[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Rules and Regulations]
[Pages 73830-73883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30378]



[[Page 73829]]

Vol. 76

Tuesday,

No. 229

November 29, 2011

Part III





Federal Communications Commission





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47 CFR Parts 0, 1, 20, et al.





Connect America Fund; A National Broadband Plan for Our Future; 
Establishing Just and Reasonable Rates for Local Exchange Carriers; 
High-Cost Universal Service Support; Final Rule

  Federal Register / Vol. 76 , No. 229 / Tuesday, November 29, 2011 / 
Rules and Regulations  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 1, 20, 36, 51, 54, 61, 64, and 69

[WC Docket Nos. 10-90, 07-135, 05-337, 03-109; GN Docket No. 09-51; CC 
Docket Nos. 01-92, 96-45; WT Docket No. 10-208; FCC 11-161]


Connect America Fund; A National Broadband Plan for Our Future; 
Establishing Just and Reasonable Rates for Local Exchange Carriers; 
High-Cost Universal Service Support

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) comprehensively reforms and modernizes the universal 
service and intercarrier compensation systems to ensure that robust, 
affordable voice and broadband service, both fixed and mobile, are 
available to Americans throughout the nation. The Commission adopts 
fiscally responsible, accountable, incentive-based policies to 
transition these outdated systems to the Connect America Fund, ensuring 
fairness for consumers and addressing the communications infrastructure 
challenges of today and tomorrow. The Commission uses measured but firm 
glide paths to provide industry with certainty and sufficient time to 
adapt to a changed regulatory landscape, and establish a framework to 
distribute universal service funding in the most efficient and 
technologically neutral manner possible, through market-based 
mechanisms such as competitive bidding.

DATES: Effective December 29, 2011, except for Sec. Sec.  1.21001(b) 
through (d); 1.21002(c) and (d); 1.21004(a); 51.907(b)(1), (c)(1), and 
(d) through (h); 51.909(b)(1), and (c) through (k); 51.911(b) and (c); 
51.915(e)(5) and (f)(7); 51.917(e)(6) and (f)(3); 51.919; 54.304; 
54.312(b)(3); 54.313(a)(7) through (a)(11); 54.313(b) through (h); 
54.314; 54.320(b); 54.1003; 54.1004(a), (c), and (d); 54.1005(a) and 
(b); 54.1006(a) through (e); 54.1007(a) and (b); 54.1008(d) and (e); 
54.1009(a) through (c); 54.1010; 61.3(bbb)(2); and 69.3(e)(12) which 
contain information collection requirements that are not effective 
until approved by the Office of Management and Budget. The Federal 
Communications Commission will publish a document in the Federal 
Register announcing the effective date for those sections.

FOR FURTHER INFORMATION CONTACT: Amy Bender, Wireline Competition 
Bureau, (202) 418-1469, Victoria Goldberg, Wireline Competition Bureau, 
(202) 418-7353, and Margaret Wiener, Wireless Telecommunications 
Bureau, (202) 418-2176 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (R&O) in WC Docket Nos. 10-90, 07-135, 05-337, 03-109; GN 
Docket No. 09-51; CC Docket Nos. 01-92, 96-45; WT Docket No. 10-208; 
FCC 11-161, released on November 18, 2011. The full text of this 
document is available for public inspection during regular business 
hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW., 
Washington, DC 20554. Or at the following Internet address: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-11-161A1.pdf.

I. Executive Summary

A. Universal Service Reform

    1. Principles and Goals. We begin by adopting support for 
broadband-capable networks as an express universal service principle 
under section 254(b) of the Communications Act, and, for the first 
time, we set specific performance goals for the high-cost component of 
the USF that we are reforming today, to ensure these reforms are 
achieving their intended purposes. The goals are: (1) Preserve and 
advance universal availability of voice service; (2) ensure universal 
availability of modern networks capable of providing voice and 
broadband service to homes, businesses, and community anchor 
institutions; (3) ensure universal availability of modern networks 
capable of providing advanced mobile voice and broadband service; (4) 
ensure that rates for broadband services and rates for voice services 
are reasonably comparable in all regions of the nation; and (5) 
minimize the universal service contribution burden on consumers and 
businesses.
    2. Budget. We establish, also for the first time, a firm and 
comprehensive budget for the high-cost programs within USF. The annual 
funding target is set at no more than $4.5 billion over the next six 
years, the same level as the high-cost program for Fiscal Year 2011, 
with an automatic review trigger if the budget is threatened to be 
exceeded. This will provide for more predictable funding for carriers 
and will protect consumers and businesses that ultimately pay for the 
fund through fees on their communications bills. We are today taking 
important steps to control costs and improve accountability in USF, and 
our estimates of the funding necessary for components of the Connect 
America Fund (CAF) and legacy high-cost mechanisms represent our 
predictive judgment as to how best to allocate limited resources at 
this time. We anticipate that we may revisit and adjust accordingly the 
appropriate size of each of these programs by the end of the six-year 
period, based on market developments, efficiencies realized, and 
further evaluation of the effect of these programs in achieving our 
goals.
    3. Public Interest Obligations. While continuing to require that 
all eligible telecommunications carriers (ETCs) offer voice services, 
we now require that they also offer broadband services. We update the 
definition of voice services for universal service purposes, and 
decline to disrupt any state carrier of last resort obligations that 
may exist. We also establish specific and robust broadband performance 
requirements for funding recipients.
    4. Connect America Fund. We create the Connect America Fund, which 
will ultimately replace all existing high-cost support mechanisms. The 
CAF will help make broadband available to homes, businesses, and 
community anchor institutions in areas that do not, or would not 
otherwise, have broadband, including mobile voice and broadband 
networks in areas that do not, or would not otherwise, have mobile 
service, and broadband in the most remote areas of the nation. The CAF 
will also help facilitate our ICC reforms. The CAF will rely on 
incentive-based, market-driven policies, including competitive bidding, 
to distribute universal service funds as efficiently and effectively as 
possible.
    5. Price Cap Territories. More than 83 percent of the approximately 
18 million Americans that lack access to residential fixed broadband at 
or above the Commission's broadband speed benchmark live in areas 
served by price cap carriers--Bell Operating Companies and other large 
and mid-sized carriers. In these areas, the CAF will introduce 
targeted, efficient support for broadband in two phases.
    6. Phase I. To spur immediate broadband buildout, we will provide 
additional funding for price cap carriers to extend robust, scalable 
broadband to hundreds of thousands of unserved Americans beginning in 
early 2012. To enable this deployment, all existing legacy high-cost 
support to price cap carriers will be frozen, and an additional $300 
million in CAF funding will be made available. Frozen support will be 
immediately subject to the goal of achieving universal availability of 
voice and broadband, and subject to obligations to build and operate 
broadband-capable networks in areas unserved by an unsubsidized

[[Page 73831]]

competitor over time. Any carrier electing to receive the additional 
support will be required to deploy broadband and offer service that 
satisfies our new public interest obligations to an unserved location 
for every $775 in incremental support. Specifically, carriers that 
elect to receive this additional support must provide broadband with 
actual speeds of at least 4 Mbps downstream and 1 Mbps upstream, with 
latency suitable for real-time applications and services such as VoIP, 
and with monthly usage capacity reasonably comparable to that of 
residential terrestrial fixed broadband offerings in urban areas. In 
addition, to ensure fairness for consumers across the country who pay 
into USF, we reduce existing support levels in any areas where a price 
cap company charges artificially low end-user voice rates.
    7. Phase II. The next phase of the CAF will use a combination of a 
forward-looking broadband cost model and competitive bidding to 
efficiently support deployment of networks providing both voice and 
broadband service for five years. We expect that the CAF will expand 
broadband availability to millions more unserved Americans.
    8. We direct the Wireline Competition Bureau to undertake a public 
process to determine the specific design and operation of the cost 
model to be used for this purpose, with stakeholders encouraged to 
participate in that process. The model will be used to establish the 
efficient amount of support required to extend and sustain robust, 
scalable broadband in high-cost areas. In each state, each incumbent 
price cap carrier will be asked to undertake a ``state-level 
commitment'' to provide affordable broadband to all high-cost locations 
in its service territory in that state, excluding extremely high cost 
areas as determined by the model. Importantly, the CAF will only 
provide support in those areas where a federal subsidy is necessary to 
ensure the build-out and operation of broadband networks. The CAF will 
not provide support in areas where unsubsidized competitors are 
providing broadband that meets our definition. Carriers accepting the 
state-level commitment will be obligated to meet rigorous broadband 
service requirements--with interim build-out requirements in three 
years and final requirements in five years--and will receive CAF 
funding, in an amount calculated by the model, over a five-year period, 
with significant financial consequences in the event of non- or under-
performance. We anticipate that CAF obligations will keep pace as 
services in urban areas evolve, and we will ensure that CAF-funded 
services remain reasonably comparable to urban broadband services over 
time. After the five-year period, the Commission will use competitive 
bidding to distribute any universal service support needed in those 
areas.
    9. In areas where the incumbent declines the state-level 
commitment, we will use competitive bidding to distribute support in a 
way that maximizes the extent of robust, scalable broadband service 
subject to an overall budget. In the Further Notice of Proposed 
Rulemaking (FNPRM) that accompanies this R&O, we propose a structure 
and operational details for the competitive bidding mechanism, in which 
any broadband provider that has been designated as an ETC for the 
relevant area may participate. The second phase of the CAF will 
distribute a total of up to $1.8 billion annually in support for areas 
with no unsubsidized broadband competitor. We expect that the model and 
competitive bidding mechanism will be adopted by December 2012, and 
disbursements will ramp up in 2013 and continue through 2017.
    10. Rate-of-Return Reforms. Although they serve less than five 
percent of access lines in the U.S., smaller rate-of-return carriers 
operate in many of the country's most difficult and expensive areas to 
serve. Rate-of-return carriers' total support from the high-cost fund 
is approaching $2 billion annually. We reform our rules for rate-of-
return companies in order to support continued broadband investment 
while increasing accountability and incentives for efficient use of 
public resources. Rate-of-return carriers receiving legacy universal 
service support, or CAF support to offset lost ICC revenues, must offer 
broadband service meeting initial CAF requirements, with actual speeds 
of at least 4 Mbps downstream and 1 Mbps upstream, upon their 
customers' reasonable request. Recognizing the economic challenges of 
extending service in the high-cost areas of the country served by rate-
of-return carriers, this flexible approach does not require rate-of-
return companies to extend service to customers absent such a request.
    11. Alongside these broadband service rules, we adopt reforms to: 
(1) Establish a framework to limit reimbursements for excessive capital 
and operating expenses, which will be implemented no later than July 1, 
2012, after an additional opportunity for public comment; (2) encourage 
efficiencies by extending existing corporate operations expense limits 
to the existing high-cost loop support and interstate common line 
support mechanisms, effective January 1, 2012; (3) ensure fairness by 
reducing high-cost loop support for carriers that maintain artificially 
low end-user voice rates, with a three-step phase-in beginning July 1, 
2012; (4) phase out the Safety Net Additive component of high-cost loop 
support over time; (5) address Local Switching Support as part of 
comprehensive ICC reform; (6) phase out over three years support in 
study areas that overlap completely with an unsubsidized facilities-
based terrestrial competitor that provides voice and fixed broadband 
service, beginning July 1, 2012; and (7) cap per-line support at $250 
per month, with a gradual phasedown to that cap over a three-year 
period commencing July 1, 2012. In the Notice, we seek comment on 
establishing a long-term broadband-focused CAF mechanism for rate-of-
return carriers, and relatedly seek comment on reducing the interstate 
rate-of-return from its current level of 11.25 percent. We expect rate-
of-return carriers will receive approximately $2 billion per year in 
total high-cost universal service support under our budget through 
2017.
    12. CAF Mobility Fund. Concluding that mobile voice and broadband 
services provide unique consumer benefits, and that promoting the 
universal availability of such services is a vital component of the 
Commission's universal service mission, we create the Mobility Fund, 
the first universal service mechanism dedicated to ensuring 
availability of mobile broadband networks in areas where a private-
sector business case is lacking. Mobile broadband carriers will receive 
significant legacy support during the transition to the Mobility Fund, 
and will have opportunities for new Mobility Fund dollars. The 
providers receiving support through the CAF Phase II competitive 
bidding process will also be eligible for the Mobility Fund, but 
carriers will not be allowed to receive redundant support for the same 
service in the same areas. Mobility Fund recipients will be subject to 
public interest obligations, including data roaming and collocation 
requirements.
    Phase I. We provide up to $300 million in one-time support to 
immediately accelerate deployment of networks for mobile voice and 
broadband services in unserved areas. Mobility Fund Phase I support 
will be awarded through a nationwide reverse auction, which we expect 
to occur in third quarter 2012. Eligible areas will include census 
blocks unserved today by mobile broadband services, and carriers may 
not receive support for areas they have previously stated they plan to 
cover. The auction will

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maximize coverage of unserved road miles within the budget, and winners 
will be required to deploy 4G service within three years, or 3G service 
within two years, accelerating the migration to 4G. We also establish a 
separate and complementary one-time Tribal Mobility Fund Phase I to 
award up to $50 million in additional universal service funding to 
Tribal lands to accelerate mobile voice and broadband availability in 
these remote and underserved areas.
    Phase II. To ensure universal availability of mobile broadband 
services, the Mobility Fund will provide up to $500 million per year in 
ongoing support. The Fund will expand and sustain mobile voice and 
broadband services in communities in which service would be unavailable 
absent federal support. The Mobility Fund will include ongoing support 
for Tribal areas of up to $100 million per year as part of the $500 
million total budget. In the Notice we propose a structure and 
operational details for the ongoing Mobility Fund, including the proper 
distribution methodology, eligible geographic areas and providers, and 
public interest obligations. We expect to adopt the distribution 
mechanism for Phase II in 2012 with implementation in 2013.
    13. Identical Support Rule. In light of the new support mechanisms 
we adopt for mobile broadband service and our commitment to fiscal 
responsibility, we eliminate the identical support rule that determines 
the amount of support for mobile, as well as wireline, competitive ETCs 
today. We freeze identical support per study area as of year end 2011, 
and phase down existing support over a five-year period beginning on 
July 1, 2012. The gradual phase down we adopt, in conjunction with the 
new funding provided by Mobility Fund Phase I and II, will ensure that 
an average of over $900 million is provided to mobile carriers for each 
of the first four years of reform (through 2015). The phase down of 
competitive ETC support will stop if Mobility Fund Phase II is not 
operational by June 30, 2014, ensuring approximately $600 million per 
year in legacy support will continue to flow until the new mechanism is 
operational.
    14. Remote Areas Fund. We allocate at least $100 million per year 
to ensure that Americans living in the most remote areas in the nation, 
where the cost of deploying traditional terrestrial broadband networks 
is extremely high, can obtain affordable access through alternative 
technology platforms, including satellite and unlicensed wireless 
services. We propose in the FNPRM a structure and operational details 
for that mechanism, including the form of support, eligible geographic 
areas and providers, and public interest obligations. We expect to 
finalize the Remote Areas Fund in 2012 with implementation in 2013.
    15. Reporting and Enforcement. We establish a national framework 
for certification and reporting requirements for all universal service 
recipients to ensure that their public interest obligations are 
satisfied, that state and federal regulators have the tools needed to 
conduct meaningful oversight, and that public funds are expended in an 
efficient and effective manner. We do not disturb the existing role of 
states in designating ETCs and in monitoring that ETCs within their 
jurisdiction are using universal service support for its intended 
purpose. We seek comment on whether and how we should adjust federal 
obligations on ETCs in areas where legacy funding is phased down. We 
also adopt rules to reduce or eliminate support if public interest 
obligations or other requirements are not satisfied, and seek comment 
on the appropriateness of additional enforcement mechanisms.
    16. Waiver. As a safeguard to protect consumers, we provide for an 
explicit waiver mechanism under which a carrier can seek relief from 
some or all of our reforms if the carrier can demonstrate that the 
reduction in existing high-cost support would put consumers at risk of 
losing voice service, with no alternative terrestrial providers 
available to provide voice telephony.

B. Intercarrier Compensation Reform

    17. Immediate ICC Reforms. We take immediate action to curtail 
wasteful arbitrage practices, which cost carriers and ultimately 
consumers hundreds of millions of dollars annually:
     Access Stimulation. We adopt rules to address the practice 
of access stimulation, in which carriers artificially inflate their 
traffic volumes to increase ICC payments. Our revised interstate access 
rules generally require competitive carriers and rate-of-return 
incumbent local exchange carriers (LECs) to refile their interstate 
switched access tariffs at lower rates if the following two conditions 
are met: (1) A LEC has a revenue sharing agreement and (2) the LEC 
either has (a) a three-to-one ratio of terminating-to-originating 
traffic in any month or (b) experiences more than a 100 percent 
increase in traffic volume in any month measured against the same month 
during the previous year. These new rules are narrowly tailored to 
address harmful practices while avoiding burdens on entities not 
engaging in access stimulation.
     Phantom Traffic. We adopt rules to address ``phantom 
traffic,'' i.e., calls for which identifying information is missing or 
masked in ways that frustrate intercarrier billing. Specifically, we 
require telecommunications carriers and providers of interconnected 
VoIP service to include the calling party's telephone number in all 
call signaling, and we require intermediate carriers to pass this 
signaling information, unaltered, to the next provider in a call path.
    18. Comprehensive ICC Reform. We adopt a uniform national bill-and-
keep framework as the ultimate end state for all telecommunications 
traffic exchanged with a LEC. Under bill-and-keep, carriers look first 
to their subscribers to cover the costs of the network, then to 
explicit universal service support where necessary. Bill-and-keep has 
worked well as a model for the wireless industry; is consistent with 
and promotes deployment of IP networks; will eliminate competitive 
distortions between wireline and wireless services; and best promotes 
our overall goals of modernizing our rules and facilitating the 
transition to IP. Moreover, we reject the notion that only the calling 
party benefits from a call and therefore should bear the entire cost of 
originating, transporting, and terminating a call. As a result, we now 
abandon the calling-party-network-pays model that dominated ICC regimes 
of the last century. Although we adopt bill-and-keep as a national 
framework, governing both inter- and intrastate traffic, states will 
have a key role in determining the scope of each carrier's financial 
responsibility for purposes of bill-and-keep, and in evaluating 
interconnection agreements negotiated or arbitrated under the framework 
in sections 251 and 252 of the Communications Act. We also address 
concerns expressed by some commenters about potential fears of traffic 
``dumping'' and seek comment in the Notice on whether any additional 
measures are necessary in this regard.
    19. Multi-Year Transition. We focus initial reforms on reducing 
terminating switched access rates, which are the principal source of 
arbitrage problems today. This approach will promote migration to all-
IP networks while minimizing the burden on consumers and staying within 
our universal service budget. For these rates, as well as certain 
transport rates, we adopt a gradual, measured transition that will 
facilitate predictability and stability. First, we require carriers to 
cap most ICC rates as of the effective date of this

[[Page 73833]]

