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Universal Service Fund- High Cost- Remote Areas Fund Public Notice

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Released: January 17, 2013

PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0500

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C.20554

TTY: 1-888-835-5322

DA 13-69

Released: January 17, 2013

WIRELINE COMPETITION BUREAU SEEKS FURTHER COMMENT ON ISSUES

REGARDING THE DESIGN OF THE REMOTE AREAS FUND

WC Docket No. 10-90

Comment Date: February 19, 2013
Reply Comment Date: March 18, 2013

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION .................................................................................................................................. 1
II. DISCUSSION......................................................................................................................................... 3
A. Areas eligible for Remote Areas Fund support................................................................................ 3
B. Consumer subsidy.......................................................................................................................... 16
1. One-time subsidy..................................................................................................................... 18
2. Monthly retail subsidy............................................................................................................. 22
3. Applying the subsidy to consumer bill .................................................................................... 28
4. Restrictions on extended contracts .......................................................................................... 30
C. Consumer eligibility for the Remote Areas Fund .......................................................................... 32
D. Designing the Remote Areas Fund within a set budget ................................................................. 41
E. Service providers eligible to receive support from the Remote Areas Fund.................................. 43
F. Performance requirements for Remote Areas Fund-supported service providers ......................... 47
G. Accountability and oversight ......................................................................................................... 52
III. PROCEDURAL MATTERS................................................................................................................ 57
A. Initial Regulatory Flexibility Act Analysis .................................................................................... 57
B. Filing Requirements....................................................................................................................... 58

I.

INTRODUCTION

1.
On November 18, 2011, the Commission released the USF/ICC Transformation Order
and FNPRM, which comprehensively reformed and modernized the universal service high-cost and
intercarrier compensation systems.1 The Commission established the Connect America Fund to ensure
that voice and broadband service is available throughout the nation. Within Connect America, the
Commission created a Remote Areas Fund with a budget of “at least $100 million annually” to ensure
that even Americans living in the most remote areas of the nation, where the cost of providing terrestrial


1 See Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order and FNPRM or Order or FNPRM), pets.
for review pending sub nom. In re: FCC 11-161,
No. 11-9900 (10th Cir. filed Dec. 8, 2011).

broadband service is extremely high, can obtain service.2 In the accompanying FNPRM, the Commission
sought comment on various issues relating to the Remote Areas Fund, including how to define the remote
areas eligible for support from the Remote Areas Fund,3 qualifications for participating providers,4 the
public interest obligations of these providers,5 as well as administrative issues.6
2.
Based on the record generated in response to the FNPRM, the Wireline Competition
Bureau (the Bureau) now seeks further detailed comment on issues relating to the implementation of the
Remote Areas Fund as a portable consumer subsidy program, as proposed by the Commission in the
FNPRM and supported by a diverse group of commenters.7 In particular, we seek to further develop the
record on a number of specific issues, including defining the areas where Remote Areas funding will be
available, how to set the consumer subsidy, consumer eligibility, measures to keep the program within a
defined annual budget, service provider participation, performance requirements, and accountability and
oversight.

II.

DISCUSSION

A.

Areas eligible for Remote Areas Fund support

3.
Background. In the USF/ICC Transformation Order and FNPRM, the Commission
budgeted funding for the Remote Areas Fund to address remote areas where the cost of deploying
traditional terrestrial broadband networks is extremely high.8 The Commission stated that it intended “to
use a forward-looking cost model—once finalized—to identify a small number of extremely high-cost
areas in both rate-of-return and price cap areas that should receive support from the Remote Areas
Fund.”9 The Commission also proposed that any eligible areas that do not receive Connect America
Phase II support, either through a state-level commitment or through the subsequent competitive bidding
process, would be eligible for Remote Areas Fund support.10 The Commission proposed as an interim


2 Id. at 17837-38, paras. 533-34. For purposes of this Public Notice, we focus the record on the design of a Remote
Areas Fund targeted to $100 million annually, which should not be viewed as prejudging any Commission action
with regard to the size of the Remote Areas Fund.
3 Id. at 18093-95, paras. 1229-32.
4 Id. at 18095, paras. 1233-37.
5 Id. at 18096-99, paras. 1239-54.
6 Id. at 18099-107, paras. 1255-90.
7 See, e.g., Comments of the Satellite Broadband Providers, WC Docket No. 10-90 et al., at 8-9 (filed Jan. 18, 2012)
(SBP Comments); Comments of the Wireless Internet Service Provider Association, WC Docket No. 10-90 et al., at
9-11 (filed Jan. 18, 2012) (WISPA Comments); Comments of AT&T, WC Docket No. 10-90, at 36 (filed Jan. 18,
2012).
8 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18092, para. 1223. The Commission suggested that
less than one percent of all Americans reside in areas that would be included in the Remote Areas Fund. See also id.
at 17837-38, para. 533.
9 Id. at 18093-94, para. 1229.
10 Id. at 18092, para. 1222. For price cap carriers, Connect America is being implemented in two general phases,
with Phase I implemented in 2012. Id. at 17709, para. 116. In a June 2012 Public Notice discussing the Connect
America Phase II cost model, the Bureau sought comment on how to use the model to “establish both the cost
benchmark above which a high-cost area will be eligible for support and the extremely high-cost threshold, above
which an area will be ineligible for support through [Connect America] Phase II and will instead be eligible for
support through the Remote Areas Fund . . . .” Wireline Competition Bureau Seeks Comment on Model Design and
(continued…)
2

