[Federal Register Volume 68, Number 240 (Monday, December 15, 2003)]
[Rules and Regulations]
[Pages 69622-69627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30826]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 03-249]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, in response to the decision of the United 
States Court of Appeals for the Tenth Circuit and the recommendations 
of the Federal-State Joint Board on Universal Service, the Commission 
modifies the high-cost universal service support mechanism for non-
rural carriers and adopts measures to induce states to ensure 
reasonable comparability of rural and urban rates in areas served by 
non-rural carriers.

DATES: Effective January 14, 2004, except for Sec. Sec.  54.316(a) and 
54.316(c) which contain information collection requirements that have 
not been approved by the Office of Management Budget (OMB). The 
Commission will publish a document in the Federal Register announcing 
the effective date of those sections.

FOR FURTHER INFORMATION CONTACT: Jennifer Schneider, Attorney, Wireline 
Competition Bureau, Telecommunications Access Policy Division, (202) 
418-7400.

[[Page 69623]]


SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Remand and Memorandum Opinion and Order in CC Docket No. 96-45 
released on October 27, 2003. There was also a Companion Further Notice 
of Proposed Rulemaking released in CC Docket No. 96-45 on October 27, 
2003. 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 or at www.fcc.gov/wcb/universal_service/highcost.html.

I. Introduction

    1. In this Order, in response to the decision of the United States 
Court of Appeals for the Tenth Circuit and the recommendations of the 
Federal-State Joint Board on Universal Service (Joint Board), we modify 
the high-cost universal service support mechanism for non-rural 
carriers and adopt measures to induce States to ensure reasonable 
comparability of rural and urban rates in areas served by non-rural 
carriers. We will continue to determine non-rural support by comparing 
statewide average costs to a national cost benchmark, but we establish 
a new cost benchmark at two standard deviations above the national 
average cost. Our action today ties the cost benchmark more closely to 
the data in the record, consistent with the court's directive, but does 
not substantially alter the level of non-rural support. Based on 
analysis of the relevant data, we explain why the modified non-rural 
mechanism will be sufficient to achieve the statutory principle of 
making rural and urban rates for non-rural carrier customers reasonably 
comparable.
    2. In addition, we will implement a rate review, through an 
expanded annual certification process, to induce States to achieve 
reasonably comparable rates and to assess how successfully the non-
rural high-cost support mechanism ensures reasonably comparable rural 
and urban rates. Consistent with the Joint Board recommendation, States 
will be required to certify that the basic service rates in their 
rural, high-cost areas served by non-rural carriers are reasonably 
comparable to a national urban rate benchmark or explain why they are 
not. This process will add a dynamic element to the non-rural high-cost 
support mechanism. By requiring States to review their rates in rural, 
high-cost areas served by non-rural carriers annually in comparison to 
a national urban rate benchmark, the Commission will be able to 
determine whether Federal and State universal service mechanisms are 
resulting in reasonably comparable rural and urban rates as competition 
develops and erodes implicit support mechanisms.

