Skip Navigation

Federal Communications Commission

English Display Options

Commission Document

Third Order on Reconsideration

Download Options

Released: May 14, 2012

Federal Communications Commission

FCC 12-52

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Connect America Fund
)
WC Docket No. 10-90
)
A National Broadband Plan for Our Future
)
GN Docket No. 09-51
)
Establishing Just and Reasonable Rates for Local
)
WC Docket No. 07-135
Exchange Carriers
)
)

High-Cost Universal Service Support
)
WC Docket No. 05-337
)
Developing a Unified Intercarrier Compensation
)
CC Docket No. 01-92
Regime
)
)

Federal-State Joint Board on Universal Service
)
CC Docket No. 96-45
)
Lifeline and Link-Up
)
WC Docket No. 03-109
)
Universal Service Reform – Mobility Fund
)
WT Docket No. 10-208

THIRD ORDER ON RECONSIDERATION

Adopted: May 14, 2012

Released: May 14, 2012

By the Commission: Commissioner Rosenworcel not participating.
1.
In this Order, we reconsider and clarify certain aspects of the USF/ICC Transformation
Order in response to various petitions for reconsideration and/or clarification.1 The USF/ICC
Transformation Order
represents a careful balancing of policy goals, equities, and budgetary constraints.
This balance was required in order to advance the fundamental goals of universal service and intercarrier
compensation reform within a defined budget while simultaneously providing sufficient transitions for
stakeholders to adapt. While reconsideration of a Commission’s decision may be appropriate when a
petitioner demonstrates that the original order contains a material error or omission, or raises additional
facts that were not known or did not exist until after the petitioner’s last opportunity to present such
matters, if a petition simply repeats arguments that were previously considered and rejected in the
proceeding, due to the balancing involved in this proceeding, we are likely to deny it.2
2.
With this standard in mind, in this Order we take several limited actions stemming from
reconsideration petitions. We grant in part and deny in part petitions relating to certain aspects of eligible


1 See Connect America Fund, WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order or Order); pets. for review pending sub
nom. In re: FCC 11-161
, No. 11-9900 (10th Cir. filed Dec. 8, 2011); Connect America Fund, WC Docket No. 10-90
et al., Order on Reconsideration, 26 FCC Rcd 17633 (2011); Connect America Fund, WC Docket No. 10-90 et al.,
Second Order on Reconsideration, FCC 12-47 (rel. Apr. 25, 2012) (Second Reconsideration Order).
2 See 47 C.F.R. § 1.429.

Federal Communications Commission

FCC 12-52

telecommunications carrier (ETC) reporting obligations, while maintaining our overall framework for
ETC accountability. We also grant in part and deny in part a petition relating to universal service support
adjustments for carriers with artificially low local rates, making a minor adjustment in the timing for the
sampling of rates to be used in calculating any such adjustments. We also clarify certain implementation
details for both the reporting requirements and the rate floor requirement. In addition, we make a minor
adjustment to the rule relating to the calculation of baseline support for competitive carriers serving
remote areas of Alaska. We also clarify that the framework established for rate-of-return companies to
extend broadband upon reasonable request would take into account any unique circumstances, such as
backhaul costs, that may impact the ability of such companies, in Alaska or elsewhere, to extend
broadband to their customers. We also deny a number of other requests relating to support for carriers
serving Alaska. We deny a request to reconsider which 12 months of revenues will be considered for
purposes of defining Eligible Recovery. Finally, we deny a request to reconsider the use of tariff
forecasts for calculating the baseline for rate-of-return carriers.

I.

REPORTING REQUIREMENTS

A.

Reporting Requirements for State-Designated ETCs

3.
In the USF/ICC Transformation Order, we extended the annual reporting requirements
to all recipients of high-cost/Connect America Fund (CAF) support. Previously, our rules required annual
reports only from federally-designated ETCs.3 A number of petitioners oppose requiring state-designated
ETCs to file section 54.313 annual reports.4 The Rural Associations argued in their petition that we
should respect the rights and discretion of the states.5 Petitioners also argued that it would be unfair to
require state-designated ETCs to report in 2012 on information they were not previously required to
maintain.6 USTelecom and other commenters asked that we clarify that we intended to preempt state
reporting requirements.7 Finally, USTelecom argued that the Commission violated the Paperwork
Reduction Act (PRA) by not seeking approval from the Office of Management and Budget for the
expanded application of the requirements in section 54.313(a)(1)-(a)(6) to state-designated ETCs and
because “[t]he new reporting requirements amount to a scatter-shot data collection effort—in many cases
with no potential to add any value to Commission decision-making.”8


3 See 47 C.F.R. § 54.209(a).
4 See Petition for Reconsideration and Clarification of the National Exchange Carrier Assoc., Inc. the Organization
for the Promotion and Advancement of Small Telecomms Cos., and the Western Telecomms Alliance, CC Docket
Nos. 01-92, 96-45; GN Docket No. 09-51; WC Docket Nos. 03-109, 05-337, 07-135, 10-90; WT Docket No. 10-208
at 22-25 (filed Dec. 29, 2011) (Rural Associations Petition); see also Opposition of the Indep. Tel. & Telecomms.
Alliance, WC Docket No. 10-90 et al., at 8-10 (filed Feb. 9, 2012) (ITTA Opposition).
5 Rural Associations Petition at 22.
6 See USTelecom Petition at 19-20.
7 See, e.g., Petition for Reconsideration of the United States Telecom Assoc., CC Docket Nos. 01-92, 96-45; GN
Docket No. 09-51; WC Docket Nos. 03-109, 05-337, 07-135, 10-90; WT Docket No. 10-208 at 17 (filed Dec. 29,
2011) (USTelecom Petition); Opposition of CenturyLink, WC Docket No. 10-90, at 18 (filed Feb. 9, 2012)
(CenturyLink Opposition); Comments of AT&T, WC Docket No. 10-90 et al., at 13-14 (filed Feb. 9, 2012) (AT&T
Comments); Letter from Mary L. Henze, AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et
al.
, at 2 (filed March 21, 2012) (urging the Commission to act swiftly on the USTelecom issues related to the new
ETC reporting requirements set forth in section 54.313).
8 USTelecom Petition at 16-17.
2

Federal Communications Commission

FCC 12-52

1.

No Exemption for State-Designated ETCs

4.
Rural Associations assert that the USF/ICC Transformation Order “provides no evidence
of inadequate, negligent or otherwise unsatisfactory monitoring of state-designated ETCs by state
commissions during the more than 14 years that they have been responsible for that task.”9 This assertion
ignores the discussion in the Order of the GAO’s criticism of the lack of accountability for recipients of
high-cost support due to lack of uniformity in reporting requirements among the states.10 As NCTA noted
in its comments, “reporting is an essential element of every government subsidy program.”11 We decline
to exempt state-designated ETCs from the reporting requirements imposed by new section 54.313.
Petitioners have neither presented new evidence nor raised new arguments that persuade us to reconsider
including state-designated ETCs within section 54.313’s purview.
2.

No Preemption of State Reporting Requirements

5.
We next deny USTelecom’s request to clarify that we intended to preempt state reporting
requirements when we implemented new section 54.313. As we stated in the USF/ICC Transformation
Order
, the federal reporting requirements in section 54.313 are intended to “serve as a baseline
requirement for all ETCs.”12 Indeed, Congress expressly provided the states a regulatory role in this
area.13 We did not preempt the states from imposing state-specific reporting requirements, as long as
those additional reporting requirements do not create burdens that thwart achievement of the universal
service reforms adopted by the Commission.14 Parties have provided no evidence that the states will act
in a way that burdens the federal support mechanism in response to the changes implemented by the
USF/ICC Transformation Order and thus have neither presented new evidence nor raised arguments that
persuade us to reconsider our decisions in this regard.
6.
We also note that we do not expect state-designated ETCs to report to the Commission
information in their 2012 filing that they were not previously required to collect. As the Wireline
Competition Bureau stated in the Clarification Order, it would be impossible for entities that were not
previously required to collect and report the information required by 54.313 with respect to their
provision of voice service in 2011 to report such information to the Commission.15 But if a state-
designated ETC is subject to a state requirement to report some or all of this information annually to the
state, then the ETC should file a copy of any relevant information with the Commission in 2012.16
Requiring a state-designated ETC to file with the Commission the same information it already reports to a
state commission imposes at most a minimal burden.
3.

Paperwork Reduction Act Procedural Requirements

7.
We disagree with the premise of USTelecom’s argument that the Commission has
violated the PRA by extending section 54.313(a)(1)-(a)(6)’s new reporting requirements to state-


9 See Rural Associations Petition at 23.
10 See USF/ICC Transformation Order, 26 FCC Rcd at 17851-52, para. 577.
11 Comments of the National Cable & Telecommunications Assoc., WC Docket No. 10-90 et al., at 10 (filed Feb. 9,
2012) (NCTA Comments).
12 USF/ICC Transformation Order, 26 FCC Rcd at 17852, para. 580; see also id. at 17850, para. 574 (“[T]he
specific reporting and certification requirements adopted below are a floor rather than a ceiling for the states.”).
13 See id. at 17850-51, para. 574 (citing 47 U.S.C. § 254(f)).
14 See id.
15 Connect America Fund, WC Docket No. 10-90 et al., Order, 27 FCC Rcd 605, 608, para. 10 (2012) (USF/ICC
Clarification Order
).
16 Id.
3

Federal Communications Commission

FCC 12-52

designated ETCs. In fact, the Commission sought and has received OMB approval for these provisions.17
Nor are we persuaded by USTelecom’s general argument that the reporting requirements add no value to
Commission decision making. As we explained in the USF/ICC Transformation Order, these
requirements are necessary and appropriate “to ensure the continued availability of high-quality voice
services and monitor progress in achieving our broadband goals and to assist the FCC in determining
whether the funds are being used appropriately.”18 We find that Petitioners have neither presented new
evidence nor raised arguments that persuade us to reconsider our decisions in this regard.

B.

Reporting Requirements for Carriers Whose Support Is Being Phased Down

8.
Certain petitioners and commenters argue that it is unreasonable to impose the new
reporting obligations on competitive ETCs whose support is being phased down.19 In the USF/ICC
Transformation Order
, we stated that such ETCs “will not be required to submit any of the new
information or certifications below related solely to the new broadband public interest obligations, but
must continue to submit information or certifications with respect to their provision of voice service.”20
As the Bureau clarified in the USF/ICC Clarification Order, competitive ETCs that have been designated
by the Commission are required to file information with respect to their provision of voice service during
2011, as previously required by section 54.209 of the Commission’s rules.21 These competitive ETCs,
who have been subject to these reporting obligations since Commission designation, are not subject to
new reporting obligations, and we therefore do not find it unreasonable to continue to impose this
reporting obligation. More generally, all competitive ETCs are required to offer voice service throughout
the designated study area, and the Commission has an obligation to ensure these ETCs, who will continue
to receive support until the completion of the phase down, are complying with this requirement.
Moreover, many state-designated competitive ETCs are already subject to reporting obligations related to
the provision of USF-supported voice service. For these reasons, we conclude it is reasonable to require
competitive ETCs to comply with annual reporting obligations during their phase-down, and we deny the
request for reconsideration. Those filings will be due on the same date as reports filed by other ETCs, as
discussed more fully below.

C.

