[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Rules and Regulations]
[Pages 29960-29979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-10231]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 05-46]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission addresses the minimum 
requirements for a telecommunications carrier to be designated as an 
``eligible telecommunications carrier'' or ``ETC,'' and thus eligible 
to receive federal universal service support. Specifically, consistent 
with the recommendations of the Federal-State Joint Board on Universal 
Service (Joint Board), we adopt additional mandatory requirements for 
ETC designation proceedings.

DATES: Effective June 24, 2005 except for Sec. Sec.  54.202 and 54.209 
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. Written comments by the public on the new and/
or modified information collection requirements are due July 25, 2005.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Marlene H. Dortch, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, SW., Washington, DC 20554. In addition to 
filing comments with the Office of the Secretary, a copy of any 
comments on the Paperwork Reduction Act information collection 
requirements contained herein should be submitted to Judith B. Herman, 
Federal Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to [email protected]. 
Parties should also send three paper copies of their filings to Sheryl 
Todd, Telecommunications Access Policy Division, Wireline Competition 
Bureau, Federal Communications Commission, 445 12th Street, SW., Room 
5-B540, Washington, DC 20554. See Supplemental Information for further 
filing instructions.

FOR FURTHER INFORMATION CONTACT: Mark Seifert, Assistant Chief, 
Wireline Competition Bureau, Telecommunications Access Policy Division, 
(202) 418-7400, TTY (202) 418-0484. For additional information 
concerning the information collection(s) contained in this document, 
contact Judith B. Herman at (202) 418-0214, or via the Internet at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, in CC Docket No. 96-45, FCC 05-46, released March 17, 2005. 
The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 12th Street, SW., Washington, DC 20554.

I. Introduction

    1. This Report and Order addresses the minimum requirements for a 
telecommunications carrier to be designated as an ``eligible 
telecommunications carrier'' or ``ETC,'' and thus eligible to receive 
federal universal service support. Specifically, consistent with the 
recommendations of the Federal-State Joint Board on Universal Service 
(Joint Board), we adopt additional mandatory requirements for ETC 
designation proceedings in which the Commission acts pursuant to 
section 214(e)(6) of the Communications Act of 1934, as amended (the 
Act). In addition, as recommended by the Joint Board, we encourage 
states that exercise jurisdiction over ETC designations pursuant to 
section 214(e)(2) of the Act, to adopt these requirements when deciding 
whether a common carrier should be designated as an ETC. We believe 
that application of these additional requirements by the Commission and 
state commissions will allow for a more predictable ETC designation 
process.
    2. We also believe that because these requirements create a more 
rigorous ETC designation process, their application by the Commission 
and state commissions will improve the long-term sustainability of the 
universal service fund. Specifically, in considering whether a common 
carrier has satisfied its burden of proof necessary to obtain ETC 
designation, we require that the applicant: (1) Provide a five-year 
plan demonstrating how high-cost universal service support will be used 
to improve its coverage, service quality or capacity in every wire 
center for which it seeks designation and expects to receive universal 
service support; (2) demonstrate its ability to remain functional in 
emergency situations; (3) demonstrate that it will satisfy consumer 
protection and service quality standards; (4) offer local usage plans 
comparable to those offered by the incumbent local exchange carrier 
(LEC) in the areas for which it seeks designation; and (5) acknowledge 
that it may be required to provide equal access if all other ETCs in 
the designated service area relinquish their designations pursuant to 
section 214(e)(4) of the Act. In addition, we make these additional 
requirements applicable on a prospective basis to all ETCs previously 
designated by the Commission, and we require these ETCs to submit 
evidence demonstrating how they comply with this new ETC designation 
framework by October 1, 2006, at the same time they submit their annual 
certification filing. As explained in greater detail below, however, we 
do not adopt the Joint Board's recommendation to evaluate separately 
whether ETC applicants have the financial resources and ability to 
provide quality services throughout the designated service area because 
we conclude the objective of such criterion will be achieved through 
the other requirements adopted in this Report and Order.
    3. In this Report and Order, we also set forth the analytical 
framework the Commission will use to determine whether the public 
interest would be served by an applicant's designation as an ETC. We 
find that, under the statute, an applicant should be designated as an

[[Page 29961]]

ETC only where such designation serves the public interest, regardless 
of whether the area where designation is sought is served by a rural or 
non-rural carrier. Although the outcome of the Commission's Sec.  
214(e)(6) analysis may vary depending on whether the area is served by 
a rural or non-rural carrier, we clarify that the Commission's public 
interest examination for ETC designations will review many of the same 
factors for ETC designations in areas served by non-rural and rural 
incumbent LECs. In addition, as part of our public interest analysis, 
we will examine the potential for creamskimming effects in instances 
where an ETC applicant seeks designation below the study area level of 
a rural incumbent LEC. We also encourage states to apply the 
Commission's analysis in determining whether or not the public interest 
would be served by designating a carrier as an ETC.
    4. In addition, we further strengthen the Commission's reporting 
requirements for ETCs in order to ensure that high-cost universal 
service support continues to be used for its intended purposes. An ETC, 
therefore, must submit, among other things, on an annual basis: (1) 
Progress updates on its five-year service quality improvement plan, 
including maps detailing progress towards meeting its five-year 
improvement plan, explanations of how much universal service support 
was received and how the support was used to improve service quality in 
each wire center for which designation was obtained, and an explanation 
of why any network improvement targets have not been met; (2) detailed 
information on outages in the ETC's network caused by emergencies, 
including the date and time of onset of the outage, a brief description 
of the outage, the particular services affected by the outage, the 
geographic areas affected by the outage, and steps taken to prevent a 
similar outage situation in the future; and (3) how many requests for 
service from potential customers were unfulfilled for the past year and 
the number of complaints per 1,000 handsets or lines. These annual 
reporting requirements are required for all ETCs designated by the 
Commission. We encourage states to require these reports to be filed by 
all ETCs over which they possess jurisdiction.
    5. As explained below, we do not adopt the recommendation of the 
Joint Board to limit high-cost support to a single connection that 
provides access to the public telephone network. Section 634 of the 
2005 Consolidated Appropriations Act prohibits the Commission from 
utilizing appropriated funds to ``modify, amend, or change'' its rules 
or regulations to implement this recommendation. Nevertheless, we 
believe the rigorous ETC designation requirements adopted above will 
ensure that only ETCs that can adequately provide universal service 
will receive ETC designation, thereby lessening fund growth 
attributable to the designation and supporting the long-term 
sustainability of the universal service fund.
    6. We also agree with the Joint Board's recommendation that changes 
are not warranted in our rules concerning procedures for redefinition 
of service areas served by rural incumbent LECs. In addition, in this 
Report and Order, we grant several petitions for redefinition of rural 
incumbent LEC service areas. Moreover, we direct the Universal Service 
Administrative Company (USAC), in accordance with direction from the 
Wireline Competition Bureau, to develop standards as necessary for the 
submission of any maps that ETCs are required to submit to USAC under 
the Commission's rules. We also modify the Commission's annual 
certification and line count filing deadlines so that newly designated 
ETCs are permitted to file that data within sixty days of their ETC 
designation date. This will allow high-cost support to be distributed 
as of the date of ETC designation. In addition, to enable price cap 
LECs and/or competitive ETCs that miss the June 30 annual interstate 
access support (IAS) certification deadline to receive IAS support, we 
modify the quarterly certification schedule for the receipt of IAS 
support. These carriers may file their certification after June 30 in 
order to receive IAS support in the second calendar quarter after the 
certification is filed. Finally, we decline to define mobile wireless 
customer location in terms of ``place of primary use,'' as defined by 
the Mobile Telecommunications Sourcing Act (MTSA), for universal 
service purposes.

II. Scope of Support

    7. On December 8, 2004, Congress passed the 2005 Consolidated 
Appropriations Act, which includes a provision prohibiting the 
Commission from utilizing appropriated funds to ``modify, amend, or 
change its rules or regulations for Universal Service support payments 
to implement the February 27, 2004 recommendations of the Federal-State 
Joint Board on Universal Service regarding single connection or primary 
line restrictions on universal service support payments.'' Accordingly, 
in this Report and Order, we do not consider the portion of the Joint 
Board's Recommended Decision, released February 27, 2004, related to 
limiting the scope of high-cost support to a single connection that 
provides access to the public telephone network.

III. ETC Designation Process

    8. State commissions and the Commission are charged with reviewing 
ETC designation applications for compliance with section 214(e)(1) of 
the Act. A common carrier designated as an ETC must offer the services 
supported by the federal universal service mechanisms throughout the 
designated service area. The ETC must offer such services using either 
its own facilities or a combination of its own facilities and resale of 
another carrier's services. The ETC must also advertise the supported 
services and the associated charges throughout the service area for 
which designation is received, using media of general distribution. In 
addition, an ETC must advertise the availability of Lifeline and Link 
Up services in a manner reasonably designed to reach those likely to 
qualify for those services. In this Report and Order, we adopt 
additional requirements consistent with section 214 of the Act that all 
ETC applicants must meet to be designated an ETC by this Commission. 
Further, although specific requirements set forth in this Report and 
Order may be relevant only for wireless ETC applicants and some may be 
relevant for wireline ETC applicants, this ETC designation framework 
generally applies to any type of common carrier that seeks ETC 
designation before the Commission under section 214(e)(6) of the Act.
    9. In addition, we set forth our public interest analysis for ETC 
designations, which includes an examination of (1) the benefits of 
increased consumer choice, (2) the impact of the designation on the 
universal service fund, and (3) the unique advantages and disadvantages 
of the competitor's service offering. As part of our public interest 
analysis, we also will examine the potential for creamskimming in 
instances where an ETC applicant seeks designation below the study area 
level of a rural incumbent LEC.
    10. We encourage state commissions to require ETC applicants over 
which they have jurisdiction to meet these same conditions and to 
conduct the same public interest analysis outlined in this Report and 
Order. We further encourage state commissions to apply these 
requirements to all ETC applicants in a manner that is consistent with 
the principle that universal service support mechanisms and rules be 
competitively neutral.

[[Page 29962]]

A. Eligibility Requirements

    11. As described above, ETC applicants must meet statutorily 
prescribed requirements before we can approve their designation as an 
ETC. Based on the record before us, we find that an ETC applicant must 
demonstrate: (1) A commitment and ability to provide services, 
including providing service to all customers within its proposed 
service area; (2) how it will remain functional in emergency 
situations; (3) that it will satisfy consumer protection and service 
quality standards; (4) that it offers local usage comparable to that 
offered by the incumbent LEC; and (5) an understanding that it may be 
required to provide equal access if all other ETCs in the designated 
service area relinquish their designations pursuant to section 
214(e)(4) of the Act. As noted above, these requirements are mandatory 
for all ETCs designated by the Commission. ETCs designated by the 
Commission prior to this Report and Order will be required to make such 
showings when they submit their annual certification filing on October 
1, 2006. We also encourage state commissions to apply these 
requirements to all ETC applicants over which they exercise 
jurisdiction. We do not believe that different ETCs should be subject 
to different obligations, going forward, because of when they happened 
to first obtain ETC designation from the Commission or the state. These 
are responsibilities associated with receiving universal service 
support that apply to all ETCs, regardless of the date of initial 
designation.
1. Commitment and Ability To Provide the Supported Services
    12. We adopt the requirement that an ETC applicant must demonstrate 
its commitment and ability to provide supported services throughout the 
designated service area: (1) By providing services to all requesting 
customers within its designated service area; and (2) by submitting a 
formal network improvement plan that demonstrates how universal service 
funds will be used to improve coverage, signal strength, or capacity 
that would not otherwise occur absent the receipt of high-cost support. 
We encourage states to adopt these requirements and, as recommended by 
the Joint Board, to do so in a manner that is flexible with applicable 
state laws and policies. For example, states that adopt these 
requirements should determine, pursuant to state law, what constitutes 
a ``reasonable request'' for service. In addition, we encourage states 
to follow the Joint Board's proposal that any build-out commitments 
adopted by states ``be harmonized with any existing policies regarding 
line extensions and carrier of last resort obligations.''
    13. First, we agree with and adopt the Joint Board recommendation 
to establish a requirement that an ETC applicant demonstrate its 
capability and commitment to provide service throughout its designated 
service area to all customers who make a reasonable request for 
service. We conclude that this requirement, which we adopted in the 
Virginia Cellular ETC Designation Order, 69 FR 8958, February 26, 2004 
and Highland Cellular ETC Designation Order, 69 FR 26097, May 11, 2004 
is appropriate as a general rule to ensure that all ETCs serve 
requesting customers in their designated service area. Therefore, 
consistent with these orders, we require that an ETC applicant make 
specific commitments to provide service to requesting customers in the 
service areas for which it is designated as an ETC. If the ETC's 
network already passes or covers the potential customer's premises, the 
ETC should provide service immediately. In those instances where a 
request comes from a potential customer within the applicant's licensed 
service area but outside its existing network coverage, the ETC 
applicant should provide service within a reasonable period of time if 
service can be provided at reasonable cost by: (1) Modifying or 
replacing the requesting customer's equipment; (2) deploying a roof-
mounted antenna or other equipment; (3) adjusting the nearest cell 
tower; (4) adjusting network or customer facilities; (5) reselling 
services from another carrier's facilities to provide service; or (6) 
employing, leasing, or constructing an additional cell site, cell 
extender, repeater, or other similar equipment. We believe that these 
requirements will ensure that an ETC applicant is committed to serving 
customers within the entire area for which it is designated. If an ETC 
applicant determines that it cannot serve the customer using one or 
more of these methods, then the ETC must report the unfulfilled request 
to the Commission within 30 days after making such determination.
    14. Second, we require an applicant seeking ETC designation from 
the Commission to submit a formal plan detailing how it will use 
universal service support to improve service within the service areas 
for which it seeks designation. Specifically, we require that an ETC 
applicant submit a five-year plan describing with specificity its 
proposed improvements or upgrades to the applicant's network on a wire 
center-by-wire center basis throughout its designated service area. The 
five-year plan must demonstrate in detail how high-cost support will be 
used for service improvements that would not occur absent receipt of 
such support. This showing must include: (1) How signal quality, 
coverage, or capacity will improve due to the receipt of high-cost 
support throughout the area for which the ETC seeks designation; (2) 
the projected start date and completion date for each improvement and 
the estimated amount of investment for each project that is funded by 
high-cost support; (3) the specific geographic areas where the 
improvements will be made; and (4) the estimated population that will 
be served as a result of the improvements. To demonstrate that 
supported improvements in service will be made throughout the service 
area, applicants should provide this information for each wire center 
in each service area for which they expect to receive universal service 
support, or an explanation of why service improvements in a particular 
wire center are not needed and how funding will otherwise be used to 
further the provision of supported services in that area. We clarify 
that service quality improvements in the five-year plan do not 
necessarily require additional construction of network facilities. 
Furthermore, as discussed infra, in connection with its annual 
reporting obligations, an ETC applicant must submit coverage maps 
detailing the amount of high-cost support received for the past year, 
how these monies were used to improve its network, and specifically 
where signal strength, coverage, or capacity has been improved in each 
wire center in each service area for which funding was received. In 
addition, an ETC applicant must submit on an annual basis a detailed 
explanation regarding why any targets established in its five-year 
improvement plan have not been met.
    15. Some commenters assert that an applicant should submit more 
detailed build-out plans than discussed above, while other commenters 
request that the build-out plans include a specific timeline, including 
start and completion dates. Our approach incorporates many commenters' 
suggestions; however, mandatory completion dates established by the 
Commission would not account for unique circumstances that may affect 
build-out, including the amount of universal service support or 
customer demand. On balance, we find that our approach allows 
consideration of fact-specific circumstances of the carrier and

