[Federal Register Volume 70, Number 24 (Monday, February 7, 2005)]
[Rules and Regulations]
[Pages 6365-6373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-2269]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 02-60; FCC 04-289]


Rural Health Care Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: In this document, we modify our rules to improve the 
effectiveness of the rural health care universal service support 
mechanism. Specifically, in this Report and Order, we change the 
Commission's definition of rural for the purposes of the rural health 
care support mechanism because the definition currently used by the 
Commission is no longer being updated with new Census Bureau data. We 
also revise our rules to expand funding for mobile rural health care 
services by subsidizing the difference between the rate for satellite 
service and the rate for an urban wireline service with a similar 
bandwidth. On reconsideration, we permit rural health care providers in 
states that are entirely rural, such as American Samoa, to receive 
support for advanced telecommunications and information services under 
section 254(h)(2)(A).

DATES: Effective April 8, 2005 except for Sec. Sec.  54.609(e) and 
54.621(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: Regina Brown at (202) 418-0792 or Dana 
Bradford at (202) 418-1932, Wireline Competition Bureau, 
Telecommunications Access Policy Division, TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, and Order on Reconsideration, in WC Docket No. 02-60 
released on December 17, 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 12th Street, SW., Washington, 
DC 20554. A companion Further Notice of Proposed Rulemaking in WC 
Docket No. 02-60 was also released on December 17, 2004.

I. Introduction

    1. In this Report and Order and Order on Reconsideration (Second 
Report and Order), we modify our rules to improve the effectiveness of 
the rural health care universal service support mechanism. The 
mechanism provides discounts to rural health care providers to access 
modern telecommunications for medical and health maintenance purposes. 
Specifically, in this Second Report and

[[Page 6366]]

Order, we change the Commission's definition of rural for the purposes 
of the rural health care support mechanism because the definition 
currently used by the Commission is no longer being updated with new 
Census Bureau data. We also revise our rules to expand funding for 
mobile rural health care services by subsidizing the difference between 
the rate for satellite service and the rate for an urban wireline 
service with a similar bandwidth. Furthermore, we improve our 
administrative process by establishing a fixed deadline for 
applications for support. On reconsideration, we permit rural health 
care providers in states that are entirely rural to receive support for 
advanced telecommunications and information services under section 
254(h)(2)(A).

II. Report and Order

A. Definition of ``Rural Area''

    2. We conclude that the record supports the adoption of a new 
definition of ``rural area'' for the rural health care program. We 
received several proposals from commenters for a new definition of 
rural. Most of those definitions are currently used by other Federal 
agencies to determine eligibility for other Federal programs. As we 
explain in further detail below, we find that those proposals are 
either over-inclusive or under-inclusive for our purpose. That is, 
based on an evaluation of the proposals contained in the record, such 
definitions would allow more areas to be considered rural than is 
appropriate for the rural health care program or would not include 
areas that are appropriately rural. The Commission should neither 
dilute the fund by using a methodology that is too broad, nor fail to 
achieve the goals of the 1996 Act by using a methodology that is not 
broad enough. As such, the Commission has built on commenters' 
proposals to develop a slightly more layered approach that more 
accurately defines the rural areas eligible for support under the rural 
health care mechanism.
    3. Whether an area is ``rural'' is determined by applying the 
following test. If an area is outside of any Core Based Statistical 
Area (CBSA), it is rural. Areas within CBSAs can be either rural or 
non-rural, depending on the characteristics of the CBSA. Small CBSAs--
those that do not contain an urban area with populations of 25,000 or 
more--are rural. Within large CBSAs--those that contain urban areas 
with populations of 25,000 or more--census tracts can be either rural 
or non-rural depending on the characteristics of the particular census 
tract. If a census tract in a large CBSA does not contain any part of a 
place or urban area with a population greater than 25,000, then that 
tract is rural. Alternatively, if a census tract in a large CBSA 
contains all or part of a place or urban area with a population that 
exceeds 25,000, then it is not rural.
    4. To eliminate any confusion regarding implementation of this 
definition, the Commission will identify the areas that are rural and 
post the list on the Universal Service Administrative Company (USAC) 
Web site, as is done now. The list will include counties that are rural 
or partially rural. As now, for those counties that are partially 
rural, eligible census tracts will be listed. Applicants can determine 
their census tract using the link on the USAC web site or by calling 
USAC's helpline for assistance. As such, the process for rural health 
care providers to determine their eligibility will be the same with the 
new definition as with the definition currently in use. The new 
definition will be effective as of Funding Year 2005, which begins July 
1, 2005.
    5. The new definition of rural area furthers the goals of section 
254 for several reasons. Our new definition uses a methodology similar 
to our current definition. Just like our prior definition, all counties 
that are not located in a CBSA are defined as rural. For those counties 
located in a CBSA, as under the current definition, a further analysis 
is conducted for certain counties that have both urban and rural areas. 
The Goldsmith methodology, however, only called for such further 
analysis for counties comprising a larger geographic area, while our 
new definition expands the review to include counties of all sizes. As 
such, we believe our new definition improves upon the method that we 
previously used to determine which areas are rural by more accurately 
carving out the rural areas within counties that are located in a CBSA. 
For example, Dungannon, Virginia, which has a population of 317, is 
located in the northeastern corner of Scott County, Virginia. Though 
Scott County is part of the Kingsport-Bristol-Bristol, TN-VA 
Metropolitan Statistical Area, Dungannon is 28 miles--about an hour 
drive--from Kingsport, TN, the nearest large urban area. Under our 
previous definition, Dungannon was not rural because it was located in 
a small county that was part of an MSA. Under our new definition, 
however, we conduct a more granular review of Scott County at the 
census tract level. The census tract in which Dungannon is located does 
not contain any part of a place or urban area with greater than a 
25,000 population. Therefore, Dungannon is rural, and any health care 
provider located in Dungannon is eligible for support.
    6. We selected 25,000 as the population threshold for the further 
analysis. While choosing the threshold is not an exact science, we 
believe urban areas above this size possess a critical mass of 
population and facilities. Although this standard may mean that some 
current eligible providers might no longer qualify, as noted below, we 
permit all health care providers that have received a funding 
commitment from USAC since 1998 to continue to qualify for funding for 
the next three years under the old definition. As we noted above, our 
new definition also allows rural health care providers to determine 
their eligibility in the same manner as under the old definition. 
Furthermore, because the definitions are similar, rural health care 
providers will not have to adjust to a new application process. An 
approach that simplifies the application process for rural health care 
providers will help ensure that applicants will not be deterred from 
applying for support due to administrative burdens.
    7. To ease the transition to the new definition, we permit all 
health care providers that have received a funding commitment from USAC 
since 1998 to continue to qualify for support under the universal 
service mechanism for health care providers for funding for the next 
three years under the old definition. Thereafter, health care providers 
must qualify under our new definition to receive funding. We find that 
this transition period is necessary to allow rural health care 
providers to plan for the elimination of support. In addition, the 
transition period will allow the Commission time to review the effect 
of this definition.
Support for Satellite Services for Mobile Rural Health Care Providers
    8. Pursuant to section 254(h)(1)(A) of the Act, telecommunications 
carriers must provide telecommunications services to rural health care 
providers at ``rates that are reasonably comparable to rates charged 
for similar services in urban areas in that State.'' Under the 
Commission's prior policies, the cost of rural satellite service was 
compared to the cost of urban satellite service. For satellite 
services, however, the price typically does not vary by location. 
Therefore rural health care providers did not receive discounts on such 
service under the rural health care program. In the 2003 Report and 
Order, 68 FR 74492, December 24, 2003, we revised this policy to allow 
rural health care providers to receive discounts for satellite service 
even where wireline

