[Federal Register: July 2, 2008 (Volume 73, Number 128)]
[Rules and Regulations]
[Page 37882-37891]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy08-41]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 32, 36 and 54
[WC Docket No. 05-337; CC Docket No. 96-45; FCC 08-122]
High-Cost Universal Service Support; Federal-State Joint Board on
Universal Service
AGENCY: Federal Communications Commission.
ACTION: Order.
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SUMMARY: In this Order, the Commission takes action to rein in the
explosive growth in high-cost universal service support disbursements.
As recommended by the Federal-State Joint Board on Universal Service,
the Commission adopts an interim, emergency cap on the amount of high-
cost support that competitive eligible telecommunications carriers
(ETCs) may receive. Specifically, as of the effective date of this
Order, total annual competitive ETC support for each state will be
capped at the level of support that competitive ETCs in that state were
eligible to receive during March 2008 on an annualized basis. The
Commission also adopts two limited exceptions from the specific
application of the interim cap. The interim cap will remain in place
only until the Commission adopts comprehensive high-cost universal
service reform. In addition, the Commission resolves most of the
petitions for ETC designation currently pending before the Commission.
DATES: This Order will be effective August 1, 2008.
FOR FURTHER INFORMATION CONTACT: Ted Burmeister, Telecommunications
Access Policy Division, Wireline Competition Bureau, 202-418-7389 or
TTY: 202-418-0484.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Order
in WC Docket No. 05-337 and CC Docket No. 96-45, adopted on April 29,
2008, and released on May 1, 2008. The complete text of this document
is available for inspection and copying during normal business hours in
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, Best Copy and Printing,
Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554,
telephone 800-378-3160 or 202-863-2893, facsimile 202-863-2898, or via
e-mail at http://www.bcpiweb.com. It is also available on the
Commission's Web site at http://www.fcc.gov.
Final Paperwork Reduction Act of 1995 Analysis: This document
contains new information collection requirements subject to the
Paperwork Reduction Act of 1995 (PRA). Paperwork Reduction Act of 1995,
Public Law 104-13, 109 Stat. 163 (1995). It will be submitted to the
Office of Management and Budget (OMB) for review under section 3507(d)
of the PRA. OMB, the general public, and other federal agencies are
invited to comment on the new information collection requirements
contained in this proceeding. In addition, we note that, pursuant to
the Small Business Paperwork Relief Act of 2002, we previously sought
specific comment on how the Commission might ``further reduce the
information collection burden for small business concerns with fewer
than 25 employees.'' Small Business Paperwork Relief Act of 2002,
Public Law 107-198, 116 Stat. 729 (2002); 44 U.S.C. 3506(c)(4).
In this present document, we have assessed the effects of
demonstrating compliance with the exception to the interim cap, and
find that there may be an increased administrative burden on businesses
with fewer than 25 employees. We have taken steps to minimize the
information collection burden for small business concerns, including
those with fewer than 25 employees. First, we note that compliance with
the exception is voluntary--small business concerns are not required to
comply with the information collection. In addition, compliance with
the exception will be elected by carriers on a study area by study area
basis. Carriers need only provide additional information on the study
areas for which they elect to rely on the exception to the interim cap.
Synopsis of the Order
Introduction
1. In this Order, we take action to rein in the explosive growth in
high-cost universal service support disbursements. As recommended by
the Federal-State Joint Board on Universal Service (Joint Board), we
adopt an interim, emergency cap on the amount of high-cost support that
competitive eligible telecommunications carriers (ETCs) may receive.
See High-Cost Universal Service Support; Federal-State Joint Board on
Universal Service, WC Docket No. 05-337, CC Docket No. 96-45,
Recommended Decision, 22 FCC Rcd 8998 (Fed.-State Jt. Bd. 2007)
(Recommended Decision). Specifically, as of the effective date of this
Order, total annual competitive ETC support for each state will be
capped at the level of support that competitive ETCs in that state were
eligible to receive during March 2008 on an annualized basis. We also
adopt two limited exceptions from the specific application of the
interim cap. First, a competitive ETC will not be subject to the
interim cap to the extent it files cost data demonstrating that its
costs meet the support threshold in the same manner as the incumbent
local exchange carrier (LEC). Second, we adopt a limited exception for
competitive ETCs serving tribal lands or Alaska Native regions. The
interim cap will remain in place only until the Commission adopts
comprehensive high-cost universal service reform. The Commission plans
to move forward on adopting comprehensive reform measures in an
expeditious manner. The Commission commits to completing a final order
on comprehensive reform as quickly as feasible after the comment cycle
is completed on the pending Commission Notices regarding comprehensive
reform. Finally, we resolve most of the petitions for ETC designation
currently pending before the Commission.
Background
2. For the past several years, the Joint Board has been exploring
recommending modifications to the
[[Page 37883]]
Commission's high-cost universal service support rules. In 2002, the
Commission asked the Joint Board to review certain of the Commission's
rules related to the high-cost universal service support mechanisms.
See Federal-State Joint Board on Universal Service, CC Docket No. 96-
45, Order, 67 FR 70703 (2002). Among other things, the Commission asked
the Joint Board to review the Commission's rules relating to high-cost
universal service support in study areas in which a competitive ETC
provides service. In response, the Joint Board made a number of
recommendations concerning the designation of ETCs in high-cost areas,
but declined to recommend that the Commission modify the basis of
support (i.e., the methodology used to calculate support) in study
areas with multiple ETCs. Instead, the Joint Board recommended that it
and the Commission continue to consider possible modifications to the
basis of support for competitive ETCs as part of an overall review of
the high-cost support mechanisms for rural and non-rural carriers.
3. In 2004, the Commission asked the Joint Board to review the
Commission's rules relating to the high-cost universal service support
mechanisms for rural carriers and to determine the appropriate rural
mechanism to succeed the plan adopted in the Rural Task Force Order.
See Federal-State Joint Board on Universal Service, CC Docket No. 96-
45, Order, 69 FR 48232, para. 1 (2004) (Rural Referral Order); Federal-
State Joint Board on Universal Service; Multi-Association Group (MAG)
Plan for Regulation of Interstate Services of Non-Price Cap Incumbent
Local Exchange Carriers and Interexchange Carriers, Fourteenth Report
and Order, Twenty-Second Order on Reconsideration, and Further Notice
of Proposed Rulemaking in CC Docket No. 96-45, and Report and Order in
CC Docket No. 00-256, 66 FR 30080 (2001) (Rural Task Force Order); see
also Federal-State Joint Board on Universal Service; High-Cost
Universal Service Support, CC Docket No. 96-45, WC Docket No. 05-337,
Order, 71 FR 30298 (2006) (extending the Rural Task Force Order plan).
