[Federal Register Volume 65, Number 249 (Wednesday, December 27, 2000)]
[Rules and Regulations]
[Pages 81759-81761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32927]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 36 and 54

[CC Docket No. 96-45; DA 00-2729]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Common Carrier Bureau (Bureau) updates 
line count input values for the new high-cost universal service support 
mechanism for non-rural carriers for purposes of calculating and 
targeting support amounts for the year 2001. Specifically, the Bureau 
shall use updated line count data in the universal service cost model 
to estimate non-rural carriers' forward-looking economic costs of 
providing the services supported by the federal high-cost mechanism. In 
addition, the Bureau clarifies that non-rural support amounts will 
continue to be adjusted each quarter to account for line growth based 
on the wire center line count data reported quarterly by non-rural 
carriers.

DATES: Effective December 27, 2000.

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

SUPPLEMENTARY INFORMATION: This is a summary of a Common Carrier 
Bureau's 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 Order, we update line count input values for the new 
high-cost universal service support mechanism for non-rural carriers 
for purposes of calculating and targeting support amounts for the year 
2001. Specifically, we shall use updated line count data in the 
universal service cost model to estimate non-rural carriers' forward-
looking economic costs of providing the services supported by the 
federal high-cost mechanism. In addition, we clarify that non-rural 
support amounts will continue to be adjusted each quarter to account 
for line growth based on the wire center line count data reported 
quarterly by non-rural carriers.

II. Discussion

    2. Consistent with the framework adopted in the Twentieth 
Reconsideration Order, 65 FR 26513, May 8, 2000, we conclude that the 
cost model should use the year-end 1999 line counts filed July 31, 
2000, as input values for purposes of estimating average forward-
looking costs and determining support for the year 2001. We also 
conclude that line counts should be allocated to the classes of service 
used in the model based on the line count data filed pursuant to the 
1999 Data Request. We conclude further that special access line counts 
should be allocated on the basis of the 1999 Data Request data and 
trued-up to 1999 43-08 ARMIS special access line counts. In addition, 
we conclude that the Bureau and USAC should use available information 
to match reported wire centers to wire centers used in the model. Line 
counts in wire centers that cannot be matched will not be used to 
estimate average costs, but will be incorporated in the calculation of 
support amounts, along with the quarterly line counts reported by 
carriers. Finally, most carriers sought confidential treatment of the 
1999 Data Request data. Such data will be made available pursuant to 
the Interim Protective Order in this proceeding.
    3. 1999 Line Counts. We find that line count input values should be 
updated so that the model will take into account changes in costs that 
result from changes in line counts. If line count input values remained 
static, the model's cost estimates would fail to reflect the economies 
of scale generated by serving an increasing number of lines. Absent an 
update of line count input values, the use of reported lines in the 
support methodology would cause non-rural support to increase 
indefinitely as reported lines increase. Such a result would be 
inconsistent with the criteria adopted in the Universal Service First 
Report and Order, 62 FR 32862, June 17, 1997, requiring that the cost 
model reflect the economies of scale of serving all lines within a 
geographic area. By updating line count input values, the cost

[[Page 81760]]

