[Federal Register Volume 75, Number 152 (Monday, August 9, 2010)]
[Proposed Rules]
[Pages 48236-48272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19459]



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Part IV





Federal Communications Commission





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47 CFR Part 54



Rural Health Care Universal Service Support Mechanism; Proposed Rule

  Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / 
Proposed Rules  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 02-60; FCC 10-125]


Rural Health Care Universal Service Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Commission seeks comment on a package of 
reforms that would expand the use of broadband to improve the quality 
and delivery of health care, and addresses each of the major 
recommendations in the National Broadband Plan regarding the 
Commission's rural health care program. The Commission proposes three 
major changes to the rural health care program. To create a health 
infrastructure program that would support up to 85 percent of the 
construction costs of new or upgraded regional or statewide dedicated 
broadband networks for health care purposes. To create a health 
broadband services program that would provide 50 percent of the monthly 
recurring costs for access to broadband services for eligible health 
care providers. To expand the definition of ``eligible health care 
provider'' to include administrative offices, data centers, skilled 
nursing facilities, and renal dialysis centers. The Commission also 
proposes to eliminate the offset contribution rule for the rural health 
care program, and seeks comment on prioritizing funding requests, and 
establishing performance measures.

DATES: Comments on the proposed rules are due on or before September 8, 
2010, and reply comments are due on or before September 23, 2010. 
Written comments on the Paperwork Reduction Act proposed information 
collection requirements must be submitted by the public, Office of 
Management and Budget (OMB), and other interested parties on or before 
October 8, 2010. If you anticipate that you will be submitting 
comments, but find it difficult to do so within the period of time 
allowed buy this notice, you should advise the contact listed below as 
soon as possible.

ADDRESSES: You may submit comments, identified by WC Docket No. 02-60, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
     Paper Filers. See instructions in the Supplementary 
Information section of this document (under Comment Filing Procedures).
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: [email protected] or phone: (202) 
418-0530 or TTY: (202) 418-0432.
     In addition to filing comments with the Secretary, a copy 
of any comments on the Paperwork Reduction Act information collection 
requirements contained herein should be submitted to the Federal 
Communications Commission via e-mail to [email protected] and to Nicholas A. 
Fraser, Office of Management and Budget, via e-mail to [email protected] or via fax at 202-395-5167.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Ernesto Beckford (202) 418-1523, 
Wireline Competition Bureau, Telecommunications Access Policy Division 
or TTY: (202) 418-0484. For additional information concerning the 
Paperwork Reduction Act information collection requirements contained 
in this document, send an e-mail to [email protected] or contact Judith B. 
Herman, Office of Managing Director, via e-mail to [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking (NPRM) in WC Docket No. 02-60, FCC 10-
125, adopted July 15, 2010, and released July 15, 2010. The complete 
text of this document is available for inspection and copying during 
normal business hours in the FCC Reference Information Center, Portals 
II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The 
document may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room 
CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-
2893, facsimile (202) 863-2898, or via the Internet at http://www.bcpiweb.com. It is also available on the Commission's Web site at 
http://www.fcc.gov.

Comment Filing Procedures

    Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document. Comments and reply comments may be filed using: (1) The 
Commission's Electronic Comment Filing System (ECFS), (2) the Federal 
Government's eRulemaking Portal, or (3) by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121, 
May 1, 1998.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/or the Federal eRulemaking Portal: http://www.regulations.gov.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
    [cir] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St., SW., Room TW-A325, Washington, DC 20554. The filing hours are 
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.
    [cir] 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.
    [cir] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street, SW., Washington DC 20554.
    [cir] In addition, one copy of each paper filing must be sent to 
each of the following: (i) The Commission's duplicating contractor, 
Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554; Web site: http://www.bcpiweb.com; phone: 1-800-
378-3160; (ii) Ernesto Beckford, Telecommunications, Telecommunications 
Access Policy Division, Wireline Competition Bureau, 445 12th Street, 
SW., Room 5-A312, Washington, DC 20554; e-mail: 
[email protected]; and (iii) Charles Tyler, Telecommunications, 
Access Policy Division, Wireline Competition Bureau, 445 12th Street, 
SW., Room 5-A452, Washington, DC 20554, e-mail: [email protected].

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     People with Disabilities: To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an e-mail to [email protected] or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (TTY).
    Filings and comments are available for public inspection and 
copying during regular business hours at the FCC Reference Information 
Center, Portals II, 445 12th Street, S.W., Room CY-A257, Washington, DC 
20554. Copies may also be purchased from the Commission's duplicating 
contractor, BCPI, 445 12th Street, SW., Room CY-B402, Washington, DC 
20554. Customers may contact BCPI through its Web site: http://www.bcpiweb.com, by e-mail at [email protected], by telephone at (202) 
488-5300 or (800) 378-3160 (voice), (202) 488-5562 (TTY), or by 
facsimile at (202) 488-5563.
    Comments and reply comments must include a short and concise 
summary of the substantive arguments raised in the pleading. Comments 
and reply comments must also comply with Sec.  1.49 and all other 
applicable sections of the Commission's rules. We direct all interested 
parties to include the name of the filing party and the date of the 
filing on each page of their comments and reply comments. All parties 
are encouraged to utilize a table of contents, regardless of the length 
of their submission. We also strongly encourage parties to track the 
organization set forth in the NPRM in order to facilitate our internal 
review process.

Initial Paperwork Reduction Act of 1995 Analysis

    This document contains proposed information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due October 8, 2010.
    Comments on the proposed information and collection requirements 
should address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology; and (e) 
ways to further reduce the information collection burden on small 
business concerns with fewer than 25 employees. In addition, pursuant 
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
see 44 U.S.C. 3506(c)(4), we seek specific comment on how we might 
further reduce the information collection burden for small business 
concerns with fewer than 25 employees.
    OMB Control Number: 3060-0804.
    Title: Universal Service--Rural Health Care Program.
    Form No.: FCC Form 465, 466, 466-A, 467 (currently approved), newly 
proposed FCC Forms 464-A, 464-B, 464-Q, and 468.
    Type of Review: Revision of currently approved collection.
    Respondents: Not-for-profit institutions; Business or other for-
profit institutions; and State, local, or Tribal Government.
    Number of Respondents and Responses: 11,000 and 46,721.
    Estimated Time per Response: 1.5 hours.
    Frequency of Response: Annually, Quarterly and One-time only.
    Obligation to Respond: Required to obtain or retain benefits.
    Total Annual Burden: 58,360 hours.
    Total Annual Costs: $3,118,069.06.
    Privacy Act Impact Assessment: This information collection does not 
affect individuals or households; thus, there are no impacts under the 
Privacy Act.
    Nature and Extent of Confidentiality: There is no need for 
confidentiality. However, respondents may request materials or 
information submitted to the Commission be withheld from public 
inspection under 47 CFR 0.459 of the Commission's rules.
    Needs and Uses: The information collected provides the Commission 
with the necessary information to administer the rural health care 
support mechanism, determine the amount of support entities seeking 
funding are eligible to receive, and inform the Commission about the 
feasibility of revising its rules.

    Statutory Authority: Statutory authority for this collection is 
contained in 47 U.S.C. 151, 154(i), 154(j), 201-205, 214, 254, and 
403.

Synopsis of the Notice of Proposed Rulemaking

I. Introduction

    1. The NPRM seeks comment on a package of potential reforms to the 
rural health care program that could be implemented in funding year 
2011 (July 1, 2011-June 30, 2012).
    2. The proposed reforms include: (1) Establishing a broadband 
infrastructure program (the ``health infrastructure program'') that 
would support up to 85 percent of the construction costs of new 
regional or statewide networks to serve public and non-profit health 
care providers in areas of the country where broadband is unavailable 
or insufficient; (2) establishing a broadband services access program 
(the ``health broadband services program'') that would subsidize 50 
percent of the monthly recurring costs for access to broadband services 
for eligible public or non-profit rural health care providers, which 
should make broadband connectivity more affordable for providers 
operating in rural areas; (3) expanding the Commission's interpretation 
of ``eligible health care provider'' to include acute care facilities 
that provide services traditionally provided at hospitals, such as 
skilled nursing facilities and renal dialysis centers and facilities, 
and administrative offices and data centers that do not share the same 
building as the clinical offices of a health care provider but that 
perform support functions critical for the provision of health care; 
(4) clarifying the Commission's existing recordkeeping requirements to 
enhance its ability to protect against waste, fraud and abuse; and (5) 
eliminating the current rule that requires that funding be offset 
against universal service contributions owed by participating service 
providers, and instead propose to allow service providers participating 
in the health broadband services program, telecommunications program, 
and health infrastructure program to receive rural health care funds 
directly from USAC.
    3. The Commission also seeks comment on the following: (1) How to 
prioritize funding requests for rural health care support to the extent 
demand exceeds the annual $400 million funding cap; and (2) ways to 
enhance ongoing program evaluation and implementation of performance 
measures to ensure that the public realizes benefits from the 
investment of universal service funding to improve broadband 
connectivity for health care providers.
    4. In addition to the changes discussed below, the proposed rules 
include non-substantive changes to the rules applicable to the 
telecommunications program. We seek comment on such changes.

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II. Health Infrastructure Program

    5. The National Broadband Plan stated that the Pilot Program 
``represents an important first step in extending broadband 
infrastructure to unserved and underserved areas and ensuring that 
health care providers in rural areas and Tribal lands are connected 
with sophisticated medical centers in urban areas.'' However, the 
National Broadband Plan noted that, despite the efforts of the 
Commission to date, many health care providers remain under-connected. 
The National Broadband Plan recommended that the Commission continue to 
support broadband infrastructure for health care purposes, 
incorporating lessons learned from the Pilot Program.
    6. In establishing the Pilot Program, the Commission noted that 
many health care providers were unable to access certain telehealth 
services without deployment of broadband facilities. Despite the 
overwhelming interest and participation levels in the Pilot Program, 
the National Broadband Plan found that a large broadband connectivity 
gap still exists, particularly among small, rural providers. For 
example, the National Broadband Plan identified a broadband 
connectivity gap among an estimated 3,600 out of approximately 307,000 
small providers. 70 percent of those small providers lacking access to 
mass-market broadband services--approximately 2,500 providers--are 
located in areas that the Commission defines as rural. The National 
Broadband Plan also found that larger physician offices (i.e., five or 
more physicians), larger clinics and hospitals also face broadband 
connectivity barriers; it noted that due to their size and health IT 
service needs, such health care providers cannot utilize mass-market 
broadband, but require dedicated Internet access (DIA) solutions.
    7. Consistent with its authority under section 254(h)(2)(A) of the 
Act, the Commission proposes to create a ``health infrastructure 
program'' to fund up to 85 percent of eligible costs for the design, 
construction and deployment of dedicated broadband networks that 
connect public or non-profit health care providers in areas of the 
country where the existing broadband infrastructure is inadequate. The 
program would provide support for the construction of State or regional 
broadband health care networks that can, for example, connect rural and 
urban health care providers, facilitate the transmission of real time 
video, pictures, and graphics, bridge the silos that presently isolate 
relevant patient data, make communications resources more robust and 
resilient, and maximize the efficiency and reliability of packet 
routing. Broadband infrastructure projects may include either new 
facilities or improvements to upgrade existing facilities (for example, 
converting a copper facility to a fiber facility capable of broadband 
delivery). In addition, funding may be used to support up to 85 percent 
of the cost of connecting health care networks to Internet2 or National 
LambdaRail (NLR), both of which are non-profit, nationwide backbone 
providers.

A. Program Process

    8. The Commission proposes an application and selection process for 
the health infrastructure program in which eligible health care 
providers may seek funding for qualified projects through a streamlined 
process. The Commission seeks comment on each step of the process 
described below. To the extent a commenter disagrees with a particular 
aspect of the proposed process, the Commission asks them to identify 
that with specificity and propose an alternative.
    9. Initial Application Phase. First, applicants may request 
consideration for funding by completing a user friendly online 
application available on a Web site to be developed and maintained by 
the Universal Service Administrative Company (USAC). Applications would 
be accepted during the first quarter of each funding year (July 1 to 
September 30). As part of this initial application phase, an applicant 
would be required to (1) Verify that either there is no available 
broadband infrastructure or the existing available broadband 
infrastructure is insufficient for health IT needed to improve and 
provide health care delivery, (2) provide letters of agency for each of 
the eligible health care providers in the applicant's proposed network, 
(3) include a preliminary budget and an infrastructure funding request, 
not in excess of the per-project caps discussed below, and (4) certify 
that it will comply with all program requirements if selected for 
funding.
    10. Project Selection Phase. The Commission proposes that 
applications submitted for funding be made publicly available on USAC's 
Web site. Publicly available information would include the names of the 
parties seeking funding, their geographic location, and information 
filed by the applicants to corroborate that sufficient broadband 
infrastructure is unavailable or insufficient in their geographic 
location. During the second quarter of each funding year (October 1 to 
December 31), USAC would review all applications received during the 
initial application phase. The Commission seeks comment below on 
limiting the total number of projects that may be selected in a given 
year. The Commission also seeks comment below on prioritization rules 
to be applied by USAC in the event that funding requests exceed the 
annual amount available under the health infrastructure program. After 
applications have been reviewed, and prioritization rules have been 
applied, USAC would notify selected participants of their project 
eligibility status. This would normally occur during the third quarter 
of each funding year (January 1 to March 30). After a participant is 
notified of project eligibility, it may proceed with the project 
commitment phase per the requirements set forth below. During the 
project commitment phase, participants may receive funding from the 
health infrastructure program for a portion of the reasonable 
administrative expenses incurred in connection with the project, 
subject to certain caps as discussed further below.
    11. Project Commitment Phase. After being selected based on their 
initial application, the Commission proposes that participants in the 
health infrastructure program would complete and submit all application 
materials and comply with all program requirements, including: (1) 15 
percent minimum contribution requirement; (2) project milestones; (3) 
detailed project description; (4) facilities ownership, IRU or capital 
lease requirements; (5) standard terms and conditions; (6) 
sustainability plan; (7) excess capacity disclosures; (8) vendor cost 
reporting requirements; (9) quarterly reporting requirements, (10) 
competitive bidding and vendor selection requirements; (11) completion 
of project; and (12) NEPA and NHPA requirements. USAC would review each 
step of the project commitment phase to confirm the participant's 
compliance with all data and information requirements and compliance 
with program rules. USAC would conduct technical and financial review 
of all proposed projects to ensure that they comply with the 
Commission's rules. USAC may request additional information from 
applicants and participants if deemed necessary to substantiate, 
explain or clarify any materials submitted as part of the funding 
process.
    12. Build-Out Period. The Commission proposes that participants 
have a period of three funding years (commencing with the funding year 
in which the initial online application was submitted) to file all 
forms and supporting documents necessary to

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receive funding commitment letters from USAC; and a period of five 
years (commencing on the date on which the participant receives its 
first funding commitment letter for the project) in which to complete 
build-out.

B. Demonstrated Need for Infrastructure Funding

    13. The Commission proposes that applicants under the health 
infrastructure program demonstrate that broadband, at the connectivity 
speeds defined below, is presently unavailable or insufficient for 
health IT needed to improve or provide health care delivery requested 
by the eligible health care providers seeking funding. The Commission 
seeks comment on this proposal.
    14. Connectivity Speed. The Commission seeks comment on setting a 
minimum threshold for broadband connectivity speeds under the health 
infrastructure program. The National Broadband Plan suggested that most 
businesses in the United States, including health care providers, have 
two choices of broadband service: Mass-market, small business solutions 
of 4 Mbps or more, or dedicated Internet access (DIA) solutions of 10 
Mbps or more. Because the focus of the health infrastructure program is 
to fund dedicated networks, the Commission proposes setting 10 Mbps as 
the minimum broadband speed for infrastructure deployment supported 
under the health infrastructure program. The Commission seeks comment 
on this proposal. The Commission also seeks comment on minimum levels 
of reliability, including physical redundancy, to support health IT 
services and what can be done to encourage reliability. The Commission 
also seeks comment on the minimum quality of service standards 
necessary to meet health IT needs. The Commission seeks comment on 
whether the health infrastructure program should contain a minimum 
quality of service requirement.
    15. The National Broadband Plan recommended that the Commission 
establish demonstrated-needs criteria to ensure that deployment is 
focused in those areas of the country where the existing broadband 
infrastructure is insufficient. It suggested that such criteria could 
include: Demonstration that the health care provider is located in an 
area where sufficient broadband is unavailable or unaffordable; or 
certification that the health care provider has posted for services for 
an extended period of time and has not received any viable proposals 
from qualified network vendors for such services.
    16. Building a dedicated broadband network involves significant 
effort and costs. It is important, therefore, to adopt a process that 
will help ensure that projects are funded only in those regions where 
providers cannot obtain access to broadband adequate for health care 
purposes due to a lack of sufficient infrastructure. Accordingly, the 
Commission proposes that applicants seeking funding under the health 
infrastructure program demonstrate that broadband adequate to meet 
their health care needs is unavailable or insufficient in the 
geographic area where health care providers are to be connected by the 
proposed dedicated network, by using any of the following methods:
     Provide a survey of current carrier network capabilities 
in the geographic area, compiled by a preparer reasonably qualified to 
make such surveys. The survey should provide details as to the identity 
and broadband capabilities of all existing carriers in the proposed 
network area, and discuss and justify the methodology used to make such 
determinations. The survey should be accompanied by a statement of the 
preparer's professional, educational, and business background that make 
the preparer qualified for conducting the survey. For example, indicate 
the preparer's prior experience, technical or engineering degrees, 
telecommunications background, and knowledge of methods typically 
employed to perform such surveys. In addition to the survey, the 
applicant would be required to provide a report detailing either that 
there is no available broadband infrastructure, or explaining why 
existing broadband infrastructure would be insufficient for health IT 
needed to provide or improve health care delivery requested by the 
health care providers that are proposing the infrastructure project.
     Provide copies or linked references to recognized 
broadband mapping studies, such as NTIA's national broadband map, State 
or local broadband maps, and other mapping sources that adequately 
depicts the available broadband in the proposed network area. In 
addition to referencing such NTIA or State broadband mapping studies, 
the applicant would be required to provide a report detailing why 
existing broadband infrastructure would be insufficient to meet the 
needs of the eligible health care providers that are proposing the 
infrastructure project.
     Certify that, for a continuous period of not less than six 
months, the health care providers in the proposed dedicated network 
requested broadband services under the telecommunications program or 
the health broadband services program, and did not receive any 
proposals from qualified network vendors meeting the terms of the 
requested services. The Commission proposes six months as the minimum 
time period for which applicants must show that they were unable to 
acquire broadband services sufficient for their needs. This period 
would allow existing carriers to compete to provide services to the 
health care providers prior to any health infrastructure funding from 
the health infrastructure program. The Commission seeks comment on 
whether six months is a sufficient period of time. To the extent 
commenters propose other time periods, they should provide specific 
information to support their recommended time periods.
    17. The National Broadband Plan also suggested that health care 
providers could justify funding from an infrastructure program by 
providing a financial analysis showing that the cost of new network 
deployment would be significantly less expensive over a specified time 
period (e.g., 15-20 years) than purchasing services from an existing 
network carrier. The Commission seeks comment on whether it should 
adopt such criteria, in addition to the three options proposed above, 
and, if so, what should be included in the financial analysis? If the 
Commission requires that applicants demonstrate that network deployment 
would be less expensive over a period of time, what period of time is 
appropriate? For example, should such period of time be equivalent to 
the useful economic life of the funded network? Should an applicant 
provide a net present value to demonstrate cost effectiveness? Are 
there other methodologies that can be included in a financial analysis 
to demonstrate the cost effectiveness of network deployment?
    18. The Commission invites comments on whether the above criteria 
are sufficient to establish that broadband is unavailable or 
insufficient. In addition, the Commission invites comments on other 
ways in which health care providers could demonstrate, or interested 
stakeholders could challenge, the sufficiency of existing broadband 
infrastructure. When possible, such comments should indicate publicly 
available sources that could be used to determine the existence or 
absence of adequate broadband infrastructure.
    19. All information submitted by applicants to establish that 
broadband is unavailable or insufficient would be

[[Page 48240]]

subject to review and verification by USAC.

C. Letters of Agency

    20. The Commission proposes that as part of the initial application 
phase for infrastructure projects, applicants identify (1) all eligible 
health care providers on whose behalf funding is being sought, and (2) 
the lead entity that will be responsible for completing the application 
process. In addition, as in the Pilot Program, the Commission would 
require that the application include a Letter of Agency (LOA) from each 
participating health care provider, confirming that the health care 
provider has agreed to participate in the applicant's proposed network, 
and authorizing the lead entity to act as the health care provider's 
agent for completing the application process. Such letters of agency 
will serve as confirmation that the identified health care providers 
endorse the proposed network, and will also avoid improper duplicate 
support for health care providers participating in multiple networks. 
All such letters of agency would be delivered by the applicant as part 
of the initial application.
    21. Consortium Applications. The Commission recognizes that 
eligible health care providers may wish to obtain broadband services as 
part of consortia that may include other entities that are not eligible 
health care providers. For example, health care providers may join with 
State organizations, public sector (governmental) entities, and non-
profit entities that are not eligible health care providers. The Pilot 
Program allowed State organizations, public entities and non-profits to 
act as administrative agents for eligible health care providers within 
a consortium. The Commission proposes retaining this same flexibility 
for the health infrastructure program. Although State organizations, 
public entities and non-profits may not constitute eligible health care 
providers, they may apply on behalf of eligible health care providers 
as part of a consortium (e.g., as consortia leaders) to function in an 
administrative capacity for eligible health care providers within the 
consortium. In doing so, however, State organizations, public entities 
and non-profits would be prohibited from receiving any funding from the 
health infrastructure program (other than some administrative expenses, 
as discussed below). The Commission proposes that any discounts, 
funding, or other program benefits secured by a State organization, 
public sector (governmental) entity or non-profit entity acting as a 
consortium leader under the health infrastructure program would be 
passed on to the consortium members that are eligible health care 
providers.
    22. The Commission also proposes that in the case of a consortium, 
the legally and financially responsible entity that owns dedicated 
facilities funded by the health infrastructure program could be a State 
organization, public sector (governmental), or not-for profit entity 
acting as a fiduciary agent for eligible health care providers within 
such consortium. For example, a State, public (government) or non-
profit entity acting as administrative agent for a consortium of 
eligible health care providers seeking funding for a dedicated network 
could also serve as the title owner of the dedicated network. However, 
the Commission proposes that title to the dedicated network would be 
held exclusively for the benefit of eligible health care providers. The 
Commission seeks comment on the above proposals.

D. Funding Requests and Budgets

    23. The Commission proposes that every applicant's initial 
application include a funding request, a brief project description and 
a detailed budget. The funding request should not exceed 85 percent of 
the eligible costs identified in the budget. The Commission seeks 
comment on the proposals set forth below.
    24. Cap on Amount Funded per Project. The Commission seeks comment 
on whether there should be a cap on the total amount for which a 
project may seek funding. A per project cap would help ensure that 
multiple projects across varying unserved geographic areas will be 
eligible to receive funding for infrastructure. The Commission notes 
that nearly 90 percent of the projects in the Pilot Program had 
proposed budgets below $15 million. For example, the Commission could 
provide that no single project would be eligible for more than $15 
million in funding. The Commission seeks comment on whether $15 
million, or some other figure, is the correct per project cap to use. 
The Commission notes that it would retain authority to consider an 
applicant's request for waiver of the per project cap on a case-by-case 
basis if warranted by the particular circumstances and the public 
interest.
    25. Cap on Number of Projects per Year. Further, the Commission 
seeks comment on whether to adopt a rule setting a maximum number of 
projects to be selected for funding each year. One of the lessons 
learned from the Pilot Program is that many applicants were ill-
prepared to undertake the complex process of developing a new health 
care network, and consequently many required ongoing coaching and 
support to navigate their way through the process. A smaller number of 
projects will allow USAC to devote greater resources and time in 
ensuring their success. Also, unlike the Pilot Program, projects not 
selected for funding in any funding year will have opportunities to 
apply for funding in subsequent funding years. If the number of 
projects that apply and qualify for funding in any year exceeded such a 
cap, should priority be given to those projects that connect the 
greatest number of rural health care providers? If the Commission 
adopts a cap on the number of projects that may be funded per year, it 
seeks comment on whether such cap should be in addition to or in lieu 
of a cap on the amounts funded per project.
    26. Budget. The Commission proposes that together with the funding 
request, applicants submit a detailed budget that identifies all costs 
related to the proposed project. The budget should be reasonable, and 
should be based on pricing information available to the applicant. All 
material assumptions used in preparing the budget should be noted and 
discussed in narrative form. The budget should separately identify the 
following (each subject to the limitations identified in this NPRM): 
(1) Eligible non-recurring costs; (2) eligible administrative expenses; 
(3) eligible network design costs; (4) eligible maintenance costs; (5) 
eligible NLR or Internet2 membership fees; and (6) all costs that are 
necessary for completion of the project, but that are not eligible for 
support under the health infrastructure program. If a budget line item 
contains both eligible and ineligible components, costs should be 
allocated to the extent that a clear delineation can be made between 
the eligible and ineligible components.
    27. Requiring applicants to prepare and submit a budget would 
ensure that the applicant has given adequate consideration to the 
project requirements, has undertaken a preliminary analysis of 
potential costs, and has identified the amount of funds that they will 
be required to contribute to the overall project. The Commission seeks 
comment on whether to require applicants to include any additional 
information in their preliminary budget.
    28. The Commission proposes that USAC review all project budgets 
for compliance with program rules. USAC could assist prospective 
applicants with tools that provide benchmark cost estimates for certain 
items common to

[[Page 48241]]

all infrastructure projects. The Commission proposes allowing budgets 
submitted by program applicants and program participants to be made 
available publicly so that other prospective applicants may use such 
information as a basis for preparing their own budgets. The Commission 
seeks comment on the above proposals.

