[Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)]
[Rules and Regulations]
[Pages 17872-17874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8010]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 36 and 54
[WC Docket No. 05-337, CC Docket No. 80-286; FCC 10-44]
High-Cost Universal Service Support, Jurisdictional Separations,
and Coalition for Equity in Switching Support Petition for
Reconsideration
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Commission addresses an inequitable
asymmetry in its current rules governing the receipt of universal
service high-cost local switching support (LSS) by small incumbent
local exchange carriers (LECs). Since the adoption of the current
rules, incumbent LEC lines have begun to decrease, and, as a result of
the one-way rule, many small LECs that have lost lines receive less
support than other LECs with a similar number of lines that face nearly
identical circumstances. By modifying the Commission's rules to permit
incumbent LECs that lose lines to receive additional LSS when they
cross a threshold, the Commission will provide LSS to all small LECs on
the same basis. The Commission also dismisses the petition for
reconsideration filed by the Coalition for Equity in Switching Support
in the jurisdictional separations freeze proceeding.
DATES: Effective April 8, 2010.
FOR FURTHER INFORMATION CONTACT: Theodore Burmeister, Wireline
Competition Bureau, Telecommunications Access Policy Division, (202)
418-7400 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. 80-286, FCC 10-44, adopted
March 17, 2010, and released March 18, 2010. 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 the Internet at http://www.bcpiweb.com. It is also
available on the Commission's Web site at http://www.fcc.gov.
People with Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an e-mail to [email protected] or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
I. Introduction
1. In the Report and Order, we address an inequitable asymmetry in
the Commission's current rules governing the receipt of universal
service high-cost local switching support (LSS) by small incumbent
local exchange carriers (LECs). Under the current rules, which were
adopted by the Commission at a time when incumbent LEC lines had
largely only increased over time, the amount of LSS that an incumbent
LEC may receive decreases when its line counts increase above a
particular threshold, but does not increase when its line counts
decrease below that same threshold. Since the adoption of these rules,
incumbent LEC lines have begun to decrease, and, as a result of the
one-way rule, many small LECs that have lost lines receive less support
than other LECs with a similar number of lines that face nearly
identical circumstances. By modifying our rules to permit incumbent
LECs that lose lines to receive additional LSS when they cross a
threshold, we will provide LSS to all small LECs on the same basis. We
emphasize that nothing in the Report and Order is intended to address
the long-term role of LSS in the Commission's high-cost universal
service policies, which we are considering as part of comprehensive
universal service reform. We also dismiss the petition for
reconsideration filed by the Coalition for Equity in Switching Support
in the jurisdictional separations freeze proceeding. The issues raised
in that petition are essentially the same as those raised in its
petition for clarification. This decision and the Coalition Petition
Order and LSS NPRM wholly address those issues, and therefore we
dismiss the petition for reconsideration as moot.
II. Discussion
2. We conclude that our rules should be modified to permit an
incumbent LEC's DEM weighting factor to increase as well as decrease
when its line counts cross one of the thresholds provided in our rules.
As described, we find that amending the rules will ensure that
similarly situated incumbent LECs will be treated similarly under our
rules. Although this will increase the total amount of high-cost
universal service support disbursed, we find that the increase will not
have a significant effect on the overall size of the universal service
fund. We emphasize that this relatively minor change to existing rules
is not intended to reflect or prejudge our consideration of LSS as part
of any comprehensive universal service reform.
3. Based on the record in this proceeding, we find no basis for
continuing to provide different amounts of LSS to otherwise similarly
situated incumbent LECs solely because one incumbent LEC had previously
exceeded a threshold in our rules but the other had not. The LSS
mechanism's existence and design are based on the relative inability of
small incumbent LECs to achieve economies of scale in switching costs.
A small incumbent LEC that has lost a significant number of lines,
causing it to cross a DEM weighting threshold, suffers the same lack of
economies of scale. We find that such a carrier should, by the logic
underpinning the LSS mechanism, receive support in the same manner as a
small incumbent LEC with a line count that never crossed a threshold.
There is no evidence that the Commission, at the time it adopted the
LSS rules, considered the possibility that small incumbent LECs would
lose lines and the effect of line loss on LSS. Indeed, as the Coalition
has noted, at that time incumbent LEC lines had grown, almost without
exception, for more than 50 years.
