mbps or faster service. Based on
the Commission's recent experience with the CAF Phase II auction, it
believes that a higher standard of service is achievable. Given the
Commission's commitment to using model-based support to achieve
widespread deployment of 25/3 Mbps service, the Commission finds it
necessary to exclude locations from eligibility only when a competitor
provides a comparable level of service. NTCA, in particular, has
emphasized the need for deployment of networks capable of providing 25/
3 Mbps or greater service throughout rural areas. Simultaneously asking
carriers to deploy 25/3 Mbps service while excluding from eligibility
locations served by competitors with inferior service would consign
many more rural locations to lower quality service for at least the
term of the new model offer.
31. The Commission is not persuaded by WISPA's arguments that the
model should exclude locations presumed to be served by unsubsidized
competitors when the unsubsidized competitor provides at least 10/1
Mbps, rather than 25/3 Mbps. WISPA argues that there is ``inherent
inequity'' in providing A-CAM II support to rate-of-return carriers in
areas where they provide 10/1 Mbps but excluding areas from A-CAM II
only if an unsubsidized competitor provides 25/3 Mbps. The Commission
finds no such inconsistency in these model parameters. Rate-of-return
carriers that have already deployed 10/1 Mbps currently receive high-
cost support pursuant to legacy mechanisms and likely require support
in areas where the model indicates their forward-looking costs exceed
their reasonable end-user revenues. Providing A-CAM II model-based
support that requires them to widely deploy 25/3 Mbps service is not
inconsistent with the separate consideration that A-CAM II support is
not required in areas where an unsubsidized competitor already provides
25/3 Mbps service.
32. WISPA further argues that the Commission's universal service
resources would be better used if A-CAM II excluded areas where an
unsubsidized competitor provides service of at least 10/1 Mbps because
that unsubsidized competitor may provide 25/3 Mbps service at a future
date or because the current service may be closer to 25/3 Mbps than 10/
1 Mbps. To create a functional model offer the Commission must have a
brightline threshold for whether an unsubsidized competitor's service
is sufficient to make an area ineligible for A-CAM II support. WISPA's
proposal to address hypothetical future unsubsidized services, or
services that do not meet the threshold, would effectively lower the
threshold. The Commission concludes that reducing the threshold does
not appropriately drive deployment of the 25/3 Mbps service that is the
new service standard.
33. Finally, WISPA notes that the 25/3 Mbps unsubsidized competitor
standard harms service providers that have invested in reliance on
``the Commission's representations that the establishment of 10/1 Mbps
service would be sufficient to avoid government-funded subsidies
flowing to competitors.'' WISPA does not cite with specificity any such
representations, and the Commission finds that such reliance would be
misplaced in any event. Congress explicitly defined universal service
as ``an evolving level of telecommunications services . . . taking into
account advances in telecommunications and information technologies and
services.'' The Commission has previously stated that broadband speeds
would be subject to an evolving standard, which indicates that higher
speed thresholds would likely be established at a later time. Indeed,
the Commission first determined that advanced telecommunications
capability required 25/3 Mbps in 2015. Further, the areas subject to
the new model offer currently receive high-cost support from legacy
mechanisms that support rate-of-return carriers without regard to
whether a competitor provides 10/1 service, except in the rare case
where a competitive provider has completely overbuilt the incumbent
provider.
34. Third, the Commission modifies the model by updating the
broadband coverage data with the most recent publicly available FCC
Form 477 data (which the Commission anticipates will be data as of
December 2017) prior to any additional offer of support. This broadband
coverage data is used to determine which census blocks are served by
unsubsidized competitors providing 25/3 Mbps broadband service, so that
universal service resources can be effectively targeted to areas that
require high-cost support. NCTA and WISPA support the use of FCC Form
477 data to identify areas of competitive overlap. Relying on the
certified FCC Form 477 data will permit us to avoid a time-consuming
and administratively burdensome challenge process. In the challenge
process for the first A-CAM offer, the Bureau granted only 61
challenges of the more than 250 requests to change A-CAM coverage. Even
that low success rate may overstate the consequences of the granted
challenges because those particular census blocks still would not be
considered ``unserved'' if there were other unsubsidized providers
reporting service in those census blocks. Further, given the
Commission's decision to adjust the model so that it will only exclude
locations presumed to be served by unsubsidized competitors providing
at least 25/3 Mbps service, the Commission believes that even fewer
locations will be excluded based on competitive overlap, and many fewer
will be linked to the type of false positives that the challenge
process is intended to address.
35. The Commission's reliance on FCC Form 477 data is consistent
with the process the Commission used in the Connect America Phase II
auction proceeding. There, the Commission found that FCC Form 477 data
superseded the results of the prior Connect America Phase II model
support proceeding. The Commission further did not require the Bureau
``to entertain challenges from parties seeking to establish that a
block reported as served on a certified FCC Form 477 . . . is
unserved.'' In other words, the Connect America Phase II auction
proceeding did not permit the type of challenges at issue here. In
declining to permit such challenges, the Commission found that the
Phase II model support process ``was very time-consuming and
administratively burdensome for all involved.'' The Commission
specifically found that it is ``difficult for the incumbent provider to
prove a negative--that a competitor is not serving an area. . . .''
This burden of proving a negative is precisely the burden that possible
electors of a new model offer would carry in their challenge process.
36. Several commenters argue in favor of retaining a challenge
process. Although a challenge process might make some modest
improvement to the quality of the data, the Commission remains
unconvinced that the challenge process represents a significant
improvement over the FCC Form 477 data, such that the benefits of the
improved data would outweigh the significant administrative burdens of
conducting a challenge process.
37. The Blooston Rural Carriers (Blooston), while conceding that
the challenge process is administratively burdensome and that only 20%
were granted in the past, argue that the ``volume of [challenges] . . .
clearly
[[Page 4716]]
demonstrates the inaccuracy of [the 477] data.'' Blooston does not
explain why the absolute number of challenges is more relevant than the
low success rate of the challenges, nor does it try to quantify in any
way the supposed benefit of the challenge process. Blooston further
cites two Mobility Fund proceedings in which the Commission did not
rely on FCC Form 477 data to suggest the ``importance of a bona fide
challenge process used in connection with Form 477 data.'' The
Commission does not find the two Mobility Fund proceedings cited by
Blooston informative here. The Mobility Fund Phase I process did not
rely on FCC Form 477 data (which did not collect the relevant broadband
deployment information at that time), and instead used commercially
available data to preliminarily identify eligible areas. In the
Mobility Fund Phase II proceeding, the Commission ultimately decided to
adopt an industry consensus proposal to perform a one-time data
collection very specifically tailored to identify qualified 4G LTE
coverage for the purposes of Mobility Fund II. Identifying qualified 4G
LTE coverage is a significantly more complex issue than determining
whether qualified broadband service is offered in a census block, and
there is no industry consensus surrounding an alternative data
collection process in this proceeding. Neither case provides any useful
data regarding the benefits or burdens of a challenge process for the
FCC Form 477 data. Similarly, to demonstrate the supposed inadequacies
of FCC Form 477 data, TCA points to the Commission's review of study
areas receiving legacy high-cost support to identify study areas 100%
overlapped by unsubsidized competitors but that proceeding uses a much
higher standard for competitive coverage than is used to determine A-
CAM eligibility.
38. WTA and Granite State support the use of a challenge process,
but specifically do so as a means of setting a higher standard for when
a census block would be deemed ineligible for the new model offer. WTA
argues specifically that the challenge process should be based on the
``actual availability'' of service ``throughout the census block.''
Granite State argues in favor of ``a challenge process similar to the
one adopted for the 100 percent overlap and rate-of-return challenge
process where the competitor has the burden of proof.'' The Commission
declines to adopt their proposals. Neither proposal includes sufficient
detail to determine how the challenge process would work in the model
offer context. Moreover, both proposals would appear to make locations
eligible for model support even if they are served by unsubsidized
competitors providing comparable service, on the grounds that the
unsubsidized competitors do not provide service throughout the census
block. Providing model support for such locations would be inconsistent
with the Commission's policy, adopted in the USF/ICC Transformation
Order, to condition Connect America Fund broadband obligations on not
spending the funds in areas already served by an unsubsidized
competitor.
39. Finally, to address the unique challenges of deploying high-
speed broadband to rural Tribal communities, the Commission
incorporates a Tribal Broadband Factor into the model. Specifically, A-
CAM incorporates nationwide assumptions about take rates and potential
average revenues per subscriber to estimate a reasonable amount of end-
user revenues per location that form the basis of the $52.50 per
location funding threshold. Those assumptions may be unrealistic given
the ``high concentration of low-income individuals [and] few business
subscribers'' in many rural, Tribal areas. By reducing the funding
threshold by 25% for locations in Indian country--in other words, by
setting a high-cost funding benchmark of $39.38 on Tribal lands--the
revised model directly addresses the lower expected end-user revenues
in rural, Tribal areas and by improving the business case will spur
further broadband deployment there. The Commission believes that 25% is
a reasonable approximation of the additional funding needed in Tribal
areas. Because A-CAM support is calculated at the census block level,
the Tribal Broadband Factor will efficiently target support to carriers
that serve significant Tribal lands, as well as those carriers that
serve only a minimal amount of Tribal lands or a small number of
housing units on Tribal lands in their study area. For the purpose of
this revised parameter, the Commission adopts the definition of
``Tribal lands'' that was used in the USF/ICC Transformation Order and
later modified in the 2015 Lifeline Reform Order, 80 FR 40923, July 14,
2015. Several commenters support this revised parameter.
40. To fully effectuate this Tribal Broadband Factor, the
Commission also raises the funding cap for Tribal lands to $213.12 per
location to reflect the additional funding arising from the lower
threshold. The Commission notes that this approach is consistent with
Sacred Wind's proposal to adopt another tier of model support for
carriers serving Tribal lands.
41. The Commission declines to adopt alternatives to the Tribal
Broadband Factor proposed by the National Tribal Telecommunications
Association (NTTA) and Gila River Telecommunications, Inc. (Gila
River). Both propose a different tribal broadband factor that would be
applied to increase support (both A-CAM and legacy) provided to
carriers serving Tribal lands by 25%. Providing additional legacy
support, without any particular correlation to circumstances faced by
carriers serving Tribal lands, would not be an effective use of
universal service resources in support of broadband deployment.
Hypothetically, a carrier receiving high (but permissible) universal
service support could receive enough additional support from this
proposed factor that it could meet its revenue requirement without any
subscribers and could receive more than an additional dollar of support
for each additional dollar it spent. In contrast, the Tribal Broadband
Factor the Commission adopts here makes model-based support more
attractive for carriers serving Tribal lands by addressing a very
specific element of model support--the estimated end-user revenues.
NTTA further argues that, even with the Tribal Broadband Factor, most
carriers serving Tribal lands are estimated to receive less support
than they currently do under legacy support mechanisms. The Commission
notes that some carriers have elected to receive A-CAM despite a
reduction in support due to the stability of support and improved
incentives for efficiently offering service.
42. Term of Support. The Commission adopts a ten-year term of
support for carriers that elect the new model offer, beginning January
1, 2019. The Commission concludes carriers electing the new model offer
should have ten-year terms to maximize broadband deployment. A ten-year
term will also permit the Commission to align the deployment
obligations of those accepting the new model offer with the terms set
for the existing A-CAM carriers without adjusting the new model offer
to a shorter term. Further, beginning the new model period on January
1, 2019 will reduce the short-term burden on the Fund; an earlier date
would require the possible upfront payment of true-ups associated with
a prior start date.
43. A ten-year term for the new model offer will align the
termination of the term of the new model offer with existing A-CAM
carriers that accept the revised offer adopted above. Multiple
[[Page 4717]]
commenters supported aligning the terms of support, and none opposed
it. Carriers that decline the revised offer will have terms that end
prior to the term of the new model offer. The Commission anticipates
that it will take into account the different termination dates in a
subsequent rulemaking to determine how support will be awarded at the
end of the 10-year term and develop a plan that addresses them.
44. Transition. The Commission adopts the same three-tiered
transition process for carriers that receive less A-CAM support than
they had received under legacy support mechanisms as the Commission
used for existing A-CAM recipients. Specifically, the Commission bases
the transition payments on the percentage difference between model
support and legacy support, as described in the 2016 Rate-of-Return
Reform Order. In that Order, the Commission found that ``a tiered
transition is preferable because it recognizes the magnitude of the
difference in support for particular carriers. At the same time, the
transition is structured in a way that prevents carriers for whom
legacy support is greater than [A-CAM] support from locking in higher
amounts of support for an extended period of time.'' USTelecom and
Concerned Rural LECs support the tiered transition process.
45. Several commenters propose alternatives to the transition
payments that focus on capping reductions to a specific percentage of
current support levels. The Commission declines to adopt these
proposals. Permanently locking carriers into specified levels of
support based on the legacy mechanisms, higher than what the model
would provide, is inconsistent with the Commission's goal of moving
carriers toward more rational, efficient levels of support.
46. As in the 2016 Rate-of-Return Reform Order, if the difference
between legacy and model-based support is 10% or less, the carrier will
have a one-year transition; if greater than 10% but not more than 25%,
then the transition period will be four years; and if the difference is
greater than 25%, then the transition will occur over the full-term of
the plan, with no extra transition support only in the final year of
the term.