Filing Deadline

9.
In the USF/ICC Transformation Order, we established a filing deadline of April 1 for
annual reports pursuant to new section 54.313,22 with reporting under a number of those subsections not
beginning until 2013 or later. A number of petitioners and commenters argued that April 1 was an
unrealistic deadline for the new financial reporting imposed by section 54.313(f)(2). These petitioners
and commenters argue that: (1) many of the affected carriers have never been audited before; (2) some
carriers do not close their books until the end of the first quarter; (3) many carriers are often still awaiting


17 77 Fed. Reg. 26987 (2012) (announcing OMB approval of information collection); see also Wireline Competition
Bureau Announces Filing Deadline of July 2, 2012, for Eligible Telecommunications Carriers to File Reports
Pursuant to Section 54.313(a)(2) through (a)(6) and (h) of the Commission’s Rules
, WC Docket Nos. 10–90 et al.,
Public Notice, DA 12-729 (rel. May 8, 2012).
18 USF/ICC Transformation Order, 26 FCC Rcd at 17852, para. 580; see also NCTA Comments at 10.
19 USTelecom Petition at 15; AT&T Comments at 10-11.
20 USF/ICC Transformation Order, 26 FCC Rcd at 17853, para. 583.
21 USF/ICC Clarification Order, 27 FCC Rcd at 608, para. 9. We note that federally-designated ETCs should have
filed their annual reports by April 1, 2012. See id. As a result of the changes implemented by this Order, those
entities will file their next annual reports by July 1, 2013.
22 Id. at 17853, para. 581.
4

Federal Communications Commission

FCC 12-52

various financial documents on April 1; and (4) RUS Form 479 filings are not due until April 30.23
AT&T also argued that ETCs operating in multiple states would have difficulty meeting an April 1
deadline.24 Most of those petitioners argued that a filing deadline of July 1 or later would be reasonable.25
Additionally, USTelecom noted in its Petition that states do not need a six-month lead time in order to
complete their section 254(e) annual certifications.26 On reconsideration, we conclude that moving the
annual filing deadline three months later in the year would be appropriate. Because we are moving the
filing deadline from April 1 to July 1, we decline to provide the automatic 60-day extension sought by the
Alaska Rural Coalition.27
10.
We hereby revise the filing deadline under section 54.313 to July 1. We do not,
however, change the years in which the various filings begin to be due. Many states do not require annual
reporting until on or after July 1, and they still have sufficient time to provide the annual section 254(e)
certifications to the Commission by October 1.28
11.
We also revise the filing deadline in section 54.1009(a) for annual reports required of
recipients of Mobility Fund Phase I support.29 In the USF/ICC Transformation Order, the Commission
established April 1 as the deadline for Mobility Fund Phase I recipients to submit their annual reports.30
In establishing the same filing deadline as that required for submission of annual reports pursuant to new
section 54.313, the Commission aimed to minimize the administrative burden on Mobility Fund recipients
that are subject to the new ETC annual reporting requirements under section 54.313 by permitting them to
satisfy their Mobility Fund reporting requirements in a separate section of their report filed under section
54.313. Consequently, in order to maintain the uniform deadline for filing of these annual reports, we
also move the Mobility Fund annual report filing deadline from April 1 to July 1.
12.
We also revise the penalty deadlines in section 54.313(j). The Rural Associations argue
in their petition that the penalties imposed by section 54.313(j) are “far more onerous than similar prior


23 See Rural Associations Petition at 23-24; Letter from Todd Thorson, Kiesling Assocs., to Carol Mattey, FCC, WC
Docket No. 10-90 et al. (received Dec. 22, 2011) (Kiesling 12/22/11 Ex Parte); Letter from David M. Marlett,
Marlett & Assocs., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al. (filed Dec. 27, 2011)
(Marlett 12/27/11 Ex Parte); USTelecom Petition at 21-22; Petition for Reconsideration of the Alaska Rural
Coalition, WC Docket No. 10-90 et al., at 16-17 (filed Dec. 29, 2011) (Alaska Rural Coalition Petition); Petition for
Clarification and/or Reconsideration of Comporium, WC Docket No. 10-90 et al., at 7 (filed Dec. 29, 2011)
(Comporium Petition); ITTA Opposition at 10-11; Comments on Request for Reconsiderations by the National
Assoc. of State Utility Consumer Advocates and the NJ Div. of Rate Counsel, WC Docket No. 10-90 et al., at 10
(filed Feb. 9, 2012) (NASUCA and NJ Div. of Rate Counsel Comments). We do not address here the other issues
raised in these Petitions or Comments relating to the new financial reporting requirements.
24 AT&T Comments at 21-22.
25 See, e.g., Alaska Rural Coalition Petition at 16-17; USTelecom Petition at 21; AT&T Comments at 20. The Rural
Associations asked that the deadline be moved to September l. See Rural Associations Petition at 25. Comporium,
ITTA, and NASUCA requested an October 15 filing deadline. See Comporium Petition at 7; ITTA Opposition at
10; NASUCA and NJ Div. of Rate Counsel Comments at 10. The state certifications are due October 1 of each
year. We have directed the states to rely on the information contained in the carriers’ section 54.313 annual reports
in making those certifications. See USF/ICC Transformation Order, 26 FCC Rcd at 17861, para. 612. Because a
September 1 deadline would put the carriers’ annual reports due only one month before the states’ annual
certifications are due, see new 47 C.F.R. § 54.314, that would not provide sufficient time for state commissions to
review the information, and we therefore decline to extend the filing deadline so far out.
26 USTelecom Petition at 21.
27 See Alaska Rural Coalition Petition at 17.
28 USTelecom Petition at 21; CenturyLink Opposition at 20.
29 47 C.F.R. § §54.1009(a).
30 See id. See also USF/ICC Transformation Order, 26 FCC Rcd at 17817, paras. 471-474.
5

Federal Communications Commission

FCC 12-52

rules that applied to individual high-cost support mechanisms because it reduces an ETC’s entire USF and
CAF support.”31 In fact, however, the Commission merely extended existing rules that applied to
federally designated ETCs to all ETCs.32 These mechanisms are necessary because they “incent prompt
filing of requisite certifications and information necessary to calculate support amounts . . . [and] to
ensure that support is being used for the intended purposes.”33 By moving the filing deadline from April
1 to July 1, carriers will have sufficient time to file their annual reports. ETCs that are unable to file their
annual reports in a timely manner without cause will receive reduced levels of support commensurate
with the lateness of their filings.34 Thus, a carrier that files late will not immediately lose all support.
Rather, that support will be prorated for each quarter the filing is late.35 Those carriers that need more
time can request a waiver, as needed, pursuant to the Commission’s rules.36
13.
We also take this opportunity to clarify that federally designated ETCs should file their
54.313 annual reports with the commissions of the states in which they operate and with the Tribal
authorities, as appropriate. As the Commission noted in the USF/ICC Transformation Order, states are
not required to file certifications with the Commission with respect to carriers that do not fall within their
jurisdiction. However, consistent with the partnership between the Commission and the states to preserve
and enhance universal service, and our recognition that states will continue to be the first place that
consumers may contact regarding consumer protection issues, in the Order we encouraged states to bring
to our attention issues and concerns about all carriers operating within their boundaries, including
information regarding non-compliance with our rules by federally-designated ETCs. We also stated in
the Order that we encourage Tribal governments, where appropriate, to report to the Commission any
concerns about non-compliance with our rules by all recipients of support operating on Tribal lands.37
Ensuring that the relevant Tribal government has access to the annual reports of any ETC operating on
Tribal lands is a critical component of the trust relationship with those Tribal governments.

D.

Document Retention Period

14.
In the USF/ICC Transformation Order, we imposed a 10-year document retention period
on all ETCs receiving high-cost support. USTelecom and CenturyLink argued that we should reduce the
new 10-year document retention period and reinstate the original 5-year retention period previously
contained in section 54.202(e).38 We are not persuaded, as we conclude that a longer period of time is
necessary for purposes of litigation under False Claims Act cases.39 Thus, we decline to revise the 10-
year document retention period set forth in section 54.320. USTelecom further argued in its Petition that,
should the Commission decline to reconsider the new ten-year retention period, the rule should apply only
to “records accumulated from the effective date of the rule going forward.”40 While we agree that section
54.320 should apply prospectively only, we disagree with US Telecom on what constitutes prospective
application. The new retention period shall apply to all covered documents in existence as of the effective


31 Rural Associations Petition at 24.
32 USF/ICC Transformation Order, 26 FCC Rcd at 17862, para. 616.
33 Id.
34 47 C.F.R. § 54.313(j).
35 Id.
36 See 47 C.F.R. § 1.3.
37 USF/ICC Transformation Order, 26 FCC Rcd at 17860, para. 611.
38 USTelecom Petition at 22-24; CenturyLink Opposition at 20.
39 31 U.S.C. § 3731(a)-(b).
40 Id.
6

Federal Communications Commission

FCC 12-52

date of section 54.320.41 The rule as so interpreted is a permissible, prospective application of a new rule
because it does not affect or penalize past behavior but instead affects only conduct going forward.

II.

REPORTING OF END USER RATES

15.
Background. In the USF/ICC Transformation Order, the Commission adopted a rule to
limit high-cost support for incumbent ETCs where end-user rates do not meet a specified local rate
floor.42 Specifically, high-cost loop support (HCLS) and high-cost model support (HCMS) will be
limited where a carrier’s local end-user rates plus state regulated fees (specifically, state SLCs, state
universal service fees, and mandatory extended area service charges) do not meet an urban rate floor
representing the national average of local rates plus those state regulated fees. This was to ensure that the
universal service fund was not being used to subsidize local service rates that are significantly lower than
the national urban average.43
16.
To implement this rule change, the Order directed carriers receiving HCLS and/or
HCMS to report basic voice rates and state regulated fees each April 1 as part of their annual section
54.313 reports.44 In addition, the Commission required carriers to report all of their rates for residential
local service and the number of lines for each such rate so that USAC can calculate any necessary support
adjustments.45 The rules specified that the rates and lines filed by the carriers each April 1 would be those
in effect as of each January 1 (i.e., the rate sampling date).46 The first phase of the reductions will begin
July 1, 2012.
17.
In a joint petition, ITTA and the Rural Associations (Joint Petitioners) seek clarification
of whether rate changes occurring after January 1, 2012 would be reflected in the adjustment to high-cost
support beginning July 1, 2012.47 The Joint Petitioners assert that the timing of the USF/ICC
Transformation Order
would not otherwise permit the carriers sufficient time to implement rate changes
to avoid reductions in support. The Joint Petitioners also request that the Commission adopt a process
that would permit carriers to amend their filing if rates were increased after July 1. In addition, the Rural
Associations asked the Commission to reconsider the use of the average urban rate for the rate
benchmark, requesting instead that the benchmark be set two standard deviations below the nationwide
average urban rate.48 Accipiter requested reconsideration of the adoption of the rate floor in whole,
arguing that it may not be permitted to raise rates by a state rate regulator, that the low local rates are


41 Section 54.320 became effective upon publication of the effective date notice in the Federal Register on May 8,
2012. 77 Fed. Reg. 26987 (2012). Carriers should update their retention policies, procedures, and systems to ensure
their compliance with the new retention period.
42 See USF/ICC Transformation Order, 26 FCC Rcd at 18212-13, App. A, Section 54.318. This rule applies to both
rate-of-return carriers and price cap companies.
43 See id. ¶¶ 235-240.
44 The Bureau subsequently clarified that support reductions based on rate floors will offset frozen CAF Phase I
support only to the extent that the recipient’s frozen CAF Phase I support replaced HCLS and HCMS. The offset
does not apply to frozen CAF Phase I support to the extent that it replaced IAS and ICLS. USF/ICC Clarification
Order
, 27 FCC Rcd at 606, para. 3. Therefore, companies that receive HCMS will also be required to report their
basic voice rates and state-regulated fees, so that USAC can determine any reductions in support that are required.
45 See 47 C.F.R. §54.313(h). To the extent that residential local rates and state fees included in the rate benchmark
vary within a carrier’s service area, the carrier must report the number of lines associated with each rate area.
46 47 C.F.R. § 54.313(h).
47 Petition for Clarification of Indep. Tel. and Telecomms. Alliance, National Exchange Carrier Assoc., National
Telecomms. Cooperative Assoc., Organization for the Promotion and Advancement of Small Telecomms. Cos., and
Western Telecomms. Alliance, WC Docket No. 10-90 et al. (filed Jan. 23, 2012).
48 Rural Associations Petition, at 13-14.
7