In August 2004, the Joint Board sought comment on issues the Commission
referred to it related to the high-cost universal service support
mechanisms for rural carriers. See Federal-State Joint Board on
Universal Service Seeks Comment on Certain of the Commission's Rules
Relating to High-Cost Universal Service Support, CC Docket No. 96-45,
Public Notice, 69 FR 53917 (Fed.-State Jt. Bd. 2004). The Joint Board
also specifically sought comment on the methodology for calculating
support for ETCs in competitive study areas. Since that time, the Joint
Board has sought comment on a variety of specific proposals for
addressing the issues of universal service support for rural carriers
and the basis of support for competitive ETCs, including proposals
developed by members and staff of the Joint Board, as well as the use
of reverse auctions (competitive bidding) to determine high-cost
universal service funding to ETCs. See Federal State Joint Board on
Universal Service Seeks Comment on Proposals to Modify the Commission's
Rules Relating to High-Cost Universal Service Support, CC Docket No.
96-45, Public Notice, 20 FCC Rcd 14267 (Fed.-State Jt. Bd. 2005);
Federal-State Joint Board on Universal Service Seeks Comment on the
Merits of Using Auctions to Determine High-Cost Universal Service
Support, WC Docket No. 05-337, CC Docket No. 96-45, Public Notice, 21
FCC Rcd 9292 (Fed.-State Jt. Bd. 2006).
4. On May 1, 2007, the Joint Board recommended that the Commission
adopt an interim cap on high-cost universal service support for
competitive ETCs while the Joint Board considered proposals for
comprehensive reform. See Recommended Decision, 22 FCC Rcd at 8999-
9001, paras. 4-7. Specifically, the Joint Board recommended that the
Commission cap competitive ETC support at the amount of support
received by competitive ETCs in 2006. The Joint Board recommended that
the cap on competitive ETC support be applied at the state level.
Finally, the Joint Board recommended that the interim cap apply until
one year from the date that the Joint Board makes its recommendation
regarding high-cost universal service reform. On May 14, 2007, the
Commission released a Notice of Proposed Rulemaking, seeking comment on
the Joint Board's recommendation. High-Cost Universal Service Support;
Federal-State Joint Board on Universal Service, WC Docket No. 05-337,
CC Docket No. 96-45, Notice of Proposed Rulemaking, 72 FR 28936 (2007)
(Notice). On November 19, 2007, the Joint Board submitted to the
Commission recommendations for comprehensive reform of high-cost
universal service support. High-Cost Universal Service Support;
Federal-State Joint Board on Universal Service, WC Docket No. 05-337,
CC Docket No. 96-45, Recommended Decision, 22 FCC Rcd 20477 (2007)
(Comprehensive Reform Recommended Decision). On January 29, 2008, the
Commission released three notices of proposed rulemaking addressing
proposals for comprehensive reform of the high-cost universal service
support program. High-Cost Universal Service Support; Federal-State
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No.
96-45, Notice of Proposed Rulemaking, 73 FR 11580 (2008) (Identical
Support Rule NPRM); High-Cost Universal Service Support; Federal-State
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No.
96-45, Notice of Proposed Rulemaking, 73 FR 11591 (2008) (Reverse
Auctions NPRM); High-Cost Universal Service Support; Federal-State
Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No.
96-45, Notice of Proposed Rulemaking, 73 FR 11587 (2008) (Joint Board
Comprehensive Reform NPRM) (collectively Reform Notices). Comments on
the Reform Notices were due by April 17, 2008 and reply comments were
due by May 19, 2008. High-Cost Universal Service Support; Federal-State
Joint Board on Universal Service, CC Docket No. 96-45; WC Docket No.
05-337, Order, DA 08-674 (rel. Mar. 24, 2008) (extending comment and
reply comment dates); High-Cost Universal Service Support; Federal-
State Joint Board on Universal Service, CC Docket No. 96-45; WC Docket
No. 05-337, Order, DA 08-1168 (rel. May 15, 2008) (extending reply
comment date).
Discussion
5. We adopt, with limited modifications, the Joint Board's
recommendation for an emergency, interim cap on high-cost support for
competitive ETCs. This action is necessary to halt the rapid growth of
high-cost support that threatens the sustainability of the universal
service fund. As described below, annual support for competitive ETCs
in each state will be capped at the level of support that competitive
ETCs in that state were eligible to receive during March 2008, on an
annualized basis. As further discussed below, we also create a limited
exception to the cap to allow competitive ETCs that serve tribal lands
or Alaska Native regions to continue to receive support at uncapped
levels.
Need for a Cap on Competitive ETC Support
A Cap on Competitive ETC Support Is Required To Preserve the
Sustainability and Sufficiency of Universal Service
6. We agree with the Joint Board's assessment that the rapid growth
in high-cost support places the federal universal service fund in dire
jeopardy. In 2007, the universal service fund
[[Page 37884]]
provided approximately $4.3 billion per year in high-cost support. In
contrast, in 2001, high-cost universal service support totaled
approximately $2. 6 billion. In recent years, this growth has been due
to increased support provided to competitive ETCs, which receive high-
cost support based on the per-line support that the incumbent LECs
receive, rather than on the competitive ETCs' own costs. While support
to incumbent LECs has been flat since 2003, competitive ETC support, in
the seven years from 2001 through 2007, has grown from under $17
million to $1. 18 billion--an average annual growth rate of over 100
percent. We find that the continued growth of the fund at this rate is
not sustainable and would require excessive (and ever growing)
contributions from consumers to pay for this fund growth.
7. We conclude that immediate action must be taken to stem the
dramatic growth in high-cost support. Therefore, as recommended by the
Joint Board, we immediately impose an interim cap on high-cost support
provided to competitive ETCs until fundamental comprehensive reforms
are adopted to address issues related to the distribution of support
and to ensure that the universal service fund will be sustainable for
future years. The interim cap that we adopt herein limits the annual
amount of high-cost support that competitive ETCs can receive in the
interim period for each state to the amount competitive ETCs were
eligible to receive in that state during March 2008, on an annualized
basis.
8. We find that adopting an interim cap is consistent with the
requirement of section 254 of the Communications Act of 1934, as
amended (the Act), that support be ``sufficient'' to meet the Act's
universal service purposes. Telecommunications Act of 1996, Public Law
104-104, 110 Stat. 56 (1996) (the Act). The Commission previously has
concluded that the statutory principle of ``sufficiency'' proscribes
support in excess of that necessary to achieve the Act's universal
service goals. MAG Plan Order, 66 FR 59719, paras. 131-32; Rural Task
Force Order, 66 FR 30080, para. 27; Federal-State Joint Board on
Universal Service, CC Docket No. 96-45, Order on Remand, Further Notice
of Proposed Rulemaking, and Memorandum Opinion and Order, 68 FR 69627,
paras. 36-37 (2003), remanded, Qwest Corp. v. FCC, 398 F.3d 1222 (10th
Cir. 2005); 47 U.S.C. 254(b). Notably, the Commission has previously
adopted cost controls, including adopting an indexed cap on the high-
cost loop support mechanism, which the U.S. Court of Appeals for the
Fifth Circuit held to be consistent with the Act's universal service
mandate. Alenco Communications, Inc. v. FCC, 201 F.3d 608, 620-21 (5th
Cir. 2000) (``[t]he agency's broad discretion to provide sufficient
universal service funding includes the decision to impose cost controls
to avoid excessive expenditures that will detract from universal
service'').