measure to use the National Broadband Map to identify “those census blocks in price cap territories that
are identified by National Broadband Map data as having no wireline or terrestrial wireless broadband
service available, subsidized or unsubsidized,” and provide Remote Areas Fund support to those price cap
areas, until the model becomes available.11
4.
Discussion. We seek to further develop the record on administratively feasible ways to
identify areas (both those served by price cap carriers and by rate-of-return carriers) where consumers
would be eligible for the Remote Areas Fund.
5.
In lieu of using the cost model to define eligible areas, should the Commission use the
National Broadband Map to identify unserved census blocks and provide Remote Areas Fund support to
those census areas until they become served with broadband that meets the Commission’s performance
requirements (i.e., speed, capacity, latency) for non-Remote Areas Fund eligible areas?
6.
If the Commission chooses to utilize the most current version of the National
Broadband Map available at the time it adopts rules for the Remote Areas Fund for the purpose of
determining areas eligible for the Remote Areas Fund, should there be a process to contest the
classification of areas as unserved or served on the map before Remote Areas funding is provided, and
how could that process be implemented in a way to expedite the launch of the Remote Areas Fund? For
instance, should the Commission consider any updates to the National Broadband Map gathered in
conjunction with Connect America Phase I when finalizing areas eligible for the Remote Areas Fund?12
Should the Commission implement a process to allow households to self-report if data indicate that
certain areas are served, if they contend those areas are unserved?13
7.
We ask for further comment on other possible data sources that the Commission could
use to identify unserved areas. Should the Commission take into consideration the unique characteristics
of locations like Alaska or Hawaii in determining areas eligible for Remote Areas funding, and if so,
how? To the extent parties advocate use of information other than a cost model or the National
Broadband Map to identify remote areas, they should provide specific objective metrics that could be
used under such an approach.
8.
Implementing the Remote Areas Fund in Rate-of-Return Areas. We seek to further
develop the record on the suggestion of the National Exchange Carrier Association, Inc. et al. that the
Commission take into account the $250 per-line per month cap when identifying areas that are eligible for
the Remote Areas Fund.14 In lieu of relying on a forward-looking cost model, should the Commission
(Continued from previous page)


Data Inputs for Phase II of the Connect America Fund, WC Docket Nos. 10-90, 05-337, Public Notice, 27 FCC Rcd
6147, 6168, para. 64 (Wireline Comp. Bur. 2012).
11 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18094, para. 1230.
12 We note that the Commission recently sought comment on a challenge process for potential future rounds of
Connect America Phase I and directed the Bureau to seek updates and corrections to the National Broadband Map
for potential future rounds of Connect America Phase I incremental support. Connect America Fund, WC Docket
10-90, Further Notice of Proposed Rulemaking, 27 FCC Rcd 14566, 14570, paras. 15-16 (2012). The Bureau also
recently sought comment on a challenge process for purposes of identifying areas eligible for support under the
forward-looking cost model in Phase II. Wireline Competition Bureau Seeks Comment on Procedures Relating to
Areas Eligible for Funding and Election to Make a Statewide Commitment in Phase II of the Connect America
Fund
, WC Docket 10-90, Public Notice, DA 12-2075 (Wireline Comp. Bur. 2012).
13 SBP Comments at 4-5.
14 See Initial Comments of the National Exchange Carrier Association, Inc., National Telecommunications
Cooperative Association, Organization for the Promotion and Advancement of Small Telecommunications
Companies, and the Western Telecommunications Alliance, WC Docket No. 10-90 et al., at 94 (filed Jan. 18, 2012).
3

identify areas for the Remote Areas Fund based on reported loop cost, such as a rule that all unserved
locations in rate-of-return study areas for which the reported loop cost equals or exceeds the 95th
percentile for average cost be eligible for Remote Areas Fund support?15
9.
Alternatively, should the Commission rely on the National Broadband Map to identify
rate-of-return census blocks that would be eligible for the Remote Areas Fund, as well as price cap census
blocks?
10.
We anticipate that rate-of-return carriers would be eligible, as existing eligible
telecommunications carriers (ETCs), to seek funding from the Remote Areas Fund and potentially could
use alternative technologies, either directly or through resale, to provide broadband to their highest cost
customers. To the extent an existing ETC receives funding from the Remote Areas Fund, should any
adjustment be made to its receipt of support under other high-cost support mechanisms? Should there be
any adjustment to an existing rate-of-return ETC’s support if another ETC were to serve some portion of
the study area through the Remote Areas Fund?16
11.
Would the ability to serve customers through the Remote Areas Fund address concerns
raised by rate-of-return carriers regarding their ability to meet the current rule requiring the deployment of
broadband upon reasonable request?17
12.
To the extent parties argue that a different method for identifying remote areas should
be used in areas served by rate-of-return carriers than in areas served by price cap carriers, they should
present specific alternative proposals of how to identify those areas that would be eligible for such
funding.
13.
Transition Issues. If the Commission were to adopt an approach that relied on the
National Broadband Map in lieu of a cost threshold in the forward-looking cost model to designate census
blocks eligible for Remote Areas funding, the potential eligibility of specific areas would change over
time with the ongoing deployment of broadband-capable infrastructure by existing ETCs receiving
support under other universal service mechanisms, as well as with expansion by unsubsidized
competitors.
14.
How should the rules address the transition where an area that is initially classified as
unserved, and therefore eligible for Remote Areas Fund support, subsequently becomes served by a
terrestrial broadband provider, and how does the answer differ if the Commission chooses to structure the
Remote Areas Fund as a one-time payment, as opposed to a monthly subsidy?
15.
Would it be a cost-effective use of universal service funds to provide a Remote Areas
Fund voucher to a consumer that resides in a location that is expected to receive terrestrial broadband at
some point in the future through Connect America Phase I or Phase II? How would a rule identifying all


