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Broadband Data Released and Comment Sought on Benchmark Calculation

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Released: June 30, 2014
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PUBLIC NOTICE

Federal Communic

ations Commission

News Media Information 202 / 418-0500

445 12th Street, S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322

DA 14-944

Released June 30, 2014

WIRELINE COMPETITION BUREAU ANNOUNCES POSTING OF

BROADBAND DATA FROM URBAN RATE SURVEY AND

SEEKS COMMENT ON CALCULATION OF

REASONABLE COMPARABILITY BENCHMARK FOR BROADBAND SERVICES

WC Docket No. 10-90

Comments: [30 days after publication in the Federal Register]

In this Public Notice, the Wireline Competition Bureau (Bureau) proposes a specific methodology

for calculating the reasonable comparability benchmark for fixed broadband services. In the USF/ICC

Transformation Order, the Commission required that as a condition of receiving Connect America Fund

support, recipients must offer voice and broadband services in supported areas at rates that are reasonably

comparable to rates for similar services in urban areas.1 The methodology proposed here would result in a

broadband benchmark that ranges from $68.48 to $71.84 for services meeting the current broadband

performance standard of 4 Mbps downstream/1 Mbps upstream, with the specific benchmark depending on

the associated usage allowance. The Bureau also announces the posting of the fixed broadband services data

collected in the 2013 urban rate survey, and explanatory notes regarding the data, on the Commission’s

website at http://www.fcc.gov/encyclopedia/urban-rate-survey-data.

On November 18, 2011, the Commission released the USF/ICC Transformation Order and FNPRM,

which comprehensively reformed and modernized the universal service and intercarrier compensation

systems.2

In the Order, the Commission directed the Wireline Competition Bureau and Wireless

Telecommunications Bureau (together, the Bureaus) to conduct a survey of residential urban rates for fixed

voice, fixed broadband, mobile voice, and mobile broadband services.3

The Commission concluded that

rural broadband rates would be deemed “reasonably comparable” to urban rates under section 254(b)(3) if

they fell within a reasonable range of urban rates for reasonably comparable broadband service.4

It directed

the Bureaus to develop a specific methodology for defining that reasonable range.5

1 Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order et al., 26 FCC 17663, 17693, 17695,

paras. 81, 86 (2011), aff’d sub nom. In re: FCC 11-161, 2014 WL 2142106 (10th Cir. May 23, 2014) (USF/ICC

Transformation Order). See also 47 U.S.C. § 254(b). Recipients are also required to submit pricing data for both their

voice and broadband offerings with their annual reports. 47 C.F.R. § 54.313(a)(7); USF/ICC Transformation Order, 26

FCC Rcd at 17856, para. 594.

2 USF/ICC Transformation Order, 26 FCC Rcd at 17667, para. 1.

3 Id. at 17694, para. 85, 17708, para. 114.

4 Section 254(b) (3) specifies that consumers in rural and high-cost areas should have access to services that “are

reasonably comparable to those services provided in urban areas, and that are available at rates that are reasonably

comparable to rates charged for similar services in urban areas.”

5 USF/ICC Transformation Order, 26 FCC Rcd at 17704, para. 113.

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In the Further Notice, the Commission sought comment on how specifically to determine whether

rural rates are within a reasonable range of the national average urban rate for broadband service.6

In

particular, the Commission noted that in the voice context, states must certify that basic voice rates for non-

rural carriers are no more than two standard deviations above the national average.7

It asked whether it

would be appropriate in the broadband context to use two standard deviations for the broadband reasonable

comparability benchmark.8

In response to the Commission’s directives, in April 2013, the Bureaus adopted an order setting the

form and content for a survey of urban rates for fixed voice and broadband residential services.9

The

Wireline Competition Bureau (Bureau) initiated the survey in December 2013 and collected the rates offered

by a statistically valid sample of providers of fixed services identified using FCC Form 477 data in 500 urban

census tracts.10

As explained in the Staff Report attached hereto and shown in the data posted on the Commission’s

website, the Bureau collected 2,105 monthly rates for broadband service in urban areas.11 The reported

download speeds ranged from .5 Mbps to 20,480 Mbps while the upload speeds ranged from 1.125 Mbps to

1,024 Mbps.12

In addition to varying speeds, the service offerings differed as to usage allowances, if one

applied.

