[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