15 Based on the 2012 NECA cost data submission, the 95th percentile for average loop cost is $2,915. See National
Exchange Carrier Association, Inc., Universal Service Fund Data: NECA Study Results, 2012 Report (filed Sept. 28,
2012), http://www.fcc.gov/wcb/iatd/neca.html.
16 We note that pursuant to section 214(e)(5) of the Communications Act of 1934, as amended, states determine the
study areas of the rural carriers under their jurisdiction. 47 U.S.C. § 214(e)(5). In order to change a rural carrier’s
study area, the Bureau (pursuant to delegated authority) must reach an agreement with the relevant state
commission, or if the state commission petitions the Commission to change a study area, the change will become
effective if the Bureau does not initiate a proceeding to consider the petition or otherwise act within 90 days of
releasing a public notice seeking comment on the petition. 47 C.F.R. § 54.207(c)-(e). The Commission has sought
comment on modifying or forbearing from this process. See USF/ICC Transformation Order and FNPRM, 26 FCC
Rcd at 18064-66, paras. 1097-1101.
17 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17740-41, para. 206.
4

unserved areas as eligible for the Remote Areas Fund, at least until they become served, affect the
incentives of existing ETCs to deploy terrestrial broadband? How would it impact carriers’ incentives to
participate in other universal service programs, such as Connect America Phase II or the Mobility Fund
Phase II?

B.

Consumer subsidy

16.
Background. In the USF/ICC Transformation Order and FNPRM, the Commission
proposed to structure the Remote Areas Fund as a portable consumer subsidy.18 The consumer subsidy
would provide each consumer with a fixed amount that could be used either to cover upfront charges and
other fees for service from an ETC of the consumer’s choosing in areas eligible for Remote Areas
funding, or to receive a monthly discount off the price of service from an ETC of the consumer’s
choosing in areas eligible for Remote Areas funding.19 As in the Commission’s Lifeline program, which
provides a discount on phone service for qualifying low-income consumers, providers would take
responsibility for signing up eligible consumers.20 Also similar to the Lifeline program, the Commission
would provide the subsidy directly to providers, and the provider would pass along the subsidy amount to
the consumer.21
17.
Discussion. We seek to further develop the record on implementation details regarding
how a portable consumer subsidy should be structured, how the amount of the portable consumer subsidy
would be set, what restrictions, if any, should be placed on the service contracts that are supported by this
subsidy, and how such a program could be designed to stay within a $100 million annual budget. We also
seek to further develop the record on the relative advantages and disadvantages of structuring the Remote
Areas Fund as a one-time subsidy or a monthly retail subsidy.
1.

One-time subsidy

18.
We seek to further develop the record on setting the subsidy amount for a one-time
payment. Satellite and fixed wireless broadband services typically include a combination of upfront and
monthly set-up and equipment fees.22 We note that in its satellite program, RUS awarded Hughes
Network Systems (Hughes) a grant of $58,777,306 and Wildblue Communications (Wildblue) a grant of
$19,533,444.23 Based on RUS’ estimates of the number of subscribers that would benefit from these
grants, Hughes received an award of approximately $227 per subscriber and Wildblue received an award
of approximately $177 per subscriber.24 Would $200 in one-time support per location be an appropriate
amount for the Remote Areas Fund one-time subsidy, or should it be higher or lower? How should the
Commission account for the fact that in some locations, installation and other upfront costs may be
significantly higher (e.g., due to the extreme remoteness of a location or obstacles that may make it


18 Id. at 18093, para. 1225.
19 Id. at 18102, paras. 1267-71. The Commission proposed to use one-time support until the forward-looking cost
model was completed. Id. at 18094-95, para. 1232.
20 See, e.g., 47 C.F.R. § 54.410; USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18108, para. 1291.
21 See, e.g., 47 C.F.R. § 54.403(b); USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18099, para. 1252.
22 Providers also often offer time-limited discounts on their fees and charges.
23 Press Release, Rural Utilities Service, Satellite Awards, Broadband Initiatives Program (Oct. 20, 2010), available
at
http://www.rurdev.usda.gov/supportdocuments/BIPSatelliteFactSheet10-20-10.pdf. In 2011, EchoStar
Corporation acquired Hughes. Press Release, EchoStar Corporation, EchoStar Completes Hughes Acquisition (June
8, 2011), available at http://www.echostar.com/NewsEvents/Press%20Releases/PressRelease.aspx?prid=
%7bBD8B9364-C9D6-49B7-8648-EE51AC596E93%7d.
24 Id.
5

difficult for a signal to reach the location)?25 We encourage commenters to suggest specific dollar
amounts and provide specific factual information in support of their assertions.
19.
How would adoption of a consumer voucher structured as a one-time payment impact
providers’ existing practices regarding the amortization of installation costs through monthly rates?26
Would this approach avoid distorting providers’ business decisions regarding the relative amounts of
upfront and monthly fees charged to the retail consumer? Would this approach present any unique
administrative challenges?
20.
Should the Commission set forth pricing and performance requirements that would
apply over a minimum period of time to ensure ongoing and acceptable service to the consumer, as a
condition of receiving a one-time payment?27 We note that RUS’ BIP program for satellite took such an
approach, setting pricing restrictions on basic service packages, prohibiting carriers from requiring
customers to enter into extended contracts (subject to certain exceptions), and requiring carriers to offer
customer premise equipment at no cost for all their service packages.28 Would a similar approach be
appropriate for the Remote Areas Fund? Should a condition of receiving the one-time payment be that
the Remote Areas Fund-supported providers offer voice service at a rate not to exceed the Commission’s
prior reasonable comparability benchmark for voice service for non-rural carriers, i.e., $36.52?29 What
would be an appropriate amount of time for such pricing and performance requirements?
21.
How would structuring the consumer subsidy as a one-time payment affect the nature
of competition among potential providers to serve the consumer? Should the Commission adopt any
restrictions on the ability of consumers to obtain a new one-time subsidy if they switch providers after
some amount of time? Would it be wasteful for the Remote Areas Fund to subsidize the cost of installing
a satellite dish or fixed wireless receiver on a home if the consumer previously has used a Remote Areas
Fund voucher to install equipment from another provider? What types of reporting or other requirements
might the Commission impose to protect against waste, fraud and abuse? For example, in the Lifeline
program, consumers must certify that they will notify their service providers within 30 days if they move
to a new address.30 What kinds of burdens might this requirement impose on service providers, and
particularly on small businesses?


