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                                Before the
               Federal Communications Commission
                    Washington, D.C.  20554


In the Matter of                     )
                                     )
Federal-State Joint Board on         )
Universal Service:                   )    CC Docket No.  96-45
Promoting Deployment and             )    
Subscribership in Unserved           )  
and Underserved Areas, Including        )    
Tribal and Insular Areas             )    
                                          
                                     
              FURTHER NOTICE OF PROPOSED RULEMAKING
                                
                                
      Adopted: August 5, 1999Released:  September 3, 1999


Comments Due:       60 days after publication in the Federal Register
Reply Comments Due: 90 days after publication in the Federal Register


By the Commission:  Commissioner Furchtgott-Roth approving in part, dissenting in part, and
issuing a statement; Commissioner Tristani issuing a statement.


                       TABLE OF CONTENTS
                                

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II.                                                             Current Levels of Deployment and Subscribership. . . . . . .8
 A.  Penetration Rates. . . . . . . . . . . . . . . . . . . . . . . . . .8
 B.  Availability and Cost of Telecommunications Services . . . . . . . .9
 C.  Impediments to Increased Penetration . . . . . . . . . . . . . . . 12
III.                                                            Tribal Lands . . . . . .16
 A.  Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
 B.  Defining "Tribal Lands". . . . . . . . . . . . . . . . . . . . . . 23
 C.  High-cost Support Mechanisms . . . . . . . . . . . . . . . . . . . 25
 D.  Revisions to Lifeline. . . . . . . . . . . . . . . . . . . . . . . 30
IV.                                                             DESIGNATING Eligible Telecommunications Carriers Pursuant to Section 214(e)(6) . . . . . 33
V. Unserved Areas -- Implementation of Section 214(e)(3) . . . . . . . .38
 A.  Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
 B.  Defining "Unserved Area" . . . . . . . . . . . . . . . . . . . . . 39
 C.  Determining When a Community is Unserved . . . . . . . . . . . . . 40
 D.  Determining When No Common Carrier Will Provide Service. . . . . . 40
 E.  Identifying Carrier or Carriers Best Able to Serve Unserved Areas. . . . . . .40
 F.  Ordering Carriers to Provide Service . . . . . . . . . . . . . . . 48
VI.                                                             Underserved Areas. . . . . . 49
 A.  Defining "Underserved Area". . . . . . . . . . . . . . . . . . . . 49
 B.  Expanding LinkUp to Include Facilities-Based Charges . . . . . . . 49
 C.  Support for Intrastate Toll Calling. . . . . . . . . . . . . . . . 51
 D.  Expanded Availability of Toll Limitation Devices . . . . . . . . . 51
 E.  Publicizing Availability of Low-Income Support . . . . . . . . . . 52
 F.  Support for Rural Health Care Infrastructure . . . . . . . . . . . 53
VII. Insular Areas . . . . . . . . . . . . . . . . . . . . . . . . . . .56
 A.  Defining "Insular Area". . . . . . . . . . . . . . . . . . . . . . 56
 B.  Rural Health Care Support. . . . . . . . . . . . . . . . . . . . . 58
 C.  Access to Toll-Free Services in Insular Areas. . . . . . . . . . . 60
VIII.                                                           Procedural Matters . . . . . 62
 A.  Ex Parte Procedures. . . . . . . . . . . . . . . . . . . . . . . . 62
 B.  Comment Filing Procedures. . . . . . . . . . . . . . . . . . . . . 62
 C.  Initial Regulatory Flexibility Act Analysis. . . . . . . . . . . . 63
IX.                                                             Ordering clauses . . . . . . 63
APPENDIX A:                                                     COMMISSION MEETINGS ON INDIAN TELECOMMUNICATIONS ISSUES   LIST OF
ATTENDEES 65
APPENDIX B:                                                     OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS -COMMISSION HEARINGS. . . . . . . . . . . . . . . . . . . .67
APPENDIX C:                                                     OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS   PARTIES FILING COMMENTS . . . . . . . . . . . . . . . . .69
APPENDIX D:                                                     COMPETITIVE BIDDING PROPOSALS AND EXAMPLES . . . . . .71
APPENDIX E:                                                     ARIZONA PROPOSAL CONCERNING UNIVERSAL SERVICE SUPPORT FOR
INITIAL CONNECTION CHARGES . . . . . . . . . . . . . . . . . . . . . . .83
APPENDIX F:                                                     INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS. . . . . .84

                         I.INTRODUCTION
1.     An important goal of the Telecommunications Act of 1996 is to preserve and advance
universal service in a competitive telecommunications environment.  The 1996 Act mandates that
"consumers in all regions of the Nation, including low-income consumers and those in rural,
insular, and high[-] cost areas, should have access to telecommunications and information services
. . . ."  Congress also directed that the support mechanisms employed by the Commission for this
task should be "specific, predictable and sufficient."  Through decisions adopted over the past
two years, the Commission has been striving to ensure that federal universal service support
mechanisms for high-cost areas, low-income consumers, schools and libraries, and rural health
care providers, enable consumers to obtain telecommunications services that would otherwise be
prohibitively expensive.  
2.     The absence of telecommunications service in a home puts its occupants at a
tremendous disadvantage in today's society.  Parents cannot be reached when urgent situations
arise at school.  Job seekers cannot offer prospective employers a quick and convenient means of
communication.  People in immediate need of emergency services cannot contact police
departments, fire departments, or medical providers.  In short, telephone service provides a vital
link between individuals and society as a whole.  Given the importance of telephone service in
modern society, it is imperative that the Commission take swift and decisive action to promote the
deployment of facilities to unserved and underserved areas and to provide the support necessary
to increase subscribership in these areas.
3.     The Commission took additional steps in the Thirteenth Order on Reconsideration
toward realizing Congress's goal of bringing telecommunications services to all regions of the
nation.  Specifically, in consultation with the Federal-State Joint Board on Universal Service
(Joint Board), we adopted the framework for a new, forward-looking high-cost support
mechanism for non-rural carriers.  This new high-cost support mechanism is intended to ensure
that high-cost areas receive support that is specific, predictable, and sufficient, even as local
competition develops.  Moreover, we believe that the forward-looking methodology, as opposed
to a methodology based on book costs, will encourage efficient entry and investment in high-cost
areas because forward-looking costs drive market decisions.  
4.     In addition to adopting the methodology for the new high-cost support mechanism for
non-rural carriers, the Thirteenth Order on Reconsideration also sought comment on certain
issues regarding the implementation of the new mechanism.  The Commission intends to resolve
these implementation issues in the fall of 1999, so that the new high-cost support mechanism will
begin providing support to non-rural carriers beginning on January 1, 2000.  In addition, the
Commission reaffirmed its intention that rural carriers will receive support based on the forward-
looking costs of providing supported services, but not before January 1, 2001, and only after
further review by the Commission, the Joint Board, and a Rural Task Force appointed by the Joint
Board.  In the meantime, rural carriers will continue to receive high-cost support based on the
existing mechanism until the Commission adopts an appropriate forward-looking mechanism for
determining rural support.   
5.     The Commission has also recognized that, despite the steps it had taken to achieve the
universal service goals of the 1996 Act, some areas of the nation remain unserved or inadequately
served.  In the First Report and Order, the Commission stated that it would revisit certain issues
pertaining to the availability of service in unserved areas and universal service support in insular
areas.  In its Second Recommended Decision, the Joint Board recommended that the special
needs of unserved areas be investigated and subjected to a more comprehensive evaluation in a
separate proceeding. Telephone penetration rates among low-income consumers, and in insular,
high-cost, and tribal lands lag behind the penetration rates in the rest of the country.  Indeed,
while approximately 94.2 percent of all households in the United States have telephone service
today, subscribership levels for very low income households (78.3 percent), insular areas,
certain high-cost areas, and tribal lands (46.6 percent), are significantly lower than the national
average.  The Commission has stated that these low penetration rates are largely the result of
"income disparity, compounded by the unique challenges these areas face by virtue of their
location." 
6.     The Commission has been particularly concerned that Indians on reservations, in
comparison to other Americans, have less access even to basic telecommunications services.  In
1998, the Commission began formally examining its relationship with Indian tribes and the unique
issues involved in providing access to telephone service for Indians on reservations.  As a first
step, Commissioners and staff met with many tribal leaders and other Indian representatives to
obtain their input.  In meetings on April 30, 1998, and July 7, 1998, Commissioners and staff
heard from a variety of tribal leaders, tribal telephone company representatives, academics,
government personnel, and others with experience and expertise in the deployment of
telecommunications services on reservations.   Experts discussed problems ranging from
geographic isolation to lack of information to economic barriers.  These meetings provided an
unprecedented opportunity for the Commission to hear about the variety of interrelated obstacles
that have resulted in the lowest penetration rates in the country.  Following these meetings,
several of the experts returned in the fall of 1998, to provide a tutorial on Indian law for
Commission staff.
7.     Based on this informal dialogue with experts, the Commission determined that it
would conduct public hearings to explore further the reasons for the lack of telephone service and
to determine what specific actions the Commission could take that would improve access to
telephone service on Indian reservations.  The hearings, entitled "Overcoming Obstacles to
Telephone Service for Indians on Reservations," BO Docket No. 99-11, provided an opportunity
to obtain formal testimony and comments on the range of problems the Commission had begun to
identify.  The first field hearing was held on January 29, 1999 at the Indian Pueblo Cultural Center
in Albuquerque, New Mexico.  The second field hearing was held on March 23, 1999 at the Gila
River Indian Community in Chandler, Arizona.  Each hearing consisted of three panels
representing tribal authorities and tribal telephone companies, industry, and government and
consumer groups.   The Commission heard extensive testimony on issues including the costs of
delivering services to remote areas having very low population densities; the impact of the size
and extent of local calling areas on affordability of service; the quality of telephone service on
reservations; the complexities of governmental jurisdiction and sovereignty issues; and the effects
on telephone service of low incomes and high unemployment on reservations.  Transcripts of the
hearings and comments filed by interested parties are available on the Commission's website. 
Comments filed in BO Docket Number 99-11 will be incorporated, where relevant, into the
record of this proceeding.
8.     Further, in connection with each of the field hearings, Commissioners and staff made
site visits to Indian reservations and tribally-owned telephone companies.  These included visits to
the Rosebud Reservation, the Santa Domingo, Jemez, and Picuris Pueblos, and to Saddleback
Communications, the Gila River Telephone Company, the Salt River Pima-Maricopa Reservation,
the Navajo Nation, the Hopi Reservation, and the Havasupai Reservation.  These site visits
provided an opportunity for Commissioners and staff to observe firsthand the state of telephone
service in these reservations and pueblos and to hear directly from tribal members about their
experiences.  For example, Commissioners and staff visited the home of an elderly couple who
could not afford the cost of installing a telephone in their home.  The husband of the couple
explained that he was suffering from a chronic illness, but was unable to reach the hospital or his
doctor by telephone to schedule medical appointments and discuss his treatment.  During another
site visit, a tribal member stated that a relative had died during a medical emergency when his
family was unable to call an ambulance in time when critical medical attention was needed.  In
addition, the trips to Saddleback Communications and the Gila River Telephone Company
enabled Commission staff to view the successful operations of some tribally-owned telephone
companies.
9.     In this Further Notice of Proposed Rulemaking (Further Notice), the Commission
addresses the unique issues that may limit telecommunications deployment and subscribership in
the unserved or underserved regions of our Nation, including on tribal lands and in insular areas.
In particular, the Commission seeks comment on current levels of deployment and subscribership
in unserved, tribal and insular areas, including penetration rates, availability of telecommunications
services, and possible impediments to increased deployment and penetration. With respect to
tribal areas, the Commission seeks comment on issues that may be affecting the availability of
universal service in tribal areas, including the assignment of jurisdiction, designation of eligible
telecommunications carriers, and possible modifications to federal high-cost and low-income
support mechanisms that may be necessary to promote deployment and subscribership in these
areas.  In particular, the Commission seeks comment on the possibility of allowing carriers to
establish separate tribal study areas, raising the cap on the high-cost fund to allow for growth
based on separate tribal study areas, and revisions to its Lifeline rules.  In a companion Notice of
Proposed Rulemaking we are adopting today, we seek comment on the potential of wireless
technology to provide basic telephone service to tribal lands.