[[Page 29963]]

the designated service area, while ensuring that high-cost support will 
be used to improve service.
2. Ability To Remain Functional in Emergency Situations
    16. We adopt the Joint Board's recommendation that we require an 
ETC applicant to demonstrate its ability to remain functional in 
emergency situations. Specifically, in order to be designated as an 
ETC, an applicant must demonstrate it has a reasonable amount of back-
up power to ensure functionality without an external power source, is 
able to reroute traffic around damaged facilities, and is capable of 
managing traffic spikes resulting from emergency situations. We believe 
that functionality during emergency situations is an important 
consideration for the public interest. Moreover, to ensure that ETCs 
continue to comply with this requirement, as discussed infra, ETCs 
designated by the Commission must certify on an annual basis that they 
are able to function in emergency situations. Because most emergency 
situations are local in nature, we anticipate that state commissions 
that choose to adopt an emergency functionality requirement may also 
identify other geographically-specific factors that are relevant for 
consideration. If states impose any additional requirements, we 
encourage them to do so in a manner that is consistent with the 
universal service principle of competitive neutrality.
    17. We also disagree with commenters that propose that the 
Commission adopt a specific benchmark requiring an ETC to maintain 
eight hours of back-up power and ability to reroute traffic to other 
cell sites in emergency situations. We believe that such a benchmark is 
inappropriate because, although an ETC may have taken reasonable 
precautions to remain functional during an emergency, the extreme or 
unprecedented nature of the emergency may render the carrier inoperable 
despite any precautions taken, including battery back-up and plans to 
reroute traffic. Furthermore, we reject suggestions that ETCs should be 
required to publish signal strength for their primary digital 
technology because signal coverage, quality, or capacity will already 
be reported on an annual basis to the Commission as part of the five-
year network improvement plan.
    18. Furthermore, as discussed infra, in connection with its annual 
reporting obligations, an ETC applicant must submit data concerning 
outages in its designated service areas on an annual basis. In 
addition, to minimize the administrative burdens that may be associated 
with such reports, these reporting requirements are modeled after the 
Commission's reporting requirements concerning outages adopted in the 
Outage Reporting Order, 69 FR 68859, November 26, 2004.
3. Consumer Protection
    19. As recommended by the Joint Board, we require a carrier seeking 
ETC designation to demonstrate its commitment to meeting consumer 
protection and service quality standards in its application before the 
Commission. We find that an ETC applicant must make a specific 
commitment to objective measures to protect consumers. Consistent with 
the designation framework established in the Virginia Cellular ETC 
Designation Order and Highland Cellular ETC Designation Order and as 
suggested by commenters, a commitment to comply with the Cellular 
Telecommunications and Internet Association's Consumer Code for 
Wireless Service will satisfy this requirement for a wireless ETC 
applicant seeking designation before the Commission. We will consider 
the sufficiency of other commitments on a case-by-case basis. We 
believe that requiring an ETC applicant to demonstrate that it will 
comply with these consumer protection requirements is consistent with 
section 254 of the Act, and with related Commission orders that require 
policies that universal service serve ``the public interest, 
convenience and necessity'' and ensure that consumers are able to 
receive an evolving level of universal service that ``tak[es] into 
account advances in telecommunications, and information technologies 
and services.'' In addition, an ETC applicant, as described infra, must 
report information on consumer complaints per 1,000 handsets or lines 
on an annual basis.
    20. We also believe that adopting state specific requirements as 
part of our ETC designation process might require the Commission to 
interpret state statutes and rules. An ETC applicant must commit to 
serve the entire service area and must provide five-year network 
improvement plans addressing each wire center for which it expects to 
receive support. We therefore conclude, given the consumer protection 
measures and other requirements adopted above and the provision in 
section 214(e)(4) of the Act that protects customers in the event that 
another ETC relinquishes designation, that it is unnecessary to impose 
additional obligations as a condition of granting ETC status to a 
competitive carrier.
    21. As with the other requirements adopted in this Report and 
Order, state commissions that exercise jurisdiction over ETC 
designations may either follow the Commission's framework or impose 
other requirements consistent with federal law to ensure that supported 
services are offered in a manner that protects consumers. Several 
commenters argue that an ETC should be required to submit to the same 
state laws concerning consumer protection that the incumbent LEC must 
follow. These include, for example, billing, collection, and mediation 
obligations. In determining whether any additional consumer protection 
requirement should apply as a prerequisite for obtaining ETC 
designation from the state--i.e., where such a requirement would not 
otherwise apply to the ETC applicant--we encourage states to consider, 
among other things, the extent to which a particular regulation is 
necessary to protect consumers in the ETC context, as well as the 
extent to which it may disadvantage an ETC specifically because it is 
not the incumbent LEC. We agree with the Joint Board's assertion that 
``states should not require regulatory parity for parity's sake.'' We 
therefore encourage states that impose requirements on an ETC to do so 
only to the extent necessary to further universal service goals.
    22. We also reject commenters' arguments that consumer protection 
requirements imposed on wireless carriers as a condition for ETC 
designation are necessarily inconsistent with section 332 of the Act. 
While section 332(c)(3) of the Act preempts states from regulating the 
rates and entry of CMRS providers, it specifically allows states to 
regulate the other terms and conditions of commercial mobile radio 
services. Therefore, states may extend generally applicable, 
competitively neutral requirements that do not regulate rates or entry 
and that are consistent with sections 214 and 254 of the Act to all 
ETCs in order to preserve and advance universal service.
4. Local Usage
    23. We adopt the Joint Board's recommendation that we establish a 
local usage requirement as a condition of receiving ETC designation. 
Specifically, we require an ETC applicant to demonstrate that it offers 
a local usage plan comparable to the one offered by the incumbent LEC 
in the service areas for which the applicant seeks designation. As in 
past orders, however, we decline to adopt a specific local usage 
threshold.
    24. The Commission requires an ETC to provide local usage in order 
to receive universal service high-cost support. In the First Report and 
Order,

[[Page 29964]]

62 FR 32862, June 17, 1997, the Commission determined that an ETC 
should provide some minimum amount of local usage as part of its 
``basic service'' package of supported services, but declined to 
specify the exact amount of local usage required. We believe the 
Commission should review an ETC applicant's local usage plans on a 
case-by-case basis. For example, an ETC applicant may offer a local 
calling plan that has a different calling area than the local exchange 
area provided by the LECs in the same region, or the applicant may 
propose a local calling plan that offers a specified number of free 
minutes of service within the local service area. We also can envision 
circumstances in which an ETC is offering an unlimited calling plan 
that bundles local minutes with long distance minutes. The applicant 
may also plan to provide unlimited free calls to government, social 
service, health facilities, educational institutions, and emergency 
numbers. Case-by-case consideration of these factors is necessary to 
ensure that each ETC provides a local usage component in its universal 
service offerings that is comparable to the plan offered by the 
incumbent LEC in the area.
    25. We encourage state commissions to consider whether an ETC 
offers a local usage plan comparable to those offered by the incumbent 
in examining whether the ETC applicant provides adequate local usage to 
receive designation as an ETC. In addition, although the Commission has 
not set a minimum local usage requirement, there is nothing in the Act, 
Commission's rules, or orders that would limit state commissions from 
prescribing some amount of local usage as a condition of ETC status.
5. Equal Access
    26. The Joint Board recommended that the Commission adopt 
guidelines that would encourage states to require an ETC be prepared to 
provide equal access if all other ETCs in that service area relinquish 
their designations pursuant to section 214(e)(4) of the Act. Although 
we do not impose a general equal access requirement on ETC applicants 
at this time, ETC applicants should acknowledge that we may require 
them to provide equal access to long distance carriers in their 
designated service area in the event that no other ETC is providing 
equal access within the service area. Specifically, we find that if 
such circumstances arise, the Commission should consider whether to 
impose an equal access or similar requirement under the Act. 
Accordingly, we will decide whether to impose any equal access 
requirements on a case-by-case basis.
    27. Under section 214(e)(4) of the Act, if an ETC relinquishes its 
ETC designation, the Commission must examine whether the customers that 
are being served by the relinquishing carrier will be served by the 
remaining ETC or ETCs. As part of that process, the Commission might 
also examine whether it is necessary to require the remaining ETC to 
provide equal access. Furthermore, under section 251(h)(2) of the Act, 
the Commission may treat another carrier as the incumbent LEC if that 
carrier occupies a position in the market that is comparable to the 
position occupied by the incumbent LEC, if such carrier has 
substantially replaced an incumbent LEC, and if such treatment is 
consistent with the public interest, convenience and necessity. One 
obligation imposed on incumbent LECs is the requirement to offer equal 
access in connection with their wireline services.
6. Adequate Financial Resources
    28. We decline to adopt the Joint Board's recommendation that an 
ETC applicant demonstrate that it has the financial resources and 
ability to provide quality services throughout the designated service 
area. We believe that compliance with the existing requirements for ETC 
designation, along with the criteria adopted above, will require an ETC 
applicant to show that it has significant financial resources. 
Specifically, an applicant must demonstrate the ability to offer all 
the supported services in the designated area by submitting detailed 
commitments to build-out facilities, abide by service quality 
standards, and provide services throughout its designated service area 
upon request. And in its annual certification and reporting 
requirements, an ETC must demonstrate that it has used universal 
service support to provide quality service throughout the designated 
area. In addition, most wireless carriers, the largest group of 
competitive ETCs that the Commission designates, are already operating 
systems within their licensed market areas, thereby demonstrating in 
practice their ability to provide such services. Since 1994, moreover, 
wireless licensees have purchased their licenses at auction, which 
evinces that they have sufficient resources to provide service. After 
obtaining a license, whether by auction or other means, wireless 
carriers must further comply with the Commission's rules by meeting 
build-out or substantial service requirements for the particular 
service. Therefore, we find additional financial requirements are 
unwarranted to demonstrate that an ETC applicant is capable of 
sustaining operations and supported services.
    29. We further disagree with commenters that argue that an ETC 
should be required to demonstrate that it has the financial capability 
to sustain operations and supported services if an incumbent LEC 
relinquishes its designation. As discussed infra, section 214(e)(4) of 
the Act already contemplates safeguards for protecting customers served 
by an ETC that relinquishes its designation.
    30. In sum, we do not believe that additional requirements 
concerning financial qualifications are necessary when determining 
whether to designate an ETC applicant. We believe that existing ETC 
obligations adequately ensure financial stability. In the event that 
state commissions do consider financial qualification factors in their 
ETC designations, we encourage them to do so in a manner that is 
consistent with the principle that universal service support mechanisms 
and rules be competitively neutral.