4. The Coalition has provided evidence that failing to provide the
higher level of LSS has caused or threatens to cause small incumbent
LEC some hardship. Many affected carriers reportedly crossed above an
access line threshold initially because their subscribers took second
lines to access dial-up Internet service, and decreased below the
threshold as the carriers deployed, and those same customers adopted,
advanced services. We find that our current rules that reduce a
carrier's LSS when line counts increase without a corresponding
increase in LSS when line counts decrease have caused hardship for some
small incumbent LEC and may affect the provision or affordability of
service to customers.
5. We also find that amending our rules as proposed would not
create undue growth in universal service support that would threaten
the fund. The National Exchange Carrier Association (NECA), which
collects cost and line count data for many of the carriers that could
be affected by the
[[Page 17873]]
DEM weighting one-way rule, estimates that changing the one-way rule
would increase LSS by approximately $27 million per year. The Coalition
estimates that the increase would be only $19 million, based on support
estimates for 2009. Using NECA's larger estimate would create an
increase of approximately 0.3 percent to the total universal service
fund, and about 0.6 percent to the high-cost portion of the fund.
Although we do not take lightly any increase to the amount of universal
service support disbursed, we find that this change will not have a
significant impact on the overall size of the fund.
6. CTIA argues that the Commission should not adopt these rule
changes because modern switching technology is less expensive and more
scalable than traditional circuit switches. We do not take any position
on the substance of these arguments, but note that, to the extent they
apply, they apply broadly to the entire LSS mechanism and not merely to
the rule changes we adopt here. For that reason, we find that CTIA's
arguments would be better raised and addressed in a comprehensive
universal service reform proceeding. CTIA also argues that the current
record fails to address how the proposed change to LSS addresses the
principle of affordability in section 254 of the Act. As discussed
above, commenters have provided evidence that the rule changes will
have minimal effect on the overall size of the universal service fund.
Moreover, as stated above, there is record evidence indicating that the
current rule has caused some carriers hardship and may impact the
provision or affordability of service to customers. In addition, absent
these rule changes, similarly situated incumbent LECs will continue to
receive disparate amounts of LSS. Therefore, we find that adoption of
the rule changes comports with the requirements of the Act that
consumers in high-cost areas have access to reasonably comparable
services at reasonably comparable rates to those available to consumers
in other areas of the country.
7. We conclude that the rule changes we adopt in this report and
order should be implemented for the full 2010 LSS funding year. Several
parties ask that we make the rule changes effective for 2008 and 2009
because true-ups for those years have yet to occur. We decline to do
so. Generally, rules adopted by administrative agencies may be applied
prospectively only. The 2008 and 2009 funding years have ended. While
it is true that 2008 and 2009 LSS true-ups have yet to be performed,
that does not change the fact that the funding periods have passed, and
thus, application of the new methodology to those years would be
improper retroactive rulemaking. The Coalition's argument that the
Commission has made similar changes to future support based on data
from earlier periods in the high-cost loop support mechanism is
inapplicable in the LSS context. Under the high-cost loop support
mechanism, support payments are made based on historical data. For
example, 2010 high-cost loop support is calculated based on 2008 cost
and loop data. Thus, a similar type of rule change to the high-cost
loop support mechanism would necessarily incorporate past year data due
to the different calculation and data method used. That is not the case
with LSS, which uses projected data for the current funding period.
Accordingly, we decline to apply these rule changes to prior LSS
funding years. Consistent with comments made by CTIA, however, we
modify our proposed rules to make the implementation period explicit in
the text of the rules. Additionally, to ensure that ETCs receive
disbursements for the current support year as soon as possible under
the new rules, we find good cause for the Report and Order to be
effective April 8, 2010. Similarly, we grant incumbent LECs that are
affected by these rule changes a waiver of the October 1, 2009 deadline
by which incumbent LECs must file their 2010 projected data with USAC
pursuant to section 54.301(b) of the Commission's rules, and by which
states must certify that affected ETCs' support will be used only for
the provision, maintenance and upgrading of facilities and services for
which the support is intended, if the certifications were not
previously filed. Such incumbent LECs and states must file their
projected data and certifications with USAC within 60 days of the
effective date of this report and order.
8. Finally, we dismiss the Coalition's petition for reconsideration
of the 2009 Separations Freeze Extension Order as moot. Specifically,
the Coalition asked the Commission to reconsider its decision not to
modify the one-way rule when it extended the separations freeze to June
30, 2010. We find that the issues raised in the Coalition's separations
reconsideration petition are essentially the same as those raised in
its petition for clarification and are wholly addressed in the
Coalition Petition Order and LSS NPRM and in this report and order.