R&O. To reduce the disparity between intrastate and interstate 
terminating end office rates, we next require carriers to bring these 
rates to parity within two steps, by July 2013. Thereafter, we require 
carriers to reduce their termination (and for some carriers also 
transport) rates to bill-and-keep, within six years for price cap 
carriers and nine for rate-of-return carriers. The framework and 
transition are default rules and carriers are free to negotiate 
alternatives that better address their individual needs. Although the 
R&O begins the process of reforming all ICC charges by capping all 
interstate rate elements and most intrastate rate elements, the Notice 
seeks comment on the appropriate transition and recovery for the 
remaining originating and transport rate elements. States will play a 
key role in overseeing modifications to rates in intrastate tariffs to 
ensure carriers are complying with the framework adopted in this R&O 
and not shifting costs or otherwise seeking to gain excess recovery. 
The Notice also seeks comment on interconnection issues likely to arise 
in the process of implementing a bill-and-keep methodology for ICC.
    20. New Recovery Mechanism. We adopt a transitional recovery 
mechanism to mitigate the effect of reduced intercarrier revenues on 
carriers and facilitate continued investment in broadband 
infrastructure, while providing greater certainty and predictability 
going forward than the status quo. Although carriers will first look to 
limited increases from their end users for recovery, we reject notions 
that all recovery should be borne by consumers. Rather, we believe, 
consistent with past reforms, that carriers should have the opportunity 
to seek partial recovery from all of their end user customers. We 
permit incumbent telephone companies to charge a limited monthly Access 
Recovery Charge (ARC) on wireline telephone service, with a maximum 
annual increase of $0.50 for consumers and small businesses, and $1.00 
per line for multi-line businesses, to partially offset ICC revenue 
declines. To protect consumers, we adopt a strict ceiling that prevents 
carriers from assessing any ARC for any consumer whose total monthly 
rate for local telephone service, inclusive of various rate-related 
fees, is at or above $30. Although the maximum ARC is $0.50 per month, 
we expect the actual average increase across all wireline consumers to 
be no more than $0.10-$0.15 a month, which translates into an expected 
maximum of $1.20-$1.80 per year that the average consumer will pay. We 
anticipate that consumers will receive more than three times that 
amount in benefits in the form of lower calling prices, more value for 
their wireless or wireline bill, or both, as well as greater broadband 
availability. Furthermore, the ARC will phase down over time as 
carriers' eligible revenue decreases, and we prevent carriers from 
charging any ARC on Lifeline customers or further drawing on the 
Lifeline program, so that ICC reform will not raise rates at all for 
these low-income consumers. We also seek comment in the Notice about 
reassessing existing subscriber line charges (SLCs), which are not 
otherwise implicated by this R&O, to determine whether those charges 
are set at appropriate levels.
    21. Likewise, although we do not adopt a rate ceiling for multi-
line businesses customers, we do adopt a cap on the combination of the 
ARC and the existing SLC to ensure that multi-line businesses do not 
bear a disproportionate share of recovery and that their rates remain 
just and reasonable. Specifically, carriers cannot charge a multi-line 
business customer an ARC when doing so would result in the ARC plus the 
existing SLC exceeding $12.20 per line. Moreover, to further protect 
consumers, we adopt measures to ensure that carriers must apportion 
lost revenues eligible for ICC recovery between residential and 
business lines, appropriately weighting the business lines (i.e., 
according to the higher maximum annual increase in the business ARC) to 
prevent carriers that elect not to receive ICC CAF from recovering 
their entire ICC revenue loss from consumers. Carriers may receive CAF 
support for any otherwise-eligible revenue not recovered by the ARC. In 
addition, carriers receiving CAF support to offset lost ICC revenues 
will be required to use the money to advance our goals for universal 
voice and broadband.
    22. In defining how much of their lost revenues carriers will have 
the opportunity to recover, we reject the notion that ICC reform should 
be revenue neutral. We limit carriers' total eligible recovery to 
reflect the existing downward trends on ICC revenues with declining 
switching costs and minutes of use. For price cap carriers, baseline 
recovery amounts available to each price cap carrier will decline at 10 
percent annually. Price cap carriers whose interstate rates have 
largely been unchanged for a decade because they participated in the 
Commission's 2000 CALLS plan will be eligible to receive 90 percent of 
this baseline every year from ARCs and the CAF. In those study areas 
that have recently converted from rate-of-return to price cap 
regulation, carriers will initially be permitted to recover the full 
baseline amount to permit a more gradual transition, but we will 
decline to 90 percent recovery for these areas as well after 5 years. 
All price cap CAF support for ICC recovery will phase out over a three-
year period beginning in the sixth year of the reform.
    23. For rate-of-return carriers, recovery will be calculated 
initially based on rate-of-return carriers' fiscal year 2011 interstate 
switched access revenue requirement, intrastate access revenues that 
are being reformed as part of this R&O, and net reciprocal compensation 
revenues. This baseline will decline at five percent annually to 
reflect combined historical trends of an annual three percent 
interstate cost and associated revenue decline, and ten percent 
intrastate revenue decline, while providing for true ups to ensure CAF 
recovery in the event of faster-than-expected declines in demand. Both 
recovery mechanisms provide carriers with significantly more revenue 
certainty than the status quo, enabling carriers to reap the benefits 
of efficiencies and reduced switching costs, while giving providers 
stable support for investment as they adjust to an IP world.
    24. Treatment of VoIP Traffic. We make clear the prospective 
payment obligations for VoIP traffic exchanged in TDM between a LEC and 
another carrier, and adopt a transitional framework for VoIP 
intercarrier compensation. We establish that default charges for 
``toll'' VoIP-PSTN traffic will be equal to interstate rates applicable 
to non-VoIP traffic, and default charges for other VoIP-PSTN traffic 
will be the applicable reciprocal compensation rates. Under this 
framework, all carriers originating and terminating VoIP calls will be 
on equal footing in their ability to obtain compensation for this 
traffic.
    25. CMRS-Local Exchange Carrier (LEC) Compensation. We clarify 
certain aspects of CMRS-LEC compensation to reduce disputes and address 
existing ambiguity. We adopt bill-and-keep as the default methodology 
for all non-access CMRS-LEC traffic. To provide rate-of-return LECs 
time to adjust to bill-and-keep, we adopt an interim transport rule for 
rate-of-return carriers to specify LEC transport obligations under the 
default bill-and-keep framework for non-access traffic exchanged 
between these carriers. We also clarify the relationship between the 
compensation obligations in section 20.11 of the Commission's rules and 
the reciprocal

[[Page 73834]]

compensation framework, thus addressing growing concerns about 
arbitrage related to rates set without federal guidance. Further, in 
response to disputes, we make clear that a call is considered to be 
originated by a CMRS provider for purposes of the intraMTA rule only if 
the calling party initiating the call has done so through a CMRS 
provider. Finally, we affirm that all traffic routed to or from a CMRS 
provider that, at the beginning of a call, originates and terminates 
within the same MTA, is subject to reciprocal compensation, without 
exception.
    26. IP-to-IP Interconnection. We recognize the importance of 
interconnection to competition and the associated consumer benefits. We 
anticipate that the reforms we adopt will further promote the 
deployment and use of IP networks, and seek comment in the accompanying 
Notice regarding the policy framework for IP-to-IP interconnection. We 
also make clear that even while our Notice is pending, we expect all 
carriers to negotiate in good faith in response to requests for IP-to-
IP interconnection for the exchange of voice traffic.
    27. In addition, we adopt a limited exception to the phase-down of 
support for competitive eligible telecommunications carriers for 
Standing Rock Telecommunications, Inc. (Standing Rock), a Tribally-
owned competitive ETC that had its ETC designation modified recently 
for the purpose of providing service throughout the entire Standing 
Rock Sioux Reservation. We find that granting a two-year exception to 
the phase-down of support to this Tribally-owned competitive ETC is in 
the public interest. For a two-year period, Standing Rock will receive 
per-line support amounts that are the same as the total support per 
line received in the fourth quarter of this year. We adopt this 
approach in order to enable Standing Rock to reach a sustainable scale 
so that consumers on the Reservation can realize the benefits of 
connectivity that, but for Standing Rock, they might not otherwise have 
access to.

II. Procedural Matters

A. Paperwork Reduction Act Analysis

    28. The Report and Order contains new information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. The new requirements will be submitted to the Office 
of Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies are invited to 
comment on the new information collection requirements contained in 
this proceeding. We note that pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we 
previously sought specific comment on how the Commission might 
``further reduce the information collection burden for small business 
concerns with fewer than 25 employees.'' We describe impacts that might 
affect small businesses, which includes most businesses with fewer than 
25 employees, in the Final Regulatory Flexibility Analysis, infra.

B. Congressional Review Act

    29. The Commission will send a copy of this Report and Order to 
Congress and the Government Accountability Office pursuant to the 
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

C. Final Regulatory Flexibility Analysis

    30. As required by the Regulatory Flexibility Act of 1980 (RFA), as 
amended, Initial Regulatory Flexibility Analyses (IRFAs) were 
incorporated in the Notice of Proposed Rule Making and Further Notice 
of Proposed Rulemaking (USF/ICC Transformation NRPM), 76 FR 11632, 
March 3, 2011, in the Notice of Inquiry and Notice of Proposed 
Rulemaking (USF Reform NOI/NPRM), and in the Notice of Proposed 
Rulemaking (Mobility Fund NPRM), 75 FR 67060, November 1, 2010, for 
this proceeding. The Commission sought written public comment on the 
proposals in the USF/ICC Transformation NRPM, including comment on the 
IRFA. The Commission received comments on the USF/ICC Transformation 
NPRM IRFA. The comments received are discussed below. The Commission 
did not receive comments on the USF Reform NOI/NPRM IRFA or the 
Mobility Fund NPRM IRFA. This present Final Regulatory Flexibility 
Analysis (FRFA) conforms to the RFA.

D. Need for, and Objectives of, the R&O

    31. The R&O adopts fiscally responsible, accountable, incentive-
based policies to transition outdated universal service and 
intercarrier compensation (ICC) systems to the Connect America Fund 
(CAF), ensuring fairness for consumers and addressing the challenges of 
today and tomorrow, instead of yesterday. We adopt measured but firm 
glide paths to provide industry with certainty and sufficient time to 
adapt to a changed landscape, and establish a regulatory framework 
which will ultimately distribute all universal service funding in the 
most efficient and technologically neutral manner possible.
    32. For decades, the Commission and the states have administered a 
complex system of explicit and implicit subsidies to support voice 
connectivity to the highest cost, most rural, and insular communities 
in the nation. Networks that provide only voice service, however, are 
no longer adequate for the country's communication needs. Broadband and 
mobility have become crucial to our nation's economic development, 
global competitiveness, and civic life. Businesses need broadband and 
mobile communications to attract customers and employees, job-seekers 
need them to find jobs and training, and children need them to get a 
world-class education. Broadband and mobility also help lower the costs 
and improve the quality of health care, and enable people with 
disabilities and Americans of all income levels to participate more 
fully in society. Broadband-enabled jobs are critical to our nation's 
economic recovery and long-term economic health, particularly in small 
towns, rural and insular areas, and Tribal lands.
    33. Too many Americans today, however, do not have access to modern 
networks that support mobility and broadband. Millions of Americans 
live in areas where there is no access to any broadband network. And 
millions of Americans live, work, or travel in areas without mobile 
broadband. There are unserved areas in every state of the nation and 
its territories, and in many of these areas there is little reason to 
believe that access to broadband service will be provided to these 
areas in the near future with current policies.
    34. Consistent with the challenge of ensuring that all Americans 
are offered basic voice service and access to networks that support 
high-speed Internet access where they live, work and travel, extending 
and accelerating broadband and advanced mobile wireless deployment have 
been two of the Commission's top priorities over the past few years. 
The R&O focuses on those remote and expensive-to-serve communities 
where the immediate prospect for stand-alone private sector action is 
limited.
    35. Our existing voice-centric universal service system is built on 
decades-old assumptions that fail to reflect today's networks, the 
evolving nature of communications services, or the current competitive 
landscape. As a result, the current system is not equipped to address 
the universal service challenges raised by broadband, mobility, and the 
transition to Internet Protocol (IP) networks.

[[Page 73835]]

    36. With respect to voice services, consumers are increasingly 
obtaining such services over broadband networks as well as over 
traditional circuit switched telephone networks. In the R&O, the 
Commission amends its rules to specify that the functionalities of 
eligible voice telephony services. The amended definition shifts to a 
technologically neutral approach, allowing companies to provision voice 
service over any platform, including the PSTN and IP networks.
    37. With respect to broadband, the component of the Universal 
Service Fund (USF) that supports telecommunications service in high-
cost areas has grown from $2.6 billion in 2001 to a projected $4.5 
billion in 2011, but recipients lack any accountability for advancing 
broadband-capable infrastructure that delivers voice service. We also 
lack sufficient mechanisms to ensure all Commission funded broadband 
investments are prudent and efficient, including the means to target 
investment to areas that lack a private business case to build 
broadband. In addition, the ``rural-rural'' divide must also be 
addressed-- some parts of rural America are connected to state-of-the-
art broadband, while other parts of rural America have no broadband 
access, because the existing program fails to direct money to all parts 
of rural America where it is needed. Similarly, the Fund supports some 
mobile providers, but only based on cost characteristics and locations 
of wireline providers. As a result, the universal service program 
provides more than $1 billion in annual support to wireless carriers, 
yet there remain many areas of the country where people live, work, and 
travel that lack mobile voice coverage, and still larger geographic 
areas that lack mobile broadband coverage.
    38. For the first time, the Commission establishes a defined budget 
for the high-cost component of the universal service fund. Establishing 
a CAF budget ensures that individual consumers will not pay more in 
contributions due to the reforms we adopt today. We therefore establish 
an annual funding target, set at the same level as our current estimate 
for the size of the high-cost program for FY 2011, of no more than $4.5 
billion. The total $4.5 billion budget will include CAF support 
resulting from intercarrier compensation reform, as well as new CAF 
funding for broadband and support for legacy programs during a 
transitional period.
    39. In the R&O, the Commission adopts rules that transform the 
existing high-cost program--the component of USF directed toward high-
cost, rural, and insular areas--into a new, more efficient, broadband-
focused Connect America Fund (CAF). In particular, we adopt a framework 
for the Connect America Fund that will provide support in price cap 
territories based on a combination of competitive bidding and a 
forward-looking cost model.
    40. In order to take immediate steps to accelerate broadband 
deployment to unserved areas across America, we modify our rules to 
provide support to price cap carriers under a transitional distribution 
mechanism, CAF Phase I, while the cost model is being developed and 
competitive bidding rules finalized. Specifically, effective in 2012, 
we freeze support to price cap carriers and their rate-of-return 
affiliates under our existing high-cost support mechanism: high-cost 
loop support (HCLS) including safety net additive (SNA), forward-
looking model support, local switching support (LSS), interstate access 
support (IAS), and frozen interstate common line support (ICLS). In 
addition, we will dedicate up to $300 million in incremental support to 
price cap carriers each year of CAF Phase I, allocated to carriers 
serving areas with the highest costs; carriers accepting incremental 
support will be required to meet defined broadband deployment 
obligations.
    41. We adopt an approach that enables competitive bidding for CAF 
Phase II support in the near-term in some price cap areas, while in 
other areas holding the incumbent carrier to broadband and other public 
interest obligations over large geographies in return for five years of 
CAF support. Specifically, we adopt the following methodology for 
providing CAF support in price cap areas. First, the Commission will 
model forward-looking costs to estimate the cost of deploying 
broadband-capable networks in high-cost areas and identify at a 
granular level the areas where support will be available. Second, using 
the cost model, the Commission will offer each price cap LEC annual 
support for a period of five years in exchange for a commitment to 
offer voice across its service territory within a state and broadband 
service to supported locations within that service territory, subject 
to robust public interest obligations and accountability standards. 
Third, for all territories for which price cap LECs decline to make 
that commitment, the Commission will award ongoing support through a 
competitive bidding mechanism.
    42. We reform legacy support mechanisms for rate-of-return carriers 
to transition towards a more incentive-based form of regulation with 
better incentives for efficient operations. In particular, we implement 
a number of reforms to eliminate waste and inefficiency and improve 
incentives for rational investment and operation by rate-of-return 
LECs. Consistent with the framework we establish for support in price 
cap territories that combines a new forward-looking cost model and 
competitive bidding, we also lay the foundation for subsequent 
Commission action that will advance rate-of-return companies on a path 
toward a more incentive-based form of regulation.
    43. We adopt the following reforms that will ensure that the 
overall size of the Fund is kept within budget while we transition a 
system that supports only telephone service to a system that will 
enable the deployment of modern high-speed networks capable of 
delivering 21st century broadband services and applications, including 
voice: First, we establish benchmarks that, for the first time, will 
establish parameters for what actual costs carriers may seek recovery 
under the federal universal service program. Second, we take immediate 
steps to ensure that carriers in rural areas are not unfairly burdening 
consumers across the nation by using excess universal service support 
to subsidize artificially low end-user rates. Third, we eliminate the 
safety net additive program, which is no longer meeting its intended 
purpose. Fourth, we eliminate local switching support in July 2012 
whereby recovery for switching investment will occur through the ICC 
recovery mechanism. Fifth, we eliminate support for rate-of-return 
companies in any study area that is completely overlapped by an 
unsubsidized facilities-based terrestrial competitor that offers fixed 
voice as well as broadband services meeting specified performance 
standards, as there is no need for universal service subsidies in these 
cases. Sixth, starting January 1, 2012, support in excess of $250 per 
line per month will no longer be provided to any carrier.
    44. We eliminate the identical support rule. Over a decade of 
experience with the operation of the current rule and having received a 
multitude of comments noting that the current rule fails to efficiently 
target support where it is needed, we conclude that this rule has not 
functioned as intended. Identical support does not provide appropriate 
levels of support for the efficient deployment of mobile services in 
areas that do not support a private business case for mobile voice and 
broadband. Because the explicit support for mobility that we adopt 
today will be designed to appropriately target funds to such areas, the 
identical support rule is