9. Similarly, our action today applies interim cost controls to the
aspect that most directly threatens the specificity, predictability,
and sustainability of the fund: the rapid growth of competitive ETC
support. See 47 U.S.C. 254(b)(5). A primary consequence of the existing
competitive ETC support rules has been to promote the sale of multiple
supported wireless handsets in given households. See Petition of Qwest
Communications International Inc. for Forbearance from Enforcement of
the Commission's Dominant Carrier Rules As They Apply After Section 272
Sunsets, WC Docket No. 05-333, Memorandum Opinion and Order, 22 FCC Rcd
5207, 5218, para. 17 (2007) (stating that a majority of presubscribed
interexchange customers also subscribe to mobile wireless service);
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation
Act of 1993, Annual Report and Analysis of Competitive Market
Conditions with Respect to Commercial Mobile Services, WT Docket No.
07-71, Twelfth Report, 23 FCC Rcd 2241, at para. 246 (2008) (citing
survey reporting that only approximately 11. 8 percent of U.S.
households relied exclusively on wireless phones in 2006) (2007
Commercial Mobile Services Report). We do not today make a final
determination regarding the level of support to competitive ETCs that
is sufficient, but not excessive, for achieving the Act's universal
service goals because we expect to take further action to enact
fundamental reform. See Alenco, 201 F.3d at 619 (``excessive funding
may itself violate the sufficiency requirements of the Act''). Instead,
today we take the reasonable, interim step of capping annual
competitive ETC support for each state at the amount competitive ETCs
in that state were eligible to receive during March 2008 on an
annualized basis. Doing so will provide a necessary constraint on the
growth of support until comprehensive reform is adopted.
10. We do not find it necessary to adopt additional caps on support
provided to incumbent LECs at this time because, as the Joint Board
noted in its Recommended Decision, high-cost support to incumbent LECs
has been flat and is therefore exerting less pressure on the universal
service fund. Recommended Decision, 22 FCC Rcd at 9001, para. 5.
Moreover, incumbent LEC high-cost loop support is already capped, and
incumbent LEC interstate access support is subject to a targeted limit.
See 47 CFR 36.603, 54.801(a). Incumbent LEC disbursements from other
support mechanisms, like local switching support and interstate common
line support, have been stable in recent years. Further, although high-
cost model support has no actual cap, it does have built-in restraints
on growth, which derive from the fact that support is based on stable
statewide average estimated costs. Accordingly, we limit the interim
cap we adopt today to high-cost support provided to competitive ETCs.
11. Some parties argue that inefficiencies in high-cost support for
incumbent LECs are the root cause of the high-cost support growth, and
that the Commission must address these inefficiencies to stabilize the
fund. Although addressing inefficiencies in incumbent LEC support may
be necessary for comprehensive reform, we disagree that such review of
incumbent LEC support is necessary immediately to rein in the growth of
high-cost support for an interim period. First, as we have noted, total
incumbent LEC support has not grown in recent years and does not have
the same potential for rapid explosive growth competitive ETC support
does. Second, although increases in incumbent LEC high-cost support may
contribute indirectly to growth in high-cost support for competitive
ETCs, the interim cap on competitive ETC support we adopt today will
eliminate that growth potential. To the extent that there may be
inefficiencies in incumbent LEC high-cost support, we anticipate
addressing those in the context of comprehensive universal service
reform.
An Interim Cap on Competitive ETC Support Is Consistent With the Act
12. We disagree with arguments that capping support for competitive
ETCs violates the Act. As a general matter, the Commission's discretion
to establish caps on high-cost support has been upheld. See Alenco, 201
F.3d at 620. Moreover, as we discuss further below, we find no merit in
the arguments raised by commenters in this proceeding that this
particular cap violates the Act.
13. We disagree with comments that this cap violates the Act's
statutory principles. CTIA argues that the cap would violate the Act's
requirements that rates in rural areas should be reasonably comparable
to those in urban areas. CTIA, however, fails to provide
[[Page 37885]]
any data demonstrating that, or analysis explaining why the cap would
result in rural rates that are not comparable with those in urban
areas. Instead, it merely asserts that ``[t]he proposed cap will deny
customers access to reasonably equivalent rates, and to reasonably
equivalent services.'' There simply is no support in the record for
this contention. To the contrary, many wireless carriers that do not
receive high-cost support compete against wireless competitive ETCs
that do receive support, and many wireless competitive ETCs served
high-cost territories before they were designated as eligible to
receive support.
14. CTIA, along with Dobson, also contends that the cap violates
the universal service principle of sufficiency. Neither commenter,
however, provides any support for its contentions. To the contrary, as
we explain above, we believe that the statutory principle of
sufficiency is not inconsistent with the interim ``cost controls'' we
adopt herein. We find that the interim cap we adopt is consistent with
the principle of sufficiency as defined by the court in Alenco because
it seeks to eliminate support in excess of that necessary to ensure the
Act's universal service goals. See Alenco, 201 F.3d at 619. Further,
because competitive ETC support is based on the incumbent LEC's costs,
rather than on the competitive ETC's own costs, there is no reason to
believe--and no record data showing--that support subject to an interim
cap would necessarily result in insufficient support levels. Dobson
also argues that the cap will violate the universal service principle
of predictability because the effects of the cap ``will be driven by
factors that are not at all 'predictable'.'' Adoption of the interim
cap, however, makes competitive ETC support more predictable, in that
it sets an upper, definitive bound on the amount of support available
in a state. Moreover, Dobson ignores the fact that, as the court
concluded in Alenco, the Act's requirement of predictability requires
only that the rules governing distribution, not the resulting funding
amounts, must be predictable. Alenco, 201 F.3d at 623.
15. We are not persuaded by CTIA's argument, citing Alenco, that
the Act requires the promotion of competition in high-cost areas
through the provision of equal per-line support amounts to all
carriers. Rather than requiring the use of universal service support to
subsidize competition, the court in Alenco was concerned with the
sustainability of universal service in a competitive environment.
Specifically, the court found that ``[t]he Commission therefore is
responsible for making the changes necessary to its universal service
program to ensure that it survives in the new world of competition.''
Alenco, 201 F.3d at 615 (citing Federal-State Joint Board on Universal
Service, CC Docket No. 96-45, Report and Order, 62 FR 32861, paras. 1-
4, 20 (1997) (Universal Service First Report and Order) (stating that
the Commission, through its work with the Joint Board, ``ensure[s] that
this system is sustainable in a competitive marketplace, thus ensuring
that universal service is available at rates that are `just,
unreasonable [sic], and affordable' for all Americans'')). The court
stated that the Commission ``must see to it that both universal service
and competition are realized; one cannot be sacrificed in favor of the
other.'' See Alenco, 201 F.3d at 615. We therefore find that our action
today is not only consistent with, but is supported by, the court's
holding in Alenco.
