[Federal Register Volume 67, Number 47 (Monday, March 11, 2002)]
[Proposed Rules]
[Pages 10867-10871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5676]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket 96-45; FCC 02-41]
Federal-State Joint Board on Universal Service
AGENCY: Federal Communications Commission
ACTION: Notice of proposed rulemaking.
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SUMMARY: In this document, the Commission seeks comment on issues from
the Ninth Report and Order remanded by the United States Court of
Appeals for the Tenth Circuit. Specifically, the court remanded the
Ninth Report and Order, to the Commission to ``establish an adequate
legal and factual basis for the Ninth Order and, if necessary, to
reconsider the operative mechanism promulgated in that Order.'' The
Commission seeks
[[Page 10868]]
comment on issues remanded by the court.
DATES: Comments are due April 10, 2002. Reply comments are due April
25, 2002.
FOR FURTHER INFORMATION CONTACT: Katie King at (202) 418-7491 or
Jennifer Schneider at (202) 418-0425 in the Accounting Policy Division,
Common Carrier Bureau.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking in CC Docket No. 96-45 released on February 15,
2002 (NPRM). The NPRM is related to an Order that was released as part
of the same document. The full text of this document is available for
public inspection during regular business hours in the FCC Reference
Center, Room CY-A257, 445 12th Street, SW, Washington, DC, 20554.
I. Introduction
1. In this NPRM, the Commission seeks comment on the issues from
the Ninth Report and Order, 64 FR 67416, December 1, 1999, remanded by
the United States Court of Appeals for the Tenth Circuit. The Ninth
Report and Order established a federal high-cost universal service
support mechanism for non-rural carriers based on forward-looking
economic costs. The court remanded the Ninth Report and Order to the
Commission for further consideration and explanation of its decision.
Specifically, the court remanded the Ninth Report and Order to the
Commission to ``establish an adequate legal and factual basis for the
Ninth Order and, if necessary, to reconsider the operative mechanism
promulgated in that Order.'' In particular, the court concluded that
the Commission did not (1) define adequately the key statutory terms
``reasonably comparable'' and ``sufficient'; (2) adequately explain
setting the funding benchmark at 135 percent of the national average;
(3) provide inducements for state universal service mechanisms; or (4)
explain how this funding mechanism will interact with other universal
service programs. The Commission seeks comment on the first three
issues and refers the record collected in this proceeding to the
Federal-State Joint Board on Universal Service (Joint Board) for a
recommended decision in the Order, released with the NPRM.
II. Issues for Comment
2. The Commission seeks comment on a number of issues that will
enable the Commission to better explain or modify the forward-looking
high-cost universal service support mechanism implemented in the Ninth
Report and Order consistent with the court's decision. Specifically,
the Commission seeks comment on: (1) How the Commission should define
certain key statutory terms; (2) whether, in light of the
interpretation of those key statutory terms, the Commission can and
should maintain the previously established benchmark or, in the
alternative, should adopt a new benchmark or benchmarks; and (3) how
the Commission should induce states to implement state universal
service policies.
A. Definitions of ``Reasonably Comparable'' and ``Sufficient''
3. The Commission seeks comment on how it should define reasonably
comparable for the purpose of achieving reasonable comparability of
rates. Section 254 of the Communications Act of 1934, as amended (Act),
suggests that rates in rural, insular and high cost areas should be
compared to rates in urban areas to determine reasonable comparability.
The Commission makes a two step inquiry. First, when determining
whether rates are reasonably comparable, the Commission seeks comment
on what should be compared. For example, such a comparison could be:
``urban'' rates compared to all other rates, ``rural'' rates compared
to all other rates, or specifically defined urban and rural rates
compared to each other. The Commission seeks comment on appropriate
definitions of urban and rural. If commenters suggest that urban and/or
rural should be defined by geographical areas, the Commission requests
comment on the particular breakdown of such areas. For example, urban
and rural could be defined in terms of population density. Urban and
rural also could be defined by number of lines per wire center. If the
line count per wire center is used, would small wire centers in large
cities be defined as rural? Is it possible to adequately define
reasonable comparability without adopting a definition for urban and
rural? Second, the Commission seeks comment on what a fair range of
rates would be to determine whether rates are reasonably comparable.
The court suggested that rates differing 70 to 80 percent would not be
within a fair range of rates that could be considered reasonably
comparable. In this regard, the Commission notes that costs in rural
areas may be one hundred times greater than costs in urban areas.
