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Connect America Fund Phase II Service Obligations

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Released: October 31, 2013

Federal Communications Commission

DA 13-2115

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Connect America Fund
)
WC Docket No. 10-90
)

REPORT AND ORDER

Adopted: October 31, 2013

Released: October 31, 2013

By the Chief, Wireline Competition Bureau:

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION………...…………………………………………….…………………………1
II.
BACKGROUND……………………………………………………………………………..……3
III.
DISCUSSION……………………………………………………………………………….……..6
A. Price Cap Carrier Obligations……………………………………………………...………….6
B. Unsubsidized Competitors………………………………………………………….………..39
IV.
PROCEDURAL MATTERS………………………………………………………………..……48
A. Paperwork Reduction Act………………………………………………………………...…..48
B. Final Regulatory Flexibility Certification…………………………………………..………..50
C. Congressional Review Act……………………………………………………………..…….52
V.
ORDERING CLAUSE……………………………….……………………………………...…...53

I.

INTRODUCTION

1.
In the USF/ICC Transformation Order, the Commission comprehensively reformed and
modernized the universal service and intercarrier compensation systems to maintain voice service and
extend broadband-capable infrastructure to millions of Americans.1 As part of the reform, the
Commission adopted a framework for providing support to areas served by price cap carriers, known as
the Connect America Fund, through “a combination of competitive bidding and a new forward-looking
model of the cost of constructing modern multi-purpose networks.”2 In particular, the Commission will
offer each price cap carrier monthly model-based support for a period of five years in exchange for a
state-level commitment to serve specified areas within the state that are not served by an unsubsidized
competitor, and if that offer is not accepted, will determine support through a competitive process.
2.
In this Report and Order (Order), the Wireline Competition Bureau (Bureau) takes further
action to implement the Commission’s direction that price cap carriers may elect to receive model-based


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 17663 (2011) (USF/ICC Transformation Order and/or FNPRM), pets. for review pending sub
nom. In re: FCC 11-161
, No. 11-9900 (10th Cir. filed Dec. 8, 2011).
2 USF/ICC Transformation Order, 26 FCC Rcd at 17725, para. 156.

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support in certain areas in exchange for making a state-level commitment to meet the Commission’s
service obligations. We specify the service obligations of price cap carriers that accept Phase II model-
based support through the state-level commitment process.3 Specifically, we provide two options for a
price cap carrier accepting model-based support to meet the Commission’s requirements for reasonably
comparable pricing of voice and broadband services. In addition, we specify a 100 gigabyte (GB)
minimum usage allowance that will initially apply to a price cap carrier accepting model-based support
for Phase II-funded locations, to the extent the carrier chooses to set usage allowances in such areas. We
also specify latency requirements – specifically, that price cap carriers must have a provider round trip
latency of 100 milliseconds (ms) or less, and provide two options for how they may test and report
compliance with this requirement. Finally, we address how we will apply these metrics to determine what
areas we will consider as served by an unsubsidized competitor.

II.

BACKGROUND

3.
In the USF/ICC Transformation Order, the Commission delegated to the Bureau the task of
implementing various aspects of Connect America Phase II.4 The Bureau has made significant progress
in developing the cost model, releasing eight working versions of the model to date to allow for targeted
public comment as the model develops. In April 2013, the Bureau released an order resolving the key
network and engineering assumptions for the Connect America Cost Model.5 In May 2013, the Bureau
adopted procedures for price cap carriers to elect to accept Phase II support via a state-level commitment
and certain procedural requirements, including presumptions, to be used in determining what areas are
served by unsubsidized competitors.6
4. Under the USF/ICC Transformation Order, the Commission specified that price cap carriers
making a state-level commitment must provide broadband service that is “reasonably comparable to
terrestrial fixed broadband service.”7 Price cap carriers are required to offer voice telephony throughout
their service areas at rates reasonably comparable to rates for reasonably comparable voice service in
urban areas.8 Moreover, as a condition of receiving support for voice telephony, a price cap carrier
accepting Phase II support through a state-level commitment is required to “offer broadband at actual
speeds of at least 4 Mbps downstream and 1 Mbps upstream, with latency suitable for real-time
applications, such as VoIP, and with usage capacity reasonably comparable to that available in


3 We emphasize that the metrics we adopt in this Order apply only to price cap carriers making a state-level
commitment for Phase II and do not prejudge how service obligations may be applied in other aspects of Connect
America, such as the requirements for recipients in areas where the price cap carrier declines to make a state-level
commitment, Phase II of the Mobility Fund or the Tribal Mobility Fund, the Remote Areas Fund, or the service
obligations of rate-of-return carriers.
4 USF/ICC Transformation Order, 26 FCC Rcd at 17701, 17729, paras. 103, 170.
5 Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order, 28 FCC Rcd 5301 (Wireline Comp.
Bur. 2013).
6 See Connect America Fund, WC Docket No. 10-90, Order, 28 FCC Rcd 7211, 7221-22, paras. 23-29 (Wireline
Comp. Bur. 2013) (Phase II Challenge Process Order).
7 USF/ICC Transformation Order, 26 FCC Rcd at 17726, para. 160.
8 Id. at 17694, para. 84; see also 47 C.F.R. § 54.313(a)(10) (requiring annual certifications for voice rates). The
Commission directed the Wireline Competition Bureau and Wireless Telecommunications Bureau to conduct a
survey of residential urban rates for voice services. USF/ICC Transformation Order, 26 FCC Rcd at 17694, para.
85.
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comparable offerings in urban areas.”9 The Commission also specified that the pricing of broadband
service in rural areas must be reasonably comparable to the rates for reasonably comparable broadband
service in urban areas.10
5. In the Phase II Service Obligations Public Notice, the Bureau sought comment on what
specific metrics a price cap carrier must meet in order to be deemed in compliance with the service
obligations adopted by the Commission and specific standards to be used in determining which areas are
served by an unsubsidized competitor and therefore excluded from Phase II support.11

III.

DISCUSSION

A.

Price Cap Carrier Obligations

6.
In this section, we discuss the specific metrics that will be used to determine compliance of
recipients of model-based Phase II support with the Commission’s service obligations.12 By setting these
standards, we provide clarity to price cap carriers contemplating accepting Phase II support through the
state-level commitment process. We detail how compliance with the Commission’s requirements will be
evaluated, while creating a straightforward framework for oversight and accountability in Phase II.13
Price cap carriers should use the standards in this Order when making their annual certifications.14 The
Commission will review these annual reports to ensure the standards set forth in this Order are being met
and to evaluate price cap carriers’ continuing eligibility for Phase II support.15


9 USF/ICC Transformation Order, 26 FCC Rcd at 17726, para. 160.
10 Id. at 17708, para. 113. The Commission delegated “authority to conduct an annual survey of urban broadband
rates, if necessary, in order to derive a national range of rates for broadband service” and “to monitor urban
broadband offerings, including by conducting an annual survey, in order to specify an appropriate minimum for
usage allowances and to adjust such a minimum over time.” Id. at 17699, 17708, paras. 99, 114.
11 Wireline Competition Bureau Seeks Further Comment on Issues Regarding Service Obligations for Connect
America Phase II and Determining Who Is an Unsubsidized Competitor
, WC Docket No. 10-90, Public Notice, 28
FCC Rcd 1517 (Wireline Comp. Bur. 2013) (Phase II Service Obligations Public Notice).
12 At the outset, we note that price cap carriers accepting model-based support may offer their customers services
other than those meeting these performance criteria. As long as the carrier offers at least one voice service plan and
one broadband service plan that meets these metrics, it is free to offer other plans and packages to meet the varying
needs of consumers. We note that usage allowance and latency requirements do not apply to those areas that rely
exclusively on satellite backhaul. See USF/ICC Transformation Order, 26 FCC Rcd at 17699-700, para. 101; see
also
47 C.F.R. § 54.313(g).
13 While we set specific standards for both the price and usage allowance of broadband service in order to
implement Phase II model-based support, this in no way constitutes price or usage regulation of broadband services,
as suggested by some commenters. Cf. Comments of the American Cable Association, WC Docket No. 10-90, at
10-11 (filed Mar. 28, 2013) (ACA Comments); Comments of the National Cable and Telecommunications
Association, WC Docket No. 10-90, at 4 (filed Mar. 28, 2013) (NCTA Comments). Rather, these measures are
merely intended to provide guidance to parties that voluntarily accept universal service support as to how their
compliance with the Commission’s service obligations will be evaluated.
14 See 47 C.F.R. § 54.313(a)(1), (e)(3).
15 An entity receiving support will receive reduced support should it fail to fulfill its public interest obligations.
USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17863, para. 618. The Commission has sought
comment on what the appropriate specific consequences are for partial non-compliance. Id. at 18067-68, paras.
1110-16.
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7.
Price. The USF/ICC Transformation Order calls for rates for both voice and broadband
between urban and rural areas to be reasonably comparable.16 The Bureau has adopted a survey
instrument to conduct a rate survey, and the Bureau is working to conduct this survey in the near future.17
We anticipate that the rate survey data will be available, and the benchmarks set, prior to the deadline for
Phase II state-level commitment elections. Once these benchmarks are adopted, a price cap carrier
accepting model-based support can certify that its rates conform to the reasonable comparability
benchmark.
8.
Consistent with the Commission’s approach when it adopted rules for the second round of
Connect America Phase I incremental support,18 we also adopt an alternative means for showing
reasonable rate comparability: a carrier’s rate for both voice and broadband will be presumed reasonably
comparable if the carrier certifies that it is offering fixed services meeting our voice and broadband
requirements for the same or lower prices in rural areas as urban areas. To qualify for this presumption,
the qualifying service plan must have substantially similar terms and conditions in both urban and rural
areas. 19 This approach recognizes that if rates in rural areas are the same as urban areas, that by
definition complies with the reasonable comparability principles set forth in section 254(b).20 In order to
certify that rates are reasonably comparable under this presumption, the rates in Phase II-funded areas
must be the same or lower than rates for fixed wireline services in urban areas.21 We do not require the
carrier to offer a particular rate nationwide; rather, it is sufficient if the carrier offers the same rate in an
urban area in the state where it accepts Phase II funding.22