Federal Communications Commission

FCC 12-52

necessary to provide bundled services at rates reasonably comparable to urban rates, and that the low
local rates are necessary to compete with competitive local exchange carriers.49
18.
Discussion. We grant Joint Petitioners’ request with regard to the sampling date for the
rate filing, and also to permit mid-year updates to reflect changes to rates. However, we deny the Rural
Associations’ and Accipiter’s petitions for reconsideration.
19.
As discussed above, we are changing the date that ETCs must file their annual section
54.313 reports, including data required for the rate floor, from April 1 to July 1.50 Consistent with this
broader change to section 54.313, we also change the sampling date set forth in section 54.313(h) from
January 1 to June 1. The Commission’s intent in specifying January 1 was to select a date relatively close
to the annual filing deadline, but with the change of the annual filing deadline to July 1, we conclude that
a six-month gap between the original sampling date of January 1 and the new reporting date of July 1 is
too long. Thus, we change the sampling date to June 1. Moreover, this conforming rule change addresses
Joint Petitioners’ request that carriers be permitted additional time to implement rate changes to maintain
their eligibility for support before reductions begin on July 1, 2012.
20.
In addition, we agree that carriers should be permitted to file mid-year updates when
their rates and/or associated fees increase in a way that would reduce or eliminate the amount of any
associated support reductions. Permitting mid-year updates in such instances will ensure that only
carriers with artificially low rates still in effect will face support reductions. As discussed in the USF/ICC
Transformation Order
, the fund should not be used to subsidize local rates far below the national average;
however, where carriers have raised their rates, it is appropriate for us to take that into account.
Accordingly, we amend our rules to add an optional filing for carriers to report increases in their local
service rates or applicable state fees. Specifically, such carriers may report their revised rates and fees, as
of December 1, on January 2 of each year. This mid-year update will be optional for any carrier that has
increased local service rates or applicable state fees and which, therefore, would have a smaller reduction
in high-cost universal service support.51 We also make a corresponding change in our rule to address
situations where rates and/or fees are reduced after the June 1st annual sampling date. The mid-year
update will be required for any carrier when local service rates and/or applicable state fees decrease after
the June 1st sampling date, which would lead to an increased reduction in high-cost universal service
support.52 USAC will use the updated local service rates and state fees to determine the support reduction
beginning with January support payments and continue until the next rate floor filing. We note that
collecting these mid-year updates will require additional approval from the Office of Management and


49 Petition for Reconsideration and Clarification, Accipiter Communications, Inc., WC Docket No. 10-90 et al.,
(field December 29, 2011), at 20-22 (Accipiter Petition).
50 See supra para. 16 (revising the filing deadline under section 54.313 from April 1 to July 1). We note that two
petitions requested waiver of the April 1, 2012, filing date for rate floor-related data. See Petition for Waiver of
Crocket Tel. Co. Inc., Peoples Tel. Co., and West Tennessee Tel. Co., Inc., WC Docket No. 10-90 et al. (filed April
25, 2012) (requesting three-month extension of filing deadline to July 1, 2012); Petition for Waiver of Shoreham
Tel. LLC, WC Docket No. 10-90 et al. (filed May 8, 2012) (requesting extension of filing deadline to June 1, 2012).
Because the change to the filing date adopted in this Order on Reconsideration effectively provide the relief
requested in these petitions, we dismiss the petitions as moot.
51 If, for instance, a carrier reports rates and state fees as of June 1st that are below the applicable benchmark, but
then its rates and/or fees increase on October 1st, it may report those increased rates and/or fees in its January 2nd
update, so that USAC can modify the support reductions for the remainder of the year. If the rates and/or fees
increase after the June 1st sampling date to a level above the applicable rate floor, such that the carrier no longer
would be subject to any reduction due to the rate floor, it may notify USAC of those increased rates in the January
2nd filing. Carriers do not need to report these rates in subsequent annual filings, as long as they remain greater than
or equal to the applicable benchmark for the rate floor.
52 The mid-year update is required only if the local service rate or state fee reduction results in a reportable rate that
is below the rate floor and would therefore be required pursuant to the annual filing.
8

Federal Communications Commission

FCC 12-52

Budget pursuant to the Paperwork Reduction Act. The mid-year update will not, therefore, take effect
until the Commission has received such approval.
21.
In addition, we make minor corrections to our rules to make clear that the residential
local rate needs only to be reported to the extent that the sum of that rate, and state regulated fees as
specified below, is below the effective rate floor, rather than requiring the reporting of all rates. To the
extent the local rate plus relevant fees is above the relevant benchmark, there is no need for USAC to
have this information in order to calculate any support reductions for lines that fall before the rate floor.53
We also clarify an inadvertent inconsistency that exists between the text of the Order and the text of the
rules regarding which rates must be reported. We clarify that carriers are required to report all rates for
residential local voice service that are under the specified rate floor, and not just rates that are
denominated “R-1” rates or “flat” rates.54 It is necessary to apply the rate floor to all local residential
service rates in order to avoid subsidization of rural rates that are significantly lower than the nationwide
urban average, as intended by the Commission in adopting the rate floor.55
22.
In response to a petition for clarification from the Vermont Public Service Board,56 we
clarify what constitutes the local rate for purposes of the rate floor. For local service provided pursuant to
measured or message rate plans – in which customers do not receive unlimited local calling, but instead
pay a per-minute or per-call charge for some or all calls – the local service rate reported by carriers should
reflect the basic rate for local service plus the additional charges incurred for measured service, 57 using
the mean number of minutes or message units for all customers subscribing to that rate plan multiplied by
the applicable rate per minute or message unit.58 For customers subscribing to bundled service, carriers
should report the local service rate as tariffed, if applicable, or as itemized on end-user bills. If a carrier
neither tariffs nor itemizes the local voice service rate on bills for bundled services, it may report the rate


53 We note, however, that all ETCs will be required to report voice and broadband price offerings, which could
include rates above the rate floor benchmark, once the Bureau specifies the format for the pricing and service
comparability survey and obtains PRA approval. See 47 C.F.R. § 54.313(a)(7). We also note that USAC may
collect additional data, subject to PRA approval, as necessary to validate the carriers’ rate floor filings.
54 The language used in paragraph 594 of the Order that carriers “must report their flat rate for residential local
service to USAC so that USAC can calculate reductions in support levels for those carriers with R1 rates below the
specified rate floor” therefore should have read “must report their rates for residential local service to USAC so that
USAC can calculate reductions in support levels for those carriers with local residential rates below the specified
rate floor” to be consistent with the adopted rule.
55 USF/ICC Transformation Order, 26 FCC Rcd at 17749-56, paras.235-47.
56 Motion for Clarification of Vermont Public Service Board, WC Docket Nos. 10-90, et al. (filed December 28,
2011). The specific requests for clarification articulated in the Vermont Public Service Board’s motion remain
pending before the Commission.
57 Measured service plans typically, but not always, include some units for additional usage – whether the units are
minutes or calls – beyond the basic plan. The local service rate to be reported for purposes of the rate floor should
include additional charges for measured service only to the extent that the average number of units used by
subscribers to that rate plan exceeds the number of units that are included in the plan. Where measured service plans
have multiple rates for additional units, such as peak and off-peak rates, the calculation should reflect the average
number of units that subscribers to the rate plan pay at each rate. Providers therefore should report a local rate for
purposes of the rate floor that accurately reflects the amount that end users are actually paying for local service.
58 Additionally, we clarify that the same methodology will apply to calculating the “R1” or “1FR” Rate Ceiling
Component Charge that limits rate increases for end users associated with intercarrier compensation reforms. In
particular, this methodology should be used by carriers that do not tariff a flat rate for residential local service that
includes unlimited local calling, i.e., the local service rate reported by such carriers should reflect the basic rate for
local service of the measured or message rate plan, plus the additional charges incurred for measured service, using
the mean number of minutes or message units for all customers subscribing to that rate plan multiplied by the
applicable rate per minute or message unit. See 47 C.F.R. § 51.915(b)(11).
9

Federal Communications Commission

FCC 12-52

of a similar stand-alone local voice service that it offers to consumers in that study area. Finally, we take
this opportunity to clarify that the only fees that may be included for purposes of meeting the urban rate
floor are state SLCs, state universal service fees, and mandatory extended area service charges. As the
Commission stated in paragraph 238 of the USF/ICC Transformation Order, “we will limit high-cost
support where local end-user rates plus state regulated fees (specifically, state SLCs, state universal
service fees, and mandatory extended area service charges) do not meet an urban rate floor representing
the national average of local rates plus such state regulated fees.”59 Accordingly, other state fees, such as
state 911 fees, may not be included.
23.
We next deny the Rural Associations’ request for reconsideration. Adopting a rate
benchmark of two standard deviations below the nationwide average urban rate could result in a rate
benchmark so low as to be meaningless.60 In any event, the Rural Associations have not provided any
analysis to support its request, other than to note that the Commission has previously used a standard
deviation analysis to set a different type of rate benchmark. In that case, the Commission used a standard
deviation analysis as part of a framework to ensure that basic voice service rates in rural, high-cost areas
served by non-rural carriers were not significantly higher than in urban areas.61 Here the Commission
addressed a different issue – ensuring that federal universal service does not subsidize basic voice service
rates that are artificially low. Adopting the Rural Associations’ proposal would undermine this goal.
Moreover, the USF/ICC Transformation Order states that a voice rate will be presumed to be reasonable
if it falls within two standard deviations above the national average.62 Adopting the Rural Associations’
proposal would require us to reconsider the broader determination that it is inappropriate for consumers
across the country to subsidize the cost of service for some consumers that pay local service rates that are
significantly lower than the national urban average,63 which we decline to do.
24.
Similarly, we are unpersuaded by Accipiter’s request to abandon the rate floor
altogether.64 A state ratemaking authority may decide to exercise its discretionary authority in a manner
that prevents a carrier from avoiding the support reduction associated with low rates, but that would not
change the fact that the carrier has excessively low rates and may, in fact, be an indication that the carrier
does not require additional subsidization to service the community. The local rate floor is not intended to
address broadband rates or components within bundled rates other than voice service, and as such
Accipiter’s argument regarding its ability to offer bundled services is irrelevant; here, all we are looking
at is the rate for local voice service. The Commission sought comment on issues relating to comparability
of pricing for broadband in the Further Notice.65 Finally, we decline to eliminate the rate floor based on
Accipiter’s unsupported suggestions of possible competitive harm. We are not persuaded that the
appropriate response to unsubsidized competitors with low rates is to provide greater subsidies for the
incumbent carrier in the competitive areas. Accordingly, we deny Accipiter’s petition for reconsideration.


59 USF/ICC Transformation Order, 26 FCC Rcd at 17751, para. 238.
60 Standard deviation is a statistical measure of dispersion of data points around an average. Assuming a normal
distribution of data points (i.e., a bell curve), the range of data points within two standard deviations of the average
would be expected to include 95 percent of the data points.
61 Specifically, the Commission required states to certify that those rates were reasonably comparable – i.e., fell
below the nationwide urban rate benchmark, which was set at two standard deviations above the average urban rate
– or explain why they are not. See 47 C.F.R. § 54.316 (2011).
62 USF/ICC Transformation Order, 26 FCC Rcd at 17694, para. 84.
63 See id. at 17751, para. 237.
64 Accipiter Petition, at [[x]].
65 USF/ICC Transformation Order, 26 FCC Rcd at 18046-47, paras. 1018-27.
10

Federal Communications Commission

FCC 12-52

III.