16. Similarly, we are not persuaded by Alltel's argument that
competitive ETCs and incumbent LECs must receive the same amount of
support on a per-line basis. Although Alltel correctly notes that, in
upholding the cap on high-cost loop support, the court in Alenco
``rejected the premise that [incumbent LEC] revenue flows must be
protected at all costs, and thus that any reductions in disbursements
needed to prevent undue fund growth must be borne by [competitive ETCs]
rather than [incumbent LECs],'' Alltel fails to explain why the court's
holding requires equal per-line support for all competitors. Put
simply, while the court rejected the idea that any reductions in
disbursements necessary to curtail fund growth had to be borne by
competitive ETCs and not incumbent LECs, the court did not prohibit the
Commission from imposing reductions or limits on competitive ETC
disbursements.
17. CTIA argues that adoption of the interim cap would not comport
with the court's statement in Alenco that ``the program must treat all
market participants equally * * * so that the market, and not local or
federal government regulators, determines who shall compete for and
deliver service to customers.'' The cited language, however, does not
require the Commission to continue to provide identical levels of
support to all carriers. It merely requires that all ETCs must be
eligible to receive support, an unremarkable conclusion given the plain
text of the statute.
18. Alltel and CTIA both ignore key aspects of Alenco, in which the
court expressly found that the Commission must ensure that all
customers be able to receive affordable basic telecommunications
services.
Competition necessarily brings the risk that some telephone
service providers will be unable to compete. The Act only promises
universal service, and that is a goal that requires sufficient
funding of customers, not providers. So long as there is sufficient
and competitively-neutral funding to enable all customers to receive
basic telecommunications services, the FCC has satisfied the Act and
is not further required to ensure sufficient funding of every local
telephone provider as well. Moreover, excessive funding may itself
violate the sufficiency requirements of the Act.
Alenco, 201 F.3d at 620. Nowhere in the court's decision did it
require that all providers must receive equal per-line support amounts.
19. In arguing that the interim cap would not comport with the
identical support rule because it would disburse unequal support per
line, Alltel also cites various Commission precedents related to the
establishment and implementation of the identical support rule, which,
at the time, the Commission found to be consistent with its principle
of competitive neutrality. In justifying this portability requirement,
both the Joint Board and Commission made clear that they envisioned
that competitive ETCs would compete directly against incumbent LECs and
try to take existing customers from them. See Universal Service First
Report and Order, 62 FR 32861, paras. 287, 311; Federal-State Joint
Board on Universal Service, Recommended Decision, 61 FR 63778, para.
296 (Fed-State Jt. Bd. 1996). The predictions of the Joint Board and
the Commission have proven inaccurate, however.
20. First, they did not foresee that competitive ETCs might offer
supported services that were not viewed by consumers as substitutes for
the incumbent LEC's supported service. Second, wireless carriers,
rather than wireline competitive LECs, have received a majority of
competitive ETC designations, serve a majority of competitive ETC
lines, and have received a majority of competitive ETC support. These
wireless competitive ETCs do not capture lines from the incumbent LEC
to become a customer's sole service provider, except in a small portion
of households. See 2007 Commercial Mobile Services Report, 23 FCC Rcd
2241, at para. 246 (citing survey reporting that only approximately 11.
8 percent of U.S. households relied exclusively on wireless phones in
2006). Thus, rather than providing a complete substitute for
traditional wireline service, these
[[Page 37886]]
wireless competitive ETCs largely provide mobile wireless telephony
service in addition to a customer's existing wireline service.
21. This has created a number of serious problems for the high-cost
fund, and calls into question the rationale for the identical support
rule. Instead of competitive ETCs competing against the incumbent LECs
for a relatively fixed number of subscriber lines, the certification of
wireless competitive ETCs has led to significant increases in the total
number of supported lines. Because the majority of households do not
view wireline and wireless services to be direct substitutes, see
Petition of Qwest Communications International Inc. for Forbearance
from Enforcement of the Commission's Dominant Carrier Rules As They
Apply After Section 272 Sunsets, WC Docket No. 05-333, Memorandum
Opinion and Order, 22 FCC Rcd 5207, 5218, para. 17 (2007) (stating that
a majority of presubscribed interexchange customers also subscribe to
mobile wireless service); Commercial Mobile Services Report, 23 FCC Rcd
2241, at para. 246 (2008) (citing survey reporting that approximately
11. 8 percent of U.S. households relied exclusively on wireless phones
in 2006), many households subscribe to both services and receive
support for multiple lines, which has led to a rapid increase in the
size of the fund. In addition, the identical support rule fails to
create efficient investment incentives for competitive ETCs. Because a
competitive ETC's per-line support is based solely on the per-line
support received by the incumbent LEC, rather than its own network
investments in an area, the competitive ETC has little incentive to
invest in, or expand, its own facilities in areas with low population
densities, thereby contravening the Act's universal service goal of
improving the access to telecommunications services in rural, insular
and high-cost areas. See 47 U.S.C. 254(b)(3). Instead, competitive ETCs
have a greater incentive to expand the number of subscribers,
particularly those located in the lower-cost parts of high-cost areas,
rather than to expand the geographic scope of their network. The
Commission is currently considering eliminating the identical support
rule. Identical Support Rule NPRM, 73 FR 11580.
22. We also find that the Commission's universal service principle
of competitive neutrality does not preclude us from adopting an
interim, limited cap under existing circumstances. Universal Service
First Report and Order, 62 FR 32861, paras. 46-52 (subsequent history
omitted) (``[W]e define this principle, in the context of determining
universal service support, as: COMPETITIVE NEUTRALITY--Universal
service support mechanisms and rules should be competitively neutral.
In this context, competitive neutrality means that universal service
support mechanisms and rules neither unfairly advantage nor
disadvantage one provider over another, and neither unfairly favor nor
disfavor one technology over another.''). As discussed above, high-cost
support has increased by $1. 7 billion--more than 65 percent--from 2001
to 2007. Continued growth at this rate would render the amount of high-
cost support unsustainable and could cripple the universal service
fund. To avert this crisis, it is necessary to place some temporary
restraints on the fastest-growing portion of high-cost support, i.e.,
competitive ETC support. Moreover, as discussed above, it is not clear
that identical support has, in reality, resulted in competitive
neutrality. We therefore find that, rather than departing from the
principle of competitive neutrality, as a matter of policy, we instead
are temporarily prioritizing the immediate need to stabilize high-cost
universal service support and ensure a specific, predictable, and
sufficient fund. See 47 U.S.C. 254(b)(5), (d).
23. Finally, we reject arguments that the cap should not be adopted
because it will not be truly interim in nature. The interim cap will
remain in place only until the Commission adopts comprehensive, high-
cost universal service reform. Thus, we are satisfied that the interim
cap's life will be of limited duration.