16 Id. at 17694, 17708-09, paras. 85, 113-14. The Commission concluded that voice rates would be presumed to be
reasonably comparable if they fall within two standard deviations of a national average. See, e.g., id. at 17694, para.
84.
17 Connect America Fund, WC Docket No. 10-90, Order, 28 FCC Rcd 4242 (Wireline Comp. Bur. 2013).
18 Connect America Fund, WC Docket No. 10-90, Order, 28 FCC Rcd 7766, 7776, para. 25 n.53 (2013).
19 For instance, it would be insufficient for a carrier to demonstrate that its low-end plan in rural areas is offered for
the same or lower prices than its high-end plan in urban areas. Similarly, a carrier may not compare a rural plan that
has a usage allowance with an urban plan that has no usage allowance (or a substantially higher usage allowance).
Recognizing that price cap carriers today do not typically offer a 100 GB usage allowance in urban areas, it will be
sufficient for purposes of the presumption to make the comparison with a wireline offering that has a 150 GB or 250
GB usage allowance.
20 This is similar to the mechanism used in the Mobility Fund Phase I auction, where a participant could demonstrate
reasonably comparable rates by showing its offering was substantially similar to a service plan offered by at least
one mobile wireless service provider in an urban area, and that its offering was made at the same or a lower rate than
the compared-to offering. Mobility Fund Phase I Auction Scheduled for September 27, 2012; Notice and Filing
Requirements and Other Procedures for Auction 901
, AU Docket No. 12-25, 27 FCC Rcd 4725, 4772, para. 175
(Wireless Telecomms. Bur. 2012).
21 Some commenters argued that the rates offered in urban and rural areas need only be reasonably comparable, not
exactly the same. See, e.g., Comments of AT&T, WC Docket No. 10-90, at 10 (filed Mar. 28, 2013) (AT&T
Comments); ACA Comments at 10. We agree, and expect to specify appropriate benchmarks for reasonable
comparability of both voice and broadband once we collect the data in our urban rate survey. The presumption we
establish herein is designed to be a workable measure in the event such benchmarks are not available at the time the
carriers must make a state-level commitment, while also providing an additional means for recipients of model-
based support to demonstrate compliance with the Commission’s requirements even after the adoption of reasonable
comparability benchmarks.
22 This should account for carriers that only operate in one state, or have different pricing in different regions of the
country. See Comments of the Independent Telephone and Telecommunications Alliance, WC Docket No. 10-90, at
(continued…)
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9.
We recognize that, in comparing urban and rural offerings, carriers may not offer service
plans that exactly match the minimum service obligations for Connect America. Therefore, in certifying
that rural rates are at or below urban rates, the basis for comparison should be the lowest cost non-
promotional rate for an urban service offering that meets or exceeds each dimension of the service
obligations set in this Order.23
10. In adopting this presumption, we conclude that the relevant comparison for a price cap
carrier accepting model-based support is to rates and usage allowances for fixed wireline services in
urban areas. Some carriers eligible for Phase II funding offer a fixed wireless product in urban areas that
may meet all of the service obligations described herein, but such offerings are typically offered at a
higher price for a given amount of data usage than typical wireline offerings. Given the Commission’s
reference in its discussion of capacity to the typical data allowances of wireline broadband offerings, we
do not believe it would be consistent with the Commission’s framework for a price cap carrier accepting
model-based support to meet its reasonable comparability obligations by relying on uniform pricing for
fixed wireless offerings.24 Rather, a price cap carrier making a reasonable comparability certification for
model-based support must look to the prices and usage allowances of its fixed wireline offerings in urban
areas.
11. This presumption may be overcome in extreme circumstances where other evidence strongly
suggests that the price cap carrier is relying on the existence of a rate plan in urban areas to which few
consumers subscribe. For example, it would not be reasonable for a price cap carrier to rely on the
offering of the same service at the same rate in urban and rural areas when only a de minimus number of
customers subscribe to the service offering in the urban area.25 Similarly, the presumption may be
overcome if a carrier is only offering the service plan in a very small portion of the urban area.
12. As proposed in the Phase II Service Obligations Public Notice, an urban area is defined as
any “urban area” or “urban cluster” that sits within a Metropolitan Statistical Area, as defined by the
Census Bureau. A carrier need only make the offering in part of the “urban area” or “urban cluster” to
qualify. The presumption of reasonable comparability under this alternative provides carriers needed
certainty in making their elections and is supported by parties in the record.26
(Continued from previous page)


7 (filed Mar. 28, 2013) (ITTA Comments); Comments of USTelecom Association, WC Docket No. 10-90, at 8
(filed Mar. 28, 2013) (USTelecom Comments).
23 For example, assume a carrier has three urban broadband offerings: 1) 6 Mbps downstream/768 kbps upstream
with a 150 GB data allowance for $40/month; 2) 10 Mbps downstream/2 Mbps upstream with a 150 GB data
allowance for $50/month; and 3) 25 Mbps downstream/5 Mbps upstream with a 250 GB usage allowance for
$60/month. The point of comparison should be the 10 Mbps/2 Mbps service, as the 6 Mbps/768 kbps service fails to
meet one of the service obligations (i.e., it does not have an upstream speed of 1 Mbps or higher) and the 25 Mbps/5
Mbps service is not the least expensive option that meets or exceeds all the criteria (as the 10 Mbps/2 Mbps offering
meets or exceeds all the criteria for $10 less). When determining which offering is the least expensive, carriers
should look at standard rates as opposed to promotional or time-limited rates (e.g., for an offering that is $30/month
for the first 12 months then $40/month thereafter, the appropriate price for comparison is $40).
24 As noted above, we emphasize that this conclusion does not prejudge any decisions regarding the reasonable
comparability of prices in other programs, such as Phase II of the Mobility Fund.
25 See USTelecom Comments at 8.
26 See, e.g., id. at 9-10; see also ITTA Comments at 7 (supporting a presumption that a carrier with the same urban
and rural prices is offering reasonably comparable rates). ViaSat objected to a presumption that a carrier serving
both urban and rural areas be deemed to have reasonably comparable rates, noting that carriers could offer “gold-
plated” packages nationally, leaving customers in rural areas without any affordable options. Comments of ViaSat,
WC Docket No. 10-90, at 5 (filed Mar. 28, 2013) (ViaSat Comments). ViaSat did not provide any evidence of this
type of behavior, however, and we conclude that any anomalous situations, if they arise, can be addressed on a case-
(continued…)
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13. The rate survey benchmarks, once adopted, will serve as a safe harbor. To the extent the
rates in question for funded locations are at or below the benchmarks established through the rate survey,
that will be sufficient to meet the Commission’s reasonable comparability requirements.
14. Usage Allowance. Under the USF/ICC Transformation Order, Phase II recipients must
provide broadband with usage allowances reasonably comparable to those available through comparable
offerings in urban areas.27 The Commission set some guide posts as to what would be deemed reasonably
comparable, noting that a 250 GB per month usage allowance would likely be reasonably comparable,
while a 10 GB per month usage allowance would not.28 The Commission delegated to the Bureau the task
of setting a specific minimum usage allowance and specified that minimum should be adjusted over
time.29
15. In the Service Obligations Public Notice, the Bureau sought comment on two methods of
setting the minimum usage allowance: the first method was based on what activities could be undertaken
with a particular data allowance, and the second method was based on current consumer data usage
patterns.30 The Bureau also inquired as to whether the minimum usage allowance should be a fixed
standard, or whether it should grow during the term of Phase II.31
16. The Commission envisioned that price cap carriers accepting model-based support would
build “robust, scalable networks.”32 As such, we do not expect those carriers accepting model-based
support would impose the kind of usage allowances that typically exist today for many wireless and
satellite offerings.33 Indeed, such usage allowances would be incompatible with the fiber-based forward
(Continued from previous page)


by-case basis. As noted above, the price cap carrier cannot rely on the existence of a service offering in urban areas
to which few customers subscribe.
27 See USF/ICC Transformation Order, 26 FCC Rcd at 17726, para. 160.
28 Id. at 17699, para. 99. The decisions we make in this Order in no way prejudge or constrain future decisions
regarding usage allowances for other aspects of Connect America implementation.
29 Id.
30 Phase II Service Obligations Public Notice, 28 FCC Rcd at 1522-23, paras. 21-23. Parties supported both
approaches to calculating the minimum usage limits. See, e.g., ITTA Comments at 8, USTelecom Comments at 10
(approving of setting the usage allowance based on the amount of data required for certain activities); but see
Comments of the Wireless Internet Service Providers Association, WC Docket No. 10-90, at 7 (filed Mar. 28, 2013)
(WISPA Comments); ViaSat Comments at 7 (approving of setting the usage allowance based on current consumer
usage patterns). As discussed below, both the current usage approach and an examination of broadband uses suggest
that the initial usage allowance could appropriately be set at a similar point: 100 GB per month. Thus, it is not
necessary to decide between these two methodologies.
31 Phase II Service Obligations Public Notice, 28 FCC Rcd at 1523, para. 24.
32 USF/ICC Transformation Order, 26 FCC Rcd at 17726, para. 162; see also id. at 17728, paras. 167, 168 (“robust,
scalable broadband”). By Commission directive, the Connect America Cost Model calculates cost based on the
expense of deploying a wireline network. See id. at 17735-36, paras. 187, 189 (specifying that the cost model
“should be of wireline technology” and “that the CAF Phase II model should estimate the cost of a wireline
network”).
33 Satellite and fixed wireless services often impose usage limits on subscribers. See, e.g., Satellite Internet
Packages – Excede Pricing in Your Area, http://www.exede.com/internet-packages-pricing (last visited Oct. 31,
2013) (offering 10 GB, 15 GB, and 25 GB packages for satellite broadband for $49 to $129); Verizon Home Fusion
Broadband, http://www.verizonwireless.com/b2c/homefusion/hf/main.do (last visited Oct. 31, 2013) (offering 10
GB, 20 GB, and 30 GB plans for fixed wireless service for $60 to $120).
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looking cost model approach that the Bureau has adopted.34 To provide clarity in the event a price cap
carrier sets any usage allowance for the service offering that it relies upon to meet its universal service
obligations for acceptance of model-based support, however, we specify an initial minimum allowed
usage limit of 100 GB per month,35 with the opportunity to obtain additional data usage at a reasonable
price to the extent the price cap carrier chooses to offer a plan providing the minimum specified amount.36
We conclude that 100 GB is a reasonable initial usage allowance for price cap carriers making a state-
level commitment.37 According to the Commission’s most recent data, 80 percent of cable/fiber users –
most of which are likely to be in urban areas – currently use less than 100 GB per month.38 As discussed
in the Phase II Service Obligations Public Notice and shown in the chart below,39 this would provide for a


