[Federal Register Volume 71, Number 26 (Wednesday, February 8, 2006)]
[Notices]
[Pages 6485-6486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1062]


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FEDERAL COMMUNICATIONS COMMISSION

[CC Docket Number 96-45; DA 06-55]


Federal-State Joint Board on Universal Service, National Exchange 
Carrier Association, Inc. 2006 Modification of Average Schedule 
Universal Service Formulas

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In this document, each year, the Commission must review and 
approve or modify any proposed modifications to the formulas used to 
calculate Part 36 high-cost loop support and local switching support 
for average schedule companies.

FOR FURTHER INFORMATION CONTACT: Cara Voth, Senior Attorney, Wireline 
Competition Bureau, Telecommunications Access Policy Division, (202) 
418-7400, TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
in CC Docket No. 96-45 released on January 12, 2006. 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. In the Order, each year, the Commission must review and approve 
or modify any proposed modifications to the formulas used to calculate 
Part 36 high-cost loop support and local switching support for average 
schedule companies. Historically, the National Exchange Carrier 
Association, Inc. (NECA) has filed the annual average schedule company 
formula modifications for both Part 36 high-cost loop support and local 
switching support. Pursuant to Sec.  54.301(f) of the Commission's 
rules, however, the Universal Service Administrative Company (USAC) now 
submits the proposed formula for local switching support. The 
Commission's rules require that these formulas simulate the 
disbursements that would be received by a company that is 
representative of average schedule companies.
    2. On August 30, 2005, NECA filed proposed modifications to the 
current high-cost loop universal service formula for average schedule 
companies, requesting that they take effect on January 1, 2006, and 
remain in effect through December 31, 2006. On September 30, 2005, USAC 
filed proposed modifications to the current local switching support 
formula for average schedule companies. On October 20, 2005, the 
Wireline Competition Bureau (Bureau) issued a public notice soliciting 
comments on NECA's high-cost support filing. For the reasons discussed 
below, we approve USAC's modified local switching support formula and, 
with respect to Part 36 high-cost support, we adopt NECA's cost per 
loop (CPL) formula. As we have done previously, we direct USAC to 
provide support to average schedule carriers consistent with this Order 
retroactive to January 1, 2006.

II. Local Switching Support Formula

    3. The local switching support formula is used to determine the 
amount of support for switching costs that will be provided to average 
schedule companies from the Commission's universal service high-cost 
support mechanism. The current interstate local switching support 
formula was approved on December 30, 2004. In its September 30, 2005, 
filing, USAC proposes a formula for 2006 that, if approved, would 
increase annual payments for local switching support from approximately 
$83.7 million in 2005 to approximately $85.8 million in 2006, an 
increase of approximately 2.5 percent. We have reviewed USAC's filing 
and the supporting information in NECA's 2005 Modification of Average 
Schedules and find that the method used to develop this year's proposed 
formula is the same method that NECA has used to develop the formula we 
approved during the last payment period. Consistent with the Bureau's 
prior orders, we approve USAC's proposed 2006 average schedule local 
switching support formula.
    4. USAC's average schedule local switching support filing provided 
only its proposed 2006 formulas. Supporting documentation for the 2006 
local switching support formulas was filed eight months earlier in 
NECA's 2005 Modification of Average Schedules. In average schedule 
local switching support filings prior to 2005, NECA provided detailed 
explanations, supporting documentation, and data. Such a consolidated 
single filing of the formulas, necessary information, and data enables 
us to conduct a more efficient review of local switching support 
filings. Thus, beginning with the local switching support filing due in 
2006, and for all subsequent filings, we require USAC to provide at 
least the same level of explanative detail and data that NECA had 
included previously with its average schedule local switching support 
formula filings.

