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CACM Peer Review Request to Reed-Sirbu.doc

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Released: July 25, 2013
UNITED STATES GOVERNMENT
memorandum
WIRELINE COMPETITION BUREAU
DATE:
December 17, 2012
TO:
Marvin Sirbu, David Reed
FROM:
Julie A. Veach
Chief, Wireline Competition Bureau
SUBJECT:
Peer Review of Connect America Phase II Cost Model
________________________________________________________________________
The Federal Communications Commission (Commission) is in the process of
developing a cost model for use in the Connect America Fund proceeding (WC Docket
No. 10-90, et al.). 1 Through this memorandum, I request that you perform a peer review
of the model in question, the Connect America Cost Model.2
The Commission is currently implementing Connect America Phase II, a program
with the goal of deploying modern, scalable, broadband-capable infrastructure to areas of
the nation where high costs have left consumers unserved by broadband, while preserving
ubiquitous voice service and minimizing the burden on all consumers to support the
funding mechanism for the program.3 The Wireline Competition Bureau (Bureau) has
been directed by the Commission to adopt an engineering-based cost model, which will
estimate the forward-looking cost of deploying and operating a modern wireline voice
and broadband-capable network at the census block (or smaller) level.4 The model will


1 See Connect America Fund, WC Docket No. 10-90, et al., Report and Order and Further Notice of
Proposed Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order). To access the order,
see http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0206/FCC-11-161A1.pdf.
2 For a description of the model, see http://transition.fcc.gov/wcb/tapd/universal_service/caf/CAF2-
Part1.pdf and http://transition.fcc.gov/wcb/tapd/universal_service/caf/CAF2-Part2.pdf.
3 USF/ICC Transformation Order, 26 FCC Rcd at 17673-75, 17725-38, paras. 23-28, 156-93.
4 See id. at 17735, para. 187; see also Request for Connect America Fund Cost Models, WC Docket Nos.
10-90, 05-337, Public Notice, 26 FCC Rcd 16836 (Wireline Comp. Bur. 2011),
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-11-2026A1.pdf . For a virtual workshop on issues
associated with the development of the cost model, see http://www.fcc.gov/blog/wcb-cost-model-virtual-
workshop-2012. For the announcement of the workshop questions, see http://www.fcc.gov/document/wcb-
releases-additional-discussion-topics-connect-america-phase-ll.

ultimately be used to determine support amounts that will be offered to incumbent price
cap carriers in specified areas. The Bureau is directed to "ensure that the model design
maximizes the number of locations that will receive robust, scalable broadband within the
budgeted amounts. Specifically, the model should direct funds to support 4 Mbps/1
Mbps broadband service to all supported locations, subject only to [a] waiver process for
upstream speed . . . and should ensure that the most locations possible receive a 6
Mbps/1.5 Mbps or faster service at the end of the five year term, consistent with the CAF
Phase II budget."5
The Universal Service Administrative Company (USAC) is the entity that is
making the model available to the public. USAC has procured the services of a
contractor, CostQuest, to provide the model and to assist with its public hosting,
execution and support. The model and accompanying documentation (including
description of process for obtaining access to them) can be accessed online at
http://www.fcc.gov/encyclopedia/caf-phase-ii-models. Access to the model is subject to
a second level protective order, and requires the execution and return to us and CostQuest
(as appropriate) of the requisite confidentiality, licensing and non-disclosure agreements
(respectively Appendices A, B and C of the attached Third Supplemental Protective
Order, also found at http://www.fcc.gov/document/connect-america-phase-ii-third-
supplemental-protective-order). Login and other information about accessing the model
is available from USAC's contractor, CostQuest (James Stegeman, President
(jstegeman@costquest.com; (513) 941-9009), or Mark Guttman, Vice President of
Operations (mguttman@costquest.com; (513) 662-2124 x102).
The current version of the model provides the ability to calculate costs using a
variety of different inputs and assumptions, allowing the Bureau to choose among
different network deployments to serve funded locations (e.g., FTTP or fiber-fed DSL),
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.6 The cost
model is based on geospatial information systems (GIS) data on the nation's roads and
implements a road-based spanning tree to minimize the distance covered by the network,
limiting coverage to road types that are used for residential and business locations. The
model employs actual locations of existing central offices. Contemporary wireline
systems engineering standards are incorporated to ensure that the modeled network
accurately captures the number of routers located at the edge of the cloud, quantities of
feeder and distribution cable, customer aggregation points, and other network elements.
The contractor supplying this model to USAC previously provided related models for
submission in the record of this proceeding.7 Subsequent versions of the model likely