10.    With respect to unserved areas, the Commission seeks further comment regarding the
implementation of section 214(e)(3) of the Act, which permits the Commission or state
commissions to order a carrier to provide service to an unserved community, including the
possibility of adopting a competitive bidding mechanism to identify the carrier or carriers best able
to serve an unserved area.  The Commission also seeks comment on possible modifications to the
federal low-income and rural health care support mechanisms in underserved areas, including
tribal and insular areas, including the possibility of expanding LinkUp to include facilities based
charges, and providing support for intrastate toll-calling and rural health care infrastructure.  The
Commission seeks comment on rule changes designed to enhance the availability of support for
rural health care providers in insular areas, including determining the urban rate and the nearest
large city.  Through these efforts, we seek to ensure that unserved and underserved areas have
access to telecommunications services.  With respect to tribal lands, we also seek to ensure that
our efforts are consistent with principles of tribal sovereignty, the federal trust relationship, and
support for tribal self-determination.
       XI.Current Levels of Deployment and Subscribership
12.    In this section, we seek to gain a better understanding of the characteristics of
unserved and underserved areas, including insular and tribal lands, which by their very nature are
difficult to assess.  We also seek comment on specific factors preventing deployment of
telecommunications services in unserved areas and causing unusually low subscribership rates in
underserved areas.  We seek to determine which of these factors are common among rural,
insular, high-cost, and tribal lands, and which are unique to specific types of areas.  We ask
commenters to support their comments with empirical evidence, in addition to anecdotal evidence,
to the extent possible.
     A.   Penetration Rates
13.    The Industry Analysis Division of the Common Carrier Bureau publishes a
Subscribership Report three times per year.  The data in this report is based on the Current
Population Survey (CPS), conducted monthly by the Census Bureau to keep track of the
unemployment rate and other socio-economic conditions.  The survey, however, is based on
information from only 50,000 households nationwide and does not identify geographic areas with
fewer than 100,000 people.  Because many unserved, tribal and insular areas fall below this
population threshold, the CPS cannot be used to estimate penetration rates for these areas.  In
addition, this data does not include areas of the United States that are not states, including Puerto
Rico and the Virgin Islands.  The long form of the decennial census, which is delivered to millions
of households, contains a question about telephone subscribership.  As a result, the census data
can be used to estimate telephone penetration for smaller geographic areas.  This data, however,
is collected only every ten years and it takes the Census Bureau one year to compile results.  
14.    We seek detailed information, to the extent that it is available, on penetration rates in
high-cost areas, insular areas, tribal lands, and any other areas considered to be underserved.  By
the term penetration rate, we mean the percentage of households within a specified area that have
telephone service in the housing unit.  We seek this information on a national level, on a state-
by-state or territory-by-territory level, and on an area-by-area level.  To the extent possible, we
encourage commenters to provide the following additional information in each of the areas, and
on each of the levels, where they measure penetration rates:  (1) total population; (2) population
density; (3) average annual income; and (4) average unemployment rate.  We also ask that
commenters briefly explain the methods by which they gather their data (e.g., census data,
statistical sampling, etc.).  We also seek comment on the difficulty of getting such information,
such as the difficulty of mapping a telephone service territory onto the census territories (such as
census block groups) because the boundaries may not always coincide, and questions concerning
the definitions of the terms "household" and "telephone service."
     A.   Availability and Cost of Telecommunications Services
15.    In each of the areas, and on each of the levels described above in section II.A above,
we seek to determine the nature of the telecommunications services available and the costs of
such services.  In particular, we seek comment on the extent to which these areas receive the
following service, if any: basic telephone service, services included within the definition of
universal service, and/or advanced telecommunications services.  We also seek comment on
whether any carrier is providing the following services and the approximate number of households
served by each service: wireline, wireless, Basic Exchange Telecommunications Radio Systems
(BETRS), or other telecommunications services; cable television; direct broadcast satellite
service; other satellite services that provide voice and data, such as those provided through VSAT
networks; Internet service; and electric service.  In addition, we seek comment on the monthly
rate for each of these services.  With specific regard to basic telephone service, we seek comment
on the average monthly bill for local service, local toll service, and long-distance service.
16.    To the extent that underserved, high-cost, insular, and/or tribal lands have basic
telephone service, we seek comment on whether the local calling area includes the nearest
metropolitan area or other area where the nearest medical, government, cultural or entertainment
facilities exist, i.e., the "community of interest."  For unserved areas, and in particular tribal lands,
we also seek comment to determine whether these areas fall within the designated service area of
existing carriers, regardless of whether such carriers are providing service to the area.
17.     We seek comment on the extent to which existing facilities currently used to provide
other services (e.g., radio broadcast towers, cable television plant, electrical poles and satellite
infrastructure) could be adapted to provide the services included within the definition of universal
service.  We also seek comment on whether specific services included within the definition of
universal service could not be provided via these facilities.  We seek comment on the extent to
which facilities used to provide telecommunications service to customers outside the unserved or
underserved areas exist adjacent to or nearby the unserved or underserved areas.  In particular,
we seek comment on whether railroad tracks, or towers used for the placement of antennas, are
found in these adjacent areas.  We seek comment on what role the Commission might play in
encouraging the use of these other facilities to provide service in underserved areas.  For example,
we seek comment on whether the Commission, or some other entity, should develop a database to
maintain information about facilities that could be used to provide service in currently unserved or
underserved areas, including tribal lands and insular areas.
18.    We also seek comment on the possible shared use of existing federal
telecommunications infrastructure, facilities or other resources, including government rights-of-
way,  to provide service in unserved or underserved areas, including tribal and insular areas.  We
seek comment on whether federal telecommunications resources could be made available in the
short term to serve as connecting backbone infrastructure for health and safety
telecommunications in unserved areas.  We encourage federal entities with government owned
telecommunications resources, particularly the Bureau of Indian Affairs, to comment on this issue. 

19.    Individuals from Indian communities, state agencies and the telecommunications
industry have commented that satellite and terrestrial wireless systems may represent practical and
cost-effective alternatives for providing service in unserved areas, including tribal lands.  In the
pending 2 GHz proceeding, which proposes policies and rules for licensing and operation of the 2
GHz mobile satellite service (MSS) systems in the United States, the Commission sought
comment on incentives and policies to encourage provision of satellite services to unserved, rural,
insular or economically isolated areas.  The commenters generally support the Commission's
tentative conclusion that satellites represent an excellent technology for providing basic and
advanced telecommunications services to unserved areas, including tribal lands.  Several
commenters stated that the Commission should take positive steps to encourage access to
Universal Service Funds by satellite operators or service providers.  Several commenters also
requested that the Commission should identify express and implicit regulatory provisions that may
prevent satellite providers from seeking universal support subsidies and reform those provisions,
or forbear from imposing these provision, so that MSS providers can fully participate in the
Universal Service Support initiative.
20.    Satellite networks, used either on a stand alone basis or in combination with a
terrestrial wireless network, may offer a cost advantage over wireline or other alternatives in
remote areas where a limited population may not provide the economies of scale to support the
deployment of wireline or other networks for each community.  Because satellites have large
coverage areas, and in many cases, can reach an entire nation, satellite providers may achieve
greater economies of scale in serving isolated areas since the costs of deployment could be spread
across a number of communities.  The basic build-out required to obtain satellite service is for
earth stations to transmit and receive satellite signals.  We seek comment on why satellite or
terrestrial wireless systems have not been used more extensively to serve these areas. 
Specifically, we seek comments regarding the particular characteristics of satellite or terrestrial
wireless systems that render these technologies suited for serving unserved areas, the costs
associated with deployment, the availability of federal universal service support, and any other
impediments to deployment.  To the extent that costs deter satellite and terrestrial wireless
deployment, we seek comment on what actions the Commission should take to support the
establishment and maintenance of satellite and terrestrial wireless services.  We ask parties to
comment on whether specific aspect of our universal service rules may deter both current and
future satellite services providers from providing service to rural, insular, and other unserved
communities, and what specific steps the Commission can undertake to encourage the use of
universal service support by satellite service providers.  We also seek comment on any other
actions the Commission should take to encourage the deployment of the most cost-effective,
practical solution in these geographically extreme areas.
     A.   Impediments to Increased Penetration
21.    An important step in increasing low penetration in unserved or underserved high-cost,
insular, and tribal lands is understanding the impediments to higher penetration rates. 
Accordingly, in this section, we seek comment on the nature of such impediments.  To facilitate
discussion, we have divided this issue into the categories described below.  These categories are
not intended to be exhaustive, however, and we encourage commenters to discuss any additional
impediments to increased penetration that they are able to identify.  
22.    In addition to identifying impediments to increased penetration rates, we also ask
commenters to discuss potential solutions for overcoming those impediments.  We do not reach
tentative conclusions on any of the proposals discussed below.  Instead, we seek comment on the
need for the Commission to address the specific concerns set forth below and the costs and
benefits of the proposals discussed.  We seek comment on how the Commission should measure
its success in satisfying the mandate in the 1996 Act that consumers in all regions of the nation
have access to telecommunications services.  We seek comment on what measure we could use,
other than penetration rates, to evaluate our success in achieving this goal.
          1.   Demographic Factors
23.    In section II.A above, we ask commenters to supply data for high-cost, insular,  and
tribal lands regarding: (1) total population; (2) population density; (3) average annual income; and
(4) average unemployment rate.  Bureau of Census data indicates that income and education
levels greatly affect telephone penetration rates and that geographic location can also make a
difference.  In this section, we seek specific comments on how these demographic factors affect
penetration rates.  For example, do income levels have a greater effect on penetration rates than
population density?  Do the combined effects of low income and low population density have an
exponential effect on penetration rates?  We seek comment on whether other demographic factors
significantly affect penetration rates in high-cost, insular, and tribal lands, e.g., education levels.
          1.   Geographic Factors
24.    One of the more obvious explanations for low penetration rates in high-cost, insular,
and tribal lands is that these areas are unusually expensive to serve.  Distance appears to be one
reason line extension charges are so high.  During the New Mexico and Arizona Field Hearings,
several tribes testified about the remoteness of their locations and the challenges that remote
locations presented in terms of telecommunications services.  For example, in 1997, the Navajo
Communications Company issued 72 line extension charge estimates that averaged more than
$40,000, including eight over $100,000 and one over $157,000.  The cost for installation of a
line on the Salt River Pima-Maricopa Indian Community (located in the heart of metropolitan
Phoenix) is $5,000.  We seek comment on the general terrain, including the existence of
mountains, plains, swamps, water, plateaus, canyons, etc., that create challenges in providing
telecommunications services.  We also seek comment on the extent to which the absence of
necessary infrastructure, for example roads or electrical capacity, constitutes a barrier to
deployment in rural, insular, high-cost, and tribal lands.  
          1.   Financial Factors 
25.    We seek comment on whether difficulties in obtaining access to financing limits the
ability of carriers to provide service in unserved or underserved rural, insular, high-cost, and tribal
lands.  We seek comment on any specific provisions in loan agreements that serve to deter
deployment in these areas.  We also seek comment on any measures the Commission could take
that would diminish the risks faced by investors and would enhance the ability of carriers to
attract financing necessary to provide service in unserved or underserved rural, insular, high-cost,
and tribal lands.  We also seek comment on the availability and utility of existing programs that
may provide funding and assistance to carriers seeking to provide telecommunications service in
unserved areas and underserved areas, including tribal and insular areas,  including whether the
availability of existing sources of funding and assistance is adequately publicized.   