E. Eligible Costs

    29. Non-Recurring Costs. The Commission proposes that the health 
infrastructure program may provide support for the following non-
recurring costs for the deployment of infrastructure: (1) Initial 
network design studies (but not in excess of the cap identified below); 
(2) engineering, materials and construction of fiber facilities or 
other broadband infrastructure; and (3) the costs of engineering, 
furnishing (i.e., as delivered from the manufacturers), and installing 
network equipment. The Commission seeks comment on these proposals and 
on whether the health infrastructure program should offer support for 
other non-recurring infrastructure costs.
    30. Network Design. While network design would be eligible for 
funding, the primary focus of the health infrastructure program should 
be capital costs for infrastructure construction and deployment. 
Therefore, the Commission proposes that support for eligible network 
design costs be limited to $1 million per project or 15 percent of the 
project's eligible costs, whichever is less. The Commission seeks 
comment on this proposal.
    31. Administrative Expenses. The Commission proposes that, for the 
health infrastructure program only, reasonable administrative expenses 
incurred by participants for completing the application process may be 
eligible for some limited support. Examples of administrative expenses 
are costs incurred in preparing request for proposals, negotiating with 
vendors, reviewing bids, etc. The Commission's experience with the 
Pilot Program supports the need to provide some amount of funding for 
administrative expenses in infrastructure projects, to support the 
process of designing the network and securing necessary agreements. 
Participants have indicated that the costs associated with 
infrastructure deployment can be a considerable financial burden on 
participants that are designing and deploying networks over vast 
geographic areas. Allowing a portion of funding to be used for 
administrative expenses could enable program participants to explore 
more efficient, effective means of deploying broadband for the delivery 
of health care. Accordingly, the Commission proposes that after a 
participant is selected for funding based on its initial application, 
it may request funding for up to 85 percent of the reasonable 
administrative expenses incurred in connection with the project.
    32. Because the primary focus of the program should be to fund 
infrastructure and not project administration, the Commission proposes 
three limitations on administrative expenses. First, support for such 
expenses will be limited to 36 months, commencing with the month in 
which a participant has been notified that its project is eligible for 
funding. This period should be sufficient for completing the majority 
of program requirements, and support should not be provided beyond this 
period. Second, the Commission proposes that the rate of support will 
not exceed $100,000 per year. This amount should be sufficient for one 
full-time employee (or the equivalent) dedicated to project 
administration. Participants would be required to submit certifications 
and maintain records confirming the number of hours provided by one or 
more employees for tasks related to the health infrastructure program 
project, and that the administrative expense for which support is 
sought is not more than the reasonable costs for the amount of time 
such employee(s) spent on the project. Third, the Commission proposes 
that the aggregate amount of support a project may receive for 
administrative expenses shall not exceed ten percent of the total 
budget for the project. The Commission acts conservatively in proposing 
a ten percent cap, which is similar to funding limits on administrative 
expenses used in some Federal grant programs. The Commission seeks 
comment on this proposal to provide limited support for administrative 
expenses.
    33. Maintenance Costs. The Commission proposes allowing limited 
support for up to 85 percent of the reasonable, necessary and customary 
ongoing maintenance costs for networks funded by the health 
infrastructure program. Such costs would include, for example, service 
agreements to operate and maintain dedicated broadband facilities. The 
primary focus of the health infrastructure program is to create a 
sustainable broadband infrastructure where access is presently 
inadequate. The Commission seeks comment on whether support for 
maintenance costs should be limited to a defined period of time, such 
as three years from completion of build-out of a project, or five years 
from the first funding commitment letter issued for such project 
(whichever period is shorter). Participants should be able to 
demonstrate in their sustainability plans that the costs of network 
operations and maintenance will be sustainable after such period of 
support from the health infrastructure program. Service agreements for 
network maintenance will be subject to competitive bidding rules, and 
may be bid either at the time of construction of the network or at a 
later time. The Commission seeks comment on this proposal.
    34. National LambdaRail and Internet2. The Commission proposes that 
participants may receive support for not more than 85 percent of the 
membership fees for connecting their networks to the dedicated 
nationwide backbones, Internet2 or NLR. As in the Pilot Program, while 
the Commission allows such connections as an eligible expense, the 
Commission does not indicate that such connections are mandatory or 
preferred. Thus, under the health infrastructure program, applicants 
would be free to propose the construction of State or regional 
dedicated networks that do not connect to a nationwide backbone. It is 
reasonable to allow, as an eligible expense, membership fees to connect 
to NLR and Internet2. As noted in the Pilot Program, both of these 
backbone providers are non-profit entities that already link a number 
of institutions such as government research institutions and academic, 
public and private health care providers that house significant medical 
expertise. By connecting to either of these two dedicated national 
backbones, health care providers at the State and local levels could 
have the opportunity to benefit from advanced applications in 
continuing education and research. While the membership fees for 
joining NLR or Internet2 would be an eligible cost, the Commission does 
not propose allowing other recurring costs related to connecting to 
such backbone networks. The Commission seeks comment on this proposal.
    35. For the Pilot Program, the Commission provided that connections 
to Internet2 or NLR were not subject to the competitive bidding rules 
requirement. For the health infrastructure program, the Commission 
proposes that participants may either pre-select to connect with either 
Internet2 or NLR, and seek funding for such connection, or may (at 
their discretion) seek competitive bids from NLR and Internet2 through 
the normal competitive bidding process. Allowing a participant to pre-
select NLR on

[[Page 48242]]

Internet2 should provide the participant with an opportunity to more 
fully develop the specific elements of its infrastructure proposal, 
particularly where only a specific non-profit nationwide backbone 
provider will fulfill the participant's network plan or meet its need 
to access a particular institution that is currently connected to only 
one nationwide network. If Internet2 or NLR are pre-selected by a 
participant, the costs of connection to such nationwide backbone must 
be reasonable. The Commission invites comment on its proposal to exempt 
connections to Internet2 and NLR from the competitive bidding rules in 
the new health infrastructure program. Regardless of whether they 
choose to pre-select NLR or Internet2, participants in the health 
infrastructure program will be subject to the Commission's audit 
authority. The Commission emphasizes that it retains the discretion to 
evaluate the activities of participants and determine on a case-by-case 
basis whether waste, fraud, or abuse has occurred and whether 
corrective action is necessary.

F. Ineligible Costs

    36. Examples of Ineligible Costs. The Commission proposes that, for 
the health infrastructure program, as in the Pilot Program, ineligible 
costs are those costs that are not directly associated with network 
design, construction, or deployment of a dedicated network for eligible 
health care providers. The Commission seeks comment on this proposal. 
Participants would be required to certify that support from the health 
infrastructure program will not be used to pay for ineligible costs. 
The Commission proposes that, as in the Pilot Program and consistent 
with the Act, the authorized purposes of the health infrastructure 
program would include the costs of access to advanced 
telecommunications services. Ineligible costs would include (but not be 
limited to) the following costs, because the following costs are not 
directly related to access or to network design, construction or 
deployment:
     Personnel costs (including salaries and fringe benefits), 
except for those costs that qualify as administrative expenses, subject 
to the limitations set forth in paragraphs 37 and 38 of this NPRM.
     Travel costs, except for travel costs that are reasonable 
and necessary for network design or deployment and that are 
specifically identified and justified as part of a competitive bid for 
a construction project.
     Legal costs.
     Training, except for basic training or instruction 
directly related to and required for broadband network installation and 
associated network operations. For example, costs for end-user 
training, e.g., training of health care provider personnel in the use 
of telemedicine applications, are ineligible.
     Program administration or technical coordination, except 
for those costs that qualify as administrative expenses, subject to the 
limitations set forth in paragraphs 37 and 38 of this NPRM.
     Inside wiring or networking equipment (e.g., video/Web 
conferencing equipment and wireless user devices) on health care 
provider premises except for equipment that terminates a carrier's or 
other provider's transmission facility and any router/switch that is 
directly connected to either the facility or the terminating equipment.
     Computers, including servers, and related hardware (e.g., 
printers, scanners, laptops), unless used exclusively for network 
management.
     Helpdesk equipment and related software, or services.
     Software, unless used for network management, maintenance, 
or other network operations; software development (excluding 
development of software that supports network management, maintenance, 
and other network operations); Web server hosting; and Website portal 
development.
     Telemedicine applications and software.
     Clinical or medical equipment.
     Electronic records management and expenses.
     Connections to ineligible network participants or sites 
(e.g., for-profit health care providers).
     Costs related to any share of a project that is not 
allocable to the dedicated health care network.
     Administration and marketing costs (e.g., administrative 
costs; supplies and materials; marketing studies, marketing activities, 
or outreach efforts; evaluation and feedback studies), except for those 
costs that qualify as eligible administrative expenses, subject to the 
limitations set forth in paragraphs 37 and 38 of this NPRM.
     Continuous power source.
    37. Billing and Operational Expenses. The Commission proposes that 
the health infrastructure program not provide support for billing and 
operational expenses incurred either by a health care provider or its 
selected vendor. An example of billing or operational costs is the 
expense that service providers may charge for allocating costs to each 
health care provider in a project's network. Because the Commission 
does not require that costs be allocated in this manner, such billing 
and operational costs should not be eligible for support. The 
Commission seeks comment on this proposal.

G. Fifteen Percent Contribution Requirement

    38. Minimum Participant Contribution. The Commission proposes that 
as one of the conditions to receiving any funding commitments from 
USAC, participants submit certification of the availability of funds, 
from eligible sources, for at least 15 percent of all eligible costs. 
The Commission seeks comment on this proposal. The Pilot Program 
similarly required a 15 percent minimum contribution requirement for 
all eligible costs. As recognized by the National Broadband Plan, the 
participant contribution requirement aligns incentives and helps ensure 
that the health care provider values the broadband services being 
deployed, and makes financially prudent decisions regarding the 
project. Ensuring that each participant has a financial stake in the 
project is an important part of the implementation of infrastructure 
projects, as well as critical to maintaining overall accountability for 
prudent use of finite universal service funds. The Commission therefore 
proposes that the health infrastructure program would pay not more than 
85 percent of eligible project costs, and participants would be 
required to pay the remaining 15 percent of such eligible projects 
costs. In addition, participants would be required to pay all costs 
that are related to the project but that do not qualify as eligible 
project costs.
    39. The Commission notes that the matching funds requirement for 
the Broadband Technology Opportunities Program (BTOP), established 
pursuant to the Recovery Act, is generally 20 percent of eligible 
costs, and that the Broadband Initiatives Program (BIP), also 
established pursuant to the Recovery Act, will fund 75 percent in 
grants and 25 percent in loans. The Commission has learned from its 
experience with the Pilot Program that some applicants have difficulty 
even meeting a 15 percent contribution requirement. At the same time, 
one of the benefits of increasing the contribution requirement to 20 
percent or higher would be that more funds would be available under the 
program to fund additional projects. The Commission invites comment on 
whether it should consider a higher level of participant contribution 
for

[[Page 48243]]

health infrastructure projects. Commenters should identify whether, in 
light of higher levels of participant contributions in the BTOP and BIP 
programs, the contribution requirement for the health infrastructure 
program should be more than 15 percent to ensure better efficiencies 
and greater level of ``at risk'' commitment by participants to their 
projects.
    40. Evidence of Viable Source for 15 Percent Contribution. The 
Commission proposes that, within 90 days after being notified of 
project selection, participants demonstrate that they have a reasonable 
and viable source for the minimum 15 percent contribution. Many 
projects in the Pilot Program indicated deployment delays due to many 
factors, including difficulty in obtaining the minimum 15 percent 
contribution. This, among other factors, resulted in the Bureau 
extending (by one year) the deadline for participants in the Pilot 
Program to select vendors and request funding commitments from USAC. To 
ensure that projects are completed in a timely manner, it is important 
for participants in the health infrastructure program to meet a date 
certain by which they have secured the minimum 15 percent contribution 
for eligible project costs. Doing so will ensure that program funds are 
not indefinitely allocated to projects that cannot proceed to 
completion due to lack of adequate financial contribution from the 
participant. The Commission therefore proposes that after a participant 
has been notified that, based on its initial application, its project 
is eligible for funding, the participant have a period of 90 days to 
submit letters of assurances confirming funds from eligible sources to 
meet the 15 percent minimum contribution requirement. The Commission 
seeks comment on this proposal.
    41. Eligible Sources. The Commission proposes placing limitations 
on the eligible sources for matching funds. Selected participants would 
be required to identify with specificity their source(s) of funding for 
the minimum 15 percent contribution of eligible network costs. Only 
funds from an eligible source may apply towards meeting this 
requirement. As in the Pilot Program, eligible sources would be limited 
to (1) Eligible health care providers; (2) State grants, funding, or 
appropriations; (3) Federal funding, grants, loans, or appropriations 
(but not other universal service funding); and (4) other grant funding, 
including private grants. Participants who do not demonstrate that 
their 15 percent contribution comes from an eligible source or whose 
minimum 15 percent contribution is derived from an ineligible source 
would be denied funding by USAC. Ineligible sources would include (1) 
in-kind or implied contributions; (2) a local exchange carrier (LEC) or 
other telecom carrier, utility, contractor, consultant, or other 
service provider; and (3) for-profit participants. Moreover, selected 
participants may not obtain any portion of their 15 percent 
contribution from any universal service support program. These 
limitations on eligible sources would safeguard against program 
manipulation, and would prevent conflicts of interest or influence from 
vendors and for-profit entities that may lead to waste, fraud, and 
abuse. The Commission therefore proposes that these limitations, which 
were applied to the Pilot Program, be applied to the health 
infrastructure program. The Commission seeks comment on the proposed 
list of eligible sources.

H. Project Milestones

    42. To ensure that projects proceed to completion, the Commission 
proposes that participants submit a project schedule that identifies 
the following project milestones: start and end date for network 
design; Start and end date for drafting and posting RFPs; start and end 
date for selecting vendors and negotiating contracts; start date for 
commencing construction and end date for completing construction; and 
target dates for each health care provider to be connected to the 
network and operational. The project schedule should be submitted 
within 90 days after a participant has been notified that, based on its 
initial application, the project is eligible for funding. The project 
schedule would also have to be updated at the time that quarterly 
reports are filed by the participants, noting which project milestones 
have been met and any progress or unanticipated delays in meeting other 
milestones. The Commission proposes that in the event a project 
milestone is not achieved, or there is a material deviation from the 
project schedule, the participant would provide an explanation in the 
quarterly reports. Requiring participants to establish a schedule and 
report on project milestones for infrastructure projects would assist 
USAC and the Commission in assessing a participant's progress in 
completing project build-out, and would reduce fraud, waste and abuse. 
The Commission seeks comment on these proposals. The Commission also 
seeks comment on whether it should require participants to include 
other information in addition to or in lieu of project milestones. Such 
information should serve as a way to monitor project progress.

I. Detailed Project Description

    43. The Commission proposes that, within 90 days after a 
participant is notified that its project is eligible for funding based 
on its initial application, the participant complete and submit a 
detailed project description that describes the network, identifies the 
proposed technology, demonstrates that the project is technically 
feasible and reasonably scalable, and describes each specific 
development phase of the project (e.g., network design phase, 
construction period, deployment and maintenance period). The Commission 
seeks comment on these proposals, as described below.
    44. Technology Neutral. While a project description must establish 
feasibility and scalability, the Commission does not propose 
restricting the type of technology participants may use. Eligible 
health care providers participating in the health infrastructure 
program may choose any currently available technology that meets the 
definition of broadband as adopted for purposes of the Rural Health 
Care program. The Commission seeks comment on this proposal. Allowing 
health care providers flexibility in designing their networks furthers 
the ``competitive neutrality'' provision of section 254(h)(2) of the 
Act by ensuring that universal service support does not favor or 
disfavor one technology over another. The Commission notes that the 
various projects in the Pilot Program employed different solutions with 
varying levels of broadband capacity to meet the specific needs of the 
health care providers participating in each network.
    45. Network Coverage. The Commission proposes that the project 
description should include the identity and location of all network 
participants, and should include a network diagram. Participants would 
be required to indicate how they plan to fully utilize their proposed 
network to provide health care services, and would be required to 
present a strategy for aggregating the specific needs of health care 
providers within a State or region, including providers that serve 
rural areas. The project description should also discuss whether the 
proposed network will connect to a national backbone, such as NLR or 
Internet2. Networks may be limited to a particular State or region, but 
participants should describe feasible ways in which such networks will 
connect to a national broadband network. Designing networks so that 
they may, where feasible, connect to a dedicated national network will 
allow health care providers the

[[Page 48244]]

opportunity to benefit from advanced applications in continuing 
education and research and will also enhance the health care 
community's ability to provide a rapid and coordinated response in the 
event of a national crisis. The Commission seeks comment on these 
proposals.
    46. Service Speeds and Scalability. The Commission proposes that 
the project description include a discussion of the speeds and services 
necessary for the particular network, and how the minimum broadband 
speed, proposed above, will be provided. Networks should be adequately 
designed for the exchange of identifiable health information, and 
capable of meeting transmission speed requirements necessary for health 
care applications to be used by the health care providers. To 
demonstrate their broadband needs, participants would be required to 
explain and provide reasonable support for the type of health care 
providers that will use the network, the bandwidth and speed 
requirements for such network, and the health care services that 
necessitate broadband connections at the desired speeds. Participants 
would also be required to explain how the proposed network will be 
designed to meet the current broadband needs of the network members, 
and would be required to address whether or how the proposed network 
will be scalable to handle projected future demand. The Commission 
seeks comment on these proposals.
    47. Health IT Purposes. The Commission proposes requiring that, as 
part of the project description, participants specify how the dedicated 
broadband network will be used by eligible health care providers for 
health IT to improve or provide health care delivery. As defined in the 
National Broadband Plan, ``health IT'' refers to information-driven 
health practices and the technologies that enable them. Health IT 
includes billing and scheduling systems, e-care, electronic health 
records (EHRs) and telehealth and telemedicine. In adopting the Pilot 
Program, the Commission recognized the benefits of telehealth and 
telemedicine. The Commission seeks comment on this proposal. Consistent 
with the National Broadband Plan's recommendation to adopt outcome-
based performance goals for the Rural Health Care program, we seek 
comment below on how best to monitor how participants are utilizing 
dedicated broadband networks to support these health IT purposes.
    48. Emergency Response Connectivity. The Commission seeks comment 
on whether every project should be required to include ways in which 
the proposed network will be used in emergency response and meet 
disaster preparedness requirements. The Commission also seeks comment 
on whether every project should be required to include ways in which 
the proposed network will provide effective and secure connectivity, 
and peering with other networks in order to address global public 
health and border issues.

J. Facilities Ownership, IRU or Capital Lease Requirements

    49. The Commission proposes requiring health care providers to have 
an ownership interest, indefeasible right of use (IRU), or capital 
lease interest in facilities funded by the program. The Pilot Program 
did not restrict the form of agreement that health care providers could 
enter into with vendors for projects funded by that program. In some 
instances, Pilot Program projects opted to enter into short-term or 
operating leases, which placed them at greater risk and more dependent 
on the vendor than if they had obtained an ownership or long-term 
interest. For example, if a vendor becomes insolvent, a project that 
does not have an IRU or ownership interest could be left with a non-
operational network with limited recourse. Moreover, in the case of a 
participant that enters into a short-term or operating lease for 
network access, once the term of the lease expires, the participant 
could potentially lose access to the network. In some instances, lease 
arrangements may result in proposals in which vendors incur 
infrastructure costs and pass these costs to the health care providers 
as either a one-time construction charge or an amortized cost over the 
term of the lease. Funding from the health infrastructure program 
should confer optimal long-term interests in a funded network with the 
least amount of risk. The Commission therefore proposes that health 
care providers seeking funding for infrastructure projects should 
either: (1) Own the infrastructure facilities funded by the program, 
(2) have an IRU for such facilities, or (3) have a capital lease. The 
Commission seeks comment on the proposals described below.
    50. Ownership or IRU. The Commission proposes permitting facilities 
subject to an IRU to be funded under the health infrastructure program. 
An IRU is an indefeasible right to use facilities for a certain period 
of time that is commensurate with the remaining useful life of the 
asset, generally 20 years. An IRU confers on the grantee the vestiges 
of ownership, and is customarily used in the telecommunications 
industry. It normally involves a substantial sum paid up front, 
generally priced as a certain amount (depending on market rates) per 
mile or per fiber mile. The Commission proposes that any contract that 
involves paying for the full cost of new construction with eligible 
funds should not be treated as an IRU, but simply as a construction 
project with assurances that the participant owns all constructed 
facilities. The Commission also proposes that an IRU should include 
maintenance of the fiber/network for the term (vendor should be 
responsible for maintenance and repairs); costs of maintenance and 
operation of associated electronics can be (and usually are) addressed 
in a separate service agreement. An IRU should be independent of any 
contract for services or electronics. Unlike a lease, an ownership 
interest or IRU ensures that the vestiges of network ownership will 
remain with the eligible health care provider members for the period of 
time delineated by the IRU, and that the network assets supported by 
universal service funds will not revert to the vendor. While IRUs are 
often for 20 years, the Commission does not propose setting a fixed 
number of years for an IRU. Rather, the period of the IRU should be 
commensurate with the remaining economic life of the facility funded by 
the program. The Commission seeks comment on this proposal.
    51. Capital Lease. The Commission also proposes permitting capital 
leases to be funded under the health infrastructure program, but 
proposes to prohibit short-term or operating leases. A capital lease is 
a lease of a business asset which represents ownership and is reflected 
on the lessee's balance sheet as an asset. This is in contrast to an 
operating lease, in which the lessee has no ownership interest. Under 
Generally Accepted Accounting Principles (GAAP), a lease is a capital 
lease if it meets one or more of the following criteria: The lease term 
is greater than 75 percent of the property's estimated economic life; 
the lease contains an option to purchase the property for less than 
fair market value; ownership of the property is transferred to the 
lessee at the end of the lease term; or the present value of the lease 
payments exceeds 90 percent of the fair market value of the property. 
The Commission proposes that participants in the health infrastructure 
program be permitted to seek support for the cost of leasing facilities 
required to provide broadband service if such lease qualifies as a 
capital lease under GAAP. If there is doubt regarding the 
classification of a

[[Page 48245]]

particular lease under GAAP, the participant may be required to provide 
an explanation justifying the classification of its leasing arrangement 
as a capital lease. The Commission invites comment on this proposal.
    52. No Short-Term Leases. The Commission proposes that short-term 
or operating leases are not eligible for funding under the health 
infrastructure program. Because the primary focus of the health 
infrastructure program is the construction and sustainability of 
broadband infrastructure facilities, the Commission does not believe 
that short-term or operating leases are appropriate. In a short-term 
lease, ownership of the funded asset would revert back to the vendor at 
the conclusion of the term of the lease, conferring a benefit on the 
vendor and not the health care provider. This is inconsistent with the 
goal of funding infrastructure programs for the creation of 
sustainable, long-term dedicated broadband networks used for health 
care purposes. The Commission therefore proposes that short-term or 
operating leases are not an acceptable vehicle for deploying facilities 
under the health infrastructure program. The Commission invites comment 
on this proposal.
    53. Depreciation of Network Components. Because of the restrictions 
against the sale, resale, or other transfer of universal service funds 
contained in section 254(h)(3) of the Act, health care providers would 
not normally be able to dispose of equipment or other improvements 
funded by the health infrastructure program. The Commission seeks 
comment on whether it should adopt rules that allow for the disposition 
of assets after the full economic useful life of funded projects (as 
determined, for example, under GAAP or as determined for tax 
depreciation reporting purposes). The Commission notes, however, that 
the full economic useful life of infrastructure projects in most 
instances should be ten to twenty years. The Commission also seeks 
comment on whether it should adopt rules that allow for the transfer of 
ownership of funded projects to subsidiaries or affiliates of the 
original applicants, provided that eligible health care providers 
continue to have a controlling beneficial ownership interest in the 
project.