[[Page 6367]]

services are available, but we capped the discount at the amount 
providers would have received if they purchased functionally similar 
wireline alternatives.
    9. The situation of the mobile rural health care provider, however, 
is different. By definition, mobile rural health care providers do not 
stay in a fixed location. To receive telecommunications services, they 
would either have to install a wireline telecommunications service to 
every location they serve or use a satellite or other mobile service 
that can function in every location. In some cases, wireline services 
are not available because the locations are so remote. Even if a 
wireline service is technically available, the number of locations 
served results in what otherwise might be a more expensive satellite 
service becoming more cost-effective and more efficient. In those 
situations, as commenters note, for practical purposes no wireline 
service is available, so rural health care providers must use a 
satellite or other mobile telecommunications service.
    10. Cost benchmark for mobile rural health care provider. 
Accordingly, after reviewing the record in this proceeding, we revise 
our rules to allow mobile rural health care providers to receive 
discounts for satellite services calculated by comparing the rate for 
the satellite service to the rate for an urban wireline service with a 
similar bandwidth. We will not cap the discount for the satellite 
service at an amount of a functionally similar wireline alternative for 
mobile rural health care providers. We conclude that this revision 
furthers the principle of competitive neutrality and recognizes the 
role that telecommunications services play in rural areas without 
unduly increasing the size of the fund. Further, consistent with 
section 254, it helps to provide an affordable rate for the services 
necessary for telemedicine in rural America, strengthens telemedicine 
and telehealth networks across the nation, helps improve the quality of 
health care services available in rural America, and better enables 
rural communities to rapidly diagnose, treat, and contain possible 
outbreaks of disease.
    11. Criteria for mobile rural health care providers. Our current 
rules, combined with the requirement that health care providers remain 
responsible for a significant portion of service costs (i.e., the urban 
rate), are adequate to ensure that rural health care providers select 
the most cost-effective services and will ensure that rural health care 
providers make prudent economic decisions. We agree, however, with 
commenters that suggest that certain parameters or procedures should be 
established for determining what constitutes a ``mobile'' rural health 
care provider so that providers cannot obtain satellite services where 
such services are not the most cost-effective option.
    12. Because we believe some threshold must be established, however, 
mobile rural health care providers will be required to submit to USAC 
the number of sites the mobile rural health care provider will serve 
during the year. Where a mobile rural health care provider serves eight 
or more different sites in a year, we will presume that satellite 
services are most cost-effective. We conclude that where a mobile rural 
health care provider serves less than eight different sites per year, 
the mobile health care provider will be required to document and 
explain why satellite services are necessary to achieve the health care 
delivery goals of the mobile telemedicine project. In instances where a 
mobile rural health care provider serves less than eight different 
sites per year, USAC will determine on a case-by-case basis whether the 
telecommunications service selected by the mobile rural health care 
provider is the most cost-effective option for the telemedicine project 
in light of the limited number of sites served per year.
    13. Additionally, mobile rural health care providers seeking 
discounts for satellite services will be required to certify that they 
are serving eligible rural areas. Providers must keep annual logs 
indicating: (i) The date and locations of each clinic stop; and (ii) 
the number of patients served at each such clinic stop. Mobile rural 
health care providers must maintain their annual logs for a period of 
five years and make such logs available to the Administrator and the 
Commission upon request.
    14. In order to receive the discount, mobile rural health care 
providers will be required to provide to USAC documentation of the 
price for bandwidth equivalent wireline services in the urban area in 
the state to be covered by the project. Where a telemedicine project 
serves locations in different states, the provider must provide the 
price for bandwidth equivalent wireline services in the urban area, 
proportional to the locations served in each state. The method of cost 
allocation chosen by an applicant should be based on objective 
criteria, and reasonably reflect the eligible usage of the mobile 
health clinic. Where mobile rural health care provider is also serving 
patients in urban areas, prorated discounts will be provided 
commensurate only with the time the mobile rural health care provider 
is serving patients in rural areas. We also direct USAC to evaluate the 
allocation methods selected by program participants in the course of 
its audit activities to ensure program integrity and to ensure that 
providers are complying with the program's certification requirements. 
Additionally, pursuant to section 54.619(a) of the commission's rules, 
providers providing mobile health services must maintain records for 
their purchases of supported services for at least five years 
sufficient to document their compliance with all Commission 
requirements.
Deadline Established for Filing FCC Form 466
    15. In the 2002 NPRM, 67 FR 34653, May 15, 2002 and 2003 Report and 
Order, 68 FR 74492, December 24, 2003, we sought comment on ways to 
streamline the application process. We establish June 30 as the final 
deadline for filing FCC Forms 466 and 466-A for health care providers 
seeking discounts for a specific funding year under the rural health 
care universal service support mechanism. We conclude that providing an 
established deadline will provide specificity and finality to rural 
health care providers and will not require them to continue to check 
for Commission public notices. This deadline is also consistent with 
USAC's Rural Health Care Division (RHCD)'s efforts to provide specific 
guidance to health care providers when submitting applications for 
universal service support. Applicants have more than a year to submit 
the necessary documentation for their application for support. In 
addition, a deadline of June 30 for filing FCC Forms 466 and 466-A 
coincides with the end of the funding year. Under section 54.623 of our 
rules, USAC can still set the dates for the filing window for purposes 
of the annual cap.