B. Public Interest Determinations

    31. Under section 214 of the Act, the Commission and state 
commissions must determine that an ETC designation is consistent with 
the public interest, convenience and necessity. The Commission also 
must consider whether an ETC designation serves the public interest 
consistent with section 254 of the Act. Congress did not establish 
specific criteria to be applied under the public interest tests in 
section 214 or section 254. The public interest benefits of a 
particular ETC designation must be analyzed in a manner that is 
consistent with the purposes of the Act itself, including the 
fundamental goals of preserving and advancing universal service; 
ensuring the availability of quality telecommunications services at 
just, reasonable, and affordable rates; and promoting the deployment of 
advanced telecommunications and information services to all regions of 
the nation, including rural and high-cost areas. Beyond the principles 
detailed in the Act, the Commission and state commissions have used 
additional factors to analyze whether the designation of an additional 
ETC is in the public interest.
    32. In instances where the Commission has jurisdiction over an ETC 
applicant, the Commission in this Report and Order adopts the fact-
specific public interest analysis it has developed in prior orders. 
First, the Commission will consider a variety of factors in the overall 
ETC determination, including the benefits of

[[Page 29965]]

increased consumer choice, and the unique advantages and disadvantages 
of the competitor's service offering. Second, in areas where an ETC 
applicant seeks designation below the study area level of a rural 
telephone company, the Commission also will conduct a creamskimming 
analysis that compares the population density of each wire center in 
which the ETC applicant seeks designation against that of the wire 
centers in the study area in which the ETC applicant does not seek 
designation. Based on this analysis, the Commission will deny 
designation if it concludes that the potential for creamskimming is 
contrary to the public interest. The Commission plans to use this 
analysis to review future ETC applications and strongly encourages 
state commissions to consider the same factors in their public interest 
reviews.
    33. We find that before designating an ETC, we must make an 
affirmative determination that such designation is in the public 
interest, regardless of whether the applicant seeks designation in an 
area served by a rural or non-rural carrier. In the Virginia Cellular 
ETC Designation Order, the Commission determined that merely showing 
that a requesting carrier in a non-rural study area complies with the 
eligibility requirements outlined in section 214(e)(1) of the Act would 
not necessarily show that an ETC designation would be consistent with 
the public interest in every instance. We find the public interest 
concerns that exist for carriers seeking ETC designation in areas 
served by rural carriers also exist in study areas served by non-rural 
carriers. Accordingly, we find that many of the same factors should be 
considered in evaluating the public interest for both rural and non-
rural designations, except that creamskimming effects will be analyzed 
only in rural study areas because the same potential for creamskimming 
does not exist in areas served by non-rural incumbent LECs.
    34. We note that section 214 of the statute provides that, for 
areas served by a rural incumbent LEC, more than one ETC may be 
designated if doing so would serve the public interest. In addition, 
``[b]efore designating an additional [ETC] for an area served by a 
rural telephone company, the [state Commission under section 214(e)(2) 
or Commission under section 214(e)(6)] shall find that the designation 
is in the public interest.'' In contrast, section 214 provides that 
additional ETCs shall be designated in an area served by a non-rural 
incumbent LEC. Therefore, although we adopt one set of criteria for 
evaluating the public interest for ETC designations in rural and non-
rural areas, in performing the public interest analysis, the Commission 
and state commissions may conduct the analysis differently, or reach a 
different outcome, depending upon the area served. For example, the 
Commission and state commissions may give more weight to certain 
factors in the rural context than in the non-rural context and the same 
or similar factors could result in divergent public interest 
determinations, depending on the specific characteristics of the 
proposed service area, or whether the area is served by a rural or non-
rural carrier.
1. Cost-Benefit Analysis
    35. We conclude that we will continue to consider and balance the 
factors listed below as part of our overall analysis regarding whether 
the designation of an ETC will serve the public interest. In 
determining whether an ETC has satisfied these criteria, the Commission 
places the burden of proof upon the ETC applicant.
    (1) Consumer Choice: The Commission takes into account the benefits 
of increased consumer choice when conducting its public interest 
analysis. In particular, granting an ETC designation may serve the 
public interest by providing a choice of service offerings in rural and 
high-cost areas. The Commission has determined that, in light of the 
numerous factors it considers in its public interest analysis, the 
value of increased competition, by itself, is unlikely to satisfy the 
public interest test.
    (2) Advantages and Disadvantages of Particular Service Offering: 
The Commission also considers the particular advantages and 
disadvantages of an ETC's service offering. For instance, the 
Commission has examined the benefits of mobility that wireless carriers 
provide in geographically isolated areas, the possibility that an ETC 
designation will allow customers to be subject to fewer toll charges, 
and the potential for customers to obtain services comparable to those 
provided in urban areas, such as voicemail, numeric paging, call 
forwarding, three-way calling, call waiting, and other premium 
services. The Commission also examines disadvantages such as dropped 
call rates and poor coverage.
    36. In addition, we believe that the requirements we have 
established in this Report and Order for becoming an ETC will help 
ensure that each ETC designation will serve the public interest. For 
example, the requirements to demonstrate compliance with a service 
quality improvement plan and to respond to any reasonable request for 
service will ensure designation of ETC applicants that are committed to 
using high-cost support to alleviate poor service quality in the ETC's 
service area.
    37. We disagree with commenters who contend that we should adopt a 
more precise cost-benefit test for the purpose of making public 
interest determinations. While we believe that a consideration of both 
benefits and costs is inherent in conducting a public interest 
analysis, we agree with the Joint Board's recommendation and decline to 
provide more specific guidance at this time on how this balancing 
should be performed. The specific determination, and the relative 
weight of the relevant considerations, must be evaluated on a case-by-
case basis.
    38. We also reject the assertions of several commenters that a more 
stringent analysis is necessary to determine whether an ETC designation 
is in the public interest. These commenters argue that the current ETC 
application process is not rigorous enough to meet section 214(e)(2) of 
the Act and that ETC applicants should be required to demonstrate the 
public benefit they will confer as a result of the ETC designation. We 
believe that the factors set out in the Virginia Cellular ETC 
Designation Order, as expanded in this Report and Order, allow for an 
appropriate public interest determination.
2. Potential for Creamskimming Effects
    39. As part of the public interest analysis for ETC applicants that 
seek designation below the service area level of a rural incumbent LEC, 
we will perform an examination to detect the potential for 
creamskimming effects that is similar to the analysis employed in the 
Virginia Cellular ETC Designation Order and the Highland Cellular ETC 
Designation Order. As discussed below, the state commissions that apply 
a creamskimming analysis similar to the Commission's will facilitate 
the Commission's review of petitions seeking redefinition of incumbent 
LEC service areas filed pursuant to section 214(e)(5) of the Act.
    40. When a competitive carrier requests ETC designation for an 
entire rural service area, it does not create creamskimming concerns 
because the affected ETC is required to serve all wire centers in the 
designated service area. The potential for creamskimming, however, 
arises when an ETC seeks designation in a disproportionate share of the 
higher-density wire centers in an incumbent LEC's service area. By 
serving a disproportionate share of the high-density portion of a 
service area, an ETC may receive more support than

[[Page 29966]]

is reflective of the rural incumbent LEC's costs of serving that wire 
center because support for each line is based on the rural telephone 
company's average costs for serving the entire service area unless the 
incumbent LEC has disaggregated its support. Because line density is a 
significant cost driver, it is reasonable to assume that the highest-
density wire centers are the least costly to serve, on a per-subscriber 
basis. The effects of creamskimming also would unfairly affect the 
incumbent LEC's ability to provide service throughout the area since it 
would be obligated to serve the remaining high-cost wire centers in the 
rural service area while ETCs could target the rural incumbent LEC's 
customers in the lowest cost areas and also receive support for serving 
the customers in these areas. In order to avoid disproportionately 
burdening the universal service fund and ensure that incumbent LECs are 
not harmed by the effects of creamskimming, the Commission strongly 
encourages states to examine the potential for creamskimming in wire 
centers served by rural incumbent LECs. This would include examining 
the degree of population density disparities among wire centers within 
rural service areas, the extent to which an ETC applicant would be 
serving only the most densely concentrated areas within a rural service 
area, and whether the incumbent LEC has disaggregated its support at a 
smaller level than the service area (e.g., at the wire center level).
    41. Because a low population density typically indicates a high-
cost area, analyzing the disparities in densities can reveal when an 
ETC would serve only the lower cost wire centers to the exclusion of 
other less profitable areas. For instance, the Commission found in the 
Virginia Cellular ETC Designation Order that designating a wireless 
carrier as an ETC in a particular service area was not in the public 
interest due to the disparity in density between the high-density wire 
center in the area that the applicant was proposing to serve and the 
wire centers within the service area that the wireless carrier was not 
proposing to serve. Even if a carrier seeks to serve both high and low 
density wire centers, the potential for creamskimming still exists if 
the vast majority of customers that the carrier is proposing to serve 
are located in the low-cost, high-density wire centers.
    42. The Commission has also determined that creamskimming concerns 
may be lessened when a rural incumbent LEC has disaggregated support to 
the higher-cost portions of the incumbent's service area. Specifically, 
under the Commission's rules, rural incumbent LECs are permitted to 
depart from service area averaging and instead disaggregate and target 
per-line high-cost support into geographic areas below the service area 
level. By doing so, per-line support varies to reflect the cost of 
service in a particular geographic area, such as a wire center, within 
the service area. By reducing per-line support in high density areas, 
disaggregation may create less incentive in certain circumstances for 
an ETC to enter only those areas. Nevertheless, although disaggregation 
may alleviate some concerns regarding creamskimming by ETCs, because an 
incumbent's service area may include wire centers with widely disparate 
population densities, and therefore highly disparate cost 
characteristics, disaggregation may be a less viable alternative for 
reducing creamskimming opportunities. This problem may be compounded 
where the cost characteristics of the rural incumbent LEC and 
competitive ETC applicant differ substantially. Thus, creamskimming may 
remain a concern where a competitive ETC seeks designation in a service 
area where the incumbent rural LEC has disaggregated high-cost support 
to the higher-cost portions of its service area.
    43. We find that a creamskimming analysis is unnecessary for ETC 
applicants seeking designation below the service area level of non-
rural incumbent LECs. Unlike the rural mechanism, which uses embedded 
costs to distribute support on a service area-wide basis, the non-rural 
mechanism uses a forward-looking cost model to distribute support to 
individual wire centers where costs exceed the national average by a 
certain amount. Therefore, under the non-rural methodology, high-
density, low-cost wire centers receive little or no high-cost support, 
thereby protecting against the potential for creamskimming.
    44. We urge state commissions to apply the Commission's 
creamskimming analysis when determining whether to designate an ETC in 
a rural service area. We reject assertions that a bright-line test is 
needed to determine whether creamskimming concerns are present. As 
demonstrated in the Virginia Cellular ETC Designation Order and 
Highland Cellular ETC Designation Order, we believe that a rigid 
standard would fail to take into account variations in population 
distributions, geographic characteristics, and other individual factors 
that could affect the outcome of a rural service area creamskimming 
effects analysis. We believe that the factors indicated above provide 
states adequate guidance in determining whether an ETC application 
presents creamskimming concerns.
3. Impact on the Fund
    45. We decline to adopt a specific test to use when considering if 
the designation of an ETC will affect the size and sustainability of 
the high-cost fund. As the Commission has found in the past, analyzing 
the impact of one ETC on the overall fund may be inconclusive. Indeed, 
given the size of the total high-cost fund--approximately $3.8 billion 
a year--it is unlikely that any individual ETC designation would have a 
substantial impact on the overall size of the fund. In addition, the 
Commission is considering in other proceedings, such as the Rural 
Referral Proceeding, 69 FR 48232, August 9, 2004, how support is 
calculated for both rural incumbent LECs and ETCs. We also find, as 
discussed below, that certain proposals examining the effect on the 
fund as part of an ETC public interest analysis may be inconsistent 
with sections 214 and 254 of the Act and related Commission orders.
    46. We find that per-line support received by the incumbent LEC 
should be one of many considerations in our ETC designation analysis. 
We believe that states making public interest determinations may 
properly consider the level of federal high-cost per-line support to be 
received by ETCs. High-cost support is an explicit subsidy that flows 
to areas with demonstrated levels of costs above various national 
averages. Thus, one relevant factor in considering whether or not it is 
in the public interest to have additional ETCs designated in any area 
may be the level of per-line support provided to the area. If the per-
line support level is high enough, the state may be justified in 
limiting the number of ETCs in that study area, because funding 
multiple ETCs in such areas could impose strains on the universal 
service fund.
    47. We decline, however, based on the record before us to adopt a 
specific national per-line support benchmark for designating ETCs. As 
the Joint Board noted, ``[m]any factors mentioned by commenters as 
relevant to the public interest determination--such as topography, 
population density, line density, distance between wire centers, loop 
lengths and levels of investment--may all affect the level of high-cost 
support received in an individual service area.'' Many commenters have 
argued that a per-line benchmark that denies entry to competitive ETCs 
in high-cost areas may prevent consumers in high-cost areas from 
receiving the benefit of competitive service offerings.

[[Page 29967]]

Although giving support to ETCs in particularly high-cost areas may 
increase the size of the fund, we must balance that concern against 
other objectives, including giving consumers throughout the country 
access to services comparable to services in urban areas and ensuring 
competitive neutrality. In addition, as a practical matter, we do not 
believe we currently have an adequate record to determine what specific 
benchmark or benchmark should be set.
    48. For similar reasons, we also decline to adopt a proposal that 
would allow only one wireline ETC and one wireless ETC in each service 
area. Such a proposal that limits the number of ETCs in each service 
area creates a practical problem of determining which wireless and 
wireline provider would be selected. We also reject the application of 
a rebuttable presumption that it is not in the public interest to have 
more than one ETC in each rural high-cost area. We believe that a more 
comprehensive public interest analysis, which considers the specific 
facts of the application, is a better approach and is consistent with 
congressional intent. We also reject arguments that we should treat 
smaller wireless rural carriers differently than larger carriers. We do 
not believe that subjecting smaller wireless carriers to an expedited 
ETC application process or a lower level of scrutiny would serve the 
public interest, and we further believe that it may be contrary to the 
principle of competitive neutrality.

