[Federal Register Volume 65, Number 243 (Monday, December 18, 2000)]
[Rules and Regulations]
[Pages 78990-78993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32071]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 36 and 54

[CC Docket No. 96-45; FCC 00-428]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission we adopt the recommendations 
of the Federal-State Joint Board on Universal Service (Joint Board) for 
phasing down the interim hold-harmless provision of the forward-looking 
high-cost universal service support mechanism for non-rural carriers. 
Specifically, the Commission adopts the Joint Board's recommendations 
that Long Term Support (LTS) be maintained under the current rules 
until the Commission considers appropriate reforms for the LTS program 
in connection with the pending proceedings for high-cost reform for 
rural carriers and/or interstate access charge reform for rate-of-
return carriers and the balance of interim hold-harmless support, 
excluding LTS, be phased down through $1.00 reductions in average 
monthly, per-line support beginning January 1, 2001, and every year 
thereafter, except that interim hold-harmless support transferred to a 
rural carrier when it acquires telephone exchanges from a non-rural 
carrier shall not be phased down following the transfer.

DATE: Effective December 18, 2000.

FOR FURTHER INFORMATION CONTACT: William Scher, Attorney, Common 
Carrier Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Thirteenth Report and Order in CC Docket No. 96-45 released on December 
8, 2000. The full text of this document is available for public 
inspection during regular business hours in the FCC Reference Center, 
Room CY-A257, 445 Twelfth Street, SW., Washington, DC, 20554.

I. Introduction

    1. In this Thirteenth Report and Order, we adopt the 
recommendations of the Federal-State Joint Board on Universal Service 
(Joint Board) for phasing down the interim hold-harmless provision of 
the forward-looking high-cost universal service support mechanism for 
non-rural carriers. Specifically, we adopt measures to phase down 
interim hold-harmless support, excluding Long-Term Support (LTS), 
through $1.00 reductions in average monthly, per-line support beginning 
January 1, 2001, and every year thereafter until there is no more 
interim hold-harmless support. For the reasons discussed, we believe 
that these measures will ensure a prompt, equitable phase-down of 
interim hold-harmless support without causing undue rate disruption. We 
conclude that several issues, such as appropriate

[[Page 78991]]

reforms for the LTS program, should be addressed in the context of our 
pending proceedings for rural high-cost reform and/or interstate access 
charge reform for rate-of-return carriers.

II. Phase Down of Interim Hold-Harmless Support

A. Long-Term Support

    2. We adopt the Joint Board's recommendation regarding LTS. The 
forward-looking mechanism adopted in the Ninth Report and Order, 64 FR 
67416, December 1, 1999, does not replace LTS for non-rural carriers, 
contrary to the Commission's originally anticipated outcome. Therefore, 
we agree with the Joint Board that LTS for non-rural carriers should be 
preserved until we have considered further reform of the LTS program. 
In addition, maintaining LTS for non-rural carriers is consistent with 
our objective to maintain the current support structure, as modified, 
for rural LTS recipients pending rural high-cost reform. Because LTS is 
geared primarily to the needs of small, rural carriers, we find that 
this determination should take place in the context of our related 
proceedings to reform the high-cost support mechanism for rural 
carriers and the interstate access charge system for rate-of-return 
carriers. We will examine these matters in the near future.