25 We note that Spacenet, Inc. received a grant of $7,530,000 from the Broadband Initiatives Program (BIP) satellite
program to serve Alaska and Hawaii, which based on RUS’ estimates, would be approximately $600 per
subscriber—far more than the $227 per subscriber awarded to Hughes and the $177 per subscriber awarded to
Wildblue to provide service in the Lower 48 states. Id.
26 SBP Comments at 9.
27 See infra paras. 47-51.
28 Broadband Initiatives Program, Request for Proposals, 75 Fed. Reg. 25185, 25187 (May 7, 2010) (requiring
awardees to offer customer premises equipment at no cost for all packages they offer (which included “no
installation, activation, or other fees”) and a basic broadband service package – defined as 768 kbps downstream – at
a rate “no higher than $50 per month for at least one year with no length of service requirements,” subject to the
exception where an awardee offered a basic service package of less than $40 per month, in which a one-year
contract requirement could be imposed as long as there was an unconditional 30-day cancellation cause included in
the contract).
29 WIRELINE COMPETITION BUREAU, REFERENCE BOOK OF RATES, PRICE INDICES, AND HOUSEHOLD EXPENDITURES
FOR TELEPHONE SERVICE, Table 1.13 (2008), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-
284934A1.pdf (WCB Reference Book of Rates).
30 47 C.F.R. § 54.410(d).
6

2.

Monthly retail subsidy

22.
In the USF/ICC Transformation Order and FNPRM, the Commission also sought
comment on various issues relating to structuring the portable consumer subsidy as “a monthly amount
equal to the difference between the retail price of a ‘basic’ satellite voice-broadband service and an
appropriate reference price for reasonably comparable service in urban areas.”31 We seek to further
develop the record on what specific figure should be used as the urban reference price, pending
implementation of the urban rate survey,32 if the Commission were to implement a monthly subsidy.
23.
We note that the Commission’s prior reasonable comparability benchmark for voice
service for non-rural carriers was $36.52.33 On an interim basis, would it be reasonable to set the urban
reference price for voice at $37 for purposes of the Remote Areas Fund? We also note that several large
fixed terrestrial providers offer broadband at speeds close to the Commission’s 4 Mbps downstream/1
Mbps upstream benchmark at prices ranging from $45 to $49.95 per month.34 Would setting an urban
reference price for broadband at a somewhat higher level, such as $60, be a reasonable interim approach
for the Remote Areas Fund?35 Should that figure be lower or higher?
24.
We also seek further comment on what should be considered “basic” satellite voice-
broadband service for the purposes of setting the monthly consumer subsidy amount. Satellite broadband
providers offer a variety of service tiers with different usage limits at different prices, with the lowest
price offerings currently in the $50 range.36 Should the Commission deem the lowest price offering to be
a “basic” broadband offering, and therefore focus on the $50 plan in setting the satellite reference rate?
Should consumers be able to use their monthly voucher to purchase services above the basic offering?
25.
How, if at all, should the Commission take into account the costs of installation and
other upfront costs as part of a monthly retail subsidy? For instance, should the representative retail rate


31 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18102, para. 1267.
32 The Bureau has sought comment on an urban rate survey instrument to gather data relating to fixed voice and
fixed broadband prices in the urban areas. Wireline Competition Bureau Seeks Comment on Proposed Urban Rates
Survey and Issues Relating to Reasonable Comparability Benchmarks and the Local Rate Floor
, WC Docket No.
10-90, Public Notice, 27 FCC Rcd 8332 (Wireline Comp. Bur. 2012) (Rate Survey PN); see also USF/ICC
Transformation Order and FNPRM
, 26 FCC Rcd at 17708-09, para. 114. The annual rate survey will be used to
develop reasonable comparability benchmarks for voice and broadband rates, which carriers will be required to
certify each year that their rates do not exceed.
33 WCB Reference Book of Rates at Table 1.13.
34 According to a report on international broadband prices, AT&T was offering a 6 Mbps downstream/768 kbps
upstream DSL service in San Francisco for $48 per month, Comcast was offering a 6 Mbps downstream/1 Mbps
upstream service in the Washington, D.C. area for $49.95, CenturyLink was offering a 7 Mbps downstream/896
kbps upstream service in Denver for $45, and Windstream was offering a 6 Mbps downstream service for $44.99.
See Third International Broadband Data Report at Appendix B, available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-12-1334A3.xls.
35 We note that in the voice context, the Commission has presumed that a rate is reasonably comparable if it falls
within two standard deviations of the national average. The reasonable comparability benchmark for voice was
$36.52, nearly $10 above the average urban voice rate of $25.62. WCB Reference Book of Rates at I-2.
36 See, e.g., Exede Internet, Packages and Pricing, http://www.exede.com/internet-packages-pricing (last visited Jan.
16, 2012) (Exede Pricing Website); HughesNet Gen4, Plans and Promotions,
http://www.hughesnet.com/index.cfm?page=Plans-Pricing (last visited Jan. 16, 2012) (Hughes’ lowest tier Gen4
plan is usually priced at $59.99 per month, but is currently being offered at $39.99 per month for new customers
through March 2013).
7

be determined by adding together the monthly service amount plus any upfront fees, amortized over a
two-year period?37
26.
Satellite broadband service rates provide a useful framework for setting the portable
consumer subsidy amount because they are generally uniform nationwide. However, we acknowledge
that terrestrial wireless or wireline service providers may be viable providers for certain remote areas and
may choose to participate in the Remote Areas Fund. Given that these service providers can charge rates
that vary by geography, we seek comment on whether, and if so, how to account for these varying rates
when setting the rate that will be compared to reasonably comparable services in urban areas.
27.
How, if at all, should the usage amounts associated with wireless broadband services in
urban areas be factored into such an adjustment?
3.