K. Standard Terms and Conditions

    54. The Commission proposes adopting requirements that construction 
contracts, IRUs or eligible capital leases entered into by health care 
providers for infrastructure projects contain certain mandatory 
provisions. This would ensure consistency among projects, and will help 
health care providers to negotiate contracts that meet at least a basic 
level of assurance. The Commission emphasizes that such standard terms 
and conditions would not be a substitute for further negotiated terms 
that health care providers may deem necessary in their business 
judgment. The Commission expects health care providers to exercise due 
diligence in negotiating such contracts with vendors. The Commission 
seeks comments on these proposed terms and conditions, and inquires 
whether additional or different provisions should be required.
    55. Construction Contracts. The Commission proposes that the 
following provisions should be included in all construction contracts:
     Work Standards. All work shall conform to identified 
standards and specifications. The vendor shall not use any defective 
material in the performance of the work.
     Withholding of Payments. The health care provider may 
withhold money due for any portion of the work which has been rejected 
by the health care provider and which has not been corrected by the 
vendor to the reasonable satisfaction of the health care provider.
     Defects in Work. For a period of not less than one year 
after project completion, the vendor shall correct at its expense all 
defects and deficiencies in the work which result from (1) labor or 
materials furnished by the vendor, (2) workmanship, or (3) failure to 
follow the plans, drawings, standards, or other specifications made a 
part of the contract.
    56. IRU. The Commission proposes that the following provisions 
should be included in all IRUs:
     Term of the Agreement. The health care provider is granted 
an exclusive and irrevocable right to use the facility funded by the 
health infrastructure program, for the remainder of facility's useful 
life.
     Beneficial Ownership Interest. The health care provider 
receives beneficial title and interest or equitable title in the 
facilities funded by the health infrastructure program. Such title 
should include the right to use the facilities, the right to have 
access for repairs, and the right to let others use such facilities.
    57. Capital Leases. The Commission proposes requiring that the 
payment structure in a capital lease should be reflective of the term 
of the lease. Lease payments in advance of the lease term would not be 
allowed. For example, in a ten-year lease, the Commission would not 
allow an upfront payment of the entire ten-year lease period. Such 
prepayments present a significant risk that the vendor could default or 
go into bankruptcy after the pre-payment has been made, resulting in 
the loss of funds.
    58. Provisions Applicable to all Contracts. Whether a construction 
contract, an IRU, or a capital lease, the Commission proposes that all 
contracts should have provisions that address the following:
     Laws and Regulations. The vendor shall comply with all 
Federal, State and municipal laws, ordinances and regulations 
(including building and construction codes) applicable to the 
performance of the work.
     Environmental Protection. The vendor shall comply with all 
applicable Federal, State and municipal environmental laws and 
regulations which relate to environmental protection, inspection and 
monitoring of property and environmental reporting and information 
requirements.
     Performance Bonds. For contracts in excess of $150,000, 
the vendor shall deliver a performance bond. For construction 
contracts, performance bonds should be for the construction term of the 
contract plus a period of not less than one year (i.e., the same period 
in which the health care provider may require the vendor to remedy 
defects in the work). For a lease or an IRU, performance bonds should 
be for the entire term of the agreement.
     Indemnification. The vendor agrees to indemnify and hold 
harmless the health care provider from any and all claims, actions, or 
causes of action to the extent the claimed loss or damages arises out 
of the vendor's negligent performance or nonperformance of its 
obligations under the contract.

L. Sustainability Reporting Requirement

    59. Consistent with the recommendations of the National Broadband 
Plan, the Commission proposes requiring that, prior to receiving a 
funding commitment letter from USAC, participants submit a 
sustainability report demonstrating that the project is sustainable. 
Although participants would be free to include additional information 
to demonstrate a project's sustainability, the Commission proposes that 
a sustainability plan would at a minimum address the following points:
     Principal Factors. Discuss each of the principal factors 
that were considered by the participant to demonstrate sustainability.
     Minimum Fifteen Percent Funding Contribution. Discuss the 
status of obtaining the minimum 15 percent

[[Page 48246]]

contribution for eligible project costs. If project funding is 
dependent on appropriations or other special conditions, such 
conditions should be discussed.
     Projected Sustainability Period. Indicate a reasonable 
sustainability period, which is at least equal to the useful life of 
the funded facility. Although a sustainability period of 10 years is 
generally appropriate, the period of sustainability should be 
commensurate with the investments made from the health infrastructure 
program.
     Terms of Membership in the Network. Describe generally any 
agreements made (or to be entered into) by network members (e.g., 
participation agreements, memoranda of understanding, usage agreements, 
or other documents). Describe financial and time commitments made by 
proposed members of the network. If the project includes excess 
bandwidth for growth of the network, describe how such excess bandwidth 
will be financed. If the network will include eligible health care 
providers and other network members, describe how fees for joining and 
using the network will be assessed.
     Ownership Structure. Explain who will own each material 
element of the network, and arrangements made to ensure continued use 
of such elements by the network members for the duration of the 
sustainability period.
     Sources of Future Support. If sustainability is dependent 
on fees to be paid by eligible health care providers, then the 
sustainability plan should confirm that the health care providers are 
committed and have the ability to pay such fees. If sustainability is 
dependent on fees to be paid by network members that will use the 
network for health care purposes, but are not eligible health care 
providers under the Commission's rules, then the sustainability plan 
should identify such entities. Alternatively, if sustainability is 
dependent on revenues from excess capacity not related to health care 
purposes, then the sustainability plan should identify the proposed 
users of such excess capacity. If rural health care provider members of 
the network qualify for continued support under the health broadband 
services program, this should be discussed in the sustainability plan.
     Management. Describe the management structure of the 
network for the duration of the sustainability period, and how 
management costs will be funded.
    60. The Commission seeks comment on whether additional or different 
sustainability requirements should be included.

M. Shared Use

    61. Given the nature of high capacity networks capable of 
supporting the health IT requirements of health care providers, it is 
customary to build excess capacity when deploying such networks. The 
Commission therefore needs to resolve: (i) What capacity should 
properly be funded by universal service funds? (ii) Should eligible 
health care providers be allowed to share this excess capacity with 
non-eligible entities and, if so, (a) with which entities and (b) what 
percentage of the total cost should such non-eligible entities be 
required to pay?
    62. The Commission recognizes that there may be cost-savings and 
other benefits from allowing community users to participate in 
infrastructure projects funded by the health infrastructure program. 
However, the Commission seeks to ensure that the health infrastructure 
program is not indirectly subsidizing unauthorized uses, and that funds 
are not wasted. Rules governing the sharing of this subsidized 
infrastructure are necessary to prevent waste, fraud and abuse, and to 
control the size of the disbursements, particularly given the annual 
limits on the health infrastructure program.
    63. Fully-Distributed and Incremental Costs. Telecommunications 
networks generally provide multiple services over a shared plant. 
Telecommunications regulators in setting prices for telecommunications 
services have generally had to allocate the costs of the shared plant 
to the various services. Two traditional methods for assigning costs to 
services are to employ incremental cost or fully distributed costs. In 
economic theory, the term ``incremental cost'' refers to ``the 
additional costs (usually expressed as a cost per unit of output) that 
a firm will incur as a result of expanding the output of a good or 
service by producing an additional quantity of the good or service.'' 
The term ``common cost'' refers to ``cost that are incurred in 
connection with the production of multiple products or services, and 
remains unchanged as the relative proportion of those products or 
services varies * * *'' Where multiple services are produced by a 
shared plant, pricing those services on the basis of their incremental 
cost is unlikely to generate revenues sufficient to recover the total 
costs of production. Accordingly, regulators traditionally have 
allocated the common costs among the multiple services so as to recover 
the total costs of the plant. A common approach has been to adopt 
``fully distributed cost'' (or fully allocated cost) pricing rules, 
which allocate costs on the basis of relative output levels, revenues 
or attributable costs.
    64. The Commission seeks comment on how to define fully distributed 
costs for purposes of the health infrastructure program. For instance, 
what allocators should the Commission use for allocating common costs? 
Should the Commission allocate costs on the basis of directly 
attributable costs? Or should the Commission allocate costs based on 
relative capacity assigned to eligible versus ineligible users? Are 
there other allocators that would be more appropriate to employ?
    65. The Commission also seeks comment on whether it should provide 
guidance on how incremental cost should be estimated. For example, 
should the cost of building laterals to other community institutions, 
the cost of electronics to light the fibers used by the other 
institutions, and any additional costs associated with purchasing a 
higher-capacity fiber cable all be deemed to be incremental costs? 
Should other costs be included in estimating incremental costs?
    66. The Commission seeks comment on these proposed distinctions 
between fully-distributed costs and incremental costs, and solicits 
alternative proposals.
    67. The Commission proposes that the health infrastructure program 
only support the infrastructure costs associated with the eligible 
health care providers' current and anticipated bandwidth requirements. 
To the extent that the deployed network has excess capacity and the 
eligible entities seek to share that excess capacity with ineligible 
entities, the Commission proposes that the ineligible entities should 
pay an appropriate portion of the costs of the network. The Commission 
seeks comment on whether the share of costs borne by the ineligible 
entities should be based on incremental cost or fully-distributed cost. 
The Commission seeks comment on the likely proportion of network costs 
ineligible entities would be required to bear if we adopt an 
incremental cost approach. The Commission seeks comment on whether it 
would be administratively simpler or more appropriate to adopt a fully 
distributed cost approach. For example, if eligible health care 
providers plan to use 75 percent of the network capacity and 25 percent 
of the capacity is planned for use by the community, should the 
Commission require a showing that the ineligible users pay 25 percent 
of the total cost of the network? In this example, should this 25 
percent proportionate share of costs include costs associated with 
trenching,

[[Page 48247]]

planning and design, obtaining rights of way, deployment, modulating 
equipment costs, and maintenance and operation costs?
    68. In the event the Commission adopts an incremental cost 
approach, should it make a bright line distinction so if ineligible 
users take more than a set percentage of the network's capacity, then 
they would be required to pay a larger share based on fully-distributed 
costs (rather than merely incremental cost)?
    69. The Commission seeks comment on which allocators it might 
adopt. For example, in fiber projects, should the Commission allocate 
the cost of the common infrastructure on the basis of the relative 
number of fibers used by the health care providers compared with other 
users? Should we use some other measure of relative capacity or demand? 
Alternatively, should the Commission allocate common costs on the basis 
of directly attributable costs? Are there other allocators that would 
be simpler to implement? Would use of a fully distributed cost 
allocation methodology reduce the likelihood of waste, fraud and abuse? 
What effect would such an approach have on the incentives of the 
eligible health care provider, the vendor and other potential users of 
the infrastructure to invest in a fiscally responsible manner in 
broadband networks?
    70. Protecting Against Fraud, Waste and Abuse. The Commission seeks 
comment on what limitations on additional capacity for community use 
are necessary to protect the integrity of dedicated health care 
networks, and to help ensure that eligible health care providers 
receive the maximum benefit from infrastructure funded by universal 
service funds. The Commission seeks comment on what restrictions or 
measures it should adopt to prevent fraud, waste and abuse as a result 
of projects that involve dedicated health care networks and additional 
capacity for use by entities that are not eligible health care 
providers under our rules. For instance, if the Commission allows 
excess capacity to be shared by other community uses at incremental 
cost, should it require that:
     The eligible health care providers or consortium of 
eligible health care providers should own (or have an IRU or capital 
lease interest in) in all physical elements of the dedicated network 
that are part of the project, including any excess capacity.
     All revenues generated by the network from allowing non-
eligible health care providers to use the network's excess capacity 
must be retained by the network to operate, maintain and support the 
network. This could include, for example, purchasing equipment or 
applications necessary for the network or the applications that run 
over it.
     The participant's sustainability plan must indicate 
reasonable assumptions for the use of excess capacity.
     Either all excess capacity will be used for the health 
care purposes identified in the participant's application for funding; 
or, if used by non-eligible entities, the users of such excess capacity 
will pay (to the network) a market or arm's length negotiated rate to 
use such excess capacity.
     Network members must have a written agreement or 
organizational document that specifies the members' respective rights 
and obligations, including access and maintenance, and reasonable 
(i.e., arm's length) allocation of recurring and non-recurring costs.
    71. Excess Capacity Disclosures. If an infrastructure project 
includes excess capacity, the Commission proposes requiring applicants 
to disclose the estimated amount of excess capacity as part of its 
sustainability plan, and to explain how they plan to allocate the cost 
of the network between the network members that are eligible health 
care providers and the members that are not eligible health care 
providers. In doing so, participants would be required to: (1) identify 
non-eligible users of such excess capacity and explain what proportion 
of the network non-recurring and recurring costs they will bear, and 
(2) describe all agreements made between the eligible health care 
providers and other participants in the network (e.g., cost allocation, 
facility sharing agreements, maintenance and access obligations, 
ownership rights). The Commission seeks comment on this proposal, and 
on how recipients should be required to document the required cost 
allocation (whether fully-distributed cost or/and incremental cost). 
Particularly, the Commission seeks comment on how to determine what 
constitutes ``fully-distributed costs'' in situations where there are 
various types of ownership interests (e.g., IRU or capital lease) 
proposed in this notice.
    72. Additional Capacity for Community Use. In addition to the 
proposed rules above (regarding excess capacity for health care 
purposes), the Commission seeks comment on whether it should encourage, 
permit, or restrict the following categories of joint projects that 
include additional capacity for use by the community (not for health 
care purposes):
     Additional capacity for use by schools and libraries;
     Additional capacity for use by governmental entities 
(State and local); and
     Additional capacity for use by other entities in the 
community, such as local non-profits, community or civic organizations, 
low-income residents, local businesses, anchor institutions and other 
residents.
    73. Priority Preferences for Projects That Include Additional 
Capacity for Community Use. For each of the above types of additional 
capacity for community use listed in paragraph 77, the Commission seeks 
comments on whether projects funded by the health infrastructure 
program should include, restrict, or allow these types of joint or 
shared projects. The Commission also invites comment on priority 
preference and other issues. For example:
     If the Commission caps the number of projects per year, or 
if the number of projects per year under the health infrastructure 
program exceeds the proposed $100 million funding cap, should the 
Commission give special prioritization treatment to projects that plan 
to allow use of excess capacity by schools and libraries that are 
otherwise eligible for universal service funding?
     Should the Commission give priority to projects that allow 
use of excess capacity by State or local government (including 
government offices, police, fire departments and Emergency Medical 
Services)?
     Should other community use be allowed or restricted?
    74. Other Considerations Regarding Additional Capacity for 
Community Use. Should there be additional restrictions on the terms and 
conditions on which additional capacity may be made available for 
community use? For example, should the Commission restrict, limit, or 
add specific requirements as to who should own the portion of a network 
dedicated for community use?
    75. Should the Commission require that additional capacity for 
community use be physically separated from the dedicated capacity 
reserved for the health care network? If so, the Commission seeks 
comment on how such separation may be effectuated. For example, should 
the Commission require capacity to be separated by fiber strand, 
channel, wavelength, or by some other method?
    76. Commenters should address how permitting joint projects that 
include additional capacity for community use would be consistent with 
the resale restrictions contained in section 254(h)(3) of the Act. The 
use of such

[[Page 48248]]

additional capacity by the community would not violate the restrictions 
against sale, resale or other transfer contained in section 254(h)(3) 
of the Act because, in such instances, health care providers would 
retain ownership of the additional capacity, and payments to the 
network for the use of such additional capacity would be retained to 
sustain the network. The Commission seeks comment on this analysis.

N. Vendor Cost Reporting Requirements

    77. The Commission proposes requiring that health care providers 
obtain certain cost information from vendors. The Commission seeks 
comment on its proposal, as detailed below. Because infrastructure 
projects are complex and involve a significant amount of funding, it is 
important that participants exercise due diligence in determining 
costs. To assist participants in this process, and to mitigate waste, 
fraud and abuse, the Commission proposes that participants in the 
health infrastructure program should:
     Require the vendor to certify either that: (1) The 
infrastructure project will only involve the construction and 
deployment of the dedicated healthcare network, and will not involve 
the construction or deployment of additional facilities or capacity 
that will not be part of the dedicated network; or (2) The 
infrastructure project will include both the construction and 
deployment of the dedicated network and the construction and deployment 
of additional facilities or capacity for uses other than the dedicated 
network, but: (a) The cost charged to the dedicated network will not 
exceed fully distributed costs given the use, quality of service, term 
(length of service) and other terms and conditions for use of the 
dedicated facility; and (b) the vendor will pay all costs related to 
the additional facility or capacity.
     To assist the health care providers to determine 
sustainability of the network, require that the vendor provide a 
depreciation schedule showing the useful life of fixed assets.
     Require the vendor to maintain books and records that 
support all cost allocations.

O. Quarterly Reporting Requirements

    78. The Commission proposes requiring that health infrastructure 
program participants submit quarterly reports that provide information 
on the following: (1) Attaining project milestones, (2) status of 
obtaining the 15 percent minimum match, (3) status of the competitive 
bidding process, (4) details on how the supported network has complied 
with HHS health IT guidelines or requirements, such as meaningful use, 
if applicable; and (6) performance measures. The Commission seeks 
comment on this proposal, and on whether such reports should only be 
required annually or semi-annually. Such information could inform the 
Commission's understanding of cost-effectiveness and efficacy of the 
different State and regional networks funded by the program and guide 
future decision-making. This information should also enable the 
Commission to ensure that universal service funds are being used in a 
manner consistent with section 254 of the Act and the Commission's 
rules and orders. In particular, collection of this information is 
critical to the goal of preventing waste, fraud, and abuse by ensuring 
that funding is flowing to its intended beneficiaries. Participants 
should also note that submission of a quarterly report is not a 
substitute for seeking consent for any material modification to the 
original application.

P. Competitive Bidding

    79. The Commission proposes that all projects funded by the health 
infrastructure program be subject to fair and open competitive bidding. 
Currently, health care providers seeking support under the Rural Health 
Care Support Mechanism post a request for services on USAC's Web site 
for a period of at least 28 days, using FCC Form 465, which serves as a 
method for USAC and potential vendors to be aware of requests for 
services. Because of the complexity of infrastructure projects, 
participants in the health infrastructure program should be explicitly 
required to prepare a detailed request for proposals (RFP) that 
provides sufficient information to define the scope of the project, and 
to distribute the RFP in a method likely to garner attention from 
interested venders. For example, participants could (1) post a notice 
of the RFP in trade journals or newspaper advertisements, (2) send the 
RFP to known or potential service providers, (3) include the RFP on the 
health care provider's Web page or other Internet sites, or (4) follow 
other customary and reasonable solicitation practices used in 
competitive bidding. Adding this mandatory RFP preparation and 
distribution requirement could increase the quality and quantity of 
bids received by health care providers for their network projects, and 
will therefore result in a more efficient use of funding under the 
health infrastructure program. The Commission seeks comment on whether 
participants also should be required to post an FCC Form 465 and note 
on that form that they have issued a detailed RFP. If participants 
using an RFP are not required to use an FCC Form 465, then the 
certifications that are contained in the Form 465 would be included in 
a substitute form.
    80. The Commission recognizes that in certain smaller projects, or 
in projects that are subject to mandatory, State or local procurement 
rules, its proposed RFP preparation and distribution requirements may 
not be practical or cost-effective. Accordingly, the Commission's 
proposed RFP requirements would not be applicable to infrastructure 
projects of $100,000 or less or projects that are subject to mandatory 
State or local procurement rules. However, such projects would still be 
required to complete a request for services on an Form 465 and post 
this request on USAC's Web page for a period of at least 28 days before 
selecting a vendor. The Commission proposes that health care providers 
be required to certify that each service or facility provider selected 
for an infrastructure project supported by the health infrastructure 
program is, to the best of the health care provider's knowledge, the 
most cost-effective service or facility provider available, as defined 
in our rules. The Commission seeks comment on the above proposals.

Q. Designation of Successor Projects

    81. The Commission proposes that USAC monitor each funded 
participant's progress, as defined by their project milestones, and 
alert the Wireline Competition Bureau (Bureau) in the event of any 
significant project delays or concerns. Similar to the Pilot Program, 
the Commission proposes delegating to the Bureau the authority to waive 
the relevant sections of Subpart G of Part 54 of the Commission's rules 
to the extent waiver may be necessary to the sound and efficient 
administration of the health infrastructure program.
    82. The Commission also proposes that in instances where a 
participant is unable to complete its project, the Wireline Competition 
Bureau would have authority to designate a successor project, similar 
to the delegation of authority for the Pilot Program. Such designation 
of a successor could be made upon request of the participant, or on the 
Bureau's own motion. The Bureau would exercise such discretion in 
instances where a project fails to meet a specified milestone, or a 
participant fails to adequately notify the Commission of modifications 
to the project milestone deadlines. In selecting a successor project, 
the Bureau would take into consideration the likelihood that the 
successor will be able, at a minimum, to complete the project in a

[[Page 48249]]

manner that provides new broadband infrastructure to the identified 
region or area. The Commission also proposes delegating authority to 
the Bureau to revoke funding awarded to any selected participant making 
unapproved material changes to the network design plan set forth in the 
participant's detailed project description submitted as part of the 
funding application materials. The Commission seeks comment on the 
proposals outlined above. As a final matter, the Commission also seeks 
comment on ways for the Bureau and USAC to improve outreach efforts in 
assisting projects through the Commission's administrative process.

R. NEPA and NHPA Requirements

    83. Certain projects funded by the health infrastructure program 
could implicate the National Environmental Policy Act (NEPA) and the 
National Historic Preservation Act (NHPA). If NEPA and NHPA are 
implicated by a particular proposed project, the Commission invites 
comment on the point in the application process at which participants 
should be required to comply with the requirements codified in the 
Commission's rules.

II. Health Broadband Services Program

    84. In the 2003 Rural Health Care Internet Access Order, the 
Commission amended the Rural Health Support mechanism to fund the 
recurring costs associated with Internet access for rural health care 
providers in two ways. First, the program subsidizes the rates paid by 
rural health care providers for telecommunications services to 
eliminate the rural/urban price difference within each State (via the 
telecommunications program). Second, to support advanced 
telecommunications and information services, the program provides a 25 
percent flat discount on monthly Internet access for rural health care 
providers and a 50 percent discount for health care providers in States 
that are entirely rural (via the Internet access program).
    85. In establishing the level of support for the Internet access 
program, the Commission concluded that a flat discount percentage of 25 
percent off the cost of monthly Internet access would assist health 
care providers seeking to purchase Internet services, while also 
providing incentives for rural health care providers to make prudent 
economic decisions concerning their telehealth needs. The Commission 
found that a flat discount would be easy to administer and consistent 
with section 254(b)(5), which requires ``a specific, sufficient, and 
predictable mechanism * * * because it limits the amount of support 
that each health care provider may receive per month to a reasonable 
level.'' The Commission also determined that a flat discount would lead 
to greater predictability and fairness among health care providers. In 
setting the discount level at 25 percent, the Commission acted 
conservatively based on the belief that this amount would provide an 
incentive for rural health care providers to choose a level of service 
appropriate to their needs, ensure that demand for Internet access 
support would not exceed the annual funding cap, and deter wasteful 
expenditures. The Commission stated that as it gained more experience 
with this aspect of the support mechanism, it would reassess the 
appropriateness of the 25 percent discount level.
    86. Noting the under-utilization of the current support mechanism, 
the National Broadband Plan recommended that the Internet access 
program be replaced with a broadband services access program that 
expands the definition of funded services and provides greater support 
than the 25 percent subsidy under the current Internet access program 
in order to better meet the health IT needs of health care providers. 
To better encourage program participation, the National Broadband Plan 
also recommended that the Commission simplify the application process 
for the program, while also continuing to protect against potential 
waste, fraud and abuse in the program.