          1.   Cultural Factors
26.    We seek comment on the extent to which cultural values or lifestyle preferences deter
consumer interest in subscribing to telecommunications services in unserved or underserved
areas.  For example, we seek comment on whether concerns about cultural preservation,
religion, identity, and values may affect the willingness of tribal authorities to allow or promote
the availability of telecommunications services in their communities.  Similarly, we seek
comment on whether there are a significant number of individuals that simply do not want
telecommunications services because of personal lifestyle choices.  We also seek comment on the
extent to which carriers justify the lack of deployment in unserved or underserved rural, insular,
high-cost, and tribal lands based on  concerns for cultural preservation and whether these
concerns are legitimate.  In addition, we seek comment on whether the Commission's efforts to
promote deployment and subscribership in unserved and underserved areas should be constrained
by the cultural choices expressed by tribal authorities or other local leadership.
          1.   Regulatory Factors
27.    In this section, we seek comment on impediments imposed by various laws,
regulations or practices that may deter carriers from providing service to unserved or underserved
areas, including federal, state, tribal or insular authorities.
28.    Federal Regulatory Impediments.  We seek comment on the current process for
obtaining access to rights-of-way on tribal lands and to what extent this process deters carriers
from providing service on tribal lands.  Under the Right-of-Way Act of 1948, there are three
critical components for obtaining rights-of-way over tribal land: (1) the Secretary of the Interior
through the Bureau of Indian Affairs must grant the easement for the right-of-way; (2)
compensation of not less than fair market value, as determined by the Secretary, plus severance
damages must be paid to the property owner; and (3) tribal consent must be obtained.  The
first of these requires a service provider to undergo environmental assessments and secure cultural
and archaeological clearances from the Bureau of Indian Affairs.  The second component
requires the service provider to obtain the standard appraisal it would for any easement but under
standards set by Bureau of Indian Affairs.  Finally, the service provider must also meet any
conditions imposed by the particular tribe because the tribe has the ultimate authority to accept or
reject the right-of-way.  Carriers have indicated that this process is a significant barrier to entry. 
Tribal authorities have expressed concern about the ability of carriers to use existing rights-of-way
to establish new terrestrial networks without obtaining the consent of the tribal authority.  In
addition, carriers and tribal authorities appear to have concerns concerning appropriate
compensation for use of rights-of-way in tribal lands.  To the extent rights-of-way management
issues pose a barrier to entry on tribal lands, we seek comment on what role, if any, the
Commission could play in addressing these issues.  
29.    We also seek comment on whether any aspect of our universal service rules deters
carriers from providing service to unserved and underserved areas.  For example, does the
definition of supported services deter terrestrial wireless or satellite service providers from
providing services in these areas?  In our ongoing proceeding to reform the high-cost universal
service support mechanism for non-rural carriers, several parties representing rural carriers have
filed comments asking that we adjust or eliminate the cap on the high-cost loop fund to coincide
with the anticipated transition of non-rural carriers to a new forward-looking support mechanism
on January 1, 2000.  We observe that the cap on the existing high-cost fund properly allows for
growth based on the rate of growth in the total number of working loops nationwide.  We also
observe that carriers do invest in facilities in an amount greater than that which is supported
through federal universal service support mechanisms.  We seek comment regarding the extent
to which the interim cap on the high-cost fund is a factor contributing to the lack of deployment in
unserved areas, including tribal and insular areas. 
30.    We comment on whether existing LATA boundaries prevent calls from unserved or
underserved areas, including tribal lands, to the nearest metropolitan area or community of
interest from being included in local service.  We seek comment on any other federal rules or
Commission regulations which may deter carriers from providing service to unserved or
underserved areas.  We also observe that issues specific to wireless providers will be addressed in
a separate proceeding.
31.    State Regulations.  We also seek comment on regulations or actions at the state level
that may impact deployment and subscribership in unserved and underserved areas.  We seek
comment on the extent to which statewide rate-averaging requirements or limited local calling
areas may make the costs of telecommunications service unaffordable to low-income consumers
living in unserved or underserved areas.  We also seek comment on existing state programs
designed to ensure that rates in remote and tribal lands are affordable.
32.    Tribal / Insular Regulatory Impediments.  We seek comment on any regulations or
requirements imposed by tribal or insular authorities that may deter entry in tribal lands or in
insular areas.  For example, we seek comment on whether local governments own or operate the
local exchange carrier in their areas and what impact this may have on competitive entry from
other cost-effective wireline, terrestrial wireless, or satellite service providers.  We seek comment
on whether government ownership or operation affects the provision of services supported by
universal service mechanisms in these areas.  We seek comment on any ownership or employment
requirements imposed by tribal authorities that may impair the ability of carriers to provide service
and/or compete with tribally-owned carriers.  For example, we seek comment on the extent to
which tribes require an ownership interest in a carrier as a prerequisite to allowing the carrier to
provide service on tribal lands.  We seek comment on the impact such requirements may have on
the deployment of telecommunications facilities and services on tribal lands.
                     XXXIII.  Tribal Lands
34.    For our universal service support mechanisms to be effective on tribal lands, we seek
to promote active involvement and collaboration between the Commission and tribal authorities. 
As a general matter, we seek comment on how we can increase Indian participation in the
Commission's decision-making process.  At a more specific level, we seek comment throughout
this section on issues unique to tribal lands that may affect the goals and incentives of federal
universal service support mechanisms and consider additional, targeted assistance the Commission
may want to provide to promote deployment and subscribership on tribal lands.  As  described
below, the trust relationship between the federal government and Indians as well as principles of
tribal sovereignty suggest that the federal government may have the authority to implement
particularized measures to address the factors causing the unusually low subscribership on tribal
lands.  We emphasize that these proposals are not meant to imply that the states have not, or will
not, do their share in promoting the availability of universal service on tribal lands.  In fact, many
states have made significant efforts in this area.  We commend them for doing so and we
encourage them to continue.  In this proceeding, however, we consider measures the Commission
may take to fulfill its obligation to address telecommunications needs on tribal lands.
     A.   Jurisdiction
          1.   Background
35.    As noted above, one of our goals in this proceeding is to identify and address the
unique issues that may limit telecommunications deployment and subscribership in unserved or
underserved regions of our Nation, including insular areas and tribal lands and to consider what
changes in our universal service rules would best address these issues.  Our jurisdiction to make
these changes springs from our obligation under section 254 of the Act to develop policies and
rules for the preservation and advancement of universal service.  With respect to tribal lands, our
exercise of this section 254 authority must be informed by our exploration of the jurisdiction of
states and Indian tribes to regulate and provide telecommunications.  Our jurisdiction to alter our
universal service rules in ways targeted to benefit unserved tribal lands must also be informed by
the principles of Indian law that stem from the unique relationship of the federal government with
Indian tribes.
36.    This relationship is set forth in the Constitution of the United States, treaties, statutes,
Executive Orders and court decisions. Historically, the United States has recognized the special
trust relationship between the federal government and tribal authorities, the unique sovereign
status of Indian tribes, and the federal obligation to guarantee the right of Indian tribes to self-
government.  
37.    Trust Relationship.  Federal courts have long recognized a "distinctive obligation of
trust incumbent upon the Government in its dealings with these dependent and sometimes
exploited people."  The formation of a trust relationship evolved out of a recognition of the
unequal bargaining power of Indian tribes in the formation of the treaties governing their rights
and obligations.  Over 150 years ago, Chief Justice Marshall acknowledged the special status of
Indian tribes in the seminal case of Cherokee Nation v. State of Georgia, describing them as
"domestic dependent nations."  Since that time, the courts have routinely observed the federal
government's unique relationship with Indian tribes, and as recently as June 14, 1999, the
Supreme Court again recognized the "special federal interest in protecting the welfare of Native
Americans."  The Supreme Court has stated that, through this special trust relationship, the
federal government "has charged itself with moral obligations of the highest responsibility and
trust.  Its conduct, as disclosed in the acts of those who represent it in dealings with the Indians,
should therefore be judged by the most exacting fiduciary standards."  
38.    Tribal Sovereignty.  The Constitution of the United States recognizes the sovereign
status of Indian tribes by classing Indian treaties as among the "Supreme Law of the land" and
establishes Indian affairs as a unique area of federal concern.  Indian tribes retain important
sovereign powers over "their members  and their territory" subject to the plenary power vested in
Congress by the Constitution of the United States. Under the tribal sovereignty doctrine, "Indian
tribes are unique aggregations possessing attributes of sovereignty over both their members and
their territory."  Under this doctrine, tribes have retained "a semi-independent position . . . not as
States, not as nations, . . . but as a separate people with the power of regulating their internal and
social relations . . .."  The foundation of Indian sovereignty over the reservation and tribal
members was first recognized by Chief Justice John Marshall, who described the Indian tribes as
"distinct political communities, having territorial boundaries within which their authority is
exclusive, and having a right to all lands within those boundaries, which is not only acknowledged
but guaranteed by the United States." The tradition of tribal sovereignty has persisted since
Chief Justice Marshall's early decisions construing the status of Indian tribes.  As the Supreme
Court has acknowledged "traditional notions of Indian self-government are so deeply ingrained in
our jurisprudence that they have provided an important 'backdrop' against which vague or
ambiguous federal enactment must always be measured." Congress recently declared that the
trust relationship "includes the protection of the sovereignty of each tribal government."
39.    Tribal Self-determination.  Through the enactment of various statutes, Congress has
demonstrated an "overriding goal of encouraging tribal self-sufficiency and economic
development."  For example, the Indian Financing Act of 1974 provides in pertinent part that:
"[i]t is hereby declared to be the policy of Congress . . . to help develop and utilize Indian
resources, both physical and human, to a point where the Indians will fully exercise responsibility
for the utilization and management of their own resources and where they will enjoy a standard of
living from their own productive efforts comparable to that enjoyed by non-Indians in neighboring
communities."  
          1.   Issues for Comment
40.    We recognize that principles of Indian law, including the trust relationship between the
federal government and Indian tribes, tribal sovereignty, and tribal self-determination, must apply
with equal force in the area of telecommunications.  With respect to telecommunications
services provided by tribal carriers on or off the reservation or by non-tribal carriers within tribal
lands (all of which are referred to jointly as "tribal telecommunications") the parameters of
federal, state and tribal authority, however, are not always clear. The Supreme Court, itself, has
acknowledged that "generalizations on this subject have become treacherous."  Nonetheless,
some of the proposals presented in this Further Notice necessitate an effort to evaluate these
jurisdictional relationships.  In this Further Notice, we seek comment to determine how best to
give effect to principles of Indian law in the context of rule changes intended to benefit unserved
and underserved tribal lands.
41.    State Jurisdiction.  Three of the proposals detailed later in this Further Notice deal
with provisions of sections 254 and 214 of the Act, and of our existing rules that are triggered
when the state lacks jurisdiction over a carrier providing telephone exchange or access service in a
particular area.  First, as described in section IV, the determination of whether a state has
jurisdiction over a common carrier providing telephone exchange service and exchange access is
key in determining whether the Commission is required to designate telecommunications carriers
as eligible to receive federal universal service support in high-cost areas.  Second, as detailed in
section V, in unserved areas where the state lacks jurisdiction the Commission, pursuant to
section 214(e)(3) shall determine which common carrier or carriers are best able to provide
service.  Third, in section III.D.1, we propose that revisions to our Lifeline rules to address the
situation faced by carriers not subject to state jurisdiction.
42.    The issue of the extent to which tribal authorities or state governments have authority
to regulate activities occurring on tribal lands, whether by tribal members or not, has a long and
complex legal history, involving considerations of whether state regulation is preempted by
federal regulation, whether state regulation is consistent with tribal sovereignty and self-
determination, and whether tribes have consented to state jurisdiction, either in treaties or
pursuant to the Indian Civil Rights Act of 1968.  In addition, Indian law jurisprudence finds 
state law generally inapplicable when states attempt to regulate the conduct of Indians directly
within reservation boundaries.  
