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Proposed Rule

Federal-State Joint Board on Universal Service

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AGENCY:

Federal Communications Commission

ACTION:

Notice of proposed rulemaking.

SUMMARY:

In this document, the Commission seeks comment on issues from the Ninth Report and Order remanded by the United States Court of Appeals for the Tenth Circuit. Specifically, the court remanded the Ninth Report and Order, to the Commission to “establish an adequate legal and factual basis for the Ninth Order and, if necessary, to reconsider the operative mechanism promulgated in that Order.” The Commission seeks Start Printed Page 10868comment on issues remanded by the court.

DATES:

Comments are due April 10, 2002. Reply comments are due April 25, 2002.

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FOR FURTHER INFORMATION CONTACT:

Katie King at (202) 418-7491 or Jennifer Schneider at (202) 418-0425 in the Accounting Policy Division, Common Carrier Bureau.

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SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Notice of Proposed Rulemaking in CC Docket No. 96-45 released on February 15, 2002 (NPRM). The NPRM is related to an Order that was released as part of the same document. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW, Washington, DC, 20554.

I. Introduction

1. In this NPRM, the Commission seeks comment on the issues from the Ninth Report and Order, 64 FR 67416, December 1, 1999, remanded by the United States Court of Appeals for the Tenth Circuit. The Ninth Report and Order established a federal high-cost universal service support mechanism for non-rural carriers based on forward-looking economic costs. The court remanded the Ninth Report and Order to the Commission for further consideration and explanation of its decision. Specifically, the court remanded the Ninth Report and Order to the Commission to “establish an adequate legal and factual basis for the Ninth Order and, if necessary, to reconsider the operative mechanism promulgated in that Order.” In particular, the court concluded that the Commission did not (1) define adequately the key statutory terms “reasonably comparable” and “sufficient'; (2) adequately explain setting the funding benchmark at 135 percent of the national average; (3) provide inducements for state universal service mechanisms; or (4) explain how this funding mechanism will interact with other universal service programs. The Commission seeks comment on the first three issues and refers the record collected in this proceeding to the Federal-State Joint Board on Universal Service (Joint Board) for a recommended decision in the Order, released with the NPRM.

II. Issues for Comment

2. The Commission seeks comment on a number of issues that will enable the Commission to better explain or modify the forward-looking high-cost universal service support mechanism implemented in the Ninth Report and Order consistent with the court's decision. Specifically, the Commission seeks comment on: (1) How the Commission should define certain key statutory terms; (2) whether, in light of the interpretation of those key statutory terms, the Commission can and should maintain the previously established benchmark or, in the alternative, should adopt a new benchmark or benchmarks; and (3) how the Commission should induce states to implement state universal service policies.

A. Definitions of “Reasonably Comparable” and “Sufficient”

3. The Commission seeks comment on how it should define reasonably comparable for the purpose of achieving reasonable comparability of rates. Section 254 of the Communications Act of 1934, as amended (Act), suggests that rates in rural, insular and high cost areas should be compared to rates in urban areas to determine reasonable comparability. The Commission makes a two step inquiry. First, when determining whether rates are reasonably comparable, the Commission seeks comment on what should be compared. For example, such a comparison could be: “urban” rates compared to all other rates, “rural” rates compared to all other rates, or specifically defined urban and rural rates compared to each other. The Commission seeks comment on appropriate definitions of urban and rural. If commenters suggest that urban and/or rural should be defined by geographical areas, the Commission requests comment on the particular breakdown of such areas. For example, urban and rural could be defined in terms of population density. Urban and rural also could be defined by number of lines per wire center. If the line count per wire center is used, would small wire centers in large cities be defined as rural? Is it possible to adequately define reasonable comparability without adopting a definition for urban and rural? Second, the Commission seeks comment on what a fair range of rates would be to determine whether rates are reasonably comparable. The court suggested that rates differing 70 to 80 percent would not be within a fair range of rates that could be considered reasonably comparable. In this regard, the Commission notes that costs in rural areas may be one hundred times greater than costs in urban areas. Taking into account such cost differences, what is a reasonable range of rates? What other factors should be considered when determining reasonable comparability of rates? The Commission seeks empirical evidence of the range of rates in rural and urban areas based on the definition of those terms provided by commenters.