34 Connect America Fund, WC Docket No. 10-90, Report and Order, 28 FCC Rcd 5301 (Wireline Comp. Bur.
2013). We are not persuaded by arguments that we should look at usage figures for mobile technology. See
Comments of CTIA – The Wireless Association, WC Docket No. 10-90, at 10 (filed Mar. 28, 2013) (requesting that
the Commission base its metrics on data that includes mobile wireless broadband usage) (CTIA Comments). The
Commission expressly stated that eligible telecommunications carriers (ETCs) “whose support is predicated on the
offering a fixed broadband service – namely, all ETCs other than recipients of the Phase I Mobility Funds – must
allow usage at levels comparable to residential terrestrial fixed broadband service in urban areas.” USF/ICC
Transformation Order
, 26 FCC Rcd at 17698, para. 98 (emphasis added). Given this language, we look to usage of
consumers of fixed services, not mobile. CTIA also urges us not to set the usage limit in a way that arbitrarily
excludes certain technologies. See CTIA Comments at 10. As demonstrated herein, our selection of 100 GB is not
arbitrary, but rather is based on a combination of actual consumer usage of fixed broadband services today and what
permits users of fixed broadband to employ a reasonable amount of useful broadband applications.
35 As discussed below, this minimum usage allowance may increase in the future to account for trends in consumer
data usage. In the unlikely event that consumer data usage declines in the future, however, the minimum usage
allowance for those carriers accepting model-based support through a state-level commitment will not drop below
100 GB.
36 The ability to purchase additional data at a reasonable price is particularly important to small businesses that may
require higher data allowances to engage in broadband-based commerce. This could be done through an overage
charge or by giving the user the choice of a higher tier offering with a greater usage allowance. Any plan with a
higher usage allowance would be deemed reasonably priced if offered at the same price in both rural and urban
areas. For example, if a price cap carrier were to meet its service obligations by offering a 100 GB plan at a
specified price in both rural and urban areas, but also offers a 250 GB plan at a higher price in both rural and urban
areas, that would be sufficient to meet the requirement to provide options for additional data usage.
37 A 100 GB minimum usage allowance is supported by the record. See, e.g., Reply of the Pennsylvania Public
Utility Commission, WC Docket No. 10-90, at 12-13 (filed Apr. 12, 2013); Comments of ADTRAN, WC Docket
No. 10-90, at 15 (filed Mar. 28, 2013) (ADTRAN Comments). As stated above, carriers are not limited to only
offering a plan that meets or exceeds 100 GB. See supra n.12. As long as a carrier offers at least one plan that
meets or exceeds all the requirements for Phase II, it is free to offer consumers other plans that do not conform to
these requirements. Nevertheless, we do not expect – and we would look with disfavor upon – downward
adjustment, in response to this Order, of any provider’s current usage thresholds in excess of this 100 GB minimum
standard.
38 See FCC’S OFFICE OF ENGINEERING AND TECHNOLOGY AND CONSUMER AND GOVERNMENTAL AFFAIRS BUREAU,
MEASURING BROADBAND AMERICA FEBRUARY 2013 REPORT 48, http://transition.fcc.gov/cgb/
measuringbroadbandreport/2013/Measuring-Broadband-America-feb-2013.pdf (MBA February 2013 Report).
Measuring Broadband America excluded users with extremely high data consumption profiles (over 160 GB per
month) and extremely fast data rates (over 60 Mbps) that had relatively low subscription rates. See id. at 46-48.
39 The calculations rely on the following assumed data usage rates for each activity: All websites – 320 kB per
website loaded; All email – 100 kB per email sent/received; Video – 1 GB per hour of video. Website and e-mail
figures are taken from the Cable One data usage calculator, using the figures for e-mails with attachments and
multimedia websites. Cable One, Estimate Your Web Usage, http://www.cableone.net/pages/datacalculator.html
(continued…)
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mid-level basket of video related activities, including viewing over 20 hours of video per week and the
ability to load hundreds of websites each day.40 And, we emphasize that the 100 GB per month is the
minimum usage – price cap carriers are free to offer plans with additional usage and indeed we encourage
price cap carriers to offer a variety of plans in rural areas as they do in urban areas.41
Broadband Applications Possible with 100 GB of Usage42
Video Applications (Education (including digital learning),
95 Hours
Healthcare, Business, Community Engagement and Other
Activities Such As Video Conferencing with Family)
plus E-mails Sent/Received for Personal and Professional
5,000 E-mails
Correspondence
plus Websites Loaded (Activities Such As Job Searching,
14,500 Websites
Education, Banking, Health, and Government Services)
17. Other parties have called for a lower minimum usage limit, with some advocating for limits
at or below 20 GB per month43 and others suggesting 60 GB.44 However, a 20 GB limit would fall well
short of existing fixed broadband usage levels – over two-thirds of cable and fiber subscribers currently
consume in excess of 20 GB of data per month.45 Nor are we convinced we should establish a minimum
usage allowance of 60 GB for price cap carriers accepting model-based support. Over 30 percent of
current fiber and cable subscribers consumed in excess of 60 GB of data per month, and consumers are
likely to consume more, not less, over time.46 We are guided by the Commission’s statement that
“Americans should have access to broadband that is capable of enabling the kinds of key applications that
drive our efforts to achieve universal broadband, including education (e.g., distance/online learning),
health care (e.g., remote health monitoring), and person-to-person communications (e.g., VoIP or online
video chat with loved ones serving overseas).”47 While the Commission recognized that service
(Continued from previous page)


(last visited Oct. 31, 2013). Video figures are taken from Netflix, based on the rate for “best quality” video. Netflix,
Manage Bandwidth Usage, https://support.netflix.com/en/node/87 (last visited Oct. 31, 2013).
40 Phase II Service Obligations Public Notice, 28 FCC Rcd at 1522, para. 21-22.
41 An offering with a usage allowance of less than 100 GB per month may still satisfy the requirement, so long as a
consumer can purchase additional data and the total cost of the plan plus additional data does not exceed the price
requirement. For example, assume the pricing requirement for broadband is $60. A particular offering has a usage
allowance of 80 GB for $50, with the option to buy additional data at $.50 per GB. A consumer could obtain 100
GB for $60, and thus the offering would satisfy the usage allowance requirement.
42 These are cumulative activities (i.e., with 100 GB of data usage, a household could watch 95 hours of video,
send/receive 5,000 e-mails, and load 14,500 websites) that could occur with the minimum monthly usage allowance.
43 See ViaSat Comments at 7; WISPA Comments at 7; Reply of the Wireless Internet Service Providers Association,
WC Docket No. 10-90, at 6 (filed Apr. 12, 2013) (WISPA Reply).
44 See, e.g., USTelecom Comments at 10; ITTA Comments at 8.
45 See MBA February 2013 Report at 48.
46 See CISCO, VISUAL NETWORKING INDEX: FORECAST AND METHODOLOGY, 2012-2017, 9 (2013), at
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.pdf
(predicting a 23 percent compound annual growth rate in data usage).
47 USF/ICC Transformation Order, 26 FCC Rcd at 17695, para. 82 (citations omitted).
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obligations may need to be relaxed in some fashion for extremely high cost areas,48 we conclude that a
usage limit of 20 GB, or 60 GB, for price cap carriers accepting model-based support is not consistent
with the robust, scalable networks that the Commission expects such providers to deploy.
18. We require price cap carriers accepting model-based Phase II support to offer a minimum
usage allowance over the course of Phase II’s five-year term that remains consistent with trends in usage
for 80 percent of consumers using cable or fiber-based fixed broadband services. As an alternative to any
national data set (such as Measuring Broadband America) that demonstrates trends in usage over time, we
will deem a price cap carrier to be in compliance with this usage allowance requirement in future years if
its minimum usage allowance for Connect America funded locations is at least 100 GB and is at or above
the usage level for 80 percent of all of its broadband subscribers, including those subscribers that live
outside of Phase II funded areas.49 Given the size and scale of most price cap carriers, it is reasonable to
presume that their individual data would be consistent with national data, and this alternative will enable
price cap carriers to anticipate how their usage allowances may change in the future.
19. Latency. In the USF/ICC Transformation Order, the Commission required Phase II
recipients to provide latency sufficient for real-time applications, such as VoIP.50 In this section, we
describe how we will implement this requirement for price cap carriers that accept Phase II model-based
support.51
20. We agree with WISPA that because latency can be defined and measured in many ways, “a
clear, workable, measureable definition of ‘latency’” is necessary.52 We also agree with commenters that
argue the Commission should base its performance metrics on “empirical data.”53 After consideration of
the record, we therefore base our standard on the International Telecommunication Union (ITU) G.114
design objectives.54 ITU Standard G.114 provides that consumers are “very satisfied” with the quality of
VoIP calls up to a mouth-to-ear latency of approximately 200 ms.55 The ITU has determined that