47. For carriers electing the new model offer, the Commission
adopts 2018 claims as the base year for calculating transitional
support. This is the most recent year for which complete data will be
available when the new model offers are likely to be released.
48. Deployment Obligations. The Commission adopts robust
obligations for carriers accepting the new model offer to deploy 25/3
Mbps to all fully funded locations. This requirement is consistent with
the Commission's goal of realizing widespread deployment of 25/3 Mbps
service throughout rural America. In adopting the speed obligations in
the 2016 Rate-of-Return Reform Order, the Commission noted that ``our
minimum requirements for rate-of-return carriers will likely evolve
over the next decade.'' The Commission acknowledged, in particular,
NTCA's argument that ``a universal service program premised on
achieving speeds of 10/1 Mbps risks locking rural America into lower
service levels.'' Although the Commission agreed that ``our policies
should take into account evolving standards in the future,'' it
required carriers electing A-CAM to deploy 25/3 Mbps service to only a
fraction of their fully funded eligible locations. The Commission's
recent experience with the CAF Phase II auction, which resulted in more
than 99.7% of new locations being served by 25/3 Mbps service, affirms
its conclusion that a higher standard of service is achievable.
Accordingly, the Commission does not adopt the same speed requirement
as are used for existing A-CAM carriers, as urged by several
commenters. The Commission instead requires carriers electing model
support to maintain voice and existing broadband service as of December
31, 2018, and to offer 25/3 Mbps or higher service to at least the
number of locations fully funded by the model by the end of the support
term.
49. Consistent with the previous A-CAM offer, the Commission also
requires carriers electing model support to offer at least 4/1 Mbps to
a defined number of locations that are not fully funded by the end of
the support term. Carriers with a density of more than 10 housing units
per square mile will be required to offer at least 4/1 Mbps to 50% of
all capped locations; and carriers with a density of 10 or fewer
housing units per square mile will be required to offer at least 4/1
Mbps to 25% of all capped locations. The remaining capped locations
will be subject to the reasonable request standard.
50. The Commission will require carriers electing the new model
offer to provide a minimum usage allowance of the higher of 170 GB per
month or one that reflects the average usage of a majority of
consumers, using Measuring Broadband America data or a similar data
source. In addition, the Commission will require carriers electing to
receive model support to certify that 95% or more of all peak period
measurements of round-trip latency are at or below 100 milliseconds.
This latency standard will apply to all locations that are fully
funded. As stated previously, the Commission ``recognize[s] there may
be need for relaxed standards in areas that are not fully funded, where
carriers may use alternative technologies to meet their public interest
obligations.'' Therefore, the Commission adopts the high-latency metric
used in the CAF Phase II auction proceeding for any capped locations
served by a non-terrestrial technology. Under the high-latency
standard, carriers are required to certify that 95% or more of all peak
period measurements of round-trip latency are at or below 750
milliseconds, and with respect to voice performance, a score of four or
higher using the Mean Opinion Score (MOS).
51. The Commission adopts the same deployment milestones that the
Commission required for existing A-CAM recipients, except delayed by
two years to reflect the later start of the ten-year term.
Specifically, companies accepting the new model offer will be required
to offer at least 25/3 Mbps service to 40% of fully funded locations by
the end of 2022, to 50% of the requisite number of funded locations by
the end of 2023, an additional 10% each year thereafter, and 100% by
2028. In addition, by the end of 2028, these carriers will be required
to offer 4/1 Mbps to the requisite percentage of locations depending on
density. The Commission also provides the same flexibility afforded
other A-CAM recipients to deploy to only 95% of the required number of
fully funded locations by the end of the term of support.
52. Consistent with existing obligations, the Commission requires
carriers to report geocoded location information for all newly deployed
locations that are capable of delivering broadband meeting or exceeding
the speed tiers. The Commission also adopts defined deployment
milestones so that the same previously adopted non-compliance measures
would apply.
53. Election Process. The Commission adopts a single-step process
whereby electing carriers make an irrevocable acceptance of the offered
amount because no support adjustments will need to be made to address
budget targets. The Commission directs the Bureau to release a public
notice announcing the new model-based support amounts and corresponding
deployment obligations and providing carriers with 45 days to confirm
that they will accept the revised offer. Any such election shall be
irrevocable.
[[Page 4718]]
54. To ensure sufficient and predictable support for legacy
carriers and spur additional deployment of 25/3 Mbps broadband service,
the Commission increases the budget and make corresponding adjustments
to carriers' buildout obligations. A budget designed to spur the
deployment of 4/1 Mbps broadband to rural America is no longer
sufficient or appropriate for deploying the high-speed broadband
capable networks of at least 25/3 Mbps that consumers living in rural
America demand. Moreover, fluctuations in support reductions make it
more challenging to engage in capital planning, potentially resulting
in reduced broadband deployment that, in turn, could harm consumers.
The Commission therefore establishes a minimum threshold of support for
each carrier and establish a budget for legacy carriers that is
independent of the fluctuating needs of other rate-of-return support
streams. Commensurate with the Commission's changes to provide a
sufficient and predictable support mechanism, the Commission adopts
measurable deployment obligations that will spur the availability of
25/3 Mbps broadband service throughout rural America.
55. The Commission also adopts further reforms to the legacy
program to streamline its rules where possible and promote further
predictability and efficiency. For example, the Commission eliminates
the capital investment allowance and revise the budget control
mechanism to simplify its rules and promote greater certainty. Further,
to ensure the efficient use of the Commission's limited funding, it
reduces the maximum support that a legacy provider can obtain on a per-
line basis and revise the Commission's methodology for allocating
support to those areas that are close to 100% overlapped by
unsubsidized competitors. Finally, the Commission addresses a number of
technical changes, including revising line count reporting requirements
and updating accounting rules.
56. To spur broadband deployment, the Commission adopts a budget
for legacy rate-of-return carriers based on 2018 unconstrained claims,
including an inflationary factor to increase the budget annually. The
Commission also establishes a minimum threshold of support for rate-of-
return carriers.
57. Discussion. The Commission addresses the concerns raised by
Congress and the industry by adopting a budget that provides sufficient
and predictable support to legacy carriers, while meeting its
responsibilities as stewards of public funds. The Commission also
adopts a minimum threshold of support for legacy carriers to ensure
that they receive sufficient and predicable funding to meet their
revised deployment obligations. In adopting this budget for legacy
carriers, the Commission continues the progress and adherence towards
the Commission's universal service reform principles and goals.
58. The Commission adopts a new budget for legacy carriers based on
2018 uncapped claims--approximately $1.42 billion--increased annually
by inflation.
59. The increased legacy budget demanded by the industry and
Congress is consistent with the Commission's requirement to base its
policies on making services in ``rural, insular, and high cost areas .
. . reasonably comparable to those services provided in urban areas and
that are available at rates that are reasonably comparable to rates
charged for similar services in urban areas.'' Consumers demand higher
speeds as they realize the benefits that come with them, and the
Commission cannot leave consumers in rural areas behind. Providing
legacy carriers an increased budget will provide the means and the
certainty necessary to spur investments to meet demand and help achieve
the Commission's universal service goals. Without increasing the budget
for legacy carriers, the Commission could expect increasing rates,
diminishing deployment, and a growing gap between rural and urban areas
in broadband availability.
60. The Commission determines that using 2018 unconstrained claims
as the basis to reset the budget is sufficient and will help spur
broadband deployment in rural areas. Since the budget control mechanism
became effective, the Commission has authorized repaying legacy
carriers all support reductions since July 1, 2017. The Commission now
takes 2018 support claims, i.e., what the carriers are spending today,
and increase that by inflation annually going forward. Claims for 2018
reflect a time when legacy carriers are fully engaged in deploying and/
or maintaining broadband capable networks. Accordingly, the Commission
finds it is a reasonable timeframe from which to establish a budget
better tailored for today's broadband needs. Furthermore, by basing the
budget on 2018 unconstrained claims, the Commission is using a figure
beneficial to meeting consumers' demand because, based on the
Commission's claims data, 2018 unconstrained claims are the highest
since the USF/ICC Transformation Order.
61. Also, with a higher overall budget and a budget control
mechanism that does not include a per-line reduction (discussed in the
following), the Commission expects a higher degree of predictability
for each carrier individually--predictability that over time will
increase as carriers become more familiar with the process. A budget
also helps with the overall predictability of the fund, which is
financially prudent and in the public interest.
62. To mitigate any harmful effects of having a lower 2018 budget,
the Commission will reimburse all support reductions due to the budget
control mechanism from July 1, 2018 through December 31, 2018, or the
effective date of this Report and Order, whichever is later. In
addition, there will be no reductions to legacy support from January 1,
2019 through June 30, 2019, as the Commission anticipates claims to
increase only slightly over 2018 claims during this time.
63. In addition, rather than awarding legacy support based on the
budget remaining once other rate-of-return recipients have been funded
under the overall $2 billion budget, the Commission establishes this
budget for legacy providers separate and apart from the other programs.
In doing so, the Commission provides greater certainty and
predictability for legacy providers. The Commission agrees that
separate budgets ``enable proponents of the two support mechanisms
[legacy and A-CAM] to focus on how best to efficiently maximize
broadband deployment under each paradigm.'' Furthermore, the Commission
agrees that ``each should be afforded a budget analysis on its own bona
fides without regard to the other,'' which will allow us in the future
to better evaluate ``each support mechanism on its own merits.'' The
Commission also agrees with ITTA's proposal to remove CAF ICC from the
budget equation and administer it outside of the legacy budget and A-
CAM support mechanism.
64. In establishing a separate budget for legacy carriers, the
Commission declines to adopt the joint industry proposal to adopt an
overall budget for all the rate-of-return support mechanisms. The
Commission finds that an all-encompassing rate-of-return budget is no
longer appropriate, given the different obligations and terms of the
various rate-of-return funding streams. In light of how other high cost
support streams have evolved, the Commission sees no reason going
forward why the support amounts for A-CAM, Alaska Plan, and CAF ICC
[[Page 4719]]
should affect total legacy support. Legacy carriers should have their
own budget--a budget that is suited to allow small, rural carriers to
meet consumers' demands in rural areas in furtherance of universal
service goals.
65. The Commission finds that a budget in general for legacy
carriers is in the public interest. In contrast to other rate-of-return
support mechanisms, legacy support is based on carriers' costs, i.e.,
claims made for support, and support claims from legacy carriers have
continued to increase since the Commission adopted a budget in 2011.
The industry and NECA forecast continued increases. As the Commission
noted in the 2018 Rate-of-Return Reform Order and NPRM, 83 FR 18951,
May 1, 2018 and 80 FR 17968, April 25, 2018, rate-of-return regulation
provides incentives for companies to operate inefficiently by
``padding'' operating expenses and over-investing in capital projects
to increase profits. Some portion of the continually increasing claims
may be due to those incentives. Although commenters contend that there
is no evidence to show rate-of-regulation provides incentives to
operate inefficiently, that carriers lack the means to over spend/
invest as a practical matter, and that the Commission's rules already
counteract these alleged incentives, basic economic theory confirms
that such motivations exist. The Commission also recognizes, however,
that network improvements to meet demand have led to increased claims.
66. Setting a budget cap for legacy carriers is financially prudent
and in the public interest. The Commission must be mindful of its
obligation to ensure that scarce public resources are spent
judiciously. Moreover, as courts have recognized, too much
subsidization could affect the affordability of telecommunications
services for those that pay for universal service support, in violation
of section 254(b). An annual budget cap for a support mechanism that
funds carriers' claims--claims that have continually increased at
varying rates--helps us meet that obligation. A budget that constrains
spending encourages efficiency and resourcefulness, and it ensures a
relatively greater level of predictability for the overall CAF.
Finally, the Commission notes that the record supports some form of a
budget.
67. The Commission will adjust the new budget for legacy carriers
based on 2018 uncapped claims increased annually by inflation--the
United States Department of Commerce's Gross Domestic Product-Chained
Price Index (GDP-CPI). The Commission notes that industry supports
budget adjustments using some type of inflationary factor. While NTCA
suggests using the Employment Cost Index (ECI) because it recognizes
that labor is a key component in rising costs, the ECI only accounts
for one specific cost input. However, of the two, the Commission finds
that GDP-CPI is more appropriate as it measures price changes in goods
and services purchased by consumers, businesses, and governments, and
is the inflationary factor the Commission has used for many years in
other legacy support mechanisms.
68. Further, in using an inflationary factor to annually increase
the overall budget for legacy carriers, the Commission is not conceding
that broadband deployment and maintenance costs increase over time
commensurate with inflation. In the development of the Connect America
Cost Model (CAM), Commission staff found that in the remote, model-
supported areas the Commission is subsidizing, costs are unlikely on
average to rise going forward; roughly speaking, this is because rising
labor costs are offset by falling equipment costs and productivity
gains. Some commenters have echoed the belief that new equipment may
lower costs. Nonetheless, other parties argue that their costs for
labor and equipment have increased or that deployment costs have not
been offset by increased productivity or lower equipment costs.
Therefore, the Commission adopts an inflationary escalator to increase
the budget and note that this increased support will be included in the
revised calculation of mandatory deployment obligations. The Commission
uses the GDP-CPI to address inflation in other high-cost support
mechanisms and see no reason to deviate from that precedent here.