B. High-Cost Loop Support for Non-Rural Carriers Under Part 36 of the 
Commission's Rules

    3. We adopt the Joint Board's recommendation that interim hold-
harmless support, excluding LTS, be phased down beginning January 1, 
2001, through annual $1.00 reductions in each carrier's average 
monthly, per-line support until this support is eliminated. This 
approach will promptly phase out interim hold-harmless support for the 
majority of carriers currently receiving less than $1.00 per-line/per-
month, without reducing any carrier's average monthly, per-line support 
by more than $1.00 per year. Thus, there will be no significant, sudden 
reductions in per-line support to an individual study area. We agree 
with the Joint Board that this approach is a reasonable means of 
ensuring a prompt, equitable phase-down of interim hold-harmless 
support without causing undue rate disruption, consistent with the 
objectives we announced in the Ninth Report and Order.
    4. We also agree with the Joint Board that the phase-down schedule 
should be reexamined in conjunction with our review of the forward-
looking mechanism, which is to be completed by January 1, 2003. At that 
time, Puerto Rico Telephone Company is likely to be the only carrier 
still receiving interim hold-harmless support, and more information 
will be available on the impact of the phase-down in Puerto Rico.
a. Mechanics of Phase-Down
    5. To ensure that the phase-down conforms with the quarterly 
schedule on which interim hold-harmless support is calculated, the 
Joint Board recommended that the applicable annual reductions be 
subtracted from the interim hold-harmless support that a carrier 
otherwise would be eligible to receive on an ongoing, quarterly basis. 
We adopt this recommendation.
    6. We also conclude that the targeting provisions of the Ninth 
Report and Order should govern the distribution of phased-down support. 
Although non-rural carriers receive interim hold-harmless support based 
on embedded costs averaged over their entire study areas, the support 
is targeted for competitive purposes to their highest-cost exchanges 
based on forward-looking economic costs. The Joint Board did not 
address the issue of whether phased-down support should be targeted to 
individual exchanges, except in connection with transferred exchanges. 
We find, however, that targeting phased-down interim hold-harmless 
support to a carrier's highest-cost exchanges is consistent both with 
the Joint Board's recommendations and with the Ninth Report and Order.
b. Calculation of High-Cost Loop Support for Rural Carriers
    7. We adopt the Joint Board's recommendation that the ``interim 
cap'' on high-cost loop support for rural carriers be calculated as if 
phased-down interim hold-harmless support were being distributed to 
non-rural carriers, pending reform of the high-cost support mechanism 
for rural carriers. Under the current rules, universal service support 
for all carriers under Part 36 is restricted by a cap that limits the 
total increase in support each year to the annual growth in nationwide 
loops. To avoid smaller annual increases in the support available to 
rural carriers as a result of the shift to forward-looking support for 
non-rural carriers, we directed in the Ninth Report and Order that the 
cap be calculated as if all carriers continue to participate in the 
preexisting Part 36 high-cost support mechanism. Subtracting phased-
down support amounts from calculation of the cap likewise could result 
in smaller annual cap increases, because the prior year support level 
used to calculate the cap includes the high-cost loop support for non-
rural carriers under Part 36 that will be phased down as a result of 
the approach we adopt herein. Accordingly, we agree with the Joint 
Board that an interim ``placeholder'' measure is warranted to avoid 
significant and immediate changes in high-cost support for rural 
carriers as a result of the phase-down. In accordance with the Joint 
Board's recommendations, we also conclude that phased-down support for 
non-rural carriers (support calculated as a ``placeholder'') should not 
be collected or distributed to other carriers. We note that we expect 
this placeholder to remain in effect for a limited time, as we are 
committed to moving forward expeditiously on high-cost reform for rural 
carriers.
c. Transferred Interim Hold-Harmless Support
    8. We are mindful of the Joint Board's concerns regarding the 
operation of Sec. 54.305 of the Commission's rules. As the Joint Board 
recognized, however, the rule serves the important purpose of 
preventing carriers receiving support based on the size of their study 
areas and embedded costs from ``placing unreasonable reliance upon 
potential universal service support in deciding whether to purchase 
exchanges[.]'' Section 54.305 was adopted as a temporary measure to be 
utilized during our transition to universal service support mechanisms 
that provide support to all carriers based on the forward-looking 
economic costs of operating a given exchange. The Joint Board is 
currently considering reform of the rural high-cost support mechanism, 
including the operation of Sec. 54.305 for rural carriers. We believe 
that the rural high-cost reform proceeding is the most appropriate 
context in which to reexamine the operation of Sec. 54.305 with regard 
to transfers involving rural carriers.
    9. We therefore adopt the Joint Board's recommendation not to phase 
down interim hold-harmless support for eligible exchanges transferred 
to rural carriers until we reexamine Sec. 54.305 or until rural high-
cost reform is complete.
    10. We also adopt the Joint Board's recommendation that interim 
hold-harmless support for exchanges transferred to non-rural carriers 
be phased down over the same time period as the seller's support would 
have been phased down. We agree with the Joint Board that this approach 
will ensure a prompt and equitable phase-down of transferred interim 
hold-harmless support, and discourage carriers from transferring 
exchanges to delay or avoid the phase-down of interim hold-

[[Page 78992]]

harmless support. In addition, we adopt the recommendation that 
targeted support for exchanges transferred to non-rural carriers be 
phased down by an equal percentage for each year of the phase-down 
period, on an exchange-by-exchange basis. This approach will be 
administratively simple and predictable for acquiring non-rural 
carriers.