A. Eligible Services

    87. Eligible Access and Transport Services. Pursuant to section 
254(h)(2)(A), and consistent with the recommendations made in the 
National Broadband Plan, the Commission proposes to replace the 
existing Internet access program with a new health broadband services 
program, which will subsidize 50 percent of an eligible rural health 
care provider's recurring monthly costs for any advanced 
telecommunications and information services that provide point-to-point 
broadband connectivity, including Dedicated Internet Access. The 
Commission seeks comment on this proposal. The Commission notes that 
section 254(h)(2)(A) is not limited to health care providers in rural 
areas. The Commission seeks comment on whether an appropriate first 
step for expanding funding for broadband services should be to focus on 
rural areas, given the particular challenges that rural communities 
often face in obtaining access to health care. The Commission also 
invites comment on whether this proposal implicates section 
254(h)(1)(A), and if so, how the Commission would implement the 
proposed health broadband services program in light of section 
254(h)(1)(A). For instance, should the Commission require that 
recipients seeking funding for telecommunications services make an 
election as to whether they wish to receive support under the 
telecommunications program or under the new proposed health broadband 
services program?
    88. As noted by the National Broadband Plan, when used effectively, 
broadband-based technologies can ``help health care professionals and 
consumers make better decisions, become more efficient, engage in 
innovation, and understand both individual and public health more 
effectively.'' Currently, the Internet access program provides support 
equal to 25 percent of the monthly cost of Internet access reasonably 
related to the health care needs of rural health care providers. The 
Commission's current rules define Internet access as ``an information 
service that enables rural health care providers to post their own 
data, interact with stored data, generate new data, or communicate over 
the World Wide Web.'' Under this definition, the Commission determined 
that Internet access provides access to the world-wide information 
resource of the Internet, and includes all features typically provided 
by Internet service providers to provide adequate functionality and 
performance. To qualify as Internet access under the definition, the 
Commission further stated that transmissions must traverse the Internet 
in some fashion.
    89. Access to advanced telecommunications and information services 
for health care delivery is provided in a variety of ways today, and is 
not limited to the public Internet and the features typically provided 
by Internet service providers. For example, due to privacy laws and 
electronic health care record requirements, secure transmission of 
health IT data needs to occur over a private dedicated connection 
between health care providers. In addition, as evidenced in the 
networks being funded under the Pilot Program, many health care 
providers rely on private wide area networks to provide Health IT and 
access applications for the delivery of health care to rural areas. 
Limiting funding to transmission over the public Internet therefore may 
inhibit access to health IT necessary to improve health care delivery. 
The low utilization rate of the existing Internet access program 
suggests the narrow definition of

[[Page 48250]]

Internet Access does not align with the needs of health care 
practitioners.
    90. The Commission proposes that the health broadband services 
program provide support to eligible rural health care providers for the 
recurring costs of access to advanced telecommunications and 
information services that enable rural health care providers to post 
their own data, interact with stored data, generate new data, or 
communicate over private dedicated networks or the public Internet for 
the provision of health IT.
    91. The Commission seeks comment on whether it should define a 
minimum level of broadband capability for purposes of providing support 
under the new health broadband services program. The National Broadband 
Plan suggested that 4 Mbps downstream is the minimum necessary for a 
solo practitioner to support the deployment of health IT applications 
today and in the near future, whereas the recommended bandwidth for 
other health care providers is 10 Mbps for small clinics and health 
care providers with 2 to 4 physicians, 25 Mbps for larger clinics and 
health care providers with 5 or more physicians, 100 Mbps for hospitals 
and 1,000 Mbps for large medical centers. Would 4 Mbps be an 
appropriate minimum for purposes of the new health broadband services 
program, or should we require different minimum speeds depending on the 
type of health care provider? Four (4) Mbps could be a sufficient 
minimum requirement since the health broadband services program would 
be used to fund broadband services without funding additional 
infrastructure. In contrast, for the health infrastructure program, 
given the use of funding specifically for broadband deployment, the 
minimum broadband speed should be higher. The Commission also seeks 
comment on minimum levels of reliability, including physical 
redundancy, to support health IT services and what can be done to 
encourage reliability. The Commission also seeks comment on the minimum 
quality of service standards necessary to meet health IT needs. The 
Commission seeks comment on whether the health broadband services 
program should contain a minimum quality of service requirement.
    92. Eligible Service Providers. In the past, the Commission has 
permitted health care providers to seek discounts on ``the most cost-
effective form of Internet access, regardless of the platform.'' 
Consistent with section 254(h)(2)(A), the Commission proposes that 
participants in the health broadband services program may seek 
supported services from any type of broadband provider, as long as the 
participant selects the most cost-effective option to meet its health 
care needs. The Commission seeks comment on this proposal.
    93. Limitations to Prevent Waste, Fraud, and Abuse. To guard 
against the possibility of waste, fraud, and abuse in the health 
broadband services program, the Commission proposes that the supported 
services must be reasonably related to the provision of health care 
services by an eligible health care provider. Second, eligible health 
care providers that seek support for telecommunications service 
offerings may not also request support from the telecommunications 
program for the same service. Lastly, all requests for discounts under 
the health broadband services program would comply with our rules on 
competitive bidding and cost-effectiveness, as discussed below. The 
Commission seeks comment on these proposals.

B. No Capital or Infrastructure Costs

    94. The National Broadband Plan recommended that the Rural Health 
Care Support Mechanism maintain a distinction between subsidies for 
recurring costs (i.e., the monthly service price) and subsidies for 
other costs (e.g., infrastructure, equipment). Given the proposed 
availability of funding for infrastructure deployment and upgrades in 
the health infrastructure program, the Commission proposes placing 
limits on the use of funding under the health broadband services 
program for non-recurring costs. Under the Internet access program, 
USAC allows participants to receive one-time support equal to 25 
percent of the cost of Internet access installation. The existing 
Internet access program, however, does not provide support for the 
costs of construction or infrastructure build-out necessary for the 
installation of Internet access services. The Commission proposes that 
under the health broadband services program, participants may receive a 
one-time support equal to 50 percent of reasonable and customary 
installation charges for broadband access. Installation charges would 
be defined as charges that are normally charged by service providers to 
commence service, and are not charges that are based on amortization or 
pass through of construction or infrastructure costs. The health 
broadband services program would only subsidize health care providers' 
recurring costs--that is, the monthly price for providers' eligible 
services and one-time installation charges. The Commission seeks 
comment on this proposal.
    95. The National Broadband Plan recommended that ``federal and 
state policies should facilitate demand aggregation and use of state, 
regional and local networks when that is the most cost-efficient 
solution for anchor institutions to meet their connectivity.'' The 
Commission proposes that eligible health care providers should be able 
to receive support for the lease of dark or lit fiber to provide 
broadband connectivity from any provider. Under such an approach, 
applicants would, for instance, be able to lease dark fiber that may be 
owned by State, regional or local governmental entities, when that is 
the most cost-effective solution to their connectivity needs.
    96. The Commission recognizes that, in some situations, service 
providers may deploy new facilities to serve eligible health care 
entities, and may seek to recover all or part of those costs through 
non-recurring charges when service is initiated. Consistent with 
policies adopted in the schools and libraries support mechanism, the 
Commission proposes that applicants may not seek upfront support for 
non-recurring charges of $500,000 or more. If non-recurring charges are 
more than $500,000, they must be part of a multi-year contract, and 
must be prorated over a period of at least five years. The Commission 
seeks comment on these proposals.

C. Restrictions on Satellite Services

    97. Section 254 directs the Commission to adopt rules that enhance 
access to advanced telecommunications and information services to the 
extent ``technologically feasible and economically reasonable.'' As 
noted by the National Broadband Plan, ``the high fixed costs of 
designing, building and launching a satellite mean that satellite-based 
broadband is likely to be cheaper than terrestrial service only for the 
most expensive-to-serve areas.'' The Commission proposes to require 
that a health care provider seeking support for satellite service 
demonstrate that it is the most cost-effective option available to meet 
the provider's health care needs. The Commission also proposes to 
incorporate the rules currently governing the purchase of satellite 
services under the telecommunications program into the new health 
broadband services program. Currently, eligible health care providers 
may seek support for rural satellite services, even if a similar 
terrestrial-based service is available. However, discounts are capped 
at the amount that the provider would have received if they purchased a 
functionally similar terrestrial-based

[[Page 48251]]

alternative. The Commission seeks comment on these proposals.

D. Level of Support

    98. The National Broadband Plan recommended that the Commission 
base discount levels for the health broadband services program on 
criteria that address such factors as lack of broadband access, lack of 
affordable broadband, price discrepancies for similar broadband 
services between health care providers, the health care provider's 
inability to afford broadband services, special status for health care 
providers in the highest Health Professional Shortage Areas (HPSAs) of 
the country, and special status for public or safety net institutions.
    99. The National Broadband Plan further recommended that, to enable 
health care providers to afford higher bandwidth broadband services, 
the subsidy support amount under the health broadband services program 
should be greater than the 25 percent subsidy available under the 
Internet access program. In addition, the National Broadband Plan 
suggested that support be adjusted to better match the costs of 
services for disadvantaged health care providers. Additionally, to 
encourage participation in the health broadband services program, the 
National Broadband Plan stated that the Commission should ``simplify 
the application process and provide clarity on the level of support 
that providers can reasonably expect, while protecting against 
potential waste, fraud and abuse.''
    100. The Commission notes that, on average, health care providers 
that applied for the urban/rural cost difference for eligible 
telecommunications services under the existing telecommunications 
program received funding commitments for a 60 percent discount on their 
cost of service; a significant number of those funding commitments are 
for T-1 lines. The Commission does not have sufficient information at 
this time regarding the comparative costs of higher bandwidth services 
that increasingly may be used by health care providers in the future as 
they employ health IT applications for telehealth and e-care, nor does 
the Commission have information that would enable it to develop an 
administratively workable affordability benchmark. Given the dearth of 
available information, a cautious approach could be to adopt a flat 
discount of 50 percent for monthly recurring costs and evaluate, after 
some period of time, whether such a flat discount results in increased 
adoption and utilization of broadband for health care purposes. The 
Commission seeks comment on this proposal, as discussed in this 
section.
    101. One potential advantage of adopting a 50 percent discount is 
that the participating health care provider has a financial stake in 
paying for its selected services, thereby providing an incentive for 
cost-effective decision making and promoting the efficient use of 
universal service funding. In particular, unlike a rural/urban 
benchmark methodology, a flat discount requires that providers seek 
cost efficient solutions to their broadband needs because they have 
their own investment in the recurring service costs. In conjunction 
with the competitive bidding process, a financial stake in services 
supported by the health broadband services program will help in keeping 
costs lower for the same quality services.
    102. The National Broadband Plan also recommended that, to better 
encourage participation in the health broadband services program, the 
Commission should provide clarity as to the level of support that 
health care providers can reasonably expect to receive. Not only does a 
50 percent flat discount promote prudent decision-making, it provides a 
clear and predictable support amount, thereby assisting rural health 
care providers in planning for their broadband needs and purchasing 
services. Moreover, a flat rate discount is easy to administer, which 
should expedite the application process and reduce administrative 
expenses incurred by USAC.
    103. The Commission also seeks input on whether affordability 
metrics could be incorporated into the flat rate methodology proposed 
above. Are there factors that could be considered under a flat rate 
funding mechanism that target health care providers in rural areas that 
still could not afford broadband access services under the 50 percent 
funding threshold?

E. Competitive Bidding

    104. The National Broadband Plan suggests that the Commission 
should evaluate the tools at its disposal, such as competitive bidding, 
to enhance its oversight of the Rural Health Care Support Mechanism. 
The Commission proposes to extend the competitive bidding requirements 
that are currently applicable to the Internet access program to the new 
health broadband services program. Specifically, the Commission 
proposes that each participant undertake a competitive bidding process 
by posting an FCC Form 465 prior to selecting a service provider, and 
certify that it considered all bids received and selected the most 
cost-effective bid. The Commission seeks comment on this proposal. Are 
there changes the Commission can make to the competitive bidding 
mechanism to make it more successful or efficient? Are there certain 
types of situations that should be exempted from the competitive 
bidding requirements?
    105. Multi-year contracts. Under the current internet access 
program, certain service contracts have ``evergreen'' status, meaning 
that for the life of the contract, the parties do not have to rebid the 
service or post an FCC Form 465. A health care provider covered under 
an evergreen contract may apply annually for Internet access support by 
filing only an FCC Form 466-A. Conversely, a health care provider who 
does not have an evergreen contract is considered to have a ``month-to-
month, tariffed service and must post an FCC Form 465 and select the 
most cost-effective service and service provider each year.''
    106. The Commission proposes to codify this practice as part of the 
new health broadband services program. If they choose to do so, program 
participants will be allowed to enter into multi-year contracts for 
recurring broadband services. Further, the Commission proposes that 
multi-year contracts that are competitively bid in accordance with the 
Commission's rules and are deemed to have evergreen status by USAC do 
not need to be re-bid each year, for the life of the contract. However, 
consistent with current policy, all health care providers would be 
required to continue to request support annually by filing an FCC Form 
466-A. Additionally, any changes to the parties' evergreen contract, 
such as an extension, renewal, or the addition of services, would 
require the posting of a new FCC Form 465. Codifying this existing 
practice would maintain consistency while transitioning from the 
existing Internet access program to the new health broadband services 
program. Health care providers would also benefit from the opportunity 
to enter into long-term contracts with service providers, which may 
offer lower pricing than would be available on an annual basis. 
Moreover, the administrative obligations would be reduced for those 
providers who do not file a Form 465 each year. The Commission seeks 
comment on this proposal.
    107. Opting into the Health Broadband Services Program. Under the 
Pilot Program, the Commission permitted participants to seek support 
for both the recurring and non-recurring costs associated with the 
deployment of broadband health care networks and the advanced 
telecommunications and

[[Page 48252]]

information services provided over those networks. When the Pilot 
Program ends, some participants may wish to transition to the new 
health broadband services program to subsidize the recurring costs 
formerly funded by the Pilot Program. The Commission seeks comment on 
whether Pilot Program participants whose original request for 
competitive bids included both non-recurring and recurring costs should 
be permitted to transition to the health broadband services program 
without undergoing a new competitive bidding process.

III. Eligible Health Care Providers

A. Administrative Offices

    108. Under the Commission's current rules, health care providers 
housing their administrative operations in off-site offices may not 
seek rural health care support for those offices. The National 
Broadband Plan recommended that the Commission expand its 
interpretation of eligible health care provider to allow participation 
in the Rural Health Care Support Mechanism by off-site administrative 
offices. Off-site administrative offices that are owned or controlled 
by an eligible health care provider should have the opportunity to 
receive rural health care support, and, as detailed below, the 
Commission proposes to amend its rules to reflect this change. The 
Commission seeks comment on this proposal.
    109. There are several reasons why the Commission thinks it 
appropriate to revisit this issue. In today's environment, while 
administrative offices do not provide ``hands on'' delivery of patient 
care, they often perform support functions that are critical to the 
provision of clinical care by rural health care providers. For example, 
administrative offices may coordinate patient admissions and 
discharges, ensure quality control and patient safety, and maintain the 
security and completeness of patients' medical records. Administrative 
offices also perform ministerial tasks, such as billing and collection, 
claims processing, and regulation compliance. Without an administrative 
office capable of carrying out these functions, an eligible health care 
provider may not be able to successfully provide patient care. From the 
Pilot Program, the Commission has also learned that administrative 
costs can be significant for rural health care providers and, in some 
cases, may prevent providers from adopting telemedicine at all. For 
example, one Pilot Program participant stated in its response to the 
NBP Public Notice #17 that, despite efforts to minimize costs, it had 
spent over $160,000 on administrative expenses in approximately two 
years. By expanding the Commission's interpretation of section 
254(h)(7)(B) to include funding for off-site administrative offices, 
the Commission could help to reduce the costs of telemedicine adoption 
for rural providers.
    110. The Commission also recognizes that there is a wide variation 
in the way that health care providers structure their facilities. While 
some providers perform both clinical and administrative functions at a 
single, stand-alone facility, other providers require multiple sites 
and choose to house their administrative and clinical operations in 
separate buildings. It is becoming a best practice among health care 
providers to locate their administrative facilities off-site from the 
provider's primary facility. To the extent that administrative offices 
are owned or controlled by an eligible health care provider, the 
Commission proposes that they should be funded as a part of the 
eligible health care provider under section 254(h)(7)(B). It is 
impractical to distinguish administrative offices that are located off-
site but otherwise perform the same functions as in-house 
administrative offices. The Commission seeks comment on this proposed 
change.
    111. If the Commission revises its rules to indicate that off-site 
administrative offices may qualify as eligible health care providers, 
additional limitations may be needed to protect the program from waste, 
fraud, and abuse. First, the Commission proposes that an off-site 
administrative office must be at least 51 percent owned or controlled 
by an eligible non-profit or public health care provider listed in 
section 254(h)(7)(B) of the Act. An off-site facility would not qualify 
for support, therefore, simply by entering into an outsourcing 
relationship with an eligible health care provider. The Commission also 
seeks comment on whether an off-site administrative office that is less 
than 51 percent owned or controlled by an eligible health care provider 
should be eligible for support on a pro-rated basis or should be 
excluded from support altogether. Second, the Commission notes that, in 
some cases, off-site administrative offices may serve several purposes, 
some of which are unrelated to health care or performed on behalf of 
ineligible entities. The Commission therefore proposes to allow 
eligible health care providers to seek support for off-site 
administrative offices only in those instances where the health care 
provider certifies that the administrative office is used primarily for 
performing services that are integral to the provision of health care 
by eligible health care providers. The Commission seeks comment on 
these proposals.

C. Data Centers

    112. Currently, off-site data centers are not eligible health care 
providers under the Commission's rules. The National Broadband Plan 
recommended that the Commission expand its interpretation of ``eligible 
health care provider'' to include off-site data centers used for health 
care purposes and owned (directly or indirectly) by an eligible health 
care provider. As the Commission learned from the Pilot Program, data 
centers often perform functions, such as housing patient records or 
serving as operations centers, which are critical to the delivery of 
health care in rural communities. For example, the Utah Telehealth 
Network Pilot Program Project uses a primary and a secondary data 
center to deliver approximately 2,500 clinical and financial 
applications across wide area networks to eligible health care 
facilities. Similarly, the Western New York Rural Area Health Education 
Center (Western New York Area Health Pilot Program Project plans to 
``connect all participating hospitals and clinics in the rural and 
under-served areas over a dedicated broadband Internet Protocol network 
to a centralized conferencing and server core at the Western New York 
Area Health data center facility * * * which aggregates, and expands 
the primary- and secondary-care capacities of these hospitals and 
clinics for telemedicine, radiological imaging, and community-based 
health information exchange, as well as clinical collaboration, 
mentoring, and distance learning and education applications.'' 
Commenters responding to the NBP Public Notice #17 stressed that if the 
connections between the data centers and the individual network sites 
are not funded, information transfer will not occur and the network 
cannot operate, thereby inhibiting patient care.
    113. As health care providers rely more on advanced applications to 
meet the challenges of sharing, storing and retrieving electronic 
medical data and images, health care providers and organizations will 
likely need to depend more heavily on high-speed connectivity between 
key sites and data centers. As an administrative matter, it is 
impractical to disallow funding to data centers that provide the same 
functions as on-site entities, but happen to be located off-site. Like 
off-site administrative offices, the Commission therefore proposes that 
off-site data

[[Page 48253]]

centers that are owned or controlled by eligible health care providers 
should receive rural health care support as a part of the eligible 
health care provider under section 254(h)(7)(B).
    114. As with the case of administrative offices, the Commission 
notes that off-site data centers can serve several purposes, some of 
which may be unrelated to health care or performed on behalf of 
ineligible entities. Many private companies, for example, offer off-
site data center services that may be purchased by any member of the 
public. In those cases, it is possible that some of the entities served 
are not eligible health care providers. As such, the Commission 
proposes to allow eligible health care providers to seek support only 
for off-site data centers in which the eligible health care provider 
has at least a 51 percent ownership or controlling interest. The 
Commission also seeks comment on whether an off-site administrative 
office that is less than 51 percent owned or controlled by an eligible 
health care provider would be eligible for support on a pro-rated basis 
or should be excluded from support altogether. Additionally, because of 
the possibility that off-site data centers may provide services 
unrelated to health care or on behalf of ineligible entities, the 
Commission proposes to require eligible health care providers seeking 
support for off-site data centers to certify that the data center is 
used primarily for performing services that are integral to the 
provision of health care. The Commission seeks comment on these 
proposals.

D. Skilled Nursing Facilities

    115. The Commission proposes that non-profit skilled nursing 
facilities be considered eligible for rural health care support under 
the category of ``not-for-profit hospitals.'' Skilled nursing 
facilities provide some of the same post-acute services that are 
traditionally provided at hospitals, such as the management, 
observation, and evaluation of patient care. As noted by the National 
Broadband Plan, under the changing technological landscape of rural 
health care, services are no longer clearly divided into traditional 
delivery models. The CDC reports that the number of acute care 
facilities has decreased, and services traditionally provided in 
hospital settings are increasingly performed at non-acute and post-
acute care facilities. Skilled nursing facilities are an example of 
this trend. Specifically, due to advances in telemedicine, in many 
instances patients no longer need to be transferred to hospitals for 
treatment because they can receive the same or similar treatment at a 
skilled nursing facility.
    116. The evolution of skilled nursing facilities as a recognized 
provider of post acute services is demonstrated by their coverage under 
Medicare. Medicare covers skilled nursing care when certain conditions 
are met: (1) The patient enters the skilled nursing facility shortly 
following a hospital stay of three consecutive days or more; (2) a 
doctor has ordered skilled nursing care which requires the skills of 
professional personnel such as nurses, physical therapists, 
occupational therapists or speech pathologists or audiologists; and (3) 
the patient needs skilled care on a daily basis on an in-patient basis. 
The Commission proposes that facilities that provide skilled nursing 
services that are covered by Medicare should be eligible for support as 
a ``not-for-profit hospital'' under section 254(h)(7)(B) of the Act.
    117. The Commission recognizes, however, that certain facilities 
(such as nursing homes) may provide both skilled nursing services and 
custodial services. Unlike skilled nursing services, custodial services 
involve assisting patients with daily activities such as eating, 
clothing, bathing, etc., and are not services covered by Medicare. It 
is therefore important that rural health care support be available only 
to those facilities with a sufficient volume of skilled nursing 
patients. The Commission seeks comment on how to distinguish a facility 
that is primarily engaged in providing skilled nursing services as 
opposed to facilities that are primarily engaged in providing custodial 
care. For example, should the Commission allow a facility to receive 
support as a skilled nursing facility if: (1) It has a certificate of 
need to provide skilled nursing services for at least 51 percent of its 
total beds; or (2) at least 51 percent of the facility's revenues for 
the last twelve months are from skilled nursing services? 
Alternatively, should designation as a skilled nursing facility be 
based on the number of patients at a facility that received skilled 
nursing services over a three-month period of time compared to the 
total number of patients at the facility for the same period of time? 
The Commission invites comment on this issue. Additionally, the 
Commission seeks comment on whether support should be limited to 
skilled nursing facilities that maintain an average patient stay not 
exceeding 20 consecutive days, which is consistent with the Centers for 
Medicare and Medicaid Services (CMS) restrictions on reimbursement for 
skilled nursing care.

E. Renal Dialysis Centers and Facilities

    118. Consistent with the National Broadband Plan's suggestion to 
examine funding those institutions that have become integral in the 
delivery of health care, the Commission proposes to indicate that non-
profit renal dialysis centers and non-profit renal dialysis facilities 
may receive support as eligible health care providers under the 
category of not-for-profit hospitals. As defined by CMS, a renal 
dialysis center is ``a hospital unit that is approved to furnish the 
full spectrum of diagnostic, therapeutic, and rehabilitative services 
required for the care of End Stage Renal Disease (ESRD) dialysis 
patients (including inpatient dialysis furnished directly or under 
arrangement and outpatient dialysis).'' More limited services are 
provided by a renal dialysis facility, which is ``a unit that is 
approved to furnish dialysis service(s) directly to ESRD patients.''
    119. Acute care provided by renal dialysis centers and renal 
dialysis facilities is consistent with the general schema of services 
traditionally provided by hospitals. The Commission also believes that 
inclusion of renal dialysis centers and renal dialysis facilities is 
consistent with CMS's classification of these facilities. Additionally, 
the Commission proposes that a renal dialysis center or renal dialysis 
facility seeking rural health care support should be required to 
certify that, over the 12-month period preceding the date of 
application for support, the facility provided life-preserving ESRD 
treatment to at least 51 percent of its patients. The Commission seeks 
comment on the above proposals.

6. Annual Caps and Prioritization Rules

    120. The aggregate annual cap for the Rural Health Care Support 
Mechanism is $400 million. Given that current demand under the existing 
program has historically been less than $70 million, we see no need to 
revisit the overall funding cap. The Commission does, however, believe 
it would be prudent to set an initial cap for the proposed health 
infrastructure program (within the overall $400 million cap) to manage 
the portion of funding that supports new deployment as opposed to 
ongoing services. The Commission proposes to allocate up to $100 
million for infrastructure projects under the health infrastructure 
program, leaving at least $300 million available annually for the 
telecommunications program and the health broadband services program. 
In the existing Pilot Program, the Commission made funding commitments 
to 62 infrastructure

[[Page 48254]]

projects in 42 States, which represented $139 million per year. As 
discussed above, funding a smaller number of infrastructure projects on 
an annual basis, at least as it initially implements the new program, 
would be more administratively workable, and therefore the Commission 
proposes a cap of $100 million per year for infrastructure projects. As 
the Commission gains more experience, it can re-evaluate and make 
subsequent changes to the program as appropriate.
    121. The Commission seeks comment on this proposal to set $100 
million cap for the health infrastructure program and $300 million for 
the telecommunications program and the health broadband services 
program. Because there are limited funds available for both the health 
broadband services program and the health infrastructure program, the 
Commission also seeks comment and proposals on what funding priority 
rules it should apply in those instances where funding requests exceed 
the amount of funds available in a particular funding year.
    122. Initially, the Commission does not believe that the funding 
requests in the health broadband services program will exceed the 
amount of available funds. However, in the event that USAC receives 
funding requests that exceed available funds, it would be necessary to 
allocate funding. One approach would be to apply a pro-rata deduction 
among all eligible health care providers, thereby reducing the amount 
that each health care provider receives for such funding year. Another 
approach would be to fund eligible health care providers based on their 
Health Professional Shortage Area (HPSA) score for primary care as 
designated by HHS. For example, health care providers in areas with the 
highest possible HPSA score (presently, 26) would receive support 
first, and health care providers with scores below the highest HPSA 
score would receive support in descending order, until available funds 
are exhausted. The Commission seeks comments on alternative proposals 
to prioritize funding for the health broadband services program if 
funding limits are reached.
    123. For the health infrastructure program, the Commission seeks 
comments on how to prioritize funding in the event projects apply and 
qualify for funding in any funding year that collectively exceed the 
proposed $100 million cap. For example, one method for prioritizing 
projects could be based on the following factors: (1) Total number of 
rural health care providers in the proposed network; (2) total number 
of health care providers (both urban and rural) in the proposed 
network, and (3) the combined HPSA scores for all urban health care 
providers in the proposed network. Under this method, USAC would give 
first priority to projects that have the highest number of eligible 
rural health care providers, not to exceed $100 million in the 
aggregate and second priority to projects that have the highest number 
of health care providers (urban and rural). In the event projects have 
the same number of eligible health care providers in their proposed 
networks, they would be sub-ranked according to the number of rural 
health care providers in the proposed network. If further sub-ranking 
is required, projects would be ranked according to the aggregate HPSA 
scores of the urban health care providers in the proposed network. 
Other ways to prioritize projects could be to consider the relative 
size of the patient base or population density of the area served by 
the health care providers, or to consider measures such as the cost per 
served population or other factors that demonstrate the most cost 
effective use of funds. The Commission seeks comment on these or other 
methods that commenters may suggest for prioritizing project funding. 
Commenters recommending the use of one prioritization method over 
another should explain the basis for such prioritization, and explain 
how the prioritization system would work.
    124. One readily available source of information to prioritize 
funding requests would be to use HPSA scores. HPSA scores rank urban 
and rural geographic areas based on the shortage of primary care health 
professionals. HPSA designations and scores are used across the Federal 
government to allocate resources, with more than 30 Federal programs 
providing benefits based on HPSA designations or scoring. Geographic 
areas are scored on a scale of 0 to 26, with 26 representing the 
highest professional shortage area. Scores are provided for three 
categories of providers: Primary Care, Mental Health and Dental. The 
factors considered by HHS for calculating HPSA scores for a geographic 
area include population-to-provider ratios, population poverty rates, 
and travel time and distance to the nearest source of care. Additional 
factors that influence the score include infant mortality rates and low 
birth weight data. The Commission seeks comment on the use of HPSA 
scores as a component of any prioritization considerations.
    125. The Commission also seeks comment on whether there are other 
publicly available criteria, in addition to HPSA scores, that could be 
used to prioritize funding. Alternatively, should the Commission 
collect additional information from applicants that could be used to 
prioritize applications, and if so, what information should be 
collected in a standardized fashion for such purpose? Commenters should 
discuss the burden or additional reporting obligations that would be 
imposed on health care providers in compiling and submitting such 
information as part of their applications for funding.
    126. The Commission also seeks comment generally on whether it 
should set aside some amount of funding each year that could be awarded 
through a competitive process that takes into account factors other 
than those proposed above. For instance, should the Commission set 
aside a defined amount of the annual $400 million funding for 
recipients that can demonstrate innovative uses of broadband 
connectivity to meet health care needs in a community?