5 USF/ICC Transformation Order, 26 FCC Rcd at 17735, para. 187.
6 Id.
7 See 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 the CostQuest Broadband
Access Tool or CQBAT model). This submission updated the ABC Coalition's prior proposal for a
forward-looking cost model, which had been submitted prior to the release of the USF/ICC Transformation
(continued...)
2

will include updates and enhancements such as the use of 2010 Census data, a 2010
commercial business data set (which includes geocoded business addresses), updated
network coverage data from the National Broadband Map/State Broadband Initiative,
updated wire center boundaries, and network topologies refreshed to reflect new demand
data. It is expected that voice costs, on a per subscriber basis, will be added and that the
brown field model will include operating expenses and replacement capital expenses for
facilities assumed to be already deployed. In addition, it is expected that audit reports for
outside plant by wire center and for middle-mile connectivity will be provided. Version
two of the model will incorporate some of these updates and is scheduled to be available
in the near future.
Before a federal agency may rely on influential scientific information such as this
cost model in creating rules, the material must be peer reviewed to enhance the quality
and credibility of the government's scientific information.8 Guidance from the Office of
Management and Budget (OMB) requires agencies to provide peer reviewers with
"instructions regarding the objective of the peer review and the specific advice sought."9
The objective of this peer review is to establish whether the Connect America Cost
Model can reasonably be used to estimate the forward-looking cost of deploying and
operating a modern voice and broadband-capable network. Specifically, we seek your
advice on the following issues, from both a theoretical and empirical perspective:
(1) whether the methodology and assumptions employed are reasonable and technically
correct; (2) whether the methodology and assumptions are consistent with accepted
practices in the fields of economics, engineering, GIS, and costing; and (3) whether the
model is logically consistent. Please note that the standards for evaluation are not
necessarily the same as those one might apply in evaluating studies for publication in a
professional journal. For example, it is not necessary that the study present new or novel
theoretical results or empirical techniques. Consistent with the requirements of the OMB
Bulletin, we are not asking you to "provide advice on policy" or to evaluate any policy
implications that might arise from use of this cost model.10
Guidance from OMB further requires that "[r]eviewers shall be informed of
applicable access, objectivity, reproducibility and other quality standards under the
(Continued from previous page)


Order. 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. (filed July 29, 2011).
8 See OMB Peer Review Bulletin, 70 Fed. Reg. 2664 (2005),
http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf.
9 Id. at 2668, http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf#page=5.
10 The OMB Bulletin states in relevant part: "Peer reviewers can make an important contribution by
distinguishing scientific facts from professional judgments. Furthermore, where appropriate, reviewers
should be asked to provide advice on the reasonableness of judgments made from the scientific evidence.
However, the charge should make clear that the reviewers are not to provide advice on the policy...." Id. at
2669, http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf#page=6.
3

Federal laws governing information access and quality."11 The OMB also requires that
"peer reviewers ensure that scientific uncertainties are clearly identified and
characterized."12 Finally, please be aware of two other aspects of the peer review
process. First, the peer review will not be anonymous. Reviewers are identified and
reviews placed in the public record. Past peer reviews conducted for the FCC can be
found at: http://www.fcc.gov/omd/dataquality/peer-agenda.html.
Second, the OMB Bulletin requires us to assess whether potential peer reviewers
have any potential conflicts of interest.13 In particular, a "conflict of interest" would exist
if you have "any financial or other interest that conflicts with the service of an individual
. . . because it could impair the individual's objectivity or could create an unfair
competitive advantage for a person or organization."14 To assist our determination of
whether there are any potential conflicts, please indicate whether you have participated in
this rulemaking proceeding in any capacity. For your convenience, a list of parties who
have participated in the proceeding is attached. A search of the Commission's Electronic
Comment Filing System (ECFS) will also be useful in identifying potential conflicts.
I request that you provide a written report of your review, findings, and
recommendations with regard to this influential scientific information by January 25,
2013. In recognition of the fact that this peer review requires substantially more effort
than is typical, we will award you an honorarium of $1,000 on completion of this work.
Attachments


11 See id. at 2675, http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf#page=12 .
These standards are discussed in greater detail in OMB's "Guidelines for Ensuring and Maximizing the
Quality, Objectivity, Utility, and Integrity of Information Disseminated by Federal Agencies," 67 Fed. Reg.
8452 (2002).
12 OMB Peer Review Bulletin. 70 Fed. Reg. at 2669,
http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf#page=6. The Bulletin further
states that since not all uncertainties have an equal effect on the conclusions drawn, reviewers should
ensure that the potential implications of the uncertainties for the technical conclusions drawn are clear. In
addition, peer reviewers might be asked to consider value-of-information analyses that identify whether
more research is likely to decrease key uncertainties. Value-of-information analysis was suggested for this
purpose in the report of the Presidential/Congressional Commission on Risk Assessment and Risk
Management. A description of additional research that would appreciably influence the conclusions of the
assessment can help an agency assess and target subsequent efforts. Id.
13 Id. at 2670, http://www.ssa.gov/515/PeerReviewsFedRegNoticeForFinalBulletin.pdf#page=7.
14 Id.
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