Consistent with longstanding Commission precedent for the voice comparability benchmark, we will

compute the broadband comparability benchmark based upon a national average.13

Indeed, the Commission

made clear that it expected the Bureau to use a national urban average.14

The attached Bureau Staff Report discusses three potential methods for determining the average

urban rate using the data collected in the Survey: simple rate statistics for specified subsamples; an average

rate for offerings meeting a minimum level of service; and regression analysis.15

The Staff Report also

6 USF/ICC Transformation Order, 26 FCC Rcd at 18046-47, paras. 1018-27.

7 Id. at 18046-47, para. 1026.

8

Id.

9 Connect America Fund, WC Docket No. 10-90, Order, 28 FCC Rcd 4242 (Wireline Comp. Bur./Wireless Tel. Bur.

2013).

10 Wireline Competition Bureau Announces Timeline for Completion of Urban Rates Survey, WC Docket No. 10-90,

Public Notice, 28 FCC Rcd 16753 (Wireline Comp. Bur. 2013). The Staff Report attached to this Public Notice

provides additional information regarding how the survey was conducted. Wireline Competition Bureau Staff Report:

Possible Methodologies for Establishing Reasonably Comparable Broadband Rates for Fixed Services at 2-4 (rel. June

30, 2014) (Staff Report).

11 Staff Report at 4. In response to the USF/ICC Transformation FNPRM, several parties argued that comparability

benchmarks for mobile and fixed services should be addressed separately. See, e.g., Comments of Alaska

Communications Systems Group, WC Docket No. 10-90 et al. at 8 (filed Jan. 18, 2012), Comments of CTIA—The

Wireless Association, WC Docket No. 10-90 et al. at 10 (filed Jan. 18, 2012). We address only the reasonable

comparability benchmark for fixed services in this Public Notice.

12 Staff Report at 4.

13 USF/ICC Transformation Order, 22 FCC Rcd at 17694, para. 84. As noted above, the Commission has already

solicited comment regarding whether use of two standard deviations provides an appropriate range. Id. at 18046-47,

para. 1026.

14 Id. at 17708, para. 114 n.187 (stating that the Bureau should use FCC Form 477 data if possible to calculate a national

average urban rate for broadband).

15 Staff Report at 5-6.

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presents the average plus two standard deviations for each approach, thus showing a potential reasonable

comparability benchmark for broadband service under each approach.

For illustrative purposes, the Staff

Report also presents the relevant calculations if the minimum performance obligations were modified as

proposed recently by the Commission. 16

The first approach calculates the average using a subsample of observations based solely on

download speed, without regard to usage or upstream speeds. The second approach calculates the average by

identifying the subset of observations that meet or exceed a minimum service level, and then for each

provider that is captured in that sub-sample, computing the average based on the lowest rate offered by that

provider that meets or exceeds the specified service level. The third approach uses a simple weighted linear

regression model that takes into account the impact of three dimensions of service on rates: upload speed,

download speed, and usage allowance, if any. We summarize below the results under the three approaches.

Method

Speed

Usage

Average

Average +

Allowanc

2 Standard

e

Deviations

Service Offerings

3 to <5 Mbps/

Any

$47.48

$73.22

Meeting 3 to <5 Mbps

any upload

Downstream

speed

Service Offerings

4 Mbps/1 Mbps

100 GB

$54.54

$82.00

Meeting or Exceeding a

Minimum Service Level

(Upstream,

Downstream, Usage)

Linear Regression

4 Mbps/1 Mbps

100 GB

$44.74

$68.48

Analysis

4 Mbps/1 Mbps

250 GB

$46.76

$70.50

4 Mbps/1 Mbps

unlimited

$48.10

$71.84

We propose to use the weighted linear regression model to calculate the average urban rate.