II. Executive Summary

    1. In this Order, we take the following actions to modify the non-
rural high-cost support mechanism and to induce States to ensure 
reasonably comparable rural and urban rates in areas served by non-
rural carriers:
    [sbull] Consistent with the Joint Board's recommendations, we 
reaffirm that comparing statewide average costs to a nationwide cost 
benchmark reflects the appropriate Federal and State roles in 
determining Federal non-rural high-cost support. We find no evidence in 
the record either for radically altering the current non-rural 
mechanism or for establishing a substantially larger Federal subsidy to 
lower local telephone service rates, as some commenters advocate.
    [sbull] In response to the Tenth Circuit's remand, we define the 
relevant statutory terms ``sufficient'' and ``reasonably comparable'' 
more precisely for purposes of the non-rural mechanism. As recommended 
by the Joint Board, we define ``sufficient'' in terms of the statutory 
principle in section 254(b)(3), as enough Federal support to enable 
States to achieve reasonable comparability of rural and urban rates in 
high-cost areas served by non-rural carriers. We also agree with the 
Joint Board that the principle of sufficiency means that non-rural 
support should be only as large as necessary to achieve the statutory 
goal. We define ``reasonably comparable'' in terms of a national urban 
rate benchmark recommended by the Joint Board. As part of the rate 
review process discussed below, the rate benchmark will be used in 
determining whether a State's local rates in rural, high-cost areas 
served by non-rural carriers are reasonably comparable to urban rates 
nationwide.
    [sbull] We modify the non-rural mechanism by basing the cost 
benchmark, which is used to determine the amount of non-rural high-cost 
support, on two standard deviations above the national average cost per 
line. Modifying the cost benchmark ties it more directly to the 
relevant data, consistent with the court's directive, but does not 
alter the level of non-rural support in a major way. We agree with the 
Joint Board that the current level of non-rural support is supported by 
data from a General Accounting Office (GAO) Report indicating that 
rural and urban rates generally are reasonably comparable today.
    [sbull] To induce States to achieve reasonably comparable rates, we 
adopt with minor changes the rate review and expanded certification 
process recommended by the Joint Board. Each State will be required to 
review its rates in rural, high-cost areas served by non-rural carriers 
annually to assess their comparability to urban rates nationwide, and 
then to file a certification with the Commission stating whether its 
rural rates are reasonably comparable to urban rates nationwide or 
explaining why they are not.
    [sbull] For purposes of the rate review process, we adopt the Joint 
Board's recommendation that we establish an annually-adjusted 
nationwide rate benchmark based on the most recent urban residential 
rates in the Reference Book, the Wireline Competition Bureau's annual 
rate survey. Specifically, we adopt a rate benchmark of two standard 
deviations above the average urban rate, which, based on the most 
recent Reference Book survey, is $32.28 or 138 percent of the average 
urban rate. The rate benchmark will establish a ``safe harbor,'' that 
is, a presumption that rates in rural, high-cost areas that are below 
the rate benchmark are reasonably comparable to urban rates nationwide. 
States with rural rates below the rate benchmark may certify that their 
rates are reasonably comparable without providing additional 
information, or rebut the presumption by demonstrating that factors 
other than basic service rates affect the comparability of their rates.
    [sbull] For purposes of the rate review process, we also establish 
a basic service rate template for states to use in comparing rates in 
rural, high-cost areas served by non-rural carriers to the nationwide 
urban rate benchmark. In addition, we adopt, with slight modifications, 
the definition of ``rural area'' already contained in Sec.  54.5 of the 
Commission's rules for purposes of the rate review process.
    [sbull] We adopt the Joint Board's recommendation to permit States 
to request further Federal action, if necessary, based on a 
demonstration that the State's rates in rural, high-cost areas served 
by non-rural carriers are not reasonably comparable to urban rates 
nationwide and that the State has taken all reasonable steps to achieve 
reasonable comparability through State action and existing Federal 
support.
    [sbull] In response to the Tenth Circuit's remand, we review and 
explain our comprehensive plan for supporting universal service in 
high-cost areas.

[[Page 69624]]

