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USF/ICC Transformation and Rule Clarification and Correction Order

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Released: March 27, 2013

Federal Communications Commission

DA 13-564

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Connect America Fund
)
WC Docket No. 10-90
)
Developing an Unified Intercarrier Compensation
)
CC Docket No. 01-92
Regime
)
)

Joint Petition of Price Cap Holding Companies for
)
WC Docket No. 12-63
Conversion of Average Schedule Affiliates to
)
Price Cap Regulation and for Limited Waiver
)
Relief
)
)

Consolidated Communications Companies
)
Transmittal No. 41
Tariff F.C.C. No. 2;
)
)

Frontier Telephone Companies
)
Transmittal No. 28
Tariff F.C.C. No. 10;
)
)

Windstream Telephone System
)
Transmittal No. 57
Tariff F.C.C. No. 7
)

ORDER

Adopted: March 27, 2013

Released: March 27, 2013

By the Chief, Wireline Competition Bureau:

TABLE OF CONTENTS

Heading Paragraph #
I. INTRODUCTION ..................................................................................................................................... 1
II. HARMONIZING CONNECT AMERICA FUND ICC CERTIFICATION DEADLINES .................... 2
III. NECA POOLING SWITCHED ACCESS RATE CAP ADJUSTMENTS............................................ 8
IV. NECA PETITION FOR CLARIFICATION OF POOLING ISSUES ................................................. 17
V. “STEP 2” TRANSITIONAL INTRASTATE ACCESS SERVICE RATES......................................... 21
VI. TREATMENT OF LOCAL SWITCHING SUPPORT IN PART 69 CALCULATIONS ................... 23
VII. CORPORATE OPERATIONS EXPENSE LIMIT AND MONTHLY $250 PER-LINE CAP.......... 29
VIII. TRUE-UP ADJUSTMENT MECHANISMS .................................................................................... 31
IX. PROCEDURAL MATTERS ................................................................................................................ 33
A. Paperwork Reduction Act................................................................................................................... 33
B. Final Regulatory Flexibility Act Certification .................................................................................... 34
C. Congressional Review Act.................................................................................................................. 36
X. ORDERING CLAUSES ........................................................................................................................ 37
APPENDIX – Final Rules

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I.

INTRODUCTION

1.
In the USF/ICC Transformation Order, the Commission delegated to the Wireline
Competition Bureau (Bureau) the authority to make any rule revisions necessary to ensure that the
reforms adopted are properly reflected in the rules, including correcting any conflicts between the new or
revised rules and existing rules, as well as addressing any omissions or oversights.1 In this Order, the
Bureau acts pursuant to its delegated authority to clarify and correct certain rules in response to recent
petitions and other requests for clarification or correction of the new rules.2 Specifically, the Bureau
harmonizes inconsistent Connect America Fund intercarrier compensation (ICC) support eligibility
certification and reporting filing deadlines contained in Parts 51 and 54 of the Commission’s rules to
coincide with the date on which carriers must file their annual access tariffs.3 The Bureau also amends
the Part 51 rules to clarify the effects of the USF/ICC Transformation Order on National Exchange
Carrier Association (NECA) traffic-sensitive tariff (“NECA pool”)4 pooling when carriers enter or exit
the pool.5 The Bureau also addresses a petition for clarification filed by NECA6 by clarifying various
NECA pooling requirements adopted in the 2012 Price Cap Conversion Order.7 In addition, the Bureau
amends rules governing the transition of rate-of-return carriers’ intrastate switched access rates to correct
an omission.8 The Bureau amends the Part 69 access charge rules to clarify the treatment of local
switching support (LSS) in the calculation of the line-side port costs shift to the Common Line category
and the allocation of Transport Interconnection Charge costs among the various access charge expense
categories.9 The Bureau also clarifies the operation of the corporate operations expense limit and monthly

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, 18149, para. 1404 (2011) (USF/ICC Transformation Order), pets. for review
pending sub nom. In re: FCC 11-161
, No. 11-9900 (10th Cir. filed Dec. 8, 2011).
2 See Letter from Jeffrey E. Dupree, Vice President – Government Relations, National Exchange Carrier
Association, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-90 et al. (filed Jan. 25, 2013) (NECA
Jan. 25 Ex Parte); National Exchange Carrier Association, Inc. Petition for Clarification or Waiver, WC Docket No.
12-63, Transmittal Nos. 41, 28, 57 (filed Dec. 27, 2012) (NECA Petition); Letter from David B. Cohen, Vice-
President – Policy, United States Telecom Association, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-
90 et al. (filed Nov. 30, 2012) (USTelecom Ex Parte); Letter from Jeffery E. Dupree, Vice President – Government
Relations, National Exchange Carrier Association, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-
90 et al. at 1 (filed Nov. 9, 2012) (NECA Nov. 9 Ex Parte).
3 See 47 C.F.R. §§ 51.915(f)(6), 51.917(f)(3), 54.304(c)(1), (d)(1).
4 In this Order, we refer to participation in the “NECA pool” synonymously with participation in the NECA traffic-
sensitive tariff. Rate-of-return carrier election to participate in the NECA traffic-sensitive tariff triggers NECA pool
participation.
5 See 47 C.F.R. § 51.909(a).
6 See generally NECA Petition.
7 See Joint Petition of Price Cap Holding Companies for Conversion of Average Schedule Affiliates to Price Cap
Regulation and for Limited Waiver Relief
, WC Docket No. 12-63; Consolidated Communications Companies Tariff
F.C.C. No. 2
, Transmittal No. 41; Frontier Telephone Companies Tariff F.C.C. No. 10, Transmittal No. 28;
Windstream Telephone System Tariff F.C.C. No. 7, Transmittal No. 57, Order, 27 FCC Rcd 15753 (2012) (2012
Price Cap Conversion Order
).
8 See 47 C.F.R. § 51.909(c)(1). The terms “access charge” or “access rates” as used in the Order herein refer to
“Access Reciprocal Compensation” as that term is defined in section 51.903(h) of the Commission’s rules. See 47
C.F.R. § 51.903(h).
9 See 47 C.F.R. §§ 69.306(d)(2), 69.415(c)(1).
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$250 per-line cap on universal service support contained in Part 54.10 Finally, the Bureau corrects errors
in the Part 51 rules implementing the Eligible Recovery true-up adjustment mechanism.11

II.

HARMONIZING CONNECT AMERICA FUND ICC CERTIFICATION DEADLINES

2.
Background. The USF/ICC Transformation Order adopted, among other things, an ICC
reform timeline including rules that require carriers to adjust, over a period of years, many of their legacy
interstate and intrastate switched access charges12 effective on July 1 of each of those years, with the
ultimate goal of transitioning to a bill-and-keep regime.13 The Commission also adopted a recovery
mechanism to mitigate the impact of reduced ICC revenues on carriers and to facilitate continued
investment in broadband infrastructure, while providing greater certainty and predictability going forward
than the status quo.14 The recovery mechanism allows incumbent local exchange carriers (LECs) to
recover ICC revenues reduced due to the ICC reforms, up to a defined baseline, which is defined as
“Eligible Recovery.”15 A carrier may recover a limited portion of its Eligible Recovery from its end users
through a fixed monthly charge called the Access Recovery Charge (ARC), and the remainder of its
Eligible Recovery, if it so elects, from Connect America Fund ICC support.16
3.
The USF/ICC Transformation Order also included new certification and reporting
requirements for carriers that are eligible for and elect to receive Connect America Fund ICC support.17
In particular, sections 51.915(f)(6) and 51.917(f)(3) require price cap and rate-of-return carriers,
respectively, that elect to receive Connect America Fund ICC support to certify to the Commission with
their 2012 annual access tariff filings, and on April 1 in each subsequent year, that they properly
calculated their Eligible Recovery and ARC rates in order to be eligible to receive Connect America Fund
ICC support.18 Additionally, sections 54.304(c)(1) and (d)(1) require eligible price cap and rate-of-return
carriers that elect to receive Connect America Fund ICC support, pursuant to sections 51.915 and 51.917,
to file data with the Universal Service Administrative Company (USAC), the Commission, and relevant