Moreover, the Commission declines the industry's request to increase
the entirety of the high-cost USF program to reflect inflation or the
overall rate-of-return budget. As noted in this document, the
Commission believes that giving legacy carriers a separate, independent
budget is more appropriate at this time, and the Commission declines to
make legacy carrier support dependent on the A-CAM, the Alaska Plan,
CAF ICC, or other high-cost support.
69. The Commission addresses issues raised regarding the effect
that the increasing number of conversions to broadband-only lines are
having on the budget. Several parties have raised the concern that as
carriers convert voice and voice/broadband lines to broadband-only
lines there will be additional pressure on the universal service budget
because federal support for broadband-only lines is typically greater
than for voice and voice/broadband lines. This circumstance is in large
part because the costs of a broadband-only line are all interstate
whereas a voice or voice/broadband line has a portion of its costs
recovered through intrastate sources. The Commission believes that
increases in support caused by these conversions will be offset through
the approach it is taking to account for support for those carriers
taking the new model offer.
70. Although the Commission currently has insufficient data to
quantify this increase, it concludes that 7% is a reasonable estimate
that will promote stability for legacy rate-of-return carriers. The
Commission notes that carriers expecting above average numbers of
broadband-only conversions (and thus greater funding increases under
the legacy mechanism) are more likely to remain on legacy support than
those expecting below average conversion rates, putting pressure on the
legacy rate-of-return budget. A 7% increase balances the Commission's
interest in accounting for expected increases without unduly increasing
the rate-of-return budget while it considers long-term means of
addressing these conversions, as discussed in the concurrently adopted
FNPRM. To account for this increase, the Commission adjusts how it
allocates funding for those carriers accepting the new model offer. For
carriers that accept a new model offer that will receive more model
support than their uncapped claims, USAC shall take those claims out of
the legacy budget. However, for carriers accepting a new model offer
that will receive less model support than their unconstrained claims
(glide-path carriers), USAC shall take only the carriers' model support
amounts out of the budget cap. The Commission anticipates that a
sufficient number of glide-path carriers will accept model-based
support and that the amount of increase to the legacy budget will
therefore be at least 7% of the budget cap (as adjusted for those
taking model-based support), if not greater. However, to ensure that
this is the case, the Commission will increase the budget in July 2019
by 7%. Once the Commission has determined which carriers are accepting
the new model offer, if, because of the number of glide-path carriers
accepting model support, the legacy budget increases by more than 7%,
legacy carriers will benefit from that entire increase in the budget
going into effect in July 2020. This will be a one-time increase.
[[Page 4720]]
71. This approach will also ensure that if carriers whose legacy
support is decreasing choose model-based support, the funding that
would have been available to other legacy carriers will continue to be
available to those carriers that remain on legacy support. For the same
reasons, after any future overlap auctions, the Commission will also
leave any resulting savings in the legacy budget. Although the
Commission believes that the new budget will account for any support
demand increases due to conversions to broadband-only lines, the
Commission seeks comment on whether additional measures are needed in
the concurrently adopted FNPRM.
72. The Commission recognizes that by setting the budget at 2018
unconstrained claims initially, it is not setting it as high as the
industry requests. The industry requests an overall amount that will
``fully fund'' the entire high-cost program so that there is no budget
constraint. Universal service support is paid by ratepayers, however,
and increasing funding demands on those ratepayers could affect the
affordability of telecommunications services, in violation of section
254(b). By adopting an overall budget for legacy carriers based on
today's support claims and then limiting future budget increases, the
Commission minimizes unexpected increases in the contributions required
from ratepayers.
73. Moreover, the Commission still is providing sufficient and
appropriate funding for the rate-of-return high-cost program. A-CAM
carriers will receive up to $200 per location and all transition
payments; Alaska Plan carriers will continue to receive their
authorized amounts; CAF ICC will receive its full amounts; and for
legacy carriers the Commission will reimburse all support cuts to date
due to the budget control mechanism. To encourage efficient and
resourceful spending and help minimize contribution burdens, going
forward, starting in July 2019, the Commission establishes a budget for
the legacy carriers, but to help meet demands and obligations, it still
allows for gradual and predictable annual increases. Furthermore, as
explained in the following, the Commission revises deployment
obligations based on the projected funding that carriers will receive.
As the Tenth Circuit stated in upholding the budget adopted in 2011,
``the FCC quite clearly rejected any notion that budgetary
`sufficiency' is equivalent to `complete' or `full' funding for
carrying out the broadband and other obligations imposed upon carriers
who are voluntary recipients of USF funds.''
74. In addition to the new budget described in this document, the
Commission also adopts a minimum threshold of support for each carrier.
The uncapped threshold will be based on a five-year CAF BLS forecast to
be developed by NECA for establishing the carrier-specific deployment
obligation, but any amounts greater than that may be subject to a
budget control mechanism. Thus, no legacy carrier will receive less
support, i.e., HCLS plus CAF BLS, as a result of budget constraints
than predicted in this CAF BLS forecast. The Commission links this
minimum threshold of support for each carrier to its minimum deployment
obligation so that carriers will receive at a minimum, the amount of
support that went into determining minimum deployment obligations. This
new five-year forecast will be calculated using the budget adopted in
this Report and Order, including the annual inflation adjustment, and
will be used to calculate each legacy carrier's new mandatory
deployment obligations. In conjunction with the new budget, this
minimum threshold will provide legacy carriers the sufficiency and
predictability that they have argued did not exist under the previous
budget. In addition, to the extent any support adjustments may be
appropriate, by eliminating the per-line reduction component of the
budget control mechanism, the Commission expects that no carrier will
see drastic reductions from the budget control mechanism relative to
other carriers.
75. While commenters support the general concept of using
unconstrained claims for a support ``floor,'' there is no consensus on
how any such ``floor'' should be established. Although some commenters
express concerns with this approach, the Commission finds that a
minimum threshold based on a revised NECA five-year forecast, in
combination with the revised budget amounts adopted herein, will ensure
that carriers can meet their deployment obligations. The Commission
disagrees with NTTA's suggestion that it prioritizes Tribal areas, the
highest-cost areas, and then all other areas because it lacks any
justification of how such a proposal is consistent with the goals of
the high-cost program, and in particular how it would further bringing
broadband to all high-cost areas of the country. And the Commission
disagrees with a recent industry proposal to use each carrier's
``unconstrained costs over the prior three years'' as a minimum. Such a
proposal would essentially require the elimination of the budget
constraint mechanism entirely while guaranteeing more support for each
carrier than that tied to its deployment obligations. Indeed, this
proposal would negate the overall predictability for the fund that a
budget provides. The ``floor'' for each carrier would be dependent upon
each's spending behavior, which can change annually or even quarterly.
As the ``floor'' changes for each carrier, the Commission would be
required to adjust the overall budget accordingly. In other words, the
Commission could not know with as much predictability how much of the
ratepayers' money it would be collectively spending each year on the
high-cost program--a situation that as stewards of public funds the
Commission aims to avoid. Consequently, the Commission declines to
adopt this industry proposal.
76. In the 2018 Rate-of-Return Reform Order and NPRM, the
Commission sought comment on when it should next revisit the budget.
Commenters support various timeframes. NTCA, WTA, USTelecom, and the
Broadband Alliance suggest that the new budget should be in effect
until 2026. ADTRAN recommends the Commission assess the budget four
years after adoption, and FWA advocates reviewing the budget no later
than three years after adoption. By fully funding A-CAM, the Alaska
Plan, and CAF ICC, and adopting a legacy budget that annually adjusts
for inflation, the Commission expects that rate-of-return carriers will
have stable and sufficient budgets for at least the next five years.
Although the Commission does not expect to review the budget prior to
2024, it may be appropriate to revisit the budget at the end of five
years to reevaluate whether any changes to the budget are appropriate.
77. By May 1, 2019, the Commission directs USAC, in consultation
with Bureau, to publish a new legacy budget cap along with the new
budget adjustment factor. USAC will calculate 2018 actual unconstrained
legacy support claims plus one year of inflation using GDP-CPI, as
reported by NECA in the most recent October annual filing. The budget
cap will be that total increased by 7%. USAC, in consultation with the
Bureau, will calculate the budget adjustment factor using that budget
cap pursuant to sections 54.901(f) and 54.1310(d), as modified in this
Report and Order to eliminate the per-line reduction calculation. The
budget adjustment factor USAC publishes by May 1, 2019 will be in
effect from July 1, 2019 to June 30, 2020.
78. By May 1, 2020, the Commission directs USAC to publish the next
legacy budget cap along with the next budget
[[Page 4721]]
adjustment factor to be in effect from July 1, 2020 to June 30, 2021.
The budget cap will be set at the previous year's budget cap, i.e.,
July 1, 2019 to June 30, 2020, plus inflation using GDP-CPI, which will
be published in the October 2019 filing by NECA. USAC shall then
account for the new model offers as follows. For carriers that accept
the new model offer, USAC shall deduct those carriers' 2018 actual
unconstrained claims plus the two years of inflation out of the legacy
budget. For glide-path carriers, USAC shall calculate the total amount
by which their 2018 actual unconstrained claims plus two years of
inflation exceeds their model support. If that number is greater than
7% of the 2020 budget, USAC shall increase the budget by the amount in
excess of 7%. In addition, prior to publishing the results of the 2020
budget cap, USAC shall compare the capped amount for each carrier with
the CAF BLS five-year forecast adopted in this Report and Order. If the
cap for any individual study area falls below the CAF BLS forecast for
that study area in that year, USAC shall raise the cap for that study
area to the amount of the CAF BLS forecast. Thus, carriers are assured
of receiving at least the amount of support that will be identified in
the forecast.
79. Going forward, for the 2021 budget and beyond, USAC shall
annually increase the previous year's budget cap by inflation using
GDP-CPI. Each year USAC shall use the budget cap to calculate the
budget adjustment factor for that budget year, July 1 to June 30. Also,
each year, for CAF BLS, USAC shall calculate the pro rata reductions
once per year, and for HCLS, USAC shall calculate the pro rata
reductions semiannually, which allows the reduction factor to reflect
the new rural growth factor for HCLS that goes into effect January 1 of
each calendar year. As noted above, if the cap for any individual study
area falls below the CAF BLS forecast for that study area in that year,
USAC shall raise the cap for that study area to the amount of the CAF
BLS forecast. Based on the Commission's experience in implementing the
budget control mechanism, it believes that it will enhance
predictability with no discernable cost by setting the budget
adjustment factor semiannually rather than quarterly.
80. To maximize the benefit resulting from the Commission's new
legacy budget, it revises the deployment obligations for legacy
carriers commensurate with the minimum threshold of support that will
not be subject to the budget constraint. The Commission also revises
the minimum speed obligation to 25/3 Mbps, up from 10/1 Mbps.
81. Discussion. The Commission revises the deployment obligations
for legacy carriers commensurate with the revised budget and minimum
threshold of support adopted in this Report and Order. The Commission
also resets the five-year deployment term and revise the minimum speed
obligation to 25/3 Mbps, up from 10/1 Mbps. By increasing the budget
for legacy carriers, the Commission expects those carriers to do more
to meet consumer demand and its obligations than they did when the
budget was first adopted in 2011.
82. Under the Commission's rules, a carrier's deployment
obligations are based, in part, on its five-year forecasted CAF BLS.
The original five-year obligations were based on forecasted CAF BLS
pursuant to the budget and rules in effect at the time, and also then-
current data. Now that the Commission resets the budget for the legacy
carriers and adopt a minimum level of support of no less than a
carrier's revised CAF BLS five-year forecast, those original forecasts
are outdated, and the Bureau must update them. The Commission disagrees
with USTelecom and Blooston to the extent they do not support changing
deployment obligations at this time. As NTCA stated, buildout
obligations should correspond to the level of support; given that the
Commission is increasing the amount of support, broadband deployment
obligations should increase as well. The assumptions in the five-year
forecast of the total CAF BLS support for each rate-of-return legacy
study area for the purposes of determining deployment obligations were
provided in Appendix D of the Order.
83. The Commission further finds that it is necessary to provide
carriers revised CAF BLS deployment obligations at the time it expects
to make the new model offers so that carriers can properly evaluate
their options. Because the Commission expects the new offers in early
2019 and actual 2018 claims will not be available until March 2019,
projected claims for 2018 may be used for calculating forecasted CAF
BLS.
84. In addition to forecasted CAF BLS, part of the calculation for
determining deployment obligations is a cost-per-location figure based
on one of two methodologies. The Commission updates both methodologies
to reflect that 25/3 Mbps is the Commission's new broadband standard.
The methodologies also factor in the per-line, per-month cap, which the
Commission revises in the Report and Order.
85. Revising deployment obligations at this junction is also
consistent with the precedent established in the 2016 Rate-of-Return
Reform Order. There, the Commission appropriately decided that at the
end of the five-year deployment term, ``carriers with less than 80
percent deployment of broadband service meeting then-current standards
in their study areas will be required to utilize a specified percentage
of their five-year forecasted CAF BLS to deploy broadband service
meeting the Commission's standards where it is lacking in subsequent
five-year periods.'' Because the Commission is increasing the budget
for legacy carriers, setting a minimum threshold of support, and
implementing the current broadband standard of 25/3 Mbps, the
Commission is replacing the prior five-year, 10/1 Mbps deployment
obligations with new obligations that reflect the increased budget and
broadband speed. Therefore, allowing carriers a full five years--rather
than the remaining three years of the original deployment term--to
complete deployment is warranted.
