[Federal Register Volume 69, Number 152 (Monday, August 9, 2004)]
[Notices]
[Pages 48232-48233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17900]


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FEDERAL COMMUNICATIONS COMMISSION

[CC Docket No. 96-45; FCC 04-125]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In this document, the Commission asks the Federal-State Joint 
Board on Universal Service to review the Commission's rules relating to 
the high-cost universal service support mechanisms for rural carriers 
and to determine the appropriate rural mechanism to succeed the five-
year plan adopted in the Rural Task Force Order.

DATES: Effective September 8, 2004.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
in CC Docket No. 96-45 released on June 28, 2004. 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 ask the Federal-State Joint Board on Universal 
Service (Joint Board) to review the Commission's rules relating to the 
high-cost universal service support mechanisms for rural carriers and 
to determine the appropriate rural mechanism to succeed the five-year 
plan adopted in the Rural Task Force Order, (RTF Order). In particular, 
we ask the Joint Board to make recommendations to the Commission on a 
long-term universal service plan that ensures that support is specific, 
predictable, and sufficient to preserve and advance universal service. 
We ask the Joint Board to ensure that its recommendations are 
consistent with the goal of ensuring that consumers in rural, insular, 
and high-cost areas have access to telecommunications and information 
services at rates that are affordable and reasonably comparable to 
rates charged for similar services in urban areas. We also ask the 
Joint Board to consider how support can be effectively targeted to 
rural telephone companies serving the highest cost areas, while 
protecting against excessive fund growth. In conducting its review, the 
Joint Board should take into account the significant distinctions among 
rural carriers, and between rural and non-rural carriers. We expect 
that the Joint Board will consider all options for determining 
appropriate support levels for rural carriers. We anticipate that the 
Joint Board will seek public comment on the issues described below.

II. Discussion

    2. On June 30, 2006, the RTF Order will have been in place for five 
years. It therefore is time to undertake a review of what measures 
should succeed the RTF plan and, more generally, how the rural and non-
rural high-cost support mechanisms function together. Fundamental 
changes are occurring in the industry, necessitating a thorough review 
of how to preserve and advance universal service. We are committed to 
maintaining predictable and sufficient universal service support in 
this dynamic marketplace.
    3. We ask the Joint Board to consider what form of universal 
service support for rural telephone companies serves the goals of the 
Act most efficiently and effectively. Specifically, we ask the Joint 
Board to consider whether a universal service mechanism for rural 
carriers based on forward-looking economic cost estimates or embedded 
costs would most efficiently and effectively achieve the Act's goals. 
In making its recommendations, the Joint Board should consider which 
mechanism would best ensure that services in rural areas, including 
both the quality and the rates for those services, are reasonably 
comparable to services available in urban areas. Moreover, the Joint 
Board should consider both the benefits of maintaining distinct support 
mechanisms for rural and non-rural carriers and the extent to which 
this creates administrative burdens, incentives for arbitrage, or other 
inefficiencies. In the event that the Joint Board recommends retaining 
a separate support mechanism for rural carriers, we ask the Joint Board 
to consider how to ensure that the distinct mechanisms for rural and 
non-rural carriers operate efficiently and in a coordinated fashion.
    4. If the Joint Board recommends that rural carriers should move to 
a support mechanism based on forward-looking costs, we ask the Joint 
Board to provide recommendations on how that goal should be achieved. 
The Joint Board

[[Page 48233]]