10 See 47 C.F.R. §§ 54.901, 54.302.
11 See 47 C.F.R. §§ 51.915(b)(13), (d)(1)(iii)(F), (d)(1)(iv)(F), (d)(1)(v)(F), (d)(1)(vi)(F), (d)(1)(vii)(H), (d)(1)(viii),
51.917(b)(6), (d)(1)(iii)(D).
12 The USF/ICC Transformation Order altered the regulatory treatment of interstate and intrastate switched access
traffic, which is now subject to the reciprocal compensation framework under section 251(b)(5) of the
Communications Act, rather than the legacy access charge regime. See USF/ICC Transformation Order, 26 FCC
Rcd at 17914-16, paras. 760-64; see 47 U.S.C. § 251(b)(5). In this Order, the term “legacy switched access” refers
to switched access charges or rates under the pre-USF/ICC Transformation Order access charge regulatory regime
as opposed to the reciprocal compensation framework adopted in the USF/ICC Transformation Order.
13 USF/ICC Transformation Order, 26 FCC Rcd at 17934-35, para. 801 and Fig. 9.
14 Id. at 17677, para. 36.
15 Id. at 17956, para. 847.
16 Id. at 17994, para. 918; 47 C.F.R. § 51.917(d)-(f).
17 See 47 C.F.R. §§ 51.915, 51.917.
18 47 C.F.R. §§ 51.915(f)(6), 51.917(f)(3). The April 1 Connect America Fund ICC certification deadlines were
originally established to match April 1 eligible telecommunications carrier (ETC) annual high-cost universal service
financial reporting deadlines. These deadlines were subsequently changed to require reporting on July 1 of each
year. See Connect America Fund et al., WC Docket No. 10-90 et al., Third Order on Reconsideration, 27 FCC Rcd
5622, 5625-27, paras. 9-13 (2012); see also 47 C.F.R. § 54.313.
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state commissions by no later than June 30, 2012, and by March 31 in subsequent years, establishing the
carrier’s projected funding eligibility amounts, including any true-ups, for the upcoming funding period.19
4.
In ex parte filings, NECA and the United States Telecom Association (USTelecom)
requested modification of certain Commission rules to correct inconsistencies among the Commission’s
Connect America Fund ICC support eligibility certification deadlines.20 Specifically, NECA asked the
Bureau to change the deadline contained in section 51.917(f)(3) so that rate-of-return carriers are required
to file their annual Connect America Fund ICC support eligibility certifications with their annual access
tariff filings.21 NECA states that this change is necessary because the April 1 deadline appears to be
“inconsistent with rules governing submission of data forecasts and calculation of Eligible Recovery and
ARC rates associated with the normal annual access tariff filing process for rate-of-return carriers.”22
NECA argues that data used for calculating ARC rates and monitoring purposes would likely change
between the April 1 Connect America Fund ICC support eligibility certification deadline and mid-June,
when annual access tariffs are typically filed, and that such changes would “require numerous updates and
revisions to data submitted previously by carriers, potentially requiring corrections and re-certification.”23
USTelecom agrees and requests that “the modification to section 51.917(f)(3) requested by NECA for
rate-of-return carriers also be made to section 51.915(f)(6), which applies to price cap carriers.”24
5.
Discussion. We agree with NECA and USTelecom that revising the Connect America
Fund ICC support eligibility certification deadlines to coincide with the annual interstate access tariff
filing deadlines is appropriate. Currently, the rules contain three separate filing deadlines that essentially
require carriers to develop the same underlying data: their Eligible Recovery calculation, their expected
ARC rate levels, and their expected Connect America Fund ICC support amounts.25 We believe that
harmonizing the certification deadlines will remove unnecessary administrative burdens and will also
remove potential conflicts within the rules caused by inconsistent reporting deadlines adopted in the
USF/ICC Transformation Order. Accordingly, we revise the Connect America Fund ICC certification
filing deadlines contained in sections 51.915(f)(6) and 51.917(f)(3) so that they coincide with the annual
interstate access tariff filing dates.
6.
In addition to revising the filing deadlines as requested by NECA and USTelecom, we
also, on our own motion, make a similar revision to a Connect America Fund ICC support eligibility data
filing deadline contained in sections 54.304(c)(1) and (d)(1). These rule sections require price cap and

19 47 C.F.R. § 54.304(c)(1), (d)(1).
20 USTelecom Ex Parte at 1-2; NECA Nov. 9 Ex Parte at 1-2.
21 NECA Nov. 9 Ex Parte at 1.
22 Id.
23 Id.
24 USTelecom Ex Parte at 1.
25 The filing requirements we harmonize in this Order are as follows: (a) carriers are required to file data
establishing projected Connect America Fund ICC support by March 31 of each year, see 47 C.F.R. § 54.304(c)(1),
(d)(1); (b) carriers are required to certify that they properly calculated their ARC and, if they qualify, their Connect
America Fund ICC support by April 1 of each year, see 47 C.F.R. §§ 54.304(c)(1), (d)(1), 51.915(f)(6), 51.917(f)(3);
and (c) carriers are required to provide their ARC rate and Connect America Fund ICC support amount calculations
in support of their annual access tariff filings in mid-June of each year, see 47 C.F.R. § 69.3(a), see also Material to
be Filed in Support of 2012 Annual Access Tariff Filings
, WCB/Pricing File No. 12-08, Order, 27 FCC Rcd 3960,
3960-61, paras. 1-3 (Wireline Comp. Bur. 2012).
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rate-of-return carriers seeking Connect America Fund ICC support pursuant to sections 51.915 and
51.917, respectively, to file data with USAC, the Commission, and relevant state commissions
establishing the amount of their Connect America Fund ICC support for the upcoming funding year by no
later than March 31 of each year.26 For the same reasons discussed above, the March 31 deadline is
inconsistent with rules requiring carriers to submit Eligible Recovery calculations and ARC rates in mid-
June with their annual access tariff filing. Accordingly, we revise the deadlines contained in sections
54.304(c)(1) and (d)(1) to coincide with the annual interstate access tariff filing dates.27
7.
The rule revisions adopted herein revise Connect America Fund ICC support eligibility
filing requirements so that they coincide with carriers’ annual access charge tariff filings.28 In the event
that the rule revisions adopted herein are not effective before March 31, 2013, we find that good cause
exists29 to waive applicable 2013 Part 51 and 54 filing deadlines30 to the extent described herein to
eliminate the administrative burdens that would result from inconsistent reporting deadlines that the rule
revisions we adopt are intended to remedy. Accordingly, this limited waiver, if needed, defers price cap
and rate-of-return carriers’ March 31, 2013 and April 1, 2013 Connect America Fund ICC support
eligibility data filing and certification obligations to the date on which the 2013 annual access filings are
required.31

III.

NECA POOLING SWITCHED ACCESS RATE CAP ADJUSTMENTS

8.
Background. As part of the transition to bill-and-keep, the rules adopted in the USF/ICC
Transformation Order capped interstate and certain intrastate switched access rates for rate-of-return
carriers at the rates that were in effect on December 29, 2011.32 This approach removed rate-of-return
carriers from rate-of-return cost-based recovery for interstate switched access services.33 However, to the
extent that rate-of-return carriers offer services other than interstate switched access service, such as
common line and special access services, carriers remain subject to rate-of-return regulation for those
services. Rate-of-return carriers, thus, must continue to establish their revenue requirements and rates for
those services remaining under rate-of-return regulation.
9.
In the USF/ICC Transformation Order, the Commission established a non-revenue
neutral recovery mechanism that replaced rate-of-return cost-based recovery for interstate switched access
services provided by rate-of-return carriers.34 The recovery mechanism carefully balanced carrier

26 See 47 C.F.R. §§ 54.304(c)(1), (d)(1).
27 Id.
28 See 47 C.F.R. § 69.3(a).
29 See 47 C.F.R. § 1.3; NetworkIP, LLC v. FCC, 548 F.3d 116, 125-128 (D.C. Cir. 2008); Delta Radio, Inc. v. FCC,
387 F.3d 897, 901 (D.C. Cir. 2004); Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir.
1990); WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969).
30 47 C.F.R. §§ 51.915(f)(6), 51.917(f)(3), 54.304(c)(1), (d)(1).
31 See id.
32 47 C.F.R. § 51.909(a).
33 The Commission stated that “we adopt an approach to Rate-of-Return Eligible Recovery that takes interstate rate-
of-return carriers off of rate-of-return based recovery specifically for interstate switched access revenues, but
provides them more predictable recovery than exists under the status quo….” USF/ICC Transformation Order, 26
FCC Rcd at 17983, para. 900.
34 47 C.F.R. § 51.917.
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recovery from end users, other users of the switched access network such as interexchange carriers, and
Connect America Fund ICC support. As part of this new recovery mechanism, rate-of-return carriers
annually establish, as “Eligible Recovery,” an amount they are eligible to recover from end users or
Connect America Fund ICC support in each year of the ICC transition.35 Eligible Recovery is determined
in subsequent years by reducing a carrier’s Base Period Revenue by an annual adjustment factor and by
specified Expected Revenues for the upcoming tariff period. 36 A rate-of-return carrier recovers its
Eligible Recovery first from a capped ARC assessed on end users and, if it is eligible, may elect to
recover any remaining amounts from Connect America Fund ICC support.37 The rules also contain a
true-up procedure for rate-of-return carriers to correct for variances between actual and projected demand
both for access services and the ARC.38
10.
In the USF/ICC Transformation Order, the Commission stated that “carriers remain free
to make elections regarding participation in the NECA pool and tariffing processes during the
transition.”39 Clearly, the USF/ICC Transformation Order contemplated a continuation of the pooling
process for switched access services,40 but it did not provide procedures governing the switched access
rate caps when carriers enter or exit the pool. In the Designation Order, which identified issues for
investigation related to NECA’s 2012 annual access tariff filings, the Bureau addressed how NECA
should allocate projected switched access revenues among pooling carriers.41 In lieu of NECA’s
allocation of projected revenues entirely to the carrier that collected them, which would have effectively
ignored the pooling process, the Bureau stated that it would be reasonable for NECA to “allocate
projected revenues for purposes of determining each LEC’s projected 2012-13 interstate switched access
revenues by allocating the projected pool revenues in relation to each LEC’s interstate Base Period
Revenue divided by the projected pool Base Period Revenue.”42 Subsequently, NECA filed its direct case
employing the procedure outlined in the Designation Order.43
11.
Prior to the USF/ICC Transformation Order, when carriers entered or exited the NECA
pool, the pool switched access rates were adjusted to reflect changes to the pool. The rate caps codified in
section 51.909(a), however, do not contain a mechanism for the pool switched access rate caps to increase
or decrease when carriers enter or exit the pool. Absent such a mechanism, the pool switched access rates