Taking into account such cost differences, what is a reasonable range
of rates? What other factors should be considered when determining
reasonable comparability of rates? The Commission seeks empirical
evidence of the range of rates in rural and urban areas based on the
definition of those terms provided by commenters.
4. The Commission also seeks comment on what it means for federal
support for universal service to be ``sufficient.'' Specifically, if
the Commission determines that high-cost support results in rural rates
that are reasonably comparable to urban rates, is that level of support
sufficient under section 254 of the Act, or should the Commission take
a broader examination of sufficiency? In establishing the support
mechanism, the Commission attempted to balance the goal of ensuring
that consumers in high-cost areas have affordable access to quality
service, against the goal of ensuring that the fund is no larger than
necessary to minimize the burdens on the carriers that contribute.
Because the Commission must weigh several principles in determining the
sufficiency of its support, the Commission seeks comment on whether it
should give more weight to the principle of reasonable comparability of
rates, or should the Commission continue to give weight equally to
other principles listed in section 254(b) of the Act. In addition,
assuming that states will implement mechanisms to support universal
service, as suggested by the court and described, the Commission seeks
comment on whether sufficiency should be determined by considering
federal support only, or state support as well.
B. Benchmark Issues
5. The Commission seeks comment on whether it should adopt a
different benchmark or benchmarks or whether it should continue to use
the 135 percent benchmark. If commenters suggest that the Commission
should adopt a new benchmark or benchmarks, the Commission seeks
comment on how it should determine the new benchmark(s). Commenters
should provide both reasoned analysis and empirical data to show that
their proposed benchmarks support reasonable comparability of rates and
sufficient high-cost support. The Commission also notes that the high-
cost loop support mechanism for rural carriers does not use a single
benchmark but, rather, uses a step function. The step function has
multiple benchmarks with greater percentages of support provided as
costs increase. The Commission seeks comment on whether it should adopt
a step function (or some formula that provides a larger percentage of
support as costs increase) in the federal high-cost support
[[Page 10869]]
mechanism for non-rural carriers as well. Commenters should describe
precisely how the step function would operate, the range and intervals
of steps, and provide the empirical support and analysis for how such a
function would support reasonable comparability of rates and
sufficiency of support. To the extent commenters advocate that the
Commission should retain the 135 percent benchmark, commenters should
provide both reasoned analysis and empirical data to show that the 135
percent benchmark supports reasonable comparability of rates and
sufficiency of support. In this regard, the Commission notes that the
135 percent benchmark is consistent with an average of the benchmarks
used in the high-cost loop support mechanism, which previously provided
support to all carriers (and currently provides support to rural
carriers). The Commission seeks comment on whether an average of
benchmarks is appropriate for the non-rural high-cost mechanism.
6. The Commission also seeks comment on whether it should continue
to use a benchmark based on nationwide average cost and compare it to
statewide average costs. Although the court rejected Qwest's argument
that the use of statewide and national averages is necessarily
inconsistent with section 254, the court suggested that such a
comparison would not be consistent with the statutory comparison of
urban and rural rates without evidence that the benchmark actually
produced comparable rates. If the Commission continues to use
nationwide and statewide averages, how should the Commission measure
reasonable comparability when rural costs are included in the
nationwide average? In the alternative, should the Commission use a
benchmark or benchmarks based on urban-only costs? Will definitions of
``urban'' and ``rural'' be required to determine an urban-only
benchmark? To the extent the Commission decides to implement a
benchmark based only on urban and/or rural costs, should this
definition be the same as discussed above in section II.A.? The
Commission also seeks comment on how the terms ``urban'' and ``rural''
should be defined--e.g., by wire centers of a certain size, by certain
density zones, urban versus non-urbanized areas or some other
criterion. Commenters should provide empirical support and analysis
showing how their proposed benchmark or benchmarks result in reasonably
comparable urban and rural rates and define precisely the statutory
terms, urban, rural, and reasonably comparable in their proposed
methodology.
C. State Inducements
1. The Commission seeks comment on how it should induce states to
implement mechanisms to support universal service. Specifically, the
Commission seeks comment on whether it should: (1) implement a state
share requirement, similar to that of the Seventh Report and Order, 64
FR 30917, June 9, 1999; (2) condition federal support on some form of
state action; (3) enter into a binding cooperative agreement with
states as suggested by the court; or (4) adopt some other form of state
inducement. To the extent that commenters suggest the Commission should
adopt one of these options, commenters should provide specific
descriptions of their proposals and recommendations for implementation.