 7. Offset Rule

    127. The Commission has historically required contributors to 
Federal universal service support mechanisms to treat the support 
received for providing services under the Rural Health Care Support 
Mechanism as an offset to the amount they must otherwise contribute to 
the universal service fund. When the Commission adopted this 
requirement, it was construing the statutory language that authorized 
both the rural health care mechanism and the schools and libraries 
mechanism. However, the Commission ultimately implemented the offset 
rule as a mandatory requirement only for the Rural Health Care Support 
Mechanism and not for the schools and libraries mechanism. Although the 
Commission concluded it had authority to allow direct reimbursement, it 
considered a mandatory offset rule for the Rural Health Care Support 
Mechanism to be ``less vulnerable to manipulation and more easily 
administered and monitored.''
    128. While the original intent of the offset rule was to prevent 
fraud, waste and abuse, it may no longer make sense today, particularly 
in light of the proposed reforms in this NPRM. The Commission has 
recognized that the offset rule can create inequities and 
inefficiencies, and has modified its applicability in the past. In 
establishing the Pilot Program, the Commission determined that the 
offset rule should not apply to that program because both 
telecommunications carriers and non-telecommunications carriers were 
eligible to provide services under the

[[Page 48255]]

program. The Commission determined it was in the public interest to 
distribute support to Pilot Program service providers in a neutral 
fashion, where neither the telecommunications carriers nor the non-
telecommunications carrier would be subject to the offset rule. The 
Commission recognizes that the offset rule could create administrative 
difficulties in the future, if the Commission authorizes support for 
services provided by entities that do not contribute to the universal 
service fund.
    129. Accordingly, the Commission proposes to eliminate the offset 
rule for participants in the health broadband services program, 
telecommunications program, and health infrastructure program and 
replace it with a rule allowing service providers in the program to 
receive monies directly from USAC. The Commission seeks comment on this 
proposal. Notably, the schools and libraries mechanism has an optional 
offset method, yet only a small percentage of service providers elect 
to offset their obligation against their contribution to the universal 
service fund. The Commission seeks comment on whether to retain the 
offset rule as an option for contributors that wish to utilize an 
offset in the context of the new programs proposed in this NPRM. The 
Commission also seeks comment on whether the reimbursement mechanism 
should be unified across all of the new rural health care programs.

8. Protecting Against Waste, Fraud, and Abuse

    130. The Commission proposes that participants in the health 
infrastructure program and the health broadband services program should 
continue to be subject to any currently applicable rules pertaining to 
audits, recordkeeping, and duplicate support. The Commission seeks 
comment on the proposals described below.
    131. With respect to audits, the Commission proposes that 
participants in both programs will be subject to random compliance 
audits to ensure compliance with program rules and orders. The 
Commission also proposes that program participants and service 
providers will be required to maintain certain documentation related to 
the purchase and delivery of services funded by the Rural Health Care 
Support Mechanism, and will be required to produce those records upon 
request. However, the Commission proposes to make the following 
clarifications to its recordkeeping rules: First, the Commission 
proposes to clarify that the documents to be retained by participants 
and service providers under the program should include all records 
related to the participant's application for, receipt of, and delivery 
of discounted services. Second, the Commission proposes to amend the 
Commission's existing rules to mandate that service providers, upon 
request, produce the records kept pursuant to the Commission's 
recordkeeping requirement.
    132. Finally, the Commission proposes that health care providers 
may not receive funds for the same services under the health broadband 
services program and the telecommunications program. Similarly, the 
Commission proposes to prohibit participants from receiving funds for 
the same services under the Rural Health Care Support Mechanism and any 
other universal service program (i.e., the E-rate program, the High 
Cost program, and the Low Income program), or from any other Federal 
program, including, for example, Federal grants, awards, or loans. The 
Commission seeks comment on these proposals.

IV. Data Gathering and Performance Measures

A. ``Meaningful Use'' Criteria

    133. The National Broadband Plan recommended that the Commission 
align the Rural Health Care Support Mechanism with other Federal 
government criteria intended to measure the efficient use of health IT, 
such as the ``meaningful use'' criteria being developed by HHS. 
Meaningful use criteria are intended to encourage physicians and 
hospitals to use broadband services and infrastructure in a way that 
improves the Nation's health care delivery system. HHS is still 
developing and considering regulations to implement meaningful use 
requirements for electronic health records, but is expected to adopt 
final rules later this year. Initially, under the HHS requirements, 
health care providers will be given financial incentives if they meet 
the HHS definition of meaningful use of electronic health records. In 
2015, full Medicare and Medicaid support will be conditioned on 
compliance with meaningful use requirements, and health care providers 
will receive reduced Medicare or Medicaid reimbursement if they do not 
meet the requirements of meaningful use.
    134. The National Broadband Plan suggested that the Commission 
should condition receipt of rural health care support on providers' 
compliance with the HHS meaningful use requirements after a certain 
period of time, such as three years. The Commission recognizes that any 
new compliance obligations may impose burdens on health care providers, 
and that these burdens may be more significant for rural providers. At 
the same time, the goals reflected in the HHS meaningful use 
requirements are important, and there may be benefits both to providers 
and the Federal government in aligning policies to the extent feasible. 
The Commission seeks comment on whether and how the Commission could 
align its performance measures with HHS's meaningful use criteria. The 
Commission also seeks comment on whether there are other Federal 
criteria that it should consider adopting.
    135. The Commission seeks comment on whether, assuming full 
implementation of meaningful use requirements in 2015, recipients of 
funding from the Rural Health Care Support Mechanism should be required 
to document their compliance with meaningful use requirements as a 
condition of receiving support. What would be the practical and 
operational implications of such a requirement? The Commission notes 
that, under HHS' draft proposed regulations, meaningful use will be 
certified at the individual physician level (with the exception of 
hospitals), while the Commission's program provides support to a 
variety of eligible entities that do not necessarily include physician 
offices (such as post-secondary educational institutions offering 
health care instruction, local health departments, community health 
centers, community mental health centers and rural health clinics). If 
the Commission were to adopt a meaningful use requirement, how should 
it evaluate whether the health care entity has satisfied meaningful 
use? The Commission also seeks comment on what the remedy should be for 
failure to meet such a requirement, if adopted? For instance, if a 
health care provider is required to comply with HHS meaningful use 
regulations as of 2015, should the Commission reduce or eliminate rural 
health care support if the entity has not achieved the HHS meaningful 
use standard by 2018?

 C. Other Performance Measures

    136. To measure the impact of the Commission's universal service 
programs, it is important for participants in the health broadband 
services program and the health infrastructure program to have 
measurable performance goals to demonstrate how they are using the 
Federal support to take advantage of broadband capabilities for medical 
services or support. The Commission therefore seeks comment on what 
generally-applicable performance

[[Page 48256]]

criteria the Commission should adopt. For example, the Commission could 
adopt criteria regarding consistency or frequency of use of broadband 
services for record-keeping, remote monitoring, or remote consultation 
on complex or non-routine medical issues. The Commission seeks comment 
on these and other possible criteria by which to measure performance. 
The Commission also seeks comment on whether the Commission should 
employ existing industry standards or metrics, such as the American 
Telemedicine Association's Standards and Guidelines for 
Teledermatology, Telemental Health and Telepathology, as part of its 
performance measure criteria. Are there other existing metrics that 
would be suitable for measuring accomplishments related to the Rural 
Health Care Support Mechanism?
    137. The Commission also recognizes there are a wide variety of 
eligible entities that may obtain support from the proposed health 
broadband services program and the health infrastructure program, and 
therefore there may be a need for some flexibility in performance 
measures to reflect the many potential uses and varying needs of 
program beneficiaries. Therefore, the Commission seeks comment on 
whether to require each program beneficiary to identify more specific 
performance measures. For example, the Commission might require all 
beneficiaries to report on progress of bringing services online, and 
the individual recipient would identify a specific timeline and report 
on whether it met the timeline. The Commission might require 
beneficiaries to identify particular goals, such as increasing network 
speed or reliability, and the beneficiary would identify the specific 
goal and report on whether the goal was accomplished. The Commission 
seeks comment on this proposal. The Commission seeks comment on how 
this process should work. For example, the Commission might require a 
beneficiary to submit specific performance measures within 60 days of 
notification that its application for support has been approved. The 
Commission also seeks comment on whether it should have the opportunity 
to reject or propose modifications to the individualized performance 
measurements that beneficiaries submit.
    138. The Commission seeks comment on the frequency of assessing 
performance and how often the beneficiary should report on performance. 
For example, should performance measures be made annually or more 
frequently? Should ongoing support be conditioned wholly or partly on 
demonstrated satisfaction of performance standards? The Commission also 
seeks comment on what, if any, additional information the report should 
contain, such as an explanation for any failure to meet performance 
goals or the opportunity to propose revisions to the performance 
measurements.

D. Data Gathering and Analysis

    139. Health Care Broadband Status Report and Testing Mechanisms. 
The National Broadband Plan recommended that the Commission 
periodically publish a health care broadband status report that 
discusses the state of health care broadband connectivity, reviews 
health IT industry trends, describes government programs and makes 
reform recommendations. Further, the National Broadband Plan suggested 
that the Commission should work in conjunction with HHS (which has 
experience in evaluating the effectiveness of clinical programs) to 
measure and assess the impact that the health broadband services 
program and the health infrastructure program have on health care and 
health IT. For example, the National Broadband Plan suggested that the 
Commission could conduct the following tests:
     Determine how health care providers that receive Rural 
Health Care Support for broadband differ in the utilization of e-care 
from health care providers that do not receive program support;
     Assess the impact of changing the level of broadband 
subsidies to a targeted community and determine if there is an 
increased use of broadband and health IT as a result of such subsidies;
     Explore whether expanding the Rural Health Care Support 
Mechanism to include funding for training would lead to better 
broadband utilization and improved care; and
     Evaluate the impact the Rural Health Care Support 
Mechanism is having on vulnerable populations, such as the elderly, 
racial and ethnic minorities, or low-income rural and urban 
communities, to understand whether targeted efforts would be more 
effective.
    140. The National Broadband Plan suggested that in order to ensure 
sufficient support for these tests, the Commission should allocate a 
portion of the Rural Health Care Support Mechanism (e.g., $5 million) 
for a testing program that funds innovative ideas for evaluating the 
existing broadband efforts or improve upon them in the future. The 
Commission seeks comment on the recommendation to allocate a portion of 
the rural health care funding for running trials of and evaluating 
innovative concepts, and if so, what amount should be set aside for 
that purpose?
    141. The Commission seeks comment on whether and how to develop the 
periodic broadband status reports and testing mechanisms suggested by 
the National Broadband Plan. In particular, the Commission is 
interested in suggestions for how to evaluate objectively the impact of 
the Rural Health Care Support Mechanism and how the Commission can 
direct support to make greatest use of limited resources. The 
Commission also seeks comment on whether to create a working group to 
develop recommendations for the direction of the Rural Health Care 
Support Mechanism, and if so, who should participate in such a group 
and how should it be structured?
    142. The Commission also proposes to collect data that will help it 
analyze how the support is being used, such as requiring beneficiaries 
to annually identify the speed of the connections supported by the 
Rural Health Care Support Mechanism and the type and frequency of 
utilization of telehealth or telemedicine applications as a result of 
broadband access. This data could assist the Commission in its ongoing 
oversight over this program and help the Commission determine how 
beneficiaries are using broadband services to improve the provision of 
medical services or support. The Commission seeks comment on this 
proposal. The Commission also seeks comment on the services or 
applications that should be included.

V. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    1. Pursuant to the Regulatory Flexibility Act (``RFA''), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(``IRFA'') of the possible significant economic impact on small 
entities by the policies and rules proposed in this Notice of Proposed 
Rulemaking. Written public comments are requested on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
on or before the dates indicated on the first page of this NPRM. The 
Commission will send a copy of the NPRM, including the IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration. In 
addition, the NPRM and IRFA (or summaries thereof) will be published in 
the Federal Register.

[[Page 48257]]

1. Need for, and Objectives of, the Notice for Proposed Rulemaking
    2. The Commission is required by section 254 of the Communications 
Act of 1934, as amended, to promulgate rules to implement the universal 
service provisions of section 254. On May 8, 1997, the Commission 
adopted rules that reformed its system of universal service support 
mechanisms so that universal service is preserved and advanced as 
markets move toward competition. Among other programs, the Commission 
adopted a program to provide discounted telecommunications services to 
public or non-profit health care providers that serve persons in rural 
areas. The changing technological landscape in rural health care over 
the past decade has prompted us to propose a new structure for the 
rural health care universal service support mechanism.
    3. In this NPRM, the Commission seeks comment on a package of 
potential reforms to the rural health care program that could be 
implemented in funding year 2011 (July 1, 2011-June 30, 2012). The 
proposed reforms include: (1) Establishing a broadband infrastructure 
program (the ``health infrastructure program'') that would support up 
to 85 percent of the construction costs of new regional or statewide 
networks to serve public and non-profit health care providers in areas 
of the country where broadband is unavailable or insufficient; (2) 
establishing a broadband services access program (the ``health 
broadband services program'') that would subsidize 50 percent of the 
monthly recurring costs for access to broadband services for eligible 
public or non-profit rural health care providers, which should make 
broadband connectivity more affordable for providers operating in rural 
areas; (3) expanding the Commission's interpretation of ``eligible 
health care provider'' to include acute care facilities that provide 
services traditionally provided at hospitals, such as skilled nursing 
facilities and renal dialysis centers and facilities, and 
administrative offices and data centers that do not share the same 
building as the clinical offices of a health care provider but that 
perform support functions critical for the provision of health care; 
(4) clarifying the Commission's existing recordkeeping requirements to 
enhance our ability to protect against waste, fraud and abuse; and (5) 
eliminating the current rule that requires that funding be offset 
against universal service contributions owed by participating service 
providers, and instead propose to allow service providers participating 
in the health broadband services program, telecommunications program, 
and health infrastructure program to receive rural health care funds 
directly from USAC.
2. Legal Basis
    4. This Notice of Proposed Rulemaking, including publication of 
proposed rules, is authorized under sections 1, 2, 4(i)-(j), 201(b), 
254, 257, 303(r), and 503 of the Communications Act of 1934, as 
amended, and section 706 of the Telecommunications Act of 1996, as 
amended, 47 U.S.C. 151, 152, 154(i)-(j), 201(b), 254, 257, 303(r), 503, 
1302.
3. Description and Estimate of the Number of Small Entities To Which 
Rules Will Apply
    5. 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 proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one that: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA. Nationwide, 
there are a total of approximately 29.6 million small businesses, 
according to the SBA. A ``small organization'' is generally ``any not-
for-profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Nationwide, as of 2002, there were 
approximately 1.6 million small organizations. The term ``small 
governmental jurisdiction'' is defined generally as ``governments of 
cities, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' Census 
Bureau data for 2002 indicate that there were 87,525 local governmental 
jurisdictions in the United States. We estimate that, of this total, 
84,377 entities were ``small governmental jurisdictions.'' Thus, the 
Commission estimates that most governmental jurisdictions are small.
    6. Small entities potentially affected by the proposals herein 
include eligible rural non-profit and public health care providers and 
the eligible service providers offering them services, including 
telecommunications service providers, Internet Service Providers 
(ISPs), and vendors of the services and equipment used for dedicated 
broadband networks.
a. Rural Health Care Providers
    7. Section 254(h)(5)(B) of the Act defines the term ``health care 
provider'' and sets forth seven categories of health care providers 
eligible to receive universal service support. In addition, non-profit 
entities that act as ``health care providers'' on a part-time basis are 
eligible to receive prorated support and the Commission has no ability 
to quantify how many potential eligible applicants fall into this 
category.
    8. As noted earlier, non-profit businesses and small governmental 
units are considered ``small entities'' within the RFA. In addition, 
the Commission notes that census categories and associated generic SBA 
small business size categories provide the following descriptions of 
small entities. The broad category of Ambulatory Health Care Services 
consists of further categories and the following SBA small business 
size standards. The categories of small business providers with annual 
receipts of $7 million or less consists of: Offices of Dentists; 
Offices of Chiropractors; Offices of Optometrists; Offices of Mental 
Health Practitioners (except Physicians); Offices of Physical, 
Occupational and Speech Therapists and Audiologists; Offices of 
Podiatrists; Offices of All Other Miscellaneous Health Practitioners; 
and Ambulance Services. The category of such providers with $10 million 
or less in annual receipts consists of: Offices of Physicians (except 
Mental Health Specialists); Family Planning Centers; Outpatient Mental 
Health and Substance Abuse Centers; Health Maintenance Organization 
Medical Centers; Freestanding Ambulatory Surgical and Emergency 
Centers; All Other Outpatient Care Centers, Blood and Organ Banks; and 
All Other Miscellaneous Ambulatory Health Care Services. The category 
of such providers with $13.5 million or less in annual receipts 
consists of: Medical Laboratories; Diagnostic Imaging Centers; and Home 
Health Care Services. The category of Ambulatory Health Care Services 
providers with $34.5 million or less in annual receipts consists of 
Kidney Dialysis Centers. For all of these Ambulatory Health Care 
Service Providers, census data indicate that there are a combined total 
of 368,143 firms that operated for all of 2002. Of these, 356,829 had 
receipts for that year of less than $5 million. In addition, an 
additional 6,498 firms had annual receipts of $5 million to $9.99 
million; and an additional 3,337 firms

[[Page 48258]]

had receipts of $10 million to $24.99 million; and an additional 865 
had receipts of $25 million to $49.99 million. The Commission therefore 
estimates that virtually all Ambulatory Health Care Services providers 
are small, given SBA's size categories. The Commission notes, however, 
that its rules affect non-profit and public health care providers, and 
many of the providers noted above would not be considered ``public'' or 
``non-profit.'' In addition, the Commission has no data specifying the 
numbers of these health care providers that are rural and meet other 
criteria of the Act.
    9. The broad category of Hospitals consists of the following 
categories with an SBA small business size standard of annual receipts 
of $34.5 million or less: General Medical and Surgical Hospitals, 
Psychiatric and Substance Abuse Hospitals; and Specialty (Except 
Psychiatric and Substance Abuse) Hospitals. For these health care 
providers, census data indicate that there is a combined total of 3,800 
firms that operated for all of 2002, of which 1,651 had revenues of 
less than $25 million, and an additional 627 firms had annual receipts 
of $25 million to $49.99 million.. The Commission therefore estimates 
that most Hospitals are small, given SBA's size categories. In 
addition, the Commission has no data specifying the numbers of these 
health care providers that are rural and meet other criteria of the 
Act.
    10. The broad category of Social Assistance consists, inter alia, 
of the category of Emergency and Other Relief Services with a small 
business size standard of annual receipts of $7 million or less. For 
all of these health care providers, census data indicate that there was 
a total of 55 firms that operated for all of 2002. All of these firms 
had annual receipts of below $1 million. The Commission therefore 
estimates that all such firms are small, given SBA's size standard. In 
addition, the Commission has no data specifying the numbers of these 
health care providers that are rural and meet other criteria of the 
Act.
b. Providers of Telecommunications and Other Services
Telecommunications Service Providers
    11. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
incumbent local exchange services. The closest size standard under SBA 
rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 1,311 incumbent carriers reported that 
they were engaged in the provision of local exchange services. Of these 
1,311 carriers, an estimated 1,024 have 1,500 or fewer employees and 
287 have more than 1,500 employees. Thus, under this category and 
associated small business size standard, the Commission estimates that 
the majority of entities are small.
    12. The Commission has included small incumbent local exchange 
carriers in this RFA analysis. A ``small business'' under the RFA is 
one that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent local exchange carriers are not dominant in their field of 
operation because any such dominance is not ``national'' in scope. The 
Commission has therefore included small incumbent carriers in this RFA 
analysis, although the Commission emphasizes that this RFA action has 
no effect on the Commission's analyses and determinations in other, 
non-RFA contexts.
    13. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA rules is for wired telecommunications 
carriers. This provides that a wired telecommunications carrier is a 
small entity if it employs no more than 1,500 employees. According to 
the Commission's 2008 Trends Report, 300 companies reported that they 
were engaged in the provision of interexchange services. Of these 300 
IXCs, an estimated 268 have 1,500 or fewer employees and 32 have more 
than 1,500 employees. Consequently, the Commission estimates that most 
providers of interexchange services are small businesses.
    14. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for wired 
telecommunications carriers. This provides that a wired 
telecommunications carrier is a small entity if it employs no more than 
1,500 employees. According to the 2008 Trends Report, 1,005 CAPs and 
competitive local exchange carriers (competitive LECs) reported that 
they were engaged in the provision of competitive local exchange 
services. Of these 1,005 CAPs and competitive LECs, an estimated 918 
have 1,500 or few employees and 87 have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive exchange services are small businesses.
    15. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the Census Bureau has placed wireless firms within this new, 
broad, economic census category. Prior to that time, such firms were 
within the now-superseded categories of ``Paging'' and ``Cellular and 
Other Wireless Telecommunications.'' Under the present and prior 
categories, the SBA has deemed a wireless business to be small if it 
has 1,500 or fewer employees. Because Census Bureau data are not yet 
available for the new category, the Commission will estimate small 
business prevalence using the prior categories and associated data. For 
the category of Paging, data for 2002 show that there were 807 firms 
that operated for the entire year. Of this total, 804 firms had 
employment of 999 or fewer employees, and three firms had employment of 
1,000 employees or more. For the category of Cellular and Other 
Wireless Telecommunications, data for 2002 show that there were 1,397 
firms that operated for the entire year. Of this total, 1,378 firms had 
employment of 999 or fewer employees, and 19 firms had employment of 
1,000 employees or more. Thus, the Commission estimates that the 
majority of wireless firms are small.
    16. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As noted, the SBA has developed a small business 
size standard for Wireless Telecommunications Carriers (except 
Satellite). Under the SBA small business size standard, a business is 
small if it has 1,500 or fewer employees. According to the 2008 Trends 
Report, 434 carriers reported that they were engaged in wireless 
telephony. Of these, an estimated 222 have 1,500 or fewer employees and 
212 have more than 1,500 employees. The Commission has estimated that 
222 of these are small under the SBA small business size standard.
    17. Satellite Telecommunications and All Other Telecommunications. 
These two economic census categories address the satellite industry. 
The first category has a small business size standard of $15 million or 
less in average annual receipts, under SBA rules. The second has a size 
standard of $25 million or less