Applying the subsidy to consumer bill

28.
Regardless of whether the Commission structures the Remote Areas Fund as a one-time
or monthly subsidy, we seek further comment on measures to ensure the consumer receives the full
benefit of the subsidy.
29.
To discourage service providers from raising their rates in response to the availability
of a consumer subsidy, the Commission sought comment in the USF/ICC Transformation Order and
FNPRM
on requiring “each ETC to establish an ‘anchor price’ for its basic service offering—including
installation and equipment charges—as a condition of eligibility to receive Remote Areas Fund
support.”38 Should the Remote Areas Fund-supported provider be required to apply the discount to the
provider’s best available rates, including any discounts or promotions, at the time the consumer
subscribes to the service? How could the Commission structure this requirement to prevent service
providers from capturing the subsidy and not passing it on to the consumer? How could it be structured
so that it could be audited to verify that providers are in fact providing consumers their best available
rates?
4.

Restrictions on extended contracts

30.
As the Commission noted in the FNPRM, certain satellite providers require that
consumers enter into 24-month contracts when they subscribe to their services.39 We seek to further
develop the record on issues relating to the use of extended contracts by Remote Areas Fund-supported
providers.
31.
If Remote Areas Fund-supported providers are permitted to enter into extended
contracts with consumers receiving Remote Areas Fund subsidies, should the maximum permitted
contract term be 24 months? We note that in implementing its satellite broadband program, RUS only
permitted awardees to enter into one-year contracts in certain circumstances.40 Does the answer depend


37 Using such an approach would result in a $64.58 monthly average satellite retail rate, if calculated based on
ViaSat’s current pricing of a $50 per month rate for service plus a $149.99 account set-up fee plus a $199.99 prepaid
equipment lease. See Exede Pricing Website. For illustrative purposes, if the urban reference price were set at $60
for broadband service, this would result in a monthly subsidy of $4.58.
38 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18099, para. 1253. See Comments of the National
Association of State Utility Consumer Advocates, Maine Office of the Public Advocate, the New Jersey Division of
Rate Counsel, and the Utility Reform Network, WC Docket No. 10-90 et al., at 95 (filed Jan. 18, 2012) (“[I]t is
essential that any mechanism prevent the ETC from increasing its price as a direct result of the [Remote Areas
Fund] support”).
39 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18103, para. 1273.
40 See supra note 28 and accompanying text.
8

on whether the Commission structures the Remote Areas Fund as a one-time payment or a monthly
subsidy? If the Commission provides portable consumer subsidies for extended contracts, how should it
handle early termination fees?

C.

Consumer eligibility for the Remote Areas Fund

32.
Background. The Commission sought comment on limiting Remote Areas Fund
support to a single subsidy per household or residence, stating that “[a] single fixed broadband connection
should be sufficient for a single residence/household.”41
33.
For purposes of imposing a one Remote Areas Fund subsidy per household restriction,
the Commission proposed to adopt the definition of the terms “household” or “residence” for the Remote
Areas Fund as ultimately adopted by the Commission for the Lifeline and Linkup program.42 Subsequent
to the FNPRM, the Commission adopted a definition for “household” in the context of the Lifeline
program to mean “any individual or group of individuals who are living together at the same address as
one economic unit,” and economic unit as “all adult individuals contributing to and sharing in the income
and expenses of a household.”43
34.
We seek further comment on limiting consumers to one Remote Areas Fund subsidy
per household and other measures to ensure that the available funds are used in a fiscally responsible
manner.
35.
Discussion. Should the Commission adopt the same definition for household for
purposes of the Remote Areas Fund as it did for Lifeline and associated implementing regulations?
36.
Should the Commission require consumer self-certifications that they do not have
terrestrial broadband available at their home meeting defined requirements (i.e., for capacity, latency,
usage, and price) as a precondition to receiving the Remote Areas Fund consumer subsidy? Are there any
other specific mechanisms the Commission should adopt to ensure that Remote Areas funding does not
go to consumers that already have terrestrial broadband that meets the Commission’s requirements?
37.
Should consumers be required to self-certify that they are using Remote Areas Fund
support at their primary address? If consumers are found to be making false self-certifications, should the
Commission impose penalties for such false statements and misrepresentations?
38.
If the Commission did require primary address self-certifications, would it be
reasonable to employ Lifeline requirements (e.g., 30-day moving notifications, a prohibition on P.O. box
addresses, and a requirement that applicants provide both a primary address and billing address) to


41 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18100, para. 1256. Commenters generally agreed
with this proposal. See Comments Submitted on Behalf of the Ohio Public Utilities Commission, WC Docket No.
10-90 et al., at 11 (filed Jan. 18, 2012); WISPA Comments at 9; but see Comments of General Communication, Inc.,
WC Docket No. 10-90 et al., at 23-25 (filed Jan. 18, 2012).
42 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18100, para. 1257. At the time the USF/ICC
Transformation Order and FNPRM
was released, the Commission was seeking comment on reforms to the Lifeline
and Link Up programs. See Lifeline and Link Up Reform and Modernization, Federal-State Joint Board on
Universal Service, Lifeline and Link Up
, WC Docket Nos. 11-42, 03-109, CC Docket No. 96-45, Notice of Proposed
Rulemaking, 26 FCC Rcd 2770 (2011).
43 47 C.F.R. § 54.400(h) (defining an adult as “any person eighteen years or older,” and stating that “[i]f an adult has
no or minimal income, and lives with someone who provides financial support to him/her, both people shall be
considered part of the same household. Children under the age of eighteen living with their parents or guardians are
considered to be part of the same household as their parents or guardians.”).
9