Cap on Competitive ETC Support Would Not Inhibit Broadband Deployment
in Rural America
24. Several commenters argue that the interim cap on competitive
ETC support will inhibit the deployment of broadband services. With the
exception of GCI, these commenters provide only anecdotal evidence of
the possible effect of the interim cap on particular deployments, and
do not systematically analyze the effect of the interim cap on
broadband deployment. Moreover, although high-cost support for rural
incumbent LECs has been capped for many years, that does not appear to
have inhibited the deployment of broadband service to areas served by
rural incumbent LECs. Indeed, high-cost universal service support may
be used to invest in facilities to provide broadband service if those
facilities are also necessary to provide voice grade access. See Rural
Task Force Order, 66 FR 30080, paras. 199-201.
25. In light of the foregoing, we decline to adopt specific
requirements for competitive ETCs regarding the provision of broadband
Internet access services. Rather, we find that the role of high-cost
support mechanisms in promoting broadband deployment is better
addressed in a rulemaking of general applicability. In fact, the
Commission currently is considering proposals to provide high-cost
support for broadband service.
Design and Implementation of the Cap
Operation of the Cap
26. We adopt a cap on competitive ETC support for each state, as
recommended by the Joint Board, subject to two limited exceptions
described below. A competitive ETC cap applied at a state level will
effectively curb growth, but, given a state's role in designating ETCs,
will allow a state the flexibility to direct competitive ETC support to
the areas in the state that it determines are most in need of such
support. An interim, state-based cap on competitive ETC support also
will avoid creating an incentive for each state to designate as many
new ETCs as possible for the sole purpose of increasing support to that
state at the expense of other states, which could occur had we adopted
a single, nationwide cap. A state-based cap will require newly-
designated competitive ETCs to share funding with other competitive
ETCs within the state.
27. Under the state-based cap, support will be calculated using a
two-step approach. First, on a quarterly basis, the Universal Service
Administrative Company (USAC) will calculate the support each
competitive ETC would have received under the existing (uncapped) per-
line identical support rule, see 47 CFR 54.307, and sum these amounts
by state. Second, USAC will calculate a state reduction factor to
reduce this amount to the competitive ETC cap amount. Specifically,
USAC will compare the total amount of uncapped support to the cap
amount for each state. Where the total state uncapped support is
greater than the available state cap support amount, USAC will divide
the state cap support amount by the total state uncapped amount to
yield the state reduction factor. USAC will then apply the state-
specific reduction factor to the uncapped amount for each competitive
ETC within the state to arrive at the capped level of high-cost
support. Where the state uncapped support is less than the available
state capped support amount, no reduction will be required.
[[Page 37887]]
28. For example, if, in State A, the capped amount is $90 million,
and the total uncapped support is $130 million, the reduction factor
would be 69.2 percent ($90/$130). In State A, each competitive ETC's
uncapped support would be multiplied by 69.2 percent to reduce support
to the capped amount. If, in State B, however, the capped amount is
$100 million, and the total uncapped support is $95 million, there
would be no reduction factor because the uncapped amount is less than
the capped amount. Finally, if, in State C the base period capped
amount is $0 (i.e., there were no competitive ETCs eligible to receive
support in State C in March 2008), then no competitive ETCs would be
eligible to receive support in that state during the interim cap. Each
quarter, for the duration of the cap, a new reduction factor would be
calculated for each state.
29. Some commenters argue that, in states where there currently are
no competitive ETCs designated, subsequently designated competitive
ETCs will receive no high-cost support while the interim cap remains in
place. The Act does not, however, require that all ETCs must receive
support, but rather only that carriers meeting certain requirements be
eligible for support. 47 U.S.C. 214(e)(1); 254(e) (emphasis added).
Section 214(e)(1) of the Act states, ``A common carrier designated as
an eligible telecommunications carrier * * * shall be eligible to
receive universal service support in accordance with section 254[.]''
47 U.S.C. 214(e)(1) (emphasis added). Likewise, section 254(e) of the
Act states, ``[O]nly an eligible telecommunications carrier designated
under section 214(e) shall be eligible to receive specific Federal
universal service support.'' 47 U.S.C. 254(e) (emphasis added). This
language indicates that designation as an ETC does not automatically
entitle a carrier to receive universal service support. See Universal
Service First Report and Order, 62 FR 32861, para. 137 (``Indeed, the
language of section 254(e), which states that `only an eligible
telecommunications carrier designated under section 214(e) shall be
eligible to receive' universal service support, suggests that a carrier
is not automatically entitled to receive universal service support once
designated as eligible.''); Alenco, 201 F.3d at 620 (``The Act only
promises universal service, and that is a goal that requires sufficient
funding of customers, not providers.''). Moreover, in section 254 of
the Act, Congress distinguished between those who are merely
``eligible'' to receive support and those who are ``entitled'' to
receive benefits. Compare 47 U.S.C. 254(e) with 47 U.S.C. 254(h)(1)(A)
(providing that carriers offering certain services to rural health care
providers ``shall be entitled'' to have the difference between the
rates charged to health care providers and those charged to other
customers in comparable rural areas treated as an offset to any
universal service contribution obligation); see also Transbrasil S.A.
Linhas Aereas v. Dep't of Transp., 791 F.2d 202, 205 (D.C. Cir. 1986)
(``[W]here different terms are used in a single piece of legislation,
the Court must presume that Congress intended the terms have different
meanings.''). We find that Congress's careful delineation demonstrates
an intention to ascribe different statutory rights. Accordingly, even
if imposition of the interim cap results in no support for some
competitive ETCs, this result is not inconsistent with the Act.
30. Moreover, there are advantages to obtaining and maintaining an
ETC designation regardless of whether a competitive ETC receives high-
cost support. In particular, the ability of competitive ETCs to receive
low-income universal service support shows value in obtaining and
maintaining ETC designation separate and apart from high-cost support.
Indeed, TracFone Wireless, Inc. (TracFone) sought forbearance from
section 214(e)(1) of the Act so that it could seek designation as an
ETC eligible only to receive universal service Lifeline support.
TracFone took this step because ``offering prepaid plans which make
wireless service available to low income users * * * has been a
critical component of TracFone's business strategy since the company's
inception.'' Other ETCs may have similar business strategies. Further,
by offering Lifeline and Link Up service, a competitive ETC may attract
new subscribers that may not otherwise have taken telephone service.
This would increase a competitive ETC's base of subscribers and,
consequently, lower its average cost of serving all of its subscribers.
Moreover, competitive ETCs may be eligible for separate universal
service support at the state level. See, e.g., Kan. Stat. Ann. 66-2008
(2006) (providing for the creation of a Kansas universal service fund
(KUSF) and requiring that carriers be designated as an ETC pursuant to
section 214(e)(1) of the Act to receive support from the KUSF).
31. We adopt two limited exceptions to the operation of the interim
cap. First, consistent with the ALLTEL-Atlantis Order and the AT&T-
Dobson Order, we find it in the public interest to adopt a limited
exception to the interim cap if a competitive ETC submits its own
costs. See ALLTEL-Atlantis Order, 22 FCC Rcd at 19521, paras 9-10;
AT&T-Dobson Order, 22 FCC Rcd at 20329-30, paras. 70-72. Specifically,
a competitive ETC will not be subject to the interim cap to the extent
that it files cost data demonstrating that its costs meet the support
threshold in the same manner as the incumbent LEC.