If the Commission were to condition federal support on state action, in
what manner and to what extent should federal support be so
conditioned? The Commission also seeks comment on what kind of state
action should be required. If the Commission were to enter into binding
cooperative agreements with states, what form should the agreements
take? Would the Commission enter into such an agreement with individual
states or with the states collectively? How would such an agreement be
enforced? In addition, how would the Commission induce and enforce the
inducement of states to implement universal service support mechanisms
in states that do not receive federal universal service support under
the non-rural high-cost mechanism?
III. Procedural Issues
A. Ex Parte Presentations
8. This is a permit but disclose rulemaking proceeding. Ex parte
presentations are permitted, except during the Sunshine Agenda period,
provided that they are disclosed as provided in the Commission's rules.
B. Initial Regulatory Flexibility Analysis
9. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared this present Initial
Regulatory Flexibility Analysis (IRFA) of the possible significant
economic impact on a substantial number of small entities by the
policies and rules proposed in this NPRM. Written public comments are
requested on this IRFA. Comments must be identified as responses to the
IRFA and must be filed by the deadlines for comments on the NPRM
provided in paragraph number 21 of the item. The Commission will send a
copy of the NPRM, including this IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration (SBA). In addition, the
NPRM and IRFA (or summaries thereof) will be published in the Federal
Register.
1. Need for, and Objectives of, the Proposed Rules
10. In the First Report and Order, 62 FR 32862, June 17, 1997, the
Commission adopted a plan for universal service support for rural,
insular, and high cost areas to replace longstanding federal subsidies
to incumbent local telephone companies with explicit, competitively
neutral federal universal service mechanisms. In doing so, the
Commission adopted the recommendation of the Joint Board that an
eligible carrier's support should be based upon the forward-looking
economic cost of constructing and operating the network facilities and
functions used to provide the services supported by the federal
universal service mechanism. In the Ninth Report and Order, the
Commission adopted a federal high-cost universal service support
mechanism for non-rural carriers based on forward-looking economic
costs. The U.S. Court of Appeals for the Tenth Circuit remanded the
Ninth Report and Order to the Commission for further explanation of its
decision.
11. In the NPRM, the Commission seeks comment on issues from the
Ninth Report and Order, remanded by the United States Court of Appeals
for the Tenth Circuit. Specifically, the Commission seeks comment on:
(1) How the Commission should define the key statutory terms
``reasonably comparable'' and ``sufficient'; (2) whether, in light of
the interpretation of those key statutory terms, the Commission can and
should maintain the previously established benchmark or, in the
alternative, should adopt a new benchmark or benchmarks; and (3) how
the Commission should induce states to implement state universal
service policies. The objective of the NPRM is to assemble a record, to
refer the record collected in this proceeding to the Joint Board for a
recommended decision, and to consider the record and Joint Board
recommendations in formulating a response to the court's remand. The
Commission expects that, upon receipt of a recommended decision from
the Joint Board, the Commission will be able adopt an order
implementing a high-cost support mechanism that will be sufficient to
enable non-rural carriers' rates for service to remain affordable and
[[Page 10870]]
reasonably comparable in all regions of the nation.
2. Legal Basis
12. This rulemaking action is supported by sections 1-4, 201-205,
214, 218-220, 254, 303(r), 403 and 410 of the Communications Act of
1934, as amended.
3. Description and Estimate of the Number of Small Entities to Which
the Notice Will Apply
13. The RFA generally defines ``small entity'' as having the same
meaning as the term ``small business,'' ``small organization,'' and
``small government jurisdiction.'' In addition, the term ``small
business'' has the same meaning as the term ``small business concern''
under the Small Business Act, unless the Commission has developed one
or more definitions that are appropriate to its activities. Under the
Small Business Act, a ``small business concern'' is one that: (1) Is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) meets any additional criteria established by the
SBA.
14. The SBA has defined a small business for Standard Industrial
Classification (SIC) category 4813 (Telephone Communications Except
Radiotelephone) to be a small entity when it has no more than 1,500
employees.