C. Permissive Guidelines for State ETC Designation Proceedings

    49. We encourage state commissions to require all ETC applicants 
over which they have jurisdiction to meet the same conditions and to 
conduct the same public interest analysis outlined in this Report and 
Order. We also encourage states to impose the annual certification and 
reporting requirements uniformly on all ETCs they have previously 
designated. In doing so, we encourage states to conform these 
guidelines with any similar conditions imposed on previously designated 
ETCs in order to avoid duplicative or inapplicable eligibility criteria 
and reporting requirements. We agree with the Joint Board's 
recommendation that a rigorous ETC designation process ensures that 
only fully qualified applicants receive designation as ETCs and that 
all ETC designees are prepared to serve all customers within the 
designated service area. Additionally, a set of guidelines allows for a 
more predictable application process among the states. We believe that 
these guidelines will assist states in determining whether the public 
interest would be served by a carrier's designation as an ETC. We also 
believe that these guidelines will improve the long-term sustainability 
of the fund, because, if the guidelines are followed, only fully 
qualified carriers that are capable of and committed to providing 
universal service will be able to receive support.
    50. As suggested by commenters and the Joint Board, we encourage 
state commissions to consider the requirements adopted in this Report 
and Order when examining whether the state should designate a carrier 
as an ETC. An ETC designation by a state commission can ultimately 
impact the amount of high-cost and low income monies distributed to an 
area served by a non-rural carrier, an area served by one or more rural 
carriers, or both. A single set of guidelines will encourage states to 
develop a single, consistent body of eligibility standards to be 
applied in all cases, regardless of the characteristics of the 
incumbent carrier. As noted above, however, the public interest 
analysis for ETC applications for areas served by rural carriers should 
be more rigorous than the analysis of applications for areas served by 
non-rural carriers.
    51. We also find that states that exercise jurisdiction over ETC 
proceedings should apply these requirements in a manner that will best 
promote the universal service goals found in Sec.  254(b). While 
Congress delegated to individual states the right to make ETC 
decisions, collectively these decisions have national implications that 
affect the dynamics of competition, the national strategies of new 
entrants, and the overall size of the federal universal service fund. 
In addition, these guidelines are designed to ensure designation of 
carriers that are financially viable, likely to remain in the market, 
willing and able to provide the supported services throughout the 
designated service area, and able to provide consumers an evolving 
level of universal service. Moreover, state commissions that apply 
these guidelines will facilitate the Commission's review of petitions 
seeking redefinition of incumbent LEC service areas filed pursuant to 
section 214(e)(5) of the Act.
    52. We decline to mandate that state commissions adopt our 
requirements for ETC designations. Section 214(e)(2) of the Act gives 
states the primary responsibility to designate ETCs and prescribes that 
all state designation decisions must be consistent with the public 
interest, convenience, and necessity. We believe that Sec.  214(e)(2) 
demonstrates Congress's intent that state commissions evaluate local 
factual situations in ETC cases and exercise discretion in reaching 
their conclusions regarding the public interest, convenience and 
necessity, as long as such determinations are consistent with Federal 
and other State law. States that exercise jurisdiction over ETCs should 
apply these requirements in a manner that is consistent with section 
214(e)(2) of the Act. Furthermore, state commissions, as the entities 
most familiar with the service area for which ETC designation is 
sought, are particularly well-equipped to determine their own ETC 
eligibility requirements. Because the guidelines we establish in this 
Report and Order are not binding upon the states, we reject arguments 
suggesting that such guidelines would restrict the lawful rights of 
states to make ETC designations. We also find that federal guidelines 
are consistent with the holding of United States Court of Appeals for 
the Fifth Circuit that nothing in section 214(e) of the Act prohibits 
the States from imposing their own eligibility requirements in addition 
to those described in Sec.  214(e)(1). Consistent with our adoption of 
permissive federal guidelines for ETC designation, state commissions 
will continue to maintain the flexibility to impose additional 
eligibility requirements in state ETC proceedings, if they so choose.
    53. We reject the argument that mandatory requirements are 
necessary to prevent waste, fraud, and abuse in the distribution of 
high-cost support. We note that safeguards already exist to protect 
against the misuse of high-cost support. For example, if a state 
commission believes that high-cost support is being used by an ETC in a 
manner that is inconsistent with section 254 of the Act, the state 
commission may decline to file an annual certification or may withdraw 
an ETC's designation, which would ensure that funds are no longer 
distributed to the ETC.
    54. We also note that the Commission may institute an inquiry on 
its own motion to ensure that high-cost support is used ``only for the 
provision, maintenance, and upgrading of facilities and services'' for 
the areas in which ETCs are designated. In addition, if an ETC 
designated by the Commission fails to fulfill the requirements of 
sections 214 and 254 of the Act, the Commission has the authority to 
revoke a carrier's ETC designation. The Commission also may assess 
forfeitures for violations of Commission rules and orders. 
Consequently, we find that adequate measures exist to prevent waste, 
fraud and abuse of high-cost support by ETCs.

[[Page 29968]]

Nevertheless, the Commission will continue to monitor use of universal 
service funds by ETCs and develop rules as necessary to continue to 
ensure that funds are used in a manner consistent with section 254 of 
the Act.
    55. Commenters further argue that mandatory requirements are 
necessary to prevent growth of the universal service fund. As discussed 
above, the Joint Board is currently contemplating in the Rural Referral 
Proceeding how universal service support can be effectively targeted to 
rural incumbent LECs and ETCs serving high-cost areas, while protecting 
against excessive fund growth. We believe that proceeding is a more 
appropriate forum for determining ways to limit fund growth.

D. Administrative Requirements for ETC Designation Proceedings

    56. Consistent with USAC's request, we note that all future ETC 
designation orders adopted by the Commission will include: (1) The name 
of each incumbent LEC study area in which an ETC has been designated; 
(2) a clear statement of whether the ETC has been designated in all or 
part of each incumbent LEC's study area; and (3) a list of all wire 
centers in which the ETC has been designated, using either the wire 
center's common name or the Common Language Location Identification 
(CLLI) code. In addition, in instances where follow-up filings or other 
conditions have been imposed before the ETC designation is final, the 
Commission will notify USAC when the conditions have been fulfilled. We 
also encourage state commissions to follow these procedures in ETC 
orders they adopt. USAC contends, and we agree, that inclusion of this 
information in ETC designation orders will greatly facilitate USAC's 
data validation and other efforts to ensure that all carriers receive 
high-cost universal service support only in the areas in which they 
have been deemed eligible.
    57. In addition, for carriers that file ETC petitions with the 
Commission seeking designation on tribal lands, we establish procedures 
to ensure that the appropriate tribal governments and tribal regulatory 
authorities are notified and provided with an opportunity to engage in 
consultation with the Commission and to comment in the ETC designation 
proceeding. We find these procedures are consistent with the 
Commission's Tribal Policy Statement, released in June 2000, which 
commits the Commission ``to consult with tribal governments prior to 
implementing any regulatory action or policy that will significantly or 
uniquely affect tribal governments, their land and resources.'' Through 
consultation, the Commission and the tribal government have an 
opportunity to discuss how the ETC petition affects public interests of 
the particular tribal community, for example, the effects of the ETC 
designation on tribal self-determination efforts and potential economic 
opportunities, and on the tribal government's own communications 
priorities and goals, which the Commission recognizes as the sovereign 
right of tribal governments.
    58. Specifically, the Commission requires that any applicant 
seeking ETC designation on tribal lands before the Commission provide 
copies of its petition to the affected tribal governments and tribal 
regulatory authorities at the time of filing. In addition, the 
Commission will send the relevant public notice seeking comment on 
those petitions to the affected tribal governments and tribal 
regulatory authorities by overnight express mail. As with the other 
guidelines adopted herein, we encourage state commissions to follow 
these guidelines for ETC designation proceedings affecting tribal lands 
so that the appropriate tribal governments and tribal regulatory 
authorities are notified of any tribal ETC petitions, related comment 
cycles or other opportunities to consult with the state commission and 
participate in the specific ETC designation proceeding.

IV. Annual Certification and Reporting Requirements

    59. Our rules currently require all ETCs to make an annual 
certification, on or before October 1, that universal service support 
will be used for its intended purposes. As recommended by the Joint 
Board, we maintain and augment this requirement. Specifically, in order 
to continue to receive universal service support each year, we require 
each ETC over which we have jurisdiction, including an ETC designated 
by the Commission prior to this Report and Order, to submit annually 
certain information regarding its network and its use of universal 
service funds. These reporting requirements will ensure that ETCs 
continue to comply with the conditions of the ETC designation and that 
universal service funds are used for their intended purposes. This 
information will initially be due on October 1, 2006, and thereafter 
annually on October 1 of each year, at the same time as the carrier's 
certification that the universal service funds are being used 
consistent with the Act. In addition, following the effective date of 
this Report and Order, we anticipate initiating a proceeding to develop 
procedures for review of these annual reports. Moreover, we anticipate 
initiating a separate proceeding on or before February 25, 2008, to 
examine whether the requirements adopted herein are promoting the use 
of high-cost support by ETCs in a manner that is consistent with 
section 254 of the Act. We further clarify that a carrier that has been 
previously designated as an ETC under Sec.  214(e)(6) does not have to 
reapply for designation, but must comply with the annual certification 
and reporting requirements on a going-forward basis.
    60. Every ETC designated by the Commission must submit the 
following information on an annual basis:
    (1) Progress reports on the ETC's five-year service quality 
improvement plan, including maps detailing progress towards meeting its 
plan targets, an explanation of how much universal service support was 
received and how the support was used to improve signal quality, 
coverage, or capacity; and an explanation regarding any network 
improvement targets that have not been fulfilled. The information 
should be submitted at the wire center level;
    (2) Detailed information on any outage lasting at least 30 minutes, 
for any service area in which an ETC is designated for any facilities 
it owns, operates, leases, or otherwise utilizes that potentially 
affect at least ten percent of the end users served in a designated 
service area, or that potentially affect a 911 special facility (as 
defined in subsection (e) of section 4.5 of the Outage Reporting 
Order). An outage is defined as a significant degradation in the 
ability of an end user to establish and maintain a channel of 
communications as a result of failure or degradation in the performance 
of a communications provider's network. Specifically, the ETC's annual 
report must include: (1) The date and time of onset of the outage; (2) 
a brief description of the outage and its resolution; (3) the 
particular services affected; (4) the geographic areas affected by the 
outage; (5) steps taken to prevent a similar situation in the future; 
and (6) the number of customers affected;
    (3) The number of requests for service from potential customers 
within its service areas that were unfulfilled for the past year. The 
ETC must also detail how it attempted to provide service to those 
potential customers;
    (4) The number of complaints per 1,000 handsets or lines;
    (5) Certification that the ETC is complying with applicable service 
quality standards and consumer

[[Page 29969]]

protection rules, e.g., the CTIA Consumer Code for Wireless Service;
    (6) Certification that the ETC is able to function in emergency 
situations;
    (7) Certification that the ETC is offering a local usage plan 
comparable to that offered by the incumbent LEC in the relevant service 
areas; and
    (8) Certification that the carrier acknowledges that the Commission 
may require it to provide equal access to long distance carriers in the 
event that no other eligible telecommunications carrier is providing 
equal access within the service area.
    61. We conclude that these reporting regulations are reasonable and 
consistent with the public interest and the Act. These reporting 
requirements will further the Commission's goal of ensuring that ETCs 
satisfy their obligation under section 214(e) of the Act to provide 
supported services throughout their designated service areas. The 
administrative burden placed on carriers is outweighed by strengthening 
the requirements and certification guidelines to help ensure that high-
cost support is used in the manner that it is intended. These reporting 
requirements also will help prevent carriers from seeking ETC status 
for purposes unrelated to providing rural and high-cost consumers with 
access to affordable telecommunications and information services.
    62. We encourage state commissions to adopt these annual reporting 
requirements. To the extent that they do so, we urge state commissions 
to apply the reporting requirements to all ETCs, not just competitive 
ETCs. In addition, state commissions may require the submission of any 
other information that they believe is necessary to ensure that ETCs 
are operating in accordance with applicable state and federal 
requirements. In doing so, states should conform these requirements 
with any similar conditions imposed on previously designated ETCs in 
order to avoid duplicative or inapplicable reporting requirements. 
Individual state commissions are uniquely qualified to determine what 
information is necessary to ensure that ETCs are complying with all 
applicable requirements, including state-specific ETC eligibility 
requirements.
    63. If a review of the data submitted by an ETC indicates that the 
ETC is no longer in compliance with the Commission's criteria for ETC 
designation, the Commission may suspend support disbursements to that 
carrier or revoke the carrier's designation as an ETC. Likewise, as the 
Joint Board noted, state commissions possess the authority to rescind 
ETC designations for failure of an ETC to comply with the requirements 
of section 214(e) of the Act or any other conditions imposed by the 
state.

V. Other Issues

A. Service Area Redefinition Process

    64. Section 214(e)(5) of the Act provides that states may establish 
geographic service areas within which competitive ETCs are required to 
comply with universal service obligations and are eligible to receive 
universal service support. For an area served by a rural incumbent LEC, 
however, the Act states that a company's service area for the purposes 
of ETC designation will be the rural incumbent LEC's study area 
``unless and until the Commission and the States, after taking into 
account the recommendations of a Federal-State Joint Board instituted 
under Sec.  410(c), establish a different definition of service area 
for such company.'' This process of changing the incumbent LEC's study 
area--and therefore the competitive ETC's service area--is known as the 
redefinition of a service area. The Commission adopted Sec.  54.207(c) 
of its rules to implement this requirement.
    65. In its Recommended Decision, the Joint Board recommended that 
the Commission retain procedures established by the Commission in 1997 
for the redefinition of rural service areas. We agree with that 
recommendation, and do not believe that changes are necessary at this 
time to our procedures for redefining rural service areas. We agree 
with the Joint Board that in redefining an incumbent LEC's study area 
so as to conform with the service area of a new ETC, the states and 
Commission should continue to work in concert to decide whether a 
different service area definition would better serve the public 
interest. First, under the current redefinition procedures for new 
ETCs, both state commissions and the Commission employ rigorous and 
fact-intensive analyses of requests for service area redefinitions that 
examine the impact of any redefinition on the affected rural incumbent 
LEC's ability to serve the entire study area, including the potential 
for creamskimming that may result from the redefinition. In addition, 
public comment is invited during every step in the process to ensure 
that the states and Commission are fully apprised of any impact the 
redefinition may have on the rural incumbent LEC.
    66. We disagree with commenters that argue that the Commission 
should adopt rules prohibiting redefinition below the study area level 
when new ETCs are designated in an incumbent LEC's service area. In 
particular, we find that this proposal ignores the provision in Sec.  
214(e)(5) that allows redefinition to occur. In any event, the process 
described above adequately protects against harm to the rural incumbent 
LEC that may result from redefinition. We also reject the argument 
posed by certain commenters that contend that the Commission should 
require redefinition of all study areas for which competitive ETCs seek 
designation or have been designated instead of redefining service areas 
on a case-by-case basis. At this time, we believe that the existing 
case-specific analysis adequately protects the interests of incumbent 
LECs.