III. Procedural Matters

A. Final Regulatory Flexibility Analysis

    4. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Remand Notice, 67 FR 10846, March 11, 2002. The 
Commission sought written public comment on the proposals in the Remand 
Notice, including comment on the IRFA. This Final Regulatory 
Flexibility Analysis (FRFA) conforms to the RFA.
1. Need for, and Objectives of, the Report and Order
    5. This Order is necessary to respond to the remand by the United 
States Court of Appeals for the Tenth Circuit of the Ninth Report and 
Order, 64 FR 67416, December 12, 1999, and also to respond to the Joint 
Board's Recommended Decision. Along with fulfilling the court's remand 
requirements, the objectives of this Order are to implement a non-rural 
high-cost support mechanism that fulfills the relevant principles in 
section 254(b) of the Act. The rules we adopt in this Order reflect the 
Commission's careful and considered determination to implement the 
mechanism consistently with section 254(b) and with the Joint Board's 
recommendations.
    6. In this Order, we take the following actions in response to the 
Tenth Circuit's remand and the Joint Board's recommendations to modify 
the non-rural high-cost support mechanism and to induce States to 
ensure reasonably comparable rural and urban rates in areas served by 
non-rural carriers:
    [sbull] Consistent with the Joint Board's recommendations, we 
reaffirm that comparing statewide average costs to a nationwide cost 
benchmark reflects the appropriate Federal and State roles in 
determining Federal non-rural high-cost support. We find no evidence in 
the record either for radically altering the current non-rural 
mechanism or for establishing a substantially larger Federal subsidy to 
lower local telephone service rates, as some commenters advocate.
    [sbull] In response to the Tenth Circuit's remand, we define the 
relevant statutory terms ``sufficient'' and ``reasonably comparable'' 
more precisely for purposes of the non-rural mechanism. As recommended 
by the Joint Board, we define ``sufficient'' in terms of the statutory 
principle in section 254(b)(3), as enough Federal support to enable 
States to achieve reasonable comparability of rural and urban rates in 
high-cost areas served by non-rural carriers. We also agree with the 
Joint Board that the principle of sufficiency means that non-rural 
support should be only as large as necessary to achieve the statutory 
goals. We define ``reasonably comparable'' in terms of a national urban 
rate benchmark recommended by the Joint Board. As part of the rate 
review process discussed, the rate benchmark will be used in 
determining whether a State's local rates in rural, high-cost areas 
served by non-rural carriers are reasonably comparable to urban rates 
nationwide.
    [sbull] We modify the non-rural mechanism by basing the cost 
benchmark, which is used to determine the amount of non-rural high-cost 
support, on two standard deviations above the national average cost per 
line. Modifying the cost benchmark ties it more directly to the 
relevant data, consistent with the court's directive, but does not 
alter the level of non-rural support in a major way. We agree with the 
Joint Board that the current level of non-rural support is supported by 
data from the GAO Report indicating that rural and urban rates 
generally are reasonably comparable today.
    [sbull] To induce States to achieve reasonably comparable rates, we 
adopt with minor changes the rate review and expanded certification 
process recommended by the Joint Board. Each State will be required to 
review its rates in rural, high-cost areas served by non-rural carriers 
annually to assess their comparability to urban rates nationwide, and 
then to file a certification with the Commission stating whether its 
rural rates are reasonably comparable to urban rates nationwide or 
explaining why they are not.
    [sbull] For purposes of the rate review process, we adopt the Joint 
Board's recommendation that we establish an annually-adjusted 
nationwide rate benchmark based on the most recent urban residential 
rates in the Reference Book, the Wireline Competition Bureau's annual 
rate survey. Specifically, we adopt a rate benchmark of two standard 
deviations above the average urban rate, which, based on the most 
recent Reference Book survey, is $32.28 or 138 percent of the average 
urban rate. The rate benchmark will establish a ``safe harbor,'' that 
is, a presumption that rates in rural, high-cost areas that are below 
the rate benchmark are reasonably comparable to urban rates nationwide. 
States with rural rates below the rate benchmark may certify that their 
rates are reasonably comparable without providing additional 
information, or rebut the presumption by demonstrating that factors 
other than basic service rates affect the comparability of their rates.
    [sbull] For purposes of the rate review process, we also establish 
a basic service rate template for States to use in comparing rates in 
rural, high-cost areas served by non-rural carriers to the nationwide 
urban rate benchmark. In addition, we adopt, with slight modifications, 
the definition of ``rural area'' already contained in Sec.  54.5 of the 
Commission's rules for purposes of the rate review process.
    [sbull] We adopt the Joint Board's recommendation to permit States 
to request further Federal action, if necessary, based on a 
demonstration that the State's rates in rural, high-cost areas served 
by non-rural carriers are not reasonably comparable to urban rates 
nationwide and that the State has taken all reasonable steps to achieve 
reasonable comparability through State action and existing Federal 
support.
    [sbull] In response to the Tenth Circuit's remand, we review and 
explain our comprehensive plan for supporting universal service in 
high-cost areas.
2. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA
    7. The Commission received no comments specifically addressing the 
IRFA. Nonetheless, the Commission considered the potential impact of 
the adopted rules on small entities and, based on analysis of the 
relevant data, determined that the compliance burden for small entities 
directly impacted will not be significant.
    8. We note that the Commission did receive some general small 
entity-related comments not specifically addressing the rules and 
policies presented in the IRFA. Some commenters suggested that eligible 
communications carriers (ETCs) should be treated differently than the 
incumbent non-rural carriers. CUSC stated that the certification 
process should apply only to the incumbent non-rural carriers. RICA 
stated that ETCs and incumbent non-rural carriers should receive 
support through separate mechanisms. In making the determination 
reflected in the Order, we have considered the impact of our actions on 
these small entities. We have determined that any impact on small 
entities will be negligible.
    9. Other small-entity related comments concerned the rural high-
cost support mechanism and were not relevant to this Order, which 
modifies the non-rural high-cost support mechanism only. The Federal 
non-rural high-cost support mechanism, revised and implemented by this 
Order,