4. The Commission also seeks comment on what it means for federal support for universal service to be “sufficient.” Specifically, if the Commission determines that high-cost support results in rural rates that are reasonably comparable to urban rates, is that level of support sufficient under section 254 of the Act, or should the Commission take a broader examination of sufficiency? In establishing the support mechanism, the Commission attempted to balance the goal of ensuring that consumers in high-cost areas have affordable access to quality service, against the goal of ensuring that the fund is no larger than necessary to minimize the burdens on the carriers that contribute. Because the Commission must weigh several principles in determining the sufficiency of its support, the Commission seeks comment on whether it should give more weight to the principle of reasonable comparability of rates, or should the Commission continue to give weight equally to other principles listed in section 254(b) of the Act. In addition, assuming that states will implement mechanisms to support universal service, as suggested by the court and described, the Commission seeks comment on whether sufficiency should be determined by considering federal support only, or state support as well.

B. Benchmark Issues

5. The Commission seeks comment on whether it should adopt a different benchmark or benchmarks or whether it should continue to use the 135 percent benchmark. If commenters suggest that the Commission should adopt a new benchmark or benchmarks, the Commission seeks comment on how it should determine the new benchmark(s). Commenters should provide both reasoned analysis and empirical data to show that their proposed benchmarks support reasonable comparability of rates and sufficient high-cost support. The Commission also notes that the high-cost loop support mechanism for rural carriers does not use a single benchmark but, rather, uses a step function. The step function has multiple benchmarks with greater percentages of support provided as costs increase. The Commission seeks comment on whether it should adopt a step function (or some formula that provides a larger percentage of support as costs increase) in the federal high-cost support Start Printed Page 10869mechanism for non-rural carriers as well. Commenters should describe precisely how the step function would operate, the range and intervals of steps, and provide the empirical support and analysis for how such a function would support reasonable comparability of rates and sufficiency of support. To the extent commenters advocate that the Commission should retain the 135 percent benchmark, commenters should provide both reasoned analysis and empirical data to show that the 135 percent benchmark supports reasonable comparability of rates and sufficiency of support. In this regard, the Commission notes that the 135 percent benchmark is consistent with an average of the benchmarks used in the high-cost loop support mechanism, which previously provided support to all carriers (and currently provides support to rural carriers). The Commission seeks comment on whether an average of benchmarks is appropriate for the non-rural high-cost mechanism.

6. The Commission also seeks comment on whether it should continue to use a benchmark based on nationwide average cost and compare it to statewide average costs. Although the court rejected Qwest's argument that the use of statewide and national averages is necessarily inconsistent with section 254, the court suggested that such a comparison would not be consistent with the statutory comparison of urban and rural rates without evidence that the benchmark actually produced comparable rates. If the Commission continues to use nationwide and statewide averages, how should the Commission measure reasonable comparability when rural costs are included in the nationwide average? In the alternative, should the Commission use a benchmark or benchmarks based on urban-only costs? Will definitions of “urban” and “rural” be required to determine an urban-only benchmark? To the extent the Commission decides to implement a benchmark based only on urban and/or rural costs, should this definition be the same as discussed above in section II.A.? The Commission also seeks comment on how the terms “urban” and “rural” should be defined—e.g., by wire centers of a certain size, by certain density zones, urban versus non-urbanized areas or some other criterion. Commenters should provide empirical support and analysis showing how their proposed benchmark or benchmarks result in reasonably comparable urban and rural rates and define precisely the statutory terms, urban, rural, and reasonably comparable in their proposed methodology.

C. State Inducements

1. The Commission seeks comment on how it should induce states to implement mechanisms to support universal service. Specifically, the Commission seeks comment on whether it should: (1) implement a state share requirement, similar to that of the Seventh Report and Order, 64 FR 30917, June 9, 1999; (2) condition federal support on some form of state action; (3) enter into a binding cooperative agreement with states as suggested by the court; or (4) adopt some other form of state inducement. To the extent that commenters suggest the Commission should adopt one of these options, commenters should provide specific descriptions of their proposals and recommendations for implementation. If the Commission were to condition federal support on state action, in what manner and to what extent should federal support be so conditioned? The Commission also seeks comment on what kind of state action should be required. If the Commission were to enter into binding cooperative agreements with states, what form should the agreements take? Would the Commission enter into such an agreement with individual states or with the states collectively? How would such an agreement be enforced? In addition, how would the Commission induce and enforce the inducement of states to implement universal service support mechanisms in states that do not receive federal universal service support under the non-rural high-cost mechanism?

III. Procedural Issues

A. Ex Parte Presentations

8. This is a permit but disclose rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in the Commission's rules.

B. Initial Regulatory Flexibility Analysis

9. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared this present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this NPRM. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM provided in paragraph number 21 of the item. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register.

