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Availability of Version One, Connect America Fund Phase II Cost Model

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Released: December 11, 2012

PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0513

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322

DA 12-2011

Released: December 11, 2012

WIRELINE COMPETITION BUREAU ANNOUNCES AVAILABILITY OF VERSION ONE

OF THE CONNECT AMERICA FUND PHASE II COST MODEL

WC Docket Nos. 10-90, 05-337

Today, the Wireline Competition Bureau (Bureau) announces the availability of version one
of the Connect America Cost Model, which provides Commission staff and interested parties the
ability to calculate costs using a variety of different inputs and assumptions. Parties may access this
version of the cost model at http://www.fcc.gov/encyclopedia/caf-phase-ii-models. Parties also will
be required to execute the relevant acknowledgement of confidentiality, licensing, and nondisclosure
documents that will be released as attachments to a Third Supplemental Protective Order.
On November 18, 2011, the Commission released the USF/ICC Transformation Order and
FNPRM, establishing the Connect America Fund Phase II to provide ongoing support for voice
services and the extension of broadband-capable networks to millions of unserved locations using “a
combination of a forward-looking cost model and competitive bidding.”1 Thereafter, the Bureau
released the Request for Models Public Notice, inviting interested parties to submit proposed
forward-looking cost models.2 In response, parties submitted two separate models into the record,3
and on June 8, 2012, the Bureau sought comment on these models as well as “on a number of
threshold decisions regarding the design of and data inputs to the forward-looking cost model.”4 The
Bureau also hosted an in-person workshop in September 2012 to discuss the design and mechanics


1 See Connect America Fund, et al., WC Docket No. 10-90, et al., Report and Order and Further Notice of
Proposed Rulemaking, 26 FCC Rcd 17663, 17673, para. 23 (2011) (USF/ICC Transformation Order and
FNPRM
), pets. for review pending sub nom. In re: FCC, No. 11-9900 (10th Cir. filed Dec. 18, 2011).
2 Request for Connect America Fund Cost Models, WC Docket Nos. 10-90 and 05-337, Public Notice, 26 FCC
Rcd 16836 (Wireline Comp. Bur. 2011) (Request for Models Public Notice).
3 Letter from Jonathan Banks, USTelecom, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 10-90 and
05-337 (filed Feb. 13, 2012) (attaching updated documentation of CQBAT model). This submission updated
the ABC Coalition’s prior proposal for a forward-looking model, which had been submitted prior to the release
of the USF/ICC Transformation Order and FNPRM. Letter from Robert W. Quinn, Jr., AT&T, Steve Davis,
CenturyLink, Michael T. Skrivan, FairPoint, Kathleen Q. Abernathy, Frontier, Kathleen Grillo, Verizon, and
Michael D. Rhoda, Windstream, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al., Attach. 1
at 13 (filed July 29, 2011). The ABC Coalition model was submitted pursuant to a protective order adopted by
the Bureau. See Connect America Fund; High-Cost Universal Service Support, WC Docket Nos. 10-90 and
05-337, Second Supplemental Protective Order, 27 FCC Rcd 1503 (Wireline Comp. Bur. 2012). Alaska
Communications Systems Group, Inc. also submitted a model that estimates the cost of serving Alaska only.
See Comments of Alaska Communications Systems Group, Inc., WC Docket Nos. 10-90 and 05-337 (filed
Feb. 1, 2012). This model also was submitted pursuant to a protective order adopted by the Bureau. Connect
America Fund; High-Cost Universal Service Support
, WC Docket Nos. 10-90 and 05-337, Second Protective
Order, 27 FCC Rcd 1494, 1494, para. 1 n.2 (Wireline Comp. Bur. 2012).
4 Wireline Competition Bureau Seeks Comment on Model Design and Data Inputs for Phase II of the Connect
America Fund
, WC Docket Nos. 10-90 and 05-337, Public Notice, 27 FCC Rcd 6147 (Wireline Comp. Bur.
2012).

of the cost models in the record and, more recently, commenced a virtual workshop soliciting input
on a variety of topics related to the development and adoption of the cost model.5
The Administrator of the Universal Service Fund, the Universal Service Administrative
Company, has procured the services of a contractor to assist with the public hosting, execution, and
support of the Connect America Cost Model, under policy direction from the Commission. Version
one of the Connect America Cost Model will provide the ability to calculate costs using a variety of
different inputs and assumptions, allowing the Bureau to examine various options for different
network deployments to serve funded locations (e.g., fiber to the premises or fiber-fed digital
subscriber line), different assumptions about the amount of existing facilities assumed to exist (e.g.,
green-field or brown-field deployments, the mix of aerial, buried or underground plant), as well as
different assumptions about unit costs for capital and operating expenses. While version one of the
Connect America Cost Model is similar to the CQBAT model submitted into the record by the ABC
Coalition, it contains a number of key differences, including an estimate of the cost of providing not
only broadband services, but also voice services, and an updated calculation of brown-field costs to
include replacement capital expenditures.
The Bureau emphasizes that it has not adopted this version of the Connect America Cost
Model, and the inclusion of various capabilities does not represent a preliminary finding about the
approach that the Bureau will ultimately adopt in this proceeding. The Bureau will continue to
develop the cost model platform and inputs before finalizing and adopting a forward-looking cost
model for Connect America Phase II as directed in the USF/ICC Transformation Order and
FNPRM
. The Bureau anticipates that a second version of the Connect America Cost Model will be
available in the coming weeks and will include an update to 2010 census geographies and updated
State Broadband Initiative (SBI) data. The Bureau is soliciting input in the virtual workshop
whether there are any other functionalities or capabilities that should be added to the Connect
America Cost Model platform. Comment in response to that virtual workshop question should be
submitted no later than

January 11, 2013

.
After an opportunity for further public comment on additional issues, the Bureau will adopt
an order at a subsequent date in 2013 that adopts a final version of the Connect America Cost Model
that will be used for purposes of estimating support amounts in price cap areas. The Bureau
encourages interested parties to access the Connect America Cost Model (v.1 and any subsequent
version) to provide input on whether it provides reasonable estimates of forward-looking efficient
costs and what adjustments, if any, should be made before the Bureau finalizes and adopts the
Connect America Cost Model.
For further information, please contact David Zesiger in the Wireline Competition Bureau at
(202) 418-1500, or via e-mail at David.Zesiger@fcc.gov.
- FCC -


5 Wireline Competition Bureau Announces Connect America Phase II Cost Model Workshop, WC Docket Nos.
10-90 and 05-337, Public Notice, 27 FCC Rcd 9882 (Wireline Comp. Bur. 2012); Wireline Competition
Bureau Announces Commencement of Connect America Phase II Cost Model Virtual Workshop
, WC Docket
Nos. 10-90 and 05-337, Public Notice, 27 FCC Rcd 11977 (Wireline Comp. Bur. 2012).
2

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