B. Pending Redefinition Petitions

    67. The Commission has before it several petitions seeking 
redefinition of incumbent LEC study areas. We grant these petitions as 
described below. These petitions, which were filed by either a 
competitive ETC or a state commission, fall into three categories. One 
category involves petitions seeking to redefine a rural incumbent LEC's 
service area into multiple smaller service areas at the wire center 
level. The second category of petitions involves ETCs that were 
designated for service areas that included portions of the incumbent 
LEC's wire centers instead of entire wire centers. These petitions seek 
to redefine the rural incumbent LEC study area for the same areas, 
including some partial wire centers, such that the ETC's designated 
service area and the incumbent LEC's redefined service area would be 
the same. The third category involves two petitions that seek to 
redefine the incumbent LEC's service area into multiple smaller service 
areas at the wire center level. However, the state commissions had 
designated these carriers' service areas to include some areas smaller 
than the incumbent LEC's wire centers. As a result, the designated 
service areas and the proposed redefined areas are not the same.
    68. Since these petitions were filed, the Commission released the 
Highland Cellular ETC Designation Order, in which the Commission 
rejected Highland's petition for designation in only a portion of a 
rural incumbent LEC's service area. Specifically, Highland requested 
that it be allowed to serve parts of the rural incumbent LEC's wire 
centers. We concluded that designating an ETC for only a portion of a 
wire center served by a rural incumbent LEC would be inconsistent with 
the public interest. We also found that the competitive ETC applicant 
must

[[Page 29970]]

commit to provide the supported services to customers throughout a 
minimum geographic area. We concluded that a rural telephone company's 
wire center is the appropriate minimum geographic area for ETC 
designation because rural carrier wire centers typically correspond 
with county or town boundary lines. We continue to believe, as we 
stated in the Highland Cellular ETC Designation Order, that requiring a 
competitive ETC to serve an entire wire center will make it less likely 
that the competitor will relinquish its ETC designation at a later date 
and will best address creamskimming concerns in an administratively 
feasible manner.
    69. In this Report and Order, we conclude that the same principles 
that we apply to ETC designation requests also apply when we are 
considering whether to grant a petition for redefinition. We recognize, 
however, that because of the timing of the underlying state ETC 
designation decisions, many of these pending petitions could not be in 
full compliance with the factors considered in the Highland Cellular 
ETC Designation Order. For example, some petitions follow the ETC 
designation and redefinition framework that was applied by the 
Commission prior to the Highland Cellular ETC Designation Order. Other 
petitions have not presented a creamskimming analysis that examines 
population density data to determine whether the ETC is seeking 
designation only in high-density wire centers of the affected study 
area, which could undercut the rural incumbent LEC's ability to provide 
service throughout its entire study area, as detailed in the Virginia 
Cellular ETC Designation Order. As a result, because the Commission had 
not fully elaborated on its creamskimming analysis based on population 
density or adopted the policy that competitive LEC service areas should 
not be defined below the wire center level, these state commissions 
granting ETC designation and seeking redefinition could not have 
applied the requirements set forth in the Highland Cellular ETC 
Designation Order.
    70. Because the states complied with applicable federal rules and 
guidelines at the time the redefinition petitions were filed, we 
decline to upset those determinations. We therefore find that granting 
these redefinition petitions would serve the public interest. 
Accordingly, we grant these redefinition petitions pursuant to section 
214(e)(5) of the Act. On a going forward basis, however, we intend to 
rigorously apply the standards set forth in the Highland Cellular ETC 
Designation Order and Virginia Cellular ETC Designation Order.

C. Identification of Wireless Customer Locations

    71. Background. In the Rural Task Force Order, 66 FR 30080, June 5, 
2001, the Commission required wireless competitive ETCs to use the 
customer's billing address to identify the location of a mobile 
wireless customer. The Commission concluded that this approach was 
reasonable and the most administratively simple solution to the problem 
of determining the location of a wireless customer for universal 
service purposes. The Commission recognized, however, that the use of a 
customer's billing address might allow carriers to identify a customer 
in a high-cost zone when service is primarily taken in a low-cost zone 
for the purpose of receiving a higher level of per-line support. The 
Commission stated that it would take appropriate enforcement action if 
an ETC were to engage in such arbitrage, and that it might revisit the 
use of a customer's billing address as more mobile wireless carriers 
become eligible to receive support.
    72. In the Rural Task Force Order, the Commission declined to use 
the Mobile Telecommunications Sourcing Act (MTSA) definition of ``place 
of primary use'' to determine a mobile wireless customer's location. In 
declining to adopt the MTSA definition to determine wireless customer 
location for universal service purposes, the Commission expressed 
concern that states might not have established databases pursuant to 
the Act, and that use of the MTSA definition might impose undue 
administrative burdens on mobile wireless ETCs. In its Recommended 
Decision, the Joint Board determined that the Commission should further 
develop the record on defining mobile wireless customer location in 
terms of place of primary use, as defined by the MTSA, for universal 
service purposes. In particular, the Joint Board concluded that the 
place of primary use represents the preferred definition of wireless 
customer location for universal service purposes because it reflects 
whether a customer actually uses mobile wireless phone service in a 
high-cost area. The Joint Board therefore recommended that the 
Commission develop the record on: (1) Whether the MTSA's place of 
primary use approach is an efficient method for determining the 
location of mobile service lines; (2) whether a ``place of primary 
use'' definition should be optional or mandatory; (3) whether a 
definition based on place of primary use would alleviate concerns about 
fraudulent billing addresses, and; (4) if the place of primary use 
definition is adopted, how it should work in conjunction with virtual 
NXX.
    73. Discussion. We are not convinced that there is a significant 
difference between our current definition, which relies on a customer's 
billing address, and the MTSA definition, which relies on the 
customer's residential street address or primary business street 
address. In a large percentage of cases, the two will be the same. In 
both cases, the underlying address information will be provided by the 
customer, who is unlikely to be providing false information in order to 
increase universal service payments to its service provider. If 
anything, customers have a greater incentive to provide false or 
misleading information under the MTSA, which will govern applicable 
taxes imposed on the customer. Further, as noted in the Rural Task 
Force Order, if a competitive ETC misuses a customer's billing address 
by identifying a customer in a high-cost zone when service is primarily 
provided in a low-cost zone for the purpose of receiving a higher level 
of per-line support, the Commission may take appropriate enforcement 
action. We further note that, to date, we are not aware of any carriers 
filing petitions before the Commission contending that a wireless ETC 
is misusing customer billing addresses for arbitrage purposes.
    74. As a result, we decline to change our method for identifying 
the location of mobile wireless customers. We, therefore, do not adopt 
the place of primary use definition at this time. Moreover, we note 
that few commenters provided responses to the specific questions from 
the Joint Board. The Iowa Utilities Board, one of the few commenters 
responding to the Joint Board's questions, submitted an analysis 
concerning the billing address methodology that found that only a small 
number of customers have billing addresses in locations other than 
where service is located. Given the limited data we currently have, we 
see no reason to modify our method of determining wireless customer 
locations.

D. Accurate, Legible, and Consistent Maps

    75. Background. Under the Commission's rules, a rural incumbent LEC 
electing to disaggregate and target high-cost support must submit to 
USAC ``maps which precisely identify the boundaries of the designated 
disaggregation zones of support within the incumbent LEC's study 
area.'' In the Rural Task Force Order, the

[[Page 29971]]

Commission explained that ``the integrity and flow of information to 
competitors is central to ensuring that support is distributed in a 
competitively neutral manner.'' The Commission further stated that, 
``in order to ensure portability and predictability in the delivery of 
support,'' it would require rural incumbent LECs to ``submit to USAC 
maps in which the boundaries of the designated disaggregation zones of 
support are clearly specified.'' USAC was directed to make those maps 
available for public inspection by competitors and other interested 
parties. Some commenters indicate that the maps filed by rural 
incumbent LECs pursuant to Sec.  54.315(f)(1) and the information 
available through USAC are of varying quality and utility. Others 
suggest that improved quality and reliability of maps submitted by 
incumbent LECs would allow for better targeting of support.
    76. In response to the concerns raised by commenters, the Joint 
Board recommended that the Commission direct USAC to develop standards 
for the submission of any maps that ETCs are required to submit to USAC 
under the Commission's rules in a uniform, electronic format. The Joint 
Board contended that the development of such standards would promote 
the integrity and flow of information to competitive ETCs by increasing 
the accuracy, consistency, and usefulness of maps submitted to USAC and 
that, as the universal service administrator, USAC is the appropriate 
entity to develop such standards.
    77. Discussion. We agree with the Joint Board and commenters and 
find that accurate, legible and consistent maps would promote the 
integrity and flow of information to competitive ETCs by increasing the 
accuracy, consistency, and usefulness of maps submitted to USAC. Among 
other things, accurate and legible maps will assist in the ETC 
designation process and ensure that high-cost support is targeted to 
the appropriate service areas. Accordingly, we direct USAC, in 
accordance with direction from the Wireline Competition Bureau, to 
develop standards as necessary for the submission of any maps that ETCs 
are required to submit to USAC under the Commission's rules.

E. Support to Newly Designated ETCs

    78. Background. Section 254(e) of the Act provides that ``only an 
eligible telecommunications carrier designated under section 214(e) 
shall be eligible to receive specific Federal universal service 
support.'' Once a carrier is designated as an ETC, additional 
requirements also must be satisfied before a carrier can begin 
receiving high-cost universal service support. In particular, Sec.  
254(e) requires that support shall be used ``only for the provision, 
maintenance, and upgrading of facilities and services for which support 
is intended.''
    79. To implement this statutory provision, the Commission adopted 
an annual certification requirement. Specifically, Sec. Sec.  54.313 
and 54.314 of the Commission's rules provide that state commissions 
must file an annual certification with USAC and with the Commission 
stating that all high-cost support received by carriers within the 
state will be used ``only for the provision, maintenance, and upgrading 
of facilities and services for which support is intended.'' In 
instances where carriers are not subject to the jurisdiction of a 
state, the Commission allows an ETC to certify directly to the 
Commission and to USAC that federal high-cost support will be used in a 
manner consistent with Sec.  254(e). Sections 54.313 and 54.314 also 
provide that certifications must be filed by October 1 of the preceding 
calendar year to receive support beginning in the first quarter of a 
subsequent calendar year. If the October 1 deadline for first quarter 
support is missed, the certification must be filed by January 1 for 
support to begin in the second quarter, by April 1 for support to begin 
in the third quarter, and by July 1 for support to begin in the fourth 
quarter. The Commission established this schedule to allow USAC 
sufficient time to process Sec.  254(e) certifications and to calculate 
estimated high-cost demand amounts for submission to the Commission.
    80. Under the Commission's current certification rules, the timing 
of a carrier's ETC designation may cause it to miss a certification 
filing deadline. As a result, a recently designated ETC's support may 
not begin to be disbursed until well after the ETC's designation date. 
For example, if a carrier is designated as an ETC on December 20, and 
the state commission with jurisdiction over the carrier files a 
certification on behalf of the ETC on January 15, that carrier will not 
begin to receive support until the third quarter of that year--more 
than six months after the carrier was designated an ETC. Therefore, 
although the Commission's rules provide a mechanism for certifications 
to be filed on a quarterly basis, payment of high-cost support for 
recently designated ETCs under this schedule may be delayed until well 
after the initial certification is made. Consequently, newly designated 
ETCs that have missed the Commission's certification filing deadlines 
due to the timing of their ETC designation date have been granted 
waivers of the certification filing deadlines.
    81. Under Sec.  54.307(d) of the Commission's rules, as a 
prerequisite for universal service high-cost support, ETCs serving both 
rural and non-rural service areas must also file the number of working 
loops and other related data for the customers they serve in the 
incumbent's service area. To ensure that the interval between the 
submission of data and receipt of support is as short as possible in 
rural carrier study areas, the Commission requires that ETCs submit 
such line count data on a quarterly basis. Therefore, under the 
quarterly schedule established by the Commission, line count data are 
due on July 31, September 30, December 30, and March 30 of each year. 
Consistent with Sec.  54.307(c) of the Commission's rules, under its 
administration of the high-cost program, USAC bases its quarterly 
support payments on these quarterly line count data submissions. For 
ETCs designated in areas served by rural incumbent LECs, line count 
data submitted on March 30 are used to target support for the third and 
fourth quarters of each year, line count data filed on September 30 are 
used to target support for the first quarter of the filing year, and 
line count data filed on December 30 are used to target support for the 
second quarter of the filing year. For ETCs designated in areas served 
by non-rural incumbent LECs, line counts filed on March 30 are used for 
third quarter support, line counts filed on July 31 are used for fourth 
quarter support, line counts filed on September 30 are used for first 
quarter support, and line counts filed on December 30 are used for 
second quarter support.
    82. Under the filing schedules described above, carriers that 
receive a late ETC designation may miss quarterly filing deadlines that 
could affect USAC's cost estimates for the relevant quarter. Also, an 
ETC receiving a late designation that did not file quarterly line 
counts in anticipation of its ETC designation could suffer significant 
delay in receipt of support. In light of the delay in support that can 
be caused by ETC designations occurring after line count certification 
filing deadlines, we sought comment in the ETC Designation NPRM, 69 FR 
40839, July 7, 2004, on whether to amend our rules to allow newly 
designated ETCs to begin receiving high-cost support as of their ETC 
designation date, provided that the required certifications and line-
count data are filed within 60 days of the carrier's ETC designation 
date.
    83. Discussion. We conclude that in order to provide universal 
service

[[Page 29972]]

support to newly designated ETCs on a timely basis, ETCs shall be 
eligible for support as of their ETC designation date, provided that 
the required certifications and line-count data are filed within 60 
days of the carrier's ETC designation date. As suggested by commenters, 
including USAC, revising the certification and line count deadline 
rules will enable customers of newly designated ETCs to begin to 
receive the benefits of universal service support as of the ETC's 
designation date. Additionally, this modification will eliminate the 
need for carriers to seek waivers of filing deadline rules in order to 
receive support on a timely basis. At the same time, for administrative 
efficiency and predictability, we must impose some time limits so that 
USAC can accurately calculate total high-cost support payments. 
Therefore, a newly-designated ETC's certification and line-count data 
must be filed within 60 days of its initial ETC designation from the 
state commission or Commission. If the newly designated ETC does not 
file within 60 days of the carrier's ETC designation date, the ETC will 
not receive support retroactively to its ETC designation date, but only 
on a going-forward basis. We note that although USAC supports this 
revision, it has indicated that such funding should not flow to a newly 
designated ETC until its line count data are included in USAC's 
quarterly demand projections. In order to avoid any administrative 
burdens associated with processing payments to a newly designated ETC, 
we agree that USAC shall distribute support only after the required 
line count data are available in USAC's quarterly demand projections. 
As a result, unless a carrier has filed its data with USAC in advance 
of its ETC designation date, a carrier might have to wait an additional 
quarter before it begins receiving support.