35 See 47 C.F.R. § 51.917(d).
36 47 C.F.R. § 51.917(d)(1). A rate-of-return carrier’s Base Period Revenue reflects a carrier’s collected revenues
from intrastate switched access services and reciprocal compensation for the fiscal year beginning October 1, 2010.
It also includes a carrier’s projected interstate switched access revenue requirement supporting its most recent
annual tariff filing prior to adoption of the USF/ICC Transformation Order, which generally would have been the
annual filing made in June 2011. See 47 C.F.R. § 51.917(b)(1)(i), (b)(7), (d)(1).
37 See 47 C.F.R. § 51.917(e) and (f).
38 See 47 C.F.R. § 51.917(d)(1)(iii).
39 USF/ICC Transformation Order, 26 FCC Rcd at 17934, para. 801, Fig. 9, n.1499.
40 See Investigation of Certain 2012 Annual Access Tariffs, WC Docket No. 12-233, Order, 27 FCC Rcd 15557,
15567, para. 23 (2012) (Termination Order) (citing Investigation of Certain 2012 Annual Access Tariffs, WC
Docket No. 12-233, Order Designating Issues for Investigation, 27 FCC Rcd 10311, 10320, paras. 25 (Wireline
Comp. Bur. 2012) (Designation Order)).
41 Designation Order, 27 FCC Rcd at 10319-20, paras. 22-27.
42 Id. at 10320, para. 25.
43 See Termination Order, 27 FCC Rcd at 15586-87.
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will not realize revenues at the level that would provide pool settlements to the remaining pooling carriers
at the level they would have received if carriers had not exited the pool.44 Furthermore, the Eligible
Recovery for the pooling carriers would increase or decrease by the revenue difference between that
produced by the preexisting rate caps and the adjusted rate caps reflecting the effects of pool entry or exit.
Such funding is outside the scope of contemplated Connect America Fund ICC support, which was
intended to help mitigate the effects of ICC reforms, not to offset the revenue effects of changes in NECA
pool participation.45 Thus, without a method for adjustment to reflect pool entry and exit, the section
51.909(a) rate caps result in an unintended shift in recovery between switched access charges and
Connect America Fund ICC support.
12.
Further, prior to the USF/ICC Transformation Order, just as NECA revised its rates
when a carrier exited the pool, an exiting carrier was required to establish rates based on its own costs
under either section 61.38 or 61.39 of the Commission’s rules.46 The switched access rate caps codified
in section 51.909(a) do not, however, detail how an exiting carrier should establish its switched access
rate caps. In the 2012 Price Cap Conversion Order, the Commission determined that each exiting
pooling carrier had to adjust the NECA switched access rates it was charging to reflect the extent of its
net contribution to the pool and to establish switched access rates that would then become the capped
switched access rates for that carrier.47 These complimentary actions by NECA and an exiting carrier
together further the policies of the USF/ICC Transformation Order and 2012 Price Cap Conversion
Order
.
13.
Discussion. We find that providing a method for adjusting NECA pool switched access
rate caps to reflect pool entry and exit corrects an omission in the rate cap rules.48 Therefore, we amend

44 If net contributors exit the pool, the pool will not receive enough revenue because the rate caps will prevent
NECA from raising its switched access rates. On the other hand, the rules adopted in the USF/ICC Transformation
Order
do not require the rate caps to be lowered, which means that if net recipients exit the pool, the pool will
collect more switched access revenues than are necessary to compensate the pooling carriers at their previous
settlement levels.
45 See 47 C.F.R. §§ 54.304, 51.917(f)(2), (d), (e); USF/ICC Transformation Order, 26 FCC Rcd at 17709-12, paras.
115-26.
46 47 C.F.R. §§ 61.38, 61.39.
47 See 2012 Price Cap Conversion Order, 26 FCC Rcd at 15759, para. 17. If a carrier that was a significant net
contributor to the pool were allowed to exit the pool and charge NECA rates, the exiting carrier would receive
revenues that, had it remained in the pool, would reduce the remaining pooling carriers’ Eligible Recovery.
Moreover, if the higher rates produced enough revenue so that the realized revenues more than offset any Eligible
Recovery, the exiting carrier would retain the revenues. Such a windfall for an exiting net contributor would
encourage such carriers to exit the pool, thereby discouraging pool participation, contrary to the Commission’s
pooling neutral policies. See Connect America Fund et al., WC Docket No. 10-90 et al., Notice of Proposed
Rulemaking and Further Notice of Proposed Rulemaking, 26 FCC Rcd 4554, 4760, paras. 644-45 (2011);
Regulation of Small Telephone Companies, CC Docket No. 86-467, 2 FCC Rcd 3811, 3811-12, paras. 5-7 (1987).
48 In the 2012 Price Cap Conversion Order, the Commission waived section 51.909(a) of its rules “to the extent
necessary
to allow NECA to increase its switched access rates by an amount necessary to reflect the lost
contributions to switched access rates of the pool.” 2012 Price Cap Conversion Order, 27 FCC Rcd at 15764, para.
32 (emphasis added). The 2012 Price Cap Conversion Order highlighted the need for clarification but does not
represent a determination that waiver of the cap was in fact necessary. Our clarification today establishes that such
waivers of section 51.909(a) will in the future not be necessary in connection with entry to and exit from the NECA
pool pursuant to sections 69.3(e)(6) of the Commission’s rules. See 47 C.F.R. §§ 51.909(a), 69.3(e)(6).
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section 51.909(a) to address this omission, and to avoid creating unintended burdens on Connect America
Fund ICC support.
14.
Specifically, as set forth in the Appendix, we revise the Commission’s rules to require
NECA, when a carrier enters the NECA pool, to adjust its switched access rate caps to account for the
difference between the entering carrier’s revenues for the preceding calendar year based on the entering
carrier’s switched access rates and what the entering carrier’s revenues for the preceding calendar year
would have been if calculated using NECA switched access rates. Additionally, we revise the
Commission’s rate cap rules to include a methodology that NECA must use to adjust its switched access
rate caps when carriers exit the NECA pool. Finally, we revise the Commission’s rules to clarify how
exiting rate-of-return carriers will establish their switched access rate caps to reflect the amount by which
the exiting carrier was a NECA pool net contributor or net recipient. These rule revisions effectuate the
Commission’s intent that NECA pooling remain available during the transition, consistent with its
historical operation, and ensure that the balance between interstate switched access revenues and Connect
America Fund ICC support is maintained and does not affect a rate-of-return carrier’s decision to enter or
exit the NECA pool. These rule revisions also ensure that no party entering or exiting the NECA pool
will receive a windfall as a result of its election, which advances the Commission’s pooling neutral
policies.49
15.
Effects of Changes to Interstate Switched Access Rates on Intrastate Rates. We also
amend the Commission’s rules as set forth in the Appendix to clarify the flow-through effects that
interstate switched access rate cap adjustments resulting from NECA pool entry or exit will have on
intrastate switched access rates. An underlying objective of the USF/ICC Transformation Order was to
create a uniform, national framework for the ICC transition.50 The USF/ICC Transformation Order
adopted rules that establish maximum intrastate switched access rate levels based on their relationship to
interstate rate levels.51 In a subsequent order, the Bureau clarified the treatment of intrastate switched
access rates that are below interstate levels when the intrastate composite switched access rate was higher
than the composite interstate switched access rate.52 Because the Commission’s rules require intrastate
switched access rate levels to be set based on interstate rate levels, we clarify that if NECA’s interstate
switched access rates decrease, pooling carriers must also reduce their intrastate rates, consistent with the
framework established in the USF/ICC Transformation Order. Similarly, we clarify that if NECA’s
switched access rates increase, pooling carriers whose intrastate rates would have been at parity with
interstate rates in 2013 or that already were at parity with interstate rates are required to increase their
intrastate rates.53