1. Need for, and Objectives of, the Proposed Rules

10. In the First Report and Order, 62 FR 32862, June 17, 1997, the Commission adopted a plan for universal service support for rural, insular, and high cost areas to replace longstanding federal subsidies to incumbent local telephone companies with explicit, competitively neutral federal universal service mechanisms. In doing so, the Commission adopted the recommendation of the Joint Board that an eligible carrier's support should be based upon the forward-looking economic cost of constructing and operating the network facilities and functions used to provide the services supported by the federal universal service mechanism. In the Ninth Report and Order, the Commission adopted a federal high-cost universal service support mechanism for non-rural carriers based on forward-looking economic costs. The U.S. Court of Appeals for the Tenth Circuit remanded the Ninth Report and Order to the Commission for further explanation of its decision.

11. In the NPRM, the Commission seeks comment on issues from the Ninth Report and Order, remanded by the United States Court of Appeals for the Tenth Circuit. Specifically, the Commission seeks comment on: (1) How the Commission should define the key statutory terms “reasonably comparable” and “sufficient'; (2) whether, in light of the interpretation of those key statutory terms, the Commission can and should maintain the previously established benchmark or, in the alternative, should adopt a new benchmark or benchmarks; and (3) how the Commission should induce states to implement state universal service policies. The objective of the NPRM is to assemble a record, to refer the record collected in this proceeding to the Joint Board for a recommended decision, and to consider the record and Joint Board recommendations in formulating a response to the court's remand. The Commission expects that, upon receipt of a recommended decision from the Joint Board, the Commission will be able adopt an order implementing a high-cost support mechanism that will be sufficient to enable non-rural carriers' rates for service to remain affordable and Start Printed Page 10870reasonably comparable in all regions of the nation.

2. Legal Basis

12. This rulemaking action is supported by sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403 and 410 of the Communications Act of 1934, as amended.

3. Description and Estimate of the Number of Small Entities to Which the Notice Will Apply

13. The RFA generally defines “small entity” as having the same meaning as the term “small business,” “small organization,” and “small government jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act, unless the Commission has developed one or more definitions that are appropriate to its activities. Under the Small Business Act, a “small business concern” is one that: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the SBA.

14. The SBA has defined a small business for Standard Industrial Classification (SIC) category 4813 (Telephone Communications Except Radiotelephone) to be a small entity when it has no more than 1,500 employees.

15. The Commission has included small incumbent local exchange carriers in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope. The Commission has therefore included small incumbent local exchange carriers in this RFA analysis, although the Commission emphasizes that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

4. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

16. With respect to reporting and recordkeeping, the NPRM seeks comment on issues concerning the Ninth Report and Order, that have been remanded by the court, as described above. Changes in recordkeeping, if any, will primarily occur in the area of benchmark issues. If the Commission upholds the mechanism adopted in the Ninth Report & Order, there will be no changes. If the Commission changes the current high-cost support mechanism, however, adoption of new rules or requirements may require additional recordkeeping. For example, if the Commission adopts a mechanism that compares “urban” and/or “rural” costs or rates in order to determine an appropriate benchmark, additional information from all non-rural carriers may be necessary, such as line count information for urban and rural areas.

5. Steps Taken To Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

17. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.

18. The proposals resulting from the NPRM could have varying positive or negative impacts on telecommunications carriers, including any such small carriers. Public comments are welcomed in the NPRM that would reduce any potential impacts on small entities. Specifically, suggestions are sought on different compliance or reporting requirements that would take into account the resources of small entities. Comments are also sought on possibilities for clarification, consolidation, or simplification of compliance and reporting requirements for small entities that would be subject to the rules, and on whether waiver or forbearance from the rules for small entities would be feasible or appropriate. Comments should be supported by specific economic analysis.

19. The Commission does not believe that any final result in any area of the proposed rules under consideration will have a differential impact on small entities. With the request for comments in the NPRM, however, the commenters may present the Commission with various proposals that may have varying impacts on small entities. The Commission seeks comment on whether any proposals, if implemented, may result in an unfair burden.

6. Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rules

20. None.

C. Comment Filing Procedures

21. The Commission invites comment on the issues and questions set forth in the Notice of Proposed Rulemaking and Initial Regulatory Flexibility Analysis contained herein. Pursuant to applicable procedures set forth in §§ 1.415 and 1.419 of the Commission's rules, interested parties may file comments on or before April 10, 2002, and reply comments on or before April 25, 2002. All filings should refer to CC Docket No. 96-45. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies.