III. Order on Reconsideration

    16. We grant, to the extent indicated herein, ASTCA's Petition for 
Reconsideration of the 2003 Report and Order, 68 FR 74492, December 24, 
2003. In light of the compelling and unique combination of 
circumstances facing ``entirely rural'' states, we believe that it is 
appropriate to establish a support mechanism under section 254(h)(2)(A) 
that will provide funding for the provision of advanced 
telecommunications and information services. We therefore amend our 
rules to provide support to health care providers in states that are 
``entirely rural'' equal to 50 percent of the monthly cost of advanced 
telecommunications and information

[[Page 6368]]

services reasonably related to the health care needs of the facility.
    17. We find that the Commission has authority to amend its rules 
for these specific circumstances under section 254(h)(2)(A). Section 
254(h)(2)(A) directs the Commission to establish competitively neutral 
rules to enhance access to advanced telecommunications and information 
services for health care providers. Section 254(h)(2)(A) gives the 
Commission broad authority to fulfill this statutory mandate. Unlike 
Congress' directive to the Commission in section 254(h)(1)(A), however, 
the Commission's authority under section 254(h)(2)(A) is discretionary, 
not mandatory. We find that there is a special need for the Commission 
to use its discretion to establish rules that will enhance access to 
advanced telecommunications and information services for health care 
providers in entirely rural states.
    18. This support is necessary to address the unique circumstances 
faced by health care providers and telecommunications carriers serving 
American Samoa and other similarly situated geographic areas. 
Geographic isolation and the lack of adequate local resources in 
``entirely rural'' states can be mitigated by the availability and use 
of modern technology. Facilitating access to advanced 
telecommunications and information services would improve health care 
in geographically remote areas.
    19. Section 254(h)(2)(A) directs the Commission to enhance access 
to advanced telecommunications and information services to the extent 
technically feasible and economically reasonable. We find that 
providing universal service support to these specific health care 
providers is technically feasible and economically reasonable. There is 
no dispute that access to advanced telecommunications and information 
services is technically feasible in these areas. In fact, such services 
are currently being provided. We believe our actions to enhance access 
are also economically reasonable. We do not believe this discount will 
significantly increase distributions from the underutilized rural 
health care fund because the number of eligible entities is so small. 
The funding amount also is unlikely to significantly increase in the 
future because the current list of eligible entirely rural areas is not 
likely to change.
    20. Furthermore, we do not think that section 254(h)(1)(A) 
prohibits us from establishing this support. In the 2003 Report and 
Order, 68 FR 74492, December 24, 2003 the Commission determined that 
section 254(h)(2)(A) was linked to section 254(h)(1)(A), such that 
funding for advanced telecommunications services must also be based on 
the urban-rural rate comparison for telecommunications services found 
in section 254(h)(1)(A). Upon further review, however, we conclude that 
the two statutory provisions are not inextricably linked. The 
methodology we use to calculate support under section 254(h)(2)(A), 
therefore, does not have to be based on the urban-rural comparison.
    21. Section 254(h)(2)(A), however, does not establish a methodology 
for calculating universal service support. The Commission provides a 
flat discount for Internet access for all eligible rural health care 
providers pursuant to section 254(h)(2)(A). We find that it is 
reasonable to use a similar methodology for support for entirely rural 
areas because we are relying on the same statutory provision. 
Therefore, we establish a 50 percent discount off the commercial rate 
for the purchase of advanced telecommunications and information 
services for states that are ``entirely rural.'' We emphasize that the 
entire state must meet the definition of rural, as described above, to 
be eligible to receive the 50 percent discount. Consistent with the 
Commission's principles of competitive neutrality, eligible health care 
providers may receive increased discounts for any advanced 
telecommunications and information service, regardless of the platform.