impose the primary address restriction?44 How should the Commission account for certain groups like
seasonal workers that may make frequent moves between residences?
39.
If the Commission requires consumers to submit a certification pursuant to a one
Remote Areas Fund subsidy per household or primary address restriction, should the service provider be
responsible for collecting and verifying the certification? We note that USAC is in the process of
developing a database to verify that households do not receive more than one Lifeline subsidy.45 Should
USAC also develop a database of Remote Areas Fund-eligible households with associated addresses, and
could the Lifeline database be expanded for this purpose in a cost-effective way? What steps, if any,
should USAC or ETCs take to verify self-certifications in the interim while the database would be
developed? We also seek comment on whether the costs to ETCs or the Administrator of verifying
certifications against such a database or other data source would outweigh any potential savings
associated with restricting Remote Areas Fund support to one-per-household and/or primary addresses.
40.
If a database is employed, should ETCs be required to collect the data for the database
from their customers?46 How can the Commission ensure that data that are submitted to the database by
ETCs are uniform? As an alternative to creating a database or utilizing an expanded version of USAC’s
Lifeline database, are there other types of tools or data sources that USAC or ETCs could rely on to verify
consumers’ addresses?

D.

Designing the Remote Areas Fund within a set budget

41.
Background. In the USF/ICC Transformation Order and FNPRM, the Commission
stated the annual budget for the Remote Areas Fund will be “at least $100 million annually,”47 and it set
the total budget for Connect America at “no more than $4.5 billion over the next six years.”48 The
Commission also questioned what it should do if “support expenditures begin to approach the budgeted
amount . . . .”49 The Commission proposed possibly providing support on a “‘first come, first served’
basis,”50 or otherwise limiting eligibility criteria.51 The Commission also sought comment on “what the
Commission should do if requests for reimbursement from the Remote Areas Fund are lower than the
budget.”52
42.
Discussion. Recognizing that the answer depends on the level of subsidy provided,
what would be the financial impact of making all census blocks shown as unserved on the National
Broadband Map eligible for Remote Areas Fund support, until deployment occurs in those areas, whether
through support from universal service or through market forces? How likely is it that the Commission


44 Lifeline and Link Up Reform and Modernization, Federal-State Joint Board on Universal Service, Lifeline and
Link Up
, Advancing Broadband Through Digital Literacy Training, WC Docket Nos. 11-42, 03-109, 12-23, CC
Docket No. 96-45, Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656, 6695-96,
paras. 85, 87 (2012) (Lifeline Report and Order).
45 Id. at 6734-55, paras. 179-225.
46 See id. at 6737, para. 189.
47 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17838, para. 534.
48 Id. at 17672, para. 18.
49 Id. at 18103, para. 1274.
50 Id.
51 Id.
52 Id. at 18103, para. 1275.
10

would need to limit the number of locations in remote areas that will be eligible for support to stay within
a defined budget? If so, what criteria should the Commission use to determine which remote areas will
receive support and which will not? If the demand for the Remote Areas Fund were to exceed a defined
$100 million annual budget, should the Commission reevaluate and set a higher budget for the following
year, or should the Commission adopt a $100 million hard cap in interest of promoting fiscal
responsibility and controlling the overall size of the universal service budget?53

E.

Service providers eligible to receive support from the Remote Areas Fund

43.
Background. In the USF/ICC Transformation Order and FNPRM, the Commission
stated that it sought “to encourage maximum participation of providers able to serve these most difficult
to reach areas.”54 In the FNPRM, the Commission proposed to require providers to obtain ETC
designation in order to receive support from the Remote Areas Fund.55 The Commission sought comment
on various issues relating to the ETC designation process to identify ways to expand the number of
participants in the Remote Areas Fund.56
44.
In this section, we seek to further develop the record on issues relating to ETC
participation in the program, both for providers that have not yet been designated as ETCs and for
existing ETCs.57
45.
Discussion. Should the Commission impose requirements to standardize the required
showings to be designated an ETC to participate in the Remote Areas Fund, the procedural aspects of the
ETC application process, the time states take to review ETC applications, the criteria states use to
evaluate ETC applications, and the obligations that states place on ETCs? If so, what specific
requirements should be adopted? The National Cable & Telecommunications Association proposes that
ETC applications be deemed granted within 30 days of filing; would a more reasonable time frame for
such a requirement be 60 or 90 days?58
46.
ETCs that receive Remote Areas Fund support will be required to provide voice
service.59 We seek to update the record on the quality of the voice service that satellite providers and
wireless Internet Service Providers (WISPs) are able to offer today, and over the next twelve months. We
note that nothing in the Commission’s existing regulations would preclude incumbent voice providers that
have already received an ETC designation and who wish to resell satellite broadband services or other
wireless broadband services from receiving Remote Areas funding, assuming such services meet
specified performance requirements. What is the likelihood that satellite providers and WISPs would


53 Id. at 17670, para. 11.
54 Id. at 17839, para. 537.
55 Id. at 18095, para. 1234.
56 Id. at 18095, para. 1235.
57 See 47 U.S.C. §§ 214(e), 254. We note that existing ETCs will be eligible to participate in the Remote Areas
Fund, and some of these ETCs may choose to partner with other providers to serve their highest cost consumers with
alternative technologies.
58 Letter from Steven F. Morris and Jennifer K. McKee, National Cable & Telecommunications Association to
Marlene H. Dortch, Federal Communications Commission, WC Docket 10-90 et al. at 4 (filed Oct. 21, 2011)
(NCTA Oct. 21, 2011 Ex Parte).
59 47 U.S.C. § 214(e)(1)(A) (requiring that ETCs “offer the services that are supported by Federal universal service
support mechanisms . . . .”); 47 C.F.R. § 54.101(b) (requiring ETCs to offer “voice telephony”). See USF/ICC
Transformation Order and FNPRM
, 26 FCC Rcd at 17672, para. 17 (stating that one of the Commission’s goals for
universal service is to “preserve and advance universal availability of voice service . . .”).
11

enter partnerships with traditional voice providers, i.e., incumbent telephone companies, to fulfill voice
obligations in areas eligible for Remote Areas funding?60

F.