86. To ensure that consumers in rural areas enjoy a reasonably
comparable quality of broadband as those in urban areas, the Commission
revises the deployment obligations to require recipients of CAF BLS to
offer broadband service at actual speeds of at least 25/3 Mbps.
Broadband of at least 25/3 Mbps is now the Commission standard, and
deployment obligations for its legacy program must reflect that.
87. To be consistent with CAF BLS deployment obligations being
based on a five-year term, the deployment term will run from the
effective date of the Report and Order until December 31, 2023. For
administrative convenience, the Commission bases this new term on the
calendar year starting January 1, 2019. Further, the Commission will
count towards the new five-year obligation any locations CAF BLS
carriers deployed to with at least 25/3 Mbps since May 25, 2016,
regardless of whether the carriers had defined deployment obligations
in the original term. CAF BLS carriers that have not had HUBB portal
reporting obligations will be provided an opportunity to certify as
needed 25/3 Mbps or higher locations deployed to since May 25, 2016.
The Commission also maintains the Commission's prohibition on deploying
``terrestrial wireline technology in any census block if doing so would
result in total support per line in the study area to exceed'' the per-
line, per-month cap, as revised in this Report and Order.
88. In the 2016 Rate-of-Return Reform Order, the Commission did not
set
[[Page 4722]]
mandatory deployment obligations for those carriers that had deployed
broadband of 10/1 Mbps to 80% or more of their study areas, as
determined by FCC Form 477. Rather, the Commission stated that it would
monitor the deployment progress of legacy carriers without defined
buildout obligations and could ``revisit this framework in the future
if such carriers do not continue to make reasonable progress on
extending broadband.'' Although those carriers with 80% or greater
deployment of 10/1 Mbps have in many cases reported additional
deployment, the Commission is unable to evaluate their progress without
an understanding of how this new deployment relates to the mandatory
obligations it has set for other carriers. Therefore, the Commission
finds that all legacy carriers should be subject to deployment
obligations.
89. As the Commission did in 2016, it finds that carriers'
mandatory deployment obligations should be determined based on a
percentage their CAF BLS, with those carriers with greater deployment
devoting a lower percentage of support to new deployment and those with
relatively lower levels of deployment devoting a higher percentage to
new deployment. Therefore, legacy rate-of-return carriers with less
than 20% deployment of 25/3 Mbps broadband service in their entire
study area, based on the most recently available FCC Form 477 data,
will be required to use 35% of their five-year forecasted CAF BLS
support specifically for the deployment of 25/3 Mbps broadband service
where it is currently lacking. Rate-of-return carriers with 20% or
greater but less than 40% deployment of 25/3 Mbps broadband service in
their entire study areas, will be required to use 25% of their five-
year forecasted CAF BLS support specifically for the deployment of 25/3
Mbps broadband service where it is currently lacking. Rate-of-return
carriers with 40% or greater deployment of 25/3 Mbps broadband service
in their entire study areas, will be required to use 20% of their five-
year forecasted CAF BLS support specifically for the deployment of 25/3
Mbps broadband service where it is currently lacking. Once a carrier
has deployed broadband service of 25/3 Mbps to all locations within the
study area, it has satisfied its deployment obligation, although the
Commission encourages such carriers to continue to look for ways to
increase the speed and reduce the latency of their services. Because
all legacy carriers will have defined deployment obligations, all will
be required to report their locations deployed in the HUBB portal.
90. The Commission finds that the capital investment allowance
should be eliminated because its burdens and inefficiencies outweigh
any benefits.
91. Discussion. The Commission finds that the capital investment
allowance should be eliminated because the burdens it imposes outweigh
the benefits. To show compliance with the capital investment allowance,
legacy carriers must track every capital expenditure and allocate it to
locations affected by that expenditure--something carriers were not
required to do previously. While carriers always account for their
capital expenditures, the requirement to tie these expenditures to
particular locations is difficult and time consuming. In addition, the
capital investment allowance may discourage marginal capital
expenditures that are economically efficient. For instance, the capital
investment allowance, which limits the total amount a carrier can spend
on a project, may prevent a carrier from deploying broadband to an
additional location or locations as part of an existing project if such
expenditures would exceed the capital investment allowance.
Accordingly, the Commission agrees with commenters that the capital
investment allowance does not encourage efficient spending and is
creating unnecessary burdens. Moreover, the Commission has found no
evidence that the capital investment allowance has encouraged
additional capital investment by those carriers below the average level
of broadband deployment. Because the burdens and disincentives on
deployment in the current capital investment allowance outweigh the
purported benefits, the Commission finds that elimination of the
capital investment allowance is appropriate.
92. The Commission declines to adopt NTCA's proffer of an
engineer's certification and record retention. Carriers are already
required to retain documentation for auditing purposes so that USAC can
determine whether support is being used for its intended purpose, and
NTCA's proposal appears to increase the paperwork burden on carriers
without much benefit.
93. In this section, the Commission modifies sections 54.901(f) and
54.1310(d) and eliminate the per-line reduction calculation that is
part of the budget control mechanism.
94. Discussion. The Commission eliminates the per-line reduction
calculation that is part of the budget control mechanism. The previous
Commission adopted the per-line and pro rata calculation on grounds
that it struck a ``fair balance among differently-situated carriers.''
Although NTCA argues that incorporating the per-line reduction is part
of a ``carefully designed balance'' or ``carefully struck balance''
between larger and smaller rate-of-return incumbent local exchange
carriers (LECs), the Commission finds that this two-part calculation
has resulted in some carriers bearing an unreasonably large share of
the support limit.
95. When adopting the budget control mechanism with both the per-
line and pro rata mechanisms, the Commission expected a ``fair
balance'' among the legacy carriers, large and small. Data since
adoption of this mechanism show, however, that the per-line reduction
has resulted in an increasingly wide variation of cuts to carriers'
support. The table in the following details across all legacy carriers
over different time periods reductions in support due to the budget
control mechanism with the per-line reduction.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Weighted
From To Average Standard 5th Percentile 95th average
reduction (%) deviation (%) (%) Percentile (%) reduction (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
9/2016........................... 12/2016.............................. 5.3 2.3 3.5 8.2 4.6
1/2017........................... 6/2017............................... 9.7 4.4 6.6 14.0 8.7
7/2017........................... 6/2018............................... 13.6 4.0 9.1 20.2 12.3
7/2018........................... 6/2019............................... 17.0 6.3 11.5 24.9 15.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Legacy Study Areas: 654.
[[Page 4723]]
96. What started as a relatively narrow variation has become
significantly wider, and now ranges (between the 5th and 95th
percentile) from 11.5% to 24.9% reductions in claimed support. The
Commission thus concludes that the per-line reduction has not, over
time, resulted in the ``fair balance'' that the Commission originally
anticipated. The carriers collectively are exceeding their budget, but
in applying the budget control mechanism, the Commission cuts some
carriers significantly more than others. Given the large variations the
Commission has now seen, it believes that it is more equitable for each
carrier to have the same percentage reduction across the board.
Accordingly, the Commission eliminates the per-line reduction
calculation that is part of the budget control mechanism.
97. In addition to making the budget control mechanism more
equitable, eliminating the per-line reduction will make it simpler to
implement administratively. Eliminating the per-line calculation will
make it easier for carriers to determine what their specific support
reduction will be and make application of the budget control mechanism
more transparent.
98. The Commission amends its rules to reduce the monthly per-line
limit on support from $250 to $225, effective July 1, 2019, and then to
$200, effective July 1, 2021. The Commission finds that reducing the
presumptive cap on support will advance the Commission's goal of
implementing responsible fiscal limits on universal service support.
99. Discussion. The Commission's experience indicates that a lower
limit is justified and will be useful in mitigating wasteful spending.
Currently, approximately 14 study areas are affected by the monthly
per-line limit. However, carriers serving only 10 of those study areas
have petitioned the Commission to justify higher support amounts, and
some withdrew their requests following requests for further supporting
information. To date, the Commission has awarded relief to only two
companies. Further, the Commission's experience reviewing the waiver
petitions that have been filed suggests that some companies cannot
justify their high expenses. Based on this history, the Commission
finds that the $250 per-line monthly limit has been neither too
restrictive nor likely to have a negative impact on the ability of
carriers to provide service. Moreover, the Commission notes that a
reduction to $200 will currently affect approximately 30 study areas
that are not already subject to the $250 per-line monthly limit, and
the same waiver process would be available to all affected study areas.
100. The Commission is unpersuaded by the arguments of those
opposing this change. Contrary to NTCA and SCC's claims, the
Commission's experience suggests that, while some carriers legitimately
incur high expenses, some of the highest supported carriers have been
found to have wasteful or abusive expenses and/or improper accounting
procedures. In the Adak Reconsideration Order, for example, the
Commission denied relief of the $250 cap, affirming findings that the
company had ``excessive and unreasonable'' operating expenses,
unwarranted executive compensation, and had engaged in improper
affiliate transactions. The Commission similarly identified
noncompliance in evaluating Allband's request for waiver of the $250
cap, finding that Allband's consistent misapplication of its cost
allocation rules rendered its cost accounting ``unreliable.'' Finally,
the Commission uncovered improper support payments of more than $27
million in connection with its review of Sandwich Isles Communications,
finding that the carrier had misclassified costs and received support
for inflated and ineligible expenses. Other carriers may not seek
waiver of the $250 monthly per-line limit because they wish to avoid
scrutiny. Indeed, despite NTCA's arguments, other existing controls to
promote the efficient distribution of support have not been sufficient
to prevent the reporting of wasteful or abusive expenses by the highest
cost carriers. The Commission does not find that its waiver process is
unreasonable and burdensome. Rather, the Commission's review of
previously filed waivers has shown that it is more likely that carriers
would not be able to justify their high expenses and sought to avoid
embarrassing scrutiny. In the Commission's experience, carriers have
contributed to the time it has taken to resolve the waiver petitions
because of their own reluctance to provide supporting data and the
number of violations of the Commission's accounting rules that it has
discovered.
101. The Commission does not agree that the budgetary relief that
would be provided by this reduction is insignificant or that possible
reductions in support will be crippling. Even if the budgetary relief
is small, the Commission has an interest in eliminating waste, fraud,
and abuse that will be served by the reduction in the monthly per-line
cap. Moreover, any carrier entitled to support above the $250 cap can
avoid support reductions by justifying its support needs through cost
studies and accounting done consistent with our rules.
102. TCA provides no data or even anecdotal evidence in support of
its assertion that carriers reduced or slowed deployment to avoid
triggering a cap or limitation on support. Further, the Commission
notes that it has invited carriers to use the waiver process
specifically as an avenue to justify their necessary spending in the
type of cases that TCA identifies. If investment is necessary to deploy
service, then the expenses will be justifiable in the waiver process.
103. South Park's alternate proposal to modify the operation of the
monthly per-line cap or to exempt carriers subject to monthly per-line
cap from the budget constraint mechanism would tend to undermine the
effect of the rule by exempting some support without regard for whether
the underlying expenses have been justified. Exempting carriers subject
to the monthly per-line cap from the budget constraint's operation
would undermine the budget constraint's purpose of limiting the size of
the fund.
104. The Commission declines to adopt, as Allband requests in its
comments, a streamlined waiver process to review any requests that
Allband might file of the monthly per-line cap, because it previously
was granted relief. Allband maintains that a streamlined process would
allow it to ``redirect financial resources from such filings to provide
expanded lines and services'' to the areas it serves. Although the
Commission is mindful of minimizing regulatory burdens in order to
maximize the benefit of limited universal service support, the
Commission must balance that goal with our responsibility as stewards
of the Fund. The Commission does not believe it is appropriate at this
time to take further action to reduce Allband's evidentiary burdens in
light of its prior misallocation of costs and need for corrective
action.
105. Finally, the Commission notes that its decision to reduce the
monthly cap in two steps addresses the possibility that a sudden influx
of many petitions for waiver will be administratively difficult to
manage. By our estimates, only an additional 10 carriers would
currently be impacted by the intermediate $225 monthly per-line cap.
The two years prior to the further reduction of the cap to $200 should
be sufficient to address any petitions for waiver arising from the $225
monthly per-line cap. Both reductions to $225 and $200 will be
implemented on July 1, to ease administrative considerations associated
with the calculation of the budget constraint mechanism.
[[Page 4724]]
106. In this section, the Commission finds that the 100% overlap
process the Commission has used to ensure that federal funding is not
being used to compete with unsubsidized competitors has not lived up to
its promise. Accordingly, the Commission ends that process and replace
it with competitive auctions for legacy service areas that are nearly
entirely overlapped by unsubsidized competitors. In the concurrently
adopted FNPRM, the Commission seeks further comment on several auction-
related issues.