estimates will reflect the economies of scale resulting from the growth 
in the number of lines served by non-rural carriers.
    4. We also find that the lines reported by carriers on July 31, 
2000 (year-end 1999 line counts) are the appropriate data to use for 
updating the cost model's input values at this time. We are not 
persuaded by AT&T's argument that we should use as input values 
projected line counts for the year in which support is provided. 
Because support currently is provided on the basis of the lines 
reported by carriers, rather than line count projections, AT&T's 
proposed solution would not resolve the purported ``mismatch'' between 
model lines and reported lines identified by AT&T.
    5. For purposes of calculating support in 2001, we will use year-
end 1999 line counts in the model and adjust support amounts every 
quarter to reflect the lines reported by carriers, according to the 
methodology set forth in the Twentieth Reconsideration Order. We defer 
to a future proceeding the issue of how often line counts and other 
input values should be updated.
    6. We are not persuaded by Qwest's argument that we should not use 
updated line count data in the cost model unless we also use updated 
customer location data. Qwest claims that updating only line counts 
would ``artificially depress the cost per line, since the numerator 
would remain stagnant while the denominator grows.'' This statement 
fails to acknowledge how the model estimates forward-looking costs. 
Qwest concedes that increased line counts reflect one of two 
situations: (1) additional lines at existing locations; and (2) lines 
at new locations. When additional lines are added at existing locations 
the model takes into account additional costs involved, such as larger 
cable sizes and increased capacity digital loop carriers. Contrary to 
Qwest's claim, the numerator (estimated forward-looking cost) would not 
remain stagnant if the model uses updated line count input values. 
Moreover, we estimate that approximately 65 percent of the increase in 
residential lines is due to additional lines at existing locations 
rather than to lines at new locations. Until the Commission adopts new 
customer location data, all new lines should be treated as additional 
lines at existing locations in the model, with their additional costs 
included in the model's cost estimates.
    7. Although certain costs associated with new locations may not be 
reflected in the cost model's estimates until the Commission adopts new 
customer location data, we agree with AT&T and the Florida PSC that we 
should not wait until then to update line counts. First, as the Florida 
PSC points out, more current line count data will be used in 
determining support amounts whether or not the customer location data 
are updated. If the line counts used in the model are not updated, the 
time lag between the model inputs and the reported lines used to 
determine support would continue to grow without any readjustment. 
Second, because the model currently uses road surrogate customer 
location data, the additional costs associated with new locations are 
less significant than implied by Qwest's argument. If the ``missing'' 
new locations are anywhere along the road network used to create the 
surrogate locations, the outside plant structure costs already would be 
included in the model's cost estimates. Thus, until the model uses 
updated customer location data, outside structure costs could be 
underestimated only to the extent that new locations would be along new 
roads. Moreover, AT&T argues that outside plant costs are not 
underestimated, but rather are overestimated. AT&T claims that the use 
of road surrogate data ``greatly overestimates the dispersion in 
customer locations and, therefore, greatly exaggerates outside plant 
costs, and hence, per-line costs.'' We need not find AT&T's claim to be 
accurate, however, to find that it is reasonable to use updated line 
counts in the model to determine support for the year 2001. As 
explained, all of the costs associated with new lines and a substantial 
portion of the costs associated with ``new'' locations would be 
included in the model's cost estimates.
    8. Class of Service Allocations. We find that using the wire center 
line count data filed pursuant to the 1999 Data Request is a reasonable 
method for allocating line counts to the classes of service used in the 
model. All commenters addressing this issue support this alternative, 
although AT&T suggests that it would be preferable to require the local 
exchange carriers to disaggregate into service classes the USF loops 
filed on July 31, 2000 (year-end 1999 lines). We do not believe that 
carriers should be subject to additional reporting requirements at this 
time, because reasonably accurate class of service allocations can be 
made easily with the data we already have. We defer to a future 
proceeding how line count data should be reported by carriers for use 
in the model in the future.
    9. For purposes of 2001 support, line counts shall be allocated to 
the classes of service used in the model by dividing the year-end 1999 
lines reported by non-rural carriers into business lines, residential 
lines, payphone lines, and single line business lines for each wire 
center in the same proportion as the lines filed pursuant to the 1999 
Data Request (year-end 1998 lines). As Worldcom points out, although 
this method reflects the overall line growth specific to the particular 
wire center, it assumes the same growth rate across service categories 
in that wire center. Nevertheless, Worldcom suggests that we use this 
method because it is simpler than the proposed alternative, which makes 
a different assumption, and both alternatives are likely to give 
similar results in most cases. We find that either method would be a 
reasonable way to use the 1999 Data Request information to allocate the 
year-end 1999 lines to the switched lines categories used in the model 
and agree that we should use the simpler method.
    10. We use a somewhat different method to determine the number of 
special lines in each wire center, because the wire center line counts 
reported by non-rural carriers (USF loops) include only switched lines. 
Thus, we cannot simply take USF loops and divide them into the 1999 
Data Request line count categories. We conclude that, to determine the 
relevant number of special lines for each wire center, we shall divide 
the 1999 ARMIS special access lines among wire centers in the same 
proportion as the special lines from the 1999 Data Request. We find 
that this method of determining special access lines is preferable to 
either of those proposed by AT&T and Worldcom, which would include 
state private lines as well as interstate special access lines. At this 
time, we find that only interstate special access lines should be 
included, as was done in the past. We also find that we should continue 
to count special lines as voice grade equivalents rather than as 
physical pairs, as suggested by Qwest. We conclude this represents a 
reasonable way to calculate 2001 support amounts, pending any future 
proceedings to refine input values.
    11. Matching Wire Centers. We conclude that when updating line 
counts for purposes of estimating forward-looking costs, the wire 
centers reported by carriers in their quarterly line count filings 
should be matched with wire centers found in the 1999 Data Request and 
in the model's customer location data. The vast majority of the 
approximately 12,500 reported wire centers have matching records in 
these other data sets. In calculating support for the year 2001, we 
shall use information from other

[[Page 81761]]

data sources to correct typographical errors, match wire centers at 
identical locations, or otherwise reconcile minor discrepancies in the 
wire center identifiers. In addition, in the process of calculating 
support amounts for the year 2000, USAC staff received additional 
matching information from carriers, which shall be incorporated in the 
Commission's matching process for calculating support amounts for the 
year 2001. In a small number of cases no matches could be found. We 
find that line counts in wire centers reported by carriers in their 
quarterly filings that cannot be matched will not be used to estimate 
average costs. Such lines will be used in determining support amounts, 
however, because these lines are included in the quarterly line counts 
that are used to calculate statewide support amounts, according to the 
methodology adopted in the Twentieth Reconsideration Order. We expect 
that on an ongoing basis we will find opportunities to make additional 
improvements in matching wire centers.
    12. Confidentiality. Most non-rural carriers claim that their wire 
center line count data are confidential. In April 2000, the Commission 
denied requests for confidential treatment of quarterly wire center 
line count data to the limited extent that the number of lines in wire 
centers receiving support may be determined when the Commission 
releases per-line and total support amounts. The Commission has not yet 
determined whether the line count data of wire centers that do not 
receive support should be afforded confidential treatment and has made 
such data available to interested parties under the terms of the 
Interim Protective Order. We do not decide, at this time, whether the 
data submitted pursuant to the 1999 Data Request should be afforded 
confidential treatment. The Commission will resolve the separate but 
related issues raised by these confidentiality requests at a later 
date. Pending resolution of these issues, the line count data filed 
pursuant to the 1999 Data Request will be made available only pursuant 
to the Interim Protective Order previously adopted in this proceeding.

III. Ordering Clauses

    13. 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, and Sec. 1.108 of the Commission's rules, this Order 
is adopted.

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.
William F. Caton,
Deputy Secretary.
[FR Doc. 00-32927 Filed 12-26-00; 8:45 am]
BILLING CODE 6712-01-P