43.    We recognize  that some state commissions have asserted jurisdiction over carriers
seeking to provide service on tribal lands and regulate certain aspects of the provision of
telecommunications service on tribal lands.  We seek comment, in particular from state
commissions as well as any other interested parties, concerning the extent of state and tribal
regulation of telecommunications provided on tribal lands and by tribally-owned or operated
carriers.  In particular, we seek comment on the appropriate jurisdictional authority in the
following situations: (1) tribally-owned or operated carriers providing service within the
reservation (a) to tribal members, (b) to non-tribal members, and (c) to non-tribal members living
on non-native fee lands (within the reservation); (2) non-tribally owned or operated carriers
offering service both inside and outside of the reservation; and (3) tribally-owned or operated
carriers offering service outside of the reservation.  We refer parties commenting on these issues
to the various ways in which tribal lands could be defined, as discussed below, and seek comment
on how these definitions inform the jurisdictional analysis requested in this section.
44.    In addition, we seek comment on the jurisdictional treatment of the following
geographic entities, as classified by the Bureau of the Census:  (1) American Indian
Reservations, which are areas with boundaries established by treaty, statute and /or executive or
court order; (2) Trust Lands, which are real property held in trust by the federal government that
is associated with a specific American Indian reservation or tribe and which may be located within
or outside the reservation;  (3) Tribal Jurisdiction Statistical Areas, which are delineated by those
Federally-recognized tribes in Oklahoma that no longer have a reservation; (3) Tribal Designated
Statistical Areas, which encompasses federally and state-recognized tribes without reservation or
trust lands; (4) Alaska Native Regional Corporations, which are corporate entities established
under the Alaska Native Claims Settlement Act of 1972 (ANCSA) to conduct the commercial and
nonprofit business of Alaska Natives; and (5) Alaska Village Statistical Areas, which are tribes,
bands, clans, groups, villages, communities, or associations in Alaska that are recognized pursuant
to the ANCSA.  
45.    We seek comment on whether there are any other kinds of tribal relationships that
would inform our jurisdictional analysis.  We seek comment on whether the state commission has
jurisdiction over telecommunications in the situations described above, the legal authority for such
jurisdiction (e.g. the state constitution, state statute, Indian treaty, etc.); and the extent to which
the particular state commission exercises that jurisdiction. We also seek comment on the existence
of any concurrent jurisdiction.
46.    In addition, we observe that wireline telephone calls between Indian tribal lands and
the state in which tribal land is located are currently treated as intrastate calls, subject to state
jurisdiction.  We seek comment on whether this treatment is consistent with principles of tribal
sovereignty and the Indian law jurisprudence regarding the limits of state authority, referenced
above.  We also seek comment on whether the treatment of these calls as intrastate is consistent
with the division of jurisdiction between the Commission and the states under section 2 of the
Act.  We seek comment as well on the need, impact, and Commission's authority to reclassify
these calls as interstate for the purpose of giving effect to principles of tribal sovereignty.
47.    We observe further that state jurisdiction may be preempted by the operation of
federal law "if it interferes with or is incompatible with federal and tribal interests reflected in
federal law, unless the state interests at stake are sufficient to justify the assertion of state
authority."  An express Congressional statement of preemption is not required.  Instead, a
preemption analysis "requires a particularized examination of the relevant state, federal and tribal
interests."  We seek comment on state interests in regulating telecommunications on tribal lands,
including the ability to ensure reasonable rates, quality service, and the continued viability of local
exchange carriers (LECs).  We also seek comment from each tribal government, and any other
interested parties, on the extent to which the state's exercise of jurisdiction over
telecommunications on tribal lands and over tribal carriers that serve areas both inside and outside
Indian sovereign territory is warranted.
48.    Tribal Regulation.  We seek comment from each tribal government, and any other
interested parties, on the extent of tribal authority over regulation of telecommunications on tribal
lands.  As a threshold matter, we note that the Commission has previously spoken to some
aspects of this issue in the A.B. Fillins Order, in which the Commission considered the extent of
tribal regulatory authority over the provision of cellular service within a tribal reservation.   In
that order, the Commission held that under well-settled case law, the Communications Act applies
with equal force to tribal reservations as to other areas, and that the Commission has sole
authority under Title III of the Act with respect to management and licensing of radio spectrum in
tribal areas.  The Commission also concluded, however, that the Communications Act does not
preempt tribal authority over access by telecommunications carriers to tribal lands, because the
provisions of the Act that preempt state and local impediments to entry do not apply to tribal
authorities.     
49.    In light of this statutory framework, we seek comment on the current extent to which
tribal authorities have engaged in telecommunications regulation and on any future plans of tribal
authorities to regulate telecommunications in tribal areas.  We seek comment on the extent to
which tribal authorities consider regulation of tribal telecommunications important to the right to
self-government and self-determination. We also seek comment on whether tribal authorities
should be considered as comparable to state authorities for purposes of regulating
telecommunications services, and the degree to which the federal-tribal relationship on
communications matters is similar or dissimilar to the federal-state relationship.  Finally, while we
have determined in the A.B. Fillins Order that tribal authorities are not subject to preemption
under provisions of the Act applicable to state and local governments, we seek comment on what
authority, if any, the Commission has to preempt tribal regulations that may be inconsistent with
our federal regulatory scheme. 
50.    Tribal Self-determination and Universal Service Goals.  We seek comment to
determine how principles of Indian law and federal support for tribal self-determination affect the
Commission's statutory mandate to ensure that consumers in all regions of the nation have access
to the services supported by federal universal service support mechanisms.  Pursuant to the Act,
the Commission is bound by its statutory mandate to promote the availability of the services
supported by federal universal service support mechanisms in all regions of the Nation.  We
seek comment on whether this statutory obligation is affected or constrained by any contrary
interests, for cultural or other reasons, of certain tribal authorities.   We seek comment, in
particular from tribal authorities, to ascertain whether tribal authorities share the goals established
by the 1996 Act, which the Commission is bound to implement.  We seek comment on the extent
to which tribal authorities seek to promote the availability of telecommunications services and
competition among telecommunications providers.
51.    We also seek comment on whether the services supported by federal universal service
support mechanisms are consistent with the interests of tribal authorities in promoting service in
tribal lands.  We recognize that some tribal authorities may prefer a different mix of services to
be supported.  For example, some tribes may prefer support for terrestrial wireless or satellite
services, rather than wireline services.  Other tribes may want to prioritize the ability for each
member to receive basic telecommunications service, rather than the entire package of services
included in the definition of universal service.  We seek comment on whether the Commission has
the authority to and whether it should develop a procedure by which the Commission, the Joint
Board and the sovereign Indian tribes could identify a single alternative definition of the services
supported by federal universal service support mechanisms in tribal lands.  We seek comment on
additional administrative burdens that would be associated with implementing this procedure.  
     A.   Defining "Tribal Lands"
52.    The definition we adopt of "tribal lands" will be used to identify those areas in which,
for reasons based on principles of Indian sovereignty, the Commission seeks comment to
determine whether possible modifications to our federal universal service policies and rules may
be warranted.  In defining tribal lands, we seek to ensure that we limit the reach of these proposals
to those areas in which principles of tribal sovereignty and tribal self-determination apply.  We
also seek to balance the reasonable exercise of federal jurisdiction with appropriate deference to
state sovereignty and jurisdiction.  
53.    We seek comment on defining tribal lands as all land within the limits of any Indian
reservation under the jurisdiction of the United States Government, notwithstanding the issuance
of any patent, and, including rights-of-way running through the reservation.  Alternatively, we
seek comment on defining tribal lands to have the same meaning as the term "Indian country," as
that term is defined by the Bureau of Indian Affairs.  "Indian country" means (a) all land within
the limits of any Indian reservation under the jurisdiction of the United States Government,
notwithstanding the issuance of any patent, and, including rights-of-way running through the
reservation, (b) all dependent Indian communities within the borders of the United States whether
within the original or subsequently acquired territory thereof, and whether within or without the
limits of a state, and (c) all Indian allotments, the Indian titles to which have not been
extinguished, including rights-of-way running through the same.  
54.    In addition, we seek comment on whether the geographic entities, as classified by the
Bureau of the Census, should be included in the definition of tribal lands: (1) American Indian
Reservations, which are areas with boundaries established by treaty, statute and / or executive or
court order; (2) Trust Lands, which are real property held in trust by the federal government that
is associated with a specific American Indian reservation or tribe and which may be located within
or outside the reservation;  (3) Tribal Jurisdiction Statistical Areas, which are delineated by those
Federally-recognized tribes in Oklahoma that no longer have a reservation; (3) Tribal Designated
Statistical Areas, which encompasses federally and state-recognized tribes without reservation or
trust lands; (4) Alaska Native Regional Corporations, which are corporate entities established
under the ANCSA to conduct the commercial and nonprofit business of Alaksa Natives; and
(5) Alaska Village Statistical Areas, which are tribes, bands, clans, groups, villages, communities,
or associations in Alaska that are recognized pursuant to the ANCSA.  
55.    We observe that, with the exception of the first category, American Indian
Reservations, the above listed classifications used by the Bureau of the Census would not be
encompassed in a definition of tribal lands that is limited to "all land within the limits of any Indian
reservation under the jurisdiction of the United States Government," as set forth above. We
recognize that tribes encompassed by these classifications may face obstacles in obtaining
telecommunications services that are similar to those faced by tribes in living in American Indian
Reservations.  Commenters supporting the inclusion of any of these categories should explain the
source of the Commission's authority to implement the additional measures proposed in this item
with respect to these areas, including noting any jurisdictional arguments provided in response to
questions raised in section III.A.2.  
     A.   High-Cost Support Mechanisms
          1.   Background
56.    In 1984, the Commission established high-cost support mechanisms to promote the
nationwide availability of telephone service at reasonable rates.  The high-cost loop fund
provides support by allowing incumbent LECs with higher than average local loop costs to
allocate an additional portion of those costs to the interstate jurisdiction to be recovered from
interstate revenues.  This enables the state jurisdictions to establish lower local exchange rates
in study areas receiving such assistance.  In general, a study area corresponds to an incumbent
LEC's entire service territory within a state.  Typically for incumbent LECs operating in more
than one state, each state represents a study area.  
57.    Pursuant to existing support mechanisms, high-cost loop support for most incumbent
LECs is calculated using data provided by incumbent LECs pursuant to the Commission's cost
accounting and jurisdictional separations rules.  Non-rural carriers are scheduled to make the
transition on January 1, 2000 to a new support mechanism based on forward-looking costs, while
rural carriers will continue to receive support based on the existing mechanisms until at least
January 1, 2001.  Under the existing mechanisms, the amount of an incumbent LEC's high-cost
loop support is based on the relationship of its historical loop cost for a particular study area to
the national average loop cost.  In order to determine this relationship, approximately half of all
incumbent LECs submit their historical loop cost data to NECA each year pursuant to sections
36.611 and 36.612 of the Commission's rules.  Because the cost data is not submitted by
carriers until seven months after the end of a calendar year, and because NECA requires time to
analyze the data and make the necessary nationwide calculations of support, carriers generally do
not receive high-cost support based on these data until the beginning of the second calendar year
after costs are incurred.  The impact of this rule is mitigated, however, by section 36.612 of the
rules, which allows carriers to update on a quarterly basis the calendar year data that they submit
to NECA on July 31 of each year.
58.    The remainder of incumbent LECs, known as "average schedule companies," are not
required to perform jurisdictionally-separated cost studies.  Average schedule treatment
historically has been available to companies that are presumed, because of their small size, to lack
the resources to justify a requirement that they perform separations and access charge cost studies
to determine their compensation from interstate services.  NECA develops a schedule based on
generalized industry data to reflect the costs of a typical small incumbent LEC.  Subject to
Commission approval, NECA's average schedule formula is used to provide support to average
schedule companies.
59.    Study Area Freeze.   The Commission froze all study area boundaries effective
November 15, 1984 to curtail the ability of incumbent LECs to place high-cost exchanges within
their existing service territories in separate study areas to maximize the payments from the
universal service support mechanisms.  As a result, an incumbent LEC must apply to the
Commission for a waiver of the study area boundary if it wishes to sell or purchase an
exchange.