107. Discussion. The Commission finds that an auction mechanism in
certain legacy study areas would be an efficient, market-based way to
distribute any high-cost support that may be necessary. In a study area
that is 100%, or almost entirely, overlapped by unsubsidized
competitors, there may still be some locations within census blocks
that do not have access to broadband, i.e., although a block is
partially served by an unsubsidized provider not all of the locations
in that block are served. As the Commission has noted previously,
competitive bidding can result in more efficient levels of support by
providing incentives to bid less than current levels of support in the
area. The Commission agrees with WISPA in general that an auction in
competitive areas ``recognizes that when a competing provider is
serving a critical mass of nearby areas, the incumbent carrier is no
longer uniquely capable of rolling out new service to locations within
the study area that remain unserved.'' While an auction would also
require administrative resources, an auction would help move the CAF
towards market-based solutions rather than sorting through documentary
evidence in hopes of determining whether locations are in fact served
by competitors. The Commission also has now seen the success of the CAF
II auction, which ``unleashed robust price competition'' so that ``more
locations will be served at less cost.'' The total locations awarded
support had an initial reserve price (maximum amount) of $5 billion
over ten years, but the amount awarded to cover these locations is only
$1.488 billion.
108. The Commission determines that support in legacy study areas
identified by FCC Form 477 data as entirely or almost entirely
overlapped with voice and 25/3 Mbps broadband by an unsubsidized
competitor or group of competitors will be awarded through a
competitive bidding process. When there are competitors, competitive
bidding can be an efficient, market-based way to distribute high-cost
support. By auctioning off support in study areas that are entirely or
almost entirely overlapped at 25/3 Mbps, the Commission expects to see
significant savings relative to current legacy claims in those areas.
Competitive bidding will result in a market-based allocation of limited
funding in areas where support is overwhelmingly not needed to achieve
our universal service goals as evidenced by the amount of unsubsidized
competition. And the Commission will dedicate those savings to
increasing the overall budget for legacy carriers--shifting support to
areas where it is needed most. Currently, there are eight legacy study
areas with 100% overlap and seven additional legacy study areas with at
least 95% overlap with approximately $12 million in unconstrained
projected claims for 2018 respectively. The Commission expects an
auction to shift a large portion of that support to other study areas
not entirely or almost entirely overlapped.
109. Consequently, the Commission eliminates the current 100%
overlap rule and process. By replacing the existing process, the
Commission eliminates the resources used to sort through documentary
evidence; and if that evidence shows even one location in the study
area is not served by unsubsidized competition, the entire process
results in zero savings. Although the Commission recognizes that an
auction could theoretically result in more funding in an area entirely
or almost entirely overlapped by unsubsidized competitors than the
existing process, the existing process has yielded almost no tangible
results and instead allowed incumbent carriers almost entirely
overlapped by unsubsidized competitors to continue to receive support
for locations also being served by unsubsidized providers. The
Commission believes that it would be better to allow such incumbent
carriers to compete against their unsubsidized competitors for federal
funds and to use a competitive bidding process to reduce funding to a
more competitive level rather than to continue with the status quo.
110. The Commission declines to formally codify a rule for this
process until it resolves certain issues it seeks comment on in the
concurrently adopted FNPRM, including ensuring the Commission properly
addresses issues raised by the incumbent LECs in their comments. In the
meantime, the Commission will reserve sections 54.319(a)-(c) of the
Commission's rules. The Commission declines to adopt the proposals of
WISPA and NCTA to auction study areas that are at least 50% overlapped
but seek further comment in the concurrently adopted FNPRM on how to
determine which study areas are almost entirely overlapped.
111. The Commission adopts two changes to our rules governing the
filing of line count data by rate-of-return carriers on FCC Form 507.
112. Discussion. The Commission adopts its proposal to change the
date for mandatory line count filings for CAF BLS to March 31 of each
year but to continue to require line counts as of December 31 (i.e.,
reduce the lag until filing to 3 months). This change will ensure that
recent line counts are used to apply the monthly cap and administer the
budget control mechanism. Currently, when USAC performs the necessary
calculations in April of each year, it typically must rely on the
carrier's FCC Form 507 from the prior July, which in turn reports line
counts as of the prior December 31. In other words, these calculations
are based on line counts that are more than 15 months old. By changing
the collection date to March 31, USAC will be able to use line count
data that is much more recent--only three months old--in determining
the monthly cap and administering the budget control mechanism.
113. The Commission declines to make any changes to the HCLS line
count filing at this time. When the Commission sought comment regarding
whether to modify the FCC Form 507 line filing schedule, it noted that
HCLS line counts are currently collected on the same schedule as FCC
Form 507, and asked whether conforming changes to the HCLS line count
filing would be appropriate. The Commission finds that such changes
would not be appropriate because HCLS line counts are collected at the
same time as HCLS cost data, and it believes that carriers will find it
less burdensome to make the HCLS line count and cost data filing on the
same schedule.
114. The Commission also adopts a requirement for rate-of-return
carriers that do not receive CAF BLS (i.e., carriers that have elected
A-CAM or Alaska Plan support) to file line counts annually on FCC Form
507. Line count data is essential for monitoring and analyzing high-
cost universal service programs. Carriers that elected A-CAM were
required to file line count data on FCC Form 507 prior to the
implementation of A-CAM because they received ICLS, which they no
longer do. Likewise, carriers authorized for Alaska Plan were also
required to file line count data on FCC Form 507 prior to the
implementation of the Alaska Plan. Requiring the A-CAM and Alaska Plan
[[Page 4725]]
carriers to continue to provide line count information will allow the
Commission to maintain a frequently used data set for assessing whether
the Commission's rules are achieving its universal service goals, while
being a minimal burden. To lessen what the Commission considers to be
an already minimal the burden associated with this data collection, it
requires carriers to file this data on July 1 of each year to coincide
with other filing dates.
115. The Commission incorporates into its Part 32 accounting rules,
the updated lease accounting standards adopted in 2016 by the Financial
Accounting Standards Board (FASB and the FASB lease accounting
standards). In so doing, the Commission eliminates the need for
incumbent LECs to account for leases under different standards in order
to comply with our rules and with the FASB lease accounting standards.
To expedite the effectiveness of these changes and ease administrative
burdens, the Commission also waives its Part 32 rules to the extent
necessary, to permit an incumbent LEC to use the FASB standards
immediately.
116. Discussion. The Commission agrees with TDS telecom that
``maintaining two sets of lease accounts, by its nature,'' imposes
burdens on carriers subject to our Part 32 rules. The Commission also
agrees that there is no benefit to requiring such carriers to maintain
two sets of lease accounts that reflect different accounting procedures
for regulated purposes and for financial reporting. Importantly, the
amendments the Commission makes to its Part 32 rules will have no
impact on a carrier's rates or on the amount of universal service
support it receives. The Commission therefore amends its Part 32 rules
to conform them to the FASB lease accounting standards, so that
carriers can maintain a single set of lease accounts that is consistent
with both our rules and the FASB standards.
117. The Commission adopts the definition of a lease as contained
in the FASB lease accounting standards, which define a lease as a
contract, or part of a contract, that conveys the right to control the
use of identified property, plant and equipment (an identified asset)
for a period of time in exchange for consideration. As a result of this
definitional change, in order to comply with our Part 32 rules, a
carrier will need to determine whether a contract is or contains a
lease because lessees are required to recognize lease assets and lease
liabilities for all leases (financing or operating) other than short-
term (less than 12 months) leases. Furthermore, the FASB lease
accounting standards require an entity to separate the lease components
from the non-lease components (for example, maintenance services or
other activities that transfer a good or service to the customer) in a
contract. With respect to operating and finance leases, our rules allow
carriers to use subsidiary accounts as they deem necessary to most
efficiently process the transactions.
118. Lessee Accounting for Operating Leases. To be consistent with
the FASB lease accounting standard's approach, the Commission amends
its rules to require that when a lessee enters into an operating lease
longer than one year, it records the net present value of the lease
payments. As the lease term runs, the lessee must recognize the lease
expense as a straight-line amortization over the life of the lease.
119. Lessor Accounting for Operating Leases. The FASB lease
accounting standards do not require substantial modifications to our
current rules governing a lessor's accounting for operating leases. A
lessor will continue to report the capital asset that it is leasing to
another entity and to apply the required standards to the asset, such
as recording depreciation expense and disclosing changes in the amount
of the asset during the fiscal year. The Commission does, however,
amend its rules to make clear that a lessor must recognize a long-term
lease receivable in Account 1410 ``Other Non-current Assets,''
measuring the amount in generally the same manner as a lessee
liability. Pursuant to our amended rules, a lessor must also recognize
a deferred inflow of resources equal to the lease receivable plus any
up-front payments the lessor received from the lessee that relate to
future periods in Account 4300 ``Other long-term liabilities and
deferred credits.''
120. The Commission also amends its rules to require that when a
carrier, that is a lessor, enters into an operating lease longer than
one year, it records the present value of the lease receivables in each
account. The lessor must determine the present value of the lease and
recognize a deferred inflow of resources equal to the lease receivable
plus any up-front payments the lessor received from the lessee that
relate to future periods.
121. As the lease term runs, the lessor in the normal course will
recognize lease revenue and a credit to the deferred lease account,
which will be done as a straight-line amortization over the life of the
lease. The actual amount recorded under our amended rules could vary
from what would have been recorded under the previous Part 32 rules.
Over the length of the lease, however, the lease revenues recognized
under either approach will be the same.
122. Finance Leases. Other than referring to capital leases as
finance leases, no additional changes are necessary to the sections of
our Part 32 rules governing finance leases. As with operating leases,
carriers may employ subsidiary accounts to facilitate FASB reporting
requirements.
123. Ratemaking and universal service considerations. Our revisions
to Part 32 do not raise any ratemaking or universal service concerns.
While there may be slight differences in the timing of certain entries,
the overall effect over the length of the lease will not create any
material disruptions to the ratemaking and universal service processes.
124. Effective date. Section 220(g) of the Act provides that the
Commission shall give notice of alterations in the manner or form of
the keeping of accounts at least six months before the alterations are
to take effect. Thus, the earliest the rules the Commission adopts in
this document could become effective would be mid-2019. Because most
accounting systems are based on a calendar year, the Commission makes
the revised rules effective on January 1, 2020. That is also the first
month in which the FASB lease accounting standards are applicable to
all entities that use GAAP accounting. For those carriers that must
comply with the FASB lease accounting standards before January 1, 2020
and for those that elect an earlier date to conform their accounts to
the FASB lease accounting standards, the Commission grants a waiver of
Part 32 as described in the following to cover the time period between
now and January 1, 2020.
125. Waiver. Generally, the Commission's rules may be waived for
good cause shown. The Commission may exercise its discretion to waive a
rule where the specific facts make strict compliance inconsistent with
the public interest. Waiver of the Commission's rules is therefore
appropriate only if special circumstances warrant a deviation from the
general rule and such deviation will serve the public interest.
126. On the Commission's own motion, it grants incumbent LECs
subject to Part 32 a waiver allowing them to employ the revised
procedures adopted herein effective upon release of this Report and
Order. Absent such relief, the six-month notice required by Section
220(g) of the Act would require those incumbent LECs subject to the
FASB lease accounting standards to have two sets of lease accounts
until the revised rules become effective. The Commission finds good
cause exists to
[[Page 4726]]
grant this waiver to preclude the imposition of duplicative accounting
requirements. To encourage efficient use of carrier resources, the
Commission extends this waiver to any carrier electing to follow the
FASB lease accounting standards before January 1, 2020.
127. The Commission declines to make any changes to the rural
growth factor or the application of the HCLS cap.
128. Discussion. The Commission declines to make any changes to the
rural growth factor or the application of the HCLS cap. Commenters fail
to address that HCLS support should be declining as customers switch to
broadband-only services, which are supported through CAF BLS. The rural
growth factor, which accounts for line loss, results in a declining
HCLS cap and a decline in the overall amount of HCLS. When there are
fewer lines to be supported, the amount of support should decrease. The
Commission also notes that because 100% of the cost above the revenue
imputation is available under CAF BLS, relative to HCLS, more support
is available to the carrier when that loop becomes a standalone
broadband loop.
129. Although the Commission seeks to preserve and advance
universal availability of voice service, it also strives to ensure
universal availability of modern networks capable of providing voice
and broadband service to homes, businesses, and community anchor
institutions. Increasing HCLS support provides a disincentive for
legacy carriers to deploy broadband capable networks. Freezing the HCLS
cap or increasing it by removing line loss from the rural growth factor
would provide carriers with an incentive to maintain voice-only loops,
and discourage the deployment of broadband.
130. While in the past the Commission spoke of limiting increases
to HCLS because at that time the number of lines was typically
increasing, the Commission noted that ``using a rural growth factor
will more accurately reflect changes in the number of rural lines over
time.'' Even though the number of voice lines is now typically
decreasing, the mechanism adopted by the Commission is still
effectively aligning HCLS support appropriately with the number of
lines. For these reasons, the Commission does not adopt any changes to
the rural growth factor or the application of the HCLS cap.
131. At this time, the Commission finds that no changes to the
rate-of-return operating expense (opex) limitation are needed.
132. Discussion. The Commission declines to make any changes to the
opex limitation at this time. The opex limitation has been in effect
for only a limited period of time and was recently adjusted to account
for inflation. The Commission finds it prudent to continue to monitor
the effects of this modified limitation before adopting any further
changes. The Commission also declines to adopt any changes to account
for business locations as the Concerned Rural LECs and NTCA recommend.