Performance requirements for Remote Areas Fund-supported service providers

47.
Background. The Commission proposed in the USF/ICC Transformation Order and
FNPRM to require ETCs to offer service “of sufficiently low latency to enable use of real-time
applications, including VoIP,”61 and at a capacity that is “reasonably comparable to usage limits for
comparable residential broadband offerings in urban areas.”62 The Commission also sought comment on
whether it should “modestly relax” the Connect America performance requirements for Remote Areas
funding,63 in order to “tailor broadband performance requirements to the economic and technical
characteristics of networks likely to exist in . . . remote areas.”64
48.
We seek to further develop the record on the Commission’s performance requirement
proposals.
49.
Discussion. The International Telecommunication Union has noted that while latency
delays above 400 milliseconds are unacceptable for network planning, latency up to 300 milliseconds
provides acceptable voice quality for most users with an increasing number of users becoming dissatisfied
if latency exceeds 300 milliseconds. 65 Based on this information, we seek comment on an appropriate
latency standard for the Remote Areas Fund. How should the Commission address the increased latency
experienced during double hop calls?
50.
We also seek to further develop the record on setting required usage allowances for
providers participating in the Remote Areas Fund.66 We have not yet established minimum usage
requirements that will apply to price cap carriers that elect to make a statewide commitment to serve areas
in Phase II. Given the Commission’s recognition that it may be appropriate to “modestly relax”
performance requirements in areas supported by the Remote Areas Fund, what downward adjustments
would represent an appropriate balancing of the “economic and technical characteristics of networks”
likely to serve the most remote areas?67
51.
We note that according to one source, during the second half of 2012, the median
monthly data consumption for fixed services in North America was 16.8 GB per subscriber.68 And


60 See, e.g., NCTA Oct. 21, 2011 Ex Parte at 2.
61 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18097, para. 1242.
62 Id. at 18097, paras. 1243-44.
63 Id. at 18096, para. 1240. See also id. at 17695-700, paras. 86-101 (describing broadband performance
requirements for other Connect America recipients.)
64 Id. at 18096, para. 1240.
65 International Telecommunication Union Telecommunication Standardization Sector, Recommendation G.114,
One-Way Transmission Time at 2- 3 (May 2003), available at http://www.itu.int/rec/T-REC-G.114-200305-I/en.
66 As noted above, the Bureau has sought comment on an urban rate survey instrument to gather data relating to
fixed voice and fixed broadband prices and usage limits, if any, in the urban areas, but that data will likely not yet be
available at the time the Commission implements the Remote Areas Fund. See Rate Survey PN; see also USF/ICC
Transformation Order and FNPRM
, 26 FCC Rcd at 17708-09, para. 114. The annual rate survey will be used to
develop reasonable comparability benchmarks for voice and broadband rates, which carriers will be required to
certify each year that their rates do not exceed.
67 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18096, para. 1240.
68 SANDVINE INTELLIGENT BROADBAND NETWORKS, GLOBAL INTERNET PHENOMENA REPORT, 6 (2H 2012),
(continued…)
12

according to recent Commission speed testing data, 75 percent of surveyed DSL subscribers in April 2012
used less than 20 GB per month.69 Given this historical data and industry forecasts for future usage, what
usage allowance should be a required minimum for providers participating in the Remote Areas Fund?
Would 20 GB be an appropriate usage allowance requirement for the Remote Areas Fund, at least in its
initial implementation? Should the Commission periodically adjust the Remote Areas Fund usage
allowance requirement to reflect consumer behavior, and if so, how often?

G.

Accountability and oversight

52.
Background. All Connect America recipients are required to fulfill certain reporting
requirements as defined in section 54.313.70 These requirements include submitting an annual report in
which a carrier must submit, among other information and certifications, a five-year build-out plan,
results of speed and latency tests, as well as certifications relating to capacity and prices.71 Additional
reporting requirements vary based on the type of provider at issue (e.g., price cap carrier, rate-of-return
carrier) and the type of universal service support they receive.72 The Commission’s rules specify that
Connect America support recipients that fail to submit the required information by the July 1st deadline
will have their support reduced accordingly.73
53.
To aid in the Commission’s oversight of Connect America funds, support recipients are
subject to USAC audits and investigations.74 Recipients must also retain for ten years all records that are
required to demonstrate that the support they received was consistent with universal service rules.75
54.
In the USF/ICC Transformation Order, the Commission proposed requiring Remote
Areas Fund recipients to comply with generally the same reporting, audit, and record retention
requirements that also apply to other recipients of Connect America support.76
55.
We seek to further develop the record on the types of information that Remote Areas
Fund-supported providers should be required to report to the Commission.
56.
Discussion. Should any of the section 54.313 reporting requirements not apply or be
tailored for Remote Areas Fund recipients? For example, is the requirement that ETCs report detailed
information about outages,77 and the number of complaints they receive per 1,000 connections,78
(Continued from previous page)