15. The Commission has included small incumbent local exchange
carriers in this present RFA analysis. As noted above, a ``small
business'' under the RFA is one that, inter alia, meets the pertinent
small business size standard (e.g., a telephone communications business
having 1,500 or fewer employees), and ``is not dominant in its field of
operation.'' The SBA's Office of Advocacy contends that, for RFA
purposes, small incumbent local exchange carriers are not dominant in
their field of operation because any such dominance is not ``national''
in scope. The Commission has therefore included small incumbent local
exchange carriers in this RFA analysis, although the Commission
emphasizes that this RFA action has no effect on Commission analyses
and determinations in other, non-RFA contexts.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
16. With respect to reporting and recordkeeping, the NPRM seeks
comment on issues concerning the Ninth Report and Order, that have been
remanded by the court, as described above. Changes in recordkeeping, if
any, will primarily occur in the area of benchmark issues. If the
Commission upholds the mechanism adopted in the Ninth Report & Order,
there will be no changes. If the Commission changes the current high-
cost support mechanism, however, adoption of new rules or requirements
may require additional recordkeeping. For example, if the Commission
adopts a mechanism that compares ``urban'' and/or ``rural'' costs or
rates in order to determine an appropriate benchmark, additional
information from all non-rural carriers may be necessary, such as line
count information for urban and rural areas.
5. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
17. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
18. The proposals resulting from the NPRM could have varying
positive or negative impacts on telecommunications carriers, including
any such small carriers. Public comments are welcomed in the NPRM that
would reduce any potential impacts on small entities. Specifically,
suggestions are sought on different compliance or reporting
requirements that would take into account the resources of small
entities. Comments are also sought on possibilities for clarification,
consolidation, or simplification of compliance and reporting
requirements for small entities that would be subject to the rules, and
on whether waiver or forbearance from the rules for small entities
would be feasible or appropriate. Comments should be supported by
specific economic analysis.
19. The Commission does not believe that any final result in any
area of the proposed rules under consideration will have a differential
impact on small entities. With the request for comments in the NPRM,
however, the commenters may present the Commission with various
proposals that may have varying impacts on small entities. The
Commission seeks comment on whether any proposals, if implemented, may
result in an unfair burden.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
20. None.
C. Comment Filing Procedures
21. The Commission invites comment on the issues and questions set
forth in the Notice of Proposed Rulemaking and Initial Regulatory
Flexibility Analysis contained herein. Pursuant to applicable
procedures set forth in Secs. 1.415 and 1.419 of the Commission's
rules, interested parties may file comments on or before April 10,
2002, and reply comments on or before April 25, 2002. All filings
should refer to CC Docket No. 96-45. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS) or by filing paper
copies.
22. Comments filed through ECFS can be sent as an electronic file
via the Internet to http://www.fcc.gov/e-file/ecfs.html>. Generally,
only one copy of an electronic submission must be filed. In completing
the transmittal screen, commenters should include their full name,
Postal Service mailing address, and the applicable docket number, which
in this instance is CC Docket No. 96-45. Parties may also submit an
electronic comment by Internet e-mail. To receive filing instructions
for e-mail comments, commenters should send an e-mail to [email protected],
and should include the following words in the body of the message: get
form your e-mail address>. A sample form and directions will be sent in
reply.
23. Parties who choose to file by paper must file an original and
four copies of each filing. If more than one docket or rulemaking
number appears in the caption of this proceeding, commenters must
submit two additional copies for each additional docket or rulemaking
number. Parties who choose to file by paper are hereby notified that
effective December 18, 2001, the Commission's contractor, Vistronix,
Inc., will receive hand-delivered or messenger-delivered paper filings
for the Commission's Secretary at a new location in downtown
Washington, DC. The address is 236 Massachusetts Avenue, NE, Suite 110,
Washington, DC, 20002. The filing hours at this location will be 8:00
am to 7:00 pm. All hand deliveries must be held together with rubber
bands or fasteners. Any envelopes must be disposed of before entering
the building. This facility is the only location where hand-delivered
or messenger-delivered paper filings for the Commission's Secretary
will be
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accepted. Accordingly, the Commission will no longer accept these
filings at 9300 East Hampton Drive, Capitol Heights, MD, 20743. Other
messenger-delivered documents, including documents sent by overnight
mail (other than United States Postal Service (USPS) Express Mail and
Priority Mail), must be addressed to 9300 East Hampton Drive, Capitol
Heights, MD, 20743. This location will be open 8:00 a.m. to 5:30 p.m.