As NTCA notes, the Commission does not have ``public availability of
business location data.'' Although future consideration of this issue
may be warranted, NTCA's suggestion that the Commission apply ``some
kind of factor'' does not provide a sufficient basis or means for us to
move forward with any modifications.
133. The Commission directs USAC to collect contributions based on
projected demand in order to minimize the universal service burden on
consumers and businesses, while ensuring sufficient support to
implement the high-cost program.
134. Discussion. The Commission concludes that its traditional
approach, which bases collections on actual projected demand, will best
serve our goals of minimizing the universal service burden on consumers
and businesses while ensuring sufficient and predictable support to
implement the high-cost program. While the uniform collection may have
served a useful purpose when the CAF program was first getting
underway, the Commission has largely implemented the CAF program now
that the Phase II auction has ended and associated support amounts have
been determined. Moreover, now that the Commission has concluded its
budget review through this Report and Order, the Commission expects a
fairly predictable and stable budget for the high-cost program for the
next several years. Finally, collecting only enough support to meet
demand enhances transparency and promotes accountability in the high-
cost program. The Commission therefore directs USAC to discontinue
uniform collections for the high-cost program and going forward to
collect contributions based on projected demand.
135. There is no need for us to do a ``full accounting'' of the
high-cost support available as SCC recommends. The Commission and USAC
always have a full accounting of the amount of high-cost support needed
and how much has been collected in excess of this total. There is
currently no excess cash in USAC's high-cost account; USAC will need to
collect additional funds to meet the requirements of the high-cost
program, including the allocations adopted in this Report and Order.
The Commission further declines to address SCC's recommendation to
``allocate any unencumbered excess'' from other universal service
programs to HCLS and CAF BLS at this time.
II. Order on Reconsideration
136. Introduction. In the Order on Reconsideration, the Commission
denies three petitions purportedly seeking reconsideration of the
Commission's decision in the 2018 Rate-of-Return Reform Order and NPRM
to increase A-CAM support by approximately $36.5 million annually--
increasing support up to $146.10 per location for all A-CAM carriers
authorized on January 24, 2017. Grand River Mutual Telephone
Corporation (Grand River) requests additional A-CAM support for 747
locations. Clarity Telecom, LLC (Clarity) requests additional A-CAM
support for 2,167 locations. Hamilton County Telephone Co-op (Hamilton)
(collectively, Petitioners) requests additional A-CAM support for 2,444
locations. The petitions for reconsideration ``relate to matters
outside the scope of the order for which reconsideration is sought.''
Accordingly, the Commission denies them.
137. Discussion. The Commission denies all three petitions for
reconsideration because they ``relate to matters outside the scope of
the order for which reconsideration is sought.'' While on their face,
the Petitioners are asking for an additional increase of A-CAM support,
in effect, they are requesting that the Commission reconsiders what
locations (census blocks) are eligible for A-CAM support. In other
words, to increase the amount of support as Petitioners request, the
Commission would have to first direct the Bureau to revise the A-CAM
eligible census blocks, which was not at issue in the 2018 Rate-of-
Return Reform Order and NPRM. Rather, the Commission made the
determination regarding eligible census blocks in the 2016 Rate-of-
Return Reform Order. Since that 2016 order, the Commission has not
sought comment on or otherwise indicated in any way that would allow
changes, modifications, or adjustments to funded locations for
authorized A-CAM carriers. Finally, the Commission finds that
Petitioners' requests as they phrase them and as they argue pertain
only to them and do not justify a change of any rule of general
applicability based on their pleadings. Accordingly, the Commission
denies the three petitions for reconsideration.
[[Page 4727]]
138. Even were the Commission to address the petitions for
reconsideration on their merits, the arguments raise nothing new to
consider and are identical to petitions the Bureau rejected in the 2016
Orders and A-CAM Challenge Process Order. With respect to Hamilton, its
attempt to introduce ``new evidence'' falls short. The ``new evidence''
is that since Hamilton accepted its A-CAM offer, Wisper ISP updated its
FCC Form 477 and reduced the number of census blocks that ``knocked out
many'' locations. Hamilton also claims that Wisper ISP decommissioned a
tower that ``would have supposedly served some of the locations that
were rendered ineligible from the A-CAM funding.'' Hamilton then claims
that it ``knows without a doubt'' Wisper ISP will not provide service
in the area.
139. Regarding the decommissioned tower and Wisper ISP's lack of
intention to provide service in the area, Hamilton provides no support
or evidence to back its claims. In addition, Hamilton's petition lacks
clarity on the number of locations that should be funded due to Wisper
ISP's updated FCC Form 477 and its decommissioned tower. Wisper ISP
apparently still serves some of the area, so the Commission can surmise
that not all of Hamilton's 2,444 locations would be funded. Based on
the record before the Commission, however, it cannot determine an exact
number. Accordingly, Hamilton's petition is unpersuasive on the merits.
140. As to Clarity and Grand River, the Commission agrees with the
Bureau's decision not to waive the date for determining FTTP and cable
deployment. As the Bureau determined, administrative closure on the
data set for incumbent study areas ``at a specific moment in time'' was
necessary for ``efficient implementation of the overall reform
effort.'' Moreover, as the Bureau recognized, the Commission clearly
stated that under the terms of their offers, ``carriers may not
resubmit their previously filed data to reduce their reported FTTP or
cable coverage.''
IV. Procedural Matters
A. Paperwork Reduction Act Analysis
141. The Report and Order adopted herein contains new or modified
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 will be
invited to comment on the new or modified information collection
requirements contained in this proceeding. In addition, the Commission
notes that pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C. 3506(c)(4), it previously sought
specific comment on how the Commission might further reduce the
information collection burden for small business concerns with fewer
than 25 employees. In this present document, the Commission has
assessed the effects of the new and modified rules that might impose
information collection burdens on small business concerns, and find
that they either will not have a significant economic impact on a
substantial number of small entities or will have a minimal economic
impact on a substantial number of small entities.
B. Congressional Review Act
142. The Commission will send a copy of this Report and Order and
Order on Reconsideration to Congress and the Government Accountability
Office pursuant to the Congressional Review Act, see 5 U.S.C.
801(a)(1)(A).
143. The Regulatory Flexibility Act of 1980 (RFA) requires that an
agency prepare a regulatory flexibility analysis for notice and comment
rulemakings, unless the agency certifies that ``the rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities.'' Accordingly, the Commission has prepared a FRFA
concerning the possible impact of the rule changes contained in the
Report and Order on small entities. The FRFA is set forth in the
following.
144. In the Report and Order, the Commission adopts further changes
to universal service support mechanisms for rate-of-return carriers to
spur broadband deployment to consumers in rural America, promote
efficiency, and deter waste, fraud, and abuse. The Commission
authorizes an offer of up to $200 per location for carriers currently
on A-CAM support with revised deployment obligations, and the
Commission authorizes a new A-CAM offer of up to $200 per location for
current legacy carriers (those carriers receive HCLS and/or CAF BLS).
The Commission then creates a separate budget for carriers that remain
on legacy support and set that budget at 2018 unconstrained claims,
which will be annually adjusted based on an inflationary factor. The
Commission also sets a minimum threshold of support for legacy carriers
equal to the five-year projection for CAF BLS. The Commission
eliminates the per-line reduction that is part of the budget control
mechanism, which will make legacy support amounts more predictable and
make the budget control mechanism less burdensome administratively. The
Commission eliminates the capital investment allowance, which has been
deterring economically efficient investments and was administratively
overburdensome for the carriers. To further the Commission's efforts in
eliminating waste, fraud, and abuse, it reduces the per-line, per-month
cap of legacy support from $250 to $225 and then to $200. The
Commission modifies a reporting deadline related to line counts so that
it is using more recent data in determining carriers subject to the
per-line, per-month cap. The Commission also makes line count filings
required for all rate-of-return carriers, which provides data it needs
to effectively monitor our high-cost program while minimally burdening
the carriers. The Commission amends the Uniform System of Accounts
(USOA) contained in Part 32 of the Commission's rules to incorporate
new lease accounting standards adopted by the Financial Accounting
Standards Board (FASB). Amending the USOA eliminates the need for
incumbent local exchange carriers (LECs) subject to Part 32 to maintain
two methods of accounting for leases. The Commission updates deployment
obligations consistent with the reset budget and rules changes adopted
in the Report and Order. The Commission adopts changes whereby support
in certain legacy areas will be awarded through competitive bidding.
Finally, to make sure that consumers in rural areas have access to
broadband consistent with demand and what services available in urban
areas, the Commission generally makes 25/3 Mbps the minimum obligations
for legacy support.
145. There were no comments raised that specifically addressed the
proposed rules and policies presented in the 2018 Rate-of-Return Reform
Order and NPRM IRFA. Nonetheless, the Commission considered the
potential impact of the rules proposed in the IRFA on small entities
and generally reduced the compliance burden for all small entities to
reduce the economic impact of the rules enacted herein on such
entities.
146. 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
[[Page 4728]]
``small business'' has the same meaning as the term ``small-business
concern'' under the Small Business Act. A small-business concern'' is
one which: (1) Is independently owned and operated; (2) is not dominant
in its field of operation; and (3) satisfies any additional criteria
established by the Small Business Administration (SBA).
147. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. Our actions, over time, may affect small entities that
are not easily categorized at present. The Commission therefore
describes here, at the outset, three broad groups of small entities
that could be directly affected herein. First, while there are industry
specific size standards for small businesses that are used in the
regulatory flexibility analysis, according to data from the SBA's
Office of Advocacy, in general a small business is an independent
business having fewer than 500 employees. These types of small
businesses represent 99.9 percent of all businesses in the United
States which translates to 28.8 million businesses.
148. Next, the type of small entity described as a ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
Nationwide, as of Aug 2016, there were approximately 356,494 small
organizations based on registration and tax data filed by nonprofits
with the Internal Revenue Service (IRS).
149. Finally, the small entity described as a ``small governmental
jurisdiction'' is defined generally as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau data from the 2012 Census of Governments indicates that there
were 90,056 local governmental jurisdictions consisting of general
purpose governments and special purpose governments in the United
States. Of this number there were 37,132 General purpose governments
(county, municipal and town or township) with populations of less than
50,000 and 12,184 Special purpose governments (independent school
districts and special districts) with populations of less than 50,000.
The 2012 U.S. Census Bureau data for most types of governments in the
local government category shows that the majority of these governments
have populations of less than 50,000. Based on this data the Commission
estimates that at least 49,316 local government jurisdictions fall in
the category of ``small governmental jurisdictions.''
150. In the Report and Order, the Commission requires all rate-of-
return carriers, not just legacy carriers, to file line count data in
the FCC Form 507, and the Commission changes the deadline for line
count reporting. The Commission amends the Uniform System of Accounts
(USOA) contained in Part 32 of the Commission's rules to incorporate
new lease accounting standards adopted by the Financial Accounting
Standards Board (FASB). The Commission updates deployment obligations
consistent with the reset budget and rules changes adopted in the
Report and Order. By adopting defined deployment obligations for all
legacy carriers, the Commission requires all of them to report
deployment in the High Cost Universal Broadband (HUBB) portal.
151. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include (among others) the following four alternatives: (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities. The Commission has considered all of these factors subsequent
to receiving substantive comments from the public and potentially
affected entities. The Commission has also considered the economic
impact on small entities, as identified in comments filed in response
to 2018 Rate-of-Return Reform Order and NPRM and IRFA, in reaching its
final conclusions and taking action in this proceeding.
152. The rules that the Commission adopts in the Report and Order
take steps to provide greater certainty and flexibility to rate-of-
return carriers, many of which are small entities. The Commission
authorizes additional support for existing A-CAM carriers. The
Commission also authorizes a new A-CAM offer for current legacy
carriers, providing them the opportunity to receive model-based support
in exchange for deploying broadband-capable networks to a pre-
determined number of eligible locations. The Commission recognizes that
permitting rate-of-return carriers to elect to receive fix monthly
support amounts over the ten years will enhance the ability of these
carriers to deploy broadband throughout the term and free them from the
administrative burdens associated with doing cost studies to receive
high-cost support. For this new offer, as with the existing A-CAM
carriers, to provide flexibility, the Commission adopts interim
milestones over the support term and permit the carriers to meet their
obligations by deploying to 95 percent of the minimum number of
locations.
153. Furthermore, the Commission adopts a new and separate budget
for the legacy carriers that annually adjusts to factor in inflation
and includes a minimum threshold of support not subject to the budget
constraint. This will increase the amount of support available
providing sufficiency and predictability for the legacy carriers. The
Commission reimburses all support reductions budget control mechanism.
Another action the Commission takes to make carriers' support more
predictable is eliminating the per-line reduction calculation that was
part of the budget control mechanism. The Commission also eliminates
the capital investment allowance, which provides further relief to
legacy carriers. The capital investment allowance had been deterring
economically efficient investments and was administratively
overburdensome for the carriers.