F. Accepting Untimely Filed Certifications for Interstate Access 
Support

    84. Background. Section 54.809(c) of the Commission's rules states 
that in order for an ETC to receive Interstate Access Support (IAS), 
the ETC must file an annual certification on the date that it first 
files line count information and thereafter on June 30 of each year. As 
a result, the current rule prohibits an otherwise eligible carrier from 
receiving IAS for as much as a year if it misses the annual 
certification deadline. In the MAG Order, 66 FR 59719, November 30, 
2001, the Commission determined that a carrier that untimely files its 
annual certification for Interstate Common Line Support (ICLS) would 
not be eligible for support until the second calendar quarter after the 
certification is filed. For example, if a carrier untimely files its 
required annual June 30 certification on July 15, it will be eligible 
to receive ICLS support beginning January 1 of the following year. 
Therefore, the MAG Order establishes a supplemental certified filing 
process that prevents an ETC from losing ICLS for an entire year if it 
misses the June 30 certification deadline. In the ETC Designation NPRM, 
the Commission proposed adopting a similar supplemental process for 
accepting untimely certifications for the receipt of IAS.
    85. Discussion. We adopt the proposal in the ETC Designation NPRM 
that establishes a procedure for accepting untimely filed 
certifications for IAS. We conclude that allowing an ETC that misses 
the June 30 certification deadline to receive IAS support following the 
filing of the untimely certification will not unduly harm a carrier 
that files an annual certification late and will eliminate the need for 
a carrier to seek a waiver of the filing certification deadlines rules. 
At the same time, by not allowing a carrier to receive IAS support for 
the entire year, the carrier still has the incentive to file the 
certification on a timely basis in order to not interrupt its receipt 
of IAS support. We, therefore, adopt a quarterly certification schedule 
to accommodate late filings. Specifically, a price cap LEC or 
competitive ETC that misses the June 30 annual IAS certification 
deadline shall receive support pursuant to the following schedule: (1) 
carriers that file no later than September 30 shall receive support for 
the fourth quarter of that year and the first and second quarters of 
the subsequent year; (2) carriers that file no later than December 31 
shall receive support for the first and second quarters of the 
subsequent year; and (3) carriers that file no later than March 31 of 
the subsequent year shall receive support for the second quarter of the 
subsequent year.

II. Procedural Matters

A. Regulatory Flexibility Analysis

    86. As required by the Regulatory Flexibility Act, 5 U.S.C. 604, 
the Commission has prepared a Final Regulatory Flexibility Analysis 
(FRFA) for the Report and Order, set forth at Appendix C.

B. Congressional Review Act

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

C. Paperwork Reduction Act

    88. This document contains new or 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 Sec.  3507(d) of the PRA. OMB, the 
general public, and other Federal agencies are invited to comment on 
the new or modified information collection requirements contained in 
this proceeding.

D. Filing Procedures

    89. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, interested parties may file comments not later than 60 days 
after publication of this Report and Order in the Federal Register and 
may file reply comments not later than 90 days after publication of 
this Report and Order in the Federal Register. In order to facilitate 
review of comments and reply comments, parties should include the name 
of the filing party and the date of the filing on all pleadings. 
Comments may be filed using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies.
    90. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/cgb/ecfs. Generally, only 
one copy of an electronic submission must be filed. If multiple docket 
or rulemaking numbers appear in the caption of this proceeding, 
however, commenters must transmit one electronic copy of the comments 
to each docket or rulemaking number referenced in the caption. In 
completing the transmittal screen, commenters should include their full 
name, U.S. Postal Service mailing address, and the applicable docket or 
rulemaking number. Parties may also submit an electronic comment by 
Internet e-mail. To get filing instructions for e-mail comments, 
commenters should send an e-mail to [email protected], and should include 
the following words in the body of the message, ``get form.'' A sample 
form and directions will be sent in reply. Or you may obtain a copy of 
the ASCII Electronic Transmittal Form (FORM-ET) at http://www.fcc.gov/e-file/email.html.
    91. Parties that choose to file by paper must file an original and 
four copies of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or

[[Page 29973]]

overnight U.S. Postal Service mail (although we continue to experience 
delays in receiving U.S. Postal Service mail). The Commission's 
contractor, Natek, Inc., will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at a new 
location in downtown Washington, DC. The address is 236 Massachusetts 
Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this 
location will be 8 a.m. to 7 p.m. All hand deliveries must be held 
together with rubber bands or fasteners. Any envelopes must be disposed 
of before entering the building.
    92. Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, 
Express Mail, and Priority Mail should be addressed to 445 12th Street, 
SW., Washington, DC 20554. All filings must be addressed to the 
Commission's Secretary, Office of the Secretary, Federal Communications 
Commission.

------------------------------------------------------------------------
    If you are sending this type of
 document or using this delivery method     It should be addressed for
                 . . .                          delivery to . . .
------------------------------------------------------------------------
Hand-delivered or messenger-delivered    236 Massachusetts Avenue, NE.,
 paper filings for the Commission's       Suite 110, Washington, DC
 Secretary.                               20002 (8 a.m. to 7 p.m.).
Other messenger-delivered documents,     9300 East Hampton Drive,
 including documents sent by overnight    Capitol Heights, MD 20743 (8
 mail (other than United States Postal    a.m. to 5:30 p.m.).
 Service Express Mail and Priority
 Mail).
United States Postal Service first-      445 12th Street, SW.,
 class mail, Express Mail, and Priority   Washington, DC 20554.
 Mail.
------------------------------------------------------------------------

    93. Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes, plus one paper copy, should be 
submitted to: Sheryl Todd, Telecommunications Access Policy Division, 
Wireline Competition Bureau, Federal Communications, at the filing 
window at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 
20002. Such a submission should be on a 3.5-inch diskette formatted in 
an IBM compatible format using Word or compatible software. The 
diskette should be accompanied by a cover letter and should be 
submitted in ``read only'' mode. The diskette should be clearly labeled 
with the commenter's name, proceeding (including the docket number, in 
this case WC Docket No. 02-60, type of pleading (comment or reply 
comment), date of submission, and the name of the electronic file on 
the diskette. The label should also include the following phrase ``Disk 
Copy--Not an Original.'' Each diskette should contain only one party's 
pleadings, preferably in a single electronic file. In addition, 
commenters must send diskette copies to the Commission's copy 
contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street, 
SW., Room CYB402, Washington, DC 20554 (see alternative addresses above 
for delivery by hand or messenger).
    94. Regardless of whether parties choose to file electronically or 
by paper, parties should also file one copy of any documents filed in 
this docket with the Commission's copy contractor, BCPI, Portals II, 
445 12th Street SW., CY-B402, Washington, DC 20554 (see alternative 
addresses above for delivery by hand or messenger) (telephone 202-488-
5300; facsimile 202-488-5563) or via e-mail at [email protected].
    95. Written comments by the public on the proposed and/or modified 
information collections are due on the same day as comments on this 
Report and Order, i.e., on or before July 25, 2005. Written comments 
must be submitted by OMB on the proposed and/or modified information 
collections on or before July 25, 2005. In addition to filing comments 
with the Secretary, a copy of any comments on the information 
collections contained herein should be submitted to Judith B. Herman, 
Federal Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to [email protected], and to 
Jeanette Thornton, OMB Desk Officer, Room 10236 NEOB, 725 17th Street, 
NW., Washington, DC 20503 or via the Internet to [email protected].
    96. 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, BCPI, 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].

E. Further Information

    97. 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 Report and Order can also be downloaded in 
Microsoft Word and ASCII formats at http:// www.fcc.gov/ccb/ 
universalservice/ highcost.

Final Regulatory Flexibility Analysis (FRFA)

    98. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the notice of proposed rulemaking to which this Report 
and Order responds. The Commission sought written public comment on the 
Federal-State Joint Board's (Joint Board) recommendations in the 
Recommended Decision, including comment on the IRFA incorporated in 
that proceeding. The comments we have received discuss only the general 
recommendations, not the IRFA. This present Final Regulatory 
Flexibility Analysis (FRFA) conforms to the RFA.

F. Need for, and Objective of, This Report and Order

    99. This Report and Order addresses the minimum requirements that a 
telecommunications carrier must meet in order to be designated as an 
``eligible telecommunications carrier'' or ``ETC,'' and thus eligible 
to receive federal universal service support. Specifically, consistent 
with the recommendations of the Joint Board, this Report and Order 
adopts additional requirements for ETC designation proceedings in which 
the Commission acts pursuant to section 214(e)(6) of the Communications 
Act of 1934, as amended (the Act). In addition, for states that 
exercise jurisdiction over ETC designations pursuant to section 
214(e)(2) of the Act, as recommended by the Joint Board, this Report 
and Order encourages such state commissions to consider these 
requirements when examining whether an ETC should be designated. The 
application of these additional requirements by the Commission and 
state commissions should allow for a more predictable ETC

[[Page 29974]]

designation process. In addition, because the additional requirements 
in this Report and Order create a more rigorous ETC designation 
process, their application by the Commission and state commissions will 
support the long-term sustainability of the universal service fund.
    100. In considering whether carriers have satisfied their burden of 
proof necessary for ETC designation, this Report and Order now requires 
that applicants: (1) Provide five-year plans demonstrating how high-
cost universal service support will be used to improve coverage, 
service quality or capacity on a wire center-by-wire center basis 
throughout their proposed designated service areas; (2) demonstrate 
their ability to remain functional in emergency situations; (3) abide 
by service quality standards, such as the Cellular Telecommunications 
and Internet Association's Consumer Code for Wireless Service; (4) 
offer local usage plans comparable to those offered by the incumbent 
LEC in the areas for which they seek designation; and (5) acknowledge 
that the Commission may require them to provide equal access to long 
distance carriers in the event that no other eligible 
telecommunications carrier is providing equal access within the service 
area. In addition, these additional requirements are made applicable to 
all ETCs previously designated by the Commission and therefore, such 
ETCs are required to submit evidence demonstrating how they comply with 
this new ETC designation framework by October 1, 2006. This Report and 
Order, however, does not adopt the Joint Board's recommendation to 
evaluate whether ETC applicants have the financial resources and 
ability to provide quality services throughout the designated service 
area because the Commission concludes the objective of these criterion 
will be achieved through the other requirements adopted in this Report 
and Order.
    101. In this Report and Order, the Commission also sets forth its 
analytical framework for determining whether or not the public interest 
would be served by an applicant's designation as an ETC. The Commission 
finds that, under the statute, an applicant should only be designated 
as an ETC where such designation serves the public interest, regardless 
of whether the area where designation is sought is served by a rural or 
non-rural carrier. The Commission clarifies that its public interest 
analysis for ETC designations for which it has jurisdiction pursuant to 
section 214(e)(6) of the Act will review many of the same factors in 
areas served by non-rural and rural incumbent LECs, although the 
Commission recognizes that the outcome of the analysis might vary 
depending on whether the area is served by a rural or non-rural 
carrier. In addition, as part of its public interest analysis, the 
Commission will examine the potential for creamskimming effects in 
instances where an ETC applicant seeks designation below the study area 
level of a rural incumbent LEC. The Commission also encourages states 
to apply the Commission's analysis because it believes such application 
will assist them in determining whether or not the public interest 
would be served by designating a carrier as an ETC.
    102. In addition, in this Report and Order, the Commission 
strengthens its reporting requirements for ETCs in order to ensure that 
high-cost universal service support continues to be used for its 
intended purposes. Specifically, each ETC designated by the Commission 
must provide on an annual basis: (1) Progress updates on its five-year 
service quality improvement plan, including maps detailing progress 
towards meeting its five-year improvement plan in every wire center for 
which designation was received, explanations of how much universal 
service support was received and how the support was used to improve 
service quality in each wire center for which designation was obtained, 
and an explanation of why any network improvement targets have not been 
met; (2) detailed information on outages in the ETC's network caused by 
emergencies, including the date and time of onset of the outage, a 
brief description of the outage, the particular services affected by 
the outage, the geographic areas affected by the outage, and steps 
taken to prevent a similar outage situation in the future; and (3) how 
many requests for service from potential customers were unfulfilled for 
the past year and the number of complaints per 1,000 handsets or lines. 
These annual reporting requirements are required for all ETCs 
designated by the Commission. Similar to the ETC designation 
requirements adopted above, the Commission, in this Report and Order, 
encourages states to require these reports to be filed by all ETCs over 
which they possess jurisdiction.
    103. The Commission, however, does not adopt the recommendation of 
the Joint Board to control growth of the high-cost universal service 
fund by limiting the scope of high-cost support to a single connection 
that provides access to the public telephone network. Section 634 of 
the 2005 Consolidated Appropriations Act prohibits the Commission from 
utilizing appropriated funds to ``modify, amend, or change'' its rules 
or regulations to implement this recommendation.
    104. In this Report and Order, the Commission also agrees with the 
Joint Board's recommendation that changes are not warranted in its 
rules concerning procedures for redefinition of service areas served by 
rural incumbent LECs. In addition, in this Report and Order, the 
Commission grants several petitions for redefinition of rural incumbent 
LEC service areas. Moreover, the Commission directs the Universal 
Service Administrative Company (USAC) to develop standards as necessary 
for the submission of any maps that ETCs are required to submit to USAC 
under the Commission's rules. The Commission also modifies its annual 
certification and line count filing deadlines so that newly designated 
ETCs are permitted to file that data within sixty days of their ETC 
designation date in order to allow high-cost support to be distributed 
as of the date of ETC designation. In addition, the Commission modifies 
the quarterly certification schedule for the receipt of interstate 
access support (IAS) so that price cap local exchange carriers and/or 
competitive ETCs that miss the June 30 annual IAS certification 
deadline may file their certification thereafter in order to receive 
IAS support in the second calendar quarter after the certification is 
filed. Finally, the Commission declines to define mobile wireless 
customer location in terms of ``place of primary use,'' as defined by 
the Mobile Telecommunications Sourcing Act (MTSA), for universal 
service purposes.