The USPS first-class mail, Express Mail, and Priority Mail should
continue to be addressed to the Commission's headquarters at 445 12th
Street, SW, Washington, DC, 20554. The USPS mail addressed to the
Commission's headquarters actually goes to our Capitol Heights facility
for screening prior to delivery at the Commission.
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If you are sending this type of It should be addressed for
document or using this delivery delivery to * * *
method.
Hand-delivered or messenger-delivered 236 Massachusetts Avenue, NE,
paper filings for the Commission's Suite 110, Washington, DC
Secretary. 20002 (8:00 am to 7:00 pm).
Other messenger-delivered documents, 9300 East Hampton Drive,
including documents sent by overnight Capitol Heights, MD 20743
mail (other than United States Postal (8:00 am to 5:30 pm).
Service Express Mail and Priority
Mail).
United States Postal Service first- 445 12th Street, SW Washington,
class mail, Express Mail, and Priority DC 20554.
Mail.
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All filings must be sent to the Commission's Acting Secretary:
William F. Caton, Office of the Secretary, Federal Communications
Commission, 445 12th Street, SW, Suite TW-A325, Washington, DC 20554.
24. Parties who choose to file by paper should also submit their
comments on diskette to Sheryl Todd, Accounting Policy Division, Common
Carrier Bureau, Federal Communications Commission, 445 12th Street, SW,
Room 5-B540, Washington, DC 20554. Such a submission should be on a
3.5-inch diskette formatted in an IBM compatible format using Microsoft
Word or compatible software. The diskette should be accompanied by a
cover letter and should be submitted in ``read only'' mode. The
diskette should be clearly labeled with the commenter's name,
proceeding (including the docket number, in this case, CC Docket No.
96-45), type of pleading (comment or reply comment), date of
submission, and the name of the electronic file on the diskette. The
label should also include the following phrase ``Disk Copy--Not an
Original.'' Each diskette should contain only one party's pleading,
preferably in a single electronic file. In addition, commenters must
send diskette copies to the Commission's copy contractor, Qualex
International, Portals II, 445 12th Street, SW, Room CY-B402,
Washington, DC 20554.
25. Regardless of whether parties choose to file electronically or
by paper, parties should also file one copy of any documents filed in
this docket with the Commission's copy contractor, Qualex
International, Inc., Portals II, 445 12th Street, SW, Room CY-B402,
Washington, DC 20554. Comments and reply comments will be available for
public inspection during regular business hours in the FCC Reference
Center, Room CY-A257, 445 12th Street, SW, Washington, DC 20554. In
addition, the full text of the document is available for public
inspection and copying during regular business hours at the FCC
Reference Information Center, Portals II, 445 12th Street, SW, Room CY-
A257, Washington, DC, 20554. The document may also be purchased from
the Commission's duplicating contractor, Qualex International, Portals
II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, telephone
202-863-2893, facsimile 202-863-2898, or via e-mail [email protected].
26. Comments and reply comments must include a short and concise
summary of the substantive arguments raised in the pleading. Comments
and reply comments must also comply with section 1.49 and all other
applicable sections of the Commission's rules. The Commission directs
all interested parties to include the name of the filing party and the
date of the filing on each page of their comments and reply comments.
All parties are encouraged to utilize a table of contents, regardless
of the length of their submission. The Commission also strongly
encourages parties to track the organization set forth in the NPRM in
order to facilitate its internal review process.
D. Further Information
27. Alternative formats (computer diskette, large print, audio
recording, and Braille) are available to persons with disabilities by
contacting Brian Millin at (202) 418-7426 voice, (202) 418-7365 TTY, or
[email protected]. This NPRM can also be downloaded in Microsoft Word and
ASCII formats at http://www.fcc.gov/ccb/universal_service/highcost.
IV. Ordering Clauses
28. Pursuant to sections 1-4, 201-205, 214, 218-220, 254, 303(r),
403 and 410 of the Communications Act of 1934, as amended, 47 U.S.C.
151-154, 201-205, 214, 218-220, 254, 303(r), 403 and 410, the Notice of
proposed rulemaking is hereby Adopted.
29. The Commission's Consumer Information Bureau, Reference
Information Center, Shall send a copy of the NPRM, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
List of Subjects in 47 CFR Part 54
Communications common carriers, Telecommunications, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 02-5676 Filed 3-8-02; 8:45 am]
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