32. Second, we also adopt a limited exception to the interim cap
for competitive ETCs that serve tribal lands or Alaska Native regions
(the Covered Locations). We permit competitive ETCs serving Covered
Locations to continue to receive uncapped high-cost support for lines
served in those Covered Locations. Because many tribal lands have low
penetration rates for basic telephone service, we do not believe that
competitive ETCs are merely providing complementary services in most
tribal lands, as they do generally. See Federal-State Joint Board on
Universal Service; Promoting Deployment and Subscribership in Unserved
and Underserved Areas, Including Tribal and Insular Areas, CC Docket
No. 96-45, Twelfth Report and Order, Memorandum Report and Order, and
Further Notice of Proposed Rulemaking, 65 FR 47883, para. 2 (2000)
(concluding that ``existing universal service support mechanisms are
not adequate to sustain telephone subscribership on tribal lands.'').
33. Participation in this limited exception to the interim cap is
voluntary and will be elected by the competitive ETC on a study area by
study area basis. Therefore, any competitive ETC that does not or
cannot opt into the limited exception, or that does not or cannot opt
into the limited exception for a particular Covered Location, will
remain subject to the interim cap as described herein. Support for
competitive ETCs that do opt into the limited exception will continue
to be provided pursuant to Sec. 54.307 of the Commission's rules,
except that the uncapped per line support is limited to one payment per
each residential account. 47 CFR 54.307. If a competitive ETC serves
lines in both Covered Locations and non-Covered Locations (or only
Covered Locations), the universal service administrator shall determine
the amount of additional support--after application of the interim
cap--necessary to ensure that a competitive ETC receives the same per-
line support amount as the incumbent LEC for the lines qualifying for
the exception.
34. Finally compliance with the terms of this limited exception
will be verified through certification and reporting
[[Page 37888]]
requirements. Specifically, a competitive ETC seeking to receive high-
cost support pursuant to this limited exception must certify the number
of lines that meet the limited exception requirements. The competitive
ETC also must provide a specific description of how it confirmed that
it had met the certification threshold.
35. Even with the total amount of support provided to competitive
ETCs being capped, continued growth in competitive ETC lines would have
the effect of reducing the amount of interstate access support (IAS)
received by incumbent LECs, due to the operation of the formula for
calculating IAS. See 47 CFR 54.800-54.808. To prevent the
implementation of the interim cap on competitive ETC support from
having this unintended consequence on incumbent LEC support, we find it
necessary to adjust the calculation of IAS for both incumbent LECs and
competitive ETCs. Accordingly, we divide IAS into separate pools for
incumbent LECs and competitive ETCs and separately cap the amount of
IAS support for both types of carriers. The annual amount of IAS
available for incumbent LECs shall be set at the amount of IAS that
incumbent LECs were eligible to receive in March 2008 on an annual
basis. This amount shall be indexed annually for line growth or loss by
price cap incumbent LECs. The annual amount of IAS available for
competitive ETCs shall be set at the amount of IAS that competitive
ETCs were eligible to receive in March 2008 on an annual basis. Subject
to these constraints, we direct USAC to calculate and distribute IAS
for each pool to eligible carriers consistent with the existing IAS
rules.
Length of Time
36. In light of the harm to the sustainability of the universal
service fund posed by the dramatic growth of support to competitive
ETCs, we find that the cap we adopt today should become effective as
soon as possible. The cap will, therefore, commence as of the effective
date of this Order.
37. We emphasize that the cap on competitive ETC support that we
adopt here is only an interim measure to slow the current explosion of
high-cost universal service support while the Commission considers
further reform. We remain committed to comprehensive reform of the
high-cost universal service support mechanisms. The Commission has
three outstanding rulemaking proceedings that consider comprehensive
reform of high-cost universal service support. The Commission plans to
move forward on adopting comprehensive reform measures in an
expeditious manner. The Commission commits to completing a final order
on comprehensive reform as quickly as feasible after the comment cycle
is completed on the pending Reform Notices. We therefore do not believe
that a fixed sunset date, as proposed by some commenters, is necessary
or provides additional benefit.
Base Period for the Cap
38. Although we adopt the Joint Board's recommendation that the cap
on competitive ETC support be set at the level of competitive ETC
support actually distributed in each state, rather than set such a cap
at the level of support actually distributed in 2006, we find it is
more appropriate to set such a cap at the level of support competitive
ETCs were eligible to receive during March 2008 on an annualized basis.
Specifically, for each state, the annual interim cap shall be set at
twelve times the level of support that all competitive ETCs were
eligible to receive in that state for the month of March 2008. Using
March 2008 data allows use of more recent actual support amounts than
2006. Use of March 2008 as the base period, moreover, will ensure that
funding levels will not undermine the expectations underlying
competitive ETC investment decisions or result in immediate funding
reductions. Further, consistent with our decision to cap competitive
ETC support on an interim basis, we find it inappropriate and
counterproductive to index the cap to a growth factor.
39. Although the interim cap that we adopt today applies only to
the amount of support available to competitive ETCs, it does not
restrict the number of competitive ETCs that may receive support. In
fact, as part of this Order, we grant, to the extent described in
Appendix B, numerous applications for ETC designation currently pending
before the Commission. As described in more detail in Appendix B, we
find that the applicants have met the Commission's requirements for
designation. We also amend an ETC designation as described in Appendix
C. These designations, however, do not affect the amount of support
available to competitive ETCs, which is limited by the interim cap we
adopt in this Order.
Procedural Matters
Final Regulatory Flexibility Analysis
40. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), See 5 U.S.C. 603, an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the Notice. Federal-State Joint
Board on Universal Service, WC Docket No. 05-337, CC Docket No. 96-45,
Notice of Proposed Rulemaking, 72 FR 28936 (2007) (Notice). The
Commission sought written public comment on the proposals in the
Notice, including comment on the IRFA. This Final Regulatory
Flexibility Analysis (FRFA) conforms to the RFA. See 5 U.S.C. 604.
Need for, and Objectives of, the Proposed Rules
41. On May 1, 2007, the Joint Board recommended that the Commission
adopt an interim cap on high-cost universal service support for
competitive ETCs to rein in the explosive growth in universal service.
Recommended Decision, 22 FCC Rcd 8998 (Appendix A). We agree with the
Joint Board's assessment that the rapid growth in high-cost support
places the federal universal service fund in dire jeopardy. In 2006,
the universal service fund provided approximately $4.1 billion per year
in high-cost support. In contrast, in 2001, high-cost universal service
support totaled approximately $2. 6 billion. In recent years, this
growth has been due to increased support provided to competitive ETCs,
which receive high-cost support based on the per-line support that the
incumbent LECs receive, rather than on the competitive ETCs' own costs.