IV. Procedural Matters

A. Regulatory Flexibility Analysis

    22. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the 2003 Further Notice of Proposed Rulemaking, 68 FR 
74538, December 24, 2003. The Commission sought public comments on the 
proposals in the Further Notice of Proposed Rulemaking, including 
comment on the IRFA. This present Final Regulatory Flexibility Analysis 
(FRFA) conforms to the RFA.

B. Need for, and Objectives of, the Second Report and Order

    23. The Commission is required by section 254 of the Act to 
promulgate rules to implement the universal service provisions of 
section 254. On May 8, 1997, the Commission adopted rules that reformed 
its system of universal service support mechanisms so that universal 
service is preserved and advanced as markets move toward competition. 
Among other programs, the Commission adopted a program to provide 
discounted telecommunications services to public or non-profit health 
care providers that serve persons in rural areas. Over the last few 
years, important changes in the rural health community, such as 
technological advances and the increasing variety of needs of the rural 
health care community, have prompted us to review the rural health care 
universal service support mechanism. In this Second Report and Order, 
we adopt several modifications to the Commission's rules to improve the 
effectiveness of the rural health care universal service support 
mechanism and increase utilization of this mechanism by rural health 
care providers.
    24. Specifically, in this Second Report and Order, we change the 
Commission's definition of rural for the purposes of the rural health 
care support mechanism because the definition currently used by the 
Commission is no longer being updated with new Census Bureau data by 
the Office of Rural Health Care Policy, the agency that developed the 
definition. Specifically, the new definition improves upon the previous 
method of determining which areas are rural by more accurately 
identifying the rural areas within counties. We also revise our rules 
to allow mobile rural health care providers to receive discounts for 
satellite services calculated by comparing the rate for the satellite 
service to the rate for an urban wireline service with a similar 
bandwidth. Mobile rural health care providers travel to remote areas of 
the country to deliver health care services to underserved populations 
for particular health conditions that may go unnoticed or untreated due 
to the lack of health care facilities in such areas. Thus, this 
approach will provide the support necessary to make mobile telemedicine 
economical for rural health care providers to provide health care to 
rural and remote areas, and to make telecommunications rates for public 
and non-profit rural health care providers comparable to those paid in 
urban areas. Furthermore, to provide specificity and finality to rural 
health care providers, we improve our administrative process by 
establishing a fixed deadline for applications for support.
    25. On reconsideration, we permit rural health care providers in 
states that are entirely rural, such as American Samoa, to receive 
support for advanced telecommunications and information services under 
section 254(h)(2)(A). Under the Commission's current policy, health 
care providers in these areas do not receive universal service funding 
for the provision of telecommunications services because no urban-rural 
rate

[[Page 6369]]

difference exists within the state or territory upon which to base the 
discount calculation. Telemedicine and other forms of treatment 
supported by advanced telecommunications services and information 
services eliminate the need for referrals to other locations by 
allowing local physicians to consult much more easily and frequently 
with physicians at fully equipped health care facilities. We expect 
this rule change will strengthen the ability of health care providers 
in states and territories that are entirely rural to provide critical 
health care services and improve health care for rural residents.
    26. We believe that such actions will improve significantly the 
ability of rural health care providers to respond to the medical needs 
of their communities, provide needed aid to strengthen telemedicine and 
telehealth networks across the nation, help improve the quality of 
health care services available in rural America, and better enable 
rural communities to rapidly diagnose, treat, and contain possible 
outbreaks of disease. In addition, these changes will equalize access 
to quality health care between rural and urban areas and will support 
telemedicine networks if needed for a national emergency. Enhancing 
access to an integrated nationwide telecommunications network for rural 
health care providers will further the Commission's core responsibility 
to make available a rapid nationwide network for the purpose of the 
national defense, particularly with the increased awareness of the 
possibility of terrorist attacks. Finally, these changes will further 
the Commission's efforts to improve its oversight of the operation of 
the program to ensure that the statutory goals of section 254 of the 
Telecommunications Act of 1996 are met without waste, fraud, or abuse.

C. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    27. No petitions for reconsideration or comments were filed 
directly in response to the IRFA or on issues affecting small 
businesses.

D. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    28. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the rules. 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. A ``small 
business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
a. Rural Health Care Providers
    29. Section 254(h)(5)(B) of the Act defines the term ``health care 
provider'' and sets forth seven categories of health care providers 
eligible to receive universal service support. Although the SBA has not 
developed a specific size category for small, rural health care 
providers, recent data indicate that there are a total of 8,297 health 
care providers, consisting of: (1) 625 ``post-secondary educational 
institutions offering health care instruction, teaching hospitals, and 
medical schools;'' (2) 866 ``community health centers or health centers 
providing health care to migrants;'' (3) 1633 ``local health 
departments or agencies;'' (4) 950 ``community mental health centers;'' 
(5) 1951 ``not-for-profit hospitals;'' and (6) 2,272 ``rural health 
clinics.'' We have no additional data specifying the numbers of these 
health care providers that are small entities nor do we know how many 
are located in areas we have defined as rural. In addition, non-profit 
entities that act as ``health care providers'' on a part-time basis are 
eligible to receive prorated support and we have no ability to quantify 
how many potential eligible applicants fall into this category. 
However, we have no data specifying the number of potential new 
applicants. Consequently, using the data we do have, we estimate that 
there are 8,297 or fewer small health care providers potentially 
affected by the actions proposed in this Notice.
    30. As noted earlier, non-profit businesses and small governmental 
units are considered ``small entities'' within the RFA. In addition, we 
note that census categories and associated generic SBA small business 
size categories provide the following descriptions of small entities. 
The broad category of Ambulatory Health Care Services consists of 
further categories and the following SBA small business size standards. 
The categories of small business providers with annual receipts of $6 
million or less consists of: Offices of Dentists; Offices of 
Chiropractors; Offices of Optometrists; Offices of Mental Health 
Practitioners (except Physicians); Offices of Physical, Occupational 
and Speech Therapists and Audiologists; Offices of Podiatrists; Offices 
of All Other Miscellaneous Health Practitioners; and Ambulance 
Services. The category of small business Ambulatory Health Care 
Services providers with $8.5 million or less in annual receipts 
consists of: Offices of Physicians; Family Planning Centers; Outpatient 
Mental Health and Substance Abuse Centers; Health Maintenance 
Organization Medical Centers; Freestanding Ambulatory Surgical and 
Emergency Centers; All Other Outpatient Care Centers, Blood and Organ 
Banks; and All Other Miscellaneous Ambulatory Health Care Services. The 
category of Ambulatory Health Care Services providers with $11.5 
million or less in annual receipts consists of: Medical Laboratories; 
Diagnostic Imaging Centers; and Home Health Care Services. The category 
of Ambulatory Health Care Services providers with $29 million or less 
in annual receipts consists of Kidney Dialysis Centers. For all of 
these Ambulatory Health Care Service Providers, census data indicate 
that there is a combined total of 345,476 firms that operated in 1997. 
Of these, 339,911 had receipts for that year of less than $5 million. 
In addition, an additional 3,414 firms had annual receipts of $5 
million to $9.99 million; and additional 1,475 firms had receipts of 
$10 million to $24.99 million; and an additional 401 had receipts of 
$25 million to $49.99 million. We therefore estimate that virtually all 
Ambulatory Health Care Services providers are small, given SBA's size 
categories. We note, however, that our rules affect non-profit and 
public healthcare providers, and many of the providers noted above 
would not be considered ``public'' or ``non-profit.'' In addition, we 
have no data specifying the numbers of these health care providers that 
are rural and meet other criteria of the Act.
    31. The broad category of Hospitals consists of the following 
categories and the following small business providers with annual 
receipts of $29 million or less: General Medical and Surgical 
Hospitals, Psychiatric and Substance Abuse Hospitals; and Specialty 
(Except Psychiatric and Substance Abuse) Hospitals. For all of these 
health care providers, census data indicate that there is a combined 
total of 330 firms that operated in 1997, of which 237 or fewer had 
revenues of less than $25 million. An additional 45 firms had annual 
receipts of $25 million to $49.99 million. We therefore estimate that 
most Hospitals are small, given SBA's size categories. In addition, we 
have no data specifying the numbers of these health care providers that 
are rural and meet other criteria of the Act.

[[Page 6370]]