UNIVERSAL SERVICE SUPPORT FOR ALASKA

25.
In this section, we address petitions for reconsideration filed by General
Communications, Inc. (GCI) and by the Alaska Rural Coalition relating to several universal service issues
in Alaska.
26.
At the outset, however, we note that the State of Alaska has expressed concern with the
Commission’s use of the term “Tribal lands” as that term relates to areas of Alaska.66 In the USF/ICC
Transformation Order
, the Commission adopted a definition of “Tribal lands” for the purposes of high-
cost support.67 Though it does not object to the definition of “Tribal lands” adopted by the Commission,
the State of Alaska asserts that the use of the term “Tribal lands” might engender confusion in light of
Alaska’s unique circumstances, and it suggests that Commission should have used the term “Tribal lands
and Alaska Native Regions” instead to reduce the possibility of such confusion.68 We decline to adopt the
term proposed by the State of Alaska because we conclude that doing so could create more confusion than
it might resolve, given the varying legal status of the other types of land included within the defined term
Tribal lands. We clarify, however, that the use of the term Tribal lands in this context was not intended to
alter the legal status of such lands for purposes unrelated to high-cost support.
27.
In the USF/ICC Transformation Order, the Commission for the first time established
ubiquitous mobile service as a universal service goal. To meet this goal, the Commission established a
new support mechanism for mobile competitive ETCs within the CAF—the Mobility Fund—and
provided for a five-year transition away from the support mechanism under which such carriers
previously received support.69 For most competitive ETCs, that five-year period begins on July 1, 2012.70
However, for competitive ETCs serving remote areas in Alaska, the Commission delayed the beginning
of the five-year transition period by two years and further provided that any phase-down of support would
only commence following implementation of Mobility Fund Phase II, including its Tribal component.71
During that two-year period, the Commission established an interim cap for remote parts of Alaska,
modeled on the state-by-state interim cap that was established in the 2008 Interim Cap Order.72

A.

GCI’s Petition for Reconsideration

28.
GCI requests that the Commission reconsider several aspects of how the USF/ICC
Transformation Order rationalizes support for competitive ETCs serving remote parts of Alaska. GCI


66 See Reply Comments of the State of Alaska, Department of Administration, WC Docket No. 10-90 et al. (filed
Feb. 17, 2012) (State of Alaska Reply Comments).
67 The Order defined “Tribal lands,” for the purposes of high-cost support, to include “any federally recognized
Indian tribe’s reservation, pueblo or colony, including former reservations in Oklahoma, Alaska Native regions
established pursuant to the Alaska Native Claims Settlements [sic] Act (85 Stat. 688) and Indian Allotments, see
§ 54.400(e), as well as Hawaiian Home Lands – areas held in trust for native Hawaiians by the state of Hawaii,
pursuant to the Hawaiian Homes Commission Act, 1920, July 9, 1921, 42 Stat. 108, et seq., as amended.” 47 C.F.R.
§ 54.5. See also USF/ICC Transformation Order, 26 FCC Rcd at 17711, para. 126 n.197. We take this opportunity
to correct the misspelling of the Alaska Native Claims Settlement Act in our definition of “Tribal lands.”
68 See State of Alaska Reply Comments at 2-3.
69 Within the CAF, the Commission established both a Phase I and a Phase II of the Mobility Fund, as well as a
Tribal Mobility Fund. See USF/ICC Transformation Order, 26 FCC Rcd at 17674-75, para. 28.
70 See id. at 17830-31, para. 513.
71 See id. at 17835-36, para. 529.
72 See id. at 17835-36, para. 529 & n.880; see also High-Cost Universal Service Support et al., WC Docket No. 05-
337 et al., Order, 23 FCC Rcd 8834 (2008) (Interim Cap Order).
11

Federal Communications Commission

FCC 12-52

first asks that we reconsider the decision to transition support away from the identical support rule, under
which competitive ETCs previously received universal service funding, to the Mobility Fund.73 GCI
argues: “Before commencing cuts to Remote Alaska support, the Commission should review the results
of its Mobility Fund and Connect America Fund mechanisms, as well as the impact of capped support, to
determine whether they, in fact, would provide sufficient support for Remote Alaska.”74
29.
While we appreciate the significant challenges that carriers serving Alaska face, we are
not persuaded that we should reconsider the transition from the prior identical support system to the
Mobility Fund for competitive ETCs serving remote portions of Alaska. In the Order, the Commission
concluded that “[i]t is clear that the current system [of support for competitive ETCs] does not efficiently
serve the nation.”75 In particular, the Commission noted, the identical support rule, under which support
for competitive ETCs had long been provided, “d[id] not provide appropriate levels of support for the
efficient deployment of mobile services in areas that do not support a private business case for mobile
voice and broadband.”76 To the contrary, “support levels generated by the identical support rule bear no
relation to the efficient cost of providing mobile voice service in a particular geography,” and, as a
consequence, support in some areas was excessive while support in other areas may have been set too
low.77 And so in some areas, multiple competitive ETCs, each with its own facilities, might receive
support, while in others, no carrier would seek to serve the area.78 For these and the many other reasons
set out in the Order, the Commission eliminated the identical support rule.
30.
We see no persuasive reason why we should maintain the identical support rule in Alaska
given our conclusion that it is an inefficient, poorly targeted mechanism for distributing support to
competitive ETCs. Instead, we remain committed to transitioning to an efficient, incentive-based
mechanism for ongoing support of mobile service. Because the Commission provided that support for
carriers serving remote areas of Alaska would not begin to be phased down until after Mobility Fund
Phase II, including its Tribal component, was implemented, support levels for these areas in Alaska will
generally remain unchanged until the replacement mechanism is in place.79 We will monitor the
performance of all of the new support mechanisms, and, if circumstances warrant, we will adjust them as
appropriate. But we are not persuaded now that they will fail to provide appropriate and sufficient
support, and we therefore decline to modify the rules as requested.
31.
In the alternative, GCI proposes that we make two changes to the interim cap for remote
areas of Alaska and revise the baseline amount from which carriers will be phased down after the two-
year delay. First, GCI asks that we modify the scope of the interim cap adopted for remote areas of
Alaska in the USF/ICC Transformation Order. As adopted, the delayed phase-down applies only to
carriers that previously had elected to take advantage of the Covered Locations exception to the 2008
interim cap, which permitted carriers to receive uncapped support (i.e., to be exempt from the cap) if they


73 General Communication Petition for Reconsideration, WC Docket No. 10-90 et al., at 4 (filed Dec. 23, 2011)
(GCI Petition).
74 Id. at 6.
75 USF/ICC Transformation Order, 26 FCC Rcd at 17772, para. 296.
76 Id. at 17827, para. 502.
77 Id. at 17828, para. 504-05.
78 See id. at 17828, para. 505.
79 See id. at 17835-36, para. 529 & n.879. Although competitive ETCs serving remote areas of Alaska are generally
subject to a delayed phase down of support, they are not exempt from the $3000 annual per line cap the Commission
adopted. See id. at 17836, para. 529 n.879.
12

Federal Communications Commission

FCC 12-52

certified that they served Tribal areas (i.e., areas “covered” by the exception).80 GCI requests that we
modify that rule so that all competitive ETCs serving remote Alaska would be included in the cap, and
that the cap be expanded to account for the support such carriers previously received.81
32.
There is only one carrier that serves portions of remote areas of Alaska but did not take
advantage of the Covered Locations exception: the competitive ETC Dobson Communications, which
was acquired by AT&T several years ago. Under the old interim cap, carriers like AT&T that did not
certify that they served Covered Locations received less support per line than carriers that did so certify.
GCI proposes that we include AT&T in the remote Alaska mechanism, but continue to provide AT&T
with the lower support amount per line that it received by virtue of not taking advantage of the Covered
Location exception.82
33.
GCI argues that including AT&T in the delayed phase-down for remote Alaska will
improve incentives for participating carriers to make investments in unserved and underserved areas in
remote Alaska.83 GCI notes that adding AT&T to the remote Alaska mechanism would increase the total
size of the cap for remote Alaska and would reduce each carrier’s relative share of the total, which means
that every time a carrier gains a customer (relative to other carriers), the operation of the cap would result
in more of the incremental support associated with that customer “coming from” other carriers rather than
the carrier itself. In addition, GCI claims that excluding AT&T from the remote Alaska mechanism
would separately reduce AT&T’s incentive to invest in those areas.
34.
We are not persuaded that we should modify the rule as GCI requests. We note that GCI
does not dispute that the cap mechanism provides incentives to make investments in unserved and
underserved areas. Rather, GCI argues that its proposal would enhance those incentives. But, while GCI
may be correct that, theoretically, a smaller pie (and larger relative shares) means less reward (and thus
less incentive) for improving a carrier’s position relative to its competitors, the opposite is true about the
incentives to avoid losing relative position. That is, with a smaller pie (and larger shares), each carrier
has a greater incentive to ensure that it does not lose customers relative to others (and, if others are
gaining customers, to ensure that it gains customers proportionately). The incentive argument thus cuts
both ways, and we do not find it compelling. Moreover, it is unclear how much the purported differences
in incentives, over this time frame, would actually alter carriers’ behavior
35.
Nor are we persuaded that AT&T should be added to the remote Alaska mechanism in
order to preserve AT&T’s incentives to invest. AT&T did not previously take advantage of the Covered
Locations exception to the interim cap, which would have provided it with significantly more support. It
is speculative that including AT&T in the remote Alaska mechanism would have any material effect on
AT&T’s plans for investment in Alaska or its conduct vis-à-vis other competitive ETCs in the state.
Indeed, in this regard, we note that AT&T neither sought reconsideration of this aspect of the Order nor


80 See 47 C.F.R. § 54.307(e)(3)(ii); GCI Petition at 10 & n.20. At a high level, the 2008 interim cap froze high-cost
support for competitive ETCs on a state-by-state basis. Support was calculated by first determining what support
each carrier would be eligible for in the absence of the cap under the identical support rule, and, if total support for
competitive ETCs in a state exceeded the cap amount, all competitive ETCs would have their support reduced by a
factor necessary to bring total support down to the capped level. A carrier that served a Tribal area could file a
certification to that effect, and its support in areas subject to its certification would not be subject to the cap—this
provision was known as the Covered Locations exception. For the purposes of the 2008 interim cap, all of Alaska
was considered Tribal and thus subject to the Covered Locations exception; however, carriers in Alaska still had to
opt in to the Covered Locations exception. See Interim Cap Order, 23 FCC Rcd 8834.
81 See GCI Petition at 9-14.
82 See id. at 12-13.
83 Id. at 10-11.
13