http://www.sandvine.com/downloads/documents/Phenomena_2H_2012/Sandvine_Global_Internet_Phenomena_Re
port_2H_2012.pdf.
69 FEDERAL COMMUNICATIONS COMMISSION, OFFICE OF ENGINEERING AND TECHNOLOGY AND CONSUMER AND
GOVERNMENTAL AFFAIRS BUREAU, 2012 MEASURING BROADBAND AMERICA 45 (July 2012),
http://transition.fcc.gov/cgb/measuringbroadbandreport/2012/Measuring-Broadband-America.pdf.
70 47 C.F.R. § 54.313.
71 See 47 C.F.R. § 54.313(a); USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17852-54, paras. 579-
87.
72 See 47 C.F.R. § 54.313(b)-(h).
73 47 C.F.R. § 54.313(j).
74 47 C.F.R. § 54.320(a); USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17864-66, paras. 622-29.
75 47 C.F.R. § 54.320(b); USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 17864, para. 621.
76 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18108, para. 1292.
77 47 C.F.R. § 54.313(a)(2).
78 47 C.F.R. § 54.313(a)(4).
13

reasonable for Remote Areas Fund-supported participants? Is there a need to require a five-year build-out
plan in a situation where the subsidy is structured as a consumer subsidy, rather than a supply-side
subsidy for deployment?79 While recognizing there are fundamental differences between the Lifeline
program and Connect America high-cost programs, are there lessons that the Commission could learn
from Lifeline’s administration of consumer subsidies?80 What measures would the Commission need to
put in place to ensure that subsidies are not flowing to consumers that are already served by terrestrial
broadband meeting the Commission’s broadband speed benchmark? What specific kinds of documents
should Remote Areas Fund participants be required to retain in order to facilitate USAC’s audits and
investigations of funding recipients? Should Remote Areas Fund participants be required to maintain date
stamped screen shots of website advertisements and/or other documentary evidence of pricing, including
both published and unpublished rates available upon request, to facilitate the ability of auditors to ensure
that consumers have the benefit of best available rates?

III.

PROCEDURAL MATTERS

A.

Initial Regulatory Flexibility Act Analysis

57.
The USF/ICC Transformation Order and FNPRM included an Initial Regulatory
Flexibility Analysis (IRFA) pursuant to 5 U.S.C. § 603, exploring the potential impact on small entities of
the Commission’s proposal.81 We invite parties to file comments on the IRFA in light of this additional
notice.

B.

Filing Requirements

58.
Interested parties may file comments and reply comments on or before the dates indicated
on the first page of this document. Comments are to reference

WC Docket Nos. 10-90 and DA 13-69

and may be filed using the Commission’s Electronic Comment Filing System (ECFS). See Electronic
Filing of Documents in Rulemaking Proceedings
, 63 FR 24121 (1998).
·
Electronic Filers: Comments may be filed electronically using the Internet by accessing
the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
·
Paper Filers: Parties who choose to file by paper must file an original and one copy of
each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier,
or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the
Commission’s Secretary, Office of the Secretary, Federal Communications Commission.
o All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary
must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325,
Washington, DC20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries
must be held together with rubber bands or fasteners. Any envelopes and boxes must be
disposed of before entering the building.


79 47 C.F.R. § 54.313(a)(1).
80 See, e.g., Lifeline Report and Order, 27 FCC Rcd at 6816, para. 379 (requiring carriers that do not offer supported
services over their own facilities to file a compliance plan with the Commission that, among other requirements,
identifies “the procedures the ETC follows in enrolling a subscriber in Lifeline and submitting for reimbursement
for that subscriber from the Fund,” along with “a detailed description of how the carrier offers service, the
geographic areas in which it offers service, and a description of the carrier’s various Lifeline service plan offerings,
including subscriber rates, number of minutes included and types of plans available”).
81 USF/ICC Transformation Order and FNPRM, 26 FCC Rcd at 18364-95, App. P; see 76 Fed. Reg. 78384, 78430-
42 (2011).
14

o Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
o U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th
Street, SW, Washington, DC 20554.

In addition, we request that one copy of each pleading be sent to each of the following:

(1) Ted Burmeister, Telecommunications Access Policy Division, Wireline Competition Bureau, 445
12th Street, S.W., Room 5-A445, Washington, D.C. 20554; e-mail: Theodore.Burmeister@fcc.gov;
(2) Heidi Lankau, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th
Street, S.W., Room 5-B511, Washington, D.C. 20554; e-mail: Heidi.Lankau@fcc.gov;
(3) Charles Tyler, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th
Street, S.W., Room 5-A452, Washington, D.C. 20554; e-mail: Charles.Tyler@fcc.gov.
59.
People with Disabilities: To request materials in accessible formats for people with
disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call
the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
60.
This matter shall be treated as a “permit-but-disclose” proceeding in accordance with the
Commission’s ex parte rules.82 Persons making ex parte presentations must file a copy of any written
presentation or a memorandum summarizing any oral presentation within two business days after the
presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral
ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all
persons attending or otherwise participating in the meeting at which the ex parte presentation was made,
and (2) summarize all data presented and arguments made during the presentation. If the presentation
consisted in whole or in part of the presentation of data or arguments already reflected in the presenter’s
written comments, memoranda or other filings in the proceeding, the presenter may provide citations to
such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant
page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them
in the memorandum. Documents shown or given to Commission staff during ex parte meetings are
deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b). In
proceedings governed by rule 1.49(f) or for which the Commission has made available a method of
electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations,
and all attachments thereto, must be filed through the electronic comment filing system available for that
proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in
this proceeding should familiarize themselves with the Commission’s ex parte rules.
61. For further information, please contact Ted Burmeister, Telecommunications Access Policy
Division, Wireline Competition Bureau at 202-418-7389, or Heidi Lankau, Telecommunications Access
Policy Division, Wireline Competition Bureau at 202-418-2876; or at TTY (202) 418-0484.
- FCC -


82 47 C.F.R. §§ 1.1200 et seq.
15

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