While support to incumbent LECs has been flat, or has even declined
since 2003, competitive ETC support, in the six years from 2001 through
2006, has grown from under $17 million to $980 million--an average
annual growth rate of over 100 percent. Competitive ETCs received $557
million in high-cost support in the first six months of 2007.
Annualizing this amount projects that they will receive approximately
$1. 11 billion in 2007. We find that the continued growth of the fund
at this rate is not sustainable and would require excessive (and ever
growing) contributions from consumers to pay for this fund growth.
42. We conclude that immediate action must be taken to stem the
dramatic growth in high-cost support. Therefore, we immediately impose
an interim cap on high-cost support provided to competitive ETCs until
fundamental comprehensive reforms are adopted to address issues related
to the distribution of support and to ensure that the universal service
fund will be sustainable for future years. The interim cap that we
adopt herein limits the amount of high-cost support that competitive
ETCs can receive in the interim period to the amount they were
[[Page 37889]]
eligible to receive in March 2008 on an annualized basis.
Summary of Significant Issues Raised by Public Comments in Response to
the IRFA
43. None.
Description and Estimate of the Number of Small Entities to Which Rules
Will Apply
44. The RFA directs agencies to provide a description of, and,
where feasible, an estimate of the number of small entities that may be
affected by the rules, if adopted. 5 U.S.C. 604(a)(3). The RFA
generally defines the term ``small entity'', 5 U.S.C. 601(6), as having
the same meaning as the terms ``small business,'' 5 U.S.C. 601(3),
``small organization,'' 5 U.S.C. 601(4), and ``small governmental
jurisdiction.'' 5 U.S.C. 601(5). 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. 5 U.S.C.
601(3) (incorporating by reference the definition of ``small business
concern'' in 5 U.S.C. 632). 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 Small Business
Administration (SBA). 15 U.S.C. 632. Nationwide, there are a total of
approximately 22. 4 million small businesses, according to SBA data.
See SBA, Programs and Services, SBA Pamphlet No. CO-0028, at 40 (July
2002). A small organization is generally ``any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.'' 5 U.S.C. 601(4). Nationwide, as of 2002, there
were approximately 1. 6 million small organizations.
45. The most reliable source of information regarding the total
numbers of certain common carrier and related providers nationwide, as
well as the number of commercial wireless entities, is the data that
the Commission publishes in its Trends in Telephone Service report.
FCC, Wireline Competition Bureau, Industry Analysis and Technology
Division, Trends in Telephone Service, Table 5.3, page 5-5 (February
2007) (Trends in Telephone Service). The SBA has developed small
business size standards for wireline and wireless small businesses
within the three commercial census categories of Wired
Telecommunications Carriers, 13 CFR 121. 201, North American Industry
Classification System (NAICS) code 517110, Paging, 13 CFR 121. 201,
NAICS code 517211 (This category will be changed for purposes of the
2007 Census to ``Wireless Telecommunications Carriers (except
Satellite),'' NAICS code 517210.), and Cellular and Other Wireless
Telecommunications. 13 CFR 21. 201, NAICS code 517212 (This category
will be changed for purposes of the 2007 Census to ``Wireless
Telecommunications Carriers (except Satellite),'' NAICS code 517210.).
Under these categories, a business is small if it has 1,500 or fewer
employees. Below, using the above size standards and others, we discuss
the total estimated numbers of small businesses that might be affected
by our actions.
Wireline Carriers and Service Providers
46. We have included small incumbent local exchange carriers (LECs)
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.'' 15 U.S.C. 632. The SBA's Office of Advocacy contends that,
for RFA purposes, small incumbent LECs are not dominant in their field
of operation because any such dominance is not ``national'' in scope.
We have therefore included small incumbent LECs in this RFA analysis,
although we emphasize that this RFA action has no effect on Commission
analyses and determinations in other, non-RFA contexts.
47. Incumbent LECs. Neither the Commission nor the SBA has
developed a size standard for small businesses specifically applicable
to incumbent LECs. The closest applicable size standard under SBA rules
is for ``Wired Telecommunications Carriers.'' Under that size standard,
such a business is small if it has 1,500 or fewer employees. According
to Commission data, 1,307 carriers reported that they were engaged in
the provision of local exchange services. Of these 1,307 carriers, an
estimated 1,019 have 1,500 or fewer employees, and 288 have more than
1,500 employees. Consequently, the Commission estimates that most
providers of incumbent local exchange service are small businesses that
may be affected by our action.
48. Competitive LECs, Competitive Access Providers (CAPs),
``Shared-Tenant Service Providers,'' and ``Other Local Service
Providers.'' Neither the Commission nor the SBA has developed a small
business size standard specifically for these service providers. The
appropriate size standard under SBA rules is for the category ``Wired
Telecommunications Carriers.'' Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 859 carriers reported that they were engaged in the
provision of either competitive LEC or CAP services. Of these 859
carriers, an estimated 741 have 1,500 or fewer employees, and 118 have
more than 1,500 employees. In addition, 16 carriers have reported that
they are ``Shared-Tenant Service Providers,'' and all 16 are estimated
to have 1,500 or fewer employees. In addition, 44 carriers have
reported that they are ``Other Local Service Providers.'' Of the 44, an
estimated 43 have 1,500 or fewer employees, and one has more than 1,500
employees. Consequently, the Commission estimates that most competitive
LECs, CAPs, ``Shared-Tenant Service Providers,'' and ``Other Local
Service Providers'' are small entities that may be affected by our
action.
Wireless Carriers and Service Providers
49. Wireless Service Providers. The appropriate size standard for
wireless service providers is the category of ``Wireless
Telecommunications Carriers (except Satellite).'' Under that standard,
the SBA deems a wireless business to be small if it has 1,500 or fewer
employees. The data necessary to estimate the number of entities in
this category has not been gathered since it was adopted in November
2007. Therefore, we will use the earlier, now-superceded categories--
``Paging'' and ``Cellular and Other Wireless Telecommunications''--to
estimate the number of entities. For the census category of ``Paging,''
Census Bureau data for 2002 show that there were 807 firms in this
category that operated for the entire year. Of this total, 804 firms
had employment of 999 or fewer employees, and three firms had
employment of 1,000 employees or more. Thus, under this category and
associated small business size standard, the majority of firms can be
considered small. For the census category of ``Cellular and Other
Wireless Telecommunications,'' Census Bureau data for 2002 show that
there were 1,397 firms in this category that operated for the entire
year. Of this total, 1,378 firms had employment of 999 or fewer
employees, and 19 firms had employment of 1,000 employees or more.
Thus, under this second category and size standard, the majority of
firms can, again, be considered small.
50. Wireless Telephony. Wireless telephony includes cellular,
personal
[[Page 37890]]
communications services (PCS), and specialized mobile radio (SMR)
telephony carriers. As noted earlier, the SBA has developed a small
business size standard for ``Wireless Telecommunications Carriers
(except Satellite).'' Under that SBA small business size standard, a
business is small if it has 1,500 or fewer employees. The data
necessary to estimate the number of entities in this category has not
been gathered since it was adopted in November 2007. Therefore, we will
use the earlier, now-superceded categories of ``Cellular and Other
Wireless Telecommunications'' to estimate the number of entities.