Federal Communications Commission

FCC 12-52

responded to GCI’s proposal. Finally, we note that including AT&T in the cap mechanism would
increase the total cost of the cap. We are not inclined to modify the mechanism to make it more costly
when the benefit to doing so is as speculative as it would be in this case. For these reasons, we decline to
alter the remote Alaska interim cap as GCI requests.84
36.
Second, GCI asks that we reconsider the calculation of the remote Alaska interim cap
amount. As adopted, the rules provide that the interim cap shall be equal to the sum of support carriers
subject to the delayed phase-down received in 2011.85 GCI suggests that, rather than using the amount of
support disbursed in 2011 to set the cap, we should set it by multiplying the number of lines such carriers
report on March 30, 2012 (reflecting lines served as of September 30, 2011) by the per-line support
amounts in effect on December 31, 2011.86 GCI asserts that doing so would be more consistent with the
purpose of the delayed phase-down mechanism, “to ‘preserve newly initiated services and facilitate
additional investment in still unserved and underserved areas.’”87 GCI argues that “[a]s written, the rules
do not preserve funding for newly initiated services.”88 As GCI explains, there is normally a delay of 10-
12 months between the time service is provided and the time support is received for that service—i.e., a
delay of 10-12 months between the time a carrier adds a line and when the carrier gets support for that
line.89 Accordingly, GCI asserts, “the rules as written in effect cap Remote Alaska funding based on
deployments as they existed more than a year ago, and fail to fully reflect the new deployments to 35
Remote Alaska villages that occurred in the spring and summer of 2010 and 2011.”90
37.
We are not persuaded that we should alter the interim cap baseline as GCI suggests. The
criticisms of the identical support rule—that, among other things, there was no reason to believe it set
support amounts at the right level—apply to its operation in Alaska, as elsewhere.91 In the USF/ICC
Transformation Order
, the Commission did not conclude that, in order to preserve newly initiated
services and facilitate investment, it was necessary to permit support levels to continue to rise to what
carriers might have anticipated they might have received in the future under that rule. Rather, the
Commission concluded that the appropriate means to preserve newly initiated services and to facilitate
additional investment would be to provide a “slower transition path” from current support levels—to
ensure that the aggregate amount of support to remote areas of Alaska was not reduced prematurely.92


84 GCI subsequently offered an alternative proposal to mitigate the budget impact of including AT&T in the delayed
phase-down mechanism. See Letter from John Nakahata to Marlene H. Dortch, Secretary, FCC, WC Docket No.
10-90 et al. (filed Mar. 7, 2012). Specifically, GCI proposed that AT&T’s support be calculated under the delayed
phase-down in the manner GCI previously proposed, and then reduced further by the reduction factor applicable to
other carriers (i.e., 20 percent in the first year, 40 percent in the second year, and so on). See id., attachment at 9.
We decline to adopt this revised proposal as well. We note that it is hard to predict precisely what effect this change
would have on the total cost of the delayed phase-down compared to our existing rules—it could increase the total
cost if other carriers like GCI were to “take away” some of AT&T’s support through the operation of the cap
mechanism, albeit by less than including AT&T without phasing down AT&T’s support. It would also add
significant complexity to the calculation of support amounts. Moreover, nothing in GCI’s revised proposal alters
our assessment of GCI’s arguments about the incentives carriers would face under its proposal.
85 47 C.F.R. § 54.307(e)(3)(v)(A).
86 See GCI Petition at 7. GCI proposes that this amount be adjusted appropriately for carriers that did not certify that
they served covered locations under the 2008 Interim Cap Order. See id.
87 GCI Petition at 8 (quoting USF/ICC Transformation Order, 26 FCC Rcd at 17835, para. 529).
88 GCI Petition at 8.
89 Id. at 9.
90 Id.
91 See supra para. 29.
92 See USF/ICC Transformation Order, 26 FCC Rcd at 17835-36, para. 529.
14

Federal Communications Commission

FCC 12-52

The Commission’s chosen approach, it explained, “balance[d] the need to control the growth in support to
competitive ETCs in uncapped areas and the need to provide a more gradual transition for the very remote
and very high-cost areas in Alaska to reflect the special circumstances carriers and consumers face in
those communities.”93 GCI has not provided any evidence that would call the Commission’s conclusions
on these points into question.94 Accordingly, we decline to alter the rule in the manner proposed.
38.
Finally, GCI requests that we revise the rules relating to the calculation of each carrier’s
baseline of support—the amount, at the end of the two-year delay, from which each carrier will phase
down over the subsequent five years. As adopted, the rules provide that the baseline amount from which
carriers will be phased down, for carriers subject to the delayed transition for remote Alaska, should be
equal to the amount each such carrier received in 2013.95 GCI proposes that we modify this baseline in
two respects. First, GCI proposes that the baseline not be set “until the delayed phase-down for Remote
Alaska actually begins, i.e., the later of July 1, 2014, or the implementation of Mobility Fund Phase II,
including its Tribal component.”96 Second, GCI proposes, each carrier’s baseline should be set “based on
the actual line count during the last complete month prior to the commencement of the support phase-
down, i.e., the latest possible line count would be used to calculate each per-study-area support
amount.”97 GCI argues that making these modifications to the rules would improve the incentives for
carriers subject to the delayed phase-down to continue to invest throughout the delay period.
39.
As GCI observes, the rule as adopted provides no incentive to deploy new services or add
new lines after the fourth quarter of 2012 (while beginning to mute incentives to do so even earlier),
because new lines added at that point will not be considered as part of the baseline support amount from
which each carrier will be phased down.98 On the other hand, by setting each carrier’s phase-down
baseline using that carrier’s actual line count from the month before the phase down begins, as GCI
proposes, carriers’ incentives would be maintained until approximately mid-2014, when the phase-down
for such carriers is expected to begin. Yet adopting these proposals will have no budgetary impact,
because total support distributed to competitive ETCs serving remote Alaska is limited by the overall cap
amount. That is, the specific methodology used for calculating each carrier’s phase-down baseline
determines only each carrier’s relative share of the total amount of support available under the cap.99
40.
We agree with GCI that its proposed revisions would be an improvement, because they
would enhance the incentives for carriers to compete and to deploy facilities, without, as GCI notes,
impacting the overall budget.100 For these reasons, we adopt GCI’s proposed revisions and revise section
54.307(e) accordingly. Specifically, we alter the rule governing the calculation of support for carriers
serving remote Alaska to provide that, rather than freezing support amounts at the end of 2013, support


93 Id.
94 Of course, there are a host of considerations outside the context of the Commission’s decision in the USF/ICC
Transformation Order
that may impact the extent to which GCI and other carriers invest in the next two years.
95 See 47 C.F.R. § 54.307(e)(1), (3)(iii).
96 GCI Petition at 16.
97 Id.
98 See id. at 15-16.
99 ACS opposes GCI’s request, noting that the rule as adopted provides a “reasonable degree of certainty for all
Alaskan carriers to make prudent investment decisions during the phase-down period, whether it lasts for two years
or longer.” Opposition of Alaska Communications Systems Group, Inc., WC Docket No. 10-90 et al., at 6 (filed
Feb. 9, 2012) (ACS Opposition). While we agree with ACS that the existing rules would work reasonably, well, as
we explain in the text, we agree with GCI that its proposal would work better.
100 See GCI Petition at 16.
15

Federal Communications Commission

FCC 12-52

amounts will not be frozen under the delayed phase down mechanism until June 2014 or the last full
month prior to the implementation of Mobility Fund Phase II, whichever is later; we also provide that the
baseline amount itself shall be the annualized monthly support amount the carrier received for June 2014
or the last full month prior to the implementation of Mobility Fund Phase II, whichever is later. As stated
previously, these changes will not affect the budget.101

B.

Alaska Rural Coalition’s Petition

41.
The Alaska Rural Coalition also asks us to reconsider and clarify aspects of the USF/ICC
Transformation Order. While the Alaska Rural Coalition praises the decision to delay the phase-down of
support for competitive ETCs serving remote areas of Alaska,102 it argues that rural incumbent carriers
serving remote Alaska should also be afforded a two-year delay before their own support is reduced.103
The Alaska Rural Coalition states that the Order places “a significant burden on small, rural companies
serving remote areas” and argues that “the same reasons that the Commission articulated in its delay of
the national five year transition period [for competitive ETCs serving remote Alaska] also warrant a more
gradual adjustment of these reforms [affecting incumbent carriers] for the remote areas of Alaska in order
to reflect the special circumstances for these remote, extremely high cost areas.”104
42.
We decline to adopt the Alaska Rural Coalition’s suggestion. We disagree that the
reasons that underlay the Commission’s decision to delay the transition for competitive ETCs serving
remote Alaska apply to incumbent carriers like the Coalition’s members. The Commission adopted the
delayed transition for competitive carriers in order to ensure that support would not be reduced until after
the mechanism that will provide ongoing support targeted at such carriers—the Mobility Fund Phase II,
including its Tribal component—is operational. As explained in the Order, the delayed phase-down
would help “preserve newly initiated services and facilitate additional investments in still unserved and
underserved areas during the national transition to the Mobility Funds.”105 In contrast, support
mechanisms for rate-of-return carriers like the members of the Alaska Rural Coalition already exist.
Moreover, although some rate-of-return carriers will receive less support based on the Commission’s
decision to place reasonable limits on expenses and to phase out mechanisms that were outdated and not
operating as intended, other rate-of-return carriers will see little change in support, and yet others will see
increases in support. Given this, we are not persuaded that a blanket delay of reforms to the existing
mechanisms for incumbent carriers serving remote Alaska would serve the public interest.
43.
The Alaska Rural Coalition also asks that we reconsider and relax certain broadband
requirements that the Commission adopted in this proceeding. The USF/ICC Transformation Order
imposed a general obligation that carriers receiving high-cost universal service support offer broadband
with defined speed, latency, and capacity characteristics.106 The Commission set an initial broadband
speed requirement of at least 4 megabits per second downstream and 1 megabit per second upstream.107
The Commission recognized, however, that these requirements may prove impractical for carriers reliant


101 We also take this opportunity to correct the spelling of the Matanuska Telephone Association in what is currently
section 54.307(e)(3)(i)(C) of our rules and renumber the subparagraphs of section 54.307(e)(3)(i) to correct an error
in the numbering of those provisions.
102 See Alaska Rural Coalition Petition for Reconsideration, WC Docket No. 10-90 et al., at 3-4 (filed Dec. 29,
2011) (Alaska Rural Coalition Petition).
103 Id. at 8.
104 Id.
105 USF/ICC Transformation Order, 26 FCC Rcd at 17835-36, para. 529.
106 See USF/ICC Transformation Order, 26 FCC Rcd at 17696-705, paras. 90-108.
107 See id. at 17697, para. 94.
16

Federal Communications Commission

FCC 12-52

on satellite backhaul facilities and therefore relaxed those obligations for carriers with no access to
terrestrial backhaul, instead allowing 1 megabit per second downstream and 256 kilobit per second
upstream speed requirement with no capacity or latency requirement.108 The Commission stated that the
limited exception would not apply to carriers that do have access to terrestrial backhaul facilities but
object to the cost of that backhaul.109 In addition, the Commission provided rate-of-return carriers like the
Alaska Rural Coalition’s members with flexibility in meeting their buildout obligations, requiring them to
provide broadband meeting the defined service characteristics on reasonable request, rather than
ubiquitously by a date certain.110
44.
The Alaska Rural Coalition asks that we reconsider these requirements in two respects.
First, the Alaska Rural Coalition objects to the requirements imposed on carriers reliant on satellite
backhaul, claiming that it “is not convinced that current satellite offerings can reliably meet” the relaxed
speed requirements for such carriers.111 The Coalition asks that “further consideration . . . be given to the
cost and realistic capacity of the satellites serving Alaska.”112 But the Alaska Rural Coalition provides no
information about satellite capacity limitations. Indeed, the Coalition does not even actually assert that
meeting the relaxed requirements will, in fact, pose a challenge at all. On this record, we are not
convinced that we should modify these requirements.
45.
The Alaska Rural Coalition also asks that we clarify or reconsider the Commission’s
conclusion that a carrier may not take advantage of the relaxed broadband requirements if terrestrial
backhaul is available to the carrier, but the carrier objects to the cost of obtaining it.113 For example, the
Coalition explains, terrestrial backhaul may be newly present in some areas of Alaska, but carriers may
not be able to get access to it at any price, while in other areas, the cost may “far exceed[] the cost of
purchasing satellite backhaul, an already cost-prohibitive solution.”114 The Alaska Rural Coalition further
observes that the buildout requirement applicable to rate-of-return carriers—that they deploy broadband
“on reasonable request”—provides some potential for flexibility, and it asks whether a request should be
deemed unreasonable if the cost of purchasing terrestrial middle mile service to provide broadband
service exceeds the high-cost support available for that line.115 ACS seconds the Coalition’s concern,
arguing that the Commission should clarify that backhaul is not “available” if it cannot be had “at a price
reasonably comparable to prices for backhaul links between urban areas.”116
46.
We appreciate the concerns raised by the Alaska Rural Coalition and ACS that it may not
be cost-effective to serve certain customers due to the high cost of backhaul. Rather than granting a
blanket exemption of the broadband obligations established for rate-of-return companies in the USF/ICC
Transformation Order
, we clarify, as the Alaska Rural Coalition requests, that our current rules provide
sufficient flexibility to take into account any unique circumstances that may impact the ability of rate-of-