[[Page 73836]]

no longer necessary or in the public interest.
    45. We transition existing competitive ETC support to the CAF, 
including our reformed system for supporting mobile service over a 
five-year period beginning July 1, 2012. We find that a transition is 
desirable in order to avoid shocks to service providers that may result 
in service disruptions for consumers. During this period, competitive 
ETCs offering mobile wireless services will have the opportunity to bid 
in the Mobility Fund Phase I auction in 2012 and participate in the 
second phase of the Mobility Fund in 2013. Competitive ETCs offering 
broadband services that meet the performance standards described above 
will also have the opportunity to participate in competitive bidding 
for CAF support in areas where price cap companies decline to make a 
state-level broadband commitment in exchange for model-determined 
support in 2013. With these new funding opportunities, many carriers, 
including wireless carriers, could receive similar or even greater 
amounts of funding after our reforms than before, albeit with that 
funding more appropriately targeted to the areas that need additional 
support.
    46. For the purpose of this transition, we conclude that each 
competitive ETC's baseline support amount will be equal to its total 
2011 support in a given study area, or an amount equal to $3,000 times 
the number of reported lines as of year-end 2011, whichever is lower. 
Using a full calendar year of support to set the baseline will provide 
a reasonable approximation of the amount that competitive ETCs would 
currently expect to receive, absent reform, and a natural starting 
point for the phase-down of support. In addition, we limit the baseline 
to $3,000 per line in order to reflect similar changes to our rules 
limiting support for incumbent wireline carriers to $3,000 per line per 
year.
    47. Competitive ETC support per study area will be frozen at the 
2011 baseline, and that monthly baseline amount will be provided from 
January 1, 2012 to June 30, 2012. Each competitive ETC will then 
receive 80 percent of its monthly baseline amount from July 1, 2012 to 
June 30, 2013, 60 percent of its baseline amount from July 1, 2013, to 
June 30, 2014, 40 percent from July 1, 2014, to June 30, 2015, 20 
percent from July 1, 2015, to June 30, 2016, and no support beginning 
July 1, 2016. The purpose of this phase down is to avoid unnecessary 
consumer disruption as we transition to new programs that will be 
better designed to achieve universal service goals, especially with 
respect to promoting investment in and deployment of mobile service to 
areas not yet served. We do not wish to encourage further investment 
based on the inefficient subsidy levels generated by the identical 
support rule. We conclude that phasing down and transitioning existing 
competitive support will not create significant or widespread risks 
that consumers in areas that currently have service, including mobile 
service, will be left without any viable mobile service provider 
serving their area. We do, however, delay by two years the phasedown 
for certain carriers serving remote parts of Alaska and a Tribally-
owned competitive ETC, Standing Rock Telecommunications, that received 
its ETC designation in 2011.
    48. We establish the Mobility Fund based on our conclusion that 
mobile voice and broadband services provide unique consumer benefits 
and that promoting the universal availability of advanced mobile 
services is a vital component of the Commission's universal service 
mission. The Mobility Fund, which will have two phases, will allow 
funding for mobility while rationalizing how universal service funding 
is provided, thereby ensuring that funds are cost-effective and 
targeted to areas that require public funding to receive the benefits 
of mobility. The purpose of the Mobility Fund is to accelerate the 
deployment of advanced mobile networks in areas where a private-sector 
business case is lacking. Mobility Fund recipients will be subject to 
public interest obligations, including data roaming and collocation 
requirements.
    49. The first phase of the Mobility Fund will provide $300 million 
in one-time support to immediately accelerate deployment of networks 
for mobile broadband services in unserved areas. Mobility Fund Phase I 
support will be awarded through a nationwide reverse auction. Eligible 
areas will include census blocks unserved today by advanced mobile 
wireless services. Carriers will be prohibited from receiving support 
for areas they have previously stated they plan to cover. The auction 
will maximize coverage of unserved road miles, with the lowest per-unit 
bids winning. A 25 percent bidding credit will be available for 
Tribally-owned or controlled providers that participate in the auction 
and place bids for the eligible census blocks located within the 
geographic area defined by the boundaries of the Tribal land associated 
with the Tribal entity seeking support. The auction will also help the 
Commission develop expertise in running reverse auctions for universal 
service support. We expect to distribute this support as quickly as 
feasible, with the goal of holding an auction in the third quarter of 
2012. As part of this first phase, we also establish a separate and 
complementary one-time Tribal Mobility Fund Phase I to award $50 
million in additional universal service funding for advanced mobile 
services on Tribal lands and Alaska Native regions. We do so in order 
to accelerate mobile broadband availability in these remote and 
underserved areas.
    50. We also establish a Mobility Fund Phase II, which will provide 
up to $500 million per year in ongoing support to ensure universal 
availability of advanced mobile services. The Fund will expand and 
sustain mobile voice and broadband service in communities in which 
service would be unavailable absent federal support. The Mobility Fund 
Phase II will include ongoing support for Tribal lands of up to $100 
million per year, as part of the $500 million total budget. We also 
establish a budget of at least $100 million annually for CAF support in 
remote areas. This reflects our commitment to ensuring that Americans 
living in the most remote areas of the nation, where the cost of 
deploying wireline or cellular terrestrial broadband technologies is 
extremely high, can obtain affordable broadband through alternative 
technology platforms such as satellite and unlicensed wireless. By 
setting aside designated funding for these difficult-to-serve areas, we 
can ensure that those who live and work in remote locations also have 
access to affordable broadband service.
    51. In the R&O, we also take steps to comprehensively reform the 
intercarrier compensation system to bring substantial benefits to 
consumers, including reduced rates for all wireless and long distance 
customers, more innovative communications offerings, and improved 
quality of service for wireless consumers and consumers of long 
distance services. The existing intercarrier compensation system--built 
on geographic and per-minute charges and implicit subsidies--is 
fundamentally in tension with and a deterrent to deployment of all-IP 
networks. And the system is eroding rapidly as demand for traditional 
telephone service falls, with consumers increasingly opting for 
wireless, VoIP, texting, email, and other phone alternatives. To 
address these issues, we take immediate action to combat two of the 
most prevalent arbitrage activities today, phantom traffic and access 
stimulation. We also launch long-term intercarrier compensation reform 
by adopting bill-and-keep as the ultimate uniform, national methodology 
for all

[[Page 73837]]

telecommunications traffic exchanged with a local exchange carrier 
(LEC). We begin the transition to bill-and-keep with terminating 
switched access rates, which are the main source of arbitrage today. We 
also begin the process of reforming originating access and other rate 
elements by capping all interstate rates and most intrastate rates. We 
provide for a measured, gradual transition to bill-and-keep for these 
rates, and adopt a recovery mechanism that provides carriers with 
certain and predictable revenue streams. We make clear the prospective 
payment obligations for VoIP traffic and adopt a transitional 
intercarrier compensation framework for VoIP. And finally, we clarify 
certain aspects of CMRS-LEC compensation to reduce disputes and 
eliminate ambiguities in our rules.
    52. We first adopt revisions to our interstate switched access 
charge rules to address access stimulation. Access stimulation occurs 
when a LEC with high switched access rates enters into an arrangement 
with a provider of high call volume operations such as chat lines, 
adult entertainment calls, and ``free'' conference calls. Consistent 
with the approach proposed in the USF/ICC Transformation NPRM, we adopt 
a definition of access stimulation which has two conditions: (1) A 
revenue sharing condition, revised slightly from the proposal in the 
USF/ICC Transformation NPRM; and (2) an additional traffic volume 
condition, which is met where the LEC either: (a) has a three-to-one 
interstate terminating-to-originating traffic ratio in a calendar 
month; or (b) has had more than a 100 percent growth in interstate 
originating and/or terminating switched access minutes of use in a 
month compared to the same month in the preceding year. If both 
conditions are satisfied, the LEC generally must file revised tariffs 
to account for its increased traffic and will be required to reduce its 
interstate switched access tariffed rates to the rates of the price cap 
LEC in the state with the lowest rates, which are presumptively 
consistent with the Act. The new access stimulation rules will 
facilitate enforcement when a LEC does not refile as required.
    53. Next, we amend the Commission's rules to address ``phantom 
traffic'' by ensuring that terminating service providers receive 
sufficient information to bill for telecommunications traffic sent to 
their networks, including interconnected VoIP traffic. ``Phantom 
traffic'' refers to traffic that terminating networks receive that 
lacks certain identifying information. Collectively, problems involving 
unidentifiable or misidentified traffic appear to be widespread and 
this sort of gamesmanship distorts the intercarrier compensation 
system. To address the problem, we adopt the core of the proposal 
contained in the USF/ICC Transformation NPRM--we modify our call 
signaling rules to require originating service providers to provide 
signaling information that includes calling party number (``CPN'') for 
all voice traffic, regardless of jurisdiction, and to prohibit 
interconnecting carriers from stripping or altering that call signaling 
information. Service providers that originate interstate or intrastate 
traffic on the PSTN, or that originate inter- or intrastate 
interconnected VoIP traffic destined for the PSTN, will now be required 
to transmit the telephone number associated with the calling party to 
the next provider in the call path. Intermediate providers must pass 
calling party number or charge number signaling information they 
receive from other providers unaltered, to subsequent providers in the 
call path.
    54. We adopt bill-and-keep as the methodology for all intercarrier 
compensation traffic, consistent with the National Broadband Plan's 
recommendation to phase out per-minute intercarrier compensation rates. 
Under bill-and-keep arrangements, a carrier generally looks to its end-
users--who are the entities making the choice to subscribe to the 
carrier's network--rather than looking to other carriers and their 
customers to recover its costs. We have legal authority to adopt a 
bill-and-keep methodology as the end point for reform pursuant to our 
rulemaking authority to implement sections 251(b)(5) and 252(d)(2), in 
addition to authority under other provisions of the Act, including 
sections 201 and 332.
    55. We conclude that a uniform, national framework for the 
transition of intercarrier compensation to bill-and-keep, with an 
accompanying federal recovery mechanism, best advances our policy goals 
of accelerating the migration to all IP networks, facilitating IP-to-IP 
interconnection, and promoting deployment of new broadband networks by 
providing certainty and predictability to carriers and investors. We 
adopt a gradual transition for terminating access, providing price cap 
carriers six years and rate-of-return carriers nine years to reach the 
end state. We believe that initially focusing the bill-and-keep 
transition on terminating access rates will allow a more manageable 
process and will focus reform where some of the most pressing problems, 
such as access charge arbitrage, currently arise. The transition we 
adopt sets a default framework, leaving carriers free to enter into 
negotiated agreements that allow for different terms.
    56. We conclude it is appropriate to clarify certain aspects of the 
obligations the Commission adopted in the 2005 T-Mobile Order, 70 FR 
1641, March 30, 2005, especially as parties have asked the Commission 
to make clear when they have the ability to require other carriers to 
negotiate to reach an interconnection agreement. We reaffirm the 
findings in the T-Mobile Order that incumbent LECs can compel CMRS 
providers to negotiate in good faith to reach an interconnection 
agreement, and make clear we have authority to do so pursuant to 
sections 332, 201, 251 as well as our ancillary authority under 4(i). 
We also clarify that this requirement does not impose any section 
251(c) obligations on CMRS providers, nor does it extend section 252 of 
the Act to CMRS providers. We decline, at this time, to extend the 
obligation to negotiate in good faith and the ability to compel 
arbitration to other contexts.
    57. As part of our comprehensive reforms, we adopt a recovery 
mechanism to facilitate incumbent LECs' gradual transition away from 
existing intercarrier revenues. This mechanism allows the LECs to 
recover ICC revenues reduced due to our reforms, up to a defined 
baseline, from alternate revenue sources: reasonable, incremental 
increases in end user rates and, where appropriate, through ICC CAF 
support. The recovery mechanism is limited in time and carefully 
balances the benefits of certainty and a gradual transition with the 
need to contain the size of the federal universal service fund and 
minimize the overall burden on end users. The recovery mechanism is not 
100 percent revenue neutral relative to today's revenues, but it 
eliminates much of the uncertainty carriers face under the existing ICC 
system, allowing them to make investment decisions based on a full 
understanding of their revenues from ICC for the next several years.
    58. In setting the framework for recovery, we believe that carriers 
should first look to reasonable but limited recovery from their own end 
users, consistent with the principle of bill-and-keep and the model in 
the wireless industry, but take measures to ensure that rates remain 
affordable and reasonably comparable. Our recovery mechanism has two 
basic components. First, we define the revenue incumbent LECs are 
eligible to recover, which we refer to as ``Eligible Recovery.'' 
Second, we specify how incumbent LECs may recover Eligible Recovery 
through end-user charges and CAF support. Although we limit a specific 
recovery

[[Page 73838]]

mechanism to incumbent LECs, competitive LECs are free to recover their 
reduced revenues through end user charges.
    59. Consistent with past ICC reforms, we permit carriers to recover 
a reasonable, limited portion of their Eligible Recovery from their end 
users through a monthly fixed charge called an Access Recovery Charge 
(ARC). We take measures to help ensure that any ARC increase on 
consumers does not impact affordability of rates and the annual 
increase is limited to $0.50 per month. To protect consumers, and to 
recognize states that have already rebalanced rates in prior state 
intercarrier compensation reforms, we adopt a $30 Residential Rate 
Ceiling to ensure that consumers paying $30 or more do not see any 
increases through ARCs as a result of our current reform. We also take 
measures to ensure that multi-line businesses' total subscriber line 
charge (SLC) plus ARC line items are just and reasonable, we do not 
permit LECs to charge a multi-line business ARC where the SLC plus ARC 
would exceed $12.20 per line. Although we limit a specific recovery 
mechanism to incumbent LECs, competitive LECs are free to recover their 
reduced revenues through end user charges.
    60. The Commission has recognized that some areas are uneconomic to 
serve absent implicit or explicit support. As we continue the 
transition from implicit to explicit support that the Commission began 
in 1997, recovery from the CAF for incumbent LECs will be available to 
the extent their Eligible Recovery exceeds their permitted ARCs. For 
price cap carriers that elect to receive CAF support, such support is 
transitional and phases out over three years, beginning in 2017. For 
rate-of-return carriers, ICC-replacement CAF support will phase down 
with Eligible Recovery over time. All incumbent LECs that elect to 
receive CAF support as part of this recovery mechanism will have 
broadband obligations and be held to the same accountability and 
oversight requirements adopted in section VIII. Competitive LECs, which 
have greater freedom in setting rates and picking which customers to 
serve, will not be eligible for CAF support to replace reductions in 
ICC revenues.
    61. We establish a rebuttable presumption that the reforms adopted 
in this R&O, including the recovery of Eligible Recovery from the ARC 
and CAF, allow incumbent LECs to earn a reasonable return on their 
investment. We establish a ``Total Cost and Earnings Review,'' through 
which a carrier may petition the Commission to rebut this presumption 
and request additional support. We identify certain factors in addition 
to switched access costs and revenues that may affect our analysis of 
requests for additional support, including: (1) Other revenues derived 
from regulated services provided over the local network, such as 
special access; (2) productivity gains; (3) incumbent LEC ICC expense 
reductions and other cost savings; and (4) other services provided over 
the local network.
    62. Under the new intercarrier compensation regime, all traffic--
including VoIP traffic--ultimately will be subject to a bill-and-keep 
framework. As part of our transition to that end point, we adopt a 
prospective intercarrier compensation framework for VoIP traffic. In 
particular, we address the prospective treatment of VoIP-PSTN traffic 
by adopting a transitional compensation framework for such traffic 
proposed by commenters in the record. Under this transitional 
framework: We bring all VoIP-PSTN traffic within the section 251(b)(5) 
framework; default intercarrier compensation rates for toll VoIP-PSTN 
traffic are equal to interstate access rates; default intercarrier 
compensation rates for other VoIP-PSTN traffic are the otherwise-
applicable reciprocal compensation rates; and carriers may tariff these 
default charges for toll VoIP-PSTN traffic in the absence of an 
agreement for different intercarrier compensation. We also make clear 
providers' ability to use existing section 251(c)(2) interconnection 
arrangements to exchange VoIP-PSTN traffic pursuant to compensation 
addressed in the providers' interconnection agreement, and address the 
application of Commission policies regarding call blocking in this 
context.
    63. To adopt this prospective regime we rely on our general 
authority to specify a transition to bill-and-keep for section 
251(b)(5) traffic. As a result, tariffing of charges for toll VoIP-PSTN 
traffic can occur through both federal and state tariffs. We do 
recognize concerns regarding providers' ability to distinguish VoIP-
PSTN traffic from other traffic, and, consistent with the 
recommendations of a number of commenters, we permit LECs to address 
this issue through their tariffs, much as they do with jurisdictional 
issues today.
    64. As part of our comprehensive ICC reform, we also believe it is 
also appropriate for the Commission to clarify the system of 
intercarrier compensation applicable to non-access traffic exchanged 
between LECs and CMRS providers. Accordingly, we clarify that the 
compensation obligations under section 20.11 are coextensive with the 
reciprocal compensation requirements under section 251(b)(5). Although 
we have adopted a glide path to a bill-and-keep methodology for access 
charges generally and for reciprocal compensation between two wireline 
carriers, we find that a different approach is warranted for non-access 
traffic between LECs and CMRS providers for several reasons. We find a 
greater need for immediate application of a bill-and-keep methodology 
in this context to address traffic stimulation. In addition, consistent 
with our overall reform approach, we adopt bill-and-keep as the default 
compensation for non-access traffic exchanged between LECs and CMRS 
providers. We adopt an additional measure to further ease the move to 
bill-and-keep LEC-CMRS traffic for rate-of-return carriers. 
Specifically, we limit rate-of-return carriers' responsibility for the 
costs of transport involving non-access traffic exchanged between CMRS 
providers and rural, rate-of-return regulated LECs. We find that these 
steps are consistent with our overall reform and will support our goal 
of modernizing and unifying the intercarrier compensation system.
    65. We address certain pending issues and disputes regarding what 
is now commonly known as the intraMTA rule, which provides that traffic 
exchanged between a LEC and a CMRS provider that originates and 
terminates within the same Major Trading Area (MTA) is subject to 
reciprocal compensation obligations rather than interstate or 
intrastate access charges. We resolve two issues that have been raised 
before the Commission regarding the correct application of this rule to 
specific traffic patterns. First, we clarify that a call is considered 
to be originated by a CMRS provider for purposes of the intraMTA rule 
only if the calling party initiating the call has done so through a 
CMRS provider. Second, we affirm that all traffic routed to or from a 
CMRS provider that, at the beginning of a call, originates and 
terminates within the same MTA, is subject to reciprocal compensation, 
without exception. In addition to these clarifications, we also deny 
requests that the intraMTA rule be modified to encompass a geographic 
license area known as the regional economic area grouping (REAG).
    66. Finally, recognizing that IP interconnection between providers 
is critical, we agree with the record that, as the industry transitions 
to all IP networks, carriers should begin planning for the transition 
to all-IP networks, and that such a transition will likely be 
appropriate before the completion of the intercarrier

[[Page 73839]]

compensation phase down. Even while our FNPRM is pending, we expect all 
carriers to negotiate in good faith in response to requests for IP-to-
IP interconnection for the exchange of voice traffic. The duty to 
negotiate in good faith has been a longstanding element of 
interconnection requirements under the Communications Act and does not 
depend upon the network technology underlying the interconnection, 
whether TDM, IP, or otherwise.

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

    67. No comments were filed in response to the Mobility Fund NPRM 
IRFA. In response to the USF/ICC Transformation NPRM IRFA, four parties 
filed comments that specifically address the IRFA with respect to 
proposed universal service reform. Valley Telephone Cooperative, 
Cascade Utilities, Molalla Communications and Pine Telephone System 
filed identical but separate comments contending that, since the 
Commission's universal service proposals will cause significant 
financial difficulties for many small companies operating in rural 
America, the Commission's IRFA contained in the NPRM is inadequate. 
These commenters state that the Commission needs to do a full analysis 
of the effect that the proposals will have on small companies serving 
rural areas. In making the determinations reflected in the R&O, we have 
considered the impact of our actions on small entities.
    68. In comments filed in response to the IRFA, concerns were also 
raised regarding the adequacy of the IRFA with respect to proposed 
intercarrier compensation reforms. Bluegrass Telephone Company stated 
that the IRFA was insufficiently specific regarding the proposed access 
stimulation rules, and that the Commission should decline to act on the 
proposed access stimulation rules until the Commission releases a more 
detailed analysis of the rules. Likewise, Furchtgott-Roth Economic 
Enterprises also states that the IRFA was insufficiently specific 
regarding the proposed rule for revenue sharing and access charges. We 
disagree: We believe that the IRFA was adequate and that the 
opportunity for parties, including small business enterprises to 
comment in a publicly accessible docket on the proposed rule revisions 
and other proposals contained in the USF/ICC Transformation NPRM was 
sufficient. The IRFA described that the USF/ICC Transformation NPRM 
sought comment on amendments to the Commission's rules to address 
access stimulation as well as a range of outcomes for access charge 
reform. The IRFA further identified carriers, including small entities 
as possibly being subject to these reforms, including projected 
reporting or other compliance-related requirements.