[[Page 48259]]

in annual receipts. The most current Census Bureau data in this 
context, however, are from the (last) economic census of 2002, and the 
Commission will use those figures to gauge the prevalence of small 
businesses in these categories.
    18. The category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing telecommunications 
services to other establishments in the telecommunications and 
broadcasting industries by forwarding and receiving communications 
signals via a system of satellites or reselling satellite 
telecommunications. For this category, Census Bureau data for 2002 show 
that there were a total of 371 firms that operated for the entire year. 
Of this total, 307 firms had annual receipts of under $10 million, and 
26 firms had receipts of $10 million to $24,999,999. Consequently, the 
Commission estimates that the majority of Satellite Telecommunications 
firms are small entities that might be affected by its action.
    19. The second category of All Other Telecommunications comprises, 
inter alia, ``establishments primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems.'' For this 
category, Census Bureau data for 2002 show that there were a total of 
332 firms that operated for the entire year. Of this total, 303 firms 
had annual receipts of under $10 million and 15 firms had annual 
receipts of $10 million to $24,999,999. Consequently, the Commission 
estimates that the majority of All Other Telecommunications firms are 
small entities that might be affected by its action.
Internet Service Providers
    20. The 2007 Economic Census places these firms, whose services 
might include voice over Internet protocol (VoIP), in either of two 
categories, depending on whether the service is provided over the 
provider's own telecommunications facilities (e.g., cable and DSL 
ISPs), or over client-supplied telecommunications connections (e.g., 
dial-up ISPs). The former are within the category of Wired 
Telecommunications Carriers, which has an SBA small business size 
standard of 1,500 or fewer employees. The latter are within the 
category of All Other Telecommunications, which has a size standard of 
annual receipts of $25 million or less. The most current Census Bureau 
data for all such firms, however, are the 2002 data for the previous 
census category called Internet Service Providers. That category had a 
small business size standard of $21 million or less in annual receipts, 
which was revised in late 2005 to $23 million. The 2002 data show that 
there were 2,529 such firms that operated for the entire year. Of 
those, 2,437 firms had annual receipts of under $10 million, and an 
additional 47 firms had receipts of between $10 million and 
$24,999,999. Consequently, the Commission estimates that the majority 
of ISP firms are small entities.
Vendors and Equipment Manufacturers
    21. Vendors of Infrastructure Development or ``Network Buildout.'' 
The Commission has not developed a small business size standard 
specifically directed toward manufacturers of network facilities. The 
closest applicable definition of a small entity are the size standards 
under the SBA rules applicable to manufacturers of ``Radio and 
Television Broadcasting and Communications Equipment'' (RTB) and 
``Other Communications Equipment.'' According to the SBA's regulations, 
manufacturers of RTB or other communications equipment must have 750 or 
fewer employees in order to qualify as a small business. The most 
recent available Census Bureau data indicates that there are 1,187 
establishments with fewer than 1,000 employees in the United States 
that manufacture radio and television broadcasting and communications 
equipment, and 271 companies with less than 1,000 employees that 
manufacture other communications equipment. Some of these manufacturers 
might not be independently owned and operated. Consequently, the 
Commission estimates that the majority of the 1,458 internal 
connections manufacturers are small.
    22. Telephone Apparatus Manufacturing. The Census Bureau defines 
this category as follows: ``This industry comprises establishments 
primarily engaged in manufacturing wire telephone and data 
communications equipment. These products may be standalone or board-
level components of a larger system. Examples of products made by these 
establishments are central office switching equipment, cordless 
telephones (except cellular), PBX equipment, telephones, telephone 
answering machines, LAN modems, multi-user modems, and other data 
communications equipment, such as bridges, routers, and gateways.'' The 
SBA has developed a small business size standard for Telephone 
Apparatus Manufacturing, which is: All such firms having 1,000 or fewer 
employees. According to Census Bureau data for 2002, there were a total 
of 518 establishments in this category that operated for the entire 
year. Of this total, 511 had employment of under 1,000, and an 
additional 7 had employment of 1,000 to 2,499. Thus, under this size 
standard, the majority of firms can be considered small.
    23. Radio and Television Broadcasting and Wireless Communications 
Equipment Manufacturing. The Census Bureau defines this category as 
follows: ``This industry comprises establishments primarily engaged in 
manufacturing radio and television broadcast and wireless 
communications equipment. Examples of products made by these 
establishments are: transmitting and receiving antennas, cable 
television equipment, GPS equipment, pagers, cellular phones, mobile 
communications equipment, and radio and television studio and 
broadcasting equipment.'' The SBA has developed a small business size 
standard for Radio and Television Broadcasting and Wireless 
Communications Equipment Manufacturing, which is: All such firms having 
750 or fewer employees. According to Census Bureau data for 2002, there 
were a total of 1,041 establishments in this category that operated for 
the entire year. Of this total, 1,010 had employment of under 500, and 
an additional 13 had employment of 500 to 999. Thus, under this size 
standard, the majority of firms can be considered small.
    24. Other Communications Equipment Manufacturing. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in manufacturing communications 
equipment (except telephone apparatus, and radio and television 
broadcast, and wireless communications equipment).'' The SBA has 
developed a small business size standard for Other Communications 
Equipment Manufacturing, which is: All such firms having 750 or fewer 
employees. According to Census Bureau data for 2002, there were a total 
of 503 establishments in this category that operated for the entire 
year. Of this total, 493 had employment of under 500, and an additional 
7 had employment of 500 to 999. Thus, under

[[Page 48260]]

this size standard, the majority of firms can be considered small.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    25. The reporting and recordkeeping requirements in this NPRM could 
have an impact on both small and large entities. However, even though 
the impact may be more financially burdensome for smaller entities, the 
Commission believes the impact of such requirements is outweighed by 
the benefit of providing the additional support necessary to make 
broadband available for rural health care providers to provide health 
care to rural and remote areas, and to make broadband access rates for 
public and non-profit rural health care providers affordable. Further, 
these requirements are necessary to ensure that the statutory goals of 
section 254 of the Telecommunications Act of 1996 are met without 
waste, fraud, or abuse.
    26. The Commission proposes an application and selection process 
for the health infrastructure program in which eligible health care 
providers may seek funding for qualified projects through a streamlined 
process. The Commission seeks comment on each step of the process 
described below. To the extent a commenter disagrees with a particular 
aspect of the proposed process, the Commission asks them to identify 
that with specificity and propose an alternative.
    27. Initial Application Phase. First, applicants may request 
consideration for funding by completing a user friendly online 
application available on a Web site to be developed and maintained by 
USAC. Applications would be accepted during the first quarter of each 
funding year (July 1 to September 30). As part of this initial 
application phase, an applicant would be required to (1) verify that 
either there is no available broadband infrastructure or the existing 
available broadband infrastructure is insufficient for health IT needed 
to improve and provide health care delivery, (2) provide letters of 
agency for each of the eligible health care providers in the 
applicant's proposed network, (3) include a preliminary budget and an 
infrastructure funding request, not in excess of the per-project caps 
discussed below, and (4) certify that it will comply with all program 
requirements if selected for funding.
    28. Project Selection Phase. The Commission proposes that 
applications submitted for funding be made publicly available on USAC's 
Web site. Publicly available information would include the names of the 
parties seeking funding, their geographic location, and information 
filed by the applicants to corroborate that sufficient broadband 
infrastructure is unavailable or insufficient in their geographic 
location. During the second quarter of each funding year (October 1 to 
December 31), USAC would review all applications received during the 
initial application phase. After applications have been reviewed, and 
prioritization rules have been applied, USAC would notify selected 
participants of their project eligibility status. This would normally 
occur during the third quarter of each funding year (January 1 to March 
30). After a participant is notified of project eligibility, it may 
proceed with the project commitment phase per the requirements set 
forth below. During the project commitment phase, participants may 
receive funding from the health infrastructure program for a portion of 
the reasonable administrative expenses incurred in connection with the 
project, subject to certain caps.
    29. Project Commitment Phase. Within 90 days after a participant in 
the health infrastructure program is notified that, based on its 
initial application, the participant's project is eligible for funding, 
the participants would complete and submit all application materials 
and comply with all program requirements, including the following: (1) 
Certification of the availability of funds for not less than 15 percent 
of all eligible costs; (2) a project schedule; and (3) a detailed 
project description. The project schedule would identify key milestones 
that the project will accomplish and the date that the tasks would be 
achieved. The detailed project description would describe the network, 
identify the proposed technology, demonstrates that the project is 
technically feasible and reasonably scalable, and describe each 
specific development phase of the project (e.g., network design phase, 
construction period, deployment, maintenance period).
    30. In addition, prior to receiving a funding commitment letter 
from USAC, participants would be required to submit a sustainability 
report demonstrating that the costs of network operations and 
maintenance will be sustainable after such period of support from the 
health infrastructure program. If an infrastructure project includes 
bandwidth that may be used by entities that are not eligible health 
care providers, the Commission will consider the extra bandwidth to be 
excess capacity and would require the participant to file excess 
capacity disclosures. The Commission would require the excess capacity 
disclosures to: (1) Identify users of the excess capacity and delineate 
how they are paying for their portion of the costs, and (2) describe 
generally agreements made between the health care network portion of 
the project and the community use portion of the project (e.g., cost 
allocation, sharing agreements, maintenance and access, ownership).
    31. We also propose adopting a rule that would require health care 
providers to obtain certain cost information from vendors. Vendors 
would be required to make certain certifications with respect to the 
construction and deployment of the dedicated network. They would also 
be required to provide participants with a depreciation schedule 
showing the useful life of fixed assets, as well as maintain books and 
records that support all cost allocations.
    32. USAC would review each step of the project commitment phase to 
confirm the participant's compliance with all data and information 
requirements and compliance with program rules. USAC would conduct 
technical and financial review of all proposed projects to ensure that 
they comply with the Commission's rules. USAC may request additional 
information from applicants and participants if deemed necessary to 
substantiate, explain or clarify any materials submitted as part of the 
funding process.
    33. Health infrastructure program participants would be required to 
submit quarterly reports that provide information regarding the 
following: (1) Attaining project milestones, (2) status of obtaining 15 
percent minimum match, (3) status of the competitive bidding process, 
(4) details on how the supported network has complied with HHS health 
IT initiatives, and (6) performance measures. The project milestones 
would be updated at the time that quarterly reports are filed by the 
participants, noting which project milestones have been met and any 
delays or progress in meeting other milestones. The Commission believes 
that requiring participants in the health infrastructure program to 
establish a schedule and report on project milestones will assist USAC 
and the Commission in assessing a participant's progress in completing 
project buildout, and will reduce waste, fraud, and abuse.
    34. The Commission also proposes several reporting and 
recordkeeping requirements for the health broadband services program 
and the health infrastructure program. The Commission proposes that 
health care providers that receive support under the health broadband 
services program or

[[Page 48261]]

the health infrastructure program would be required to complete a 
certification that identifies the speed of any connection supported by 
the Rural Health Care Support Mechanism. They would also indicate, as a 
result of broadband access, the type of health IT applications they 
were using and the frequency with which they used they used the 
applications. The Commission also proposes the retention of the 
existing competitive bidding requirements for both programs, because 
the Commission believes that competitive bidding has been successful 
regarding the prevention of waste, fraud, and abuse in the Rural Health 
Care Support Mechanism.
    35. Finally, the current rules establish a five year document 
retention period for health care providers. The Commission recommends 
that it adopt the same requirement for service providers and non-
telecommunications carriers. The Commission believes that it should 
clarify that the documents would include all records related to the 
application for, receipt and delivery of discounted services. The 
Commission also seeks comment on whether it should adopt any additional 
rules regarding recordkeeping requirements.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    36. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its 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.
    37. In this NPRM, the Commission makes a number of proposals that 
may have an economic impact on small entities that participate in the 
universal service support mechanism for rural health care providers. 
Specifically, as addressed above, the Commission seeks comment on: (1) 
Establishing a broadband infrastructure program (the ``health 
infrastructure program'') for eligible health care providers; (2) 
establishing a broadband services access program (the ``health 
broadband services program'') for eligible health care providers; (3) 
expanding the number of entities eligible for discounts by broadening 
the interpretation of the definition of eligible health care providers 
to include off-site data centers and administrative offices, as well as 
skilled nursing facilities and renal dialysis centers; and (4) 
establishing performance measures for eligible health care providers 
receiving broadband support. If adopted, these proposals will change 
the size of the overall pool of eligible applicants that may receive 
universal service support under the Rural Health Care Support 
Mechanism, as well as affect the amount of support that eligible 
entities may receive.
    38. In seeking to minimize the burdens imposed on small entities 
where doing so does not compromise the goals of the universal service 
mechanism, the Commission has invited comment on how these proposals 
might be made less burdensome for small entities. The Commission again 
invites commenters to discuss the benefits of such changes on small 
entities and whether these benefits are outweighed by resulting costs 
to rural health care providers that might also be small entities. The 
Commission anticipates that the record will reflect whether the overall 
benefits of such programmatic changes would outweigh the burdens on 
small entities, and if so, suggest alternative ways in which the 
Commission could lessen the overall burdens on small entities. The 
Commission encourages small entities to comment.
    39. The Commission has taken the following steps to minimize the 
impact on small entities. First, to ease the administrative burden on 
applicants, the Commission proposes an approach that simplifies the 
application process for rural health care providers. The Commission 
believes that this will help ensure that applicants, including small 
entities, will not be deterred from applying for support due to 
administrative burdens. Applicants for support from the health 
infrastructure program may choose between three methods in order to 
demonstrate the need requirement for infrastructure funding. An 
applicant may choose a method that would not require preparation by a 
third party. The Commission also proposes that participants in the 
health infrastructure program may receive funding for a portion of 
their administrative expenses in order to ease the financial burden of 
compliance with the various reporting requirements associated with 
participation in the health infrastructure program.
    40. The Commission also recognizes that participants in the health 
infrastructure program, particularly smaller projects, or projects that 
are subject to mandatory, State or local procurement rules, may find 
the proposed RFP preparation and distribution requirements to be overly 
burdensome. Accordingly, the Commission has included an exception for 
such projects that would exclude infrastructure projects of $100,000 or 
less or projects that are subject to mandatory, State or local 
procurement rules. However, such projects would still be required to 
complete a request for services on a Form 465 and posting this request 
on USAC's Web page for a period of at least 28 days before selecting a 
vendor.
    41. Next, in order to encourage participation in the health 
broadband services program, the Commission proposes a simplified 
application process that clearly identifies the level of support that 
providers can reasonably expect to receive. The proposed 50 percent 
flat discount promotes prudent business decisions thereby assisting 
rural health care providers in planning for their Health IT needs. 
Moreover, a flat rate discount is easy to administer and consistent 
with section 254(b)(5), which requires ``a specific, sufficient, and 
predictable mechanism * * * because it limits the amount of support 
that each health care provider may receive per month to a reasonable 
level.'' The Commission proposes to simplify the forms process used in 
the application process.
6. Federal Rules That May Duplicate, or Conflict With Proposed Rules
    42. None.

B. Paperwork Reduction Act Analysis

    43. This document contains proposed [new or modified] information 
collection requirements. The Commission, as part of its continuing 
effort to reduce paperwork burdens, invites the general public and the 
Office of Management and Budget (OMB) to comment on the information 
collection requirements contained in this document, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. In addition, 
pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 
107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment on how we 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.

C. Ex Parte Presentations

    44. The rulemaking this Notice initiates shall be treated as a 
``permit-but-disclose'' proceeding in accordance

[[Page 48262]]

with the Commission's ex parte rules. Persons making oral ex parte 
presentations are reminded that memoranda summarizing the presentations 
must contain summaries of the substance of the presentations and not 
merely a listing of the subjects discussed. More than a one- or two-
sentence description of the views and arguments presented generally is 
required. Other requirements pertaining to oral and written 
presentations are set forth in Sec.  1.1206(b) of the Commission's 
rules.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Reporting and 
recordkeeping requirements, Telecommunications, Telephone.

Marlene H. Dortch,
Secretary, Federal Communications Commission.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

Subpart G--Universal Service Support for Health Care Providers

    1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, and 254 unless 
otherwise noted.

    2. Add Sec.  54.600 and an undesignated center heading to subpart G 
to read as follows:

Defined Terms and Eligibility


Sec.  54.600  Index of defined terms.

    The following definitions apply to this subpart.
    Administrative office is defined in Sec.  54.601.
    Broadband access services is defined in Sec.  54.631(b).
    Capital lease (for purposes of the health infrastructure program) 
is defined in Sec.  54.659(c).
    Data centers is defined in Sec.  54.601(c).
    Eligible sources (for purposes of the health infrastructure 
program) is defined in Sec.  54.656(c).
    Evergreen status or evergreen contract (for purposes of the health 
broadband services program) is defined in Sec.  54.641(b).
    Excess capacity (for purposes of the health infrastructure program) 
is defined in Sec.  54.662.
    HCP consortium leader is defined in Sec.  54.652(c).
    Health broadband services program is defined in Sec.  54.602(c).
    Health care provider is defined in Sec.  54.601(a)(2).
    Health infrastructure program is defined in Sec.  54.602(b).
    Health IT is defined in Sec.  54.658(d)(2).
    Ineligible costs (for purposes of the health infrastructure 
program) is defined in Sec.  54.655(a).
    Ineligible sources (for purposes of the health infrastructure 
program) is defined in Sec.  54.656(d).
    Installation charges is defined in Sec.  54.633.
    IRU (for purposes of the health infrastructure program) is defined 
in Sec.  54.659(b).
    Maximum supported distance (for purposes of the telecommunications 
program) is defined in Sec.  54.625(a).
    Minimum broadband speed for purposes of the health infrastructure 
program is defined in Sec.  54.651(c), and for purposes of the health 
broadband services program is defined in Sec.  54.631(e).
    Minimum contribution (for purposes of the health infrastructure 
program) is defined in Sec.  54.656(a).
    NTIA is defined in Sec.  54.651(a)(2).
    Renal dialysis centers is defined in Sec.  54.601(e).
    Renal dialysis facilities is defined in Sec.  54.601(e).
    Rural health care provider is defined in Sec.  54.601(a)(3).
    Rural rate (for purposes of the telecommunications program) is 
defined in Sec. Sec.  54.607(a) and 54.607(b).
    Selected participants (for purposes of the health infrastructure 
program) is defined in Sec.  54.650(c)(2).
    Skilled nursing facilities is defined in Sec.  54.601(d).
    Standard urban distance or SUD (for purposes of the 
telecommunications program) is defined in Sec.  54.605(c).
    Telecommunications program is defined in Sec.  54.602(a).
    Urban rate (for purposes of the telecommunications program) is 
defined in Sec. Sec.  54.605(a) and 54.605(b).
    3. Section 54.601 is revised to read as follows:


Sec.  54.601  Eligibility.

    (a) Eligible health care providers. (1) Only an entity that is 
either a public or non-profit health care provider, as defined in this 
section, shall be eligible to receive supported services under this 
subpart.
    (2) For purposes of this subpart, a ``health care provider'' is any 
public or non-profit:
    (i) Post-secondary educational institution offering health care 
instruction, including a teaching hospital or medical school;
    (ii) Community health center or health center providing health care 
to migrants;
    (iii) Local health department or agency;
    (iv) Community mental health center;
    (v) Not-for-profit hospital;
    (vi) Rural health clinic; or
    (vii) Consortium of health care providers consisting of one or more 
entities described in paragraphs (a)(2)(i) through (vi) of this 
section.
    (3) Rural health care providers. For purposes of this subpart, a 
``rural health care provider'' is an eligible health care provider 
located in a rural area, as that term is defined for purposes of the 
rural health care universal service support mechanism in Sec.  54.5 of 
this part.
    (i) Any health care provider that was located in a rural area under 
the definition used by the Commission prior to July 1, 2005, and that 
had received a funding commitment from USAC since 1998, remains 
eligible for support under this subpart through the funding year ending 
on June 30, 2011.
    (ii) [Reserved]
    (4) Per location determination. Each separate site or location of a 
health care provider shall be considered an individual health care 
provider for purposes of calculating and limiting support under this 
subpart.
    (b) Administrative offices. As used in this subpart, an 
``administrative office'' means a facility that does not provide hands-
on delivery of patient care, but performs support functions that are 
critical to the provision of clinical care by eligible health care 
providers. Administrative offices qualify as part of an eligible health 
care provider if they are located on the main campus of an eligible 
health care provider listed in paragraph (a) of this section, or they 
are located off-site and comply with the following provisions:
    (1) The off-site administrative office is at least 51 percent owned 
or controlled by an eligible health care provider listed in paragraph 
(a) of this section. For purposes of this paragraph, ``control'' of an 
administrative office is presumed to exist if one or more eligible 
health care providers listed in paragraph (a) of this section, directly 
or indirectly, own, control, or hold the power to vote or proxies for 
at least 51 percent of the voting rights or governance right of the 
entity that owns the administrative offices.
    (2) Eligible health care providers seeking support for off-site 
administrative offices must certify that the administrative office is 
used primarily for performing services that are integral to the 
eligible health care provider's provision of health care.

[[Page 48263]]

    (c) Data centers. As used in this subpart, a ``data center'' means 
a facility that serves as a centralized repository for the storage, 
management, and dissemination of an eligible health care provider's 
computer systems, associated components, and data. Data centers qualify 
as part of an eligible health care provider if they are located on the 
main campus of an eligible health care provider listed in paragraph (a) 
of this section, or they are located off-site and comply with the 
following provisions:
    (1) The off-site data center is at least 51 percent owned or 
controlled by an eligible health care provider listed in paragraph (a) 
of this section. For purposes of this paragraph, ``control'' of a data 
center is presumed to exist if one or more eligible health care 
providers listed in paragraph (a) of this section, directly or 
indirectly, own, control, or hold the power to vote or proxies for at 
least 51 percent of the voting rights or governance right of the entity 
that owns the data center.
    (2) Eligible health care providers seeking support for off-site 
data centers must certify that the data center is used primarily for 
performing services that are integral to the eligible health care 
provider's provision of health care.
    (d) Skilled nursing facilities. As used in this subpart, a 
``skilled nursing facility'' means a facility that primarily provides 
post-acute services that are traditionally provided at not-for-profit 
hospitals, including the management, observation, and evaluation of 
patient care. Public or non-profit skilled nursing facilities qualify 
as eligible health care providers as not-for-profit hospitals under 
paragraph (a)(5) of this section, provided that the facility primarily 
provides (for at least 51 percent of its total beds) services that are 
recognized as skilled nursing care by the Centers for Medicare and 
Medicaid Services.
    (e) Renal dialysis centers and facilities. As used in this subpart, 
a ``renal dialysis center'' means a hospital unit that is approved by 
the Centers for Medicare and Medicaid Services (CMS) to furnish the 
full spectrum of diagnostic, therapeutic, and rehabilitative services 
required for the care of End Stage Renal Disease (ESRD) dialysis 
patients (including both inpatient and outpatient dialysis services). 
As used in this subpart, a ``renal dialysis facility'' is a unit that 
is approved by CMS to furnish dialysis services directly to ESRD 
patients. Public or non-profit renal dialysis centers or facilities 
qualify as eligible health care providers as not-for-profit hospitals 
under paragraph (a)(5) of this section, provided that the facility or 
center seeking support certifies that, over the 12-month period 
preceding the date of application for support, the facility or center 
provided life preserving ESRD treatment to at least 51 percent of its 
patients.
    (f) Consortia. (1) An eligible health care provider may join a 
consortium with other eligible health care providers; with schools, 
libraries, and library consortia eligible under Subpart F; and with 
public sector (governmental) entities to order telecommunications 
services. With one exception, eligible health care providers 
participating in consortia with ineligible private sector members shall 
not be eligible for supported services under this subpart. A consortium 
may include ineligible private sector entities if such consortium is 
only receiving services at tariffed rates or at market rates from those 
providers who do not file tariffs.
    (2) For consortia, universal service support under this subpart 
shall apply only to the portion of eligible services used by an 
eligible health care provider.
    4. Add Sec.  54.602 to read as follows:


Sec.  54.602  Eligible services.

    (a) Telecommunications program. Rural health care providers may 
request support for the difference, if any, between the urban and rural 
rates for telecommunications services, subject to the provisions and 
limitations beginning at Sec.  54.604. This support is referred to as 
the telecommunications program.
    (b) Health infrastructure program. Eligible health care providers 
may request support for broadband infrastructure, subject to the 
provisions and limitations beginning at Sec.  54.650. This support is 
referred to as the health infrastructure program.
    (c) Health broadband services program. Rural health care providers 
may request support for the recurring costs for broadband access 
services, subject to the provisions and limitations beginning at Sec.  
54.631. This support is referred to as the health broadband services 
program.
    (d) Allocation of discounts. An eligible health care provider that 
engages in eligible and ineligible activities or that collocates with 
an entity that provides ineligible services shall allocate eligible and 
ineligible activities in order to receive a prorated discount (or 
prorated support) for eligible activities. Health care providers shall 
choose a method of cost allocation that is based on objective criteria 
and reasonably reflects the eligible usage of the facilities.
    (e) Health care purposes. Telecommunications and broadband access 
services for which eligible health care providers receive support from 
the telecommunications program, the health infrastructure program or 
the health broadband services program, must be reasonably related to 
the provision of health care services by the eligible health care 
provider.
    5. Section 54.603 is revised to read as follows:


Sec.  54.603  Competitive bid and certification requirements.