III. Discussion

    5. Consistent with our reasoning in our 2003 Order, Federal-State 
Joint Board on Universal Service in CC Docket No. 96-45, DA 02-3587, 
released on December 27, 2002; 2004 Order, Federal-State Joint Board on 
Universal Service in CC Docket No. 96-45, DA 03-4063, released on 
December 24, 2003; and 2005 Order, Federal-State Joint Board on 
Universal Service in CC Docket No. 96-45, DA 04-4070, released on 
December 30, 2004, we adopt the CPL formula for purposes of calculating 
average schedule company expense adjustments for 2006. In previous 
average schedule formula filings, NECA conceded that the CPL formula 
better estimates cost per loop, but argued that the Bureau should 
instead approve NECA's EAPL formula because NECA believes it better 
estimates the expense adjustments that an average schedule carrier 
should receive. We again find, however, that we are not required to 
adopt a formula based on its ability to predict expense adjustments per 
loop, i.e., ``disbursements,'' compared to a formula's ability to 
predict costs per loop. The Bureau has consistently held, and the 
Commission has upheld, that the appropriate high-cost loop support 
formula should reasonably approximate the cost per loop of the sample 
average schedule companies and allocate funds accurately to average 
schedule companies. Because the CPL formula provided by NECA in its 
filing better estimates the cost per loop of sample average schedule 
companies than the proposed EAPL formula, based on the current record, 
the Bureau concludes, as it did in its 2003 Order, that the CPL formula 
is a more appropriate means of calculating universal service high-cost 
loop support for average schedule companies. Because NECA's submission 
of the results derived from the CPL formula appear to be accurate and 
complete, we therefore approve the CPL formula results provided in 
NECA's August 30, 2005 submission.
    6. Although today, based on the current record, we approve NECA's 
CPL formula for 2006, which is essentially the same CPL formula filed 
since 2002 adjusted for changes in the sample cost data, we are 
concerned about yearly

[[Page 6486]]

increases in high-cost loop support. For the three years beginning with 
2004, and ending with the estimate of high-cost loop support for 2006, 
high-cost loop support provided to average schedule companies has 
increased by 16.4 percent, 38.7 percent, and 41.6 percent, 
respectively. NECA states that increases in support are primarily 
driven by the increases in costs reported by sample average schedule 
companies. Although support for 2006 is estimated to be going up by 
over 41%, NECA's filing also shows that the support will be provided to 
more carriers. We also note that the increase in NECA's high-cost loop 
support estimate is due, in part, to NECA's implementation of loop 
count reporting modifications pursuant to a 2004 Commission order. NECA 
makes marginal reference to this order without specific details of the 
effect on universal service fund payments resulting from its 
implementation of the loop count adjustment. For future filings, we 
find that NECA should clearly disclose and quantify any significant 
modifications to the development of average schedule universal service 
formulas in its annual average schedule universal service filings. We 
require NECA to disclose when a Commission order or rule change causes 
a change in aggregate universal service support to average schedule 
companies by more than five percent of the previous year's universal 
service support. Similarly, we require USAC to disclose when a 
Commission order or rule change causes a change in aggregate local 
switching universal service support to average schedule companies by 
more than five percent of the previous year's support.

IV. Ordering Clauses

    7. Pursuant to Sec. Sec.  0.91 and 0.291 of the Commission's rules, 
47 CFR 0.91, 0.291, that the average schedule formula proposed by the 
Universal Service Administrative Company on September 30, 2005, for 
local switching support IS adopted, effective retroactively as of 
January 1, 2006.
    8. Pursuant to Sec. Sec.  0.91 and 0.291 of the Commission's rules, 
47 CFR 0.91, 0.291, that the average schedule cost per loop formula 
described by the National Exchange Carrier Association on August 30, 
2005, for high-cost loop support is adopted, effective retroactively as 
of January 1, 2006.
    9. Pursuant to section 4(i) of the Communications Act of 1934, as 
Amended, 47 U.S.C. 154(i), Sec. Sec.  0.91 and 0.291 of the 
Commission's rules, 47 CFR 0.91, 0.291, that this order is effective 
upon its release.

Federal Communications Commission.
Cathy Carpino,
Deputy Chief, Wireline Competition Bureau, Telecommunications Access 
Policy Division.
[FR Doc. 06-1062 Filed 2-7-06; 8:45 am]
BILLING CODE 6712-01-P