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

    69. 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 which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
    70. Small Businesses. Nationwide, there are a total of 
approximately 27.5 million small businesses, according to the SBA.
    71. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 2007, there were 3,188 firms in 
this category, total, that operated for the entire year. Of this total, 
3144 firms had employment of 999 or fewer employees, and 44 firms had 
employment of 1000 employees or more. Thus, under this size standard, 
the majority of firms can be considered small.
    72. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. The closest applicable 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, 1,307 carriers reported 
that they were incumbent local exchange service providers. Of these 
1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 
301 have more than 1,500 employees. Consequently, the Commission 
estimates that most providers of local exchange service are small 
entities that may be affected by the rules and policies proposed in the 
R&O.
    73. Incumbent Local Exchange Carriers (incumbent LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to incumbent local exchange 
services. The closest applicable 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, 1,307 carriers reported that they were incumbent local 
exchange service providers. Of these 1,307 carriers, an estimated 1,006 
have 1,500 or fewer employees and 301 have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of incumbent 
local exchange service are small businesses that may be affected by 
rules adopted pursuant to the R&O.
    74. We have included small incumbent LECs in this present RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. We have therefore included 
small incumbent LECs in this RFA analysis, although we emphasize that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    75. Competitive Local Exchange Carriers (competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate size standard under SBA rules is for 
the category Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 1,442 carriers reported that they were 
engaged in the provision of either competitive local exchange services 
or competitive access provider services. Of these 1,442 carriers, an 
estimated 1,256 have 1,500 or fewer employees and 186 have more than 
1,500 employees. In addition, 17 carriers have reported that they are 
Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 
or fewer employees. In addition, 72

[[Page 73840]]

carriers have reported that they are Other Local Service Providers. Of 
the 72, seventy have 1,500 or fewer employees and two have more than 
1,500 employees. Consequently, the Commission estimates that most 
providers of competitive local exchange service, competitive access 
providers, Shared-Tenant Service Providers, and Other Local Service 
Providers are small entities that may be affected by rules adopted 
pursuant to the R&O.
    76. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to interexchange services. The closest applicable 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, 359 companies reported 
that their primary telecommunications service activity was the 
provision of interexchange services. Of these 359 companies, an 
estimated 317 have 1,500 or fewer employees and 42 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by rules adopted pursuant to the R&O.
    77. Prepaid Calling Card Providers. Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
prepaid calling card providers. The appropriate size standard under SBA 
rules is for the category Telecommunications Resellers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 193 carriers have reported that they are 
engaged in the provision of prepaid calling cards. Of these, an 
estimated all 193 have 1,500 or fewer employees and none have more than 
1,500 employees. Consequently, the Commission estimates that the 
majority of prepaid calling card providers are small entities that may 
be affected by rules adopted pursuant to the R&O.
    78. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 213 carriers have reported 
that they are engaged in the provision of local resale services. Of 
these, an estimated 211 have 1,500 or fewer employees and two have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities that may be affected by 
rules adopted pursuant to the R&O.
    79. Toll Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 881 carriers have reported 
that they are engaged in the provision of toll resale services. Of 
these, an estimated 857 have 1,500 or fewer employees and 24 have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities that may be affected by 
rules adopted pursuant to the R&O.
    80. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to Other Toll Carriers. This category includes toll carriers that do 
not fall within the categories of interexchange carriers, operator 
service providers, prepaid calling card providers, satellite service 
carriers, or toll resellers. The closest applicable 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, 284 companies reported that their primary 
telecommunications service activity was the provision of other toll 
carriage. Of these, an estimated 279 have 1,500 or fewer employees and 
five have more than 1,500 employees. Consequently, the Commission 
estimates that most Other Toll Carriers are small entities that may be 
affected by the rules and policies adopted pursuant to the R&O.
    81. 800 and 800-Like Service Subscribers. Neither the Commission 
nor the SBA has developed a small business size standard specifically 
for 800 and 800-like service (toll free) subscribers. The appropriate 
size standard under SBA rules is for the category Telecommunications 
Resellers. Under that size standard, such a business is small if it has 
1,500 or fewer employees. The most reliable source of information 
regarding the number of these service subscribers appears to be data 
the Commission collects on the 800, 888, 877, and 866 numbers in use. 
According to our data, as of September 2009, the number of 800 numbers 
assigned was 7,860,000; the number of 888 numbers assigned was 
5,588,687; the number of 877 numbers assigned was 4,721,866; and the 
number of 866 numbers assigned was 7,867,736. We do not have data 
specifying the number of these subscribers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
toll free subscribers that would qualify as small businesses under the 
SBA size standard. Consequently, we estimate that there are 7,860,000 
or fewer small entity 800 subscribers; 5,588,687 or fewer small entity 
888 subscribers; 4,721,866 or fewer small entity 877 subscribers; and 
7,867,736 or fewer small entity 866 subscribers.
    82. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the SBA has recognized 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. For this category, census data for 2007 show that there were 
1,383 firms that operated for the entire year. Of this total, 1,368 
firms had employment of 999 or fewer employees and 15 had employment of 
1000 employees or more. Similarly, according to Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service 
(PCS), and Specialized Mobile Radio (SMR) Telephony services. Of these, 
an estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Consequently, the Commission estimates that 
approximately half or more of these firms can be considered small. 
Thus, using available data, we estimate that the majority of wireless 
firms can be considered small.
    83. Broadband Personal Communications Service. The broadband 
personal communications service (PCS) spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved

[[Page 73841]]

small business size standards bid successfully for licenses in Blocks A 
and B. There were 90 winning bidders that qualified as small entities 
in the Block C auctions. A total of 93 small and very small business 
bidders won approximately 40 percent of the 1,479 licenses for Blocks 
D, E, and F. In 1999, the Commission re-auctioned 347 C, E, and F Block 
licenses. There were 48 small business winning bidders. In 2001, the 
Commission completed the auction of 422 C and F Broadband PCS licenses 
in Auction 35. Of the 35 winning bidders in this auction, 29 qualified 
as ``small'' or ``very small'' businesses. Subsequent events, 
concerning Auction 35, including judicial and agency determinations, 
resulted in a total of 163 C and F Block licenses being available for 
grant. In 2005, the Commission completed an auction of 188 C block 
licenses and 21 F block licenses in Auction 58. There were 24 winning 
bidders for 217 licenses. Of the 24 winning bidders, 16 claimed small 
business status and won 156 licenses. In 2007, the Commission completed 
an auction of 33 licenses in the A, C, and F Blocks in Auction 71. Of 
the 14 winning bidders, six were designated entities. In 2008, the 
Commission completed an auction of 20 Broadband PCS licenses in the C, 
D, E and F block licenses in Auction 78.
    84. Advanced Wireless Services. In 2008, the Commission conducted 
the auction of Advanced Wireless Services (``AWS'') licenses. This 
auction, which as designated as Auction 78, offered 35 licenses in the 
AWS 1710-1755 MHz and 2110-2155 MHz bands (``AWS-1''). The AWS-1 
licenses were licenses for which there were no winning bids in Auction 
66. That same year, the Commission completed Auction 78. A bidder with 
attributed average annual gross revenues that exceeded $15 million and 
did not exceed $40 million for the preceding three years (``small 
business'') received a 15 percent discount on its winning bid. A bidder 
with attributed average annual gross revenues that did not exceed $15 
million for the preceding three years (``very small business'') 
received a 25 percent discount on its winning bid. A bidder that had 
combined total assets of less than $500 million and combined gross 
revenues of less than $125 million in each of the last two years 
qualified for entrepreneur status. Four winning bidders that identified 
themselves as very small businesses won 17 licenses. Three of the 
winning bidders that identified themselves as a small business won five 
licenses. Additionally, one other winning bidder that qualified for 
entrepreneur status won 2 licenses.
    85. Narrowband Personal Communications Services. In 1994, the 
Commission conducted an auction for Narrowband PCS licenses. A second 
auction was also conducted later in 1994. For purposes of the first two 
Narrowband PCS auctions, ``small businesses'' were entities with 
average gross revenues for the prior three calendar years of $40 
million or less. Through these auctions, the Commission awarded a total 
of 41 licenses, 11 of which were obtained by four small businesses. To 
ensure meaningful participation by small business entities in future 
auctions, the Commission adopted a two-tiered small business size 
standard in the Narrowband PCS Second Report and Order, 65 FR 35875, 
June 6, 2000. A ``small business'' is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A ``very small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. The SBA has approved these small business 
size standards. A third auction was conducted in 2001. Here, five 
bidders won 317 (Metropolitan Trading Areas and nationwide) licenses. 
Three of these claimed status as a small or very small entity and won 
311 licenses.
    86. Paging (Private and Common Carrier). In the Paging Third Report 
and Order, 64 FR 33762, June 24, 1999, we developed a small business 
size standard for ``small businesses'' and ``very small businesses'' 
for purposes of determining their eligibility for special provisions 
such as bidding credits and installment payments. A ``small business'' 
is an entity that, together with its affiliates and controlling 
principals, has average gross revenues not exceeding $15 million for 
the preceding three years. Additionally, a ``very small business'' is 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues that are not more than $3 
million for the preceding three years. The SBA has approved these small 
business size standards. According to Commission data, 291 carriers 
have reported that they are engaged in Paging or Messaging Service. Of 
these, an estimated 289 have 1,500 or fewer employees, and two have 
more than 1,500 employees. Consequently, the Commission estimates that 
the majority of paging providers are small entities that may be 
affected by our action. An auction of Metropolitan Economic Area 
licenses commenced on February 24, 2000, and closed on March 2, 2000. 
Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven companies 
claiming small business status won 440 licenses. A subsequent auction 
of MEA and Economic Area (``EA'') licenses was held in the year 2001. 
Of the 15,514 licenses auctioned, 5,323 were sold. One hundred thirty-
two companies claiming small business status purchased 3,724 licenses. 
A third auction, consisting of 8,874 licenses in each of 175 EAs and 
1,328 licenses in all but three of the 51 MEAs, was held in 2003. 
Seventy-seven bidders claiming small or very small business status won 
2,093 licenses. A fourth auction, consisting of 9,603 lower and upper 
paging band licenses was held in the year 2010. Twenty-nine bidders 
claiming small or very small business status won 3,016 licenses.
    87. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
small business size standard for small entities specifically applicable 
to such incumbent 220 MHz Phase I licensees. To estimate the number of 
such licensees that are small businesses, we apply the small business 
size standard under the SBA rules applicable to Wireless 
Telecommunications Carriers (except Satellite). Under this category, 
the SBA deems a wireless business to be small if it has 1,500 or fewer 
employees. The Commission estimates that nearly all such licensees are 
small businesses under the SBA's small business size standard that may 
be affected by rules adopted pursuant to the R&O.
    88. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
subject to spectrum auctions. In the 220 MHz Third Report and Order, we 
adopted a small business size standard for ``small'' and ``very small'' 
businesses for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. This small 
business size standard indicates that a ``small business'' is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $15 million for the preceding 
three years. A ``very small business'' is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that do not

[[Page 73842]]

exceed $3 million for the preceding three years. The SBA has approved 
these small business size standards. Auctions of Phase II licenses 
commenced on September 15, 1998, and closed on October 22, 1998. In the 
first auction, 908 licenses were auctioned in three different-sized 
geographic areas: three nationwide licenses, 30 Regional Economic Area 
Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of the 908 
licenses auctioned, 693 were sold. Thirty-nine small businesses won 
licenses in the first 220 MHz auction. The second auction included 225 
licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies 
claiming small business status won 158 licenses.
    89. Specialized Mobile Radio. The Commission awards small business 
bidding credits in auctions for Specialized Mobile Radio (``SMR'') 
geographic area licenses in the 800 MHz and 900 MHz bands to entities 
that had revenues of no more than $15 million in each of the three 
previous calendar years. The Commission awards very small business 
bidding credits to entities that had revenues of no more than $3 
million in each of the three previous calendar years. The SBA has 
approved these small business size standards for the 800 MHz and 900 
MHz SMR Services. The Commission has held auctions for geographic area 
licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction was 
completed in 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels was conducted in 1997. Ten bidders claiming that they 
qualified as small businesses under the $15 million size standard won 
38 geographic area licenses for the upper 200 channels in the 800 MHz 
SMR band. A second auction for the 800 MHz band was conducted in 2002 
and included 23 BEA licenses. One bidder claiming small business status 
won five licenses.
    90. The auction of the 1,053 800 MHz SMR geographic area licenses 
for the General Category channels was conducted in 2000. Eleven bidders 
won 108 geographic area licenses for the General Category channels in 
the 800 MHz SMR band qualified as small businesses under the $15 
million size standard. In an auction completed in 2000, a total of 
2,800 Economic Area licenses in the lower 80 channels of the 800 MHz 
SMR service were awarded. Of the 22 winning bidders, 19 claimed small 
business status and won 129 licenses. Thus, combining all three 
auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR 
band claimed status as small business.
    91. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. In 
addition, we do not know how many of these firms have 1,500 or fewer 
employees. We assume, for purposes of this analysis, that all of the 
remaining existing extended implementation authorizations are held by 
small entities, as that small business size standard is approved by the 
SBA.
    92. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (``MDS'') and Multichannel Multipoint Distribution 
Service (``MMDS'') systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (``BRS'') and Educational Broadband Service (``EBS'') 
(previously referred to as the Instructional Television Fixed Service 
(``ITFS'')). In connection with the 1996 BRS auction, the Commission 
established a small business size standard as an entity that had annual 
average gross revenues of no more than $40 million in the previous 
three calendar years. The BRS auctions resulted in 67 successful 
bidders obtaining licensing opportunities for 493 Basic Trading Areas 
(``BTAs''). Of the 67 auction winners, 61 met the definition of a small 
business. BRS also includes licensees of stations authorized prior to 
the auction. At this time, we estimate that of the 61 small business 
BRS auction winners, 48 remain small business licensees. In addition to 
the 48 small businesses that hold BTA authorizations, there are 
approximately 392 incumbent BRS licensees that are considered small 
entities. After adding the number of small business auction licensees 
to the number of incumbent licensees not already counted, we find that 
there are currently approximately 440 BRS licensees that are defined as 
small businesses under either the SBA or the Commission's rules. The 
Commission has adopted three levels of bidding credits for BRS: (i) A 
bidder with attributed average annual gross revenues that exceed $15 
million and do not exceed $40 million for the preceding three years 
(small business) is eligible to receive a 15 percent discount on its 
winning bid; (ii) a bidder with attributed average annual gross 
revenues that exceed $3 million and do not exceed $15 million for the 
preceding three years (very small business) is eligible to receive a 25 
percent discount on its winning bid; and (iii) a bidder with attributed 
average annual gross revenues that do not exceed $3 million for the 
preceding three years (entrepreneur) is eligible to receive a 35 
percent discount on its winning bid. In 2009, the Commission conducted 
Auction 86, which offered 78 BRS licenses. Auction 86 concluded with 
ten bidders winning 61 licenses. Of the ten, two bidders claimed small 
business status and won 4 licenses; one bidder claimed very small 
business status and won three licenses; and two bidders claimed 
entrepreneur status and won six licenses.
    93. In addition, the SBA's Cable Television Distribution Services 
small business size standard is applicable to EBS. There are presently 
2,032 EBS licensees. All but 100 of these licenses are held by 
educational institutions. Educational institutions are included in this 
analysis as small entities. Thus, we estimate that at least 1,932 
licensees are small businesses. Since 2007, Cable Television 
Distribution Services have been defined within the broad economic 
census category of Wired Telecommunications Carriers; that category is 
defined as follows: ``This industry comprises establishments primarily 
engaged in operating and/or providing access to transmission facilities 
and infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired telecommunications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies.'' The SBA defines a small business 
size standard for this category as any such firms having 1,500 or fewer 
employees. The SBA has developed a small business size standard for 
this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 955 firms in this previous category that operated for the entire 
year. Of this total, 939 firms had employment of 999 or fewer 
employees, and 16 firms had employment of 1000 employees or more. Thus, 
under this size standard, the majority of firms can be considered small 
and may be affected by rules adopted pursuant to the R&O.
    94. Lower 700 MHz Band Licenses. The Commission previously adopted

[[Page 73843]]

criteria for defining three groups of small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits. The Commission defined a ``small business'' as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues not exceeding $40 million for the preceding three years. 
A ``very small business'' is defined as an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that are not more than $15 million for the preceding three years. 
Additionally, the Lower 700 MHz Band had a third category of small 
business status for Metropolitan/Rural Service Area (``MSA/RSA'') 
licenses, identified as ``entrepreneur'' and defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA approved these small size standards. The 
Commission conducted an auction in 2002 of 740 Lower 700 MHz Band 
licenses (one license in each of the 734 MSAs/RSAs and one license in 
each of the six Economic Area Groupings (EAGs)). Of the 740 licenses 
available for auction, 484 licenses were sold to 102 winning bidders. 
Seventy-two of the winning bidders claimed small business, very small 
business or entrepreneur status and won a total of 329 licenses. The 
Commission conducted a second Lower 700 MHz Band auction in 2003 that 
included 256 licenses: 5 EAG licenses and 476 Cellular Market Area 
licenses. Seventeen winning bidders claimed small or very small 
business status and won 60 licenses, and nine winning bidders claimed 
entrepreneur status and won 154 licenses. In 2005, the Commission 
completed an auction of 5 licenses in the Lower 700 MHz Band, 
designated Auction 60. There were three winning bidders for five 
licenses. All three winning bidders claimed small business status.
    95. In 2007, the Commission reexamined its rules governing the 700 
MHz band in the 700 MHz Second Report and Order, 72 FR 48814, August 
24, 2007. The 700 MHz Second Report and Order revised the band plan for 
the commercial (including Guard Band) and public safety spectrum, 
adopted services rules, including stringent build-out requirements, an 
open platform requirement on the C Block, and a requirement on the D 
Block licensee to construct and operate a nationwide, interoperable 
wireless broadband network for public safety users. An auction of A, B 
and E block licenses in the Lower 700 MHz band was held in 2008. Twenty 
winning bidders claimed small business status (those with attributable 
average annual gross revenues that exceed $15 million and do not exceed 
$40 million for the preceding three years). Thirty-three winning 
bidders claimed very small business status (those with attributable 
average annual gross revenues that do not exceed $15 million for the 
preceding three years). In 2011, the Commission conducted Auction 92, 
which offered 16 Lower 700 MHz band licenses that had been made 
available in Auction 73 but either remained unsold or were licenses on 
which a winning bidder defaulted. Two of the seven winning bidders in 
Auction 92 claimed very small business status, winning a total of four 
licenses.
    96. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and 
Order, the Commission revised its rules regarding Upper 700 MHz band 
licenses. In 2008, the Commission conducted Auction 73 in which C and D 
block licenses in the Upper 700 MHz band were available. Three winning 
bidders claimed very small business status (those with attributable 
average annual gross revenues that do not exceed $15 million for the 
preceding three years).
    97. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order, 
65 FR 17594, April 4, 2000, we adopted a small business size standard 
for ``small businesses'' and ``very small businesses'' for purposes of 
determining their eligibility for special provisions such as bidding 
credits and installment payments. A ``small business'' is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $40 million for the preceding 
three years. Additionally, a ``very small business'' is an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $15 million for the preceding 
three years. An auction of 52 Major Economic Area (MEA) licenses 
commenced on September 6, 2000, and closed on September 21, 2000. Of 
the 104 licenses auctioned, 96 licenses were sold to nine bidders. Five 
of these bidders were small businesses that won a total of 26 licenses. 
A second auction of 700 MHz Guard Band licenses commenced on February 
13, 2001 and closed on February 21, 2001. All eight of the licenses 
auctioned were sold to three bidders. One of these bidders was a small 
business that won a total of two licenses.
    98. Cellular Radiotelephone Service. Auction 77 was held to resolve 
one group of mutually exclusive applications for Cellular 
Radiotelephone Service licenses for unserved areas in New Mexico. 
Bidding credits for designated entities were not available in Auction 
77. In 2008, the Commission completed the closed auction of one 
unserved service area in the Cellular Radiotelephone Service, 
designated as Auction 77. Auction 77 concluded with one provisionally 
winning bid for the unserved area totaling $25,002.
    99. Private Land Mobile Radio (``PLMR''). PLMR systems serve an 
essential role in a range of industrial, business, land transportation, 
and public safety activities. These radios are used by companies of all 
sizes operating in all U.S. business categories, and are often used in 
support of the licensee's primary (non-telecommunications) business 
operations. For the purpose of determining whether a licensee of a PLMR 
system is a small business as defined by the SBA, we use the broad 
census category, Wireless Telecommunications Carriers (except 
Satellite). This definition provides that a small entity is any such 
entity employing no more than 1,500 persons. The Commission does not 
require PLMR licensees to disclose information about number of 
employees, so the Commission does not have information that could be 
used to determine how many PLMR licensees constitute small entities 
under this definition. We note that PLMR licensees generally use the 
licensed facilities in support of other business activities, and 
therefore, it would also be helpful to assess PLMR licensees under the 
standards applied to the particular industry subsector to which the 
licensee belongs.
    100. As of March 2010, there were 424,162 PLMR licensees operating 
921,909 transmitters in the PLMR bands below 512 MHz. We note that any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, and that any revised rules in this context could therefore 
potentially impact small entities covering a great variety of 
industries.
    101. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio System (``BETRS''). In the present 
context, we will use the SBA's small business size standard applicable 
to Wireless Telecommunications Carriers (except Satellite), i.e., an 
entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and the Commission 
estimates that there are 1,000 or fewer small entity licensees in