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

    105. No comments were filed directly in response to the IRFA in 
this proceeding. The Commission has nonetheless considered the 
potential significant economic impact of the rules on small entities 
and, as discussed below, has concluded that the rules adopted may 
impose some economic burden on small entities that are designated as 
ETCs.

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

    106. 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 adopted herein. The RFA 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''

[[Page 29975]]

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).
    107. We have included ETCs that may meet the definition of ``small 
business'' 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.''
    108. Incumbent Local Exchange Carriers (Incumbent LECs). 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 FRFA 
analysis, although we emphasize that this RFA action has no effect on 
Commission analyses and determinations in other, non-RFA contexts.
    109. Wireline Carriers and Service Providers (Wired 
Telecommunications Carriers). The SBA has developed a small business 
size standard for Wired Telecommunications Carriers, which consists of 
all such companies having 1500 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 employees or more. Thus, under this size standard, 
the great majority of firms can be considered small.
    110. 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. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to 
recent data, there are 1,310 incumbent LECs, 563 CAPs, 281 IXCs, 21 
OSPs, 613 payphone providers and 772 resellers. Of these, an estimated 
1,025 incumbent LECs, 472 CAPs, 254 IXCs, 20 OSPs, 609 payphone 
providers, and 740 resellers have 1,500 or fewer employees. In 
addition, an estimated 285 incumbent LECs, 91 CAPs, 27 IXCs, 1 OSP, 4 
payphone providers, and 32 resellers, alone or in combination with 
affiliates, 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 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, most 
incumbent LECs, IXCs, CAPs, OSPs, payphone providers and resellers are 
small entities that may be affected by the decisions and rules adopted 
in this Report and Order.
    111. Wireless Service Providers. The SBA has size standards for 
wireless small businesses within the two separate Economic Census 
categories of Paging and of Cellular and Other Wireless 
Telecommunications. For both of those categories, the SBA considers a 
business to be small if it has 1,500 or fewer employees. According to 
Trends in Telephone Report data, 1,387 companies reported that they 
were engaged in the provision of wireless service. Of these 1,387 
companies, an estimated 945 reported that they have 1,500 or fewer 
employees and 442 reported that, alone or in combination with 
affiliates, they have more than 1,500 employees. Consequently, we 
estimate that most wireless service providers are small entities that 
may be affected by the rules adopted herein.
    112. Cellular Radio Telephone Service. The Commission has not 
developed a definition of small entities specifically applicable to 
cellular licensees. Therefore, the applicable definition of a small 
entity is the SBA definition applicable to radiotelephone companies, 
which provides that a small entity is a radiotelephone company 
employing no more than 1,500 persons. The size data provided by SBA do 
not enable us to make a meaningful estimate of the number of cellular 
providers that are small entities because it combines all 
radiotelephone companies with 500 or more employees. We therefore have 
used the 1992 Census of Transportation, Communications, and Utilities, 
conducted by the Bureau of the Census, which is the most recent 
information available. That census shows that only 12 radiotelephone 
firms out of a total of 1,178 such firms operating during 1992 had 
1,000 or more employees. Therefore, even if all 12 of these large firms 
were cellular telephone companies, all of the remainder would be small 
businesses under the SBA definition.
    113. There are presently 1,758 cellular licenses. However, the 
number of cellular licensees is not known, since a single cellular 
licensee may own several licenses. In addition, we note that there are 
1,758 cellular licenses; however, a cellular licensee may own several 
licenses. In addition, according to the most recent Telecommunications 
Industry Revenue data, 732 carriers reported that they were engaged in 
the provision of either cellular service or Personal Communications 
Service (PCS) services, which are placed together in the data. We do 
not have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of cellular service carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are 732 or fewer small cellular service carriers that may be 
affected by the rules, herein adopted.
    114. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequencies designated A through F, 
and the Commission has held auctions for each block. The Commission 
defined ``small entity'' for Blocks C and F as an entity that has 
average gross revenues of $40 million or less in the three previous 
calendar years. For Block F, an additional classification for ``very 
small business'' was added and is defined as an entity that, together 
with affiliates, has average gross revenues of not more than $15 
million for the preceding three calendar years. These standards 
defining ``small entity'' in the context of broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-approved 
definition bid successfully for licenses in Blocks A and B. There were 
90 winning bidders that qualified as small entities in the Block C 
auctions. A total of 93 small and very small business bidders won 
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. 
On March 23, 1999, the Commission re-auctioned 347 C, D, E, and F Block 
licenses; there were 48 small business winning bidders. On January 26, 
2001, the Commission completed the auction of 422 C and F Broadband PCS 
licenses in Auction No. 35. Of the 35 winning bidders in this auction, 
29 qualified as ``small'' or ``very small businesses.'' Based on this 
information, we conclude

[[Page 29976]]

that the number of small broadband PCS licensees will include the 90 
winning C Block bidders, the 93 qualifying bidders in the D, E, and F 
blocks, the 48 winning bidders in the 1999 re-auction, and the 29 
winning bidders in the 2001 re-auction, for a total of 260 small entity 
broadband PCS providers, as defined by the SBA small business size 
standards and the Commission's auction rules. Consequently, we estimate 
that 260 broadband PCS providers are small entities that may be 
affected by the rules and policies adopted herein.
    115. Narrowband PCS. The Commission held an auction for Narrowband 
PCS licenses that commenced on July 25, 1994, and closed on July 29, 
1994. A second auction commenced on October 26, 1994 and closed on 
November 8, 1994. For purposes of the first two Narrowband PCS 
auctions, ``small businesses'' were entities with average gross 
revenues for the prior three calendar years of $40 million or less. 
Through these auctions, the Commission awarded a total of 41 licenses, 
11 of which were obtained by four small businesses. To ensure 
meaningful participation by small business entities in future auctions, 
the Commission adopted a two-tiered small business size standard in the 
Narrowband PCS Second Report and Order, 65 FR 35875, June 6, 2000. A 
``small business'' is an entity that, together with affiliates and 
controlling interests, has average gross revenues for the three 
preceding years of not more than $40 million. A ``very small business'' 
is an entity that, together with affiliates and controlling interests, 
has average gross revenues for the three preceding years of not more 
than $15 million. The SBA has approved these small business size 
standards. A third auction commenced on October 3, 2001 and closed on 
October 16, 2001. Here, five bidders won 317 (Metropolitan Trading 
Areas and nationwide) licenses. Three of these claimed status as a 
small or very small entity and won 311 licenses.
    116. Specialized Mobile Radio (SMR). The Commission awards ``small 
entity'' and ``very small entity'' bidding credits in auctions for 
Specialized Mobile Radio (SMR) geographic area licenses in the 800 MHz 
and 900 MHz bands to firms that had revenues of no more than $15 
million in each of the three previous calendar years, or that had 
revenues of no more than $3 million in each of the three previous 
calendar years, respectively. In the context of both the 800 MHz and 
900 MHz SMR service, the definitions of ``small entity'' and ``very 
small entity'' have been approved by the SBA. These bidding credits 
apply to SMR providers in the 800 MHz and 900 MHz bands that either 
hold geographic area licenses or have obtained extended implementation 
authorizations. We do not know how many firms provide 800 MHz or 900 
MHz geographic area SMR service pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. We 
assume, for our purposes here, that all of the remaining existing 
extended implementation authorizations are held by small entities, as 
that term is defined by the SBA. The Commission has held auctions for 
geographic area licenses in the 800 MHz and 900 MHz SMR bands. There 
were 60 winning bidders that qualified as small and very small entities 
in the 900 MHz auctions. Of the 1,020 licenses won in the 900 MHz 
auction, bidders qualifying as small and very small entities won 263 
licenses. In the 800 MHz SMR auction, 38 of the 524 licenses won were 
won by small and very small entities. Consequently, we estimate that 
there are 301 or fewer small entity SMR licensees in the 800 MHz and 
900 MHz bands that may be affected by the rules and policies adopted 
herein.
    117. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). For purposes of 
this IRFA, we will use the SBA's size standard applicable to wireless 
service providers, supra--an entity employing no more than 1,500 
persons. There are approximately 1,000 licensees in the Rural 
Radiotelephone Service, and the Commission estimates that almost all of 
them qualify as small entities under the SBA's size standard. 
Consequently, we estimate that there are 1,000 or fewer small entity 
licensees in the Rural Radiotelephone Service that may be affected by 
the rules and policies adopted herein.
    118. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service. For purposes of this FRFA, we will use the 
SBA's size standard applicable to wireless service providers, supra--an 
entity employing no more than 1,500 persons. There are approximately 
100 licensees in the Air-Ground Radiotelephone Service, and we estimate 
that almost all of them qualify as small under the SBA definition.

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

    119. Reporting and Recordkeeping. The Commission requires all ETCs 
over which it possesses jurisdiction, including ETCs designated by the 
Commission prior to this Report and Order, to submit annually certain 
information regarding their networks and their use of universal service 
funds. These reporting requirements will ensure that ETCs continue to 
comply with the conditions of the ETC designation so that universal 
service funds are used for their intended purposes. This information 
will initially be due on October 1, 2006, and thereafter annually on 
October 1 of each year, as part of the carrier's certification that the 
universal service funds are being used consistent with the Act.
    120. Every ETC designated by the Commission must submit the 
following information on an annual basis: progress reports on the ETC's 
five-year service quality improvement plan, including maps detailing 
progress towards meeting its plan targets; an explanation of how much 
universal service support was received and how the support was used to 
improve signal quality, coverage, or capacity; and an explanation 
regarding any network improvement targets that have not been fulfilled. 
The information should be submitted at the wire center level;
    (1) Detailed information on any outage lasting at least 30 minutes, 
for any service area in which an ETC is designated for any facilities 
it owns, operates, leases, or otherwise utilizes that potentially 
affect at least ten percent of the end users served in a designated 
service area, or that potentially affect a 911 special facility (as 
defined in subsection (e) of Sec.  4.5 of the Outage Reporting Order). 
An outage is defined as a significant degradation in the ability of an 
end user to establish and maintain a channel of communications as a 
result of failure or degradation in the performance of a communications 
provider's network. Specifically, the ETC's annual report must include: 
(1) The date and time of onset of the outage; (2) a brief description 
of the outage and its resolution; (3) the particular services affected; 
(4) the geographic areas affected by the outage; (5) steps taken to 
prevent a similar situation in the future; and (6) the number of 
customers affected;
    (2) The number of requests for service from potential customers 
within its service areas that were unfulfilled for the past year. The 
ETC must also detail

[[Page 29977]]

how it attempted to provide service to those potential customers;
    (3) The number of complaints per 1,000 handsets or lines;
    (4) Certification that the ETC is complying with applicable service 
quality standards and consumer protection rules, e.g., the CTIA 
Consumer Code for Wireless Service;
    (5) Certification that the ETC is able to function in emergency 
situations;
    (6) Certification that the ETC is offering a local usage plan 
comparable to that offered by the incumbent LEC in the relevant service 
areas; and
    (7) Certification that the carrier acknowledges that the Commission 
may require it to provide equal access to long distance carriers in the 
event that no other eligible telecommunications carrier is providing 
equal access within the service area.