60.    Interim Cap on High-Cost Fund.   In 1993, the Commission became concerned about
the rapid and erratic pattern of growth in the size of the high-cost loop fund and initiated an
inquiry to reevaluate its universal service support mechanism and to consider permanent changes
in the manner in which high-cost support would be provided.  At that time, the Commission
established an interim cap to the universal service fund.  The cap was designed to moderate the
growth of the fund while the Commission conducted a rulemaking proceeding and to allow for an
orderly transition to the new universal service support mechanisms that would be adopted.
Under the cap, the total fund for a given year may increase by no more than a percentage equal to
the percentage growth nationwide in the number of loops for that year.
61.    May 8, 1997 First Report and Order.   In 1997, the Commission adopted broad
revisions to its universal service support mechanisms consistent with the directive of the 1996 Act
to ensure that universal service support mechanisms be explicit, sufficient, and sustainable as local
competition develops.  The Commission established a plan for providing high-cost support
through the explicit federal universal service support mechanism rather than the interstate access
charge rate structure and a methodology for determining high-cost support based on the
forward-looking economic cost of providing the supported services to a particular service area. 
62.    Currently, all carriers receive high-cost support based upon the high-cost support
mechanisms which pre-date the 1996 Act.  As discussed above, non-rural carriers will begin
receiving high-cost support based on forward-looking costs on January 1, 2000.  The
Commission intends that rural carriers also will receive support based on forward-looking costs,
but only after further review by the Commission, the Joint Board, and the Rural Task Force
appointed by the Joint Board, and in no event before January 1, 2001.
63.    Until a carrier receives high-cost support based upon forward-looking costs, that
carrier's support will be determined on the basis of whether the carrier is an incumbent LEC or
a competitive eligible telecommunications carrier. A competitive eligible telecommunications
carrier  is defined in our rules as an eligible telecommunications carrier  that does not meet the
definition of incumbent LEC.  A competitive eligible telecommunications carrier  receives the
same amount of support per customer that the incumbent LEC previously serving that customer
received.
          1.   Federal Share of High-Cost Support
64.    As discussed above, because the trust relationship creates a unique relationship
between the federal government and Indian tribes, the federal government may have authority to
undertake additional measures to promote deployment and subscribership on tribal lands and to
provide universal service support necessary to offset the particular challenges facing these areas. 
With respect to high-cost support on tribal lands, we seek comment on the extent to which states
currently support the costs of universal service in tribal lands and whether the Commission should
provide an additional portion of the universal service support calculated by the federal support
methodology in high-cost, tribal lands.  For instance, with regard to the forward-looking high-cost
support mechanism for non-rural carriers, we seek comment on whether, rather than providing
support for costs that exceed both a national cost benchmark and the individual state's resources
to support those costs, the mechanism should provide support for all costs in unserved tribal lands
that exceed the national benchmark.
          1.   Separate Study Areas Option for Tribal Lands
65.    In order to provide additional high-cost support to tribal lands, we seek comment on
modifications to our study area rules.  Our study area rules provide a mechanism through which
the Commission has controlled the growth of the high-cost universal service support mechanism.
Universal service support for high-cost areas is determined on the basis of average loop costs
throughout a study area.  Averaging costs on a study-area wide basis spreads the burden of
serving high-cost areas among all of the telecommunications subscribers in that study area.  As a
result, however, carriers with relatively low average loop costs in a particular study area receive
no support for serving additional customers in a high-cost portion of that study area if the loop
costs in the high-cost portion do not raise the overall average loop costs for the study area above
a specific national benchmark, currently 115% of the national average cost per loop.  By
freezing study area boundaries, the Commission sought to eliminate incentives for carriers to
place high-cost exchanges in separate study areas in order to receive additional support for
providing service to those study areas.  As a result of these two policies, however, certain carriers
may experience strong financial disincentives to serving unprofitable high-cost customers in their
study areas and other carriers may lack incentives to purchase those unserved exchanges.
66.    In order to promote the deployment of universal services on tribal lands, we seek
comment on modifying our rules to permit carriers to treat tribal lands as a distinct study
area.  We seek comment on whether, by providing an exception to our study area rules, we can
eliminate regulatory requirements that may deter carriers from serving high-cost, tribal lands.  For
example, one option may be that the tribal study area for a carrier will consist of all of the tribal
lands served by the carrier within the borders of a single state.  This means that carriers may have
a tribal study area in each state in which it provides service on tribal lands.  We seek comment on
whether the tribal study area should include all of the tribal lands in a state (rather than, for
example, a single nationwide tribal study area) because states use study areas for purposes of
determining intrastate revenue requirements. 
67.    We emphasize that the proposal to allow tribal study areas is not related to the issue of
the area over which costs are averaged to determine support using the new high-cost mechanisms,
which is pending in the high-cost proceeding.  We seek comment on how allowing a separate
tribal study area could affect whether the carrier serving that area falls within the statutory
definition of a rural carrier for providing service to that area.  If a carrier designates the tribal
lands within a state as a separate study area, the number of access lines or inhabitants in that
newly created study area may qualify the carrier as a rural carrier with respect to that study
area.  We seek comment on whether this may result in some carriers, currently designated as
non-rural, being considered rural for purposes of receiving universal service support in certain
tribal study areas. 
          1.   Interim Cap on the High-Cost Fund
68.    In the First Report and Order, the Commission concluded that it would maintain the
cap on the existing high-cost loop support mechanism until all carriers receive support based on
the new high-cost funding mechanism.  The cap on the high-cost loop fund was initially
intended as an interim measure.  Commission rules require that if total support, based on each
carrier's actual costs, is above the total allowed capped amount, each recipient of high-cost loop
support will receive a reduced amount of support to keep the total fund at the capped amount. 
The cap has served its purpose in controlling excessive growth in the size of the fund during the
past six years as the Commission has reformed its universal service support mechanisms.  We
have stated that the rural carriers will receive support based on the new high-cost funding
mechanism no earlier than January 1, 2001.  The Commission has not established a timetable for
moving rural carriers to a forward-looking high-cost support mechanism.  Rather, this
undertaking is on hold pending the Rural Task Force making its recommendation to the Joint
Board; the Joint Board may recommend that the Commission conduct further proceedings on
certain issues.  
69.    Allowing carriers to designate separate tribal study areas, as proposed above, could
mean that additional carriers may be entitled to a portion of the high-cost support fund.  We seek
comment on the need for the Commission to provide additional high-cost support under the
existing mechanisms to tribal lands.  In order to do so, the Commission may either lift the cap on
the high-cost fund to allow for growth in the size of the fund attributable to the separate study
area proposal or reallocate the existing funds among the expanded category of recipients.  We
seek comment on these options.  We also seek comment on any other options that may assist the
Commission in achieving the goal of targeting additional federal high-cost support to tribal lands.
     A.   Revisions to Lifeline
70.    The Commission's Lifeline support program for low-income consumers is designed to
reduce the monthly billed cost of basic service for low-income consumers, which we anticipate
will increase telephone penetration.  Lifeline provides carriers with three elements of universal
service support.  The support must be passed through to each qualifying low-income consumer
by an equivalent reduction in his or her monthly bill for telephone service.  All carriers receive a
baseline amount of $3.50 per month per Lifeline customer in the form of a waiver of the federal
subscriber line charge (SLC).  An additional $1.75 per month is available per Lifeline customer
if "the state commission approves an additional reduction of $1.75 in the amount paid by
consumers. . . ."  Finally, carriers can receive federal matching funds of fifty percent of the
amount of state Lifeline support, up to a maximum of an additional $1.75 per month, as long as
the entire amount is passed on to subscribers.  Federal Lifeline support per qualifying low-
income consumer is capped at $7.00 per month.  
          1.   State Commission Approval
71.    The Commission has received petitions for waiver of our Lifeline rules to allow
carriers not subject to the jurisdiction of a state commission to receive the second tier of federal
support where no regulations issued by local authorities (including state commissions and tribal
authorities) exist that would prevent an equivalent reduction in the monthly telephone bills of
qualifying low-income consumers.  In drafting our rule, we did not consider the situation faced
by carriers not subject to the jurisdiction of a state commission.  Based on these waiver petitions,
it appears that our rule has given rise to certain situations that we did not anticipate.  The
requirement of state consent prior to making available the second tier of federal Lifeline support
was intended to reflect deference to the states in such areas of traditional state expertise and
authority.  We did not intend to require carriers not subject to state commission jurisdiction to
seek either state commission action or a Commission waiver in order to receive the additional
$1.75 available under federal support mechanisms, where that additional support would be passed
through to consumers.  For these reasons, we propose to modify our rule to state that an
additional $1.75 per qualifying low-income consumer will be provided to the carrier where the
additional support will result in an equivalent reduction in the monthly bill of each qualifying low-
income consumer.  This proposed revision maintains deference to the state commission because
the additional support will not be provided where a state commission with jurisdiction to do so
has not permitted an equivalent reduction in the consumer's bill.  The proposed revision is
intended to eliminate the need for carriers not subject to the jurisdiction of a state commission to
seek state commission action or a Commission waiver.  We seek comment on the proposed
revision. 
          1.   Federal Support on Tribal Lands
72.    In addition, in keeping with principles of tribal sovereignty, we seek comment on
modifying our rule to provide that the third tier of federal support, a maximum of $1.75 per
month per low-income consumer, is available to customers on tribal lands.  As described above,
the federal government has a special trust relationship with Indian tribes, and this entails special
responsibilities, particularly where tribal reservations appear to be particularly disadvantaged by a
lack of important resources, like telecommunications.  With respect to tribal lands, we seek
comment on the extent to which states currently provide the support necessary to qualify for
matching funds for the third tier of Lifeline support.  We also seek comment on whether the
federal government, in light of its trust relationship with Indian tribes, should provide carriers
serving tribal lands the third tier of Lifeline support, $1.75 per qualifying Lifeline customer, as
long as all such Lifeline customers receive an equivalent reduction in their bills.  Unlike in other
areas, this federal support amount would not be contingent upon the state in which the tribal lands
are located providing support. 
          1.   Amendments to Consumer Qualification Criteria
73.    We seek comment on whether the Commission should expand the consumer
qualifications for Lifeline assistance to ensure that low income consumers on tribal lands are able
to participate fully in the Lifeline assistance program.  Under our current rules, in states that
provide intrastate matching funds, a consumer must meet the criteria established by the state
commission to receive federal Lifeline support.  In most states, a consumer can meet the criteria
by demonstrating or certifying that he or she participates in one of several narrowly targeted low
income assistance programs.  We are concerned that some state commissions have established
Lifeline criteria that may inadvertently exclude low income consumers on tribal lands because the
criteria do not include low income assistance programs that are specifically targeted toward
Indians living on tribal lands.  Similarly, in those states that do not provide intrastate matching
funds (and thus do not establish the consumer qualifications for Lifeline participation), a consumer
seeking Lifeline support must certify his or her participation in one of the following Commission-
designated low income assistance programs: Medicaid; food stamps; Supplemental Security
Income; federal public housing assistance; or Low-Income Home Energy Assistance Program.
74.    We seek comment on how the Commission might expand the consumer qualifications
for Lifeline support to enable low income consumers on tribal lands to participate in the Lifeline
assistance program.  In particular, we seek comment about whether we should amend our rules to
allow low income consumers on tribal lands to qualify for Lifeline support by certifying their
participation in additional means tested assistance programs, such as the programs administered
by the Bureau of Indian Affairs or Indian Health Services. We encourage commenters to
indicate whether there might be other suitable criteria -- based solely on income or factors related
to income -- that should be used to determine qualification for low income members of tribal
lands.  We ask commenters to indicate whether providing Indians living on tribal lands with
greater access to Lifeline assistance might increase incentives for eligible telecommunications
carriers to serve these tribal lands.  Finally, we seek comment on whether the Commission could
apply any new criteria specifically targeted to low income Indians living on tribal lands both to
states that do not provide matching funds and states that do provide such funds.