48 Id. at 17837-38, para. 533 (recognizing it may be appropriate to modestly relax broadband performance
obligations for Remote Areas Fund areas).
49 The 100 GB minimum usage allowance acts as a floor. Even if 80 percent of a particular price cap carrier’s
customers used less than 100 GB, the minimum usage allowance for Phase II funded locations remains at 100 GB.
Carriers should be prepared to provide information, in the course of an audit, regarding the information source upon
which they are relying to adjust or maintain their minimum usage allowance. For instance, an officer could certify
that the minimum usage allowance was determined based on the carrier’s own usage profile for its customer base.
50 47 C.F.R. § 54.312(b)(4).
51 Our decision here does not prejudge how this requirement may be implemented for other aspects of Phase II or the
Remote Areas Fund.
52 WISPA Comments at 6; see also USTelecom Comments at 10 (“To avoid any confusion, the Bureau should
specify a discrete number” for latency).
53 Reply of US Cellular, WC Docket No. 10-90, at 15 (filed Apr. 12, 2013); see also WISPA Reply at 5; ViaSat
Comments at 2.
54 A number of commenters cite the ITU’s determinations on latency, while none has put forth any other basis for
determining appropriate latency for VoIP. This supports our use of the ITU design objective to set performance
standards. See, e.g., ITTA Comments at 8; AT&T Comments at 8; ADTRAN Comments at 13-14; Reply of
ADTRAN, WC Docket No. 10-90, at 8 (filed Apr. 12, 2013) . Those recommending use of the mouth-to-ear ITU
design objective were not clear, however, regarding which segments of a mouth-to-ear path were included within
their recommended latency measure.
55 International Telecommunication Union, Telecommunication Standardization Sector, Series G: Transmission
Systems and Media, Digital Systems and Networks, G.114 at 3 (Figure 1/G.114—Determination of the effects of
absolute delay by the E-model) (May 2003) (ITU Series G).
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consumers become less satisfied with the quality of VoIP calls when total mouth-to-ear latency is above
200 ms.56 Therefore, we conclude that a reasonable approach is a framework that should result in mouth-
to-ear latency of 200 ms or less.
21. We recognize that price cap carriers accepting model-based support may not presently have
a way to measure end-to-end latency,57 and therefore adopt an approach that allows them to certify they
are meeting the Commission’s requirements based on a provider round-trip latency measure. The ITU
latency calculations are “mouth-to-ear” one-way path measurements which include: the signal conversion
at the input (the conversion of the speaker’s voice to digital packets); the broadband provider’s network
path from the input device to the Internet core; the path through the Internet core; the broadband
provider’s network path from the Internet core over the provider’s network to the output device; and the
signal conversion at the output device (the conversion of the digital packets back to voice for the listener).
ITU Standard Y.1541 calculates input and output terminal conversion delays together to be between 50
and 80 ms.58 Based on these ITU calculations and other research, we use 75 ms for purposes of
calculating conversion delays.59 An assumed conversion delay of 75 ms means that the total latency for
the network path to the Internet core, the Internet core, and the network path from the Internet core to the
output device would need to be no greater than 125 ms if 200 ms mouth-to-ear latency limit is to be
maintained.


56 Id.
57 See, e.g., Comments of Alaska Communications Systems, WC Docket No. 10-90, at 7 (filed Mar. 28, 2013)
(ACS Comments). Certain standards setting bodies are working to develop a methodology for end-to-end latency
testing, but no such methodology is currently available. See AT&T Comments at 7 n.16 (noting that the Broadband
Forum/Internet Engineering Task Force (IETF) is working on latency standards); see also IETF Proposed Working
Group, Large Scale Measurement of Access Network Performance (lmap), https://datatracker.ietf.org/wg/lmap/ (last
visited Oct. 31, 2013). In the event the IETF adopts latency standards or means of measuring latency that differ
from the standards or means announced in this Order, we reserve the right to make adjustments to our approach for
price cap carriers accepting model-based support to take into account the IETF’s findings.
58 International Telecommunication Union, Telecommunication Standardization Sector, Series Y: Global
Information Infrastructure, Internet Protocol Aspects and Next-Generation Networks, App. VII at 35 (Dec. 2011)
(ITU Series Y).
59 See id.; Wenyu Jiang, Kazuumi Koguchi & Henning Schulzrinne, QoS Evaluation of VoIP End-points, IEEE
International Conference on Communications, ICC ’03, (2003) available at
http://www.cs.columbia.edu/~wenyu/papers/icc_2003.pdf.
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22. Based on ITU calculations60 and reported core latencies in the contiguous United States,61
we assume 50 ms as the roundtrip (25 ms one way) core Internet latency in our calculations. The
assumed 75 ms for conversion delay and assumed 50 ms (25 ms one way) for the Internet core path
means that the provider network path from the input device to the Internet core and from the Internet core
to the output device must be no more than 100 ms (50 for each provider segment) in order to maintain an
overall mouth-to-ear latency limit of 200 ms. Because existing network management systems, ping tests,
or other commonly available network measurement tools typically calculate latency as a round-trip
measurement, we adopt a 100 ms provider latency round-trip limit, which is consistent with the 50 ms
one-way latency assumption for the path from the input device to the Internet core.
23. To show that it is meeting this standard, a price cap carrier accepting model-based support
will need to certify that 95 percent or more of all peak period measurements (also referred to as
observations) of network round trip latency are at or below 100 ms.62 As suggested in the Phase II
Service Obligations Public Notice
, measurements should be taken during peak period (defined as


60 ITU Series Y, App. III at 23-25.
61 Information from the following Tier I providers was used to calculate the 50 ms core latency: AT&T; Deutsche
Telekom; CenturyLink/Qwest; COGENT; NTT; SAVVIS; Sprint; Verizon; and XO Communications. See, e.g.,
AT&T Network Averages, available at http://ipnetwork.bgtmo.ip.att.net/pws/averages.html (last visited Oct. 31,
2013); Deutsche Telekom IP Transit—Service Parameters, available at http://www.download.ghs.de/ICSS/
StaticPage/33/04/90/IP%20Transit%20-%20Technical.pdf_330490.pdf (last visited Oct. 31, 2013); Qwest Internet
Service Level Agreement, available at http://qwest.centurylink.com/legal/docs/
Qwest_Internet_Network_SLA_102103.pdf (last visited Oct. 31, 2013); Cogent Performance Measures, available
at
http://www.cogentco.com/en/network/performance (last visited Oct. 31, 2013); NTT Communications Provides
High-Quality Global IP Network Service with Industry Leading SLA, available at
http://www.ntt.net/english/service/sla_ts.html (last visited Oct. 31, 2013); Savvis Global Internet Backbone
(AS3561) SLA Performance Statistics, available at http://ipsla.savvis.net/index.jsp (last visited Oct. 31, 2013);
Sprint SLA Performance, available at https://www.sprint.net/sla_performance.php (last visited Oct. 31, 2013);
Verizon IP Latency Statistics, available at http://www.verizonenterprise.com/about/network/latency/ (last visited
Oct. 31, 2013).
62 Excluding 5 percent of measurements will ensure that the results are not unreasonably affected by a few outlying
observations. The same approach also would apply to unsubsidized competitors in census blocks that meet the
funding thresholds to be determined by the Bureau for Phase II model-based support.
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weeknights between 7:00 pm to 11:00 pm local time) between the customer premises and the closest
designated Internet core peering interconnection point (often referred to as an Internet Exchange Point -
IXP).63 The measurements should be conducted over a minimum of two consecutive weeks during peak
hours for at least 50 randomly-selected customer locations within the census blocks of each state for
which the provider is receiving model-based support using existing network management systems, ping
tests, or other commonly available network measurement tools.64
24. We acknowledge that measuring latency is a complex task that requires detailed testing
protocols. To minimize the cost of testing and ensure that it can be done relatively quickly, we will allow
providers to rely on existing network management systems, ping tests, or other commonly available
network measurement tools. Although we recognize that these types of tests have drawbacks, such as a
possible low priority handling/response times at target servers,65 low quality of service (QoS)
handling/packet drops in intermediate nodes,66 and generally small packet sizes,67 we conclude that this
approach strikes the appropriate balance of implementing Phase II quickly, with some assurance that