III. Procedural Matters

A. Regulatory Flexibility Act Certifications--Final and Initial

    11. The Regulatory Flexibility Act (RFA) requires an Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on small entities of proposed policies and rules, and a 
Final Regulatory Flexibility Analysis (FRFA) whenever an agency 
subsequently promulgates a final rule, unless the agency certifies that 
the proposed or final rule will not have ``a significant economic 
impact on a substantial number of small entities,'' and includes the 
factual basis for such certification. 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). The SBA defines a small telecommunications entity in Standard 
Industrial Classification Code 4813 (Telephone Communications, Except 
Radiotelephone) as an entity with 1,500 or fewer employees.
    12. We conclude that a FRFA is not required here. The foregoing 
Thirteenth Report and Order adopts a final rule. The rules adopted 
affect the amount of high-cost support provided to non-rural carriers. 
Non-rural carriers generally do not fall within the SBA's definition of 
a small business concern because they are usually large corporations or 
affiliates of such corporations. Thus, the final rules adopted here do 
not affect a substantial number of small entities. Therefore, we 
certify, pursuant to section 605(b) of the RFA, that the final rule 
adopted in the Thirteenth 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 Thirteenth Report and Order and of 
this certification to the Chief Counsel for Advocacy of the SBA. In 
addition, this certification will be published in the Federal Register. 
The Commission will send a copy of this Thirteenth Report and Order, 
including a copy of this certification, in a report to Congress 
pursuant to the SBREFA.

B. Effective Date of Final Rules

    13. We conclude that the amendments to our rules adopted herein 
shall be effective upon publication in the Federal Register. In this 
Thirteenth Report and Order we conclude that the phase-down of interim 
hold-harmless support, excluding LTS, will be implemented beginning 
January 1, 2001. Thus, the amendments must become effective by January 
1, 2001. Making the amendments effective 30 days after publication in 
the Federal Register would jeopardize the required January 1, 2001 
implementation date. This implementation date is important because 
January 1, 2001 is the beginning of a new funding year, and interim 
hold-harmless support is a transitional funding mechanism that 
increases the size of the federal high-cost fund and should be phased 
down as rapidly as possible without causing undue disruption to 
consumer rates in high-cost areas. Accordingly, pursuant to the 
Administrative Procedure Act, we find good cause to depart from the 
general requirement that final rules take effect not less than 30 days 
after their publication in the Federal Register.

C. Paperwork Reduction Act

    14. The instant Report and Order contains no information 
collections.

IV. Ordering Clauses

    21. Pursuant to the authority contained in sections 1-4, 201-205, 
214, 218-220, 254, 303(r), 403, and 410 of the Communications Act of 
1934, as amended, this Thirteenth Report and Order is adopted.
    22. Part 36 of the Commission's rules is amended as set forth, 
effective December 18, 2000.
    23. Part 54 of the Commission's rules is amended as set forth, 
effective December 18, 2000.
    24. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of the Thirteenth Report and 
Order, including the Regulatory Flexibility Act Certifications, to the 
Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 36

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Final Rules

    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

Subpart F--Universal Service Fund

    1. The authority citation for part 36 continues to read as follows:

    Authority: 47 U.S.C. Secs. 151, 154(i) and (j), 205, 221(c), 
254, 403 and 410.


    2. In Sec. 36.601, add the following sentence at the end of 
paragraph (c) to read as follows:


Sec. 36.601  General.

* * * * *
    (c) * * *
    Support amounts calculated pursuant to this subpart F but not 
received due to the phase down of interim hold-harmless support or the 
receipt of forward-looking support pursuant to Sec. 54.311 of this 
chapter shall not be redistributed to other carriers.
* * * * *

PART 54--UNIVERSAL SERVICE

Subpart D--Universal Service Support for High Cost Areas

    3. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 1, 4(i), 201, 205, 214 and 254 unless 
otherwise noted.

    4. In Sec. 54.311, paragraph (d) is added to read as follows:


Sec. 54.311  Interim hold-harmless support for non-rural carriers.

* * * * *
    (d) Phase down of interim hold-harmless support. Beginning January 
1, 2001, the interim hold-harmless support for which a non-rural 
incumbent local exchange carrier qualifies under paragraph (a) of this 
section, excluding Long Term Support, shall be phased down through 
annual $1.00 reductions

[[Page 78993]]

in average monthly, per-line support. Applicable annual reductions 
shall be subtracted from the total amount of interim hold-harmless 
support that a non-rural incumbent local exchange carrier otherwise 
would be eligible to receive on an ongoing, quarterly basis. The 
provisions of paragraph (b) of this section shall apply to the total 
amount of phased-down interim hold-harmless support provided to each 
non-rural incumbent local exchange carrier.
    (1) Interim hold-harmless support for a wire center transferred to 
a carrier that does not meet the definition of rural telephone company 
in Sec. 51.5 of this chapter shall be phased down following the 
transfer over the same time period as the seller's support would have 
been phased down, by an equal percentage for each year of the phase-
down period.
    (2) Interim hold-harmless support for a wire center transferred to 
a carrier that meets the definition of rural telephone company in 
Sec. 51.5 of this chapter shall remain frozen at the per-line support 
level as of the sale date.

[FR Doc. 00-32071 Filed 12-15-00; 8:45 am]
BILLING CODE 6712-01-U