108 See id. at 17699-700, para. 101.
109 See id. at 17700, para. 101 n.162.
110 See id. at 17740-41, para. 206. In contrast, price cap carriers receiving support through CAF Phase I or Phase II
are required to meet separate buildout requirements specific to each of those support mechanisms. See id. at 17717-
22, paras. 138-47 (CAF Phase I), 17726-27, paras. 160-63 (CAF Phase II).
111 Alaska Rural Coalition Petition at 11.
112 Id.
113 See id. at 11-14.
114 Id. at 12.
115 See Letter from Shannon Heim to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al. (filed Apr.
16, 2012).
116 ACS Opposition at 5.
17

Federal Communications Commission

FCC 12-52

return companies to extend broadband to their customers, including backhaul costs. As the Coalition
notes, rate-of-return carriers are required to provide service meeting the specified characteristics on
reasonable request, which, the Commission explained in the Order, was an obligation similar to the voice
deployment obligation many of those carriers were already subject to.117 This obligation, enforced in the
first instance by the relevant ETC-designating authority (generally the state), permits these entities to take
into account backhaul costs or other unique circumstances that may make it cost-prohibitive to extend
service to particular customers, in Alaska or any other area. We intend to carefully monitor developments
in this regard and will consider making further clarifications or revisions if necessary.
47.
We further conclude that it would be premature to modify the deployment requirements
applicable to price cap carriers like ACS. Phase I of the Connect America Fund is designed to reach a
significant number of relatively low-cost locations for which there is nevertheless no business case for
deployment without support.118 Areas that may be more expensive to deploy broadband to, such as those
served by satellite backhaul, will be addressed in ongoing proceedings to implement CAF Phase II, which
will employ a model to determine the forward-looking cost of providing broadband to a service area on a
granular basis.119 We conclude that ACS’s concerns are more properly considered in the context of the
effort to develop appropriate support levels in CAF Phase II, and we therefore decline, at this time, to
modify our rule relating to backhaul availability.
48.
The Alaska Rural Coalition also requests that we clarify that the new local rate
benchmark, which reduces high-cost support to incumbent carriers that offer very low rates, applies to
competitive ETCs in Alaska, or, if it does not already apply to such carriers, that we extend the rate
benchmark to them.120 The Coalition argues that imposing the rate floor on all carriers receiving high-
cost support is necessary to avoid creating a “significant competitive disadvantage for anyone competing
against” a competitive ETC that is not subject to the rate floor.121
49.
We take this opportunity to clarify that the rate floor does not apply to competitive
ETCs; it applies only to incumbent carriers. To eliminate any potential confusion, we modify section
54.318(c) of our rules accordingly. Further, we decline to extend the rate floor to competitive ETCs.
Imposing a rate floor on competitive ETCs would be administratively complicated and time-consuming.
Most competitive ETCs are mobile wireless carriers, not landline carriers, and because mobile wireless
service is sold in different ways, it is not at all obvious how a rate floor could be quickly implemented for
such carriers.122 We also do not find the Alaska Rural Coalition’s competitive parity argument
compelling in light of the changes that have already been made to support for competitive ETCs, both
wireline and wireless. We note, for example, that existing rules provide that support for competitive
ETCs will be phased down in most areas of the Nation. Even in remote areas of Alaska, funding under
the identical support rule is being phased out, albeit on a delayed basis. Moreover, even in the near term,
for carriers serving remote areas of Alaska competitive ETC per-line support will decrease as total lines


117 See USF/ICC Transformation Order, 26 FCC Rcd at 17740-41, para. 206.
118 See Second Reconsideration Order, para. 20.
119 See id.
120 See Alaska Rural Coalition Petition at 10. See also USF/ICC Transformation Order, 26 FCC Rcd at 17749-56,
paras. 234-47; 47 C.F.R. § 54.318.
121 Alaska Rural Coalition Petition at 9.
122 Even setting aside the fact that wireless service is mobile service, wireless carriers do not, for example, typically
offer a “local residential rate” as incumbent wireline providers do. Cf. USF/ICC Transformation Order, 26 FCC
Rcd at 17750, para. 236. See also Letter from Shannon M. Heim to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 10-90 et al., at 3 (filed Apr. 16, 2012) (acknowledging the complexity of applying the rate floor to
mobile providers and suggesting that the Commission focus on wireline competitive ETCs).
18

Federal Communications Commission

FCC 12-52

increase as a result of the USF/ICC Transformation Order’s cap on such support. The Alaska Rural
Coalition focuses on one rule in isolation, in effect arguing that the Commission’s reform is not
competitively neutral. However, as we discussed in the USF/ICC Transformation Order, “[t]he
competitive neutrality principle does not require all competitors to be treated alike, but ‘only prohibits the
Commission from treating competitors differently in ‘unfair’ ways.’”123 Given the other rule changes that
competitive ETCs face that rate-of-return carriers do not, the rule as applied to incumbents is not
unfair.124 For these reasons, we decline to alter the rules as requested by the Alaska Rural Coalition.

IV.

INTERCARRIER COMPENSATION

A.

Background

50.
In the USF/ICC Transformation Order, we adopted a uniform national bill-and-keep
framework as the ultimate intercarrier compensation end state for all telecommunications traffic
exchanged with a LEC, and established a gradual, measured transition that focused initially on reducing
certain terminating switched access rates.125 The Commission also adopted a transitional recovery
mechanism to mitigate the effect of reduced intercarrier revenues on carriers and to facilitate continued
investment in broadband infrastructure, while providing greater certainty and predictability going forward
than the status quo ante.126 The Commission also noted that predictable recovery during the intercarrier
compensation reform transition is “particularly important” but that “[p]roviding this stability does not
require revenue neutrality.”127 In determining how the transitional recovery should be funded, the
Commission concluded that “it is appropriate to first look to customers paying lower rates for some
limited, reasonable recovery, and adopt[ed] a number of safeguards to ensure that rates remain affordable
and that consumers are not required to contribute an inequitable share of lost intercarrier revenues.”128
51.
As part of the transitional recovery mechanism, the Commission defined, as “Eligible
Recovery,” the amount of intercarrier compensation revenue reductions that incumbent LECs would be
eligible to recover.129 The Commission defined Eligible Recovery differently for price cap incumbent
LECs than for rate-of-return incumbent LECs.130 For price cap carriers, Eligible Recovery equals 90


123 See USF/ICC Transformation Order, 26 FCC Rcd at 17731-32, para. 176.
124 See also Letter from John Nakahata to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al. (filed
Apr. 23, 2012).
125 Id., at 17676-77, para. 35.
126 Id. at 17677, para. 36. In adopting the recovery mechanism, the Commission explained that it did so in large part
“to provide predictability to incumbent carriers that had been receiving implicit ICC subsidies [and] to mitigate
marketplace disruption during the reform transition. . . .” Id. at 17962, para. 858.
127 Id.
128 Id. at 17988, para. 906.
129 Id. at 17956, para. 847. Several petitioners requested reconsideration of issues related to the calculation of
Eligible Recovery. See, e.g., Rural Associations Petition at 29-33, USTelecom Petition at 30-34. In this Order on
Reconsideration, we address two specific proposals relating to the calculation of Eligible Recovery. To the
extent that issues relating to reconsideration of this calculation methodology more broadly, including alternative
proposals, are not specifically addressed herein, those issues remain pending before the Commission.
130 To provide rate-of-return carriers predictable recovery during the transition to bill-and-keep, and to provide
incentives for reducing costs and increasing productivity, the Commission determined that rate-of-return carriers’
Eligible Recovery for interstate switched access costs would be based upon their interstate revenue requirement, and
would include true-ups to adjust recovery should demand decline faster or slower than anticipated. USF/ICC
Transformation Order
, 26 FCC Rcd at 17977-987, paras. 891-904. Price cap carriers do not have an interstate
revenue requirement, and already bore the risk of declining demand for interstate switched access. Therefore, their
Eligible Recovery for interstate switched access for those carriers was based upon switched access revenues, and
there is no true-up to reflect declining minutes of use (“MOUs”). Id. at 17971-977, paras. 879-890.
19

Federal Communications Commission

FCC 12-52

percent of relevant Fiscal Year 2011 (“FY2011” defined as October 1, 2010 through September 30, 2011)
revenues, reduced five or ten percent annually beginning in 2012.131 For rate-of-return carriers, Eligible
Recovery equals 100% of the carrier’s 2011 interstate switched access revenue requirement, plus FY2011
intrastate switched access revenues and FY2011 net reciprocal compensation revenues,132 reduced by five
percent annually.133

B.

Definition of Fiscal Year for Calculation of Eligible Recovery

52.
Background. In the USF/ICC Transformation Order, we defined the period for which
revenues would be used to calculate Eligible Recovery as the fiscal year October 1, 2010 through
September 30, 2011 (FY2011).134 In their petition, the Rural Associations request, among other things,
that the Commission change the fiscal year definition from October 1, 2010 through September 30, 2011
to July 1, 2010 through June 30, 2011 for rate-of-return carriers, asserting that such a change would
“assure that base period data are fully and fairly representative of prior-year operations and provide a
greater degree of certainty and closure to all parties.”135
53.
Discussion. We deny the Rural Associations’ request. The Rural Associations provide
no explanation of why using the period July 1, 2010 through June 30, 2011 is more “fully and fairly
representative of prior-year operations.” Given the significant and ongoing decline of minutes of use
across the industry, with minutes-of-use declining at rates in excess of 10 percent per year,136 the Rural
Associations’ proposed time period would, by basing recovery on an earlier time period with
correspondingly greater demand, likely permit greater recovery from consumers, through the Access
Recovery Charge (ARC) and CAF, than would use of the Fiscal Year definition adopted in the USF/ICC
Transformation Order
.137 Additionally, the Rural Associations have not quantified the impact of their
proposed change on consumers or the budget for the CAF. We are likewise unpersuaded that using an
earlier period would provide greater “certainty and closure” as the Rural Associations assert. Carriers
currently are preparing their filings based upon the dates in the existing rules and changing them at this
time would potentially disrupt that process. Accordingly, we decline to reconsider the fiscal year time
period to be used for determining Eligible Recovery.

C.