[[Page 73844]]

the Rural Radiotelephone Service that may be affected by the rules and 
policies proposed herein.
    102. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. We will use SBA's small business size standard 
applicable to Wireless Telecommunications Carriers (except Satellite), 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 100 licensees in the Air-Ground Radiotelephone Service, 
and we estimate that almost all of them qualify as small under the SBA 
small business size standard and may be affected by rules adopted 
pursuant to the R&O.
    103. Aviation and Marine Radio Services. Small businesses in the 
aviation and marine radio services use a very high frequency (VHF) 
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator 
transmitter. The Commission has not developed a small business size 
standard specifically applicable to these small businesses. For 
purposes of this analysis, the Commission uses the SBA small business 
size standard for the category Wireless Telecommunications Carriers 
(except Satellite), which is 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Most applicants for recreational licenses are individuals. 
Approximately 581,000 ship station licensees and 131,000 aircraft 
station licensees operate domestically and are not subject to the radio 
carriage requirements of any statute or treaty. For purposes of our 
evaluations in this analysis, we estimate that there are up to 
approximately 712,000 licensees that are small businesses (or 
individuals) under the SBA standard. In addition, between December 3, 
1998 and December 14, 1998, the Commission held an auction of 42 VHF 
Public Coast licenses in the 157.1875-157.4500 MHz (ship transmit) and 
161.775-162.0125 MHz (coast transmit) bands. For purposes of the 
auction, the Commission defined a ``small'' business as an entity that, 
together with controlling interests and affiliates, has average gross 
revenues for the preceding three years not to exceed $15 million. In 
addition, a ``very small'' business is one that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $3 million dollars. There are 
approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the above special small business size standards and 
may be affected by rules adopted pursuant to the R&O.
    104. Fixed Microwave Services. Fixed microwave services include 
common carrier, private operational-fixed, and broadcast auxiliary 
radio services. At present, there are approximately 22,015 common 
carrier fixed licensees and 61,670 private operational-fixed licensees 
and broadcast auxiliary radio licensees in the microwave services. The 
Commission has not created a size standard for a small business 
specifically with respect to fixed microwave services. For purposes of 
this analysis, the Commission uses the SBA small business size standard 
for Wireless Telecommunications Carriers (except Satellite), which is 
1,500 or fewer employees. The Commission does not have data specifying 
the number of these licensees that have more than 1,500 employees, and 
thus is unable at this time to estimate with greater precision the 
number of fixed microwave service licensees that would qualify as small 
business concerns under the SBA's small business size standard. 
Consequently, the Commission estimates that there are up to 22,015 
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the 
microwave services that may be small and may be affected by the rules 
and policies adopted herein. We note, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    105. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for 
television broadcasting in the coastal areas of states bordering the 
Gulf of Mexico. There are presently approximately 55 licensees in this 
service. The Commission is unable to estimate at this time the number 
of licensees that would qualify as small under the SBA's small business 
size standard for the category of Wireless Telecommunications Carriers 
(except Satellite). Under that SBA small business size standard, a 
business is small if it has 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Thus, under this category and the associated small business size 
standard, the majority of firms can be considered small.
    106. 39 GHz Service. The Commission created a special small 
business size standard for 39 GHz licenses--an entity that has average 
gross revenues of $40 million or less in the three previous calendar 
years. An additional size standard for ``very small business'' is: an 
entity that, together with affiliates, has average gross revenues of 
not more than $15 million for the preceding three calendar years. The 
SBA has approved these small business size standards. The auction of 
the 2,173 39 GHz licenses began on April 12, 2000 and closed on May 8, 
2000. The 18 bidders who claimed small business status won 849 
licenses. Consequently, the Commission estimates that 18 or fewer 39 
GHz licensees are small entities that may be affected by rules adopted 
pursuant to the R&O.
    107. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (``LMDS'') is a fixed broadband point-to-
multipoint microwave service that provides for two-way video 
telecommunications. The auction of the 986 LMDS licenses began and 
closed in 1998. The Commission established a small business size 
standard for LMDS licenses as an entity that has average gross revenues 
of less than $40 million in the three previous calendar years. An 
additional small business size standard for ``very small business'' was 
added as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. The SBA has approved these small business size 
standards in the context of LMDS auctions. There were 93 winning 
bidders that qualified as small entities in the LMDS auctions. A total 
of 93 small and very small business bidders won approximately 277 A 
Block licenses and 387 B Block licenses. In 1999, the Commission re-
auctioned 161 licenses; there were 32 small and very small businesses 
winning that won 119 licenses.
    108. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In the 
218-219 MHz Report and Order and Memorandum Opinion and Order, we

[[Page 73845]]

established a small business size standard for a ``small business'' as 
an entity that, together with its affiliates and persons or entities 
that hold interests in such an entity and their affiliates, has average 
annual gross revenues not to exceed $15 million for the preceding three 
years. A ``very small business'' is defined as an entity that, together 
with its affiliates and persons or entities that hold interests in such 
an entity and its affiliates, has average annual gross revenues not to 
exceed $3 million for the preceding three years. These size standards 
will be used in future auctions of 218-219 MHz spectrum.
    109. 2.3 GHz Wireless Communications Services. This service can be 
used for fixed, mobile, radiolocation, and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the 
wireless communications services (``WCS'') auction as an entity with 
average gross revenues of $40 million for each of the three preceding 
years, and a ``very small business'' as an entity with average gross 
revenues of $15 million for each of the three preceding years. The SBA 
has approved these definitions. The Commission auctioned geographic 
area licenses in the WCS service. In the auction, which was conducted 
in 1997, there were seven bidders that won 31 licenses that qualified 
as very small business entities, and one bidder that won one license 
that qualified as a small business entity.
    110. 1670-1675 MHz Band. An auction for one license in the 1670-
1675 MHz band was conducted in 2003. The Commission defined a ``small 
business'' as an entity with attributable average annual gross revenues 
of not more than $40 million for the preceding three years and thus 
would be eligible for a 15 percent discount on its winning bid for the 
1670-1675 MHz band license. Further, the Commission defined a ``very 
small business'' as an entity with attributable average annual gross 
revenues of not more than $15 million for the preceding three years and 
thus would be eligible to receive a 25 percent discount on its winning 
bid for the 1670-1675 MHz band license. One license was awarded. The 
winning bidder was not a small entity.
    111. 3650-3700 MHz band. In March 2005, the Commission released a 
Report and Order and Memorandum Opinion and Order that provides for 
nationwide, non-exclusive licensing of terrestrial operations, 
utilizing contention-based technologies, in the 3650 MHz band (i.e., 
3650-3700 MHz). As of April 2010, more than 1270 licenses have been 
granted and more than 7433 sites have been registered. The Commission 
has not developed a definition of small entities applicable to 3650-
3700 MHz band nationwide, non-exclusive licensees. However, we estimate 
that the majority of these licensees are Internet Access Service 
Providers (ISPs) and that most of those licensees are small businesses.
    112. 24 GHz--Incumbent Licensees. This analysis may affect 
incumbent licensees who were relocated to the 24 GHz band from the 18 
GHz band, and applicants who wish to provide services in the 24 GHz 
band. For this service, the Commission uses the SBA small business size 
standard for the category ``Wireless Telecommunications Carriers 
(except satellite),'' which is 1,500 or fewer employees. To gauge small 
business prevalence for these cable services we must, however, use the 
most current census data. Census data for 2007, which supersede data 
contained in the 2002 Census, show that there were 1,383 firms that 
operated that year. Of those 1,383, 1,368 had fewer than 100 employees, 
and 15 firms had more than 100 employees. Thus under this category and 
the associated small business size standard, the majority of firms can 
be considered small. The Commission notes that the Census' use of the 
classifications ``firms'' does not track the number of ``licenses''. 
The Commission believes that there are only two licensees in the 24 GHz 
band that were relocated from the 18 GHz band, Teligent and TRW, Inc. 
It is our understanding that Teligent and its related companies have 
less than 1,500 employees, though this may change in the future. TRW is 
not a small entity. Thus, only one incumbent licensee in the 24 GHz 
band is a small business entity.
    113. 24 GHz--Future Licensees. With respect to new applicants in 
the 24 GHz band, the size standard for ``small business'' is an entity 
that, together with controlling interests and affiliates, has average 
annual gross revenues for the three preceding years not in excess of 
$15 million. ``Very small business'' in the 24 GHz band is an entity 
that, together with controlling interests and affiliates, has average 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved these small business size standards. These size 
standards will apply to a future 24 GHz license auction, if held.
    114. Satellite Telecommunications. Since 2007, the SBA has 
recognized satellite firms within this revised category, with a small 
business size standard of $15 million. The most current Census Bureau 
data are from the economic census of 2007, and we will use those 
figures to gauge the prevalence of small businesses in this category. 
Those size standards are for the two census categories of ``Satellite 
Telecommunications'' and ``Other Telecommunications.'' Under the 
``Satellite Telecommunications'' category, a business is considered 
small if it had $15 million or less in average annual receipts. Under 
the ``Other Telecommunications'' category, a business is considered 
small if it had $25 million or less in average annual receipts.
    115. The first category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing point-to-point 
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 2007 show that there were a total of 512 firms that 
operated for the entire year. Of this total, 464 firms had annual 
receipts of under $10 million, and 18 firms had receipts of $10 million 
to $24,999,999. Consequently, we estimate that the majority of 
Satellite Telecommunications firms are small entities that might be 
affected by rules adopted pursuant to the R&O.
    116. The second category of Other Telecommunications ``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. Establishments providing Internet services or 
voice over Internet protocol (VoIP) services via client-supplied 
telecommunications connections are also included in this industry.'' 
For this category, Census Bureau data for 2007 show that there were a 
total of 2,383 firms that operated for the entire year. Of this total, 
2,346 firms had annual receipts of under $25 million. Consequently, we 
estimate that the majority of Other Telecommunications firms are small 
entities that might be affected by our action.
    117. Cable and Other Program Distribution. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers; that

[[Page 73846]]

category is defined as follows: ``This industry comprises 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies.'' The SBA has 
developed a small business size standard for this category, which is: 
all such firms having 1,500 or fewer employees. According to Census 
Bureau data for 2007, there were a total of 955 firms in this previous 
category that operated for the entire year. Of this total, 939 firms 
had employment of 999 or fewer employees, and 16 firms had employment 
of 1000 employees or more. Thus, under this size standard, the majority 
of firms can be considered small and may be affected by rules adopted 
pursuant to the R&O.
    118. Cable Companies and Systems. The Commission has developed its 
own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
indicate that, of 1,076 cable operators nationwide, all but eleven are 
small under this size standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that, of 7,208 systems nationwide, 
6,139 systems have under 10,000 subscribers, and an additional 379 
systems have 10,000-19,999 subscribers. Thus, under this second size 
standard, most cable systems are small and may be affected by rules 
adopted pursuant to the R&O.
    119. Cable System Operators. The Act also contains a size standard 
for small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' The Commission has determined that an 
operator serving fewer than 677,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all its affiliates, do not exceed $250 million in the 
aggregate. Industry data indicate that, of 1,076 cable operators 
nationwide, all but ten are small under this size standard. We note 
that the Commission neither requests nor collects information on 
whether cable system operators are affiliated with entities whose gross 
annual revenues exceed $250 million, and therefore we are unable to 
estimate more accurately the number of cable system operators that 
would qualify as small under this size standard.
    120. Open Video Services. The open video system (``OVS'') framework 
was established in 1996, and is one of four statutorily recognized 
options for the provision of video programming services by local 
exchange carriers. The OVS framework provides opportunities for the 
distribution of video programming other than through cable systems. 
Because OVS operators provide subscription services, OVS falls within 
the SBA small business size standard covering cable services, which is 
``Wired Telecommunications Carriers.'' The SBA has developed a small 
business size standard for this category, which is: all such firms 
having 1,500 or fewer employees. According to Census Bureau data for 
2007, there were a total of 955 firms in this previous category that 
operated for the entire year. Of this total, 939 firms had employment 
of 999 or fewer employees, and 16 firms had employment of 1000 
employees or more. Thus, under this second size standard, most cable 
systems are small and may be affected by rules adopted pursuant to the 
R&O. In addition, we note that the Commission has certified some OVS 
operators, with some now providing service. Broadband service providers 
(``BSPs'') are currently the only significant holders of OVS 
certifications or local OVS franchises. The Commission does not have 
financial or employment information regarding the entities authorized 
to provide OVS, some of which may not yet be operational. Thus, again, 
at least some of the OVS operators may qualify as small entities.
    121. Internet Service Providers. Since 2007, these services have 
been defined within the broad economic census category of Wired 
Telecommunications Carriers; that category is defined as follows: 
``This industry comprises establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' The SBA has developed a small business size standard 
for this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were 3,188 
firms in this category, total, that operated for the entire year. Of 
this total, 3144 firms had employment of 999 or fewer employees, and 44 
firms had employment of 1000 employees or more. Thus, under this size 
standard, the majority of firms can be considered small. In addition, 
according to Census Bureau data for 2007, there were a total of 396 
firms in the category Internet Service Providers (broadband) that 
operated for the entire year. Of this total, 394 firms had employment 
of 999 or fewer employees, and two firms had employment of 1000 
employees or more. Consequently, we estimate that the majority of these 
firms are small entities that may be affected by rules adopted pursuant 
to the R&O.
    122. Internet Publishing and Broadcasting and Web Search Portals. 
Our action may pertain to interconnected VoIP services, which could be 
provided by entities that provide other services such as email, online 
gaming, web browsing, video conferencing, instant messaging, and other, 
similar IP-enabled services. The Commission has not adopted a size 
standard for entities that create or provide these types of services or 
applications. However, the Census Bureau has identified firms that 
``primarily engaged in (1) publishing and/or broadcasting content on 
the Internet exclusively or (2) operating Web sites that use a search 
engine to generate and maintain extensive databases of Internet 
addresses and content in an easily searchable format (and known as Web 
search portals).'' The SBA has developed a small business size standard 
for this category, which is: all such firms having 500 or fewer 
employees. According to Census Bureau data for 2007, there were 2,705 
firms in this category that operated for the entire year. Of this 
total, 2,682 firms had employment of 499 or fewer employees, and 23 
firms had employment of 500 employees or more. Consequently, we 
estimate that the majority of these firms are small entities that may 
be affected by rules adopted pursuant to the R&O.
    123. Data Processing, Hosting, and Related Services. Entities in 
this category ``primarily * * * provid[e] infrastructure for hosting or 
data processing services.'' The SBA has developed a small business size 
standard for this category; that size standard is $25 million or less 
in average annual receipts. According to Census Bureau data for 2007, 
there were 8,060 firms in this category that operated for the entire 
year. Of these, 7,744 had annual receipts of under $24,999,999. 
Consequently, we estimate that the majority of these firms are small 
entities that may be affected by rules adopted pursuant to the R&O.

[[Page 73847]]

    124. All Other Information Services. The Census Bureau defines this 
industry as including ``establishments primarily engaged in providing 
other information services (except news syndicates, libraries, 
archives, Internet publishing and broadcasting, and Web search 
portals).'' Our action pertains to interconnected VoIP services, which 
could be provided by entities that provide other services such as 
email, online gaming, web browsing, video conferencing, instant 
messaging, and other, similar IP-enabled services. The SBA has 
developed a small business size standard for this category; that size 
standard is $7.0 million or less in average annual receipts. According 
to Census Bureau data for 2007, there were 367 firms in this category 
that operated for the entire year. Of these, 334 had annual receipts of 
under $5.0 million, and an additional 11 firms had receipts of between 
$5 million and $9,999,999. Consequently, we estimate that the majority 
of these firms are small entities that may be affected by our action.

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

    125. This R&O has two components, modernization of the Commission's 
universal service system and reform of the Commission's intercarrier 
compensation mechanism. We summarize below the recordkeeping and other 
obligations of the R&O. Additional information on each of these 
requirements can be found in the R&O.
    126. In the R&O, the Commission takes several steps to harmonize 
and update annual reporting requirements relating to universal service 
recipients. We extend current reporting requirements for voice service 
to all ETCs, and we adopt uniform broadband reporting requirements for 
all ETCs. We also adopt rules requiring the reporting of financial and 
ownership information to assist our discharge of statutory 
requirements.
    127. We extend the current federal annual reporting requirements to 
all ETCs that receive high-cost support, except recipients of only 
Mobility Fund Phase I support, as a baseline requirement. We also 
revise the Commission's annual reporting and certification requirements 
and create new requirements applicable to all ETCs that receive high-
cost support, except recipients of only Mobility Fund Phase I support, 
to ensure carriers are complying with public interest obligations, 
including new broadband-related requirements, and that they are using 
the funds they receive for the intended purposes. These requirements 
include reports and certifications concerning deployment, performance 
requirements, service quality, rates, and financial and ownership 
information. Included in these requirements is a requirement that 
recipients of funding test their broadband networks for compliance with 
speed and latency metrics and certify to and report the results to the 
Universal Service Administrative Company on an annual basis. These 
results will be subject to audit. We also create new reporting 
requirements for carriers electing to receive CAF Phase I incremental 
support. Specifically, carriers will be required to file notices 
identifying where they will deploy broadband to in connection with 
their incremental support, and they will be required, as part of their 
annual filings, to certify that they have met required deployment 
milestones. Mobility Fund recipients will be required to file annual 
reports demonstrating the coverage provided with the Mobility Fund 
support for a period of five years after qualifying for the support. 
These annual report must include information such as project 
descriptions and data from network coverage drive tests. We also 
establish certain reporting requirements for applicants seeking to 
participate in an auction to bid for Mobility Fund support. These 
requirements include the disclosure of information such as parties' 
ownership information and the source of the spectrum they plan to use 
to meet their Mobility Fund obligations in the particular area(s) for 
which they plan to bid. Winning bidders who apply for funds awarded 
through the reverse auction must satisfy additional reporting 
requirements, including the provision of detailed ownership 
information. These winning bidders must also provide an irrevocable 
stand-by Letter of Credit in an amount equal to the amount of Mobility 
Fund support as it is disbursed. All winning bidders, regardless of 
criteria such as capitalization level, will be required to meet the 
Letter of Credit requirement. The Commission concluded that limiting 
the requirement to bidders below a certain level of capitalization 
would likely disproportionately burden small business entities, even 
though small entities are often less able to sustain the additional 
cost burden of posting financial security while still being able to 
compete with larger entities.
    128. Recognizing that existing five-year build out plans may need 
to change to account for new broadband obligations adopted in the R&O, 
we require all ETCs to file a new five-year build-out plan in a manner 
consistent with our rules. ETCs will also be required to include in 
their annual reports information regarding their progress on this five-
year broadband build-out plan beginning April 1, 2014. We require all 
rate-of-return ETCs receiving support to include a self-certification 
letter certifying that they are taking reasonable steps to offer 
broadband service throughout their service area and that requests for 
such service are met within a reasonable amount of time. We also 
require all ETCs receiving CAF support in price cap territories based 
on a forward-looking cost model to include a self-certification letter 
certifying that they are meeting the interim deployment milestones as 
set forth under our revised public interest obligations and that they 
are taking reasonable steps to meet increased speed obligations that 
will exist for all supported locations before the expiration of the 
five-year term for CAF Phase II funding.
    129. The rules adopted to address arbitrage practices will affect 
certain carriers, potentially including small entities. Carriers that 
meet the definition of access stimulation will generally be required to 
file revised tariffs to account for the change in the volume of their 
traffic. Further, the modifications to address phantom traffic will 
apply to all service providers, including small entities, that 
originate interstate or intrastate traffic on the PSTN, or that 
originate inter- or intrastate interconnected VoIP traffic. These 
measures will require service providers to transmit the telephone 
number associated with the calling party to the next provider in the 
call path and intermediate providers to pass calling party number or 
charge number signaling information they receive from other providers 
unaltered, to subsequent providers in the call path. Service providers, 
including small entities, may need to modify some administrative 
processes relating to their signaling and billing systems as a result 
of these rule changes.
    130. As part of our comprehensive reform of the intercarrier 
compensation system, we establish a uniform, national transition for 
default intercarrier compensation rate levels. We set forth two 
separate transition paths--one for price cap carriers and competitive 
LECs that benchmark to price cap rates and one for rate-of-return 
carriers and competitive LECs that benchmark to rate-of-return rates. 
For the transition of default rates, carriers, including small 
entities, may be required to adjust their record-keeping, 
administrative and billing systems, and interstate and

[[Page 73848]]

intrastate tariff filings in order to effectuate necessary changes to 
rate levels. At the same time, carriers will remain free to enter into 
alternative intercarrier compensation agreements.
    131. We also adopt a transitional recovery mechanism in order to 
facilitate incumbent LECs' gradual transition away from existing 
revenues. The mechanism will allow LECs to partially recover ICC 
revenues reduced as part of our intercarrier compensation reforms from 
sources such as reasonable increases to end user charges and, where 
appropriate, universal service support. As part of our recovery 
mechanism and to evaluate compliance with the R&O and rules, incumbent 
local exchange carriers electing to participate in the recovery 
mechanism, including small entities, will be required to file data 
annually regarding rates, revenues, expenses and demand with the 
Commission, states, and Universal Service Administrative Company 
(USAC), as applicable. These data are needed to monitor compliance as 
well as the impact of the reforms we adopt today and to enable the 
Commission to resolve the issues teed up in the FNPRM regarding the 
appropriate transition to bill-and-keep. To minimize any burden, 
filings will be aggregated at the holding company level when possible, 
limited to the preceding fiscal year, and will include data carriers 
must monitor to comply with our recovery mechanism rules. For carriers 
eligible and electing to receive ICC CAF support, we will ensure that 
the data filed with USAC is consistent with our request, so that 
carriers can use the same format for both filings. All such information 
may be filed under protective order and will be treated as 
confidential.
    132. We adopt a prospective intercarrier compensation framework for 
VoIP traffic. Pursuant to this framework, we allow carriers to tariff 
default intercarrier compensation charges for toll VoIP-PSTN traffic in 
the absence of an agreement for different intercarrier compensation. 
VoIP and other service providers, including small entities, may need to 
modify or adopt administrative, record-keeping or other processes to 
implement the new intercarrier compensation framework applicable to 
VoIP traffic. Service providers may also need to revise their 
interstate and intrastate tariffs to account for these changes. For 
interstate toll VoIP-PSTN traffic, the relevant language will be 
included in a tariff filed with the Commission, and for intrastate toll 
VoIP-PSTN traffic, the rates may be included in a state tariff.
    133. Finally, we clarify that the compensation obligations under 
section 20.11 of our rules, 47 CFR Sec.  20.11 are coextensive with the 
reciprocal compensation requirements under 251(b)(5) and we adopt bill-
and-keep as the default compensation for non-access traffic exchanged 
between LECs and CMRS providers. To further ease the move to bill-and-
keep LEC-CMRS traffic for rate-of-return carriers, we limit rate-of-
return carriers' responsibility for the costs of transport involving 
non-access traffic exchanged between CMRS providers and rural, rate-of-
return regulated LECs. In addition, as described above, we make 
clarifications surrounding the intraMTA rule. As a result of these 
actions, service providers, including small entities, may need to 
modify some of their processes surrounding the billing and collection 
of intercarrier compensation.