63 For the purposes of this Order, we define IXPs as occurring in the following locations: New York City, NY;
Washington, DC; Atlanta, GA; Miami, FL; Chicago, IL; Dallas-Fort Worth, TX; Los Angeles, CA; San Francisco,
CA; Seattle, WA; and Denver, CO. For testing purposes, providers may use publicly available servers at these
locations (such as speedtest.net servers). All of the IXPs identified above, except Denver, are the current locations
used by the Measuring Broadband America (MBA) program, which selected these locations because they are
geographically distributed major U.S. Internet peering locations. See, e.g., FCC’S OFFICE OF ENGINEERING AND
TECHNOLOGY AND CONSUMER AND GOVERNMENTAL AFFAIRS BUREAU, MEASURING BROADBAND AMERICA 2011
REPORT, Technical App. at 19-20,
http://transition.fcc.gov/cgb/measuringbroadbandreport/technical_appendix/Technical_Appendix_Full.pdf.
Denver was added to ensure all contiguous areas in the USA are within 700 miles of an IXP. As explained in
paragraph 35, infra, providers located in non-contiguous areas can use a point at which traffic is consolidated for
transport to an IXP in the continental United States.
64 For those states in which a provider receives model-based support for 2,000 or fewer lines, a provider must
conduct measurements for at least 20 randomly-selected customer locations, rather than 50. Providers should
document, and maintain records and data from, the testing on which the annual certification is based, and be
prepared to produce such documentation if audited.
65 Ping tests are based upon ICMP (Internet Control Message Protocol) and are often treated as a low priority task
by destination/target servers and routers. This is referred to as “process delay.” The Cisco website describes ping
and TRACEROUTE command performance at the destination as: “When a packet destination is the router itself, this
packet has to be process-switched. The processor has to handle the information from this packet, and send an
answer back. This is not the main goal of a router. By definition, a router is built to route packets. Answering a
ping is offered as a best-effort service.” Cisco, Understanding Ping and Traceroute Commands,
http://www.cisco.com/en/
US/products/sw/iosswrel/ps1831/products_tech_note09186a00800a6057.shtml (last visited Oct. 31, 2013).
66 Many network administrators implement traffic engineering and/or performance management capabilities in their
networks. Often this implementation will include the configuration of QoS policies on the routers and network
devices under their control. The specific QoS policies implemented can direct the router to place defined
traffic/packets, i.e., PING/ICMP packets, into low priority output queues. Thus, the PING/ICMP packets can
experience more delay (latency) at individual routers before they continue on their path, as they wait in these lower
priority queues. This is referred to as “queuing delay.”
67 See, e.g., INTERNET ENGINEERING TASK FORCE, FRAMEWORK FOR TCP THROUGHPUT TESTING (REQUEST FOR
COMMENT 6349) 11 (Aug. 2011), http://tools.ietf.org/html/rfc6349. Often small packets can receive lower priority
processing by routers in its path – this is also referred to as “process delay.” See Stoke, Why Do Small Packet Sizes
Matter in Your Network Planning, http://www.stoke.com/lte/index.asp (last visited Oct. 31, 2013) (“However, many
network equipment suppliers optimize equipment for large packet sizes only, with performance falling off rapidly as
packet sizes get smaller and the packets per second (PPS) numbers soar”).
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Phase II funded locations will have the service that the Commission expects, without requiring carriers
accepting model-based support to make a significant investment in testing infrastructure.
25. As an alternative to conducting ping-like tests, carriers participating in the MBA program
may use the results from that testing to support certification that they meet the latency requirement.68 To
use MBA results, carriers will need to deploy at least 50 white boxes to customers within the Phase II-
funded areas within each state, i.e. at least 50 white boxes per state distributed throughout the Phase II-
funded areas within that state. The white box costs and any associated administrative costs imposed by
the MBA program would be the carrier’s responsibility. Because white boxes take measurements on a
continuous basis, a carrier would prove compliance with the latency limit by certifying that 95 percent or
more of the measurements taken during peak periods for a period of two weeks were at or below 100 ms.
26. We are not persuaded by AT&T’s argument that the Commission should not set a specific
numerical latency standard and should instead “assume that wireline networks capable of delivering
speeds of 4/1 and greater will meet the latency requirements for real-time applications such as VoIP.”69
Although results from the most recent MBA testing show that providers using fiber, cable, or DSL
technology are generally able to meet or exceed 100 ms provider-round trip latency 95 percent limit,
MBA testing is currently limited to only large providers.70 Not all of the price cap carriers eligible for
Phase II support are participating in this program and, in any event, we have no assurance that the
measurements taken in MBA are taken at Phase II-funded locations. Moreover, MBA testing results
show that there can be a great disparity in latency among different locations served by a single provider.71
We conclude it is necessary for carriers to test latency in the census blocks where they will be receiving
Phase II funding, and not rely on MBA data that may be derived from other locations.
27. We also disagree with ViaSat’s argument that “network latency need not impact the end-
user experience” and that adoption of a numerical latency standard could “violate the Commission’s
policy of technological neutrality.”72 To the contrary, the ITU’s extensive VoIP calculations show that
consumer satisfaction is improved by lower latency.73 Further, adoption of a numerical standard designed
to meet reasonable regulatory objectives does not violate technological neutrality simply because some
technologies or service providers cannot meet that standard. Failing to specify how the Commission’s
requirements will be enforced in practical terms that can be incorporated into business planning would be
a disservice both to price cap carriers accepting Phase II support and to consumers that stand to benefit
from Phase II deployments. Quantifiable metrics provide certainty to these price cap carriers at the time
they accept funding: they are aware of the specific performance standards they must meet in order to
satisfy their obligations. These metrics also give federal and state regulators a bright line standard against
which to hold these Phase II recipients accountable, ensuring that they perform in line with expectations.
Failing to provide such clarity would result in obligations that are difficult to anticipate, difficult to
measure, and difficult to enforce.


68 New, as well as current, participants in the MBA program may use this alternative. Any carrier choosing this
alternative will need to comply with any MBA requirements.
69 AT&T Comments at 7.
70 MBA February 2013 Report at 40-41 (Figure 1).
71 See, e.g., FCC’S OFFICE OF ENGINEERING AND TECHNOLOGY AND CONSUMER AND GOVERNMENTAL AFFAIRS
BUREAU, MEASURING BROADBAND AMERICA 2013 REPORT, VALIDATED DATA – 2013,
http://www.fcc.gov/measuring-broadband-america/2013/validated-data-february-2013.
72 ViaSat Comments at 8-9.
73 ITU Series G at 3.
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28. We note that we are adopting a more lenient approach than the 60 ms average latency
standard the Bureau originally proposed in the Public Notice. We do so after consideration of the ITU
conclusion that consumers are “very satisfied” with the quality of VoIP calls up to an ear-to-mouth
latency of approximately 200 ms and the record received in this proceeding.74 We agree that the ITU data
for a VoIP call are an appropriate basis for determining latency sufficient for this aspect of Phase II, and
we believe the 100 ms limit adopted herein is consistent with ITU data.
29. We disagree with ACS that “[i]t is particularly important to develop testing solutions not
dependent on customer usage, as there is an expected increase in latency over Internet Protocol networks
as customer usage nears the peak capacity of the service.”75 Although we agree that latency is affected by
customer usage, this does not lead to a conclusion that testing should be done at times of low customer
usage. Latency sufficient for real-time applications such as VoIP must be available to consumers during
the time they use the Internet. A network with low latency does not benefit most consumers if the low
latency is only available when few customers are using the Internet. Therefore, we have adopted testing
specifications that require testing to be conducted during the peak hours, weeknights between 7:00 pm to
11:00 pm local time. We believe that measurements conducted during the peak period will demonstrate
the latency experienced by the majority of customers.
30. We do not believe that the testing methodology we have adopted will impose an undue
burden on providers,76 as there are readily available hardware and software solutions for conducting such
testing. The latency testing requires only 50 Phase II-funded locations in a state to be measured over a
two-week period per quarter using existing or readily acquired network management or performance
management systems. Many providers already perform network management tests to monitor network
performance. Network devices commonly support ICMP and SNMP, as well as other vendor-specific
tests such as Cisco’s IP service level agreement (SLA) command line.77 In addition, for those carriers that
either currently participate in or join the MBA program, we will allow the use of MBA test results from
Phase II-funded locations as an alternative basis for certifying compliance with our requirements.
Therefore, even if a provider does not already have a testing mechanism in use for its network, the means
to conduct such testing are readily available.
31. We are not persuaded by USTelecom’s claims that testing should be “between the customer
premises to the provider’s transit or peering interconnection point, at least in cases where there is a transit
or peering interconnection point located in the same state as the customer premises being measured.”78
The Commission determined that latency should be sufficient to allow consumers to make use of real-
time applications such as VoIP. Testing latency on only a portion of the network connecting a consumer


74 ITTA Comments at 9; AT&T Comments at 8; WISPA Comments at 6; Reply of USTelecom, WC Docket No. 10-
90, at 7-8 (filed Apr. 12, 2013).
75 ACS Comments at 7-8.
76 See AT&T Comments at 7; ACS Comments at 7-8.
77 See, e.g., INTERNET ENGINEERING TASK FORCE NETWORK WORKING GROUP, A SIMPLE NETWORK MANAGEMENT
PROTOCOL (SNMP) (May 1990), http://www.ietf.org/rfc/rfc1157.txt?number=1157 (stating that SNMP is a full
Internet standard).
78 USTelecom Comments at 10-11. The Rural Associations ask that latency be defined as a “network-based
standard” because “companies operating in remote areas of the nation typically only control the performance of
‘last-mile’ facilities.” Comments of NTCA – The Rural Broadband Association et al., WC Docket No. 10-90, at 5
(filed Apr. 12, 2013). The decision to reject USTelecom’s approach only applies to price cap carriers accepting
model-based support (and will be the framework applied to companies that are unsubsidized competitors in census
blocks served by those price cap carriers). We do not decide here what approach may be adopted for rate-of-return
companies or other aspects of Phase II.
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to the Internet core will not show whether that customer is able to enjoy high-quality real-time
applications because it is network performance from the customer’s location to the destination that
determines the quality of the service from the customer’s perspective.
32. Further, while a price cap carrier accepting Phase II model-based support may not have
direct control over any middle-mile or transit providers with which it connects, it does have influence
over its transit providers. For example, a last-mile provider can compare the quality of service offered by
transit providers and select one with a higher quality of service. In addition, the last-mile provider can
improve its latency by purchasing additional capacity from the transit provider or by negotiating a SLA.
Last-mile providers can also implement dual homing to more than one transit provider to ensure a higher
quality of service. Measuring latency from the customer location to designated Internet exchange points
will show if customers are being provided with service that allows use of real-time applications by giving
price cap carriers accepting Phase II model-based support strong incentives to maintain a high-quality
network and to use sufficient, high-quality transit providers.
33. We conclude that the metrics we adopt today provide sufficient flexibility that price cap
carriers serving markets with unique conditions, such as Alaska, will be able to make the necessary
certifications.79 ACS argues that when measuring broadband latency in Alaska, the Commission must
take into account the long transmission facilities in Alaska, which often include point-to-point
microwave, satellite transport, and undersea cable, as well as the remote location of Internet exchange
points.80 We do not believe that that the use of point-to-point microwave links will adversely affect the
latency of broadband services in most cases. ITU planning values for delays of different technologies
indicate that coaxial fiber has a higher delay time at 5 microseconds per kilometer whereas microwave
transmissions (radio-relay) are at 4 microseconds per kilometer.81 Indeed, there has recently been
renewed interest in microwave technology to support low-latency applications.82
34. Conversely, the use of geostationary satellite technologies would substantially affect a price
cap carrier’s ability to meet the 200 ms end-to-end latency standard we adopt herein. Although satellite
transmissions travel at rates faster than copper, cable, or fiber transmissions, the satellite’s distance from
Earth makes achievement of the 200 ms end-to-end transmission (100 ms limit for the round-trip carrier
portion) impossible. Therefore, we presume that ACS would not include customers served by satellite
technologies in the 50 measurement locations required for latency testing.83 ACS has not alleged that a