    32. The broad category of Social Assistance consists of the 
category of Emergency and Other Relief Services and small business size 
standard of annual receipts of $6 million or less. For all of these 
health care providers, census data indicates that there are a combined 
total of 37,778 firms that operated in 1997. Of these, 37,649 or fewer 
firms had annual receipts of below $5 million. An additional 73 firms 
had annual receipts of $5 million to $9.99 million. We therefore 
estimate that virtually all Social Assistance providers are small, 
given SBA's size categories. In addition, we have no data specifying 
the numbers of these health care providers that are rural and meet 
other criteria of the Act.
b. Providers of Telecommunications and Other Services
    33. We have 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. We 
have therefore included small incumbent local exchange carriers in this 
RFA analysis, although we emphasize that this RFA action has no effect 
on Commission analyses and determinations in other, non-RFA contexts.
    34. Total Number of Telephone Companies Affected. The Wireline 
Competition Bureau reports that, as of October 22, 2003, there were 
4,748 firms engaged in providing telephone services, as defined 
therein. This number contains a variety of different categories of 
carriers, including local exchange carriers, interexchange carriers, 
competitive access providers, cellular carriers, mobile service 
carriers, operator service providers, pay telephone operators, PCS 
providers, covered SMR providers, and resellers. It seems certain that 
some of those 4,748 telephone service firms may not qualify as small 
entities because they are not ``independently owned and operated.'' For 
example, a PCS provider that is affiliated with an interexchange 
carrier having more than 1,500 employees would not meet the definition 
of a small business. It seems reasonable to conclude, therefore, that 
4,748 or fewer telephone service firms are small entity telephone 
service firms that may be affected by the decisions and rules adopted 
in this Report and Order.
    35. Local Exchange Carriers, Interexchange Carriers, Competitive 
Access Providers, Operator Service Providers, Payphone Providers, and 
Resellers. Neither the Commission nor SBA has developed a definition 
particular to small local exchange carriers (LECs), interexchange 
carriers (IXCs), competitive access providers (CAPs), operator service 
providers (OSPs), payphone providers or resellers. The closest 
applicable definition for these carrier-types under SBA rules is for 
Wired Telecommunications Carriers having less than 1,500 employees. The 
most reliable source of information regarding the number of these 
carriers nationwide of which we are aware appears to be the data that 
we collect annually on the Form 499-A. According to our most recent 
data, there are 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 
payphone providers and 454 resellers. Although it seems certain that 
some of these carriers are not independently owned and operated, or 
have more than 1,500 employees, we are unable at this time 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 fewer than 1,335 incumbent LECs, 349 CAPs, 204 
IXCs, 21 OSPs, 758 payphone providers, and 541 resellers that may be 
affected by the decisions and rules adopted in this Report and Order.
    36. Internet Service Providers. The SBA has developed a small 
business size standard for ``On-Line Information Services,'' NAICS code 
518111. This category comprises establishments ``primarily engaged in 
providing direct access through telecommunications networks to 
computer-held information compiled or published by others.'' Under this 
small business size standard, a small business is one having annual 
receipts of $21 million or less. Based on firm size data provided by 
the Bureau of the Census, 3,123 firms are small under SBA's $21 million 
size standard for this category code. Although some of these Internet 
Service Providers (ISPs) might not be independently owned and operated, 
we are unable at this time to estimate with greater precision the 
number of ISPs that would qualify as small business concerns under 
SBA's small business size standard. Consequently, we estimate that 
there are 3,123 or fewer small entity ISPs that may be affected.
    37. Satellite Service Carriers. The SBA has developed a definition 
for small businesses within the category of Satellite 
Telecommunications. According to SBA regulations, a small business 
under the category of Satellite communications is one having annual 
receipts of $12.5 million or less. According to SBA's most recent data, 
there are a total of 371 firms with annual receipts of $9,999,999 or 
less, and an additional 69 firms with annual receipts of $10,000,000 or 
more. Thus, the number of Satellite Telecommunications firms that are 
small under the SBA's $12 million size standard is between 371 and 440. 
Further, some of these Satellite Service Carriers might not be 
independently owned and operated. Consequently, we estimate that there 
are fewer than 440 small entity ISPs that may be affected by the 
decisions and rules of the present action.
    38. Wireless Service Providers. The SBA has developed a definition 
for small businesses within the two separate categories of Cellular and 
Other Wireless Telecommunications. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to the 
Commission's most recent Telephone Trends Report data, 1,495 companies 
reported that they were engaged in the provision of wireless service. 
Of these 1,495 companies, 989 reported that they have 1,500 or fewer 
employees and 506 reported that, alone or in combination with 
affiliates, they have more than 1,500 employees. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated, and thus are unable at this time to estimate with 
greater precision the number of wireless service providers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are 989 or fewer small wireless 
service providers that may be affected by the rules.
    39. Vendors of Infrastructure Development or ``Network Buildout.'' 
The Commission has not developed a small business size standard 
specifically directed toward manufacturers of network facilities. The 
closest applicable definition of a small entity are the size standards 
under the SBA rules applicable to manufacturers of ``Radio and 
Television Broadcasting and Communications Equipment'' (RTB) and 
``Other Communications Equipment.'' According to the SBA's regulations, 
manufacturers of RTB or other communications equipment must have 750 or 
fewer employees in order to qualify as a small business. The most 
recent available Census Bureau data indicates that there are 1,187 
establishments with fewer than 1,000

[[Page 6371]]

employees in the United States that manufacture radio and television 
broadcasting and communications equipment, and 271 companies with less 
than 1,000 employees that manufacture other communications equipment. 
Some of these manufacturers might not be independently owned and 
operated. Consequently, we estimate that the majority of the 1,458 
internal connections manufacturers are small.
    40. Cable and Other Program Distribution. The SBA has developed a 
small business size standard which includes all such companies 
generating $12.5 million or less in revenue annually. This standard 
covers Cable and Other Program Distribution. Only businesses in Cable 
and Other Program Distribution category can be affected by the rules 
and policies adopted herein. This category includes cable systems 
operators, closed circuit television services, direct broadcast 
satellite services, multipoint distribution systems, satellite master 
antenna systems, and subscription television services. According to 
Census Bureau data for 1997, there were a total of 1,311 firms in this 
category, total, that had operated for the entire year. Of this total, 
1,180 firms had annual receipts of under $10 million and an additional 
52 firms had receipts of $10 million or more but less than $25 million. 
Consequently, the Commission estimates that the majority of providers 
in this service category are small businesses that may be affected by 
the rules and policies adopted herein.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    41. This Second Report and Order adopts several modifications to 
the Commission's rules to improve the effectiveness of the rural health 
care universal service support mechanism and increase utilization of 
this mechanism by rural health care providers. First, as articulated 
above, in this Second Report and Order, we change the Commission's 
definition of rural for the purposes of the rural health care support 
mechanism. The new definition will not impact reporting or 
recordkeeping requirements. It does, however, change the overall pool 
of eligible applicants. Second, this Second Report and Order expands 
funding for mobile rural health care services by subsidizing the 
difference between the actual rate of satellite service for mobile 
rural health care providers and the rate for an urban wireline service 
with a similar bandwidth. Because mobile rural health care providers 
will now be eligible for support, we adopt rules requiring such 
providers to submit an estimated number of sites the mobile health care 
provider will serve during the year. Additionally, mobile rural health 
care providers seeking discounts for satellite services will be 
required to certify that they are serving eligible rural areas. 
Providers must keep annual logs indicating: (i) The date and locations 
of each clinic stop; and (ii) the number of patients served at each 
such clinic stop. Mobile rural health care providers must maintain 
their annual logs for a period of five years and make such logs 
available to the Administrator and the Commission upon request. 
Further, in order to receive the discount, mobile rural health care 
providers will be required to provide to USAC documentation of the 
price for bandwidth equivalent wireline services in the urban area in 
the state to be covered by the project.
    42. These reporting and recordkeeping requirements will minimally 
impact both small and large entities. However, even though the minimal 
impact may be more financially burdensome for smaller entities, the 
minimal impact of such requirements is outweighed by the benefit of 
providing support necessary to make mobile telemedicine economical for 
rural health care providers to provide health care to rural and remote 
areas, and to make telecommunications rates for public and non-profit 
rural health care providers comparable to those paid in urban areas. 
Further, these requirements are necessary to ensure that the statutory 
goals of section 254 of the Telecommunications Act of 1996 are met 
without waste, fraud, or abuse.

F. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    43. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach 
impacting small business, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance and 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 part thereof, for small entities.
    44. In this Second Report and Order, we amend our rules to improve 
the program, increase participation by rural health care providers, and 
ensure that the benefits of the program continue to be distributed in a 
fair and equitable manner. The actions taken in this Second Report and 
Order help improve health care services available in rural America, and 
better enable rural communities to rapidly diagnose, treat, and contain 
possible outbreaks of disease. Thus, rural health care providers stand 
to benefit directly from the modifications to our rules and policies.
    45. We have taken the following steps to minimize the impact on 
small entities. First, to ease the transition to the new definition, we 
permit all health care providers that have received a funding 
commitment from USAC since 1998 to continue to qualify for funding for 
the next three years under the old definition. Thereafter, health care 
providers must qualify under our new definition to receive funding. We 
find that this transition period is necessary to allow rural health 
care providers to plan for the elimination of support. The alternative 
of not providing for a transition period was considered but rejected 
because we believe a transition period is necessary to allow rural 
health care providers to plan for the elimination of support, thus 
minimizing any adverse or unfair impact on smaller entities. In 
addition, this transition period will allow us time to review the 
effect of this definition on smaller entities. Second, our new 
definition allows rural health care providers to determine their 
eligibility in the same manner as under the old definition. Because the 
old and new definitions are similar, rural health care providers will 
not have to adjust to a new application process. The alternative of not 
allowing rural health care providers to determine their eligibility in 
the same manner was also considered but rejected because we wanted to 
minimize confusion on the part of applicants. An approach that 
simplifies the application process for rural health care providers will 
help ensure that applicants, including small entities, will not be 
deterred from applying for support due to administrative burdens. 
Lastly, for mobile rural health care services, we have established a 
presumption that will minimize administrative burdens for all 
applicants, including smaller entities. Mobile rural health care 
providers will be required to submit to USAC an estimated number of 
sites the mobile rural health care provider will serve during the year. 
Where a mobile rural health care provider serves eight or more sites in 
a year, we will presume

[[Page 6372]]

that satellite services are most cost-effective and we will not require 
a further showing from such providers.

G. Report to Congress

    46. The Commission will send a copy of this Report and Order and 
Order on Reconsideration including this 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 Report and Order and Order on 
Reconsideration including this FRFA, to the Chief Counsel for Advocacy 
of the Small Business Administration. A copy of this Report and Order 
and Order on Reconsideration and FRFA (or summaries thereof) will also 
be published in the Federal Register.

H. Paperwork Reduction Act Analysis

    47. This document contains modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will be submitted to the Office of Management and 
Budget (OMB) for review under section 3507(d) of the PRA. OMB, the 
general public, and other Federal agencies are invited to comment on 
the modified information collection requirements contained in this 
proceeding. In addition, we note that pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4), we previously sought specific comment on how the Commission 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''
    48. In this present document, we have assessed the effects of the 
measures adopted to protect against waste, fraud and abuse in the 
administration of the rural health care universal service support 
mechanism. We find that the modified information and record retention 
requirements for mobile rural health care providers and the modified 
certification requirements for health care providers in states that are 
entirely rural will not be unduly burdensome on small businesses.
    49. The full text of this 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. This document may also be purchased from 
the Commission's duplicating contractor, Best Copy and Printing, 
Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, 
telephone (202) 488-5300, facsimile (202) 488-5563, or via e-mail 
[email protected].

I. Further Information

    50. 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 Order can also be downloaded in Microsoft Word 
and ASCII formats at http://www.fcc.gov/ccb/universalservice/highcost.
    51. For further information, contact Regina Brown at (202) 418-0792 
or Dana Bradford at (202) 418-1932, in the Telecommunications Access 
Policy Division, Wireline Competition Bureau.

V. Ordering Clauses

    52. Pursuant to the authority contained in sections 1, 4(i), 4(j), 
201-205, 214, 254, and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 214, 254, and 403, 
this Report and Order and Order on Reconsideration, is adopted.
    53. Pursuant to the authority contained in section 405, of the 
Communications Act of 1934, as amended, 47 U.S.C. 405, and Sec. Sec.  
0.291 and 1.429 of the Commission's rules, 47 CFR 0.291 and 1.429, 
American Samoa Telecommunications Authority's Petition for 
Reconsideration is granted to the extent indicated herein.
    54. It is further ordered that part 54 of the Commission's rules, 
47 CFR part 54, except Sec. Sec.  54.609 and 54.619 which will become 
effective upon Office of Management and Budget approval, is amended as 
set forth in Appendix A attached hereto, effective thirty (30) days 
after the publication of this Report and Order and Order on 
Reconsideration in the Federal Register.
    55. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order and Order on Reconsideration 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

    Health Facilities, Libraries, Reporting and recordkeeping 
requirements, Schools, 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 citation for part 54 continues to read as follows:

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


0
2. Amend Sec.  54.5 by revising the definition of ``Rural area'' to 
read as follows:


Sec.  54.5  Terms and definitions.