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

    134. 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.
1. Universal Service
    135. The Commission is aware that some of the universal service 
proposals under consideration may impact small entities. The Commission 
held meetings with small carriers that operate in the most rural areas 
of the nation and considered the economic impact on small entities, as 
identified in comments filed in response to the USF/ICC Transformation 
NPRM and the Mobility Fund NPRM, in reaching its final conclusions and 
taking action in this proceeding. In addition, the Commission held a 
workshop in Nebraska in order to hear directly from small companies 
serving rural America. The Commission also held various meetings in 
Alaska and other rural areas, including those in South Dakota.
    136. The Commission recognizes that, in the absence of any federal 
mandate to provide broadband, rate-of-return carriers have been 
deploying broadband to millions of rural Americans, often with support 
from a combination of loans from lenders and ongoing universal service 
support. Rather than establishing a mandatory requirement to deploy 
broadband-capable facilities to all locations within their service 
territory, we continue to offer a more flexible approach for these 
smaller carriers. They will be required to provide their customers with 
at least the same initial minimum level of broadband service as those 
carriers who receive model-based support, but given their size, we 
determine that they should be provided more flexibility in how they 
make incremental progress in edging out their broadband-capable 
networks in response to consumer demand; we do not adopt nor impose 
intermediate build-out milestones. The broadband deployment obligation 
we adopt is similar to the voice deployment obligations many of these 
carriers are subject to today.
    137. The Commission also considered the economical impact on 
smaller rate-of-return carriers. Although they serve a smaller portion 
of access lines in the U.S, smaller rate-of-return carriers operate in 
many of the most difficult and expensive areas to serve. Recognizing 
the economic challenges of extending service in the high-cost areas of 
the country served by rate-of-return carriers, especially smaller 
carriers, our flexible approach does not require rate-of-return 
carriers to extend service to customers absent a reasonable request by 
customers. In addition, we also do not specifically shift these smaller 
rate-of-return carriers from current support mechanisms or shift them 
to a model or reverse auction mechanism because we realize that these 
smaller rate-of-return carriers are indeed unique.
    138. Many small carriers operating in more remote rural areas have 
argued that universal service support provides a significant share of 
their revenues, and thus sudden changes in the current support 
mechanisms could have a significant impact on their operations. The 
reforms we adopt today are interim steps that are necessary to allow 
these rate-of-return carriers to continue receiving support based on 
existing mechanisms for the time being, but also begins the process of 
transitioning carriers to a more incentive-based form of regulation.
    139. The Commission further recognizes that the existing regulatory 
structure and competitive trends places many small carriers under 
financial strain and inhibits the ability of these providers to raise 
capital. We take a number of important steps to enhance the 
sustainability of the universal

[[Page 73849]]

service mechanism in the R&O and are careful to implement these changes 
in a gradual manner so that our efforts do not jeopardize investments 
made consistent with existing rules. Our goal is to ensure the 
continued availability and affordability of offerings in the rural and 
remote communities served by many of these smaller carriers. We provide 
rate-of-return carriers the predictability of remaining under the 
legacy universal service system in the near-term, while giving notice 
that we intend to transition to more incentive-based regulation in the 
near future. We believe that this approach will provide a more stable 
base going forward for these carriers and the communities they serve. 
Today's package of universal service reforms is targeted at eliminating 
inefficiencies and closing gaps in our system, not at making 
indiscriminate industry-wide reductions.
    140. The Commission also considered the significant economic impact 
of the CAF Phase I incremental support mechanism on small entities. 
Most price cap carriers that may receive support under the mechanism 
are not small. To the extent small carriers elect to receive 
incremental support, there are additional obligations on such carriers. 
However, the Commission believes that the burdens associated with 
meeting these obligations are outweighed by the support provided to 
meet those obligations, as well as the accompanying public benefits. 
Carriers may also decline to receive incremental support, and the 
obligations associated with such support, by filing a notice to that 
effect.
    141. The Commission considered the significant economic impact of 
eliminating the identical support rule on small entities. Small 
entities here impacted include small competitive ETCs that receive 
high-cost universal service support pursuant to the identical support 
rule. Although retaining the identical support rule may have minimized 
the significant economic impact for some small competitive ETCs, the 
Commission concluded that the rule did not efficiently or effectively 
promote the Commission's universal service goals, including the 
deployment of mobile services. The Commission did, however, minimize 
the significant economic impact on small entities by phasing down 
support over a period of five years, by which time support will be 
available for many small entities pursuant to Mobility Fund Phase II, 
Tribal Mobility Fund Phase II, and CAF Phase II. We note that Tribal 
Mobility Fund Phase II will provide a dedicated form of support for 
areas that historically have been served by small entities.
    142. Further, the Commission took steps to minimize significant 
economic impacts by automatically pausing the phase-down of support 
received pursuant to the identical support rule if the Mobility Fund 
Phase II or, for some small entities, Tribal Mobility Fund Phase II is 
not operational by June 30, 2014. In addition, the Commission delayed 
the phase-down for certain carriers serving remote parts of Alaska and 
a Tribally-owned competitive ETC, Standing Rock Telecommunications, 
that received its ETC designation in 2011. In the Commission's 
consideration, these small entities are potentially subject to 
significant economic impact as a result of an immediate commencement of 
the phase-down and the delayed phase-down will minimize the impact.
    143. The R&O harmonizes and updates the Commission's Universal 
Service reporting requirements, extending current requirements for 
voice service to all ETCs. This extension of the reporting requirements 
will benefit the public interest. The R&O seeks to minimize reporting 
burdens where possible by requiring certifications rather than data 
collections and by permitting the use of reports already filed with 
other government agencies, rather than requiring the production of new 
ones. The R&O extends the record retention requirement from a period of 
five to ten years for purposes of litigation under the False Claims 
Act. The Commission believes that any burdens that may be associated 
with these requirements is outweighed by the accompanying public 
benefits.
2. Intercarrier Compensation
    144. As a general matter, our actions in the R&O should benefit all 
service providers, including small entities, by facilitating the 
exchange of traffic and providing greater regulatory certainty and 
reduced litigation costs. In the USF/ICC Transformation NPRM, we 
encouraged small entities to bring to the Commission's attention any 
specific concerns that they had, including on any issues or measures 
that may apply to small entities in a unique fashion. As described 
below, in many cases, including for transition paths, recovery, and for 
certain reporting requirements, we sought to tailor the impact of our 
reforms to the needs of small entities. In other cases, however, we did 
not identify any feasible alternatives that would have lessened the 
economic impact on small entities while achieving the vital reform of 
the intercarrier compensation system.
    145. We considered a range of alternative proposals in regard to 
our rules designed to address access stimulation. As detailed in the 
R&O, in response to the record, we found it appropriate to include a 
traffic measurement condition in the definition of access stimulation. 
Unlike some proposals in the record, however, as part of this 
measurement condition, we do not require all LECs, including small 
entities, to file traffic reports. Instead, we allow carriers paying 
switched access charges to observe and file complaints based on their 
own traffic patterns. We concluded that this approach is less 
burdensome to all LECs, including small entities, than a system that 
would require all LECs to file traffic reports, as some proposed in the 
record. Similarly, we also rejected the use of alternative definitional 
triggers for access stimulation, such as per line MOU limits, in part, 
to avoid the creation of new self-reporting requirements that could 
prove burdensome to carriers, including small entities. Finally, our 
access stimulation rules respond to a concern raised by the Louisiana 
Small Carrier Committee. Specifically, if a carrier terminates its 
access revenue sharing agreement before the date on which it would be 
required to file a revised tariff, then that carrier will not be 
required to file a revised tariff. This will serve to eliminate any 
potential to burden such carriers when there is no reason to do so.
    146. In the R&O, we set forth default transition paths for 
terminating end office switching and certain transport rate elements as 
part of the transition to a bill-and-keep framework. In adopting these 
default paths, we take into account the unique concerns facing small 
entities, including many rate-of-return LECs as well as entities that 
operate in rate-of-return service areas. Accordingly, we set forth a 
six-year transition for price cap carriers and competitive LECs that 
benchmark to price cap rates. We adopt a longer nine-year transition 
for rate-of-return carriers and competitive LECs that benchmark to 
rate-of-return carrier rates. We found that additional time for rate-
of-return carriers and those that benchmark to their rates recognizes 
the often higher rates of and circumstances unique to these carriers. 
The longer transition also provides them with a predictable glide path 
and appropriately balances any adverse impact that could arise from 
moving carriers too quickly from the existing intercarrier compensation 
system.

[[Page 73850]]

    147. The R&O establishes a transitional recovery mechanism to help 
transition incumbent LECs away from existing revenues, but tailored by 
type of carrier. To this end, we set forth different methodologies for 
the calculation of Eligible Recovery for price cap carriers and rate-
of-return carriers. As we describe in the R&O, for price cap carriers, 
our recovery mechanism will allow them to determine at the outset 
exactly how much their Eligible Recovery will be each year. For rate-
of-return carriers, we adopt a recovery mechanism that provides more 
certainty and predictability than exists today and rewards carriers for 
efficiencies achieved in switching costs. Rate-of-return carriers will 
be able to determine their total intercarrier compensation and recovery 
revenues for all transitioned elements, for each year of the 
transition. We find that providing this greater degree of certainty for 
rate-of-return carriers, which are generally smaller and less able to 
respond to changes in market conditions than price cap carriers, is 
necessary to provide a reasonable transition from the existing 
intercarrier compensation system. And, we further tailor the 
obligations for broadband deployment applicable to rate-of-return and 
price cap carriers as well as the phase out period applicable to each 
for the receipt of CAF support. Whereas the phase out of CAF support 
for price cap carriers will be three years beginning in 2017, ICC CAF 
support for smaller rate-of-return carriers will phase down as Eligible 
Revenue decreases over time, but not be subject to other reductions. In 
addition, as we note above, we establish a presumption that our reforms 
allow incumbent LECs to earn a reasonable return on investment, but at 
the same time establish a ``Total Costs and Earnings Review'' through 
which a carrier may petition the Commission to rebut this presumption. 
This will ensure that individual carriers, including small entities, 
are able to seek additional recovery to prevent a taking, where 
necessary. For competitive LECs, which are not subject to the 
Commission's end user rate regulations and have greater freedom to set 
rates and determine which customer to serve, CAF support will not be 
available for recovery. Competitive LECs may recover lost intercarrier 
compensation revenues through their end user charges.
    148. Above all, our tailored approach to transitional recovery is 
designed to balance the different circumstances facing the different 
carrier types and provide all carriers with necessary predictability, 
certainty and stability to transition from the current intercarrier 
compensation system. With regard to small carriers in particular, our 
transitional recovery mechanism includes an assortment of measures to 
moderate the impact of our reforms on small carriers and provide such 
carriers with certainty and predictability with regard to their 
recovery.
    149. With respect to the prospective VoIP traffic, we believe that 
the VoIP-PSTN intercarrier compensation framework that we adopt best 
balances the policy considerations of providing certainty regarding 
prospective intercarrier compensation obligations for VoIP-PSTN 
traffic, while acknowledging the flaws with the current intercarrier 
compensation regimes. With regard to the scope of our reform, as 
intercarrier disputes have encompassed all forms of what we define as 
VoIP-PSTN traffic, including ``one-way'' VoIP services, we believe 
addressing this traffic comprehensively will help guard against new 
forms of arbitrage. As part of our reform, we adopt transitional rules 
that will specify, prospectively, the default compensation for VoIP-
PSTN traffic. We reject approaches, including an immediate adoption of 
a bill-and-keep methodology for VoIP traffic or to delay reform of VoIP 
traffic to a future point on the glide path. Instead, the framework 
that we adopt in the R&O will provide greater certainty to service 
providers, including small entities, regarding intercarrier 
compensation revenue and reduce intercarrier compensation disputes. Our 
transitional VoIP-PSTN intercarrier compensation framework provides the 
opportunity for some revenues in conjunction with other appropriate 
recovery opportunities adopted as part of comprehensive intercarrier 
compensation and universal service reform. We rely on existing 
mechanisms, including tariffs to implement our approach. Carriers may 
tariff charges at rates equal to interstate access rates for toll VoIP-
PSTN traffic in federal or state tariffs, though remain free to 
negotiate interconnection agreements specifying alternative 
compensation for that traffic. This prospective regime facilitates the 
benefits that can arise from negotiated agreements, without sacrificing 
the revenue predictability traditionally associated with tariffing 
regimes. In contrast to proposals to require certifications regarding 
carriers' reported VoIP-PSTN traffic, we also provide all carriers, 
including small entities, with tools to use in their tariffs to help 
distinguish VoIP-PSTN traffic. The transitional regime for VoIP-PSTN 
intercarrier compensation, which allows LECs to tariff charges, also 
mitigates the concerns of some commenters regarding disparate leverage 
that may exist in interconnection negotiations.
    150. Finally, with respect to our reforms applicable to 
intercarrier compensation for wireless traffic, we note that our 
decision to treat ``reasonable compensation'' requirements under Sec.  
20.11, 47 CFR 20.11, as coextensive with the scope of reciprocal 
compensation requirements under section 251(b)(5) of the Act. We also 
find it in the public interest to set a default pricing methodology of 
bill-and-keep for LEC-CMRS intraMTA traffic, which shall reduce growing 
confusion and litigation for these carriers. This action presents a 
smaller risk of market disruption than would an immediate shift to 
bill-and-keep more generally and our recovery mechanism provides 
incumbent LECs with a stable, predictable recovery for reduced 
intercarrier compensation revenues and we further limit rate-of-return 
carriers' responsibility for the costs of transport involving non-
access traffic exchange between CMRS providers and rural, rate-of-
return LECs.

I. Report to Congress

    151. The Commission will send a copy of the R&O, including this 
FRFA, in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996. In addition, the Commission will send 
a copy of the R&O, including the FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. A copy of the R&O and 
FRFA (or summaries thereof) will also be published in the Federal 
Register.

List of Subjects

47 CFR Part 0

    Authority delegations (government agencies).

47 CFR Part 1

    Administrative practice and procedure, Communications common 
carriers, Telecommunications.

47 CFR Part 20

    Communications common carriers, Communications equipment, Radio.

47 CFR Part 36

    Communications common carriers, Reporting and Recordkeeping 
Requirements, Telephone, Uniform systems of accounts.

[[Page 73851]]

47 CFR Part 51

    Communications common carriers, Telecommunications.

47 CFR Part 54

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

47 CFR Parts 61 and 69

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 64

    Communications common carriers, Individuals with disabilities, 
Reporting and Recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 0, 1, 20, 36, 51, 54, 61, 
64, and 69 to read as follows:

PART 0--COMMISSION ORGANIZATION

0
1. The authority citation for part 0 continues to read as follows:

    Authority: Sec. 5, 48 Stat. 1068, as amended, 47 U.S.C. 155, 
225, unless otherwise noted.


0
2. Amend Sec.  0.91 by adding paragraph (p) to read as follows:


Sec.  0.91  Functions of the Bureau.

* * * * *
    (p) In coordination with the Wireless Telecommunications Bureau, 
serves as the Commission's principal policy and administrative staff 
resource with respect to the use of market-based mechanisms, including 
competitive bidding, to distribute universal service support. Develops, 
recommends and administers policies, programs, rules and procedures 
concerning the use of market-based mechanisms, including competitive 
bidding, to distribute universal service support.

0
3. Amend Sec.  0.131 by adding paragraph (r) to read as follows:


Sec.  0.131  Functions of the Bureau.

* * * * *
    (r) In coordination with the Wireline Competition Bureau, serves as 
the Commission's principal policy and administrative staff resource 
with respect to the use of market-based mechanisms, including 
competitive bidding, to distribute universal service support. Develops, 
recommends and administers policies, programs, rules and procedures 
concerning the use of market-based mechanisms, including competitive 
bidding, to distribute universal service support.

PART 1--PRACTICE AND PROCEDURE

0
4. The authority citation for part 1 continues to read as follows:

    Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(j), 160, 
201, 225, 303, and 309.


0
5. Add new subpart AA to part 1 to read as follows:

Subpart AA--Competitive Bidding for Universal Service Support

Sec.
1.21000 Purpose.
1.21001 Participation in competitive bidding for support.
1.21002 Prohibition of certain communications during the competitive 
bidding process.
1.21003 Competitive bidding process.
1.21004 Winning bidder's obligation to apply for support.


Sec.  1.21000  Purpose.

    This subpart sets forth procedures for competitive bidding to 
determine the recipients of universal service support pursuant to part 
54 of this chapter and the amount(s) of support that each recipient 
respectively may receive, subject to post-auction procedures, when the 
Commission directs that such support shall be determined through 
competitive bidding.


Sec.  1.21001  Participation in competitive bidding for support.