22. Comments filed through ECFS can be sent as an electronic file via the Internet to <http://www.fcc.gov/​e-file/​ecfs.html>. Generally, only one copy of an electronic submission must be filed. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket number, which in this instance is CC Docket No. 96-45. Parties may also submit an electronic comment by Internet e-mail. To receive filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message: get form <your e-mail address>. A sample form and directions will be sent in reply.

23. Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, commenters must submit two additional copies for each additional docket or rulemaking number. Parties who choose to file by paper are hereby notified that effective December 18, 2001, the Commission's contractor, Vistronix, Inc., will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at a new location in downtown Washington, DC. The address is 236 Massachusetts Avenue, NE, Suite 110, Washington, DC, 20002. The filing hours at this location will be 8:00 am to 7:00 pm. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. This facility is the only location where hand-delivered or messenger-delivered paper filings for the Commission's Secretary will be Start Printed Page 10871accepted. Accordingly, the Commission will no longer accept these filings at 9300 East Hampton Drive, Capitol Heights, MD, 20743. Other messenger-delivered documents, including documents sent by overnight mail (other than United States Postal Service (USPS) Express Mail and Priority Mail), must be addressed to 9300 East Hampton Drive, Capitol Heights, MD, 20743. This location will be open 8:00 a.m. to 5:30 p.m. The USPS first-class mail, Express Mail, and Priority Mail should continue to be addressed to the Commission's headquarters at 445 12th Street, SW, Washington, DC, 20554. The USPS mail addressed to the Commission's headquarters actually goes to our Capitol Heights facility for screening prior to delivery at the Commission.

If you are sending this type of document or using this delivery method.It should be addressed for delivery to * * *
Hand-delivered or messenger-delivered paper filings for the Commission's Secretary.236 Massachusetts Avenue, NE, Suite 110, Washington, DC 20002 (8:00 am to 7:00 pm).
Other messenger-delivered documents, including documents sent by overnight mail (other than United States Postal Service Express Mail and Priority Mail).9300 East Hampton Drive, Capitol Heights, MD 20743 (8:00 am to 5:30 pm).
United States Postal Service first-class mail, Express Mail, and Priority Mail.445 12th Street, SW Washington, DC 20554.

All filings must be sent to the Commission's Acting Secretary: William F. Caton, Office of the Secretary, Federal Communications Commission, 445 12th Street, SW, Suite TW-A325, Washington, DC 20554.

24. Parties who choose to file by paper should also submit their comments on diskette to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, Federal Communications Commission, 445 12th Street, SW, Room 5-B540, Washington, DC 20554. Such a submission should be on a 3.5-inch diskette formatted in an IBM compatible format using Microsoft Word or compatible software. The diskette should be accompanied by a cover letter and should be submitted in “read only” mode. The diskette should be clearly labeled with the commenter's name, proceeding (including the docket number, in this case, CC Docket No. 96-45), type of pleading (comment or reply comment), date of submission, and the name of the electronic file on the diskette. The label should also include the following phrase “Disk Copy—Not an Original.” Each diskette should contain only one party's pleading, preferably in a single electronic file. In addition, commenters must send diskette copies to the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554.

25. Regardless of whether parties choose to file electronically or by paper, parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, Qualex International, Inc., Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW, Washington, DC 20554. In addition, the full text of the document is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW, Room CY-A257, Washington, DC, 20554. The document may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com.

26. Comments and reply comments must include a short and concise summary of the substantive arguments raised in the pleading. Comments and reply comments must also comply with section 1.49 and all other applicable sections of the Commission's rules. The Commission directs all interested parties to include the name of the filing party and the date of the filing on each page of their comments and reply comments. All parties are encouraged to utilize a table of contents, regardless of the length of their submission. The Commission also strongly encourages parties to track the organization set forth in the NPRM in order to facilitate its internal review process.

D. Further Information

27. Alternative formats (computer diskette, large print, audio recording, and Braille) are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 voice, (202) 418-7365 TTY, or bmillin@fcc.gov. This NPRM can also be downloaded in Microsoft Word and ASCII formats at http://www.fcc.gov/​ccb/​universal_​service/​highcost.

IV. Ordering Clauses

28. Pursuant to sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403 and 410 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-205, 214, 218-220, 254, 303(r), 403 and 410, the Notice of proposed rulemaking is hereby Adopted.

29. The Commission's Consumer Information Bureau, Reference Information Center, Shall send a copy of the NPRM, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

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List of Subjects in 47 CFR Part 54

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Federal Communications Commission.

William F. Caton,

Acting Secretary.

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[FR Doc. 02-5676 Filed 3-8-02; 8:45 am]

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