LXXV.DESIGNATING Eligible Telecommunications Carriers Pursuant to
                       Section 214(e)(6)
76.    Pursuant to section 254(e) of the 1996 Act, not all telecommunications providers are
eligible for federal universal service support.  For purposes of the universal service support
mechanisms for high-cost areas and low income consumers "only an eligible telecommunications
carrier designated under section 214(e) shall be eligible" to receive federal universal service
support.  To be designated as an eligible telecommunications carrier, a carrier must: 
          
       (A) offer the services that are supported by Federal universal service support
     mechanisms under section 254(c), either using its own facilities or a combination
     of its own facilities and resale of another carrier's services (including the services
     offered by another eligible telecommunications carrier); and
     (B) advertise the availability of such services and the charges therefor using media
     of general distribution.
77.    Under section 214(e), the primary responsibility for designating a prospective carrier
as an eligible telecommunications carrier lies with the state commission.  In a situation where
there is no common carrier willing to provide supported services to an unserved community that
requests such services, section 214(e)(3) states that:

          [T]he Commission, with respect to interstate services . . . or a State
          commission, with respect to intrastate services, shall determine
          which common carrier or carriers are best able to provide such
          service to the requesting unserved community or portion thereof
          and shall order such carrier or carriers to provide such service for
          that unserved community or portion thereof.
     
In the event that a common carrier is not subject to the jurisdiction of a state commission, section
214(e)(6) authorizes the Commission, upon request, to designate the carrier as an eligible
telecommunications carrier, for a service area designated by the Commission, if the carrier meets
the qualifications for eligible telecommunications carrier status. 
78.    Section 214(e) of the Act states that only an "eligible telecommunications carrier"
designated under section 214(e) shall be eligible to receive federal universal service support. 
Pursuant to section 214(e)(2) and (e)(5) of the Act, state commissions are generally responsible
for designating eligible telecommunications carriers and for designating service areas for such
carriers.  Initially, section 214(e) did not include a provision for designating carriers not subject
to the jurisdiction of a state commission.   The Act was amended in 1997 to address this
"oversight." Section 214(e)(6) authorizes the Commission to designate as an eligible
telecommunications carrier "a common carrier providing telephone exchange service and
exchange access that is not subject to the jurisdiction of a State Commission."  We tentatively
conclude that, by adding section 214(e)(6), Congress sought to ensure that carriers serving all
regions of the United States have access to a mechanism that will allow them to be designated as
eligible telecommunications carriers, if they meet the statutory requirements.  Recognizing that
the designation of eligible telecommunications carriers is primarily a state commission function,
Congress granted this Commission the authority for this task in the event that a carrier is not
subject to the jurisdiction of a state commission. 
79.    Although some of the legislative history of section 214(e)(6) focuses on the ability of
tribally-owned carriers to be designated as eligible telecommunications carriers,  the statutory
language and other legislative history is not so limited.  The other legislative history states that
"the intent of this bill is to cover such situations where a State commission lacks jurisdiction over
a carrier, in which case the FCC determines who is eligible to receive federal universal service
support."  The legislative history also makes clear that "nothing in this bill is intended to impact
litigation regarding jurisdiction between State and federally recognized tribal entities" or to
"expand or restrict the existing jurisdiction of State commissions over any common carrier or
provider in any particular situation."  In the following paragraphs, we seek comment on how
section 214(e)(6) should be interpreted and implemented with respect to carriers (whether tribally
owned or otherwise) that provide telecommunications services to tribal areas. 
80.    First, however, we seek comment identifying other situations in which carriers
providing telephone exchange and exchange access services to areas other than tribal lands are not
subject to state commission jurisdiction and thus must seek designation as eligible
telecommunications carriers from the Commission.  In this context, we seek comment on whether
the Commission, rather than state commissions, has the jurisdiction to designate terrestrial
wireless or satellite carriers as eligible telecommunications carriers.  If such carriers submit
applications for designation pursuant to section 214(e)(6) during the pendency of this proceeding,
we will consider them on a case by case basis in light of the statutory language and the showings
made by the affected parties.  We also note that our analysis of the scope of the designation
provision of section 214(e)(6) is not intended to affect any other decision with respect to the
authority of state commissions or tribal authorities to regulate telecommunications on tribal lands
or over terrestrial wireless or satellite carriers.
81.    The statutory language of section 214(e)(6) is ambiguous with respect to when the
Commission's authority to designate eligible telecommunications carriers is triggered.  It is not
clear whether the Commission's authority is triggered when a carrier is not subject to the
jurisdiction of a state commission or when the service or access the carrier provides is not subject
to the jurisdiction of a state commission.  Thus, the initial question in interpreting section
214(e)(6) with respect to the provision of telecommunications service in tribal lands is under what
circumstances the Commission may designate carriers as eligible telecommunications carriers. 
The title of section 214(e)(6), "Common Carriers not Subject to State Commission Jurisdiction,"
suggests that the triggering inquiry is whether the carrier is subject to state commission
jurisdiction.  We tentatively conclude, however, that the better interpretation of section 214(e)(6)
is that the determination of whether a carrier is subject to the jurisdiction of a state commission
depends in turn on the nature of the service provided (e.g. telephone exchange or access service
provided by wire, satellite or terrestrial wireless)  or the geographic area in which the service is
being provided (e.g. tribal lands).  This interpretation is supported by the legislative history of
section 214(e)(6).  Representative Tauzin stated that "S.1354 makes a technical correction to the
Act that will make it possible for telephone companies serving areas not subject to the jurisdiction
of a State Commission, to be eligible to receive federal Universal Service support."  Our
tentative conclusion that the nature of the service or the geographic area in which the carrier
provides it should be the basis for distinguishing between the designation authority of the
Commission and state commission under section 214(e)(6), is consistent with other provisions of
the Act.  Section 2 of the Act similarly distinguishes between federal and state jurisdiction over
telecommunications services based on the geographic area in which the service is provided. 
Section 332(3) of the Act limits state authority on the basis of the service provided (i.e.
commercial and private mobile service).  We seek comment on this analysis and on any other
factors which may be relevant to this determination.
82.    Our next question then is under what circumstances are telecommunications carriers
providing telecommunications services on tribal lands subject to state commission authority?  In
section III.A.2, above, we seek comment on the extent to which a state commission has
jurisdiction over tribally-owned carriers seeking to provide telecommunications service on tribal
lands and over non-tribally-owned carriers seeking to provide such service on tribal lands.  The
answer to these questions will determine whether the Commission may designate carriers seeking
to provide service on tribal lands as eligible telecommunications carriers.  With respect to tribally-
owned carriers seeking to provide telecommunications service on tribal lands, we note that state
law is generally inapplicable when states attempt to regulate the conduct of tribal members
directly within reservation boundaries, except in "exceptional circumstances."    We seek
comment on whether, for the purpose of eligible telecommunications carrier designation, tribally-
owned carriers providing telecommunications services within tribal reservations would be subject
to state regulatory authority. 
83.    We further recognize that when states seek to regulate non-tribal members and their
activities conducted within a reservation, the appropriateness of the state's assertion of regulatory
authority is determined by a "particularized inquiry" into the nature of the state, federal, and tribal
interests at stake.  Specifically, the analysis turns "on whether state authority is pre-empted by the
operation of federal law; and '[s]tate jurisdiction is pre-empted . . . if it interferes or is
incompatible with federal and tribal interests reflected in federal law, unless the state interests at
stake are sufficient to justify the assertion of state authority.'  The inquiry is to proceed in light of
traditional notions of Indian sovereignty and the congressional goal of Indian self-government,
including its 'overriding goal' of encouraging tribal self-sufficiency and economic development." 
We recognize that this inquiry is a particularized one, and thus specific to each state and the facts
and circumstances surrounding the provision of telecommunications services by non-tribal
members within those tribal lands.  However, we seek comment on whether there are any general
federal, state and tribal interests at stake which might inform the inquiry and help provide general
guidance on the proper boundaries of state authority in this case.  Specifically, we seek comment
on the federal government's interest in assuming authority over the designation of eligible
telecommunications services, and the extent to which state authority would be preempted by the
operation of federal law -- namely section 214 or other relevant provisions or other federal or
tribal interests reflected in federal law.  
84.    We also seek comment on the states' interests in designating eligible
telecommunications carriers, as well as the implications of state designation on Indian sovereignty,
self-government and "tribal self-sufficiency and economic development."   We recognize,
however, that some state commissions have asserted jurisdiction over carriers seeking to provide
service on tribal lands, and that these commissions regulate certain aspects of a carrier's
provisions of service on tribal lands.   
85.    In implementing section 214(e)(6), we are concerned that the fact intensiveness and
the legal complexity of determining whether a state has jurisdiction over carriers seeking
designation as an eligible telecommunications carrier may lead to confusion, duplication of efforts
and needless controversy among carriers, tribal authorities, state commissions and this
Commission, which could undermine efforts to achieve our universal service goals.   For these
reasons, we propose the following process to treat applications for the Commission's designation
of eligible telecommunications companies eligible to receive universal service support for serving
tribal land.  Carriers seeking designation as an eligible telecommunications carrier from this
Commission, whether to serve tribal lands or on the basis of other jurisdictional arguments,
should consult with the relevant tribal authority, where appropriate, and the state commission on
the issue of whether the state commission has jurisdiction to designate the carrier.  In situations
where the tribal authority and the state commission agree that the state has jurisdiction, we
anticipate that the state would conduct the designation proceeding.  In instances where the tribal
authority challenges the state's exercise of jurisdiction, we encourage the carriers, with the
support of the tribal authority, to apply to this Commission for designation.  In the public
comment period subsequent to a carrier's application for designation as an eligible
telecommunications carrier, the carriers and tribal authorities would be expected to demonstrate
why Commission designation is appropriate.  Interested parties, including the state commission,
that disagree with the Commission's exercise of jurisdiction would also be expected to raise their
challenges in that proceeding. We seek comment on this proposal and suggestions for other ways
in which the determination of whether the designation must be performed by the Commission or a
state commission could be simplified or streamlined.
  LXXXVI.Unserved Areas -- Implementation of Section 214(e)(3)
     A.   Overview
87.    The federal universal service support mechanisms are designed to provide appropriate
incentives for the deployment of facilities capable of providing the supported services and the
promotion of increased subscribership.  This system depends upon the complex interrelationship
between federal mechanisms and state actions.  For these reasons, we rely on the input of the
Joint Board in making our decisions.  In general, we are confident that the new forward-looking
high-cost support mechanism described in the Thirteenth Order on Reconsideration will provide
appropriate incentives for carriers to provide supported services to all Americans who need them. 
Nonetheless, we are concerned that certain areas of the nation remain unserved because of
extraordinarily high-costs, low-incomes, or any other factors identified above in section II.C
above, that would inhibit service.  In this section, we discuss a specific statutory provision, section
214(e)(3) of the Act, that may allow the Commission to accelerate the deployment of facilities and
the provision of service in unserved areas by ordering carriers to serve those areas. 
88.    Section 214(e)(3) of the Act establishes that, in certain instances, the Commission or
state commissions may order a common carrier to provide the services supported by universal
service in unserved areas.  Due to the lack of information in the record, and at the Joint Board's
recommendation, the Commission decided in the May 8, 1997 First Report and Order not to
adopt particular rules to implement this provision at that time.  As part of our current efforts to
promote the deployment of service in unserved areas, insular and tribal lands, we conclude that it
is time to establish a framework for conducting proceedings pursuant to section 214(e)(3). 
Accordingly, we seek comment, as described below, regarding the implementation of this
provision.  
89.    Section 214(e)(3) provides that:
          
          if no common carrier will provide the services that are supported by
          Federal universal service support mechanisms under section 254(c)
          to an unserved community or any portion thereof that requests such
          service, the Commission, with respect to interstate services or an
          area served by a common carrier to which paragraph (6) applies,
          or a State commission, with respect to intrastate services, shall
          determine which common carrier or carriers are best able to provide
          such service for that unserved community or portion thereof.  Any
          carrier or carriers ordered to provide such service shall meet the
          requirements of  paragraph (1) and shall be designated as an eligible
          telecommunications carrier for that community or portion thereof.
          
The legislative history for this provision states that section 214(e)(3) "makes explicit the implicit
authority of the Commission" to order a common carrier to provide services supported by the
universal service support mechanisms. 