49 See 2012 Price Cap Conversion Order, 27 FCC Rcd at 15764-65, paras. 32-33.
50 See USF/ICC Transformation Order, 26 FCC Rcd at 17929, para. 790.
51 47 C.F.R. § 51.909(b) and (c). See USF/ICC Transformation Order, 26 FCC Rcd at 17934-35, para. 801 and Fig.
9.
52 See Connect America Fund et al., WC Docket No. 10-90 et al., Order, 27 FCC Rcd 5986, 5988-89, para. 7
(Wireline Comp. Bur. 2012).
53 Subject to the rule revisions we adopt herein, the ICC switched access rate transition requires rate-of-return
carriers’ intrastate switched access rates subject to the transition to be no higher than the corresponding capped
interstate rate cap beginning July 1, 2013, and subject to the same rate structure and all subsequent rate and rate
structure modifications. See 47 C.F.R. § 51.909(c)(1). Carriers are free to charge less than the maximum switched
access rates, but must impute the maximum assessable switched access rate for purposes of calculating Eligible
Recovery. 47 C.F.R. § 51.917(b)(1).
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16.
We further clarify that carriers exiting the NECA traffic-sensitive pool must reduce any
intrastate switched access rates that are higher than their interstate switched access rates to the levels
established in connection with exiting the pool pursuant to the rate cap revisions adopted in this Order.54
In all cases, these new or revised rates will become the capped switched access rates set pursuant to
51.909(a)(1) for purposes of applying other rules relying on such rates or rate caps. In addition, the
revised rate caps will be used to establish a carrier’s Eligible Recovery going forward. Finally, we clarify
that, if a switched access rate is revised as a result of the NECA pool entry and exit process, any
competitive local exchange carrier (CLEC) benchmarking to that rate must benchmark to the revised rate.

IV.

NECA PETITION FOR CLARIFICATION OF POOLING ISSUES

17.
Background. On December 27, 2012, NECA filed a petition55 seeking clarification of
several NECA pooling-related issues flowing from the 2012 Price Cap Conversion Order.56 In that order,
the Commission granted a waiver to allow Consolidated Communications, Inc., Frontier Communications
Corporation and Windstream Corporation to convert their respective average schedule study areas from
rate-of-return regulation to the regulatory requirements applicable to price cap carriers.57 The
Commission also granted a waiver of section 51.909 to the extent necessary to allow NECA to increase its
switched access rates to reflect the lost contributions to the switched access portion of the NECA pool.58
18.
Discussion. NECA first asks the Commission to clarify that NECA pooling carriers do
not need to change their “Step 1” intrastate rates to account for interstate rate adjustments related to the
converting carriers’ exit from the NECA pool.59 The Step 1 intrastate rate reductions required carriers to
reduce their intrastate access rates, effective on July 3, 2012, based on one-half of the difference between
the revenue they would have received from transitional intrastate access service if it had been priced at
the capped interstate access rates and the revenue received from intrastate access rates.60 NECA notes
that if the Step 1 fifty-percent requirement were ongoing, the increase in interstate access rates on January
1, 2013 would have similarly required an increase in intrastate rates on January 1, 2013. If intrastate rates
were adjusted in early 2013 to reflect the 2012 Price Cap Conversion Order, these adjustments would
only be effective until carriers made their 2013 annual access tariff filings, which, under the ICC
transition rules, require intrastate switched access rates subject to the ICC transition to be no higher than

54 See Appendix at 47 C.F.R. § 51.909(a)(6).
55 See NECA Petition, supra note 2.
56 See generally 2012 Price Cap Conversion Order, 27 FCC Rcd 15753.
57 Id. at 1.
58 Id. at 15764-65, paras. 32-33.
59 NECA Petition at 3-5. NECA proposes that, in the alternative to clarifying adjustments to intrastate switched
access rates as a result of the change to NECA interstate rates effective January 1, 2013, “the Commission could
consider extending its waiver of 51.909(a) [granted in the 2012 Price Cap Conversion Order] to the relevant
provisions of 51.909(b) as well, so as to make clear the rule does not require further adjustments to intrastate
switched access rates.” Id. at 4-5. Because this Order clarifies whether adjustments are required to intrastate
switched access rates as a result of the change in NECA intrastate switched access rates effective January 1, 2013,
we need not address NECA’s alternative waiver proposal and hereby dismiss that request as moot.
60 47 C.F.R. § 51.909(b). See also July 3, 2012 Annual Access Charge Tariff Filings, WCB/Pricing No. 12-07,
Order, 27 FCC Rcd 2981, 2982, para. 3 (Pric. Pol. Div. 2012) (2012 Annual Access Tariff Procedures Order) (the
Commission moved the 2012 annual access charge tariff effective date from July 1, 2012 to July 3, 2012).
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the corresponding interstate rates as of July 1, 2013.61 We believe that adjusting intrastate rates in this
manner would have presented an unnecessary administrative burden with little, if any, offsetting benefit.62
If the Commission had intended to require such adjustments, carriers would have been precluded from
doing so without further Commission action due to the prohibition on rate increases.63 Therefore, we
clarify that the Step 1 reduction was a one-time calculation that occurred on July 3, 2012 with no ongoing
intrastate ratemaking obligation as a result of the waiver.64 Thus, carriers were not required to recalculate
and re-file intrastate rates as of January 1, 2013.
19.
NECA also requests confirmation that NECA pooling carriers are not required to impute
differences between the current intrastate rates and what the intrastate rates would be if adjusted to
correspond with the increase in interstate rates required by the 2012 Price Cap Conversion Order.65
NECA notes that the Commission has required carriers to use the “maximum assessable rate” in
projecting 2012-13 intrastate revenues for purposes of calculating Eligible Recovery.66 As we clarified
above, no increase in intrastate rates is required in this context. Thus, there is no higher rate to impute,
and rate-of-return carriers must use the highest intrastate switched access rates they could have charged in
calculating true-ups to their 2012-13 tariff year Eligible Recovery.
20.
Finally, NECA asks the Commission to clarify whether, when calculating “Step 2”
transitional intrastate switched access rates, NECA pooling carriers whose interstate switched access rates
rose as of January 1, 2013 as a result of the 2012 Price Cap Conversion Order should raise their intrastate
switched access rates to match their interstate rate levels by July 1, 2013.67 The rules we clarify in
Section III above, which maintain interstate and intrastate switched access rate parity when a rate-of-
return carrier enters or exits the NECA pool, address this request by clarifying that NECA pooling
carriers must, in the circumstances described in the NECA Petition, raise their intrastate switched access
rates to match interstate switched access rate levels on July 1, 2013, subject to the same rate structure and
all subsequent rate and rate structure modifications.68 A carrier that does not raise its intrastate rates
would be required to impute the higher rates in projecting its switched access revenues for the 2013-14
tariff period when calculating its Eligible Recovery.

V.

“STEP 2” TRANSITIONAL INTRASTATE ACCESS SERVICE RATES
21.
Background. The USF/ICC Transformation Order, among other things, adopted rules
setting forth a transition path to bill-and-keep for certain terminating switched end office and transport
rates, certain originating and terminating dedicated transport rates, and certain legacy reciprocal

61 47 C.F.R. §§ 51.907(c), 51.909(c).
62 Requiring carriers to adjust their 2013 intrastate rates to account for interstate rate increases would trigger
ratemaking obligations, requiring carriers to re-file their adjusted intrastate rates in every state in which they provide
service.
63 See 47 C.F.R. § 51.909(a).
64 Carriers will, however, have to adjust their interstate switched access rates going forward to reflect changes in
NECA switched access rates. See Appendix § 51.909(c)(1).
65 NECA Petition at 5-7.
66 NECA Petition at 5; see 47 C.F.R. § 51.909(d).
67 See NECA Petition at 7-8.
68 See supra para. 15; 47 C.F.R. § 51.909(c)(1).
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compensation rates.69 As part of the “Step 1” transition, beginning July 1, 2012, price cap and rate-of-
return carriers were required to reduce intrastate terminating switched end office and transport rates,
originating and terminating dedicated transport rates, and reciprocal compensation rates by fifty percent
of the difference between such rates and each carrier’s interstate access rates as of December 29, 2011.70
As part of the “Step 2” transition, beginning July 1, 2013, price cap and rate-of-return carriers are
required to reduce their intrastate switched access rates, including originating and terminating dedicated
transport switched access service rates, to parity with interstate switched access rates.71 However, the
rules adopted in the USF/ICC Transformation Order to implement Step 2 of the transition inadvertently
omitted originating and terminating dedicated transport switched access service rates from the list of rate-
of-return carrier rate elements subject to the Step 2 reductions that must be reduced to the interstate level
by July 1, 2013.72
22.
Discussion. We correct this omission in the Commission’s rules by amending the rules
governing rate-of-return carriers’ transitional intrastate access rates.73 We revise the transitional intrastate
access service rate schedule in section 51.909(c)(1) to include originating and terminating dedicated
transport switched access services rates within the intrastate rate elements that must be reduced to parity
with interstate switched access rates beginning July 1, 2013.