    (a) Competitive bidding requirements. Each eligible health care 
provider shall participate in a competitive bidding process pursuant to 
the requirements established in this section and any additional and 
applicable State, local, or other procurement requirements to select 
the telecommunications carriers or other services providers that will 
provide services eligible for universal service support under this 
subpart.
    (b) Additional bidding requirements for health infrastructure 
program. In addition to the requirements in paragraph (a) of this 
section, eligible health care providers seeking support from the health 
infrastructure program for projects of $100,000 or more that are not 
subject to mandatory State or local procurement rules, must (prior to 
selecting a service provider) prepare a detailed request for proposal 
(RFP) that provides sufficient information to define the scope of the 
project. Such RFP must be distributed in a method likely to garner 
attention from interested service providers. Examples include: Post a 
notice of the RFP in trade journals or newspaper advertisements, send 
the RFP to known or potential service providers, include the RFP on the 
health care provider's Web page or other Internet sites, or follow 
other customary and reasonable solicitation practices used in 
competitive bidding for infrastructure projects.
    (c) Posting of FCC Form 465; health care provider certification 
requirements.
    (1) An eligible health care provider seeking to receive services 
eligible for universal service support under this subpart (whether 
under the telecommunications program, the health broadband services 
program, or the health infrastructure program) shall submit a completed 
FCC Form 465 to the Administrator. FCC Form 465 shall be signed by the 
person authorized to order telecommunications or information services 
for the health care provider and shall include, at a minimum, that 
person's certification under oath that:
    (i) The requester is a public or not-for-profit entity that falls 
within one of the categories set forth in the definition of

[[Page 48264]]

health care provider, listed in Sec.  54.601(a), 54.601(b) or 
54.601(c);
    (ii) The requester is physically located in a rural area, unless 
the health care provider is requesting services eligible for support 
under the health infrastructure program;
    (iii) If the requester is seeking services eligible for support 
under the health infrastructure program, that the requester has 
complied with the initial application requirements listed in Sec.  
54.650(b);
    (iv) The requested service or services will be used solely for 
purposes reasonably related to the provision of health care services or 
instruction that the health care provider is legally authorized to 
provide under the law in the State in which such health care services 
or instruction are provided;
    (v) The requested service or services will not be sold, resold or 
transferred in consideration of money or any other thing of value;
    (vi) If the service or services are being purchased as part of an 
aggregated purchase with other entities or individuals, the full 
details of any such arrangement, including the identities of all co-
purchasers and the portion of the service or services being purchased 
by the health care provider; and
    (vii) The requester is required to comply with the performance 
measures listed in Sec.  54.677.
    (2) The Administrator shall post each FCC Form 465 that it receives 
from an eligible health care provider on its Rural Health Care Division 
Web site designated for this purpose.
    (3) After posting an eligible health care provider's FCC Form 465 
on the Rural Health Care Division Web site, the Administrator shall 
send confirmation of the posting to the entity requesting services. The 
health care provider shall wait at least 28 days from the date on which 
its FCC Form 465 is posted on the Web site before selecting a service 
provider(s). The confirmation from the Administrator shall include the 
date after which the requester may sign a contract with its chosen 
service provider(s).
    (4) Selecting a service provider. In selecting a service provider 
for services eligible for universal service support under this subpart, 
a health care provider shall consider all bids submitted by service 
providers and select the most cost-effective alternative. After 
selecting a service provider for services eligible for support under 
this subpart: The health care provider shall certify to the 
Administrator that the health care provider is selecting the most cost-
effective method of providing the requested service or services, where 
the most cost-effective method of providing a service is defined as the 
method that costs the least after consideration of the features, 
quality of transmission, reliability, and other factors that the health 
care provider deems relevant to choosing a method of providing the 
required health care services; and The health care provider shall 
submit to the Administrator paper copies of the responses or bids 
received in response to the requested services.
    6. Add an undesignated centered heading ``TELECOMMUNICATIONS 
PROGRAM'' above Sec.  54.604 subpart G.
    7. Section 54.604 is revised to read as follows:


Sec.  54.604  Telecommunications services.

    (a) Telecommunications services. Any telecommunications service 
that is the subject of a properly completed bona fide request by a 
rural health care provider shall be eligible for universal service 
support for the difference, if any, between the urban rate and the 
rural rate, subject to the limitations described in this paragraph. The 
length of a supported telecommunications service under the 
telecommunications program may not exceed the distance between the 
health care provider and the point farthest from that provider on the 
jurisdictional boundary of the largest city in a State as defined in 
Sec.  54.625(a).
    (b) Existing contracts. A signed contract for services eligible for 
telecommunications program support pursuant to this subpart between an 
eligible health care provider as defined under Sec.  54.601 and a 
telecommunications carrier shall be exempt from the competitive bid 
requirements set forth in Sec.  54.603(a) as follows:
    (1) A contract signed on or before July 10, 1997 is exempt from the 
competitive bid requirement for the life of the contract.
    (2) [Reserved]
    (c) For rural health care providers that take service under or 
pursuant to a master contract, as defined in Sec.  54.500(f), the date 
of execution of that master contract represents the applicable date for 
purposes of determining whether and to what extent the rural health 
care provider is exempt from the competitive bid requirements.
    (d) The competitive bid system will be deemed to be operational 
when the Administrator is ready to accept and post FCC Form 465 from 
rural health care providers on a Web site and that Web site is 
available for use by telecommunications carriers.
    8. Section 54.605 is amended by revising paragraphs (a) and (c), to 
read as follows:


Sec.  54.605  Determining the urban rate.

    (a) If a rural health care provider requests support for an 
eligible service to be funded from the telecommunications program that 
is to be provided over a distance that is less than or equal to the 
standard urban distance, as defined in paragraph (c) of this section, 
for the State in which it is located, the ``urban rate'' for that 
service shall be a rate no higher than the highest tariffed or 
publicly-available rate charged to a commercial customer for a 
functionally similar service in any city with a population of 50,000 or 
more in that State, calculated as if it were provided between two 
points within the city.
* * * * *
    (c) The ``standard urban distance'' (or ``SUD'') for a State is the 
average of the longest diameters of all cities with a population of 
50,000 or more within the State.
* * * * *
    9. Section 54.609 is amended by revising paragraphs (a) 
introductory text, (a)(1)(iv), (a)(3), (d)(1), (d)(2), and (e)(1) to 
read as follows:


Sec.  54.609  Calculating support.

    (a) For a public or non-profit rural health care provider, the 
amount of universal service support provided for an eligible service to 
be funded from the telecommunications program shall be the difference, 
if any, between the urban rate and the rural rate charged for the 
service, as defined herein. In addition, all reasonable charges that 
are incurred by taking such services, such as State and Federal taxes 
shall be eligible for universal service support. Charges for 
termination liability, penalty surcharges, and other charges not 
included in the cost of taking such service shall not be covered by the 
universal service support mechanisms. Rural health care providers may 
choose one of the following two support options.
    (1) * * *
    (iv) A telecommunications carrier that provides telecommunications 
service to a rural health care provider participating in an eligible 
health care consortium, and the consortium must establish the actual 
distance-based charges for the health care provider's portion of the 
shared telecommunications services.
* * * * *
    (3) Base rate support-consortium. A telecommunications carrier that 
provides telecommunications service to a rural health care provider 
participating in an eligible health care consortium, and the consortium 
must

[[Page 48265]]

establish the applicable rural base rates for telecommunications 
service for the health care provider's portion of the shared 
telecommunications services, as well as the applicable urban base rates 
for the telecommunications service.
* * * * *
    (d) * * *
    (1) Rural public and non-profit health care providers may receive 
support for rural satellite services under the telecommunications 
program, even when another functionally similar terrestrial-based 
service is available in that rural area. Support for satellite services 
shall be capped at the amount the rural health care provider would have 
received if they purchased a functionally similar terrestrial-based 
alternative.
    (2) Rural health care providers seeking support from the 
telecommunications program for satellite services shall provide to the 
Administrator with the Form 466, documentation of the urban and rural 
rates for the terrestrial-based alternatives.
* * * * *
    (e) * * *
    (1) Calculation of support. The support amount allowed under the 
telecommunications program for satellite services provided to mobile 
rural health care providers is calculated by comparing the rate for the 
satellite service to the rate for an urban wireline service with a 
similar bandwidth. Discounts for satellite services shall not be capped 
at an amount of a functionally similar wireline alternative. Where the 
mobile rural health care provider provides service in more than one 
State, the calculation shall be based on the urban areas in each State, 
proportional to the number of locations served in each State.
* * * * *
    10. Section 54.611 is revised to read as follows:


Sec.  54.611  Election to offset support against annual USF 
contribution.

    (a) A telecommunications carrier providing services eligible for 
telecommunications program support under this subpart to eligible 
health care providers may, at the election of the carrier: Treat the 
amount eligible for support under this subpart as an offset against the 
carrier's universal service support obligation for the year in which 
the costs for providing eligible services were incurred; or receive 
direct reimbursement from the Administrator for that amount.
    (b) Carriers shall elect in January of each year the method by 
which they will be reimbursed and shall remain subject to that method 
for the duration of the calendar year. Any support amount that is owed 
a carrier that fails to remit its monthly universal service 
contribution obligation, however, shall first be applied as an offset 
to that carrier's contribution obligation. Such a carrier shall remain 
subject to the offsetting method for the remainder of the calendar year 
in which it failed to remit their monthly universal service obligation. 
A carrier that continues to be in arrears on its universal service 
contribution obligations at the end of a calendar year shall remain 
subject to the offsetting method for the next calendar year.
    (c) If a telecommunications carrier providing services eligible for 
support from the telecommunications program elects to treat that 
support amount as an offset against the carrier's universal service 
contribution obligation and the total amount of support owed to the 
carrier exceeds its universal service obligation, calculated on an 
annual basis, the carrier shall receive a direct reimbursement in the 
amount of the difference. Any such reimbursement due a carrier shall be 
provided to that carrier no later than the end of the first quarter of 
the calendar year following the year in which the costs were incurred 
and the offset against the carrier's universal service obligation was 
applied.
    11. Section 54.613 is amended by revising paragraph (b) to read as 
follows:


Sec.  54.613  Limitations on supported services for rural health care 
providers.

* * * * *
    (b) This section shall not affect a rural health care provider's 
ability to obtain services supported under the health broadband 
services program or the health infrastructure program, provided that 
eligible health care providers that seek support for bundled services 
that include basic telecommunications service supported under the 
health broadband services program may not also request support from the 
telecommunications program for the same basic telecommunications 
service.
    12. Section 54.615 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec.  54.615  Obtaining services.

* * * * *
    (b) Receiving supported rate. Upon receiving a bona fide request, 
as defined in paragraph (c) of this section, from a rural health care 
provider for a telecommunications service eligible for support under 
the telecommunications program, a telecommunications carrier shall 
provide the service at a rate no higher than the urban rate, as defined 
in Sec.  54.605, subject to the limitations set forth in this Subpart.
    (c) Bona fide request. In order to receive services eligible for 
support under the telecommunications program, an eligible health care 
provider must submit a request for services to the telecommunications 
carrier, signed by an authorized officer of the health care provider, 
and shall include that person's certification under oath that:
    (1) The requester is a public or non-profit entity that falls 
within one of the seven categories set forth in the definition of 
health care provider, listed in Sec.  54.601(a);
    (2) The requester is physically located in a rural area; or, if the 
requester is a mobile rural health care provider requesting services 
under Sec.  54.609(e), that the requester has certified that it is 
serving eligible rural areas.
    (3) [Reserved].
    (4) The requested service or services will be used solely for 
purposes reasonably related to the provision of health care services or 
instruction that the health care provider is legally authorized to 
provide under the law in the State in which such health care services 
or instruction are provided;
    (5) The requested service or services will not be sold, resold or 
transferred in consideration of money or any other thing of value;
    (6) If the service or services are being purchased as part of an 
aggregated purchase with other entities or individuals, the full 
details of any such arrangement, including the identities of all co-
purchasers and the portion of the service or services being purchased 
by the health care provider; and
    (7) The requester is selecting the most cost-effective method of 
providing the requested service or services, where the most cost-
effective method of providing a service is defined as the method that 
costs the least after consideration of the features, quality of 
transmission, reliability, and other factors that the health care 
provider deems relevant to choosing a method of providing the required 
health care services.


Sec.  54.617  [Redesignated as Sec.  54.671]

    13. Redesignate Sec.  54.617 as Sec.  54.671.


Sec.  54.619  [Redesignated as Sec.  54.673]

    14. Redesignate Sec.  54.619 as Sec.  54.673.


Sec.  54.621  [Removed]

    15. Remove Sec.  54.621.


Sec.  54.623  [Redesignated as Sec.  54.675]

    16. Redesignate Sec.  54.623 as Sec.  54.675.
    17. Section 54.625 is revised to read as follows:

[[Page 48266]]

Sec.  54.625  Support for telecommunications services beyond the 
maximum supported distance for rural health care providers.

    (a) The maximum support distance for the telecommunications program 
is the distance from the health care provider to the farthest point on 
the jurisdictional boundary of the city in that State with the largest 
population, as calculated by the Administrator.
    (b) An eligible rural health care provider may purchase an eligible 
telecommunications service supported under the telecommunications 
program that is provided over a distance that exceeds the maximum 
supported distance.
    (c) If an eligible rural health care provider purchases an eligible 
telecommunications service supported under the telecommunications 
program that exceeds the maximum supported distance, the health care 
provider must pay the applicable rural rate for the distance that such 
service is carried beyond the maximum supported distance.
    18. Add an undesignated centered heading ``HEALTH BROADBAND 
SERVICES PROGRAM'' below Sec.  54.625 of subpart G.
    19. Add Sec.  54.631 to read as follows:


Sec.  54.631  Eligible services.

    (a) Recurring costs for broadband access services. Subject to the 
provisions of Sec. Sec.  54.631 through 54.641, rural health care 
providers may request support from the health broadband services 
program for 50 percent of the recurring monthly costs for broadband 
access services at the minimum broadband speeds defined below.
    (b) For purposes of this subpart, ``broadband access service'' is 
any advanced telecommunications or information service that enables 
rural health care providers to post their own data, interact with 
stored data, generate new data, or communicate over private dedicated 
networks or the public Internet for the provision of health IT.
    (c) Eligible health care providers that seek support from the 
health broadband services program for broadband access services must 
certify that such services are reasonably related to the provision of 
health IT for the delivery of health care services by the eligible 
health care provider.
    (d) Eligible health care providers that seek support under the 
health broadband services program for telecommunications services may 
not also request support from the telecommunications program for the 
same service.
    (e) For purposes of the health broadband services program, 
``minimum broadband speed'' means 4 Mbps.
    20. Add Sec.  54.633 to read as follows:


Sec.  54.633  Installation charges and other non-recurring costs.

    (a) Rural health care providers may request one-time support from 
the health broadband services program for 50 percent of the reasonable 
and customary installation charges for broadband access services. 
``Installation charges'' are defined as charges that are normally 
charged by service providers to commence service, and are not charges 
that are based on an amortization of construction or infrastructure 
costs.
    (b) Except as provided in paragraph (c) of this section, no 
universal service support is available under the health broadband 
services program for the non-recurring costs associated with the 
construction or deployment of broadband infrastructure.
    (c) Rural health care providers may not seek support for non-
recurring charges of $500,000 or more. If non-recurring charges are 
more than $500,000, they must be part of a multi-year contract, and 
must be prorated over a period of at least five years.
    21. Add Sec.  54.635 to read as follows:


Sec.  54.635  Eligible service providers.

    Broadband access services may be provided by a telecommunications 
carrier or other qualified broadband access service provider, provided 
that the health care provider selects the most cost effective option to 
meet its health care needs in accordance with Sec.  54.603.
    22. Add Sec.  54.637 to read as follows:


Sec.  54.637  Competitive bidding requirements.

    Rural health care providers seeking broadband access services to be 
supported by the health broadband services program must comply with the 
competitive bidding and certification requirements set forth in Sec.  
54.603.
    23. Add Sec.  54.639 to read as follows:


Sec.  54.639  Restrictions on satellite services.

    (a) Rural health care providers may seek support for rural 
satellite-based broadband access services under the health broadband 
services program, even when another functionally similar terrestrial-
based service is available in the rural area, subject to the provisions 
of this section.
    (b) Support for satellite services will be capped at the amount of 
support the eligible health care provider would be eligible to receive 
under the health broadband services program if it had purchased such 
service from a functionally similar terrestrial-based alternative.
    (c) Where an eligible health care provider seeks a more expensive 
satellite-based service when a less expensive terrestrial-based 
alternative is available, the health care provider will be responsible 
for the difference between the satellite-based service and the 
terrestrial-based alternative.
    (d) An eligible health care provider seeking support for satellite 
service must submit documentation to the Administrator demonstrating 
that satellite service is the most cost-effective option available to 
meet the provider's health care needs at the same time information is 
submitted pursuant to Sec.  54.603(c)(4).
    24. Add Sec.  54.641 to read as follows:


Sec.  54.641  Multi-year contracts.

    (a) Participants in the health broadband services program are 
permitted to enter into multi-year contracts for recurring broadband 
access services, but may not receive funding commitments from the 
Administrator for more than one funding year at a time.
    (b) Multi-year contracts entered into by a rural health care 
provider after complying with the competitive bid requirements of Sec.  
54.603, are deemed to have ``evergreen'' status. Health care providers 
do not have to rebid for services during the term of a multi-year 
contract with evergreen status. However, health care providers may not 
add services to a multi-year contract or extend the term of a multi-
year contract and retain ``evergreen'' status. Such modifications to a 
multi-year contract are deemed a new request for services, and require 
that the health care provider rebid the services in compliance with the 
provisions of Sec.  54.603 and select the most cost-effective service 
provider.
    (c) All program participants, including those covered by evergreen 
contracts, must submit a request for support each funding year to 
continue receiving funding from the health broadband services program 
for recurring broadband access services. Requests for support each 
funding year are subject to the program funding and prioritization 
rules set forth in Sec.  54.675. Rural health care providers with 
multi-year contracts do not have a priority preference over other rural 
health care providers seeking support from the health broadband 
services program in any funding year.
    25. Add an undesignated centered heading and Sec.  54.650 to read 
as follows:

[[Page 48267]]

Health Infrastructure Program


Sec.  54.650  Obtaining support.

    (a) Subject to the provisions in Sec. Sec.  54.650 through 54.664, 
eligible health care providers may request universal service support to 
fund up to 85 percent of eligible costs for the design, construction 
and deployment of dedicated broadband networks that connect public or 
non-profit health care providers in areas of the country where there is 
no available broadband infrastructure or the existing broadband 
infrastructure is insufficient for health IT needed to improve and 
provide health care delivery. Broadband infrastructure projects may 
include either new facilities or improvements to upgrade existing 
facilities (for example, converting a copper facility to a fiber 
facility capable of broadband delivery). In addition, funding may be 
used to support up to 85 percent of the cost of connecting health care 
networks to Internet2 or National LambdaRail.
    (b) Initial application phase. Eligible health care providers may 
apply for funding under the health infrastructure program by submitting 
an application to the Administrator. Applications will be accepted 
during the first quarter of each funding year (July 1 to September 30). 
As part of this initial application phase, an applicant will be 
required:
    (1) To either verify that either there is no available broadband 
infrastructure, or demonstrate, pursuant to Sec.  54.651, that the 
existing broadband infrastructure is insufficient for health IT needed 
to improve and provide health care delivery;
    (2) To provide letters of agency, as set forth in Sec.  54.652, for 
each of the eligible health care providers in the applicant's proposed 
network, and identify the lead entity that will be responsible for 
completing the application process;
    (3) To include a preliminary budget and an infrastructure funding 
request as set forth in Sec.  54.653; and
    (4) To certify that it will comply with all program requirements if 
selected for funding.
    (c) Project selection phase. (1) Applications submitted for funding 
will be made publicly available on the Administrator's Web site.
    (2) After applications have been reviewed, the Administrator will 
notify those applicants whose projects have been selected in that 
funding year as eligible to participate in the program (``selected 
participants''). After a selected participant is notified of project 
eligibility, it may proceed with the project commitment phase as set 
forth in paragraph (d) of this section.
    (3) Health care providers whose projects are not selected for 
funding in any funding year may apply for funding in subsequent funding 
years.
    (d) Project commitment phase. Selected participants must complete 
and submit all additional materials and comply with all program 
requirements as set forth in Sec. Sec.  54.656 through 54.663. The 
Administrator may request additional information from applicants and 
selected participants if necessary to substantiate, explain or clarify 
any materials submitted as part of the funding process.
    (e) Build-out period. All projects funded by the health 
infrastructure program must be subject to fair and open competitive 
bidding, as provided in Sec.  54.603. The Administrator will review all 
applications and additional information provided by selected 
participants to confirm compliance with the program rules. The 
Administrator will issue funding commitment letters for projects after 
a selected participant has completed all requirements and selected a 
service provider. Selected participants have a period of three funding 
years, commencing with the funding year in which the initial online 
application was submitted pursuant to Sec.  54.650(b), to file all 
forms and supporting documents necessary to receive funding commitment 
letters from the Administrator. Selected participants have a period of 
five funding years, commencing with the funding year on which the 
selected participant receives its first funding commitment letter for 
the project, in which to complete build-out.
    26. Add Sec.  54.651 to read as follows:


Sec.  54.651  Demonstrated need for infrastructure funding.

    (a) Pursuant to Sec.  54.650, applicants seeking funding under the 
health infrastructure program must demonstrate that broadband at the 
minimum broadband speed, as defined in paragraph (c) of this section, 
is unavailable or insufficient in the geographic area where the 
eligible health care providers are to be connected by the proposed 
dedicated network, by using any of the following methods:
    (1) Survey method. Provide a survey of current carrier network 
capabilities in the geographic area, compiled by a preparer qualified 
to make such surveys.
    (i) The survey must provide details as to the identity and 
broadband capabilities of all existing carriers in the proposed network 
area, and discuss and justify the methodology used to make such 
determinations.
    (ii) The survey must be accompanied by a statement of the 
preparer's professional, educational, and business background that make 
the preparer qualified for conducting the survey. The statement should 
include the preparer's prior experience, technical or engineering 
degrees, telecommunications background, and knowledge of methods 
typically employed to perform such surveys.
    (iii) The applicant must also provide a report detailing either 
that there is no available broadband infrastructure, or explaining why 
existing broadband infrastructure would be insufficient for health IT 
needed to provide or improve health care delivery by the eligible 
health care providers that are proposing the infrastructure project.
    (2) Broadband mapping method. (i) Provide copies or linked 
references to recognized broadband mapping studies, such as the 
National Telecommunications and Information Administration (``NTIA'') 
national broadband map, State or local broadband maps, and other 
mapping sources that adequately depict the available broadband in the 
proposed network area.
    (ii) The applicant must also provide a report detailing why 
existing broadband infrastructure would be insufficient for health IT 
needed to provide or improve health care delivery by the by the 
eligible health care providers that are proposing the infrastructure 
project.
    (3) Certification method. Certify that, for a continuous period of 
not less than six months, the health care providers that will 
participate in the proposed dedicated network requested broadband 
access services under the telecommunications program or the health 
broadband services program, at connectivity speeds of not less than the 
minimum broadband speed, and did not receive any proposals from network 
service providers meeting the terms of the requested services.
    (b) All information submitted by applicants to establish that 
broadband is unavailable or insufficient will be subject to review and 
verification by the Administrator.
    (c) For purposes of the health infrastructure program, ``minimum 
broadband speed'' means 10 Mbps.
    27. Add Sec.  54.652 to read as follows:


Sec.  54.652  Letters of agency.

    (a) Pursuant to Sec.  54.650, applicants must identify all eligible 
health care providers on whose behalf funding is being sought, and the 
lead entity that will be responsible for completing the application 
process.

[[Page 48268]]

    (b) The initial application must include a letter of agency from 
each participating eligible health care provider, confirming that the 
health care provider has agreed to participate in the applicant's 
proposed network, and authorizing the lead entity to act as the health 
care provider's agent for completing the application process.
    (c) As used in this section, ``HCP consortium leaders'' means State 
organizations, public entities and non-profits that are not eligible 
health care providers but that serve in an administrative capacity for 
eligible health care providers within a consortium. HCP consortium 
leaders may apply for funding under the health infrastructure program, 
on behalf of eligible health care providers. In doing so, however, HCP 
consortium leaders may not receive any funding from the health 
infrastructure program except as provided in Sec.  54.654(c). The full 
value of any discounts, funding, or other program benefits under the 
health infrastructure program that are secured by an HCP consortium 
leader must be passed on to the eligible health care providers that are 
members of the consortium.
    28. Add Sec.  54.653 to read as follows:


Sec.  54.653  Funding requests and budgets.

    (a) Every applicant's initial application must include a funding 
request, a brief project description, and a detailed budget that 
identifies all costs related to the proposed project. The funding 
request may not exceed 85 percent of the eligible costs identified in 
the budget.
    (b) Budget requirements. (1) The budget must be reasonable, and 
must be based on general pricing information available to the applicant 
from third parties. All material assumptions used in preparing the 
budget must be noted and discussed in narrative form. The budget must 
separately identify the following:
    (i) Eligible non-recurring costs, subject to the limitations set 
forth in Sec.  54.654(a);
    (ii) Eligible network design costs, subject to the limitations set 
forth in Sec.  54.654(b);
    (iii) Eligible administrative expenses, subject to the limitations 
set forth in Sec.  54.654(c);
    (iv) Eligible maintenance costs, subject to the limitations set 
forth in Sec.  54.654(d);
    (v) Eligible NLR or Internet2 membership fees, subject to the 
limitations set forth in Sec.  54.654(e); and
    (vi) All costs that are necessary for completion of the project, 
but that are not eligible for support under the health infrastructure 
program.
    (2) If a budget line item contains both eligible and ineligible 
components, costs should be allocated between the eligible and 
ineligible components.
    (3) Budgets submitted by applicants and selected participants may 
be made publicly available by the Administrator so that other 
prospective applicants may use such information as a basis for 
preparing their own budgets.
    29. Add Sec.  54.654 to read as follows:


Sec.  54.654  Eligible costs.