154. In adopting mandatory line count reporting for all rate-of-
return carriers, the Commission notes that this is something that all
carriers were required to do previously, and the burden is minimal. In
lowering the monthly per-line support for legacy carriers, to minimize
the impact, the Commission does it gradually--from $250 to $225,
effective July 1, 2019, and then to $200, effective July 1, 2021. In
revising the deployment obligations for legacy carriers, to minimize
the impact, the Commission restarts the five-year deployment term and
allow any locations deployed to with at least 25/3 Mbps broadband in
the original term to count towards this new term. Finally, our decision
to auction off support in legacy study areas may have a significant
economic impact on small entities, but to reduce that impact, the
Commission limits the auction to study areas that are significantly
overlapped with unsubsidized competition. Moreover, while it affects
incumbent LECs, our decision to auction certain legacy areas may have a
positive impact on other small entity providers who currently do not
receive universal service support.
V. Ordering Clauses
155. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1-4, 5, 201-206, 214, 218-220,
[[Page 4729]]
251, 252, 254, 256, 303(r), 332, 403, and 405 of the Communications Act
of 1934, as amended, and section 706 of the Telecommunications Act of
1996, 47 U.S.C. 151-155, 201-206, 214, 218-220, 251, 252, 254, 256,
303(r), 403, 405, and 1302, the Report and Order, Further Notice of
Proposed Rulemaking, and Order on Reconsideration is adopted, effective
thirty (30) days after publication of the text or summary thereof in
the Federal Register, except for those rules and requirements involving
Paperwork Reduction Act burdens, which shall become effective
immediately upon announcement in the Federal Register of OMB approval,
and the rules adopted pursuant to section III.C.8 of the Report and
Order (paragraphs 115 to 126 of this Federal Register summary) shall
become effective on January 1, 2020. It is the Commission's intention
in adopting these rules that if any of the rules that it retains,
modifies, or adopts herein, or the application thereof to any person or
circumstance, are held to be unlawful, the remaining portions of the
rules not deemed unlawful, and the application of such rules to other
persons or circumstances, shall remain in effect to the fullest extent
permitted by law.
156. It is further ordered that Part 32, 54, and 65 of the
Commission's rules, 47 CFR part 32, 54, and 65, are amended as set
forth in the following, and such rule amendments shall be effective
thirty (30) days after publication of the rules amendments in the
Federal Register, except that those rules and requirements which
contain new or modified information collection requirements that
require approval by the Office of Management and Budget under the
Paperwork Reduction Act will become effective after the Commission
publishes a notice in the Federal Register announcing such approval and
the relevant effective date, and the rules adopted pursuant to section
III.C.8 of the Report and Order (paragraphs 115 to 126 of this Federal
Register summary) shall become effective on January 1, 2020.
157. It is further ordered that, pursuant to the authority
contained in section 405 of the Communications Act of 1934, as amended,
47 U.S.C. 405, and sections 0.331 and 1.429 of the Commission's rules,
47 CFR 0.331 and 47 CFR 1.429, the Petition for Reconsideration filed
by GRAND RIVER MUTUAL TELEPHONE CORPORATION on May 2, 2018 is denied.
158. It is further ordered that, pursuant to the authority
contained in section 405 of the Communications Act of 1934, as amended,
47 U.S.C. 405, and sections 0.331 and 1.429 of the Commission's rules,
47 CFR 0.331 and 47 CFR 1.429, the Petition for Reconsideration filed
by CLARITY TELECOM, LLC on May 10, 2018 is denied.
159. It is further ordered that, pursuant to the authority
contained in section 405 of the Communications Act of 1934, as amended,
47 U.S.C. 405, and sections 0.331 and 1.429 of the Commission's rules,
47 CFR 0.331 and 47 CFR 1.429, the Petition for Reconsideration filed
by HAMILTON COUNTY TELEPHONE CO-OP on May 8, 2018 is denied.
160. It is further ordered, pursuant to section 1.3 of the
Commission's rules, 47 CFR 1.3, the Commission waives Part 32 rules to
the extent necessary to allow carriers subject to those rules to employ
the revised procedures adopted in section III.C.8 (paragraphs 115 to
126 of this Federal Register summary).
List of Subjects
47 CFR Part 32
Communications common carriers, Reporting and recordkeeping
requirements, Telephone, Uniform system of accounts.
47 CFR Part 54
Communications common carriers, Health facilities, Infants and
children, Internet, Libraries, Reporting and recordkeeping
requirements, Schools, Telecommunications, Telephone.
47 CFR Part 65
Administrative practice and procedure, Communications common
carriers, Reporting and recordkeeping requirements, Telephone.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR parts 32, 54 and 65 as follows:
PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS
COMPANIES
0
1. The authority citation for part 32 continues to read as follow:
Authority: 47 U.S.C. 219, 220 as amended, unless otherwise
noted.
0
2. Amend Sec. 32.1410 by adding paragraphs (l) and (m) to read as
follows:
Sec. 32.1410 Other noncurrent assets.
* * * * *
(l) This account shall include property subject to a lessee
operating lease longer than one year.
(1) An operating lease is a contract, or part of a contract, that
conveys the right to control the use of identified property, plant and
equipment (an identified asset) for a period of time in exchange for
consideration.
(2) The amounts recorded in this account at the inception of an
operating lease shall be equal to the present value not to exceed fair
value, at the beginning of the lease term, of minimum lease payments
during the lease term, excluding that portion of the payments
representing executory costs to be paid by the lessor, together with
any profit thereon. Amounts subject to current treatment shall be
included in Account 1350, Other current assets.
(3) Any balance in this account relating to capitalized operating
leases shall be excluded in any ratemaking calculations.
(m) This account shall include the amount of lessor receivables
from an operating lease longer than one year.
(1) The amount recorded in this account at the inception of an
operating lease shall be equal to the present value not to exceed fair
value, at the beginning of the lease term, of minimum lease payments
during the lease term, excluding that portion of the payments
representing executory costs to be paid by the lessee, together with
any profit thereon. Amounts subject to current settlement shall be
included in Account 1350, Other current assets.
(2) Any balance in this account relating to receivables associated
with capitalized operating leases shall be excluded in any ratemaking
calculations.
0
3. Revise Sec. 32.2680 to read as follows:
Sec. 32.2680 Amortizable tangible assets.
This account shall be used by companies to record amounts for
property acquired under finance leases and the original cost of
leasehold improvements of the type of character detailed in Accounts
2681 and 2682.
0
4. Amend Sec. 32.2681 by revising the section heading and paragraphs
(a) and (c) to read as follows:
Sec. 32.2681 Finance leases.
(a) This account shall include all property acquired under a
finance lease. A lease qualifies as a finance lease when one or more of
the following criteria is met:
* * * * *
(c) The amounts recorded in this account at the inception of a
finance lease shall be equal to the original cost,
[[Page 4730]]
if known, or to the present value not to exceed fair value, at the
beginning of the lease term, of minimum lease payments during the lease
term, excluding that portion of the payments representing executory
costs to be paid by the lessor, together with any profit thereon.
0
5. Amend Sec. 32.2682 by revising paragraph (a) to read as follows:
Sec. 32.2682 Leasehold improvements.
(a) This account shall include the original cost of leasehold
improvements made to telecommunications plant held under a finance or
operating lease, which are subject to amortization treatment. This
account shall also include those improvements which will revert to the
lessor.
* * * * *
0
6. Amend Sec. 32.3400 by revising paragraphs (a)(1) and (b) to read as
follows:
Sec. 32.3400 Accumulated amortization--tangible.
(a) * * *
(1) The accumulated amortization associated with the investment
contained in Account 2681, Finance leases.
* * * * *
(b) This account shall be credited with amounts for the
amortization of finance leases and leasehold improvements concurrently
charged to Account 6563, Amortization expense--tangible. (Note also
Account 3300, Accumulated depreciation--nonoperating.)
* * * * *
0
7. Amend Sec. 32.3410 by revising the section heading and paragraphs
(a) and (b) to read as follows:
Sec. 32.3410 Accumulated amortization--capitalized finance leases.
(a) This account shall include the accumulated amortization
associated with the investment contained in Account 2681, Finance
Leases.
(b) This account shall be credited with amounts for the
amortization of finance leases concurrently charged to Account 6563,
Amortization expense--tangible. (Note also Account 3300, Accumulated
depreciation--nonoperating.)
* * * * *
0
8. Amend Sec. 32.4130 by revising paragraph (c) to read as follows:
Sec. 32.4130 Other current liabilities.
* * * * *
(c) The current portion of obligations applicable to property
obtained under finance leases.
* * * * *
0
9. Amend Sec. 32.4200 by revising paragraph (a)(5) and adding
paragraph (a)(9) to read as follows:
Sec. 32.4200 Long term debt and funded debt.
(a) * * *
(5) The noncurrent portion of obligations applicable to property
obtained under finance leases. Amounts subject to current settlement
shall be included in Account 4130, Other current liabilities.
* * * * *
(9) The noncurrent portion of obligations applicable to property
subject to capitalized operating leases. Amounts subject to current
settlement shall be included in Account 4130, Other current
liabilities. Any balance in this account relating to capitalized
operating leases shall be excluded in any ratemaking calculations.
* * * * *
0
10. Amend Sec. 32.4300 by adding paragraph (c) to read as follows:
Sec. 32.4300 Other long-term liabilities and deferred credits.
* * * * *
(c) This account shall include the deferred obligations associated
with a capitalize operating lease longer than one year. The amounts
recorded in this account at the inception of an operating lease shall
be equal to the present value not to exceed fair value, at the
beginning of the lease term, of minimum lease payments during the lease
term, excluding that portion of the payments representing executory
costs to be paid by the lessor, together with any profit thereon.
0
11. Amend Sec. 32.7500 by revising paragraph (e) to read as follows:
Sec. 32.7500 Interest and related items.
* * * * *
(e) This account shall include the interest portion of each finance
lease and capitalized operating lease payment.
* * * * *
PART 54--UNIVERSAL SERVICE
0
12. The authority citation for part 54 continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220,
254, 303(r), 403, and 1302 unless otherwise noted.
0
13. Amend Sec. 54.302 by adding two sentences to the end of paragraph
(a) and revising paragraph (c) to read as follows:
Sec. 54.302 Monthly per-line limit on universal service support.
(a) * * * Beginning July 1, 2019, until June 30, 2021, each study
area's universal service monthly per-line support shall not exceed
$225. Beginning July 1, 2021, each study area's universal service
monthly per-line support shall not exceed $200.
* * * * *
(c) The Administrator, in order to limit support for carriers
pursuant to paragraph (a) of this section, shall reduce safety net
additive support, high-cost loop support, safety valve support, and
Connect America Fund Broadband Loop Support in proportion to the
relative amounts of each support the study area would receive absent
such limitation.
Sec. 54.303 [Amended]
0
14. Amend Sec. 54.303 by removing and reserving paragraph (b) and
removing paragraphs (c) through (m).
0
15. Amend Sec. 54.308 by
0
a. Revising the first sentence of paragraph (a)(1);
0
b. Adding paragraphs (a)(1)(iii) and (iv); and
0
c. Revising paragraphs (a)(2) introductory text, (a)(2)(i),
(a)(2)(ii)(A)(1) and (2), (a)(2)(ii)(B), and (a)(2)(iii).
The revisions and additions read as follows:
Sec. 54.308 Broadband public interest obligations for recipients of
high-cost support.
(a) * * *
(1) Carriers that elect to receive Connect America Fund-Alternative
Connect America Cost Model (CAF-ACAM) support pursuant to Sec. 54.311
are required to offer broadband service at actual speeds of at least 10
Mbps downstream/1 Mbps upstream to a defined number of locations as
specified by public notice, with a minimum usage allowance of 150 GB
per month, subject to the requirement that usage allowances remain
consistent with median usage in the United States over the course of
the term. * * *
* * * * *
(iii) Revised A-CAM I carriers, as defined by Sec. 54.311(a)(2),
must offer the following broadband speeds to locations that are fully
funded, as specified by public notice at the time of the
authorizations, as follows:
(A) Revised A-CAM I carriers with a state-level density of more
than 10 housing units per square mile, as specified by public notice at
the time of election, are required to offer broadband speeds of at
least 25 Mbps downstream/3 Mbps upstream to 85 percent of all fully
funded locations in the state by the end of the term.
(B) Revised A-CAM I carriers with a state-level density of 10 or
fewer, but
[[Page 4731]]
more than five, housing units per square mile, as specified by public
notice at the time of election, are required to offer broadband speeds
of at least 25 Mbps downstream/3 Mbps upstream to 65 percent of fully
funded locations in the state by the end of the term.
(C) Revised A-CAM I carriers with a state-level density of five or
fewer housing units per square mile, as specified by public notice at
the time of election, are required to offer broadband speeds of at
least 25 Mbps downstream/3 Mbps upstream to 50 percent of fully funded
locations in the state by the end of the term.
(iv) A-CAM II carriers, as defined by Sec. 54.311(a)(3), must
offer broadband speeds of at least 25 Mbps downstream/3 Mbps upstream
to 100 percent of fully funded locations in the state by the end of the
term, and therefore have no additional 10/1 Mbps obligation.