     A.   Defining "Unserved Area"
90.    In order to determine whether an allegedly unserved community is eligible for relief
pursuant to section 214(e)(3), we must first decide whether the area at issue is unserved.  Only
after making this initial determination can we proceed with the rest of the analysis required by
section 214(e)(3).  We propose defining an unserved area as "any area in which facilities would
need to be deployed in order for its residents to receive each of the services designated for
support by the universal service support mechanisms."  In the First Report and Order, we
identified the services that would be supported by universal service support mechanisms as: 
single-party service; voice grade access to the public switched network; DTMF signaling or its
functional equivalent; access to emergency services; access to operator services; access to
interexchange service; access to directory assistance; and toll limitation services for qualifying
low-income consumers.  These services were identified based on the statutory directive
embodied in section 254(c)(1)(A)-(D), requiring the Joint Board and the Commission to 
"consider the extent to which ... telecommunications services" included in the definition of
universal service: (1)  are essential to education, public health, or public safety;   (2) have, through
the operation of market choices by customers, been subscribed to by a substantial majority of
residential customers;  (3) are being deployed in public telecommunications networks by
telecommunications carriers;  and (4) are consistent with the public interest, convenience and
necessity.
91.    The proposed definition is based on whether facilities would need to be deployed to
provide the supported services to distinguish unserved areas from areas in which a large
percentage of the population does not subscribe to available services.  This definition is intended
to help further our statutory mandate to promote the availability of services supported by federal
universal service support mechanisms.  We recognize that this definition may result in certain
areas being deemed unserved, even though those areas are receiving some level of service that
includes less than all of the services designated for support by the universal service support
mechanisms.  We also recognize that this definition may result in the existence of relatively small
unserved areas within larger areas that are currently receiving service.  We seek comment on
whether this definition will enable us to appropriately target our efforts to those areas that do not
receive all of the services supported by federal universal service support mechanisms. 
92.    We emphasize, however, that determining whether a particular area meets the
definition of unserved area is only the beginning of the analysis under section 214(e)(3).  To
obtain relief pursuant to section 214(e)(3), each of the steps discussed below must be followed. 
We seek comment on this analysis and we invite commenters to propose alternative definitions.  
     A.   Determining When a Community is Unserved
93.    The language "or any portion thereof" in section 214(e)(3) suggests that we are not
meant to impose minimum size requirements on the number of potential subscribers needed to
invoke the authority of section 214(e)(3).  We seek comment on whether the language should be
interpreted differently or suggests a particular definition.  
     A.   Determining When No Common Carrier Will Provide Service
94.    By its terms, the relief afforded in section 214(e)(3) is not triggered until a
determination is made that "no common carrier will provide" the services supported by the federal
universal service support mechanisms.  Therefore, we seek comment on the meaning of the phrase
"no common carrier will provide" the supported services.
95.    As an initial matter, section 214(e)(3) does not specify whether the request for service
must be received from members of the unserved community or whether state, local, or tribal
authorities must make an official request for service from the carrier on behalf of the unserved
members of the community.  We tentatively conclude that limitations on who may issue the
request are not warranted by the terms of the statute or the goals it seeks to achieve.  We seek
comment on this tentative conclusion.
96.    We tentatively conclude that the language "no common carrier will provide" the
services supported by the federal universal service support mechanisms means something more
than no common carrier is actually providing the supported services.  We seek comment on how
we can determine that no common carrier is willing to provide the supported services.  We seek
comment on which common carriers must be asked in order to reach the conclusion that no
common carrier will provide the service.  We seek comment on how a satellite services provider
should be treated for this issue, given that they can potentially provide service to these unserved
areas.  We also seek comment on whether the reasons for the common carrier's refusal to provide
service are relevant to a determination that the area is unserved.  For example, what if the refusal
to provide service is based on the poor credit histories of the individuals requesting service or an
existing overdue debt?  Given the extremely low annual incomes, on average, on tribal lands, it
seems possible that inadequate credit histories of the potential customers may cause a carrier to be
unwilling to provide service.
     A.   Identifying Carrier or Carriers Best Able to Serve Unserved Areas
97.    Section 214(e)(3) authorizes the Commission, with respect to interstate service or an
areas served by a carrier to which section 214(e)(6) applies, and state commissions, with respect
to intrastate service, to determine which carrier or carriers are best able to provide service to the
requesting, unserved community and order that carrier or carriers to provide service.  We seek
comment on the relative roles that the Commission and the states should play in determining
which carriers are best able to provide the supported services in unserved areas, including any
coordination that should occur in making this determination.
98.    We seek comment on whether the Commission is authorized to and whether it should
establish national guidelines by which states may or must make this determination, when they have
jurisdiction to do so.  We recognize that the selection of the carrier to serve some unserved areas
pursuant to section (e)(3) of the Act is to be made by state commissions.  We seek comment on
whether a consistent, national approach is necessary to further the universal service goals of the
Act or to provide certainty to carriers regarding the possible application of this important
provision.  We seek comment on whether, in situations where the state has jurisdiction to
designate eligible telecommunications carriers, all aspects of this decision should be left to the
states because states have more familiarity with the areas in question.  We also seek comment on
the role of tribal authorities with respect to the Commission's determination of the carrier or
carriers best able to serve unserved, tribal lands.  We also seek comment to determine whether the
Commission's obligation to identify and order a carrier to provide service in tribal lands should be
affected by the interests of the tribal authorities.
99.    One approach for making a determination pursuant to section 214(e)(3) would be to
conduct a fact-intensive inquiry, polling common carriers serving nearby or surrounding areas to
determine where existing facilities are deployed, to estimate the costs for each carrier to provide
the supported services, and to consider other possible factors that may be relevant to the
conclusion that a carrier is "best able."  We tentatively conclude, however, that our preferred
approach would be to adopt a competitive bidding mechanism for identifying the carrier or
carriers best able to provide service in unserved areas for which the Commission has authority to
order carriers to provide service.  We seek comment on the use of a competitive bidding
mechanism in section V.E.2, below.  We seek comment on whether it is within our authority to
require states to adopt a competitive bidding mechanism to determine which carrier or carriers
will be ordered to provide intrastate service in unserved areas to which section 214(e)(6) does not
apply.  
100.   If the competitive bidding mechanism does not give rise to a carrier willing and
able to provide the supported services in the unserved area at a reasonable cost, we seek comment
on whether the Commission should then initiate an inquiry to determine the carrier or carriers
best-able to provide service to the area.  We seek comment on whether the following factors
would be relevant in making that determination:  (1) whether the area falls within the designated
service area of an existing carrier;  (2) the extent to which a carrier has deployed facilities capable
of providing supported services in the surrounding area; (3) the cost for that carrier to build
facilities capable of providing the supported services; (4) the quality of services that would be
provided; (5) the financial strength of the carrier; (6) the proportionate impact serving the area
would have on the number of lines and the geographic area served by the carrier; (7) the amount
of time required for the carrier to deploy facilities; and (8) a carrier's status as either an incumbent
LEC or a competitive eligible telecommunications carrier.  We seek comment on any other factors
that may be relevant.  We also seek comment on whether our inquiry must be limited to
incumbent LECs and competitive eligible telecommunications carriers or whether we may also
include other competitive LECs, interexchange carriers, terrestrial wireless or satellite service
providers, or providers of cable or electric services that would be capable of providing the
supported services to the unserved area. We seek comment on whether to exclude certain carriers
from consideration, for example, carriers that are considered small entities for purposes of the
Regulatory Flexibility Act.   Finally, we seek comment on whether the preferences of the
unserved community for a particular carrier or technology should be considered in making a
determination of which carrier is best able to provide service to the area.
          1.   Background on Competitive Bidding
101.   In the Notice of Proposed Rulemaking issued to implement the universal service
provisions of the 1996 Act, the Commission sought comment on how to provide universal
service support to rural, insular, and high-cost areas, generally, and asked whether competitive
bidding could be used to set the level of support.  The Commission sought comment on the use
of a competitive bidding system in which eligible carriers offering all of the services supported by
universal service mechanisms would bid on the level of assistance per line that they would need to
provide such services at affordable rates, consistent with the Act.  The Commission explained that
such an approach would attempt to harness competitive forces to minimize the cost of universal
service.  In a July 1996 Public Notice, the Common Carrier Bureau sought further comment on a
competitive bidding system.  In addition, Commission staff conducted ex parte meetings
relating to competitive bidding, including a March 19, 1997 forum on universal service
auctions.
102.   The Joint Board focused its recommendations regarding support for rural, insular,
and high-cost areas on a mechanism for estimating the forward-looking economic cost of service
for such areas.  The Joint Board concluded that:
          [w]hile the record in this proceeding persuades us that a properly
          structured competitive bidding system could have significant
          advantages over other mechanisms used to determine the level of
          universal service support for high cost areas, we find that the
          information contained in the record does not support adoption of
          any particular competitive bidding proposal at this time.
103.   The Joint Board cited the potential advantages of competitive bidding including
the use of marketplace dynamics to establish the level of universal service support for any given
area.  The Joint Board noted that "[a] properly designed competitive bidding system would
reduce the role of regulators in determining the costs of providing universal service once an area
becomes subject to bidding."  The Joint Board also recognized that a properly structured
competitive bidding system could reduce the amount of support needed for universal service by
reflecting the lower costs of more efficient carriers and new technologies that would be used to
set the level of universal service support for the entire area.
104.   The Joint Board found that sections 254 and 214(e) of the Act and the record
developed in this proceeding provide some guidance as to how a competitive bidding system
should be structured.  The Joint Board recommended that any carrier that meets the eligibility
criteria for universal service support should be permitted to participate in the auction and that any
competitive bidding system should be competitively neutral, favoring neither incumbents nor new
entrants.  It also recommended that the system adopted should minimize the ability of bidders to
collude, and suggested that the system should either prescribe a minimum number of bidders or
be designed to be effective for any number of bidders.  Finally, the Joint Board recommended
that, in determining the geographic area that carriers would bid to serve, any final proposed
bidding plan use areas sized to promote competition and target universal service support
efficiently.
105.   On May 8, 1997, the Commission released its First Report and Order.  In the First
Report and Order, the Commission adopted most of the recommendations of the Joint Board
including "a specific timetable for implementation of federal universal service support to rural,
insular, and high cost areas."  In the First Report and Order, the Commission found that "a
compelling reason to use competitive bidding is its potential as a market-based approach to
determining universal service support. . . ."  The Commission also found that "a properly
structured competitive bidding system would . . . reduce the amount of support needed for
universal service."  By reducing the amount of support provided for universal service, the
Commission found that competitive bidding may advance the goal of affordable rates  because
carriers would be able to pass-through any reductions to their subscribers.  The Commission
concluded, however, that further proceedings were needed to examine issues related to the use of
competitive bidding to set universal service support levels for rural, insular, and high-cost areas. 
Specifically, the Commission found that the record did not contain adequate discussion or analysis
to enable us either to define a competitive bidding mechanism that would be consistent with the
requirements of sections 214(e) and 254, or to adopt specific procedures for implementing a
lawful competitive bidding system. 
          1.   Competitive Bidding Proposal
106.   We tentatively conclude that we should adopt a competitive bidding mechanism to
identify the carrier or carriers best able to provide the supported services in unserved tribal lands
and to set the level of support provided for serving the area.  We are hopeful that we may be able
to design a competitive bidding mechanism that will generate public awareness of the needs of a
particular area for service and elicit proposals from one or more carriers that could be compared
before determining which carrier or carriers should be designated as an eligible
telecommunications carrier for the area.  We seek comment on this proposal.  