According to Commission data, 432 carriers reported that they were
engaged in the provision of wireless telephony. We have estimated that
221 of these are small under the SBA small business size standard.
Satellite Service Providers
51. Satellite Telecommunications and Other Telecommunications.
There is no small business size standard developed specifically for
providers of international service. The appropriate size standards
under SBA rules are for the two broad census categories of ``Satellite
Telecommunications'' and ``All Other Telecommunications.''
52. The first category of ``Satellite Telecommunications''
``comprises establishments primarily engaged in providing point-to-
point telecommunications services to other establishments in the
telecommunications and broadcasting industries by forwarding and
receiving communications signals via a system of satellites or
reselling satellite telecommunications.'' Under this category, the SBA
size standard is $13. 5 million or less in aveage annual receipts. For
this category, Census Bureau data for 2002 show that there were a total
of 371 firms that operated for the entire year. Of this total, 307
firms had annual receipts of under $10 million, and 26 firms had
receipts of $10 million to $24,999,999. Consequently, we estimate that
the majority of Satellite Telecommunications firms are small entities
that might be affected by our action.
53. The second category of ``All Other Telecommunications''
``comprises establishments primarily engaged in (1) providing
specialized telecommunications applications, such as satellite
tracking, communications telemetry, and radar station operations; or
(2) providing satellite terminal stations and associated facilities
operationally connected with one or more terrestrial communications
systems and capable of transmitting telecommunications to or receiving
telecommunications from satellite systems.'' The SBA size standard for
``All Other Telecommunications'' is $23. 0 million or less in average
annual revenues. For this category, Census Bureau data for 2002 show
that there were a total of 332 firms that operated for the entire year.
Of this total, 259 firms had annual receipts of under $10 million and
15 firms had annual receipts of $10 million to $24,999,999.
Consequently, we estimate that the majority of Other Telecommunications
firms are small entities that might be affected by our action.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
54. In order to qualify for the exception to the interim cap, some
small carriers serving tribal lands or Native Alaskan regions will be
required to file certifications that they qualify for the exception.
Other small carriers may qualify for an exception if they file data
reporting their costs of serving high-cost areas for which they seek
the exception to be applied.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
55. 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 and 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 part thereof, for small
entities. See 5 U.S.C. 603(c).
56. In adopting the interim cap, the Commission considered several
alternatives to minimize the cap's effect on small entites. We adopt an
exception to the rule for carriers providing services to tribal lands.
We also note that the Commission is examining ways to comprehensively
reform federal high-cost universal service. The interim cap that the
Commission adopts today is an interim measure that will be replaced by
comprehensive reforms which will be developed in the future and which
will minimize any economically adverse effect of the cap on small
businesses.
Report to Congress
57. The Commission will send a copy of the Order, including this
FRFA, in a report to be sent to Congress pursuant to the SBREFA. See 5
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of
the Order, including the FRFA, to the Chief Counsel for Advocacy of the
SBA. A copy of the Order and the FRFA (or summaries thereof) will also
be published in the Federal Register. See 5 U.S.C. 604(b).
Paperwork Reduction Act Analysis
58. This document contains new information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA). Paperwork
Reduction Act of 1995, Public Law 104-13, 109 Stat. 163 (1995). It will
be submitted to the Office of Management and Budget (OMB) for review
under section 3507(d) of the PRA. OMB, the general public, and other
federal agencies are invited to comment on the new information
collection requirements contained in this proceeding. In addition, we
note that, pursuant to the Small Business Paperwork Relief Act of 2002,
we previously sought specific comment on how the Commission might
``further reduce the information collection burden for small business
concerns with fewer than 25 employees.'' Small Business Paperwork
Relief Act of 2002, Public Law 107-198, 116 Stat. 729 (2002); 44 U.S.C.
3506(c)(4).
59. In this present document, we have assessed the effects of
demonstrating compliance with the exception to the interim cap, and
find that there may be an increased administrative burden on businesses
with fewer than 25 employees. We have taken steps to minimize the
information collection burden for small business concerns, including
those with fewer than 25 employees. First, we note that compliance with
the exception is voluntary--small business concerns are not required to
comply with the information collection. In addition, compliance with
the exception will be elected by carriers on a study area by study area
basis. Carriers need only provide additional information on the study
areas for which they elect to rely on the exception to the interim cap.
Congressional Review Act
60. The Commission will send a copy of this Order in a report to be
sent to Congress and the Government Accountability Office pursuant to
the Congressional Review Act. See 5 U.S.C. 801(a)(1)(A).
[[Page 37891]]
Ordering Clauses
61. Accordingly, it is ordered, pursuant to the authority contained
in sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403, 405, 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, 405, and 410, that this Order in
CC Docket No. 96-45 and WC Docket No. 05-337 is adopted.
62. It is further ordered that, pursuant to the authority contained
in section 214(e)(6) of the Communications Act, 47 U.S.C. 214(e)(6),
the petitions for eligible telecommunications carrier designation as
set forth in Appendix B are granted, denied, or dismissed without
prejudice to the extent described therein and, pursuant to Sec. 1.
103(a) of the Commission's rules, 47 CFR 1. 103(a), shall be effective
thirty days after publication in the Federal Register, except where
redefined service areas require the agreement of a state commission as
described therein.
63. It is further ordered that, pursuant to the authority contained
in section 214(e)(5) of the Communications Act, 47 U.S.C. 214(e)(5),
and Sec. Sec. 54.207(d) and (e) of the Commission's rules, 47 CFR
54.207(d) and (e), the requests to redefine the service areas of the
rural telephone companies described in Appendix B, are granted, denied,
or granted in part and denied in part to the extent described therein
and subject to the agreement of the relevant state commissions with the
Commission's redefinition of the relevant service areas, if not
previously redefined as described therein.
64. It is further ordered that a copy of this order shall be
transmitted by the Office of the Secretary to the relevant state
commissions and the Universal Service Administrative Company.
65. It is further ordered that the petitioners set forth in
Appendix B shall submit additional information pursuant to Sec.
54.202(a) of the Commission's rules, 47 CFR 54.202(a).
66. It is further ordered that NEP Cellcorp, Inc.'s Motion to
Strike is dismissed as moot as described in Appendix B to the Order.
67. It is further ordered that, pursuant to the authority contained
in section 214(e)(6) of the Communications Act, 47 U.S.C. 214(e)(6),
RCC Minnesota, Inc. and RCC Atlantic, Inc.'s ETC designation in New
Hampshire is amended as set forth in Appendix C to the Order.
68. 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
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
69. It is further ordered, that this Order shall be effective
thirty days after publication in the Federal Register.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E8-14897 Filed 7-1-08; 8:45 am]
BILLING CODE 6712-01-P