* * * * *
(2) Rate-of-return recipients of Connect America Fund Broadband
Loop Support (CAF BLS) shall be required to offer broadband service at
actual speeds of at least 25 Mbps downstream/3 Mbps upstream, over a
five-year period, to a defined number of unserved locations as
specified by public notice, as determined by the following methodology:
(i) Percentage of CAF BLS. Each rate-of-return carrier is required
to target a defined percentage of its five-year forecasted CAF BLS
support to the deployment of broadband service to locations that are
unserved with 25 Mbps downstream/3 Mbps upstream broadband service as
follows:
(A) Rate-of-return carriers with less than 20 percent deployment of
25/3 Mbps broadband service in their study areas, as determined by the
Bureau, will be required to use 35 percent of their five-year
forecasted CAF BLS support to extend broadband service where it is
currently lacking.
(B) Rate-of-return carriers with more than 20 percent but less than
40 percent deployment of 25/3 Mbps broadband service in their study
areas, as determined by the Bureau, will be required to use 25 percent
of their five-year forecasted CAF BLS support to extend broadband
service where it is currently lacking.
(C) Rate-of-return carriers with more than 40 percent deployment of
25/3 Mbps broadband service in their study areas, as determined by the
Bureau, will be required to use 20 percent of their five-year
forecasted CAF BLS support to extend broadband service where it is
currently lacking.
(ii) * * *
(A) * * *
(1) The weighted average unseparated cost per loop for carriers of
similar density that offer 25/3 Mbps or better broadband service to at
least 95 percent of locations, based on the most current FCC Form 477
data as determined by the Bureau, but excluding carriers subject to the
current per-line per-month cap set forth in Sec. 54.302 and carriers
subject to limitations on operating expenses set forth in Sec. 54.303;
or
(2) 150% of the weighted average of the cost per loop for carriers
of similar density, but excluding carriers subject to the per line per
month cap set forth in Sec. 54.302 and carriers subject to limitations
on operating expenses set forth in Sec. 54.303, with a similar level
of deployment of 25/3 Mbps or better broadband based on the most
current FCC Form 477 data, as determined by Bureau; or
(B) The average cost per location for census blocks lacking 25/3
Mbps broadband service in the carrier's study area as determined by the
A-CAM.
(iii) Restrictions on deployment obligations. No rate-of-return
carrier shall deploy terrestrial wireline technology in any census
block if doing so would result in total support per line in the study
area to exceed the per-line per-month cap in Sec. 54.302.
* * * * *
0
16. Amend Sec. 54.311 by adding paragraphs (a)(1) through (3) and
revising paragraph (c) through (e) to read as follows:
Sec. 54.311 Connect America Fund Alternative-Connect America Cost
Model Support
(a) * * *
(1) For the purposes of this section, ``A-CAM I'' refers to
carriers initially authorized to receive CAF-ACAM support as of January
24, 2017, including any carriers that later elected revised offers,
except for carriers described in paragraph (a)(2) of this section. For
such carriers, the first program year of CAF-ACAM is 2017.
(2) For the purposes of this section, ``Revised A-CAM I'' refers to
carriers initially authorized to receive CAF-ACAM support as of January
24, 2017, and were subsequently authorized to receive CAF-ACAM pursuant
to a revised offer after January 1, 2019. For such carriers, the first
program year of CAF-ACAM is 2017.
(3) For the purposes of this section, ``A-CAM II'' refers to
carriers first authorized to receive A-CAM support after January 1,
2019. For such carriers, the first program year of CAF-ACAM is 2019.
* * * * *
(c) Term of support. CAF-ACAM model-based support shall be provided
to A-CAM I carriers for a term that extends until December 31, 2026,
and to Revised A-CAM I and A-CAM II carriers for a term that extends
until December 31, 2028.
(d) Interim deployment milestones. Recipients of CAF-ACAM model-
based support must meet the following interim milestones with respect
to their deployment obligations set forth in Sec. 54.308(a)(1)(i) of
this subpart. Compliance shall be determined based on the total number
of fully funded locations in a state. Carriers that complete deployment
to at least 95 percent of the requisite number of locations will be
deemed to be in compliance with their deployment obligations. The
remaining locations that receive capped support are subject to the
standard specified in Sec. 54.308(a)(1)(ii).
(1) A-CAM I and Revised A-CAM I carriers must complete deployment
of 10/1 Mbps service to a number of eligible locations equal to 40
percent of fully funded locations by the end of 2020, to 50 percent of
fully funded locations by the end of 2021, to 60 percent of fully
funded locations by the end of 2022, to 70 percent of fully funded
locations by the end of 2023, to 80 percent of fully funded locations
by the end of 2024, to 90 percent of fully funded locations by the end
of 2025, and to 100 percent of fully funded locations by the end of
2026. By the end of 2026, A-CAM I carriers must complete deployment of
broadband meeting a standard of at least 25 Mbps downstream/3 Mbps
upstream to the requisite number of locations specified in Sec.
54.308(a)(1)(i). For Revised A-CAM I carriers, the deployment
milestones for 10/1 Mbps service described in this paragraph shall be
based on the number of locations that were fully funded pursuant to
authorizations made prior to January 1, 2019.
(2) Revised A-CAM I and A-CAM II carriers must complete deployment
of 25/3 Mbps service to a number of eligible locations equal to 40
percent of locations required by Sec. 54.308(a)(1) of this subpart by
the end of 2022, 50 percent of requisite locations by the end of 2023,
60 percent of requisite locations by the end of 2024, 70 percent of
requisite location by the end of 2025, 80 percent of requisite
locations by the end of 2026, 90 percent of requisite locations by the
end of 2027, and 100 percent of requisite locations by the end of 2028.
[[Page 4732]]
(e) Transition to CAF-ACAM Support. An A-CAM I, Revised A-CAM I, or
A-CAM II carrier whose final model-based support is less than the
carrier's legacy rate-of-return support in its base year as defined in
paragraph (e)(4) of this section, will transition as follows:
(1) If the difference between a carrier's model-based support and
its base year support, as determined by paragraph (e)(4) of this
section, is ten percent or less, it will receive, in addition to model-
based support, 50 percent of that difference in program year one, and
then will receive model support in program years two through ten.
(2) If the difference between a carrier's model-based support and
its base year support, as determined in paragraph (e)(4) of this
section, is 25 percent or less, but more than 10 percent, it will
receive, in addition to model-based support, an additional transition
payment for up to four years, and then will receive model support in
program years five through ten. The transition payments will be phased-
down 20 percent per year, provided that each phase-down amount is at
least five percent of the total base year support amount. If 20 percent
of the difference between a carrier's model-based support and base year
support is less than five percent of the total base year support
amount, the transition payments will be phased-down five percent of the
total base year support amount each year.
(3) If the difference between a carrier's model-based support and
its base year support, as determined in paragraph (e)(4) of this
section, is more than 25 percent, it will receive, in addition to
model-based support, an additional transition payment for up to nine
years, and then will receive model support in year ten. The transition
payments will be phased-down ten percent per year, provided that each
phase-down amount is at least five percent of the total base year
support amount. If ten percent of the difference between a carrier's
model-based support and its base year support is less than five percent
of the total base year support amount, the transition payments will be
phased-down five percent of the total base year support amount each
year.
(4) The carrier's base year support for purposes of the calculation
of transition payments is:
(i) For A-CAM I and Revised A-CAM I carriers, the amount of high-
cost loop support and interstate common line support disbursed to the
carrier for 2015 without regard to prior period adjustments related to
years other than 2015, as determined by the Administrator as of January
31, 2016 and publicly announced prior to the election period for the
voluntary path to the model; and
(ii) For A-CAM II carriers, the amount of high-cost loop support
and Connect America Fund--Broadband Loop Support disbursed to the
carrier for 2018 without regard to prior period adjustments related to
years other than 2018, as determined by the Administrator as of January
31, 2019 and publicly announced prior to the election period for the
voluntary path to the model.
0
17. Amend Sec. 54.313 by revising paragraph (f)(1)(i) and adding
paragraph (f)(5) to read as follow:
Sec. 54.313 Annual reporting requirements for high-cost recipients.
* * * * *
(f) * * *
(1) * * *
(i) If the rate-of-return carrier is receiving support pursuant to
subparts K and M of this part, a certification that it is taking
reasonable steps to provide upon reasonable request broadband service
at actual speeds of at least 25 Mbps downstream/3 Mbps upstream, with
latency suitable for real-time applications, including Voice over
internet Protocol, and usage capacity that is reasonably comparable to
comparable offerings in urban areas as determined in an annual survey,
and that requests for such service are met within a reasonable amount
of time; if the rate-of-return carrier receives CAF-ACAM support, a
certification that it is meeting the relevant reasonable request
standard; or if the rate-of-return carrier is receiving Alaska Plan
support pursuant to Sec. 54.306, a certification that it is offering
broadband service with latency suitable for real-time applications,
including Voice over internet Protocol, and usage capacity that is
reasonably comparable to comparable offerings in urban areas, and at
speeds committed to in its approved performance plan to the locations
it has reported pursuant to Sec. 54.316(a), subject to any limitations
due to the availability of backhaul as specified in paragraph (g) of
this section.
* * * * *
(5) Rate-of-return carriers receiving support pursuant to the
Alternative Connect America Model or the Alaska Plan, that are not
otherwise required to file count data pursuant to Sec. 54.903(a)(1) of
this subpart, must file the line count data required by Sec.
54.903(a)(1).
* * * * *
0
18. Amend Sec. 54.316 by revising paragraphs (b)(2)(i) and (ii) and
(b)(3)(i) and (ii) to read as follows:
Sec. 54.316 Broadband deployment reporting and certification
requirements for high-cost recipients.
* * * * *
(b) * * *
(2) * * *
(i) No later than March 1, 2021, and every year thereafter ending
on no later than March 1, 2029, a certification that by the end of the
prior calendar year, it was offering broadband meeting the requisite
public interest obligations specified in Sec. 54.308 to the required
percentage of its fully funded locations in the state, pursuant to the
interim deployment milestones set forth in Sec. 54.311(d).
(ii) No later than March 1, 2027, a certification that as of
December 31, 2026, it was offering broadband meeting the requisite
public interest obligations specified in Sec. 54.308(a)(1) to all of
its fully funded locations in the state and to the required percentage
of its capped locations in the state.
(3) * * *
(i) No later than March 1, 2024, a certification that it fulfilled
the deployment obligation meeting the requisite public interest
obligations as specified in Sec. 54.308(a)(2) to the required number
of locations as of December 31, 2023.
(ii) Every subsequent five-year period thereafter, a certification
that it fulfilled the deployment obligation meeting the requisite
public interest obligations as specified in Sec. 54.308(a)(2)(iv).
* * * * *
Sec. 54.319 [Amended]
0
19. Amend Sec. 54.319 by removing and reserving paragraphs (a) through
(c).:
0
20. Amend Sec. 54.643 by revising paragraph (a)(6)(iv) introductory
text to read as follows:
Sec. 54.643 Funding commitments.
(a) * * *
(6) * * *
(iv) Sustainability plans for applicants requesting support for
long-term capital expenses: Consortia that seek funding to construct
and own their own facilities or obtain indefeasible right of use or
finance lease interests are required to submit a sustainability plan
with their funding requests demonstrating how they intend to maintain
and operate the facilities that are supported over the relevant time
period. Applicants may incorporate by reference other portions of their
applications (e.g., project management plan, budget). The
sustainability plan must, at a minimum, address the following points:
* * * * *
[[Page 4733]]
0
21. Amend Sec. 54.901 by removing and reserving paragraph (f)(2) and
revising paragraph (f)(3).
The revision reads as follows:
Sec. 54.901 Calculation of Connect America Fund Broadband Loop
Support.
* * * * *
(f) * * *
(3) The Administrator shall apply a pro rata reduction to CAF BLS
for each recipient of CAF BLS as necessary to achieve the target
amount.
* * * * *
0
22. Amend Sec. 54.903 by revising the first sentence of paragraph
(a)(1) to read as follows:
Sec. 54.903 Obligations of rate-of-return carriers and the
Administrator.
(a) * * *
(1) Each rate-of-return carrier shall submit to the Administrator
on March 31 of each year the number of lines it served as of the prior
December 31, within each rate-of-return carrier study area showing
residential and single-line business line counts, multi-line business
line counts, and consumer broadband-only line counts separately. * * *
* * * * *
0
23. Amend Sec. 54.1310 by revising paragraph (d)(2) to read as
follows:
Sec. 54.1310 Expense adjustment.
* * * * *
(d) * * *
(2) Each January 1 and July 1, the Administrator shall apply a pro
rata reduction to High Cost Loop Support for each recipient of High
Cost Loop Support as necessary to achieve the target amount.
* * * * *
PART 65--INTERSTATE RATE OF RETURN PRESCRIPTION, PROCEDURES, AND
METHODOLOGIES
0
24. The authority citation for part 65 continues to read as follow:
Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220,
254, 303(r), 403, and 1302 unless otherwise noted.
0
25. Amend Sec. 65.450 by revising paragraph (b)(1) to read as follows:
Sec. 65.450 Net income.
* * * * *
(b) * * *
(1) Gains related to property sold to others and leased back under
finance leases for use in telecommunications services shall be recorded
in Account 4300, Other long-term liabilities and deferred credits, and
credited to Account 6563, Amortization expense--tangible, over the
amortization period established for the finance lease;
* * * * *
[FR Doc. 2019-01827 Filed 2-15-19; 8:45 am]
BILLING CODE 6712-01-P