Use of Revenue Forecast

54.
Background. In the USF/ICC Transformation Order, we determined that the baseline for


131 USF/ICC Transformation Order, 26 FCC Rcd at 17971, para. 879.
132 Id. at 17977, para. 891.
133 Id. at 17979, para. 894.
134 Id. at 17957, para. 851, n.1639.
135 Rural Associations Petition at pp. 32-33. As noted above, the Order provides that rate-of-return carriers will use
their 2011 interstate revenue requirement in the calculation of Eligible Recovery of interstate charges reduced or
capped as part of the Order. The Fiscal Year for rate-of-return carriers is used solely for the calculation of intrastate
revenues and net reciprocal compensation reduced as part of the Order. Eligible Recovery for price cap carriers is
based entirely on revenues and the Fiscal Year defines the timing of such revenues. The petition for reconsideration,
however, is limited to requesting that we reconsider the definition for rate of return carriers. USF/ICC
Transformation Order
, 26 FCC Rcd at 17971-984, paras. 879-899.
136 See, e.g., USF/ICC Transformation Order, 26 FCC Rcd at 17975, para. 886.
137 Changing the time period used for calculating recovery for rate-of-return carriers, as the Rural Associations
proposed, would affect only the intrastate and net reciprocal compensation components of a rate-of-return carrier’s
base period revenue because these components are based on certain revenues which, as described above, are
decreasing steadily over time as minutes-of-use decrease. 47 C.F.R. § 57.917(c)(ii). Rate-of-return carrier’s
interstate base period revenue would not be affected because this component is calculated using a carrier’s 2011
revenue requirement, rather than actual demand during a specified time period. 47 C.F.R. § 57.917(d).
20

Federal Communications Commission

FCC 12-52

determining a rate-of-return carrier’s Eligible Recovery would be based, in part, on its 2011 interstate
switched access revenue requirement, noting that average schedule carriers would use projected
settlements associated with 2011 annual interstate switched access tariff filings.138 In their petition, the
Rural Associations ask that the Commission reconsider the use of tariff forecasts for calculating the
baseline for rate-of-return carriers, and argue that the Commission should instead “rely on each study
area’s actual 2011 interstate revenue requirements.”139 The Rural Associations petition claims that
“[w]hile NECA’s overall tariff forecasts are reasonably accurate, there are great variations at the study
area level,” and that “actual revenue requirements will … be far more accurate and fair in establishing
individual company interstate baseline amounts.”140
55.
Discussion. The Rural Associations fail to demonstrate that the use of each study area’s
actual 2011 interstate revenue requirements would produce substantially more accurate baseline amounts.
We believe that using projected settlements associated with 2011 annual interstate switched access tariff
filings—filings which were deemed lawful, which established the charges paid by consumers, and which
are based on historical costs141—sufficiently protects the interests of such carriers.
56.
Additionally, making carriers’ actual 2011 interstate revenue requirement the basis of
their recovery would create opportunity and incentive for carriers to manipulate their cost studies to
increase their recovery.142 The actual interstate revenue requirements that the Rural Associations suggest
we use had not been filed at the time the Order was adopted. Consequently, in preparing cost studies,
carriers could adopt study procedures designed to include costs associated with one-time events,
extraordinary depreciation, etc. that could improperly increase a carrier’s Rate-of-Return Baseline—and
thus its Eligible Recovery—for years to come. The Rural Associations cite “review and verification by
independent auditors, NECA review procedures, state regulators and other entities” as sufficient to allay
concerns that “cost studies might be manipulated….”143 Given the very significant incentives that the
rural carriers’ proposed approach would create to increase costs—allowing them to in effect “lock in”
higher recovery each year for at least the next several years based upon a single cost study—we are not
persuaded that the processes the Rural Associations identify provide sufficiently robust protections
compared to using tariff forecasts filed before the USF/ICC Transformation Order was adopted.144
Moreover, we note that any carrier may petition for a Total Cost and Earnings Review if it believes the
allowed recovery is insufficient.145 The request for reconsideration on this matter is therefore denied.


138 See USF/ICC Transformation Order, 26 FCC Rcd at 17978-79, para. 892; 47 C.F.R. 51.917(b).
139 Rural Associations Petition at 31.
140 Id. at 32.
141 The Commission favors incentive regulation over recovery based on historical costs and our reference to
historical costs in this context should not be construed as a general endorsement of the use of historical costs for
regulatory purposes. See e.g., USF/ICC Transformation Order, 26 FCC Rcd at 17983-87, paras. 900-05. We note,
however, that any bias from using historical costs in this context generally would be to the benefit of the filing
carriers. Cf id. at 17983-86, paras. 900-903 (“[A]bsent incentives for efficiency, determining recovery based on the
historical approach to these carriers’ rate regulation could cause the Connect America Fund to grow significantly
and without constraint.”)
142 Carriers’ tariff filings submitted prior to the release of the USF/ICC Transformation Order were used to inform
our assessment of the impact of our reforms on carriers, consumers and the CAF. Shifting to a different approach
would have uncertain effects, and could increase the burden placed on consumers and the CAF. See USF/ICC
Transformation Order
, 26 FCC Rcd at 17962-63, paras. 858 – 859.
143 Rural Association Petition at 32, n.82.
144 In particular, we note that at the time the relevant documents were filed the carriers had every incentive to
maximize their costs but did not have knowledge of how USF/ICC Transformation Order would provide for
recovery.
145 See USF/ICC Transformation Order, 26 FCC Rcd at 17996-8002, paras. 924 – 932.
21

Federal Communications Commission

FCC 12-52

V.

PROCEDURAL MATTERS

A.

Paperwork Reduction Act

57.
This Third Order on Reconsideration contains new information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law No. 104-13. It has been or 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 information
collection requirements contained in this proceeding.

B.

Final Regulatory Flexibility Act Certification

58.
The Regulatory Flexibility Act (RFA)146 requires that agencies prepare a regulatory
flexibility analysis for notice-and-comment rulemaking proceedings, unless the agency certifies that “the
rule will not have a significant economic impact on a substantial number of small entities.”147 The RFA
generally defines “small entity” as having the same meaning as the terms “small business,” “small
organization,” and “small governmental jurisdiction.”148 In addition, the term “small business” has the
same meaning as the term “small business concern” under the Small Business Act.149 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).150
59.
We hereby certify that the rule revisions in this Third Order on Reconsideration will not
have a significant economic impact on a substantial number of small entities. This Order adopts several
revisions to our rules. First, we modify certain of our reporting requirements. Second, we change the
sampling date for reporting end user rates. Third, we create a mid-year rate filing update that is voluntary
for carriers that increase rates and mandatory for carriers that reduce rates and that are otherwise subject
to the annual rate filing requirement. Fourth, we alter our rules so that the capped support mechanism for
competitive Eligible Telecommunications Carriers serving remote areas of Alaska will continue until the
phase down of support begins, and we set each carrier’s baseline amount for the phase down period as the
carrier’s support amount for the last full month prior to the beginning of the phase down. We conclude
that these minor revisions, though they may possibly have some impact on some carriers, are not likely to
have a significant economic impact on a substantial number of small entities. The Commission will send
a copy of this Order, including this certification, to the Chief Counsel for Advocacy of the Small Business
Administration.151 In addition, the Order (or a summary thereof) and certification will be published in the
Federal Register.152


146 See 5 U.S.C. § 601 et seq. The RFA has been amended by the Small Business Regulatory Enforcement Fairness
Act of 1996, Pub. L. No. 104-121, Title II, 110 Stat. 857.
147 5 U.S.C. § 605(b).
148 5 U.S.C. § 601(6).
149 5 U.S.C. § 601(3) (incorporating by reference the definition of “small business concern” in Small Business Act,
15 U.S.C. S § 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.”
150 Small Business Act, § 15 U.S.C. S 632.
151 Id.
152 Id.
22

Federal Communications Commission

FCC 12-52

C.

Congressional Review Act

60.
The Commission will send a copy of this Order to Congress and the Government
Accountability Office pursuant to the Congressional Review Act.153

VI.

ORDERING CLAUSES

61.
Accordingly, IT IS ORDERED, pursuant to the authority contained in sections 1, 2, 4(i),
201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, and 403 of the Communications Act of 1934, as
amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. §§ 151, 152, 154(i), 201-
206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, 1302, and sections 1.1 and 1.429 of the
Commission’s rules, 47 C.F.R. §§ 1.1, 1.429, that this Third Order on Reconsideration IS ADOPTED,
effective thirty (30) days after publication of the text or summary thereof in the Federal Register, except
for those rules and requirements involving Paperwork Reduction Act burdens, which shall become
effective immediately upon announcement in the Federal Register of OMB approval.
62.
IT IS FURTHER ORDERED that Part 54 of the Commission’s rules, 47 C.F.R. Part 54,
is AMENDED as set forth in the Appendix A, and such rule amendment shall be effective 30 days after
the date of publication of the rule amendment in the Federal Register, except for those rules and
requirements involving Paperwork Reduction Act burdens, which shall become effective immediately
upon announcement in the Federal Register of OMB approval.
63.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of Alaska Rural Coalition IS GRANTED IN
PART to the extent described herein, and IS DENIED IN PART to the extent described herein.
64.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of United States Telecom Association IS
GRANTED IN PART to the extent described herein, and IS DENIED IN PART to the extent described
herein.
65.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of Rock Hill Telephone Company d/b/a
Comporium, Lancaster Telephone Company d/b/a Comporium, Fort Mill Telephone Company d/b/a
Comporium, PBT Telecom, Inc. d/b/a Comporium, and Citizens Telephone Company d/b/a Comporium
IS GRANTED IN PART to the extent described herein, and IS DENIED IN PART to the extent described
herein.
66.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section and 1.429 of the
Commission’s rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of National Exchange Carrier
Association, Inc., Organization for the Promotion and Advancement of Small Telecommunications
Companies, and Western Telecommunications Alliance IS GRANTED IN PART to the extent described
herein, and IS DENIED IN PART to the extent described herein.
67.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the January 23, 2012 Joint Petition for Clarification of the Independent


153 See 5 U.S.C. 801(a)(1)(A).
23

Federal Communications Commission

FCC 12-52

Telephone and Telecommunications Alliance, National Exchange Carrier Association, National
Telecommunications Cooperative Association, Organization for the Promotion and Advancement of
Small Telecommunications Companies, and Western Telecommunications Alliance IS GRANTED.
68.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of
the Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of Accipiter Communications Inc. IS DENIED
IN PART.
69. IT IS FURTHER ORDERED that, pursuant to the authority contained in section 405 of the
Communications Act of 1934, as amended, 47 U.S.C. § 405, and section 1.429 of the Commission’s
rules, 47 C.F.R. § 1.429, the Petition for Reconsideration of General Communication, Inc., is GRANTED
to the extent provided herein and DENIED to the extent provided herein.
70.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 1.3 of
the Commission’s rules, 47 C.F.R. § 1.3, the Petition for Waiver of Crocket Telephone Company Inc.,
Peoples Telephone Company, and West Tennessee Telephone Company, Inc., is DISMISSED.
71.
IT IS FURTHER ORDERED that, pursuant to the authority contained in section 1.3 of
the Commission’s rules, 47 C.F.R. § 1.3, the Petition for Waiver of Shoreham Telephone Company is
DISMISSED.
72.
IT IS FURTHER ORDERED that the Commission SHALL SEND a copy of this Order to
Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5
U.S.C. § 801(a)(1)(A).
73.
IT IS FURTHER ORDERED, that the Commission’s Consumer and Governmental
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Order, including the Final
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business
Administration.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
24

Federal Communications Commission

FCC 12-52

APPENDIX

Final Rules

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part
54 to read as follows:

PART 54—UNIVERSAL SERVICE

1.
The authority citation for part 54 continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, 219, 220, 254, 303(r), 403, and 1302 unless otherwise
noted.