VI.

TREATMENT OF LOCAL SWITCHING SUPPORT IN PART 69 CALCULATIONS

23.
Background. In the USF/ICC Transformation Order, the Commission eliminated Local
Switching Support (LSS) as a separate universal service support mechanism for rate-of-return carriers
beginning July 1, 2012.74 However, the amount that was previously recovered through LSS is now
accounted for in a rate-of-return carrier’s Eligible Recovery.75 Further, LSS continues to be listed as a
factor in making certain access charge calculations pursuant to Part 69 of the Commission’s rules.76
Treating LSS as zero in these circumstances could, absent clarification, enable rate-of-return carriers to
claim duplicative recovery for a portion of the amount previously recovered through LSS, which is
contrary to the intent of rules adopted in the USF/ICC Transformation Order.77 Accordingly, we revise
and clarify the Commission’s rules to resolve a potential conflict that exists between the calculation of
Eligible Recovery under section 51.917(d) and a potential reading of sections 69.306(d)(2) and 69.415(c).
24.
Section 51.917(d) provides the method for calculating a rate-of-return carrier’s Eligible
Recovery throughout the ICC reform transition period.78 Section 51.917(d)(1) states that

69 See USF/ICC Transformation Order, 26 FCC Rcd at 17933-36, paras. 800-01 and Fig. 9.
70 See 47 C.F.R. §§ 51.907(b), 51.909(b). See also 2012 Annual Access Tariff Procedures Order, 27 FCC Rcd at
2982, para. 3.
71 See 47 C.F.R. §§ 51.907(c), 51.909(c); see USF/ICC Transformation Order, 26 FCC Rcd at 17933-36, paras. 800-
01 and Fig. 9.
72 See 47 C.F.R. § 51.909(c)(1).
73 See USF/ICC Transformation Order, 26 FCC Rcd at 18149, para. 1404.
74 See 47 C.F.R. § 54.301(a)(1); USF/ICC Transformation Order, 26 FCC Rcd at 17758-60, paras. 253-57.
75 See 47 C.F.R. § 51.917(d).
76 See 47 C.F.R. §§ 69.306(d)(2), 69.415(c)(1).
77 See USF/ICC Transformation Order, 26 FCC Rcd at 17964-65, para. 862 n.1664.
78 See 47 C.F.R. § 51.917(d).
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“[n]otwithstanding any other provision of the Commission’s rules, a Rate-of-Return Carrier may recover
the amounts specified in this paragraph [paragraph (d)] through the mechanisms described in paragraphs
(e) and (f) of this section.”79 We read “notwithstanding” in this context to mean that other rules that are
inconsistent with the requirements of paragraph (d), or that would produce a result inconsistent with the
policies of the USF/ICC Transformation Order, must be interpreted consistent with section 51.917.80
Broadly speaking, section 51.917 establishes a rate-of-return carrier’s Base Period Revenue.81 A rate-of-
return carrier’s Base Period Revenue includes, among other things, its projected 2011 Interstate Switched
Access Revenue Requirement.82 A rate-of-return carrier’s projected 2011 Interstate Switched Access
Revenue Requirement, in turn, includes the revenue requirement that the rate-of-return carrier projected
to recover through LSS in the 2011-12 tariff period.83 Accordingly, the amount previously recovered
through LSS has been moved into a rate-of-return carrier’s revenue requirement, and is accounted for in
the calculation of a rate-of-return carrier’s Eligible Recovery.84
25.
Section 69.306(d)(2) Line-Side Port Costs Calculations. Some parties have questioned
whether the elimination of LSS as a separate universal service support mechanism could be interpreted as
altering the section 69.306(d)(2) access charge calculation that shifts line-side port costs to the Common
Line category.85 Section 69.306(d)(2) provides that “line-side port costs shall be assigned to the Common
Line category. Such amount shall be determined after any Local Switching support has been removed
from the interstate Local Switching revenue requirement.”86 One possible interpretation of this provision
is that because LSS has been eliminated, there is no amount by which to reduce the Local Switching
revenue requirement for purposes of determining the line-side port costs to shift to the Common Line
category. Absent clarification, rate-of-return carriers might apply the section 69.306(d)(2) thirty percent
default factor for calculating line-side port costs to the entire, unreduced, Local Switching revenue
requirement in order to determine the amount to be shifted to the Common Line category.
26.
We clarify that reading section 69.306(d)(2) to allow rate-of-return carriers to apply the
thirty percent default factor to the entire Local Switching revenue requirement would conflict with section
51.917 because the revenue recovery provided for what was formerly LSS is already accounted for in a
rate-of-return carrier’s Base Period Revenue. In essence, such an interpretation would allow a carrier to
recover thirty percent of its former LSS amount through higher Subscriber Line Charges, or, more likely,

79 47 C.F.R. § 51.917(d)(1).
80 See Implementation of the DTV Delay Act et al., MB Docket No. 07-148 et al., Second Report and Order and
Notice of Proposed Rulemaking, 24 FCC Rcd 2526, 2552-53, paras. 70-71 (2009) (finding both that a
“notwithstanding” clause contained in DTV Delay Act excused compliance with otherwise applicable legal
requirements that would impede Commission actions to implement DTV Delay Act by the statutory deadline, and
that the plain meaning of the language was reinforced by circumstances surrounding its passage). See also id. at
2552, para. 71 (quoting Liberty Maritime Corp. v. United States, 928 F.2d 413, 416 (D.C. Cir. 1991)) (“In other
contexts, the D.C. Circuit has interpreted similar ‘notwithstanding’ language ‘to supersede all other laws,’ stating
that ‘a clearer statement is difficult to imagine.’”).
81 See 47 C.F.R. § 51.917.
82 See 47 C.F.R. § 51.917(b)(7)(i).
83 See USF/ICC Transformation Order, 26 FCC Rcd at 17760, para. 257; id. at 17969, para. 872.
84 See 47 C.F.R. § 51.917(d).
85 See NECA Jan. 25 Ex Parte at 1.
86 47 C.F.R. § 69.306(d)(2).
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through higher Interstate Common Line Support (ICLS), without reducing the amount of Eligible
Recovery it would be entitled to receive under section 51.917(d). Such a result, where rate-of-return
carriers recover thirty percent of what was formerly LSS through a multi-million dollar line-port cost shift
to the Common Line category, was not anticipated by the USF/ICC Transformation Order. 87
27.
Furthermore, duplicative recovery is inconsistent with the policy goals of the USF/ICC
Transformation Order.88 Specifically, section 51.917(d)(1)(vii) provides that “[i]f a Rate-of-Return
Carrier recovers any costs or revenues that are already being recovered as Eligible Recovery through
Access Recovery Charges or the Connect America Fund from another source, that carrier’s ability to
recover reduced switched access revenue from Access Recovery Charges or the Connect America Fund
shall be reduced to the extent it receives duplicative recovery.”89 To avoid the potential for duplicative
recovery and the need to adjust future Eligible Recovery calculations to account for such duplicative
recovery, we revise section 69.306(d). Specifically, we clarify that a rate-of-return carrier shall assign
line-side port costs to the Common Line category equal to the line-side port costs it shifted in its 2011
Interstate Switched Access Revenue Requirement calculation. The Bureau found this approach
reasonable in the development of the average schedule formulas.90 This approach is consistent with
capping switched access rates and avoids requiring carriers to make unnecessary calculations in the cost
allocation process.
28.
Section 69.415 Transport Interconnection Charge Calculations. Similar to section
69.306(d)(2), section 69.415 includes LSS in calculations to determine the allocation of the Transport
Interconnection Charge (TIC) among the various access charge expense categories.91 The potential for
including a LSS value of zero in the calculation specified in section 69.415 could affect the calculation of
Eligible Recovery in a manner contrary to the Commission’s intent and similar to that described in the
preceding paragraph. Therefore, we revise section 69.415 to clarify that the amount of a rate-of-return
carrier’s TIC costs to be reallocated to each category must equal the amount of TIC costs the carrier
shifted to each category in its 2011 Interstate Switched Access Revenue Requirement calculation. The
Bureau found this approach reasonable in the development of the average schedule formulas, and we
likewise utilize it here.92