79 ACS Comments at 7-8.
80 Id. at 7.
81 International Telecommunication Union, Telecommunication Standardization Sector, Transmissions and Media,
General Characteristics of International Telephone Connections and International Telephone Circuits, One-Way
Transmission Time, ITU-T Recommendations G.114, at 3-4 (Table A.1) (Feb. 2006).
82 See, e.g., Mark Hachman, Microwaves Could Solve Need for Long-Haul, Low-Latency Networks,
http://slashdot.org/topic/datacenter/microwaves-could-solve-need-for-long-haul-low-latency-networks/ (Feb. 28,
2013); Markets Media, Microwave Beginning to Offer Low Latency Alternative to Fiber,
http://marketsmedia.com/microwave-offers-low-latency-alternative-to-fiber/ (Jan. 21, 2013); David Wigman,
Analysis: Low Latency Battle Takes to the Airwaves, http://www.fow.com/Article/3132706/Analysis-Low-latency-
battle-takes-to-the-airwaves.html (Dec. 18, 2012).
83 In the event that the random selection of locations includes a location served by satellite technologies, due to the
inclusion of locations served by satellite backhaul where there are no available terrestrial backhaul options, 47
C.F.R. § 54.313(g), ACS may exclude that customer and select another random location in its place.
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majority, or even a substantial number, of its customers are served by satellite technologies, so
elimination of satellite customers from testing calculations should resolve this concern.84
35. ACS also alleges that the use of undersea cable in its network and the distance between
customers and Internet exchange points could affect ACS’s ability to meet the latency standard. It is
possible that the use of undersea cable, depending upon the type and length of cable, could affect latency
determinations for providers serving Alaska. Therefore, providers in noncontiguous areas of the United
States should conduct their latency network testing from the customer location to a point at which traffic
is consolidated for transport to an Internet exchange point in the continental United States. For example,
speedtest.net has five servers located in Anchorage, Alaska, and one in Fairbanks, Alaska, that could be
used for network testing.85 Although we allow providers in noncontiguous areas of the United States to
conduct their latency network testing from the customer location to a point at which traffic is consolidated
for undersea cable transport to an IXP in the continental United States, we may not extend this exception
to other circumstances without additional evidence that such an exception is warranted. We note that
MBA 2013 data results show that the 25 Time Warner Cable-based customer locations in Hawaii were
able to meet the 100 ms limit 95 percent or more of the time. Hawaii, at approximately 2,500 miles from
the continental United States, is over double the undersea cable distance from a continental United States-
based IXP as Anchorage, Alaska.86
36. ACS notes that with peering points “over a thousand miles away in Oregon and
Washington,” its ability to conduct testing and improve results is limited.87 Our decision that testing for
noncontiguous parts of the United States should be conducted between the customer location and the
point at which traffic is aggregated for transport to the continental United States via undersea cable should
resolve this issue. Moreover, for remote points within Alaska, MBA testing data shows that although
there is a correlation between distance and latency, the 200 ms end-to-end standard (100 ms roundtrip
limit 95 percent or more of the time for the carrier portion) is reasonable for distances of 700 or more
miles, as data from Measuring Broadband America testing in Hawaii shows. The MBA February 2013
Report shows that the mean latency for measurements 700 miles from the test server was 44.7 ms
roundtrip.88 Thus, even for customer locations in Alaska located a substantial distance from a point used
for aggregating traffic for transport to the continental United States, an Alaska provider should be able to
meet the 200 ms end-to-end standard (100 ms roundtrip limit for the carrier portion).
37. Buildout Measurement. In order to satisfy their state-level commitment, Phase II recipients
must deploy voice and broadband-capable networks and offer services meeting the above performance


84 While Alaska presents unique circumstances regarding the use of satellites for backhaul, we conclude that the
Commission did not intend for price cap carriers in the contiguous United States to meet their Phase II buildout
obligations by partnering with satellite providers to provide retail broadband Internet access service. See, e.g.,
USF/ICC Transformation Order, 26 FCC Rcd at 17699-700, para. 101 (noting the unique backhaul issues presented
in Alaska, and stating that the exception for satellite backhaul does not apply to carriers that have a terrestrial
backhaul option). Excluding customers served by satellite from testing calculations therefore would be permissible
in Alaska, but is not warranted in the contiguous United States, where terrestrial backhaul is widely available. The
extent to which satellite’s latency is acceptable in other contexts, particularly the Remote Areas Fund, will be
addressed in other orders.
85 A map showing speedtest.net servers is available at www.speedtest.net.
86 See, e.g., FCC’S OFFICE OF ENGINEERING AND TECHNOLOGY AND CONSUMER AND GOVERNMENTAL AFFAIRS
BUREAU, MEASURING BROADBAND AMERICA 2013 REPORT, VALIDATED DATA – 2013,
http://www.fcc.gov/measuring-broadband-america/2013/validated-data-february-2013.
87 ACS Comments at 7.
88 MBA February 2013 Report, file curr_udplatency.csv.
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metrics to a specified number of locations. We expect to release a Public Notice specifying the number of
locations that recipients of model-based support will be required to serve, based on the Connect America
Cost Model, state by state, so that carriers are aware at the time of acceptance the required number of
locations. Three years after making a state-level commitment, a carrier must have deployed voice and
broadband-capable networks to 85 percent of the specified number of locations in the given state.89 Five
years after making a state-level commitment, a carrier must have deployed voice and broadband-capable
networks to the total number of locations as specified by the Bureau.
38. Generally, all deployment must occur in census blocks funded under the Connect America
Cost Model. However, the USF/ICC Transformation Order states that “[i]n meeting its obligation to
serve a particular number of locations in a state, an incumbent that has accepted the state-level
commitment may choose to serve some census blocks with costs above the highest cost threshold instead
of eligible census blocks (i.e., census blocks with lower costs), provided that it meets the public interest
obligations in those census blocks, and provided that the total number of unserved locations and the total
number of locations covered is greater than or equal to the number of locations in the eligible census
blocks.”90 Thus, a carrier could build to one of these higher-cost locations in lieu of building to a location
in one of its eligible census blocks as originally planned.91

B.

Unsubsidized Competitors

39. In adopting the USF/ICC Transformation Order, the Commission directed that Phase II
support should not go to any “areas where an unsubsidized competitor offers broadband service that
meets the broadband performance requirements” of Phase II.92 An unsubsidized competitor is defined as
a facilities-based provider of residential terrestrial fixed voice and broadband service that does not receive
high-cost support.93 The Commission delegated to the Bureau the task of implementing the specific
requirements of the unsubsidized competitor rule and determining what areas should be considered as
served by an unsubsidized competitor.94 In the Phase II Challenge Process Order, the Bureau determined
that an area would be presumed as served by an unsubsidized competitor if the area was shown on the
National Broadband Map as served by a provider with speeds of 3 Mbps/768 kbps, and that provider was
shown on Form 477 data as providing voice service in that state.95 Thus, a potential unsubsidized
provider need only make a showing regarding the metrics discussed in this Order in two circumstances:
first, if it challenges an area initially designated as unserved, claiming that the area should instead be
treated as served; or second, if it is responding to a challenger’s claim that one of the census blocks shown
as served by the provider is in fact unserved.96