* * * * *
    Rural area. For purposes of the schools and libraries universal 
support mechanism, a ``rural area'' is a nonmetropolitan 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, or any contiguous non-urban Census Tract or 
Block Numbered Area within an MSA-listed metropolitan county identified 
in the most recent Goldsmith Modification published by the Office of 
Rural Health Policy of the U.S. Department of Health and Human 
Services. For purposes of the rural health care universal service 
support mechanism, a ``rural area'' is an area that is entirely outside 
of a Core Based Statistical Area; is within a Core Based Statistical 
Area that does not have any Urban Area with a population of 25,000 or 
greater; or is in a Core Based Statistical Area that contains an Urban 
Area with a population of 25,000 or greater, but is within a specific 
census tract that itself does not contain any part of a Place or Urban 
Area with a population of greater than 25,000. ``Core Based Statistical 
Area'' and ``Urban Area'' are as defined by the Census Bureau and 
``Place'' is as identified by the Census Bureau.
* * * * *

0
3. Amend Sec.  54.601 by adding paragraphs (a)(3)(i), (a)(3)(ii), and 
(c)(3) to read as follows:


Sec.  54.601  Eligibility.

    (a) * * *
    (3) * * *
    (i) Any health care provider that was located in a rural area under 
the definition used by the Commission prior to July 1, 2005, and that 
had received a funding commitment from USAC since 1998, shall continue 
to qualify for support under the universal service mechanism for health 
care providers for a period of three years, beginning July 1, 2005.

[[Page 6373]]

    (ii) [Reserved]
* * * * *
    (c) * * *
    (3) Advanced telecommunications and information services as 
provided under Sec.  54.621.
* * * * *

0
4. Amend Sec.  54.609 by adding paragraph (e) to read as follows:


Sec.  54.609  Calculating support.

* * * * *
    (e) Mobile rural health care providers. (1) Calculation of support. 
Mobile rural health care providers may receive discounts for satellite 
services calculated by comparing the rate for the satellite service to 
the rate for an urban wireline service with a similar bandwidth. 
Discounts for satellite services shall not be capped at an amount of a 
functionally similar wireline alternative. Where the mobile rural 
health care provider provides service in more than one state, the 
calculation shall be based on the urban areas in each state, 
proportional to the number of locations served in each state.
    (2) Documentation of support. (i) Mobile rural health care 
providers shall provide to the Administrator documentation of the price 
of bandwidth equivalent wireline services in the urban area in the 
state or states where the service is provided. Mobile rural health care 
providers shall provide to the Administrator the number of sites the 
mobile health care provider will serve during the funding year.
    (ii) Where a mobile rural health care provider serves less than 
eight different sites per year, the mobile rural health care provider 
shall provide to the Administrator documentation of the price of 
bandwidth equivalent wireline services. In such case, the Administrator 
shall determine on a case-by-case basis whether the telecommunications 
service selected by the mobile rural health care provider is the most 
cost-effective option. Where a mobile rural health care provider seeks 
a more expensive satellite-based service when a less expensive wireline 
alternative is most cost-effective, the mobile rural health care 
provider shall be responsible for the additional cost.

0
5. Amend Sec.  54.615 by revising paragraph (c)(2) to read as follows:


Sec.  54.615  Obtaining services.

* * * * *
    (c) * * *
    (2) The requester is physically located in a rural area, unless the 
health care provider is requesting services provided under Sec.  
54.621; or, if the requester is a mobile rural health care provider 
requesting services under Sec.  54.609(e), that the requester has 
certified that it is serving eligible rural areas.
* * * * *

0
6. Amend Sec.  54.619 by revising paragraph (a) to read as follows:


Sec.  54.619  Audits and recordkeeping.

    (a) Health care providers. (1) Health care providers shall maintain 
for their purchases of services supported under this subpart 
documentation for five years from the end of the funding year 
sufficient to establish compliance with all rules in this subpart. 
Documentation must include, among other things, records of allocations 
for consortia and entities that engage in eligible and ineligible 
activities, if applicable. Mobile rural health care providers shall 
maintain annual logs indicating: The date and locations of each clinic 
stop; and the number of patients served at each such clinic stop.
    (2) Mobile rural health care providers shall maintain its annual 
logs for a period of five years. Mobile rural health care providers 
shall make its logs available to the Administrator and the Commission 
upon request.
* * * * *

0
7. Amend Sec.  54.621 by adding paragraph (c) to read as follows:


Sec.  54.621  Access to advanced telecommunications and information 
services.

* * * * *
    (c) Health care providers located in States that are entirely rural 
shall be eligible to receive universal service support equal to 50 
percent of the monthly cost of advanced telecommunications and 
information services reasonably related to the health care needs of the 
facility.

0
8. Amend Sec.  54.623 by revising paragraphs (a), (b), (c)(2), and 
(c)(3) to read as follows:


Sec.  54.623  Cap.

    (a) Amount of the annual cap. The annual cap on federal universal 
service support for health care providers shall be $400 million per 
funding year, with the following exceptions.
    (b) Funding year. A funding year for purposes of the health care 
providers cap shall be the period July 1 through June 30.
    (c) * * *
    (2) For each funding year, which will begin on July 1, the 
Administrator shall implement a filing period that treats all health 
care providers filing within that period as if they were simultaneously 
received. The filing period shall begin on the date that the 
Administrator begins to receive applications for support, and shall 
conclude on a date to be determined by the Administrator.
    (3) The Administrator may implement such additional filing periods 
as it deems necessary. The deadline for all required forms to be filed 
with the Administrator is June 30 for the funding year that begins on 
the previous July 1.
* * * * *
[FR Doc. 05-2269 Filed 2-4-05; 8:45 am]
BILLING CODE 6712-01-U