[[Page 69625]]

calculates and distributes Federal support to non-rural carriers 
providing service in high-cost areas. For purposes of the mechanism, 
``non-rural carriers'' are those that do not meet the statutory 
definition of a rural telephone company. As stated, the rural and non-
rural high-cost support mechanisms are separate.
3. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply
    10. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that will 
be directly affected by the rules adopted herein. The RFA generally 
defines the term ``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, 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 
Small Business Administration (SBA).
    11. The Commission has determined that the group of small entities 
directly affected by the rules adopted in this Order are eligible 
telecommunications carriers (ETCs) providing service in areas served by 
non-rural carriers. Within the category of ETCs we find competitive 
local exchange carriers (CLECs), which are all wired telecommunications 
carriers, and wireless carriers. Further descriptions of these entities 
are provided.
    12. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 1997, there were 2,225 firms in 
this category, total, that operated for the entire year. Of this total, 
2,201 firms had employment of 999 or fewer employees, and an additional 
24 firms had employment of 1,000 or more. Thus, under this size 
standard, the great majority of firms can be considered small.
    13. Competitive Local Exchange Carriers (CLECs), Competitive Access 
Providers (CAPs) and ``Other Local Exchange Carriers.'' Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to providers of competitive exchange 
services or to competitive access providers or to ``Other Local 
Exchange Carriers.'' 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, 532 companies reported that they were 
engaged in the provision of either competitive access provider services 
or competitive local exchange carrier services. Of these 532 companies, 
an estimated 411 have 1,500 or fewer employees and 121 have more than 
1,500 employees. In addition, 55 carriers reported that they were 
``Other Local Exchange Carriers.'' Of the 55 ``Other Local Exchange 
Carriers,'' an estimated 53 have 1,500 or fewer employees and two have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of competitive local exchange service, competitive 
access providers, and ``Other Local Exchange Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    14. Cellular and Other Wireless Telecommunications Carriers. The 
SBA has developed a small size standard for Cellular and Other Wireless 
Telecommunications Carriers which consists of all such companies having 
1,500 or fewer employees. According to the Commission's most recent 
data, 1,761 companies reported that they were engaged in the provision 
of wireless service. Of these, 1,761 companies, and estimated 1,175 
have 1,500 or fewer employees and 586 have more than 1,500 employees. 
Consequently, the Commission estimates that most wireless service 
providers are small entities that may be affected by the rules and 
policies adopted herein.
    15. Eligible Telecommunications Carriers (ETCs) that Provide 
Service in Areas Serviced by Non-Rural Carriers. Neither the SBA nor 
the Commission has developed a definition of small entities 
specifically applicable to ETCs. ETC designation allows a carrier to 
receive universal service support in accordance with section 254 of the 
Act. An entity is designated as an ETC by a State commission or, if 
there is no State jurisdiction, by the Commission upon meeting the 
requirements of section 214(e) of the Act. Any entity offering services 
supported by Federal universal service mechanisms that uses its own 
facilities or a combination of its own facilities and resale of another 
carrier's services and advertises such charges and rates can seek 
designation as an ETC. ETCs are competitive carriers that are not 
dominant in the field. The group of ETCs providing service in areas 
served by non-rural carriers is composed of mostly competitive local 
exchange carriers (CLECs) and wireless carriers. We have indicated 
above that, pursuant to SBA standards, ETCs are CLECs or wireless 
carriers. In addition, we note that the only ETCs affected by this 
Order are those that provide service in areas served by non-rural 
carriers. If we had no further information concerning the specific ETCs 
affected by this rulemaking, we would estimate that numerous ETCs, 
which are either CLECs or wireless service providers that provide 
service in areas served by non-rural carriers, are small businesses 
that may be affected by the rules adopted herein.
    16. At this time, however, the Commission is aware of approximately 
30 ETCs providing service in areas served by non-rural carriers. We 
have determined that at least 9 of these ETCs are subsidiaries of 
public companies--not independently owned and operated--and, therefore, 
not small businesses under the Small Business Act. We do not have data 
specifying whether the remaining ETCs, or other ETCs not accounted for, 
are independently owned and operated, and therefore we are unable to 
estimate with greater precision the number of these carriers that would 
qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are 20 or fewer small entities 
that may be affected directly by the proposed rules herein adopted.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    17. This Order does not impose directly any change in projected 
reporting, record keeping or other compliance requirements on small 
entities. No changes have been made to the reporting or recordkeeping 
requirements of carriers receiving Federal non-rural high-cost support.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    18. 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