    (a) Public Notice of the Application Process. The dates and 
procedures for submitting applications to participate in competitive 
bidding pursuant to this subpart shall be announced by public notice.
    (b) Application Contents. An applicant to participate in 
competitive bidding pursuant to this subpart shall provide the 
following information in an acceptable form:
    (1) The identity of the applicant, i.e., the party that seeks 
support, including any required information regarding parties that have 
an ownership or other interest in the applicant;
    (2) The identities of up to three individuals authorized to make or 
withdraw a bid on behalf of the applicant;
    (3) The identities of all real parties in interest to any 
agreements relating to the participation of the applicant in the 
competitive bidding;
    (4) Certification that the application discloses all real parties 
in interest to any agreements involving the applicant's participation 
in the competitive bidding;
    (5) Certification that the applicant and all applicable parties 
have complied with and will continue to comply with Sec.  1.21002;
    (6) Certification that the applicant is in compliance with all 
statutory and regulatory requirements for receiving the universal 
service support that the applicant seeks;
    (7) Certification that the applicant will make any payment that may 
be required pursuant to Sec.  1.21004;
    (8) Certification that the individual submitting the application is 
authorized to do so on behalf of the applicant; and
    (9) Such additional information as may be required.
    (c) Financial Requirements for Participation. As a prerequisite to 
participating in competitive bidding, an applicant may be required to 
post a bond or place funds on deposit with the Commission in an amount 
based on the default payment that may be required pursuant to Sec.  
1.21004. The details of and deadline for posting such a bond or making 
such a deposit will be announced by public notice. No interest will be 
paid on any funds placed on deposit.
    (d) Application Processing. (1) Any timely submitted application 
will be reviewed by Commission staff for completeness and compliance 
with the Commission's rules. No untimely applications shall be reviewed 
or considered.
    (2) An applicant will not be permitted to participate in 
competitive bidding if the application does not identify the applicant 
as required by the public notice announcing application procedures or 
does not include all required certifications, as of the deadline for 
submitting applications.
    (3) An applicant will not be permitted to participate in 
competitive bidding if the applicant has not provided any bond or 
deposit of funds required pursuant to Sec.  1.21001(c), as of the 
applicable deadline.
    (4) An applicant may not make major modifications to its 
application after the deadline for submitting the application. An 
applicant will not be permitted to participate in competitive bidding 
if Commission staff determines that the application requires major 
modifications to be made after that deadline. Major modifications 
include, but are not limited to, any changes in the ownership of the 
applicant that constitute an assignment or transfer of control, or any 
changes in the identity

[[Page 73852]]

of the applicant, or any changes in the required certifications.
    (5) An applicant may be permitted to make minor modifications to 
its application after the deadline for submitting applications. Minor 
modifications may be subject to a deadline specified by public notice. 
Minor modifications include correcting typographical errors and 
supplying non-material information that was inadvertently omitted or 
was not available at the time the application was submitted.
    (6) After receipt and review of the applications, an applicant that 
will be permitted participate in competitive bidding shall be 
identified in a public notice.


Sec.  1.21002  Prohibition of certain communications during the 
competitive bidding process.

    (a) Definition of Applicant. For purposes of this paragraph, the 
term ``applicant'' shall include any applicant, each party capable of 
controlling the applicant, and each party that may be controlled by the 
applicant or by a party capable of controlling the applicant.
    (b) Certain Communications Prohibited. After the deadline for 
submitting applications to participate, an applicant is prohibited from 
cooperating or collaborating with any other applicant with respect to 
its own, or one another's, or any other competing applicant's bids or 
bidding strategies, and is prohibited from communicating with any other 
applicant in any manner the substance of its own, or one another's, or 
any other competing applicant's bids or bidding strategies, until after 
the post-auction deadline for winning bidders to submit applications 
for support, unless such applicants are members of a joint bidding 
arrangement identified on the application pursuant to Sec.  
1.21001(b)(4).
    (c) Duty To Report Potentially Prohibited Communications. An 
applicant that makes or receives communications that may be prohibited 
pursuant to this paragraph shall report such communications to the 
Commission staff immediately, and in any case no later than 5 business 
days after the communication occurs. An applicant's obligation to make 
such a report continues until the report has been made.
    (d) Procedures for Reporting Potentially Prohibited Communications. 
Particular procedures for parties to report communications that may be 
prohibited under this rule may be established by public notice. If no 
such procedures are established by public notice, the party making the 
report shall do so in writing to the Chief of the Auctions and Spectrum 
Access Division by the most expeditious means available, including 
electronic transmission such as email.


Sec.  1.21003  Competitive bidding process.

    (a) Public Notice of Competitive Bidding Procedures. Detailed 
competitive bidding procedures shall be established by public notice 
prior to the commencement of competitive bidding any time competitive 
bidding is conducted pursuant to this subpart.
    (b) Competitive Bidding Procedures. The public notice detailing 
competitive bidding procedures may establish any of the following:
    (1) Limits on the public availability of information regarding 
applicants, applications, and bids during a period of time covering the 
competitive bidding process, as well as procedures for parties to 
report the receipt of such non-public information during such periods;
    (2) The way in which support may be made available for multiple 
identified areas by competitive bidding, e.g., simultaneously or 
sequentially, and if the latter, in what grouping, if any, and order;
    (3) The acceptable form for bids, including whether and how bids 
will be accepted on individual items and/or for combinations or 
packages of items;
    (4) Reserve prices, either for discrete items or combinations or 
packages of items, as well as whether the reserve prices will be public 
or non-public during the competitive bidding process;
    (5) The methods and times for submission of bids, whether remotely, 
by telephonic or electronic transmission, or in person;
    (6) The number of rounds during which bids may be submitted, e.g., 
one or more, and procedures for ending the bidding;
    (7) Measurements of bidding activity in the aggregate or by 
individual applicants, together with requirements for minimum levels of 
bidding activity;
    (8) Acceptable bid amounts at the opening of and over the course of 
bidding;
    (9) Consistent with the public interest objectives of the 
competitive bidding, the process for reviewing bids and determining the 
winning bidders and the amount(s) of universal service support that 
each winning bidder may apply for, pursuant to applicable post-auction 
procedures;
    (10) Procedures, if any, by which bidders may withdraw bids; and
    (11) Procedures by which bidding may be delayed, suspended, or 
canceled before or after bidding begins for any reason that affects the 
fair and efficient conduct of the bidding, including natural disasters, 
technical failures, administrative necessity, or any other reason.
    (c) Apportioning Package Bids. If the public notice establishing 
detailed competitive bidding procedures adopts procedures for bidding 
for support on combinations or packages of geographic areas, the public 
notice also shall establish a methodology for apportioning such bids 
among the geographic areas within the combination or package for 
purposes of implementing any Commission rule or procedure that requires 
a discrete bid for support in relation to a specific geographic area.
    (d) Public Notice of Competitive Bidding Results. After the 
conclusion of competitive bidding, a public notice shall identify the 
winning bidders that may apply for the offered universal service 
support and the amount(s) of support for which they may apply, and 
shall detail the application procedures.


Sec.  1.21004  Winning bidder's obligation to apply for support

    (a) Timely and Sufficient Application. A winning bidder has a 
binding obligation to apply for support by the applicable deadline. A 
winning bidder that fails to file an application by the applicable 
deadline or that for any reason is not subsequently authorized to 
receive support has defaulted on its bid.
    (b) Liability for Default Payment. A winning bidder that defaults 
is liable for a default payment, which will be calculated by a method 
that will be established as provided in a public notice prior to 
competitive bidding. If the default payment is determined as a 
percentage of the defaulted bid amount, the default payment will not 
exceed twenty percent of the amount of the defaulted bid amount.
    (c) Additional Liabilities. A winning bidder that defaults, in 
addition to being liable for a default payment, shall be subject to 
such measures as the Commission may provide, including but not limited 
to disqualification from future competitive bidding pursuant to this 
subpart AA, competitive bidding for universal service support.

PART 20--COMMERCIAL MOBILE RADIO SERVICES

0
6. The authority citation for part 20 continues to read as follows:

    Authority: 47 U.S.C. 154, 160, 201, 251-254, 301, 303, 316, and 
332 unless otherwise noted. Section 20.12 is also issued under 47 
U.S.C. 1302.


[[Page 73853]]



0
7. Amend Sec.  20.11 by revising paragraph (b) to read as follows:


Sec.  20.11  Interconnection to facilities of local exchange carriers.

* * * * *
    (b) Local exchange carriers and commercial mobile radio service 
providers shall exchange Non-Access Telecommunications Traffic, as 
defined in Sec.  51.701 of this chapter, under a bill-and-keep 
arrangement, as defined in Sec.  51.713 of this chapter, unless they 
mutually agree otherwise.
* * * * *

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

0
8. The authority citation for part 36 is revised to read as follows:

    Authority: 47 U.S.C. 151, 154(i) and (j), 205, 221(c), 254, 
303(r), 403, 410, and 1302 unless otherwise noted.

Subpart A--General

0
9. Add Sec.  36.4 to subpart A to read as follows:


Sec.  36.4  Streamlining procedures for processing petitions for waiver 
of study area boundaries.

    Effective January 1, 2012, local exchange carriers seeking a change 
in study area boundaries shall be subject to the following procedure:
    (a) Public Notice and Review Period. Upon determination by the 
Wireline Competition Bureau that a petitioner has filed a complete 
petition for study area waiver and that the petition is appropriate for 
streamlined treatment, the Wireline Competition Bureau will issue a 
public notice seeking comment on the petition. Unless otherwise 
notified by the Wireline Competition Bureau, the petitioner is 
permitted to alter its study area boundaries on the 60th day after the 
reply comment due date, but only in accordance with the boundary 
changes proposed in its application.
    (b) Comment Cycle. Comments on petitions for waiver may be filed 
during the first 30 days following public notice, and reply comments 
may be filed during the first 45 days following public notice, unless 
the public notice specifies a different pleading cycle. All comments on 
petitions for waiver shall be filed electronically, and shall satisfy 
such other filing requirements as may be specified in the public 
notice.

0
10. Revise subpart F heading to read as follows:

Subpart F--High-Cost Loop Support

0
11. Amend Sec.  36.601 by adding the following two sentences at the end 
of paragraph (a) and removing paragraph (c) to read as follows:


Sec.  36.601  General

    (a) * * * Effective January 1, 2012, this subpart will only apply 
to incumbent local exchange carriers that are rate-of-return carriers 
not affiliated, as ``affiliated companies'' are defined in Sec.  
32.9000 of this chapter, with price cap local exchange carriers. Rate-
of-return carriers and price cap local exchange carriers are defined 
pursuant to Sec.  54.5 and Sec.  61.3(aa) of this chapter, 
respectively.
* * * * *


Sec.  36.602  [Removed]

0
12. Section 36.602 is removed.

0
13. Section 36.603 is amended by revising the section heading, and 
paragraph (a) to read as follows:


Sec.  36.603  Calculation of incumbent local exchange carrier portion 
of nationwide loop cost expense adjustment for rate-of-return carriers.

    (a) Beginning January 1, 2003, the annual amount of the rural 
incumbent local exchange carrier portion of the nationwide loop cost 
expense adjustment calculated pursuant to this subpart F shall not 
exceed the amount of the total rural incumbent local exchange carrier 
loop cost expense adjustment for the immediately preceding calendar 
year, multiplied times one plus the Rural Growth Factor calculated 
pursuant to Sec.  36.604. Beginning January 1, 2012, the total annual 
amount of the incumbent local exchange carrier portion of the 
nationwide loop cost expense adjustment shall not exceed the expense 
adjustment calculated for rate-of-return regulated carriers pursuant to 
this paragraph. Beginning January 1, 2012, rate-of-return local 
exchange carriers shall not include rate-of-return carriers affiliated 
with price cap local exchange carriers as set forth in Sec.  36.601(a) 
of this subpart. Beginning January 1, 2013, and each calendar year 
thereafter, the total annual amount of the incumbent local exchange 
carrier portion of the nationwide loop cost expense adjustment shall 
not exceed the amount for the immediately preceding calendar year, 
multiplied times one plus the Rural Growth Factor calculated pursuant 
to Sec.  36.604.
* * * * *

0
14. Revise Sec.  36.604 to read as follows:


Sec.  36.604  Calculation of the rural growth factor.

    (a) Until July 30, 2012, the Rural Growth Factor (RGF) is equal to 
the sum of the annual percentage change in the United States Department 
of Commerce's Gross Domestic Product--Chained Price Index (GPD-CPI) 
plus the percentage change in the total number of rural incumbent local 
exchange carrier working loops during the calendar year preceding the 
July 31st filing submitted pursuant to Sec.  36.611. The percentage 
change in total rural incumbent local exchange carrier working loops 
shall be based upon the difference between the total number of rural 
incumbent local exchange carrier working loops on December 31 of the 
calendar year preceding the July 31st filing and the total number of 
rural incumbent local exchange carrier working loops on December 31 of 
the second calendar year preceding that filing, both determined by the 
company's submissions pursuant to Sec.  36.611. Loops acquired by rural 
incumbent local exchange carriers shall not be included in the RGF 
calculation.
    (b) Beginning July 31, 2012, pursuant to Sec.  36.601(a) of this 
subpart, the calculation of the Rural Growth Factor shall not include 
price cap carrier working loops and rate-of-return local exchange 
carrier working loops of companies that were affiliated with price cap 
carriers during the calendar year preceding the July 31st filing 
submitted pursuant to Sec.  36.611.

0
15. Amend Sec.  36.605 by revising paragraphs (a) and (b), the heading 
of paragraph (c), and paragraph (c)(1) to read as follows:


Sec.  36.605  Calculation of safety net additive.

    (a) ``Safety net additive support.'' Beginning January 1, 2012, 
only those local exchange carriers that qualified in 2010 or earlier, 
based on 2009 or prior year costs, shall be eligible to receive safety 
net additive pursuant to paragraph (c) of this section. Local exchange 
carriers shall not receive safety net additive for growth of 
Telecommunications Plant in Service in 2011, as compared to 2010. A 
local exchange carrier qualifying for safety net additive shall no 
longer receive safety net additive after January 1, 2012 unless the 
carrier's realized total growth in Telecommunications Plant in Service 
was more than 14 percent during the qualifying period, defined as 2010 
or earlier, pursuant to paragraph (c) of this section. A local exchange 
carrier qualifying for safety net additive that fails to meet the 
requirements set forth

[[Page 73854]]

in the preceding sentence will receive 50 percent of the safety net 
additive that it otherwise would have received pursuant to this rule in 
2012 and will cease to receive safety net additive in 2013 and 
thereafter.
    (b) Calculation of safety net additive support for companies that 
qualified prior to 2011: Safety net additive support is equal to the 
amount of capped support calculated pursuant to this subpart F in the 
qualifying year minus the amount of support in the year prior to 
qualifying for support subtracted from the difference between the 
uncapped expense adjustment for the study area in the qualifying year 
minus the uncapped expense adjustment in the year prior to qualifying 
for support as shown in the following equation: Safety net additive 
support = (Uncapped support in the qualifying year--Uncapped support in 
the base year)--(Capped support in the qualifying year--Amount of 
support received in the base year).
    (c) Operation of safety net additive support for companies that 
qualified prior to 2011: (1) In any year in which the total carrier 
loop cost expense adjustment is limited by the provisions of Sec.  
36.603 a rate-of-return incumbent local exchange carrier, as set forth 
in Sec.  36.601(a) of this subpart, shall receive safety net additive 
support as calculated in paragraph (b) of this section, if in any study 
area, the rural incumbent local exchange carrier realizes growth in end 
of period Telecommunications Plant in Service (TPIS), as prescribed in 
Sec.  32.2001 of this chapter, on a per loop basis, of at least 14 
percent more than the study area's TPIS per loop investment at the end 
of the prior period.
* * * * *

0
16. Amend Sec.  36.611 by revising the first sentence of paragraph (h) 
to read as follows:


Sec.  36.611  Submission of information to the National Exchange 
Carrier Association (NECA).

* * * * *
    (h) For incumbent local exchange carriers subject to Sec.  
36.601(a) this subpart, the number of working loops for each study 
area. * * *

0
17. Amend Sec.  36.612 by revising the first sentence of paragraph (a) 
introductory text to read as follows:


Sec.  36.612  Updating information submitted to the National Exchange 
Carrier Association.

    (a) Any incumbent local exchange carrier subject to Sec.  36.601(a) 
of this subpart may update the information submitted to the National 
Exchange Carrier Association (NECA) on July 31st pursuant to Sec.  
36.611 one or more times annually on a rolling year basis according to 
the schedule. * * *
* * * * *

0
18. Amend Sec.  36.621 by revising paragraph (a)(4) introductory text 
and adding paragraphs (a)(4)(iii), and (a)(5) to read as follows:


Sec.  36.621  Study area total unseparated loop cost.

    (a) * * *
    (4) Corporate Operations Expenses, Operating Taxes and the benefits 
and rent portions of operating expenses, as reported in Sec.  36.611(e) 
attributable to investment in C&WF Category 1.3 and COE Category 4.13. 
This amount is calculated by multiplying the total amount of these 
expenses and taxes by the ratio of the unseparated gross exchange plant 
investment in C&WF Category 1.3 and COE Category 4.13, as reported in 
Sec.  36.611(a), to the unseparated gross telecommunications plant 
investment, as reported in Sec.  36.611(f). Total Corporate Operations 
Expense, for purposes of calculating universal service support payments 
beginning July 1, 2001 and ending December 31, 2011, shall be limited 
to the lesser of Sec.  36.621(a)(4)(i) or (ii). Total Corporate 
Operations Expense for purposes of calculating universal service 
support payments beginning January 1, 2012 shall be limited to the 
lesser of Sec.  36.621(a)(4)(i) or (iii).
* * * * *
    (iii) A monthly per-loop amount computed according to paragraphs 
(a)(4)(iii)(A), (a)(4)(iii)(B), (a)(4)(iii)(C), and (a)(4)(iii)(D) of 
this section. To the extent that some carriers' corporate operations 
expenses are disallowed pursuant to these limitations, the national 
average unseparated cost per loop shall be adjusted accordingly.
    (A) For study areas with 6,000 or fewer total working loops the 
amount monthly per working loop shall be $42.337 - (.00328 x the number 
of total working loops), or, $63,000/the number of total working loops, 
whichever is greater;
    (B) For study areas with more than 6,000 but fewer than 17,887 
total working loops, the monthly amount per working loop shall be 
$3.007 + (117,990/the number of total working loops); and
    (C) For study areas with 17,887 or more total working loops, the 
monthly amount per working loop shall be $9.562.
    (D) Beginning January 1, 2013, the monthly per-loop amount computed 
according to paragraphs (a)(4)(iii)(A), (a)(4)(iii)(B), and 
(a)(4)(iii)(C) of this section shall be adjusted each year to reflect 
the annual percentage change in the United States Department of 
Commerce's Gross Domestic Product-Chained Price Index (GDP-CPI).
    (5) Study area unseparated loop cost may be limited annually 
pursuant to a schedule announced by the Wireline Competition Bureau.
* * * * *

0
19. Amend Sec.  36.631 by revising the introductory text of paragraphs 
(c) and (d) to read as follows:


Sec.  36.631  Expense adjustment.

* * * * *
    (c) Beginning January 1, 1988, for study areas reporting 200,000 or 
fewer working loops pursuant to Sec.  36.611(h), the expense adjustment 
(additional interstate expense allocation) is equal to the sum of 
paragraphs (c)(1) through (2) of this section.
* * * * *
    (d) Beginning January 1, 1998, for study areas reporting more than 
200,000 working loops pursuant to Sec.  36.611(h), the expense 
adjustment (additional interstate expense allocation) is equal to the 
sum of paragraphs (d)(1) through (4) of this section.
* * * * *

PART 51--INTERCONNECTION

0
20. The authority citation for part 51 is revised to read as follows:

    Authority: Sections 1-5, 7, 201-05, 207-09, 218, 220, 225-27, 
251-54, 256, 271, 303(r), 332, 706 of the Telecommunication Act of 
1996, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-
05, 207-09, 218, 220, 225-27, 251-54, 256, 271, 303(r), 332, 1302, 
47 U.S.C. 157 note, unless otherwise noted.

Subpart H--Reciprocal Compensation for Transport and Termination of 
Telecommunications Traffic

0
21. Add Sec.  51.700 to subpart H to read as follows:


Sec.  51.700  Purpose of this subpart.