107.   We seek comment on whether the possibility that a carrier will be ordered to
provide service pursuant to section 214(e)(3) will provide incentives for carriers to participate in
the competitive bidding mechanism in order to be able to set the terms on which they will provide
service.  We seek comment on whether the competitive bidding mechanism could bring unserved
areas to the attention of carriers previously unaware of the need for telecommunications services
in those areas and thus identify carriers that would be willing to provide service to the area for a
support amount equal to or lower than the amount that would be provided under existing federal
universal service support mechanisms.  In addition, we seek comment on possible negative
incentives and distortions that may be created by using a competitive bidding mechanism.  For
example, we seek comment on whether a competitive bidding approach will likely lead carriers to
provide the lowest-cost, lowest-quality service that meets the definition of supported services,
unfairly depriving residents of higher quality or advanced services.
108.   We also seek comment on whether the Commission should conduct a trial to
determine whether a competitive bidding mechanism is the most efficient means of identifying the
carrier or carriers best able to provide the supported services in unserved areas.  We seek
comment on how large a service area would be appropriate for such a trial.  We seek comment on
whether the Commission should solicit volunteers from Indian tribes that currently have large
unserved areas.  
               (a)  Participants
109.   We seek comment on the possible participants in a competitive bidding
proceeding.  Section 214(e)(3) states that any carrier ordered to provide service pursuant to this
section shall meet the requirements necessary and be designated an eligible telecommunications
carrier for the unserved area.  We seek comment on whether a carrier must first be designated
an eligible telecommunications carrier for the area prior to participating in the competitive bidding
mechanism.  We seek comment on whether any carrier that can demonstrate that it can meet the
requirements of section 214(e)(1) may participate in the competitive bidding mechanism.  We
seek comment on what kind of showing is necessary to demonstrate that a carrier can meet the
requirements of section 214(e)(1).  We seek comment on whether terrestrial wireless or satellite
providers will be able to participate in the competitive bidding mechanism.  We also seek
comment on the number of bidders we should anticipate for auctions in the universal service
context, and the extent to which we should consider that number in deciding the type of auction
that should be used, as discussed below.
               (a)  Number of Winners
110.   We seek comment on whether the characteristics of the unserved tribal lands may
be such that it is not economically practical to support more than one provider to serve unserved,
tribal lands. To the extent that supporting a single provider is more economical, permitting
multiple providers to receive federal universal service support may not be in the public interest.  In
addition, if all carriers were entitled to receive support at the level determined in the competitive
bidding auctions, bidders would have no incentive to bid below the opening level; that is,
competitive bidding would not reveal the minimum amount of support necessary to provide
service to the area.  For these reasons, we propose that qualified eligible telecommunications
carriers bid to secure an exclusive right to receive universal service support for serving the
unserved tribal area.  That is, the winning bidder would be the only carrier designated as an
eligible telecommunications carrier for providing the supported services to the unserved, tribal
lands subject to competitive bidding.
111.   We seek comment on whether the Commission has the authority to and whether
we should try to attract carriers by agreeing to designate only one carrier to serve the unserved,
tribal land or permitting only one carrier to receive federal universal service support for serving
the area.  We seek comment on whether a decision to limit support to a single carrier is consistent
with the universal service provisions and pro-competitive goals of the Act.  We observe that, in
the case of an area served by a rural carrier, the Commission "may" designate more than one
eligible telecommunications carrier but must make a specific showing that an additional eligible
telecommunications carrier would serve the public interest.  With respect to all other carriers,
the Commission "shall" designate more than one common carrier as an eligible
telecommunications carrier.  We seek comment on whether these provisions apply with respect to
an unserved area.  We seek comment on whether the statutory language that the Commission
"shall determine which carrier or carriers are best able to provide such service" indicates that the
Commission may determine that a single carrier shall be designated.  Finally, we seek comment
concerning the ability of bidders to accurately estimate the possible future challenges from other
carriers for the more profitable customers in the previously unserved, tribal lands.
112.   As an alternative to a single winner, we consider the possibility of supporting two
or more winning bidders.  We generally believe that customers benefit most when multiple
providers are available, because competition leads to lower prices and provides an alternative
where service quality is unsatisfactory.  Supporting two winning bidders means that a second
carrier would be able to compete vigorously with the lowest bidder.  We seek comment on
whether to use the competitive bidding mechanism to identify a level of support which would be
provided for serving the area and to allow any carrier with a bid within a specific range of the
winning bidder, who also satisfies the requirements of section 214(e)(1) of the Act, to receive
that level of support for providing service to the area.  We seek comment on whether the
possibility of having multiple carriers receive support for these previously unserved areas would
substantially diminish or even eliminate any incentives carrier might have to participate in
competitive bidding.  We seek comment on whether providing support sufficient to allow
competing carriers to build the necessary infrastructure would generate customer benefits over the
long-term that would offset the additional cost associated with supporting two carriers.  In
making this determination, we must consider the duration of the service term and the rate of
change in network technology.  For example, if technological change were so rapid that both the
new entrant and incumbent carrier would need to install and recover the cost of new facilities for
each contract term, the benefits of creating competing carriers would be significantly reduced. 
We seek comment on these issues.  
               (a)  Term of Exclusivity Period
113.   If the Commission determines that a bidder should win the exclusive right to
federal universal service support, we would seek to establish an exclusivity period that is of an
adequate length to provide incentives for carriers to deploy facilities yet does not result in
unnecessary support being provided.  We seek comment on the appropriate duration of any
exclusivity period.  After the exclusivity period has ended, we could choose to re-auction the
service obligation and consider multiple providers if the costs of providing service decreased or
market conditions improved so that multiple providers became practical.  We anticipate that that
the length of the exclusivity period will affect the bids for monthly support levels.  In addition, the
length of the exclusivity period will affect the average administrative and transaction costs for
conducting the auction. Granting exclusivity periods that are too short could be harmful because
the winning carrier is likely to need time to establish its network, and to amortize its investments. 
In addition, more frequent auctions entail increased administrative costs.  Granting periods that
are too long, however, also could be harmful.  Technological advances over time can create more
efficient means of providing communications, which would enable firms to offer service at a lower
cost.  To the extent that the winning bidder is shielded from competition during the exclusivity
period, the benefits of adopting a more efficient technology will accrue to the carrier, rather than
the customer.  In addition, with longer contract terms, the carriers' prediction of their costs at
later stages in the contract becomes more speculative, which could translate into higher bids in the
auction.  We seek comment on this analysis and the appropriate length of the exclusivity period. 
We suggest that commenters review the competitive bidding proposals and mechanisms
summarized in Appendix D for examples that may assist in determining the length of the
exclusivity requirement.
               (a)  Bidding Process
114.   We seek comment on whether to use a single-round, sealed bid process or a
descending, multi-round auction.   Each bidder would submit an amount of support necessary
per line given our universal service technical specifications.  We observe that the Commission has
successfully implemented multi-round auctions in other contexts.  We seek comment on
whether a descending multi-round bidding system would be preferable to a single-round sealed bid
auction.
115.   We also seek comment on how to establish the reservation price   the highest bid
that would qualify for support    for the competitive bidding mechanism.  One option would be to
use the new high-cost mechanism to estimate the amount of support that would be available for
providing the supported services in the unserved, tribal area and set that as the reservation price. 
We seek comment on what incentives carriers would have, if any, to bid an amount lower than the
reservation price determined by the model.  Alternatively, we seek comment on whether we
should set a reservation price that is some percentage above the support amount determined under
the new high-cost mechanisms.  We seek comment on whether a rational percentage can be
identified.  We also seek comment on whether to conduct an auction without establishing a
particular reservation price or specifically identifying the amount that would be provided under
the new high-cost mechanism in an effort to determine the amount of support each carrier believes
is necessary.  We seek comment on whether, if we were to proceed in this manner, the
Commission should reserve the right to conclude that the competitive bidding mechanism was not
successful and to proceed to the fact-based inquiry, described in paragraph 96 above.
               (a)  Support Amount
116.   A well-designed auction should provide incentives for carriers to disclose the
minimum amount of support they require, even though this information may be competitively
sensitive. We seek comment on how to provide incentives for carriers to reveal the minimum
amount of support necessary to provide service to the unserved area.  We seek comment on
whether we should employ a "Second Price" or "Vickrey" auction, in which the successful bidder
gets support at the level of the lowest bid made by a non-successful bidder.  In theory, this style of
auction appears to induce bidders to reveal their actual costs and would thereby generate the same
total support requirements as a first price, sealed bid auction.  Another factor relevant in setting
the support level is whether the federal support provided constitutes the entire amount of subsidy
available to the carrier.  We tentatively conclude that we would need to establish that the
competitive bidding mechanism for unserved areas would be used to determine the entire amount
of support to be divided and the relevant share of support would be allocated to the federal and
state authorities, in whatever proportion is established for the high-cost support mechanism in
general.  We seek comment on this analysis.
               (a)  Obligations Assumed by Winning Bidder
117.   We tentatively conclude that, pursuant to section 214(e), a successful bidder must
provide the services supported by the universal service support mechanisms to all customers
requesting service in the designated area and advertise the availability of such service throughout
the service area.  We seek comment on this tentative conclusion.
          1.   Other Proposals and Examples of Competitive Bidding
118.   A number of parties submitted competitive bidding proposals in the universal
service docket, the most detailed of which were submitted by GTE, consultants to Ameritech,
and Frank Kelly and Richard Steinberg of Cambridge University, Great Britain.  These
proposals were designed to determine the carrier or carriers entitled to receive universal service
support and the level of support to be provided.  In addition, other government agencies have
used competitive bidding systems that may have features relevant to the market at issue here.  We
seek comment on these other competitive bidding proposals, summarized in Appendix D, because
aspects of these proposals may be preferable to the competitive bidding approach proposed
above. 
     A.   Ordering Carriers to Provide Service
119.    We seek comment on the ramifications of ordering a carrier to provide service in
an unserved area.  We tentatively conclude that this requirement entails an obligation to deploy
the facilities necessary to provide the services supported by federal universal service support
mechanisms, to offer the services to all customers requesting service in the designated area, and to
advertise the availability of such service throughout the service area.  These requirements are
consistent with the language in section 214(e)(3) of the Act, stating that the carrier ordered to
provide service shall meet the requirements of section 214(e)(1) of the Act.  We seek comment
on this tentative conclusion.
120.   We also seek comment whether additional measures may be necessary to ensure
that the carrier ordered to provide service is able to earn an appropriate return on its investment. 
For example, a carrier may deploy facilities, advertise the availability of services and offer service
to all customers and yet an inadequate number of customers may subscribe to the service,
rendering the operation unprofitable.  This result may occur due to faulty estimations by the
carrier, but it may also be the result of unpredictable demand.  Similarly, it is possible that carriers
may provide services to all requesting customers, yet the customers might default on their bills.  If
the carrier is ordered to provide service, to what extent must it retain customers who cannot pay
overdue debts or with poor credit  records?  How will the carrier recover its investment on the
facilities deployed to provide service to subscribers who do not pay their bills?  We seek comment
on these issues, including the appropriate role for the Commission and state commissions to play
in addressing these issues.
                     CXXI.Underserved Areas
122.   In this section of the Further Notice, the Commission considers whether additional
support for low-income consumers is necessary to promote subscribership in unserved and
underserved areas, including tribal and insular areas.  
     A.   Defining "Underserved Area"
123.   In the Thirteenth Order on Reconsideration, the Commission observed that there
may be inadequately served areas that are characterized by extremely low penetration, low
population density, and high costs.  We seek comment on the need for the Commission to
establish a definition of "underserved area" that would be used in targeting supplemental universal
service support to those areas.  For example, a community may be considered underserved if the
penetration rate of the community is significantly below the national average.  In addition to the
number of supported services available, and the percentage of the population receiving those
supported services, there may be  other identifying characteristics that describe an underserved
area.  We seek comment on an appropriate definition for underserved area.  For example, we
could define underserved area as a geographic area that meets certain statistical benchmarks, i.e.,
a penetration rate below a certain percentage, a population density below a certain level, costs of
providing supported services above a certain level, etc.  We also seek comment on whether there
is sufficient, readily available statistical data to make such a definitional approach viable. 
     A.   Expanding LinkUp to Include Facilities-Based Charges
124.   We seek comment on whether increasing federal support to offset initial
connection charges may be necessary to increase the success of our universal service support
mechanisms in underserved areas, including insular and tribal