    (a) Non-recurring costs. The health infrastructure program may 
provide support for the following non-recurring costs for the 
deployment of infrastructure: initial network design studies not in 
excess of the cap identified in Sec.  54.654(b); engineering, materials 
and construction of fiber facilities or other broadband infrastructure; 
and the costs of engineering, furnishing (i.e., as delivered from the 
manufacturers), and installing network equipment.
    (b) Network design. Network design costs are limited to $1 million 
per project or 15 percent of the project's eligible costs, whichever is 
less.
    (c) Administrative expenses. Selected participants may request 
funding under the health infrastructure program for up to 85 percent of 
the reasonable administrative expenses incurred in connection with 
infrastructure projects. Selected participants must submit 
certifications and maintain records confirming the number of hours 
provided by one or more employees for tasks related to the health 
infrastructure program project and that the administrative expense for 
which support is sought is not more than the reasonable costs for the 
amount of time such employee(s) spent on the project. Administrative 
expenses are subject to the following limitations:
    (1) Support for such expenses will be limited to 36 months, 
commencing with the month in which a selected participant has been 
notified by the Administrator that the selected participant's project 
is eligible for funding.
    (2) The rate of support will not exceed $100,000 per year.
    (3) The aggregate amount of support a project may receive for 
administrative expenses shall not exceed 10 percent of the total 
proposed budget for the project.
    (d) Maintenance costs. Selected participants may request funding 
for up to 85 percent of the reasonable, necessary and customary ongoing 
maintenance costs for networks funded by the health infrastructure 
program, subject to the following limitations:
    (1) Support for maintenance costs shall be limited to a period of 
five years from the first funding commitment letter issued for such 
project.
    (2) Selected participants must demonstrate in their sustainability 
plans, as described in Sec.  54.661, that the costs of network 
operations and maintenance will be sustainable after such period of 
support from the health infrastructure program.
    (3) Service agreements for network maintenance will be subject to 
the competitive bidding rules set forth in Sec.  54.603, and may be bid 
either at the time of construction of the network or at a later time.
    (e) National LambdaRail and Internet2. (1) Selected participants 
may request funding under the health infrastructure program for up to 
85 percent of the membership fees for connecting their networks to the 
dedicated nationwide backbones offered by Internet2 or National 
LambdaRail, or their successors.
    (2) Selected participants may either pre-select to connect with 
either Internet2 or National LambdaRail, and seek funding for such 
connection, or may (at their discretion) seek competitive bids from 
National LambdaRail and Internet2 through the normal competitive 
bidding process. If Internet2 or National LambdaRail are pre-selected 
by a selected participant, the costs of connection to such nationwide 
backbone must be reasonable.
    30. Add Sec.  54.655 to read as follows:


Sec.  54.655  Ineligible costs.

    (a) Certification that funds will not be used to pay for ineligible 
costs. The authorized purposes of the health infrastructure program 
include the costs of access to advanced telecommunications services. 
For purposes of the health infrastructure program, ``ineligible costs'' 
are those costs that are not directly related to access or are not 
directly associated with network design, construction, or deployment of 
a dedicated network for eligible health care providers. Selected 
participants are required to certify that support from the health 
infrastructure program will not be used to pay for ineligible costs.
    (b) Examples of ineligible costs. Examples of ineligible costs 
include but are not limited to:
    (1) Personnel costs, including salaries and fringe benefits, except 
for those costs that qualify as administrative expenses, subject to the 
limitations set forth in Sec.  54.654(c).

[[Page 48269]]

    (2) Travel costs, except for travel costs that are reasonable and 
necessary for network design or deployment and that are specifically 
identified and justified as part of a competitive bid for a 
construction project.
    (3) Legal costs.
    (4) Training, except for basic training or instruction directly 
related to and required for broadband network installation and 
associated network operations. For example, costs for training health 
care provider personnel in the use of telemedicine applications are 
ineligible.
    (5) Program administration or technical coordination, except for 
those costs that qualify as administrative expenses, subject to the 
limitations set forth in Sec.  54.654(c).
    (6) Inside wiring or networking equipment, e.g., video/Web 
conferencing equipment and wireless user devices, on health care 
provider premises, except for equipment that terminates a carrier's or 
other provider's transmission facility and any router/switch that is 
directly connected to either the facility or the terminating equipment.
    (7) Computers, including servers, and related hardware, e.g., 
printers, scanners, laptops, unless used exclusively for network 
management.
    (8) Helpdesk equipment and related software, or services.
    (9) Software, unless used for network management, maintenance, or 
other network operations; software development, excluding development 
of software that supports network management, maintenance, and other 
network operations; Web server hosting; and Web site portal 
development.
    (10) Telemedicine applications and software.
    (11) Clinical or medical equipment.
    (12) Electronic records management and expenses.
    (13) Connections to ineligible network participants or sites, e.g., 
for-profit health care providers.
    (14) Costs related to any share of a project that is not allocable 
to the dedicated health care network.
    (15) Administration and marketing costs, e.g., administrative 
costs; supplies and materials; marketing studies, marketing activities, 
or outreach efforts; evaluation and feedback studies, except for those 
costs that qualify as eligible administrative expenses, subject to the 
limitations set forth in Sec.  54.654(c).
    (16) Continuous power source.
    (c) Billing and operational expenses. The health infrastructure 
program will not provide support for billing and operational expenses 
incurred either by a health care provider or its selected vendor. An 
example of billing or operational costs is the expense that service 
providers may charge for allocating costs to each health care provider 
in a project's network.
    31. Add Sec.  54.656 to read as follows:


Sec.  54.656  Minimum participant contribution requirement.

    (a) Minimum participant contribution. The health infrastructure 
program will not pay more than 85 percent of eligible project costs, 
and selected participants are required to pay the remaining amount of 
all eligible project costs (the ``minimum contribution''). Selected 
participants are required to pay all costs that are related to the 
project but that do not qualify as eligible project costs. Selected 
participants must demonstrate that their minimum contribution 
requirement will be met from an eligible source to receive funding from 
the health infrastructure program.
    (b) Evidence of eligible sources for minimum participant 
contribution. Within 90 days after a selected participant has been 
notified that its project is eligible for funding, the selected 
participant must submit to the Administrator letters of assurances: 
Confirming funds from eligible sources to meet the minimum contribution 
requirement, and identifying with specificity the eligible sources of 
funding.
    (c) Eligible sources. The following are ``eligible sources'' for 
meeting the minimum contribution:
    (1) Eligible health care providers;
    (2) State grants, funding, or appropriations;
    (3) Federal funding, grants, loans, or appropriations, but not 
other universal service funding; and
    (4) Other grant funding, including private grants, but not grants 
from ineligible sources.
    (d) Ineligible sources. The following are examples of ``ineligible 
sources'' for meeting the minimum contribution:
    (1) In-kind or implied contributions;
    (2) A local exchange carrier (LEC) or other telecom carrier, 
utility, contractor, consultant, or other service provider;
    (3) For-profit participants; and
    (4) Any other universal service support program.
    32. Add Sec.  54.657 to read as follows:


Sec.  54.657  Project milestones.

    (a) Project schedule. Within 90 days after a selected participant 
has been notified that its project is eligible for funding, the 
selected participant must submit to the Administrator a project 
schedule that identifies the following project milestones:
    (1) Start and end date for network design;
    (2) Start and end date for drafting and posting RFPs;
    (3) Start and end date for selecting vendors and negotiating 
contracts;
    (4) Start date for commencing construction and end date for 
completing construction; and
    (5) Target dates for each health care provider to be connected to 
the network and operational.
    (b) Quarterly updates. Each selected participant must submit to the 
Administrator, on a quarterly basis, an update of the selected 
participant's project schedule, noting which project milestones have 
been met and any progress or unanticipated delays in meeting other 
milestones. In the event a project milestone is not achieved, or there 
is a material deviation from the project schedule, the selected 
participant must provide an explanation in the project schedule update.
    33. Add Sec.  54.658 to read as follows:


Sec.  54.658  Detailed project description.

    (a) Project description. Within 90 days after a selected 
participant has been notified that its project is eligible for funding, 
the selected participant must submit to the Administrator a detailed 
project description that describes the network, identifies the proposed 
technology, demonstrates that the project is technically feasible and 
reasonably scalable, and describes each specific development phase of 
the project (e.g., network design phase, construction period, 
deployment and maintenance period).
    (b) Network coverage. (1) The project description must include the 
identity and location of all network participants, and a network 
diagram.
    (2) The project description must indicate how selected participants 
plan to fully utilize their proposed network to provide health care 
services, and must present a strategy for aggregating the specific 
needs of health care providers within a State or region, including 
providers that serve rural areas. Networks may be limited to a 
particular State or region, but selected participants should describe 
feasible ways in which such networks will connect to a national 
broadband network. The project description should discuss whether the 
proposed network will connect to a national backbone, such as National 
LambdaRail or Internet2.
    (c) Service speeds and scalability. (1) The project description 
must include a discussion of the speeds and services necessary for the 
particular network, and how the minimum broadband speed, as defined in 
Sec.  54.651(c), will be provided.

[[Page 48270]]

    (2) Networks must be designed for the exchange of identifiable 
health information, and capable of meeting transmission speed 
requirements necessary for health care applications to be used by the 
health care providers. To demonstrate their broadband needs, selected 
participants are required to explain and provide reasonable support for 
the type of health care providers that will use the network, the 
bandwidth and speed requirements for such network, and the health care 
services that necessitate broadband connections at the desired speeds.
    (3) The project description must explain how the proposed network 
will be designed to meet the current broadband needs of the network 
members, and must address whether or how the proposed network will be 
scalable to handle projected future demand. As referenced here, 
scalability refers to the ability of a system to accommodate a 
significant growth in the size of the system (i.e., services provided, 
end users served) without the need for substantial redesign.
    (d) Health IT purposes. (1) The project description must specify 
how the dedicated broadband network will be used by eligible health 
care providers for health IT to improve or provide health care 
delivery.
    (2) For purposes of this subpart, ``health IT'' is defined as 
information-driven health practices and the technologies that enable 
them. Health IT includes billing and scheduling systems, e-care, 
electronic health records (EHRs) and telehealth and telemedicine.
    34. Add Sec.  54.659 to read as follows:


Sec.  54.659  Facilities ownership, IRU or capital lease.

    (a) Health care providers seeking funding for infrastructure 
projects under the health infrastructure program must:
    (1) Own the infrastructure facilities funded by the program,
    (2) Have an IRU for such facilities, or
    (3) Have a capital lease.
    (b) IRU. An ``IRU'' is an indefeasible right to use facilities for 
a certain period of time that is commensurate with the remaining useful 
life of the asset. An IRU confers on the grantee the vestiges of 
ownership, and is customarily used in the telecommunications industry. 
An IRU may include maintenance of the fiber/network for the term, where 
vendor is responsible for maintenance and repairs. An IRU must be 
independent of any contract for services or electronics. Costs of 
maintenance and operation of associated electronics can be (and usually 
are) addressed in a separate service agreement.
    (c) Capital lease. A capital lease is a lease of a business asset 
which represents ownership and is reflected on the lessee's balance 
sheet as an asset, and meets one or more of the following criteria: The 
lease term is greater than 75 percent of the property's estimated 
economic life; the lease contains an option to purchase the property 
for less than fair market value; ownership of the property is 
transferred to the lessee at the end of the lease term; or the present 
value of the lease payments exceeds 90 percent of the fair market value 
of the property. If there is doubt regarding a selected participant's 
classification of a particular lease as a capital lease, the selected 
participant may be required to provide an explanation justifying the 
classification of its leasing arrangement as a capital lease.
    35. Add Sec.  54.660 to read as follows:


Sec.  54.660  Standard terms and conditions.

    (a) Construction contracts, IRUs or eligible capital leases entered 
into by health care providers for infrastructure projects receiving 
support from the health infrastructure program must contain the 
provisions set forth in this section.
    (b) Construction contracts. The following provisions must be 
included in all construction contracts:
    (1) Work standards. All work shall conform to identified standards 
and specifications. The vendor shall not use any defective material in 
the performance of the work.
    (2) Withholding of payments. The health care provider may withhold 
money due for any portion of the work which has been rejected by the 
health care provider and which has not been corrected by the service 
provider to the reasonable satisfaction of the health care provider.
    (3) Defects in work. For a period of not less than one year after 
project completion, the service provider shall correct at its expense 
all defects and deficiencies in the work which result from: Labor or 
materials furnished by the service provider, workmanship, or failure to 
follow the plans, drawings, standards, or other specifications made a 
part of the contract.
    (c) IRUs. The following provisions must be included in all 
construction IRUs:
    (1) Term of the agreement. The health care provider is granted an 
exclusive and irrevocable right to use the facility funded by the 
health infrastructure program, for the remainder of facility's useful 
life.
    (2) Beneficial ownership interest. The health care provider 
receives beneficial title and interest or equitable title in the 
facilities funded by the health infrastructure program. Such title 
should include the right to use the facilities, the right to have 
access for repairs, and the right to let others use such facilities.
    (d) Capital leases. The payment structure in a capital lease must 
be reflective of the term of the lease. Leases may not provide for 
payments in advance of the lease term. For example, a ten year lease 
may not provide for an upfront payment of the entire ten year lease 
period.
    (e) Provisions applicable to all contracts. Any construction 
contract, IRU or capital lease for projects receiving support from the 
health infrastructure program must include provisions as follows:
    (1) Laws and regulations. The service provider shall comply with 
all Federal, State and municipal laws, ordinances and regulations 
(including building and construction codes) applicable to the 
performance of the work.
    (2) Environmental protection. The service provider shall comply 
with all applicable Federal, State and municipal environmental laws and 
regulations which relate to environmental protection, inspection and 
monitoring of property and environmental reporting and information 
requirements.
    (3) Performance bonds. For contracts in excess of $150,000, the 
service provider shall deliver a performance bond. For construction 
contracts, performance bonds must be for the construction term of the 
contract plus a period of not less than one year (i.e., the same period 
in which the health care provider may require the service provider to 
remedy defects in the work). For a lease or an IRU, performance bonds 
should be for the entire term of the agreement.
    (4) Indemnification. The service provider agrees to indemnify and 
hold harmless the health care provider from any and all claims, 
actions, or causes of action to the extent the claimed loss or damages 
arises out of the service provider's negligent performance or 
nonperformance of its obligations under the contract.
    (f) Service provider reporting requirements. Selected participants 
in the health infrastructure program must, at or prior to the time of 
selecting a service provider:
    (1) Require the service provider to certify either that:
    (i) The infrastructure project will only involve the construction 
and deployment of the dedicated health care network, and will not 
involve the construction or deployment of

[[Page 48271]]

additional facilities or capacity that will not be part of the 
dedicated network; or
    (ii) The infrastructure project will include both the construction 
and deployment of the dedicated network and the construction and 
deployment of additional facilities or capacity for uses other than the 
dedicated network, but: The cost charged to the dedicated network will 
not exceed fully distributed costs given the use, quality of service, 
term (length of service) and other terms and conditions for use of the 
dedicated facility; and the service provider will pay all costs related 
to the additional facility or capacity.
    (2) Require the service provider to provide a depreciation schedule 
showing the useful life of fixed assets to assist the health care 
providers in determining their network sustainability.
    (3) Require the service provider to maintain books and records that 
support all cost allocations.
    36. Add Sec.  54.661 to read as follows:


Sec.  54.661  Sustainability.

    Prior to receiving funding for infrastructure projects under the 
health infrastructure program, each selected participant must submit to 
the Administrator a sustainability report demonstrating that its 
project is sustainable. Although each selected participant may include 
additional information to demonstrate a project is sustainable, every 
sustainability plan is required to address, at a minimum, the following 
points:
    (a) Principal factors. Discuss each of the principal factors that 
were considered by the selected participant to demonstrate 
sustainability.
    (b) Minimum contribution requirement. Discuss the status of 
obtaining the minimum contribution for eligible project costs. If 
project funding is dependent on appropriations or other special 
conditions, such conditions should be discussed.
    (c) Projected sustainability period. Indicate a reasonable 
sustainability period, which is at least equal to the useful life of 
the funded facility. Although a sustainability period of 10 years is 
generally appropriate, the period of sustainability should be 
commensurate with the investments made from the health infrastructure 
program.
    (d) Terms of membership in the network. Describe generally any 
agreements made (or to be entered into) by network members, e.g., 
participation agreements, memoranda of understanding, usage agreements, 
or other documents. Describe financial and time commitments made by 
proposed members of the network. If the project includes excess 
bandwidth for growth of the network, describe how such excess bandwidth 
will be financed. If the network will include eligible health care 
providers and other network members, describe how fees for joining and 
using the network will be assessed.
    (e) Ownership structure. (1) Explain who will own each material 
element of the network, and arrangements made to ensure continued use 
of such elements by the network members for the duration of the 
sustainability period.
    (2) In the case of a consortium, the legally and financially 
responsible entity designated to own facilities funded by the health 
infrastructure program can be a State organization, public sector 
(governmental) or not-for-profit entity acting as a fiduciary agent for 
eligible health care providers within such consortium. However, title 
to the dedicated network must be held exclusively for the benefit of 
eligible health care providers.
    (f) Sources of future support. If sustainability is dependent on 
fees to be paid by eligible health care providers, then the 
sustainability plan must confirm that the health care providers are 
committed and have the ability to pay such fees. If sustainability is 
dependent on fees to be paid by network members that will use the 
network for health care purposes, but are not eligible health care 
providers under the Commission's rules, then the sustainability plan 
must identify such entities. Alternatively, if sustainability is 
dependent on revenues from excess capacity not related to health care 
purposes, then the sustainability plan must identify the proposed users 
of such excess capacity. If rural health care provider members of the 
network qualify for continued support under the health broadband 
services program, this should be discussed in the sustainability plan.
    (g) Management. Describe the management structure of the network 
for the duration of the sustainability period, and how management costs 
will be funded.
    (h) Excess capacity disclosures. If an infrastructure project 
includes excess capacity, as part of its sustainability plan the 
selected participant must disclose the estimated amount of excess 
capacity and explain how it plans to allocate the cost of the network 
between the network members that are eligible health care providers and 
the members that are not eligible health care providers. In doing so, 
selected participants are required to: Identify non-eligible users of 
such excess capacity and explain what proportion of the network non-
recurring and recurring costs they will bear, and describe all 
agreements made between the eligible health care providers and other 
participants in the network (e.g., cost allocation, facility sharing 
agreements, maintenance and access obligations, ownership rights).
    37. Add Sec.  54.662 to read as follows:


Sec.  54.662  Excess capacity.

    The health infrastructure program will only provide funds for the 
infrastructure costs associated with the eligible health care 
providers' current and anticipated bandwidth requirements. To the 
extent that a deployed network has excess capacity and the eligible 
health care providers seek to share that excess capacity with 
ineligible entities, the ineligible entities must pay an appropriate 
portion of the costs of the network.
    39. Add Sec.  54.663 to read as follows:


Sec.  54.663  Quarterly reporting requirements.

    (a) Selected participants in the health infrastructure program must 
submit quarterly reports that provide information on the following: 
Attaining project milestones; status of meeting the minimum 
contribution requirement; status of the competitive bidding process; 
details on how the supported network has complied with HHS health IT 
guidelines or requirements, such as meaningful use, if applicable; and 
performance measures, as described in Sec.  54.677.
    (b) Such reports must be filed with the Administrator and the 
Commission on a quarterly basis, at such times as determined by the 
Administrator.
    40. Add Sec.  54.664 to read as follows:


Sec.  54.664  Designation of successor projects.

    (a) The Bureau may waive the relevant sections of subpart G of part 
54 of the Commission's rules to the extent waiver may be necessary to 
the sound and efficient administration of the health infrastructure 
program.
    (b) In instances where a selected participant is unable to complete 
its project, the Bureau has authority to designate a successor project. 
Such designation of a successor can be made upon request of the 
selected participant, or on the Bureau's own motion. The Bureau may 
exercise such discretion in instances where a project fails to meet a 
specified milestone, or a selected participant fails to adequately 
notify the Commission of modifications to the project milestone 
deadlines. In selecting a successor project, the Bureau may take into 
consideration the likelihood that the successor will be able, at a

[[Page 48272]]

minimum, to complete the project in a manner that provides new 
broadband infrastructure to the identified region or area.
    (c) The Bureau may revoke funding awarded to any selected 
participant making unapproved material changes to the network design 
plan set forth in the selected participant's detailed project 
description submitted as part of the funding application materials.
    40. Add an undesignated centered heading ``GENERAL PROVISIONS'' 
below Sec.  54.664 of subpart G.
    41. Amend newly redesignated Sec.  54.671 by revising paragraph (b) 
to read as follows:


Sec.  54.671  Resale.

* * * * *
    (b) Permissible fees. The prohibition on resale set forth in 
paragraph (a) of this section shall not prohibit a health care provider 
from charging normal fees for health care services, including 
instruction related to such services rendered via telecommunications or 
broadband access services purchased under this subpart.
    42. Amend newly redesignated Sec.  54.673 by revising paragraph (d) 
to read as follows:


Sec.  54.673  Audits and recordkeeping.

* * * * *
    (d) Service providers. Telecommunications and other service 
providers delivering services supported by the telecommunications 
program, the health broadband services program or the health 
infrastructure program, shall retain documents related to the delivery 
of any discounted or supported services for at least 5 years after the 
last day of the delivery of such discounted or supported services. Any 
other document that demonstrates compliance with the statutory or 
regulatory requirements for the rural health care mechanism shall be 
retained as well.
    43. Amend newly redesignated Sec.  54.675 by revising paragraphs 
(a), (c), and (f) to read as follows:


Sec.  54.675  Cap.

    (a) Amount of the annual cap. The aggregate annual cap on Federal 
universal service support for health care providers shall be $400 
million per funding year, of which up to $100 million per funding year 
will be available for the health infrastructure program, and the 
remainder shall be available for the telecommunications program and the 
health broadband services program.
* * * * *
    (c) Requests. Funds shall be available as follows:
    (1) Generally, funds shall be available to eligible health care 
providers on a first-come-first-served basis, with requests accepted 
beginning on the first of January prior to each funding year.
    (2) For the telecommunications program and the health broadband 
services program, the Administrator shall implement a filing window 
period that treats all rural health care providers filing within the 
window period as if their applications were simultaneously received.
    (3) For the health infrastructure program, the filing window period 
for applications will be the first quarter of each funding year (July 1 
to September 30). The Administrator will treat all applications 
received during such window period as if they were simultaneously 
received.
    (4) The deadline for all required forms to receive funding under 
the telecommunications program and the health broadband services 
program is June 30 for the funding year that begins on the previous 
July 1.
    (5) For applicants selected to participate in the health 
infrastructure program based on their initial online application, the 
deadline to file all forms and supporting documents necessary to 
receive funding commitment letters from the Administrator is three 
funding years, commencing on July 1 of the funding year in which the 
initial online application is submitted pursuant to Sec.  54.650(b) and 
ending 36 months (on June 30) after that. Selected participants have a 
period of five funding years (commencing with the funding year on which 
the selected participant receives its first funding commitment letter 
for the project) in which to complete build-out.
* * * * *
    (f) Pro-rata reductions for telecommunications program support. The 
Administrator shall act in accordance with this section when a filing 
window period for the telecommunications program and the health 
broadband services program, as described in paragraph (c)(3) of this 
section, is in effect. When a filing window period described in 
paragraph (c)(3) of this section closes, the Administrator shall 
calculate the total demand for telecommunications program and health 
broadband services program support submitted by all applicants during 
the filing window period. If the total demand during a filing window 
period exceeds the total remaining support available for the funding 
year, the Administrator shall take the following steps:
    (1) The Administrator shall divide the total remaining funds 
available for the funding year by the total amount of 
telecommunications program support requested by each applicant that has 
filed during the window period, to produce a pro-rata factor.
    (2) The Administrator shall calculate the amount of 
telecommunications program support requested by each applicant that has 
filed during the filing window.
    (3) The Administrator shall multiply the pro-rata factor by the 
total telecommunications program dollar amount requested by each 
applicant filing during the window period. Administrator shall then 
commit funds to each applicant for telecommunications program support 
consistent with this calculation.
    44. Add Sec.  54.677 to read as follows:


Sec.  54.677  Data gathering.

    Health care providers receiving support under the health broadband 
services program and the health infrastructure program will be required 
to annually identify the speed of the connection supported by such 
funds, and the type and frequency of utilization of health IT 
applications as a result of broadband access. Such annual report shall 
be in a form to be prescribed by the Commission.
[FR Doc. 2010-19459 Filed 8-6-10; 8:45 am]
BILLING CODE 6712-01-P