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

    121. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    122. The Commission concludes in this Report and Order that the 
above reporting regulations are reasonable and consistent with the 
public interest and the Act. In particular, these reporting 
requirements will further the Commission's goal of ensuring that ETCs 
satisfy their obligations under section 214(e) of the Act to provide 
supported services throughout their designated service areas. In 
addition, the Commission concludes that any administrative burdens 
placed on carriers as a result of this Report and Order are outweighed 
by strengthening the requirements and certification guidelines to help 
ensure that high-cost support is used in the manner that it is 
intended. These reporting requirements also will help prevent carriers 
from seeking ETC status for purposes unrelated to providing rural and 
high-cost consumers with access to affordable telecommunications and 
information services.
    123. The Commission has considered the above alternatives when 
establishing these reporting requirements. For example, to simplify and 
consolidate the administrative burdens that may be associated with 
annual reports concerning outages, the Commission modeled its outage 
reporting requirements after the Commission's reporting requirements 
concerning outages adopted in the Outage Reporting Order. As a result, 
many ETCs may be able to file the same or similar information instead 
of having to compile and submit new outage data. In addition, the 
Commission has not imposed financial reporting requirements on ETCs 
because it believes any such requirements are unwarranted in light of 
the other commitments and reporting requirements adopted in this Report 
and Order. Moreover, the Commission has only required annual 
certifications, instead of actual data submissions, for certain of its 
reporting requirements, such as local usage plans, functionality in 
emergency situations, and compliance with consumer protection 
standards. Such certifications ensure compliance with section 254 of 
the Act without imposing data submissions that would impose significant 
administrative burdens on small entities that may not possess the 
resources to compile and submit such information on an annual basis.

K. Report to Congress

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

VI. Ordering Clauses

    125. 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 is adopted.
    126. Part 54 of the Commission's rules, 47 CFR part 54, is amended 
as set forth effective June 24, 2005, except that the requirements 
subject to the Paperwork Reduction Act are not effective until approved 
by Office of Management and Budget. The Commission will publish a 
document in the Federal Register announcing the effective date of the 
requirements.
    127. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of this Report and 
Order, including the Final Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.
    128. The Universal Service Administrative Company shall to develop 
standards for the submission of any maps that eligible 
telecommunications carriers are required to submit to the Universal 
Service Administrative Company under the Commission's rules, to the 
extent discussed herein.
    129. The petition for redefinition filed by the Colorado Public 
Utilities Commission, on August 12, 2002, is granted, to the extent 
discussed herein.
    130. The petition for redefinition filed by the Colorado Public 
Utilities Commission, on May 30, 2003, is granted, to the extent 
discussed herein.
    131. The petition for redefinition filed by RCC Minnesota, Inc, on 
June 24, 2003, is granted, to the extent discussed herein.
    132. The petition for redefinition filed by the Minnesota Public 
Utilities Commission, on August 7, 2003, is granted, to the extent 
discussed herein.
    133. The petition for redefinition filed by ALLTEL Communications, 
Inc., on November 21, 2003, is granted, to the extent discussed herein.
    134. The petition for redefinition filed by ALLTEL Communications, 
Inc., on December 17, 2003, is granted, to the extent discussed herein.
    135. The petition for redefinition filed by CTC Telecom, Inc., on 
June 30, 2004, is granted, to the extent discussed herein.
    136. The petition for redefinition filed by American Cellular 
Corporation, on July 16, 2004, is granted, to the extent discussed 
herein.
    137. The petition for redefinition filed by RCC Minnesota, Inc. and 
Wireless Alliance, LLC, on August 27, 2004, is granted, to the extent 
discussed herein.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, Libraries, Reporting and recordkeeping requirements, Schools, 
Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
Part 54 of Title 47 of the Code of Federal Regulations is amended as 
follows:

[[Page 29978]]

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), 4(j), 201-205, 214, 245 and 403 
unless otherwise noted.

0
2. Section 54.202 is added to read as follows:


Sec.  54.202  Additional requirements for Commission designation of 
eligible telecommunications carriers.

    (a) In order to be designated an eligible telecommunications 
carrier under section 214(e)(6), any common carrier in its application 
must:
    (1) (i) Commit to provide service throughout its proposed 
designated service area to all customers making a reasonable request 
for service. Each applicant shall certify that it will:
    (A) Provide service on a timely basis to requesting customers 
within the applicant's service area where the applicant's network 
already passes the potential customer's premises; and
    (B) Provide service within a reasonable period of time, if the 
potential customer is within the applicant's licensed service area but 
outside its existing network coverage, if service can be provided at 
reasonable cost by:
    (1) Modifying or replacing the requesting customer's equipment;
    (2) Deploying a roof-mounted antenna or other equipment;
    (3) Adjusting the nearest cell tower;
    (4) Adjusting network or customer facilities;
    (5) Reselling services from another carrier's facilities to provide 
service; or
    (6) Employing, leasing or constructing an additional cell site, 
cell extender, repeater, or other similar equipment.
    (ii) Submit a five-year plan that describes with specificity 
proposed improvements or upgrades to the applicant's network on a wire 
center-by-wire center basis throughout its proposed designated service 
area. Each applicant shall demonstrate how signal quality, coverage or 
capacity will improve due to the receipt of high-cost support; the 
projected start date and completion date for each improvement and the 
estimated amount of investment for each project that is funded by high-
cost support; the specific geographic areas where the improvements will 
be made; and the estimated population that will be served as a result 
of the improvements. If an applicant believes that service improvements 
in a particular wire center are not needed, it must explain its basis 
for this determination and demonstrate how funding will otherwise be 
used to further the provision of supported services in that area.
    (2) Demonstrate its ability to remain functional in emergency 
situations, including a demonstration that it has a reasonable amount 
of back-up power to ensure functionality without an external power 
source, is able to reroute traffic around damaged facilities, and is 
capable of managing traffic spikes resulting from emergency situations.
    (3) Demonstrate that it will satisfy applicable consumer protection 
and service quality standards. A commitment by wireless applicants to 
comply with the Cellular Telecommunications and Internet Association's 
Consumer Code for Wireless Service will satisfy this requirement. Other 
commitments will be considered on a case-by-case basis.
    (4) Demonstrate that it offers a local usage plan comparable to the 
one offered by the incumbent LEC in the service areas for which it 
seeks designation.
    (5) Certify that the carrier acknowledges that the Commission may 
require it to provide equal access to long distance carriers in the 
event that no other eligible telecommunications carrier is providing 
equal access within the service area.
    (b) Any common carrier that has been designated under section 
214(e)(6) as an eligible telecommunications carrier or that has 
submitted its application for designation under section 214(e)(6) 
before the effective date of these rules must submit the information 
required by paragraph (a) of this section no later than October 1, 
2006, as part of its annual reporting requirements under Sec.  54.209.
    (c) Public Interest Standard. Prior to designating an eligible 
telecommunications carrier pursuant to section 214(e)(6), the 
Commission determines that such designation is in the public interest. 
In doing so, the Commission shall consider the benefits of increased 
consumer choice, and the unique advantages and disadvantages of the 
applicant's service offering. In instances where an eligible 
telecommunications carrier applicant seeks designation below the study 
area level of a rural telephone company, the Commission shall also 
conduct a creamskimming analysis that compares the population density 
of each wire center in which the eligible telecommunications carrier 
applicant seeks designation against that of the wire centers in the 
study area in which the eligible telecommunications carrier applicant 
does not seek designation. In its creamskimming analysis, the 
Commission shall consider other factors, such as disaggregation of 
support pursuant to Sec.  54.315 by the incumbent local exchange 
carrier.
    (d) A common carrier seeking designation as an eligible 
telecommunications carrier under section 214(e)(6) for any part of 
tribal lands shall provide a copy of its petition to the affected 
tribal government and tribal regulatory authority, as applicable, at 
the time it files its petition with the Federal Communications 
Commission. In addition, the Commission shall send the relevant public 
notice seeking comment on any petition for designation as an eligible 
telecommunications carrier on tribal lands, at the time it is released, 
to the affected tribal government and tribal regulatory authority, as 
applicable, by overnight express mail.

0
3. Section 54.209 is added to read as follows:


Sec.  54.209  Annual reporting requirements for designated eligible 
telecommunications carriers.

    (a) A common carrier designated under section 214(e)(6) as an 
eligible telecommunications carrier shall provide:
    (1) A progress report on its five-year service quality improvement 
plan, including maps detailing its progress towards meeting its plan 
targets, an explanation of how much universal service support was 
received and how it was used to improve signal quality, coverage, or 
capacity, and an explanation regarding any network improvement targets 
that have not been fulfilled. The information shall be submitted at the 
wire center level;
    (2) Detailed information on any outage, as that term is defined in 
47 CFR 4.5, of at least 30 minutes in duration for each service area in 
which an eligible telecommunications carrier is designated for any 
facilities it owns, operates, leases, or otherwise utilizes that 
potentially affect
    (i) At least ten percent of the end users served in a designated 
service area; or
    (ii) A 911 special facility, as defined in 47 CFR 4.5(e).
    (iii) Specifically, the eligible telecommunications carrier's 
annual report must include information detailing:
    (A) The date and time of onset of the outage;
    (B) A brief description of the outage and its resolution;
    (C) The particular services affected;
    (D) The geographic areas affected by the outage;
    (E) Steps taken to prevent a similar situation in the future; and
    (F) The number of customers affected.

[[Page 29979]]

    (3) The number of requests for service from potential customers 
within the eligible telecommunications carrier's service areas that 
were unfulfilled during the past year. The carrier shall also detail 
how it attempted to provide service to those potential customers, as 
set forth in Sec.  54.202(a)(1)(i);
    (4) The number of complaints per 1,000 handsets or lines;
    (5) Certification that it is complying with applicable service 
quality standards and consumer protection rules;
    (6) Certification that the carrier is able to function in emergency 
situations as set forth in Sec.  54.201(a)(2);
    (7) Certification that the carrier is offering a local usage plan 
comparable to that offered by the incumbent LEC in the relevant service 
areas; and
    (8) Certification that the carrier acknowledges that the Commission 
may require it to provide equal access to long distance carriers in the 
event that no other eligible telecommunications carrier is providing 
equal access within the service area.
    (b) Filing deadlines. In order for a common carrier designated 
under section 214(e)(6) to continue to receive support for the 
following calendar year, or retain its eligible telecommunications 
carrier designation, it must submit the annual reporting information in 
paragraph (a) no later than October 1, 2006, and thereafter annually by 
October 1 of each year. Eligible telecommunications carriers that file 
their reports after the October 1 deadline shall receive support 
pursuant to the following schedule:
    (1) Eligible telecommunication carriers that file no later than 
January 1 of the subsequent year shall receive support for the second, 
third and fourth quarters of the subsequent year.
    (2) Eligible telecommunication carriers that file no later than 
April 1 of the subsequent year shall receive support for the third and 
fourth quarters of the subsequent year.
    (3) Eligible telecommunication carriers that file no later than 
July 1 of the subsequent year shall receive support for the fourth 
quarter of the subsequent year.

0
4. Section 54.307 is amended by adding paragraph (d) to read as 
follows:


Sec.  54.307  Support to a competitive eligible telecommunications 
carrier.

* * * * *
    (d) Newly designated eligible telecommunications carriers. 
Notwithstanding the deadlines in paragraph (c) of this section, a 
carrier shall be eligible to receive support as of the effective date 
of its designation as an eligible telecommunications carrier under 
section 214(e)(2) or (e)(6), provided that it submits the data required 
pursuant to paragraph (b) of this section within 60 days of that 
effective date. Thereafter, the eligible telecommunications carrier 
must submit the data required in paragraph (b) of this section pursuant 
to the schedule in paragraph (c) of this section.

0
5. Section 54.313 is amended by adding paragraph (d)(3)(vi) to read as 
follows:


Sec.  54.313  State certification of support for non-rural carriers.

* * * * *
    (d) * * *
    (3) * * *
    (vi) Newly designated eligible telecommunications carriers. 
Notwithstanding the deadlines in paragraph (d) of this section, a 
carrier shall be eligible to receive support pursuant to Sec.  54.309 
or Sec.  54.311, whichever is applicable, as of the effective date of 
its designation as an eligible telecommunications carrier under section 
214(e)(2) or (e)(6), provided that it files the certification described 
in paragraph (b) of this section or the state commission files the 
certification described in paragraph (a) of this section within 60 days 
of the effective date of the carrier's designation as an eligible 
telecommunications carrier. Thereafter, the certification required by 
paragraphs (a) or (b) of this section must be submitted pursuant to the 
schedule in paragraph (d) of this section.

0
6. Section 54.314 is amended by adding paragraph (d)(6) to read as 
follows:


Sec.  54.314  State certification of support for rural carriers.

* * * * *
    (d) * * *
    (6) Newly designated eligible telecommunications carriers. 
Notwithstanding the deadlines in paragraph (d) of this section, a 
carrier shall be eligible to receive support pursuant to Sec. Sec.  
54.301, 54.305, or Sec.  54.307 or part 36 subpart F of this chapter, 
whichever is applicable, as of the effective date of its designation as 
an eligible telecommunications carrier under section 214(e)(2) or 
(e)(6), provided that it files the certification described in paragraph 
(b) of this section or the state commission files the certification 
described in paragraph (a) of this section within 60 days of the 
effective date of the carrier's designation as an eligible 
telecommunications carrier. Thereafter, the certification required by 
paragraphs (a) or (b) of this section must be submitted pursuant to the 
schedule in paragraph (d) of this section.

0
7. Section 54.809 is amended by revising paragraph (c) to read as 
follows:


Sec.  54.809  Carrier certification.

* * * * *
    (c) Filing deadlines. In order for a price cap local exchange 
carrier or an eligible telecommunications carrier serving lines in the 
service area of a price cap local exchange carrier to receive 
interstate access universal service support, such carrier shall file an 
annual certification, as described in paragraph (b) of this section, on 
the date that it first files its line count information pursuant to 
Sec.  54.802, and thereafter on June 30 of each year. Such carrier that 
files its line count information after the June 30 deadline shall 
receive support pursuant to the following schedule:
    (1) Carriers that file no later than September 30 shall receive 
support for the fourth quarter of that year and the first and second 
quarters of the subsequent year.
    (2) Carriers that file no later than December 31 shall receive 
support for the first and second quarters of the subsequent year.
    (3) Carriers that file no later than March 31 of the subsequent 
year shall receive support for the second quarter of the subsequent 
year.

[FR Doc. 05-10231 Filed 5-24-05; 8:45 am]
BILLING CODE 6712-01-P