87 For 2011, LSS was projected to total $383.5 million. FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE,
UNIVERSAL SERVICE MONITORING REPORT, CC Docket No. 98-202, page 1-30, Table 1.10 (2011), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-311775A1.pdf (last visited Feb. 20, 2013).
88 See, e.g., USF/ICC Transformation Order, 26 FCC Rcd at 17964-65, para. 862 n.1664 (“If an incumbent LEC
receives recovery of any costs or revenues that are already being recovered as Eligible Recovery through ARCs or
the [Connect America Fund], that LEC’s ability to recover reduced switched access revenue from ARCs or the CAF
shall be reduced to the extent it receives duplicative recovery.”).
89 47 C.F.R. § 51.917(d)(1)(vii).
90 See National Exchange Carrier Association, Inc. 2011 Modification of Average Schedules, WC Docket No. 10-
251; National Exchange Carrier Association, Inc. 2012 Modification of Average Schedules, WC Docket No. 11-204,
Order, 27 FCC Rcd 6209, 6211, para. 6 (Wireline Comp. Bur. 2012) (Average Schedule Order).
91 Section 69.415(c) provides, in pertinent part, that the reallocation of the TIC shall be based on “each access
element’s projected revenue requirement divided by the total revenue requirement of all the access elements,
provided that . . . Local switching support shall not be included in the local switching category’s projected revenue
requirement, or in the total projected revenue requirement . . . .” 47 C.F.R. § 69.415(c).
92 Average Schedule Order, 27 FCC Rcd at 6210-11, paras. 4-6.
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VII.

CORPORATE OPERATIONS EXPENSE LIMIT AND MONTHLY $250 PER LINE CAP

29.
Background. In the USF/ICC Transformation Order, the Commission adopted limits on
the recovery of certain costs through universal service mechanisms. Specifically, the rules adopted in the
USF/ICC Transformation Order limited the amount of corporate operations expenses that a rate-of-return
carrier could recover through ICLS in section 54.901(c).93 The Commission also adopted a presumptive
monthly $250 per-line cap on the amount of total high-cost universal service support, which would reduce
the amount of ICLS received by certain carriers.94 Several parties have questioned the extent to which
disallowed expenses or reduced ICLS may be recovered through the NECA pooling processes.95
30.
Discussion. In this Order, we clarify that the recovery limitations for corporate
operations expenses adopted in the USF/ICC Transformation Order shall operate as limits on a rate-of-
return carrier’s ability to recover the disallowed amounts through the NECA pooling processes.
Permitting carriers to receive increased pool settlements to offset such reductions to ICLS would
effectively create an implicit support flow to replace the disallowed explicit support. This treatment is
also comparable to the effect that a non-pooling rate-of-return carrier would experience because it cannot
look to other carriers to recover amounts it does not receive as a result of the recovery limitations.
Therefore, it is appropriate for NECA to modify its procedures such that the effect of the corporate
operations expense limit and the monthly $250 per-line cap are not shifted to common line NECA
pooling carriers.96 In addition to clarifying the scope of the limitations, we revise section 54.901(c) to
clarify operation of the limitations discussed above as they relate to interstate corporate operations
expenses allocated to the Common Line category, consistent with the USF/ICC Transformation Order.

VIII.

TRUE-UP ADJUSTMENT MECHANISMS

31.
Background. In the USF/ICC Transformation Order, the Commission required rate-of-
return carriers to project ICC revenues for use in determining Eligible Recovery.97 Because projected
demand, an input needed in order to project ICC revenues, likely differs from actual demand, the
Commission adopted a true-up procedure for rate-of-return carriers to adjust their Eligible Recovery to
account for any difference between projected and actual switched access revenues resulting from demand
variations.98 The Commission also adopted true-up procedures for price cap and rate-of-return carriers to
adjust their Eligible Recovery to account for any difference between projected and actual ARC revenues
resulting from ARC demand variations.99 Under these true-up procedures, a carrier’s Eligible Recovery

93 47 C.F.R. § 54.901(c); USF/ICC Transformation Order, 26 FCC Rcd at 17747-49, paras. 227-33.
94 47 C.F.R. § 54.302. The Commission expressly invited carriers to seek waiver of this rule if they could
demonstrate a need for support in excess of $250 per-line, per-month. USF/ICC Transformation Order, 26 FCC
Rcd at 17766, para. 278. Further, the Commission considered and rejected petitions for reconsideration of its
decision to extend the corporate operations expense limit to ICLS and the $250 monthly per-line cap on total high-
cost universal service support. See Connect America Fund, WC Docket No. 10-90; High-Cost Universal Service
Support
, WC Docket No. 05-337, Sixth Order on Reconsideration and Memorandum Opinion and Order, FCC 13-16
(rel. Feb. 27, 2013).
95 See, e.g. NECA Jan. 25 Ex Parte at 1.
96 See 47 C.F.R. §§ 54.901(c), 54.302.
97 See USF/ICC Transformation Order, 26 FCC Rcd at 17892-93, paras. 898-99.
98 47 C.F.R. § 51.917(d)(1)(iii); see USF/ICC Transformation Order, 26 FCC Rcd at 17892-93, paras. 898-99.
99 47 C.F.R. §§ 51.915(d)(1)(iii)(F), (d)(1)(iv)(F), (d)(1)(v)(F), (d)(1)(v)(F), (d)(1)(vi)(G), (d)(1)(vii)(H), (d)(1)(viii),
51.917(d)(1)(iii)(D).
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for the period reflecting the true-up would be reduced if the carrier’s actual demand exceeded projected
demand; likewise a carrier’s Eligible Recovery would be increased if the carrier’s actual demand was less
than projected demand.100
32.
Discussion. The rules implementing the true-up adjustments do not properly calculate
the difference between projected and actual revenues resulting from the difference in projected and actual
demand consistent with the USF/ICC Transformation Order.101 By not correctly accounting for actual
revenues, true-up revenue is incorrectly calculated and is, therefore, not correctly reflected in the steps for
calculating Eligible Recovery each year as intended by the USF/ICC Transformation Order.102 Revising
the rules is necessary in order for price cap and rate-of-return carriers to correctly implement the true-up
procedures adopted in the USF/ICC Transformation Order. Therefore, we amend sections 51.915103 and
51.917104 so that they correctly set out the method for determining the amount of any true-up consistent
with the USF/ICC Transformation Order.

IX.

PROCEDURAL MATTERS

A.

Paperwork Reduction Act

33.
This document does not contain new or modified information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA).105 Therefore, the Order does not contain any new
or modified information collection burdens for small businesses with fewer than 25 employees, pursuant
to the Small Business Paperwork Relief Act of 2002.106

B.

Final Regulatory Flexibility Act Certification

34.
The Regulatory Flexibility Act of 1980, as amended (RFA),107 requires agencies to
prepare a regulatory flexibility analysis for rulemaking proceedings, unless the agency certifies that “the
rule will not have a significant economic impact on a substantial number of small entities.”108 The RFA
generally defines “small entity” as having the same meaning as the terms “small business,” “small
organization,” and “small governmental jurisdiction.”109 In addition, the term “small business” has the

100 See USF/ICC Transformation Order, 26 FCC Rcd at 17893, para. 899.
101 See id. at 17892-93, paras. 898-99.
102 See id.
103 See 47 C.F.R. §§ 51.915(b)(13), (d)(1)(iii)(F), (d)(1)(iv)(F), (d)(1)(v)(F), (d)(1)(v)(F), (d)(1)(vi)(G),
(d)(1)(vii)(H), (d)(1)(viii).
104 See 47 C.F.R. §§ 51.917(b)(5)-(6), (d)(1)(iii)(D).
105 Pub. Law No. 104-13; 44 U.S.C. Part 35.
106 Pub. Law No. 107-198; see 44 U.S.C. § 3506(c)(4).
107 The RFA, see 5 U.S.C. § 601 et seq., has been amended by the Contract With America Advancement Act of
1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA).
108 5 U.S.C. § 605(b).
109 5 U.S.C. § 601(6).
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same meaning as the term “small business concern” under the Small Business Act.110 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).111
35.
We hereby certify that the rule revisions adopted in this Order will not have a significant
economic impact on a substantial number of small entities. This Order amends rules adopted in the
USF/ICC Transformation Order by correcting conflicts between the new or revised rules and existing
rules, as well as addressing omissions or oversights. These revisions do not create any burdens, benefits,
or requirements that were not addressed by the Final Regulatory Flexibility Analysis attached to the
USF/ICC Transformation Order.112 The Commission will send a copy of this Order, including a copy of
this final certification, to the Chief Counsel for Advocacy of the Small Business Administration.113 In
addition, the Order (or a summary thereof) and certification will be published in the Federal Register.114

C.