III. Procedural Matters
A. Paperwork Reduction Analysis
9. This document does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995, Public
Law 104-13. In addition, therefore, it does not contain any new or
modified ``information collection burden for small business concerns
with fewer than 25 employees,'' pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4).
B. Final Regulatory Flexibility Act Certification
10. The Regulatory Flexibility Act of 1980, as amended (RFA)
requires that a regulatory flexibility analysis be prepared for
rulemaking proceedings, unless the agency certifies that ``the rule
will not have a significant economic impact on a substantial number of
small entities.'' The RFA generally defines ``small entity'' as having
the same meaning as the terms ``small business,'' ``small
organization,'' and ``small governmental jurisdiction.'' In addition,
the term ``small business'' has the same meaning as the term ``small
business concern'' under the Small Business Act. A small business
concern is one which: (1) Is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA).
11. In this document, the Commission modifies its LSS rules.
Pursuant to the ``one-way rule,'' a small incumbent LEC receives less
LSS when the number of access lines it served increased above certain
thresholds, but does not receive more LSS when the number of access
lines it served decreased below the same thresholds. In this document,
the Commission changes its rules to provide LSS based on the incumbent
LEC's current period line counts without regard for whether the LEC's
lines had ever exceeded a line-count threshold. This rule change can
only provide an incumbent LEC with more universal service support and
the administrative burdens associated with complying with the
Commission's rules will not change. Therefore, we certify that the
requirements of this report and order will not have a significant
economic impact on a substantial number of small entities. The
Commission will send a copy of the report and order, including a copy
of this final certification, in a report to Congress pursuant to the
Small Business Regulatory Enforcement Fairness Act of 1996. In
addition, this document and this certification will be sent to the
Chief Counsel for Advocacy
[[Page 17874]]
of the Small Business Administration, and will be published in the
Federal Register.
C. Congressional Review Act
12. The Commission will send a copy of the Report and Order in a
report to be sent to Congress and the Government Accountability Office
pursuant to the Congressional Review Act.
List of Subjects
47 CFR Part 36
Reporting and recordkeeping requirements, Telecommunications,
Telephone.
47 CFR Part 54
Communications common carriers, Health facilities, Infants and
children, Libraries, Reporting and recordkeeping requirements, Schools,
Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Rule Changes
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR parts 36 and 54 as follows:
PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES,
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES
0
1. The authority citation continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 154(j), 205, 221(c), 254, 403,
and 410 unless otherwise noted.
0
2. Section 36.125 is amended by revising paragraph (j) to read as
follows:
Sec. 36.125 Local switching equipment--Category 3.
* * * * *
(j) If the number of a study area's access lines increases such
that, under Sec. 36.125(f), the weighted interstate DEM factor for
1997 or any successive year would be reduced, that lowered weighted
interstate DEM factor shall be applied to the study area's 1996
unweighted interstate DEM factor to derive a new local switching
support factor. If the number of a study area's access lines decreases
or has decreased such that, under Sec. 36.125(f), the weighted
interstate DEM factor for 2010 or any successive year would be raised,
that higher weighted interstate DEM factor shall be applied to the
study area's 1996 unweighted interstate DEM factor to derive a new
local switching support factor.
PART 54--UNIVERSAL SERVICE
0
3. The authority citation continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, and 254 unless
otherwise noted.
0
4. Section 54.301 is amended by revising paragraph (a)(2)(ii) to read
as follows:
Sec. 54.301 Local switching support.
(a) * * *
(2) * * *
(ii) If the number of a study area's access lines increases such
that, under Sec. 36.125(f) of this chapter, the weighted interstate
DEM factor for 1997 or any successive year would be reduced, that
lowered weighted interstate DEM factor shall be applied to the study
area's 1996 unweighted interstate DEM factor to derive a new local
switching support factor. If the number of a study area's access lines
decreases or has decreased such that, under Sec. 36.125(f) of this
chapter, the weighted interstate DEM factor for 2010 or any successive
year would be raised, that higher weighted interstate DEM factor shall
be applied to the study area's 1996 unweighted interstate DEM factor to
derive a new local switching support factor.
* * * * *
[FR Doc. 2010-8010 Filed 4-7-10; 8:45 am]
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