Subpart D—Universal Service Support for High Cost Areas

2.
Amend § 54.5 by revising the definition of “Tribal lands” to read as follows:
* * * * *
Tribal lands. For the purposes of high-cost support, “Tribal lands” include any federally recognized
Indian tribe’s reservation, pueblo or colony, including former reservations in Oklahoma, Alaska Native
regions established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) and Indian
Allotments, see § 54.400(e), as well as Hawaiian Home Lands – areas held in trust for native Hawaiians
by the state of Hawaii, pursuant to the Hawaiian Homes Commission Act, 1920, July 9, 1921, 42 Stat
108, et seq., as amended.
* * * * *
3.
Amend § 54.307 by revising paragraph (e) to read as follows:
* * * * *
(e) * * *
(1) * * *
(2) * * *
(3) * * *
(i) * * *
(A) The ACS-Anchorage incumbent study area;
(B) The ACS-Juneau incumbent study area;
(C) The fairbankszone1 disaggregation zone in the ACS-Fairbanks incumbent study area; and
(D) The Chugiak 1 and 2 and Eagle River 1 and 2 disaggregation zones of the Matanuska
Telephone Association incumbent study area.
(ii) * * *
25

Federal Communications Commission

FCC 12-52

(iii) Baseline for Delayed Phase Down. For purpose of the delayed phase down for remote areas
in Alaska, the baseline amount for each competitive eligible telecommunications carrier subject to the
delayed phase down shall be the annualized monthly support amount received for June 2014 or the last
full month prior to the implementation of Mobility Fund Phase II, whichever is later.
(iv) * * *
(A) From July 1, 2014, to June 30, 2015, each competitive eligible telecommunications
carrier shall receive 80 percent of its monthly baseline support amount each month.
(B) From July 1, 2015, to June 30, 2016, each competitive eligible telecommunications
carrier shall receive 60 percent of its monthly baseline support amount each month.
(C) From July 1, 2016, to June 30, 2017, each competitive eligible telecommunications
carrier shall receive 40 percent of its monthly baseline support amount each month.
(D) From July 1, 2017, to June 30, 2018, each competitive eligible telecommunications
carrier shall receive 20 percent of its monthly baseline support amount each month.
(E) Beginning July 1, 2018, no competitive eligible telecommunications carrier serving
remote areas in Alaska shall receive universal service support pursuant to this section.
(v) Interim Support for Remote Areas in Alaska. From January 1, 2012, until June 30, 2014 or
the last full month prior to the implementation of Mobility Fund Phase II, whichever is later, competitive
eligible telecommunications carriers subject to the delayed phase down for remote areas in Alaska shall
continue to receive the support, as calculated by the Administrator, that each competitive
telecommunications carrier would have received under the frozen per-line support amount as of
December 31, 2011 capped at $3,000 per year, provided that the total amount of support for all such
competitive eligible telecommunications carriers shall be capped pursuant to subparagraph (A).
(A) * * *
(B) * * *
(4) * * *
(5) Implementation of Mobility Fund Phase II Required. In the event that the implementation of
Mobility Fund Phase II has not occurred by June 30, 2014, competitive eligible telecommunications
carriers will continue to receive support at the level described in paragraph (e)(2)(iv) of this section until
Mobility Fund Phase II is implemented. In the event that Mobility Fund Phase II for Tribal lands is not
implemented by June 30, 2014, competitive eligible telecommunications carriers serving Tribal lands
shall continue to receive support at the level described in paragraph (e)(2)(iii) of this section until
Mobility Fund Phase II for Tribal lands is implemented, except that competitive eligible
telecommunications carriers serving remote areas in Alaska and subject to paragraph (e)(3) of this section
shall continue to receive support at the level described in paragraph (e)(3)(v) of this section.
(6) * * *
(7) Line Count Filings. Competitive eligible telecommunications carriers, except those subject to the
delayed phase down described in paragraph (e)(3) of this section, shall no longer be required to file line
counts beginning January 1, 2012. Competitive eligible telecommunications carriers subject to the
delayed phase down described in paragraph (e)(3) of this section shall no longer be required to file line
counts beginning July 1, 2014, or the date after the first line count filing following the implementation of
Mobility Fund Phase II, whichever is later.
26

Federal Communications Commission

FCC 12-52

4.
Amend § 54.313 to read as follows:
§ 54.313 Annual reporting requirements for high-cost recipients.
(a) * * *
* * * * *
(10) Beginning July 1, 2013. A letter certifying that the pricing of the company’s voice services
is no more than two standard deviations above the applicable national average urban rate for
voice service, as specified in the most recent public notice issued by the Wireline Competition
Bureau and Wireless Telecommunications Bureau; and
(11) Beginning July 1, 2013. The results of network performance tests pursuant to the
methodology and in the format determined by the Wireline Competition Bureau, Wireless
Telecommunications Bureau, and Office of Engineering and Technology and the information and
data required by this paragraphs (a)(1)through (7) of this section separately broken out for both
voice and broadband service.
* * * * *
(c) * * *
(1) By July 1, 2013. A certification that frozen high-cost support the company received in 2012
was used consistent with the goal of achieving universal availability of voice and broadband;
(2) By July 1, 2014. A certification that at least one-third of the frozen-high cost support the
company received in 2013 was used to build and operate broadband-capable networks used to
offer the provider’s own retail broadband service in areas substantially unserved by an
unsubsidized competitor;
(3) By July 1, 2015. A certification that at least two-thirds of the frozen-high cost support the
company received in 2014 was used to build and operate broadband-capable networks used to
offer the provider’s own retail broadband service in areas substantially unserved by an
unsubsidized competitor; and
(4) By July 1, 2016 and in subsequent years. A certification that all frozen-high cost support the
company received in the previous year was used to build and operate broadband-capable
networks used to offer the provider’s own retail broadband service in areas substantially unserved
by an unsubsidized competitor.
(d) In addition to the information and certifications in paragraph (a) of this section, beginning July 1,
2013, price cap carriers receiving high-cost support to offset reductions in access charges shall provide a
certification that the support received pursuant to § 54.304 in the prior calendar year was used to build
and operate broadband-capable networks used to offer provider’s own retail service in areas substantially
unserved by an unsubsidized competitor.
(e) * * *
* * * * *
27

Federal Communications Commission

FCC 12-52

(3) Beginning July 1, 2014. A progress report on the company’s five-year service quality plan
pursuant to § 54.202(a), including the following information:
(f) * * *
(1) Beginning July 1, 2014. A progress report on its five-year service quality plan pursuant to
§54.202(a) that includes the following information:
* * * * *
(h) Additional voice rate data. (1) All incumbent local exchange carrier recipients of high-cost support
must report all of their rates for residential local service for all portions of their service area, as well as
state fees as defined pursuant to § 54.318(e) of this subpart, to the extent the sum of those rates and fees
are below the rate floor as defined in § 54.318 of this subpart, and the number of lines for each rate
specified. Carriers shall report lines and rates in effect as of June 1. (2) In addition to the annual filing,
local exchange carriers may file updates of their rates for residential local service, as well as state fees as
defined pursuant to § 54.318(e) of this subpart, on January 2 of each year. If a local exchange carrier
reduces its rates and the sum of the reduced rates and state fees are below the rate floor as defined in §
54.318 of this subpart, the local exchange carrier shall file such an update. For the update, carriers shall
report lines and rates in effect as of December 1.
* * * * *
(j) Filing deadlines. In order for a recipient of high-cost support to continue to receive support for the
following calendar year, or retain its eligible telecommunications carrier designation, it must submit the
annual reporting information required by this section no later than July 1, 2012, except as otherwise
specified in this section to begin in a subsequent year, and thereafter annually by July 1 of each year.
Eligible telecommunications carriers that file their reports after the July 1 deadline shall receive support
pursuant to the following schedule:
(1) Eligible telecommunication carriers that file no later than October 1 shall receive support for
the second, third and fourth quarters of the subsequent year.
(2) Eligible telecommunication carriers that file no later than January 1 of the subsequent year
shall receive support for the third and fourth quarters of the subsequent year.
(3) Eligible telecommunication carriers that file no later than April 1 of the subsequent year shall
receive support for the fourth quarter of the subsequent year.
* * * * *
5. Amend paragraphs (a), (b), (c), and (f) of § 54.318 and add paragraph (h) to § 54.318 to read as
follows:
§ 54.318 High-cost support; limitations on high-cost support.
(a) Beginning July 1, 2012, each carrier receiving high-cost support in a study area under this subpart will
receive the full amount of high-cost support it otherwise would be entitled to receive if its rates for
residential local service plus state regulated fees as defined in paragraph (e) of this section exceed a local
urban rate floor representing the national average of local urban rates plus state regulated fees under the
schedule specified in paragraph (f) of this section.
28

Federal Communications Commission

FCC 12-52

(b) Carriers whose rates for residential local service plus state regulated fees offered for voice service are
below the specified local urban rate floor under the schedule below plus state regulated fees shall have
high-cost support reduced by an amount equal to the extent to which its rates for residential local service
plus state regulated fees are below the local urban rate floor, multiplied by the number of lines for which
it is receiving support.
(c) This rule will apply only to rate-of-return carriers as defined in § 54.5 and carriers subject to price cap
regulation as that term is defined in § 61.3 of this chapter.
(f) Schedule. High-cost support will be limited where the rate for residential local service plus state
regulated fees are below the local urban rate floor representing the national average of local urban rates
plus state regulated fees under the schedule specified in this paragraph. To the extent end user rates plus
state regulated fees are below local urban rate floors plus state regulated fees, appropriate reductions in
high-cost support will be made by the Universal Service Administrative Company.
***
(h) If, due to changes in local service rates, a local exchange carrier makes an updated rate filing pursuant
to section 54.313(h)(2) of this subpart, the Universal Service Administrative Company will update the
support reduction applied pursuant to paragraphs (b) and (f) of this section.
(i) For the purposes of this section and the reporting of rates pursuant to paragraph 313(h) of this subpart,
rates for residential local service provided pursuant to measured or message rate plans or as part of a
bundle of services should be calculated as follows:
(1) Rates for measured or message service shall be calculated by adding the basic rate for local
service plus the additional charges incurred for measured service, using the mean number of
minutes or message units for all customers subscribing to that rate plan multiplied by the
applicable rate per minute or message unit. The local service rate includes additional charges for
measured service only to the extent that the average number of units used by subscribers to that
rate plan exceeds the number of units that are included in the plan. Where measured service plans
have multiple rates for additional units, such as peak and off-peak rates, the calculation should
reflect the average number of units that subscribers to the rate plan pay at each rate.
(2) For bundled service, the residential local service rate is the local service rate as tariffed, if
applicable, or as itemized on end-user bills. If a carrier neither tariffs nor itemizes the local voice
service rate on bills for bundled services, the local service rate is the rate of a similar stand-alone
local voice service that it offers to consumers in that study area.
6. Amend § 54.1009 by revising paragraph (a) to read as follows:
§ 54.1009

Annual Reports.

(a) A winning bidder authorized to receive Mobility Fund Phase I support shall submit an annual
report no later than July 1 in each year for the five years after it was so authorized. Each annual report
shall include the following, or reference the inclusion of the following in other reports filed with the
Commission for the applicable year:
(1) * * *
(2) * * *
(3) * * *
(4) * * *
29

Federal Communications Commission

FCC 12-52

(5) * * *
(6) * * *
* * * * *
30

Note: We are currently transitioning our documents into web compatible formats for easier reading. We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology. The original version of the document is available as a PDF, Word Document, or as plain text.

close
FCC

You are leaving the FCC website

You are about to leave the FCC website and visit a third-party, non-governmental website that the FCC does not maintain or control. The FCC does not endorse any product or service, and is not responsible for, nor can it guarantee the validity or timeliness of the content on the page you are about to visit. Additionally, the privacy policies of this third-party page may differ from those of the FCC.