Congressional Review Act

36.
The Commission will send a copy of this Order to Congress and the Government
Accountability Office pursuant to the Congressional Review Act.115

X.

ORDERING CLAUSES

37.
Accordingly, IT IS ORDERED, pursuant to the authority contained in sections 1, 2, 4(i),
201-203, 220, 251, 252, 254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C.
§§ 151, 152, 154(i), 201-203, 220, 251, 254, 252, 303(r), and 403, and pursuant to sections 0.91, 0.201(d),
0.291, 1.3, and 1.427 of the Commission's rules, 47 C.F.R. §§ 0.91, 0.201(d), 0.291, 1.3, and 1.427 and
pursuant to the delegation of authority in paragraph 1404 of 26 FCC Rcd 17663 (2011), that this Order IS
ADOPTED, effective thirty (30) days after publication of the text or summary thereof in the Federal
Register.
38.
IT IS FURTHER ORDERED that Parts 51, 54 and 69 of the Commission’s rules, 47
C.F.R. sections 51.909, 51.915, 51.917, 54.304, 69.306, and 69.415 are AMENDED as set forth in the
Appendix, and such rule amendments shall be effective 30 days after the date of publication of the rule
amendments in the Federal Register.

110 5 U.S.C. § 601(3) (incorporating by reference the definition of “small business concern” in Small Business Act,
15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an
agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity
for public comment, establishes one or more definitions of such term which are appropriate to the activities of the
agency and publishes such definition(s) in the Federal Register.” 5 U.S.C. § 601(3).
111 Small Business Act, 15 U.S.C. § 632.
112 See USF/ICC Transformation Order, 26 FCC Rcd at 18324-63, App. O.
113 15 U.S.C. § 632.
114 Id.
115 See 5 U.S.C. § 801(a)(1)(A).
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39.
IT IS FURTHER ORDERED that, pursuant to section 1.3 of the Commission’s rules, 47
C.F.R. § 1.3, and pursuant to the authority delegated in sections 0.91 and 0.291 of the Commission’s
rules, 47 C.F.R. §§ 0.91, 0.291, sections 51.915(f)(6), 51.917(f)(3), 54.304(c)(1), (d)(1), 47 C.F.R. §§
51.915(f)(6), 51.917(f)(3), 54.304(c)(1), and (d)(1), ARE WAIVED effective upon release of this Order
for the limited purpose specified in paragraph 7, supra, of this Order.
40.
IT IS FURTHER ORDERED, pursuant to the authority contained in sections 1-4 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154, and the authority delegated in sections
0.91 and 0.291 of the Commission’s rules, 47 C.F.R. §§ 0.91 and 0.291, that the National Exchange
Carrier Association, Inc. Petition for Clarification or Waiver, WC Docket No. 12-63, Transmittal Nos. 41,
28, 57 (filed Dec. 27, 2012) is GRANTED to the extent provided herein and DISMISSED AS MOOT to
the extent provided herein.
41.
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.116
42.
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
Julie A. Veach
Chief, Wireline Competition Bureau

116 Id.
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APPENDIX

Final Rules

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 C.F.R.
parts 51, 54 and 69.

PART 51—INTERCONNECTION

1.
The authority citation for part 51 continues to read as follows:
Authority: Sections 1–5, 7, 201–05, 207–09, 218, 220, 225–27, 251–54, 256, 271, 303(r), 332, 706 of the
Telecommunication Act of 1996, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151–55, 157, 201–05, 207–
09, 218, 220, 225–227, 251–254, 256, 271, 303(r), 332, 1302, 47 U.S.C. 157 note, unless otherwise noted.