89 USF/ICC Transformation Order, 26 FCC Rcd at 17726, para. 161.
90 Id. at 17729, para.171 n.279.
91 If a carrier chooses to deploy to these higher cost locations, those locations must be reported in the carrier’s
annual progress report. 47 C.F.R. § 54.313(a)(1). Those reported locations will be checked to ensure that they meet
the eligibility criteria for Phase II, including that they are unserved by an unsubsidized competitor.
92 USF/ICC Transformation Order, 26 FCC Rcd at 17729, para. 170.
93 Id. at 17701, para. 103.
94 Id. at 17729, para. 170.
95 Phase II Challenge Process Order, 28 FCC Rcd at 7216, para. 11.
96 Some commenters suggested that unsubsidized competitors should be required to make certain certifications that
they are willing to deploy to all locations in the census blocks in which they serve or that they are able to comply
with the obligations and reporting requirements demanded of a universal service fund recipient. See, e.g., Reply of
(continued…)
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40. Consistent with the Commission’s direction in the USF/ICC Transformation Order, we
conclude that unsubsidized competitors should meet the same standards we require of Phase II price cap
carrier recipients.97 To exclude an area from Phase II support, an unsubsidized competitor must be
offering broadband and voice service that would meet the Commission’s requirements for price cap
carriers receiving model-based support.98 However, certain adjustments are necessary, not only to make
an administrable system for determining what areas should be excluded from support, but also to account
for the diversity of circumstances that potential unsubsidized competitors face.
41. Unsubsidized competitor. The Commission directed the Bureau to exclude areas with
unsubsidized competitors from Phase II funding. The codified rule states that an unsubsidized competitor
is one that “does not receive high-cost support.” The Commission’s intent in adopting this rule was to
preclude support to areas where voice and broadband is available without burdening the federal support
mechanisms. We will presume that any recipient of high-cost support at the time the challenge process is
conducted does not meet the literal terms of the definition, but will entertain challenges to that
presumption from any competitive eligible telecommunications carrier that otherwise meets or exceeds
the performance obligations established herein and whose high-cost support is scheduled to be eliminated
during the five-year term of Phase II.99 This will provide an opportunity for the Commission to consider
whether to waive application of the “unsubsidized” element of the unsubsidized competitor definition in
situations that would result in Phase II support being used to overbuild an existing broadband-capable
network.100
42. Speed. In the Phase II Service Obligations Public Notice, we sought comment on what
proxy we should use for the requirement that an unsubsidized competitor provides 4 Mbps/1 Mbps
(Continued from previous page)


Alexicon Telecommunications Consulting, WC Docket No. 10-90, at 3 (filed Apr. 12, 2013); Reply of GNVW
Consulting, WC Docket No. 10-90, at 6 (filed Apr. 12, 2013). We agree that to be an unsubsidized competitor, a
provider must be offering service throughout the area in question. We are not persuaded, however, that we should
require unsubsidized competitors to comply with the reporting requirements of a funding recipient. Many of the
reporting requirements focus on oversight of public funds. As unsubsidized competitors, by definition, do not
receive universal service funds, there is no reason to impose such reporting obligations on them.
97 This parity between Phase II recipients and unsubsidized competitors was generally supported in the record. See,
e.g.
, ADTRAN Comments at 6-7. However, some parties argued that unsubsidized competitors should not be held
to the same standards given they deployed their networks without the advantage of government subsidies, and thus
for economic reasons may offer lower usage allowances or speeds. See NCTA Comments at 3. We disagree, and
adopt a uniform standard for both Phase II recipients and unsubsidized competitors. The Commission directed the
Bureau to exclude areas where an unsubsidized competitor meets the broadband performance requirements
“described above,” referring to the earlier discussion in the USF/ICC Transformation Order of public interest
obligations for ETCs. USF/ICC Transformation Order, 26 FCC Rcd at 17729, para. 170.
98 In the event a would-be unsubsidized competitor is filing or responding to a challenge, the service obligations in
question must be met at the time it makes its filing. For those characteristics that are readily changeable, such as
price or usage allowance, it would be more persuasive evidence if the would-be unsubsidized competitor commits to
meeting those criteria for the five-year term of Phase II. Without such evidence, a would-be unsubsidized
competitor theoretically could merely satisfy the criteria during the pendency of the challenge process, with no
intent to continue meeting them after the challenge is resolved.
99 See USF/ICC Transformation Order, 26 FCC Rcd at 17832, para. 519.
100 See Reply Comments of General Communications, Inc., WC Docket No. 10-90, at 5-8 (filed Apr. 12, 2013). We
note that the Commission has not yet defined “unsubsidized competitor” for purposes of support for mobile services.
We are not prejudging any actions that may be taken in the future on questions relating to unsubsidized competitors
in other contexts.
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service.101 Providers meeting this proxy would be presumed to meet the speed requirement of an
unsubsidized competitor. We conclude that the proxy for 4 Mbps/1 Mbps broadband should be set at 3
Mbps/768 kbps, as data on 3 Mbps/768 kbps deployment are available on the National Broadband Map.102
This is consistent with the precedent established by the Commission in the USF/ICC Transformation
Order
, as well as its conclusions in the Phase I Order.103 Commenters note that areas served by an
unsubsidized competitor with speeds of 3 Mbps/768 kbps are often already served by speeds of 4 Mbps/1
Mbps.104 If we were to use a 6 Mbps/1.5 Mbps proxy,105 areas served by speeds of only 4 Mbps/1 Mbps
would be presumed unserved. This would have the effect of burdening potential unsubsidized
competitors, many of which are small businesses, requiring them to come forward in the challenge
process discussed in the Phase II Challenge Process Order and show that they are actually providing 4
Mbps/1 Mbps service.106
43. Pricing. Under the presumptions the Bureau adopted in the Phase II Challenge Process
Order, a provider would be initially presumed to meet the reasonably comparable pricing requirement, so
long as it was shown on the National Broadband Map as offering 3 Mbps/768 kbps service and shown on
Form 477 data as offering voice service in the relevant state..107 We now adopt a conclusive presumption
that a potential unsubsidized competitor is offering reasonably comparable prices if it offers the same or
lower rates in rural markets as it does for fixed wireline offerings meeting the requisite standards in urban


101 The Commission previously concluded that because data on 4 Mbps/1 Mbps broadband is not widely available, a
proxy may be used in its place. See USF/ICC Transformation Order, 26 FCC Rcd at 17701, para. 103 n.168. For
download speeds, the closest available data sets are for broadband with speeds 3 Mbps and 6 Mbps. For upload
speeds, the closest available data sets are 768 kbps and 1.5 Mbps.
102 We note that the Commission recently adopted an order that will require providers to file deployment and
subscription data about the specific advertised speeds they offer, rather than filing data on government-prescribed
speed tiers. Modernizing the FCC Form 477 Data Program, WC Docket No. 11-10, Report and Order, 28 FCC Rcd
9887, 9899, para. 25 (2013). That data is expected to be collected in September 2014.
103 See USF/ICC Transformation Order, 26 FCC Rcd at 17701, para. 103 n.168 (using a 3 Mbps/768 kbps proxy);
see also Connect America Fund, WC Docket No. 10-90, 28 FCC Rcd 7766, 7772, para. 16 n.38 (2013) (reaffirming
the use of the 3 Mbps/768 kbps proxy for Phase I) (Phase I Order).
104 See Reply Comments of the American Cable Association, WC Docket No. 10-90, at 4-5 (filed Apr. 12, 2013).
105 See, e.g., ACS Comments at 2; ITTA Comments at 3; USTelecom Comments at 3 (supporting the use of a 6
Mbps/1.5 Mbps proxy for 4 Mbps/1 Mbps). As we decline to use a 6 Mbps/1.5 Mbps proxy, it is unnecessary for us
to address comments in the record suggesting that if 6 Mbps/1.5 Mbps is used as the proxy, that carriers should or
should not be required to provide service meeting a 6 Mbps/1.5 Mbps standard. See ACA Comments at 6 (arguing
that if a 6 Mbps/1.5 Mbps standard is used, carriers should be required to provide 6 Mbps/1.5 Mbps to all locations);
ADTRAN Comments at 6-7; but see USTelecom Comments at 4 (arguing that if the Commission adopts a 6
Mbps/1.5 Mbps proxy, it should not require carriers to provide speeds of 6 Mbps/1.5 Mbps to all locations); ACS
Comments at 3; ITTA Comments at 4-5.
106 See Phase II Challenge Process Order, 28 FCC Rcd at 7212-20, paras. 4-22.
107 See id. at 7214, 7216, paras. 8, 11. A provider would only need to demonstrate that its prices are reasonably
comparable in one of two circumstances: first, where a party challenges that a census block shown as served by the
provider should be treated as unserved on the basis of price; or second, where the provider challenges the
designation of a census block as unserved, claiming that it, in fact, serves the census block. Because of this
presumption, most providers will not need to make an affirmative showing that their prices are reasonably
comparable.
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markets.108 In such circumstances, the Commission’s policy objective of ensuring consumers have access
to reasonably comparable services at reasonably comparable rates should be achieved.109
44. We also adopt a conclusive presumption that if a potential unsubsidized competitor is
competing in a particular census block with the incumbent price cap carrier, and both are offering services
that offer at least 4 Mbps downstream, and at least 1 Mbps upstream, and at least 100 GB of data, the
pricing of the competitor will be deemed reasonable, and not subject to challenge. Given the finite $1.8
billion budget for Phase II, we do not find it efficient to target funding to such areas that already have two
providers offering service meeting the Phase II standards for price cap carriers, when there are likely to be
other census blocks where the average cost exceeds the funding threshold that have no providers at all.
45. We now turn to situations where the potential competitor does not offer fixed wireline
service in urban areas, or does not serve an area where the incumbent itself offers broadband. Once we
adopt the urban rate benchmark, the pricing of such a potential competitor will not be subject to challenge
if it at or below the urban rate benchmark. Stated differently, there will be a conclusive presumption that
the pricing of any operator with non-promotional rates below the urban rate benchmark is reasonable. In
the event the challenge process is underway prior to the publication of the urban rate benchmark resulting
from the urban rate survey, however, we will need a simple, administratively workable method of
determining whether the price cap carrier has made a prima facie case regarding pricing that shifts the
burden to the other provider to respond.110 In the Phase II Service Obligations Public Notice, the Bureau
sought comment on whether to adopt on an interim basis reasonable comparability benchmarks of $37 for
voice service and $60 for broadband service.111 We now adopt such an approach on an interim basis,
which will enable the Bureau to quickly and efficiently adjudicate challenges to the extent that process
occurs before the adoption of the urban rate benchmark.112
46. In order to make a prima facie case to proceed with a challenge in situations where the
conclusive presumptions discussed above do not apply, a price cap carrier seeking to overturn the