should consider whether the current forward-looking economic cost 
model, used in calculating high-cost support for non-rural telephone 
companies, is appropriate for some or all rural telephone companies, or 
if some other method for estimating forward-looking economic costs 
would be better suited for some or all rural telephone companies. The 
Joint Board should also consider whether the current model could be 
made more effective for rural telephone companies by using different 
inputs than are currently used for non-rural telephone companies. The 
Joint Board should consider implementation issues related to any 
modified mechanism that it recommends, including whether it would be 
appropriate for rural telephone companies to begin receiving high-cost 
support based on forward-looking economic costs immediately upon 
expiration of the plan adopted in the RTF Order or if some further 
transitional stages would be beneficial.
    5. If the Joint Board recommends maintaining an embedded cost 
mechanism for rural carriers, the Joint Board should consider whether 
modifications to the current high-cost loop support mechanism and LSS 
would better serve the Act's goals. For example, the Joint Board should 
consider whether using average annual line counts rather than year-end 
line counts would provide rural carriers with a more appropriate level 
of high-cost loop support. We request that the Joint Board consider 
whether high-cost loop support can be more effectively targeted to the 
highest-cost rural carriers. We also note that LSS currently targets 
support to study areas with fewer than 50,000 access lines without 
regard to whether those study areas experience high switching costs. 
The Joint Board should consider if another methodology would better 
target support to areas with high switching costs. The Joint Board 
should also consider whether there is a continued need to maintain 
separate loop and switching support mechanisms, and whether support 
calculations for rural carriers can be simplified in any fashion.
    6. In conjunction with considering whether maintaining a different 
support mechanism for rural carriers best serves the goals of the Act, 
we ask the Joint Board to consider whether to modify the definition of 
``rural telephone company.'' As noted above, we recognize the great 
diversity among rural telephone companies. This diversity may suggest 
that not all rural telephone companies have similar support 
requirements. Recognizing the great diversity among rural telephone 
companies, we ask the Joint Board to consider whether support based on 
some form of forward-looking economic costs would be appropriate for 
some subset of rural telephone companies. For example, the Joint Board 
should consider whether it would be appropriate to use forward-looking 
economic cost estimates to determine high-cost support for rural 
telephone companies with more than 50,000 lines in a state, while 
smaller rural telephone companies would continue to use embedded costs 
on an interim or permanent basis. The Joint Board should consider 
whether a modified definitional framework that permits finer 
distinctions among carriers of different sizes or characteristics would 
be useful. We also ask the Joint Board to consider the relevance of the 
fact that many rural telephone companies are, in fact, the operating 
subsidiaries of larger holding companies, which may provide them 
economies of scale that are not realized by other non-affiliated rural 
telephone companies.
    7. Because eligibility for certain types of high-cost universal 
service support is determined at the study area level, we ask the Joint 
Board to consider whether multiple study areas within a state should be 
consolidated for universal service support calculation purposes, when 
those study areas have common ownership. A study area is a geographic 
segment of an incumbent local exchange carrier's telephone operations 
and generally corresponds to an incumbent local exchange carrier's 
entire service territory within a state. For various reasons, however, 
an incumbent local exchange carrier may have more than one study area 
within a state. The Joint Board should consider whether we should 
modify the definition of ``study area'' to limit a holding company to 
one study area per state. By operating in multiple study areas in a 
given state, certain carriers may receive more high-cost universal 
service support than they would if their study areas within the state 
were combined. The Joint Board should consider whether requiring 
consolidation of study areas would better reflect the appropriate 
economies of scale of the service provider.
    8. Finally, we ask that the Joint Board consider whether, in the 
event we retain two distinct mechanisms for rural and non-rural 
carriers, we should retain or further modify Sec.  54.305 of the 
Commission's rules, which provides that carriers that acquire exchanges 
receive support for those exchanges based on the exchanges' pre-
transfer level of support. In adopting Sec.  54.305, the Commission 
intended to discourage carriers from transferring exchanges merely to 
increase their share of high-cost support. The Joint Board should 
consider the costs and benefits of retaining Sec.  54.305 in its 
present form, and evaluate whether alternatives exist that would more 
effectively prevent carriers from acquiring exchanges in order to 
maximize the amount of universal service support that they receive. The 
Joint Board should also consider whether the safety valve mechanism 
contained in Sec.  54.305 provides sufficient incentives for investment 
in acquired exchanges.

III. Ordering Clauses

    9. Pursuant to sections 1, 4(i) and (j), 214(e), 254, and 410 of 
the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(j), 
214(e), 254, and 410, that this Order is adopted.
    10. Pursuant to sections 1, 4(i) and (j), 214(e), 254, and 410 of 
the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(j), 
214(e), 254, and 410, that the Federal-State Joint Board on Universal 
Service is requested to review the Commission's rules relating to high-
cost universal service support for rural telephone companies and other 
related issues described herein and provide recommendations to the 
Commission.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-17900 Filed 8-6-04; 8:45 am]
BILLING CODE 6712-01-P