Although the regression analysis is more complex than the other methods identified in the Staff Report,

regression analysis is well suited to take into account the differences in speed and usage allowance among

the service offerings in the sample (and thus reducing the likelihood of having the rates for dramatically

higher-speed services increase the benchmark for lower-speed services). Further, we propose to use a

subsample of data points to develop the regression, specifically, those data points with download speeds less

than or equal to 15 Mbps.17

We propose to adopt a separate benchmark for services with differing usage

levels. Thus, the reasonable comparability benchmark for a high-cost recipient offering a 4 Mbps/1

Mbps/100 GB offering would be $68.48; if that high-cost recipient chose to meet the Commission’s

broadband performance obligations with a 4 Mbps/1 Mbps/unlimited usage offering, its reasonable

comparability benchmark would be $71.84. We seek comment on these proposals.

16 Recently, the Commission proposed to increase the download speed requirement to 10 Mbps for all entities subject to

broadband public interest obligations and proposed that such entities offer at least one service offering at least 100

gigabytes (GB) of usage. Connect America Fund, WC Docket No. 10-90 et al., Report and Order, Declaratory Ruling,

Order, Memorandum Opinion and Order, Seventh Order on Reconsideration, and Further Notice of Proposed

Rulemaking, FCC 14-54, para. 138 (rel. June 10, 2014). The Bureau has specified that price cap carriers accepting

model-based support must offer at least one service plan with at least a 100 GB minimum usage allowance. Connect

America Fund, WC Docket No. 10-90, Report and Order, 28 FCC Rcd 15060, 15060-61, para. 2 (Wireline Comp. Bur.

2013).

17 There is increased variability in rates for the services with higher download speeds.

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To the extent parties believe one of the other approaches to determining an average of the data

collected in the Survey is preferable, they should explain with specificity the benefits of adopting an

alternative approach. Is there some other method of calculating the average urban rate that would better

account for the differences in speed and usage allowance among the service offerings?

Procedural Matters

Filing Requirements.

Pursuant to sections 1.415 and 1.419 of the Commission’s rules, interested

parties may file comments on or before the dates indicated on the first page of this document.18

Comments

may be filed using the Commission’s Electronic Comment Filing System (ECFS).19

Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS:

http://fjallfoss.fcc.gov/ecfs2/.

Paper Filers: Parties who choose to file by paper must file an original and one copy of each filing. If

more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two

additional copies for each additional docket or rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class

or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s Secretary, Office

of the Secretary, Federal Communications Commission.

All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be

delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325, Washington, DC 20554. The filing

hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners.

Any envelopes and boxes must be disposed of before entering the building.

Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be

sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.

U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street, SW,

Washington DC 20554.

People with Disabilities: To request materials in accessible formats for people with disabilities (Braille,

large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer &

Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (tty).

In addition, one copy of each pleading must be sent to each of the following:

Jay Schwarz, Industry Analysis and Technology Division, Wireline Competition Bureau, 445 12th

Street, S.W., 6-A134, Washington, D.C. 20554; e-mail: Jay.Schwarz@fcc.gov.

Alexander Minard, Telecommunications Access Policy Division, Wireline Competition Bureau, 445

12th Street, S.W., 5-A334, Washington, D.C. 20554; e-mail: Alexander.Minard@fcc.gov.

The proceeding this Notice initiates shall be treated as a “permit-but-disclose” proceeding in

accordance with the Commission’s ex parte rules.20

Persons making ex parte presentations must file a copy

of any written presentation or a memorandum summarizing any oral presentation within two business days

after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making

18 47 C.F.R. §§ 1.415, 1.419.

19 See Electronic Filing of Documents in Rulemaking Proceedings, GC Docket No. 97-113, Report and Order, 13 FCC

Rcd 11322 (1998).

20 47 C.F.R. §§ 1.1200 et seq.

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oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all

persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and

(2) summarize all data presented and arguments made during the presentation. If the presentation consisted

in whole or in part of the presentation of data or arguments already reflected in the presenter’s written

comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or

arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or

paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the

memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be

written ex parte presentations and must be filed consistent with rule 1.1206(b). In proceedings governed by

rule 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte

presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be

filed through the electronic comment filing system available for that proceeding, and must be filed in their

native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize

themselves with the Commission’s ex parte rules.

For further information about this Public Notice, please contact Jay Schwarz, Industry Analysis and

Technology Division, Wireline Competition Bureau, at (202) 418-0940; or at TTY (202) 418-0432.

- FCC -

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