Subpart J—Transitional Access Service Pricing

2.
Amend 47 C.F.R. § 51.909 by revising paragraphs (a)(3) and (c)(1) and adding paragraphs (a)(4)-
(6) to read as follows:
§ 51.909 Transition of rate-of-return carrier access charges.
(a) * * *
(3) Except as provided in paragraphs (a)(6) and (b)(4) of this section, nothing in this section
obligates or allows a Rate-of-Return Carrier that has intrastate rates lower than its functionally
equivalent interstate rates to make any intrastate tariff filing or intrastate tariff revisions raising
such rates.
(4) Notwithstanding the requirements of paragraph (a)(1) of this section, if a Rate-of-Return
Carrier enters or exits the National Exchange Carrier Association (Association), as defined in §
69.2(d) of this chapter, traffic-sensitive tariff pursuant to the provisions of § 69.3(e)(6) of this
chapter, the Association shall adjust its switched access rate caps referenced in paragraph (a)(1)
of this section.
(i) For each entering Rate-of-Return Carrier, the Association shall:
(A) Determine each entering Rate-of-Return Carrier’s interstate switched access
revenues for the preceding calendar year;
(B) Determine the revenues that would have been realized by the entering Rate-
of-Return Carrier in the preceding calendar year if it had used the Association’s
switched access rates (employing the rates for the appropriate bands) as of
December 31 of the preceding year and the entering Rate-of-Return Carrier’s
switched access demand used to determine switched access revenues under
paragraph (a)(4)(i)(A) of this section; and
(C) Subtract the sum of the revenues determined pursuant to paragraph
(a)(4)(i)(A) of this section from the sum of the revenues determined pursuant to
paragraph (a)(4)(i)(B) of this section.
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(ii) The Association shall determine the amount by which each exiting Rate-of-Return
Carrier is a net contributor or net recipient to or from the switched access segment of the
Association pool as follows:
(A) The Association shall calculate the difference between each exiting Rate-of-
Return Carrier’s 2011-2012 tariff year projected interstate switched access
revenues excluding Local Switching Support and the Rate-of-Return Carrier’s
projected switched access pool settlements excluding Local Switching Support
for the same period with a net contribution amount being treated as a positive
amount and a net recipient amount being treated as a negative amount. The
Association shall divide the calculated difference by the Rate-of-Return Carrier’s
2011-2012 tariff year projected interstate switched access revenues excluding
Local Switching Support to produce a percent net contribution or net receipt
factor.
(B) The Association shall multiply the factor calculated in paragraph
(a)(4)(ii)(A) of this section by the Rate-of-Return Carrier’s billed switched access
revenues for the preceding calendar year to yield the amount of the Rate-of-
Return Carrier’s net contribution or net receipts for the calendar year.
(iii) To determine the Association’s adjusted switched access rate caps, the Association
shall:
(A) Add the amounts calculated under paragraphs (a)(4)(i) and (a)(4)(ii) of this
section;
(B) Divide the amount determined in paragraph (a)(4)(iii)(A) of this section by
the preceding year’s switched access revenues of the Rate-of-Return Carriers that
will participate in the Association traffic-sensitive tariff for the next annual tariff
period and multiply the result by negative one;
(C) The Association shall proportionately adjust its June 30 switched access rate
caps by the percentage amount determined in paragraph (a)(4)(iii)(B) of this
section.
(iv) The interstate switched access rate caps determined pursuant to paragraph
(a)(4)(iii)(C) of this section shall be the new capped interstate switched access rates for
purposes of § 51.909(a) of this Part. The Association shall provide support in its annual
access tariff filing to justify the revised interstate switched access rate caps, the Access
Recovery Charges that will be assessed, and the amount of Connect America Fund ICC
support each carrier will be eligible to receive.
(5) A Rate-of-Return Carrier exiting the Association traffic-sensitive tariff pursuant to §
69.3(e)(6) of this chapter must establish new switched access rate caps as follows:
(i) The Rate-of-Return Carrier shall multiply the factor determined in paragraph
(a)(4)(ii)(A) of this section by negative one and then multiply the result by the
Association’s capped switched access rates as of the date preceding the effective date of
the exiting Rate-of-Return Carrier’s next annual tariff filing. A Rate-of-Return Carrier
that was a net contributor to the pool will have rates that are lower than the Association
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switched access rates, while a net recipient will have switched access rates that are higher
than the Association’s switched access rates;
(ii) The interstate switched access rate caps determined pursuant to paragraph (a)(5)(i) of
this section shall be the new capped interstate switched access rates of the exiting Rate-
of-Return Carrier for purposes of § 51.909(a) of this Part. An exiting Rate-of-Return
Carrier shall provide support in its annual access tariff filing to justify the revised
interstate switched access rate caps, the Access Recovery Charges that will be assessed,
and the amount of Connect America Fund ICC support the carrier will be eligible to
receive.
(6) If the Association revises its interstate switched access rate caps pursuant to paragraph (a)(4)
of this section, each Rate-of-Return Carrier participating in the upcoming annual Association
traffic-sensitive tariff shall:
(i) Revise any of its intrastate switched access rates that would have reached parity with
its interstate switched access rates in 2013 to parity with the revised interstate switched
access rate levels;
(ii) The Association shall provide Rate-of-Return Carriers that are participating in the
Association traffic-sensitive pool with notice of any revisions the Association proposes
under paragraph (a)(4) of this section no later than May 1.
* * * * *
(c) * * *
(1) Transitional Intrastate Access Service rates shall be no higher than the Rate-of-Return
Carrier’s interstate Terminating End Office Access Service, Terminating Tandem-Switched
Transport Access Service, and Originating and Terminating Dedicated Transport Access Service
rates and subject to the same rate structure and all subsequent rate and rate structure
modifications. Except as provided in paragraph (c)(2) of this section, nothing in this section
obligates or allows a Rate-of-Return Carrier that has intrastate rates lower than its functionally
equivalent interstate rates to make any intrastate tariff filing or intrastate tariff revisions to
increase such rates.
* * * * *
3.
Amend 47 C.F.R. § 51.915 to revise paragraphs (b)(13), (d)(1)(iii)(F), (d)(1)(iv)(F), (d)(1)(v)(F),
(d)(1)(vi)(G), (d)(1)(vii)(H), (d)(1)(vii), (d)(1)(viii) and (f)(6) to read as follows:
§ 51.915 Recovery mechanism for price cap carriers.
* * * * *
(b) * * *
(13) True-up Revenues for Access Recovery Charge. True-up revenues for Access Recovery
Charge are equal to (projected demand minus actual realized demand for Access Recovery
Charges) times the tariffed Access Recovery Charge. This calculation shall be made separately
for each class of service and shall be adjusted to reflect any changes in tariffed rates for the
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Access Recovery Charge. Realized demand is the demand for which payment has been received
by the time the true-up is made.
* * * * *
(d) * * *
(1) * * *
(iii) * * *
(F) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2012.
(iv) * * *
(F) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2013.
(v) * * *
(F) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2014.
(vi) * * *
(G) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2015.
(vii) * * *
(H) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2016.
(viii) Beginning July 1, 2019, and in subsequent years, a Price Cap Carrier's eligible
recovery will be equal to the amount calculated in paragraph (d)(1)(vii)(A) through
(d)(1)(vii)(H) of this section before the application of the Price Cap Carrier Traffic
Demand Factor applicable in 2018 multiplied by the appropriate Price Cap Carrier Traffic
Demand Factor for the year in question, and then adding an amount equal to True-up
Revenues for Access Recovery Charges for the year beginning July 1 two years earlier.
* * * * *
(f) * * *
(6) A Price Cap Carrier that elects to receive CAF ICC support must certify with its annual
access tariff filing that it has complied with paragraphs (d) and (e) of this section, and, after doing
so, is eligible to receive the CAF ICC support requested pursuant to paragraph (f) of this section.
* * * * *
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3.
Amend 47 C.F.R. § 51.917 to revise paragraphs (b)(5), (b)(6), (d)(1)(iii)(D), and (f)(3) to read as
follows:
§ 51.917 Revenue recovery for Rate-of-Return Carriers.
* * * * *
(b) * * *
* * * * *
(5) True-up Adjustment. The True-up Adjustment is equal to the True-up Revenues for any
particular service for the period in question.
(6) True-up Revenues. True-up Revenues from an access service are equal to (projected demand
minus actual realized demand for that service) times the default transition rate for that service
specified by § 51.909. True-up Revenues from a non-access service are equal to (projected
demand minus actual realized net demand for that service) times the default transition rate for that
service specified by § 20.11(b) or § 51.705 of this chapter. Realized demand is the demand for
which payment has been received, or has been made, as appropriate, by the time the true-up is
made.
* * * * *
(d) * * *
(1) * * *
(iii) * * *
(D) An amount equal to True-up Revenues for Access Recovery Charges for the
year beginning July 1, 2012.
* * * * *
(f) * * *
(3) A Rate-of–Return Carrier that elects to receive CAF ICC support must certify with its annual
access tariff filing that it has complied with paragraphs (d) and (e), and, after doing so, is eligible
to receive the CAF ICC support requested pursuant to paragraph (f) of this section.
* * * * *

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

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2.
Amend 47 C.F.R. § 54.304 to revise paragraphs (c)(1) and (d)(1) to read as follows:
§ 54.304 Administration of Connect America Fund Intercarrier Compensation Replacement.
* * * * *
(c) * * *
(1) A Price Cap Carrier seeking CAF ICC support pursuant to § 51.915 of this chapter shall file
data with the Administrator, the Commission, and the relevant state commissions no later than
June 30, 2012, for the first year, and on the date it files its annual access tariff filing with the
Commission, in subsequent years, establishing the amount of the Price Cap Carrier’s eligible
CAF ICC funding during the upcoming funding period pursuant to § 51.915 of this chapter. The
amount shall include any true-ups, pursuant to § 51.915 of this chapter, associated with an earlier
funding period.
* * * * *
(d) * * *
(1) A Rate-of-Return Carrier seeking CAF ICC support shall file data with the Administrator, the
Commission, and the relevant state commissions no later than June 30, 2012, for the first year,
and on the date it files its annual access tariff filing with the Commission, in subsequent years,
establishing the Rate-of-Return Carrier’s projected eligibility for CAF ICC funding during the
upcoming funding period pursuant to § 51.917 of this chapter. The projected amount shall
include any true-ups, pursuant to § 51.917 of this chapter, associated with an earlier funding
period.
* * * * *

Subpart K—Interstate Common Line Support Mechanism Rate-of-Return Carriers

3.
Amend 47 C.F.R. 54.901 to revise paragraphs (c) and (c)(2) to read as follows:
§ 54.901 Calculation of Interstate Common Line Support.
* * * * *
(c) Beginning January 1, 2012, for purposes of calculating the amount of Interstate Common Line
Support determined pursuant to paragraph (a) of this section that a non-price cap carrier may receive, the
corporate operations expense allocated to the Common Line Revenue Requirement, pursuant to § 69.409
of this chapter, shall be limited to the lesser of:
(1) * * *
(2) The portion of the monthly per-loop amount computed pursuant to § 36.621(a)(4)(iii) of this
chapter that would be allocated to the interstate Common Line Revenue Requirement
pursuant to § 69.409 of this chapter.
* * * * *
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PART 69—ACCESS CHARGES

1.
The authority citation for part 69 continues to read as follows:
Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403.

Subpart D—Apportionment of Net Investment

2.
Amend 47 C.F.R. § 69.306 to revise paragraph (d)(2) and add paragraph (d)(3) to read as follows:
§ 69.306 Central office equipment (COE).
* * * * *
(d) * * *
(1) * * *
(2) Until June 30, 2012, for non-price cap local exchange carriers, line-side port costs shall be
assigned to the Common Line rate element. Such amount shall be determined after any local
switching support has been removed from the interstate Local Switching revenue requirement.
Non-price cap local exchange carriers may use thirty percent of the interstate Local Switching
revenue requirement, minus any local switching support, as a proxy for allocating line port costs
to the Common Line category.
(3) Beginning July 1, 2012, a non-price cap local exchange carrier shall assign line-side port costs
to the Common Line rate element equal to the amount of line-side port costs it shifted in its 2011
projected Interstate Switched Access Revenue Requirement.
* * * * *

Subpart E—Apportionment of Expenses

3.
Amend 47 C.F.R. § 69.415 to revise paragraphs (b) and (c) and add paragraph (d) to read as
follows:
§ 69.415 Reallocation of certain transport expenses.
* * * * *
(b) Until June 30, 2012, the amount to be reallocated is limited to the total revenues recovered through the
interconnection charge assessed pursuant to § 69.124 for the 12–month period ending June 30, 2001.
(c) Until June 30, 2012, the reallocation of the amount in paragraph (b) of this section shall be based on
each access element's projected revenue requirement divided by the total revenue requirement of all the
access elements, provided that:
* * * * *
(d) Beginning July 1, 2012, the amount of the Transport Interconnection Charges to be reallocated to each
category shall be equal to the amount of Transport Interconnection Charge costs the non-price cap local
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exchange carrier was projected to shift to each category in projecting its 2011 Interstate Switched Access
Revenue Requirement.
* * * * *
25

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