[[Page 69626]]

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.''
    19. In this Order, in response to the Tenth Circuit's remand and 
the Joint Board's Recommended Decision, we modify the high-cost 
universal service support mechanism for non-rural carriers and adopt 
measures to induce states to ensure reasonable comparability of rural 
and urban rates in areas served by non-rural carriers. Our actions may 
affect the amount of support distributed to non-rural carriers and ETCs 
providing service in areas served by non-rural carriers. Based on our 
analysis of the relevant data, the Commission believes that there will 
be minimal, if any, economic impact on small entities in adopting 
modifications to the Federal non-rural high-cost support mechanism and 
rate review and expanded certification process. The modifications to 
the current Federal non-rural high-cost support mechanism, as adopted 
in the Order, should maintain or increase the current level of non-
rural high-cost support to carriers receiving such support. As such, 
based on the relevant data, we anticipate little, if any, negative 
economic effects on any small businesses directly affected by the 
modifications to the non-rural high-cost mechanism implemented by this 
Order.
6. Report to Congress
    20. The Commission will send a copy of the Order, including the 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act. In addition, the Commission will send a copy of the Order, 
including this FRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration. A copy of this Order and FRFA (or summaries 
thereof) will also be published in the Federal Register.

B. Paperwork Reduction Act Analysis

    21. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. 
Implementation of these new or modified reported and recordkeeping 
requirements will be subject to approval by the Office of Management 
and Budget (OMB) as prescribed by the Act, and will go into effect upon 
announcement in the Federal Register of OMB approval.

IV. Ordering Clauses

    22. Pursuant to the authority contained in sections 1, 4(i), 4(j), 
201-205, 214, 218-220, 254, 403 and 405 of the Communications Act of 
1934, as amended, this Order on Remand is hereby adopted.
    23. Part 54 of the Commission's rules is amended as set forth 
attached hereto, effective January 14, 2004, except for Sec. Sec.  
54.316(a) and 54.316(c) which contain information collection 
requirements that have not been approved by the Office of Management 
Budget (OMB). The Commission will publish a document in the Federal 
Register announcing the effective date of those sections.
    24. Pursuant to Sec.  1.106(j) of the Commission's rules, the 
Petitions for Reconsideration of the Ninth Report and Order and 
Eighteenth Order on Reconsideration filed by AT&T Corp., Personal 
Communications Industry Association, Puerto Rico Telephone Company, and 
the Wyoming Public Service Commission on January 3, 2000, are denied, 
and the Petition for Reconsideration of the Ninth Report and Order and 
Eighteenth Order on Reconsideration filed by SBC Communications Inc. on 
January 3, 2000, is denied in part and dismissed as moot in part.
    25. Pursuant to section 4(i) of the Communications Act of 1934, as 
amended, and Sec.  1.3 of the Commission's rules, the Petition for 
Waiver of Sec.  36.631 of the Commission's Rules Governing the 
Universal Service Fund, filed by the Vermont Department of Public 
Service and the Vermont Public Service Board, September 21, 1993, AAD 
93-103, is dismissed as moot.
    26.The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of this Order on Remand 
and Memorandum Opinion and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citations continue to read as follows:

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

0
2. Amend Sec.  54.309 by revising paragraph (a)(3) to read as follows:


Sec.  54.309  Calculation and distribution of forward-looking support 
for non-rural carriers.