108 See Letter from Steven F. Morris, National Cable & Telecommunications Association, to Marlene Dortch,
Secretary, Federal Communications Commission, WC Docket No. 10-90 (filed Sept. 18, 2013); see also ITTA
Comments at 7 (“if a portion of a broadband competitor’s base is urban, there is no need for the Commission to set
a level at which a provider’s rate is too high to be considered reasonable. The competitiveness of the market will
ensure that the provider’s rate is reasonable.”); USTelecom Comments at 8 (similar).
109 The compared services must have substantially similar attributes. For instance, an unsubsidized competitor
would not enjoy a conclusive presumption if, though it offers the same urban and rural rates, its rural package has
relatively restrictive data usage allowances and low speeds, while its urban offering has no data usage allowance and
higher speeds. Moreover, we only provide a conclusive presumption in situations where more than a de minimis
number of customers in urban areas purchase the plan that serves as the point of comparison. A conclusive
presumption would not be afforded if an unsubsidized competitor technically offers service in both urban and rural
areas, but has few or no subscribers in the urban areas. Finally, consistent with the requirement established above
for price cap carriers, the relevant comparison must be to fixed wireline offerings in urban areas. If the provider in
question does not offer fixed wireline service in urban areas, a price cap carrier would need to make a prima facie
case that the provider’s rates exceed the interim benchmark we discuss below, and the other provider would then
respond.
110 The Rural Associations have argued that we should wait for the urban rate survey to be completed before using
pricing as a determinant of whether an area is served by an unsubsidized competitor. Reply of NTCA – The Rural
Broadband Association et al., WC Docket No. 10-90, at 8 (filed Apr. 12, 2013). We note that the process we adopt
herein only applies to the implementation of the Phase II challenge process for price cap carriers accepting model-
based support.
111 Phase II Service Obligations Public Notice, 28 FCC Rcd at 1521, paras. 17-18.
112 WISPA supports such an approach. WISPA Comments at 7.
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classification of a particular block as served based on a lack of reasonably comparable pricing would need
to demonstrate that the provider’s advertised non-promotional price for the lowest cost broadband service
offering is above $60 and/or the provider’s advertised non-promotional price for the lowest cost voice
service offering is above $37.113 If the price cap carrier successfully makes such a showing, the burden
then would shift to the other provider to submit evidence that its rates are in fact reasonably comparable.
The provider can defeat the challenge by demonstrating either that: 1) it does in fact offer a qualifying
broadband offering at a price at or below $60 and a voice offering at or below $37; 2) its rates nonetheless
should be deemed reasonably comparable because it offers a more robust broadband service than the
minimum requirements established for price cap carriers accepting Phase II support; 114 or 3) its rates are
the same as those of other providers in nearby urban markets where there are two or more providers
offering fixed services meeting the Commission’s standards.
47. We now address what showing is necessary when a provider is challenging the initial
designation of a census block as unserved, arguing that instead the block should be treated as served by
the provider. Prior to adoption of the urban rate benchmark, the provider may demonstrate that 1) it
offers a qualifying broadband offering at a price at or below $60 and a voice offering at or below $37; 2)
its rates nonetheless should be deemed reasonably comparable because it offers a more robust broadband
service than the minimum requirements established for price cap carriers accepting Phase II support; 3) it
offers service meeting or exceeding the specified performance requirements for the same or lower rates in
rural areas as it does for fixed wireline offerings in urban areas; or 4) both it and the price cap carrier are
serving that census block and therefore its rates should be presumed reasonably comparable. After the
adoption of the urban rate benchmark, the provider may present evidence that its rates are lower than the
benchmark. If it successfully makes any of these showings, and the price cap carrier fails to offer
sufficient contrary evidence, the provider will be deemed to be offering reasonably comparable rates. In
responding to an unserved-to-served challenge, price cap carriers may contest the factual assertions made
by the provider.115

IV.

PROCEDURAL MATTERS

A.

Paperwork Reduction Act

48. This document contains new information collection requirements subject to the Paperwork
Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and
Budget (OMB) for review under Section 3507(d) of the PRA. OMB, the general public, and other
Federal agencies are invited to comment on the new or modified information collection requirements
contained in this proceeding. In addition, we note that pursuant to the Small Business Paperwork Relief
Act of 2002,116 we previously sought specific comment on how the Commission might further reduce the
information collection burden for small business concerns with fewer than 25 employees.


113 The broadband offering must meet all the performance metrics set forth in this Order. This section uses the term
“price cap carrier” as the party opposing the provider’s status as an unsubsidized competitor. This designation is
used for the sake of clarity; however, any party may make such challenges.
114 While we decline to adopt a bright-line test at this time of how to compare the prices of services offering
different levels of speed, the Bureau will consider the substantive merits of such arguments as part of the Phase II
challenge process.
115 For example, the price cap carrier could challenge the veracity of the assertion that service is offered at a rate
lower than the urban benchmark, by presenting evidence that this rate is not advertised on the provider’s website, or
that a potential customer was unable to obtain service at this rate.
116 Public Law 107-198; see 44 U.S.C. § 3506(c)(4).
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49. In this present document, we have assessed the effects of requiring price cap carriers to
report certain information related to their Phase II service obligations. As all price cap carriers employ
more than 25 employees, these changes will have no impact on businesses with fewer than 25 employees.
Some changes adopted in this Order affect how unsubsidized competitors report information related to the
challenge process. Unsubsidized competitors may be businesses with fewer than 25 employees.
However, the changes adopted herein fall under previous OMB approval for the Phase II challenge
process.117

B.

Final Regulatory Flexibility Certification

50. The Regulatory Flexibility Act of 1980, as amended (RFA)118 requires that a regulatory
flexibility analysis be prepared for rulemaking proceedings, unless the agency certifies that “the rule will
not have a significant economic impact on a substantial number of small entities.”119 The RFA generally
defines “small entity” as having the same meaning as the terms “small business,” “small organization,”
and “small governmental jurisdiction.”120 In addition, the term “small business” has the same meaning as
the term “small business concern” under the Small Business Act.121 A small business concern is one
which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business Administration (SBA).122
51. The metrics and standards for determining compliance with the Commission’s service
requirements contained in the “Price Cap Carrier Obligations” section of this Order do not have a
significant economic impact on a substantial number of small entities. The requirements in that section
only directly affect price cap carriers that ultimately elect to accept Phase II support through the state-
level commitment. The vast majority of these affected carriers are not small businesses.123 As separate
and independent grounds, we also conclude that articulating objective quantitative metrics for
demonstrating compliance with the standards adopted by the Commission creates only a de minimis
economic impact.124 The metrics and standards adopted in the “Unsubsidized Competitors” section of
this Order could affect a substantial number of small entities, depending on how many such entities


117 See 78 Fed. Reg. 44893 (July 25, 2013).
118 The RFA, see 5 U.S.C. § 601 et seq., has been amended by the Contract With America Advancement Act of
1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA).
119 5 U.S.C. § 605(b).
120 5 U.S.C. § 601(6).
121 5 U.S.C. § 601(3) (incorporating by reference the definition of “small business concern” in Small Business Act,
15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an
agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity
for public comment, establishes one or more definitions of such term which are appropriate to the activities of the
agency and publishes such definition(s) in the Federal Register.”
122 15 U.S.C. § 632.
123 An incumbent local exchange carrier is considered a small business if it has 1,500 or fewer employees and is not
dominant in its field of operation. See USF/ICC Transformation Order, 26 FCC Rcd at 18335, para. 44-45. Only
four carriers potentially fall under this definition. We conclude four is not a substantial number, either compared to
the universe of price cap carriers (13 carriers) or all incumbent local exchange carriers (1,307 carriers).
124 For example, the Commission had already determined that the latency for Phase II should be sufficient to allow
the use of real-time applications, including VoIP. See USF/ICC Transformation Order, 26 FCC Rcd at 17721,
17729, paras. 147, 171. Articulating a numerical measure for how carriers should show that they are meeting the
Commission’s standard (round trip latency of less than 115 ms) does not create a significant economic impact.
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participate in the challenge process. However, in setting the proxy by which we will determine whether
an unsubsidized competitor offers 4 Mbps/1 Mbps service and stating a how an unsubsidized competitor
can make a showing that its rates are reasonably comparable, we create only a de minimis economic
impact. Therefore, we certify that the requirements of this Order will not have a significant economic
impact on a substantial number of small entities. The Commission will send a copy of the order including
a copy of this final certification, in a report to Congress pursuant to the Small Business Regulatory
Enforcement Fairness Act of 1996, see 5 U.S.C. § 801(a)(1)(A). In addition, the order and this
certification will be sent to the Chief Counsel for Advocacy of the Small Business Administration, and
will be published in the Federal Register. See 5 U.S.C. § 605(b).

C.

Congressional Review Act

52. The Commission will send a copy of this order to Congress and the Government
Accountability Office pursuant to the Congressional Review Act. 125

V.

ORDERING CLAUSE

53. Accordingly, IT IS ORDERED that, pursuant to sections 1, 4(i), 5(c), 201(b), 214, and 254
of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of
1996, 47 U.S.C. §§ 151, 154(i), 155(c), 201(b), 214, 254, 1302, sections 0.91 and 0.291 of the
Commission’s rules, 47 C.F.R. §§ 0.91, 0.291, and the delegations of authority in paragraphs 112, 170,
and 171 of the USF/ICC Transformation Order, FCC 11-161, this Report and Order IS ADOPTED,
effective thirty (30) days after publication of the text or summary thereof in the Federal Register, except
for the provisions subject to the PRA,126 which will become effective upon announcement in the Federal
Register
of OMB approval of the subject information collection requirements.
FEDERAL COMMUNICATIONS COMMISSION
Julie A. Veach
Chief
Wireline Competition Bureau


125 See 5 U.S.C. § 801(a)(1)(A).
126 See supra paras. 48-49.
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