    (a) * * *
    (3) The national cost benchmark shall equal two weighted standard 
deviations above the national average FLEC per line.
* * * * *

0
3. Add Sec.  54.316 to subpart D to read as follows:


Sec.  54.316  Rate comparability review and certification for areas 
served by non-rural carriers.

    (a) Certification. Each state will be required annually to review 
the comparability of residential rates in rural areas of the state 
served by non-rural incumbent local exchange carriers to urban rates 
nationwide, and to certify to the Commission and the Administrator as 
to whether the rates are reasonably comparable, for purposes of section 
254(b)(3) of the Telecommunications Act of 1996. If a state does not 
rely on the safe harbor described in paragraph (b) of this section, or 
certifies that the rates are not reasonably comparable, the state must 
fully explain its rate comparability analysis and provide data 
supporting its certification, including but not limited to residential 
rate data for rural areas within the state served by non-rural 
incumbent local exchange carriers. If a state certifies that the rates 
are not reasonably comparable, it must also explain why the rates are 
not reasonably comparable and explain what action it intends to take to 
achieve rate comparability.
    (b) Safe harbor. For the purposes of its certification, a state may 
presume that the residential rates in rural areas served by non-rural 
incumbent local exchange carriers are reasonably comparable to urban 
rates nationwide if the rates are below the nationwide urban rate 
benchmark. The nationwide urban rate benchmark shall equal the most 
recent average urban rate plus two weighted standard deviations. The 
benchmark shall be calculated using the average urban rate and standard 
deviation shown in the most recent annual Reference Book of Rates, 
Price Indices, and Expenditures for Telephone Service published by the 
Wireline Competition Bureau. To the extent that a state relies

[[Page 69627]]

on the safe harbor, the rates that it compares to the nationwide urban 
rate benchmark shall include the access charges and other mandatory 
monthly rates included in the rate survey published in the most recent 
annual Reference Book of Rates, Price Indices, and Expenditures for 
Telephone Service. The Reference Book of Rates, Price Indices, and 
Expenditures for Telephone Service is available for public inspection 
at the Commission's Reference Center at 445 12th Street, S.W., 
Washington, D.C. 20554 and on the Commission Web site at www.fcc.gov/wcb/iatd/lec.html.
    (c) Definition of ``rural area.'' For the purposes of this section, 
a ``rural area'' is a non-metropolitan county or county equivalent, as 
defined in the Office of Management and Budget's (OMB) Revised 
Standards for Defining Metropolitan Areas in the 1990s and identifiable 
from the most recent Metropolitan Statistical Area (MSA) list released 
by OMB. At a state's discretion, a ``rural area'' may also include any 
wire center designated by the state as rural for the purposes of this 
section. In the event that a state designates a wire center as rural, 
it must provide an explanation supporting such designation in its 
certification pursuant to paragraph (a) of this section.
    (d) Schedule for certification. Annual certifications are required 
on the schedule set forth in Sec.  54.313(d)(3), beginning October 1, 
2004. Certifications due on October 1 of each year shall pertain to 
rates as of the prior July 1. Certifications filed during the remainder 
of the schedule set forth in Sec.  54.313(d)(3) shall pertain to the 
same date as if they had been filed on October 1.
    (e) Effect of failure to certify. In the event that a state fails 
to certify, no eligible telecommunications carrier in the state shall 
receive support pursuant to Sec.  54.309.

[FR Doc. 03-30826 Filed 12-12-03; 8:45 am]
BILLING CODE 6712-01-P