    The purpose of this subpart, as revised in 2011 by FCC 11-161 is to 
establish rules governing the transition of intercarrier compensation 
from a calling-party's-network pays system to a default bill-and-keep 
methodology. Following the transition, the exchange of 
telecommunications traffic between and among service providers will, by 
default, be governed by bill-and-keep arrangements.

    Note to Sec.  51.700: See FCC 11-161, figure 9 (chart 
identifying steps in the transition).


[[Page 73855]]



0
22. Revise Sec.  51.701 paragraphs (a), (b) introductory text, add 
paragraph (b)(3) and revise paragraphs (c), (d), and (e) to read as 
follows:


Sec.  51.701  Scope of transport and termination pricing rules.

    (a) Effective December 29, 2011, compensation for 
telecommunications traffic exchanged between two telecommunications 
carriers that is interstate or intrastate exchange access, information 
access, or exchange services for such access, other than special 
access, is specified in subpart J of this part. The provisions of this 
subpart apply to Non-Access Reciprocal Compensation for transport and 
termination of Non-Access Telecommunications Traffic between LECs and 
other telecommunications carriers.
    (b) Non-Access Telecommunications Traffic. For purposes of this 
subpart, Non-Access Telecommunications Traffic means:
* * * * *
    (3) This definition includes telecommunications traffic exchanged 
between a LEC and another telecommunications carrier in Time Division 
Multiplexing (TDM) format that originates and/or terminates in IP 
format and that otherwise meets the definitions in paragraphs (b)(1) or 
(b)(2) of this section. Telecommunications traffic originates and/or 
terminates in IP format if it originates from and/or terminates to an 
end-user customer of a service that requires Internet protocol-
compatible customer premises equipment.
    (c) Transport. For purposes of this subpart, transport is the 
transmission and any necessary tandem switching of Non-Access 
Telecommunications Traffic subject to section 251(b)(5) of the 
Communications Act of 1934, as amended, 47 U.S.C. 251(b)(5), from the 
interconnection point between the two carriers to the terminating 
carrier's end office switch that directly serves the called party, or 
equivalent facility provided by a carrier other than an incumbent LEC.
    (d) Termination. For purposes of this subpart, termination is the 
switching of Non-Access Telecommunications Traffic at the terminating 
carrier's end office switch, or equivalent facility, and delivery of 
such traffic to the called party's premises.
    (e) Non-Access Reciprocal Compensation. For purposes of this 
subpart, a Non-Access Reciprocal Compensation arrangement between two 
carriers is either a bill-and-keep arrangement, per Sec.  51.713, or an 
arrangement in which each carrier receives intercarrier compensation 
for the transport and termination of Non-Access Telecommunications 
Traffic.

0
23. Revise Sec.  51.703 to read as follows:


Sec.  51.703  Non-Access reciprocal compensation obligation of LECs.

    (a) Each LEC shall establish Non-Access Reciprocal Compensation 
arrangements for transport and termination of Non-Access 
Telecommunications Traffic with any requesting telecommunications 
carrier.
    (b) A LEC may not assess charges on any other telecommunications 
carrier for Non-Access Telecommunications Traffic that originates on 
the LEC's network.
    (c) Notwithstanding any other provision of the Commission's rules, 
a LEC shall be entitled to assess and collect the full charges for the 
transport and termination of Non-Access Telecommunications Traffic, 
regardless of whether the local exchange carrier assessing the 
applicable charges itself delivers such traffic to the called party's 
premises or delivers the call to the called party's premises via 
contractual or other arrangements with an affiliated or unaffiliated 
provider of interconnected VoIP service, as defined in 47 U.S.C. 
153(25), or a non-interconnected VoIP service, as defined in 47 U.S.C. 
153(36), that does not itself seek to collect Non-Access Reciprocal 
Compensation charges for the transport and termination of that Non-
Access Telecommunications Traffic. In no event may the total charges 
that a LEC may assess for such service to the called location exceed 
the applicable transport and termination rate. For purposes of this 
section, the facilities used by the LEC and affiliated or unaffiliated 
provider of interconnected VoIP service or a non-interconnected VoIP 
service for the transport and termination of such traffic shall be 
deemed an equivalent facility under Sec.  51.701.

0
24. Revise Sec.  51.705 to read as follows:


Sec.  51.705  LECs' rates for transport and termination.

    (a) Notwithstanding any other provision of the Commission's rules, 
by default, transport and termination for Non-Access Telecommunications 
Traffic exchanged between a local exchange carrier and a CMRS provider 
within the scope of Sec.  51.701(b)(2) shall be pursuant to a bill-and-
keep arrangement, as provided in Sec.  51.713.
    (b) Establishment of incumbent LECs' rates for transport and 
termination:
    (1) This provision applies when, in the absence of a negotiated 
agreement between parties, state commissions establish Non-Access 
Reciprocal Compensation rates for the exchange of Non-Access 
Telecommunications Traffic between a local exchange carrier and a 
telecommunications carrier other than a CMRS provider where the 
incumbent local exchange carriers did not have any such rates as of 
December 29, 2011. Any rates established pursuant to this provision 
apply between December 29, 2011 and the date at which they are 
superseded by the transition specified in paragraphs (c)(2) through 
(c)(5) of this section.
    (2) An incumbent LEC's rates for transport and termination of 
telecommunications traffic shall be established, at the election of the 
state commission, on the basis of:
    (i) The forward-looking economic costs of such offerings, using a 
cost study pursuant to Sec. Sec.  51.505 and 51.511; or
    (ii) A bill-and-keep arrangement, as provided in Sec.  51.713.
    (3) In cases where both carriers in a Non-Access Reciprocal 
Compensation arrangement are incumbent LECs, state commissions shall 
establish the rates of the smaller carrier on the basis of the larger 
carrier's forward-looking costs, pursuant to Sec.  51.711.
    (c) Except as provided by paragraph (a) of this section, and 
notwithstanding any other provision of the Commission's rules, default 
transitional Non-Access Reciprocal Compensation rates shall be 
determined as follows:
    (1) Effective December 29, 2011, no telecommunications carrier may 
increase a Non-Access Reciprocal Compensation for transport or 
termination above the level in effect on December 29, 2011. All Bill-
and-Keep Arrangements in effect on December 29, 2011 shall remain in 
place unless both parties mutually agree to an alternative arrangement.
    (2) Beginning July 1, 2012, if any telecommunications carrier's 
Non-Access Reciprocal Compensation rates in effect on December 29, 2011 
or established pursuant to paragraph (b) of this section subsequent to 
December 29, 2011, exceed that carrier's interstate access rates for 
functionally equivalent services in effect in the same state on 
December 29, 2011, that carrier shall reduce its reciprocal 
compensation rate by one half of the difference between the Non-Access 
Reciprocal Compensation rate and the corresponding functionally 
equivalent interstate access rate.
    (3) Beginning July 1, 2013, no telecommunications carrier's Non-
Access Reciprocal Compensation rates shall exceed that carrier's 
tariffed interstate access rate in effect in the

[[Page 73856]]

same state on January 1 of that same year, for equivalent 
functionality.
    (4) After July 1, 2018, all Price-Cap Local Exchange Carrier's Non-
Access Reciprocal Compensation rates and all non-incumbent LECs that 
benchmark access rates to Price Cap Carrier shall be set pursuant to 
Bill-and-Keep arrangements for Non-Access Reciprocal Compensation as 
defined in this subpart.
    (5) After July 1, 2020, all Rate-of-Return Local Exchange Carrier's 
Non-Access Reciprocal Compensation rates and all non-incumbent LECs 
that benchmark access rates to Rate-of-Return Carriers shall be set 
pursuant to Bill-and-Keep arrangements for Non-Access Reciprocal 
Compensation as defined in this subpart.


Sec.  51.707  [Removed and Reserved]

0
25. Remove and reserve Sec.  51.707.

0
26. Revise Sec.  51.709 to read as follows:


Sec.  51.709  Rate structure for transport and termination.

    (a) In state proceedings, where a rate for Non-Access Reciprocal 
Compensation does not exist as of December 29, 2011, a state commission 
shall establish initial rates for the transport and termination of Non-
Access Telecommunications Traffic that are structured consistently with 
the manner that carriers incur those costs, and consistently with the 
principles in this section.
    (b) The rate of a carrier providing transmission facilities 
dedicated to the transmission of non-access traffic between two 
carriers' networks shall recover only the costs of the proportion of 
that trunk capacity used by an interconnecting carrier to send non-
access traffic that will terminate on the providing carrier's network. 
Such proportions may be measured during peak periods.
    (c) For Non-Access Telecommunications Traffic exchanged between a 
rate-of-return regulated rural telephone company as defined in Sec.  
51.5 and a CMRS provider, the rural rate-of-return incumbent local 
exchange carrier will be responsible for transport to the CMRS 
provider's interconnection point when it is located within the rural 
rate-of-return incumbent local exchange carrier's service area. When 
the CMRS provider's interconnection point is located outside the rural 
rate-of-return incumbent local exchange carrier's service area, the 
rural rate-of-return incumbent local exchange carrier's transport and 
provisioning obligation stops at its meet point and the CMRS provider 
is responsible for the remaining transport to its interconnection 
point. This paragraph (c) is a default provision and applicable in the 
absence of an existing agreement or arrangement otherwise.

0
27. Revise Sec.  51.711 paragraphs (a) introductory text, (a)(1) and 
(b) to read as follows:


Sec.  51.711  Symmetrical non-access reciprocal compensation.

    (a) Rates for transport and termination of Non-Access 
Telecommunications Traffic shall be symmetrical, unless carriers 
mutually agree otherwise, except as provided in paragraphs (b) and (c) 
of this section.
    (1) For purposes of this subpart, symmetrical rates are rates that 
a carrier other than an incumbent LEC assesses upon an incumbent LEC 
for transport and termination of Non-Access Telecommunications Traffic 
equal to those that the incumbent LEC assesses upon the other carrier 
for the same services.
* * * * *
    (b) Except as provided in Sec.  51.705, a state commission may 
establish asymmetrical rates for transport and termination of Non-
Access Telecommunications Traffic only if the carrier other than the 
incumbent LEC (or the smaller of two incumbent LECs) proves to the 
state commission on the basis of a cost study using the forward-looking 
economic cost based pricing methodology described in Sec. Sec.  51.505 
and 51.511, that the forward-looking costs for a network efficiently 
configured and operated by the carrier other than the incumbent LEC (or 
the smaller of two incumbent LECs), exceed the costs incurred by the 
incumbent LEC (or the larger incumbent LEC), and, consequently, that 
such that a higher rate is justified.
* * * * *

0
28. Revise Sec.  51.713 to read as follows:


Sec.  51.713  Bill-and-keep arrangements.

    Bill-and-keep arrangements are those in which carriers exchanging 
telecommunications traffic do not charge each other for specific 
transport and/or termination functions or services.

0
29. Revise Sec.  51.715 paragraphs (a) introductory text, (a)(1), (b) 
introductory text, (b)(2), and revise the first sentence in paragraph 
(d) to read as follows:


Sec.  51.715  Interim transport and termination pricing.

    (a) Upon request from a telecommunications carrier without an 
existing interconnection arrangement with an incumbent LEC, the 
incumbent LEC shall provide transport and termination of Non-Access 
Telecommunications Traffic immediately under an interim arrangement, 
pending resolution of negotiation or arbitration regarding transport 
and termination rates and approval of such rates by a state commission 
under sections 251 and 252 of the Act.
    (1) This requirement shall not apply when the requesting carrier 
has an existing interconnection arrangement that provides for the 
transport and termination of Non-Access Telecommunications Traffic by 
the incumbent LEC.
* * * * *
    (b) Upon receipt of a request as described in paragraph (a) of this 
section, an incumbent LEC must, without unreasonable delay, establish 
an interim arrangement for transport and termination of Non-Access 
Telecommunications Traffic at symmetrical rates.
* * * * *
    (2) In a state in which the state commission has not established 
transport and termination rates based on forward-looking economic cost 
studies, an incumbent LEC shall set interim transport and termination 
rates either at the default ceilings specified in Sec.  51.705(c) or in 
accordance with a bill-and-keep methodology as defined in Sec.  51.713.
* * * * *
    (d) If the rates for transport and termination of Non-Access 
Telecommunications Traffic in an interim arrangement differ from the 
rates established by a state commission pursuant to Sec.  51.705, the 
state commission shall require carriers to make adjustments to past 
compensation. * * *


Sec.  51.717  [Removed and Reserved]

0
30. Remove and reserve Sec.  51.717.

0
31. Add new subpart J to part 51 to read as follows:
Subpart J--Transitional Access Service Pricing
Sec.
51.901 Purpose and scope of transitional access service pricing 
rules.
51.903 Definitions.
51.905 Implementation.
51.907 Transition of price cap carrier access charges.
51.909 Transition of rate-of-return carrier access charges.
51.911 Reciprocal compensation rates for competitive LECs.
51.913 Transition for VoIP-PSTN traffic.
51.915 Recovery mechanism for price cap carriers.
51.917 Revenue recovery for rate of return carriers.

[[Page 73857]]

51.919 Reporting and monitoring.

Subpart J--Transitional Access Service Pricing


Sec.  51.901  Purpose and scope of transitional access service pricing 
rules.

    (a) The purpose of this section is to establish rules governing the 
transition of intercarrier compensation from a calling-party's-network 
pays system to a default bill-and-keep methodology. Following the 
transition, the exchange of traffic between and among service providers 
will, by default, be governed by bill-and-keep arrangements.
    (b) Effective December 29, 2011, the provisions of this subpart 
apply to reciprocal compensation for telecommunications traffic 
exchanged between telecommunications providers that is interstate or 
intrastate exchange access, information access, or exchange services 
for such access, other than special access.

    Note to Sec.  51.901: See FCC 11-161, figure 9 (chart 
identifying steps in the transition).

Sec.  51.903  Definitions.

    For the purposes of this subpart:
    (a) Competitive Local Exchange Carrier. A Competitive Local 
Exchange Carrier is any local exchange carrier, as defined in Sec.  
51.5, that is not an incumbent local exchange carrier .
    (b) Composite Terminating End Office Access Rate means terminating 
End Office Access Service revenue, calculated using demand for a given 
time period, divided by end office switching minutes for the same time 
period.
    (c) Dedicated Transport Access Service means originating and 
terminating transport on circuits dedicated to the use of a single 
carrier or other customer provided by an incumbent local exchange 
carrier or any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier. Dedicated Transport Access Service rate elements for an 
incumbent local exchange carrier include the entrance facility rate 
elements specified in Sec.  69.110 of this chapter, the dedicated 
transport rate elements specified in Sec.  69.111 of this chapter, the 
direct-trunked transport rate elements specified in Sec.  69.112 of 
this chapter, and the intrastate rate elements for functionally 
equivalent access services. Dedicated Transport Access Service rate 
elements for a non-incumbent local exchange carrier include any 
functionally equivalent access services.
    (d) End Office Access Service means:
    (1) The switching of access traffic at the carrier's end office 
switch and the delivery to or from of such traffic to the called 
party's premises;
    (2) The routing of interexchange telecommunications traffic to or 
from the called party's premises, either directly or via contractual or 
other arrangements with an affiliated or unaffiliated entity, 
regardless of the specific functions provided or facilities used; or
    (3) Any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier. End Office Access Service rate elements for an incumbent local 
exchange carrier include the local switching rate elements specified in 
Sec.  69.106 of this chapter, the carrier common line rate elements 
specified in Sec.  69.154 of this chapter, and the intrastate rate 
elements for functionally equivalent access services. End Office Access 
Service rate elements for an incumbent local exchange carrier also 
include any rate elements assessed on local switching access minutes, 
including the information surcharge and residual rate elements. End 
office Access Service rate elements for a non-incumbent local exchange 
carrier include any functionally equivalent access service.

    Note to paragraph (d): For incumbent local exchange carriers, 
residual rate elements may include, for example, state Transport 
Interconnection Charges, Residual Interconnection Charges, and 
PICCs. For non-incumbent local exchange carriers, residual rate 
elements may include any functionally equivalent access service.

    (e) Fiscal Year 2011 means October 1, 2010 through September 30, 
2011.
    (f) Price Cap Carrier has the same meaning as that term is defined 
in Sec.  61.3(aa) of this chapter.
    (g) Rate-of-Return Carrier is any incumbent local exchange carrier 
not subject to price cap regulation as that term is defined in Sec.  
61.3(aa) of this chapter, but only with respect to the territory in 
which it operates as an incumbent local exchange carrier.
    (h) Access Reciprocal Compensation means telecommunications traffic 
exchanged between telecommunications service providers that is 
interstate or intrastate exchange access, information access, or 
exchange services for such access, other than special access.
    (i) Tandem-Switched Transport Access Service means:
    (1) Tandem switching and common transport between the tandem switch 
and end office; or
    (2) Any functional equivalent of the incumbent local exchange 
carrier access service provided by a non-incumbent local exchange 
carrier via other facilities. Tandem-Switched Transport rate elements 
for an incumbent local exchange carrier include the rate elements 
specified in Sec.  69.111 of this chapter, except for the dedicated 
transport rate elements specified in that section, and intrastate rate 
elements for functionally equivalent service. Tandem Switched Transport 
Access Service rate elements for a non-incumbent local exchange carrier 
include any functionally equivalent access service.
    (j) Transitional Intrastate Access Service means terminating End 
Office Access Service that was subject to intrastate access rates as of 
December 31, 2011; terminating Tandem-Switched Transport Access Service 
that was subject to intrastate access rates as of December 31, 2011; 
and originating and terminating Dedicated Transport Access Service that 
was subject to intrastate access rates as of December 31, 2011.


Sec.  51.905  Implementation.

    (a) The rates set forth in this section are default rates. 
Notwithstanding any other provision of the Commission's rules, 
telecommunications carriers may agree to rates different from the 
default rates.
    (b) LECs who are otherwise required to file tariffs are required to 
tariff rates no higher than the default transitional rates specified by 
this subpart.
    (1) With respect to interstate switched access services governed by 
this subpart, LECs shall tariff rates for those services in their 
federal tariffs. Except as expressly superseded below, LECs shall 
follow the procedures specified in part 61 of this chapter when filing 
such tariffs.
    (2) With respect to Transitional Intrastate Access Services 
governed by this subpart, LECs shall follow the procedures specified by 
relevant state law when filing such tariffs, price lists or other 
instrument (referred to collectively as ``tariffs'').
    (c) Nothing in this section shall be construed to require a carrier 
to file or maintain a tariff or to amend an existing tariff if it is 
not otherwise required to do so under applicable law.


Sec.  51.907  Transition of price cap carrier access charges.

    (a) Notwithstanding any other provision of the Commission's rules, 
on December 29, 2011, a Price Cap Carrier shall cap the rates for all 
interstate and intrastate rate elements for services contained in the 
definitions of Interstate End Office Access Services, Tandem Switched 
Transport Access Services, and Dedicated Transport Access Services. In 
addition, a Price Cap Carrier

[[Page 73858]]

shall also cap the rates for any interstate and intrastate rate 
elements in the traffic sensitive basket'' and the ``trunking basket'' 
as described in 47 CFR 61.42(d)(2) and (3) to the extent that such rate 
elements are not contained in the definitions of Interstate End Office 
Access Services, Tandem Switched Transport Access Services, and 
Dedicated Transport Access Services. Carriers will remove these 
services from price cap regulation in their July 1, 2012 annual tariff 
filing.
    (b) Step 1. Beginning July 1, 2012, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Price Cap Carrier shall file tariffs, in accordance with 
Sec.  51.905(b)(2), with the appropriate state regulatory authority, 
that set forth the rates applicable to Transitional Intrastate Access 
Service in each state in which it provides Transitional Intrastate 
Access Service.
    (2) Each Price Cap Carrier shall establish the rates for 
Transitional Intrastate Access Service using the following methodology:
    (i) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's interstate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (ii) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's intrastate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (iii) Calculate the Step 1 Access Revenue Reduction. The Step 1 
Access Revenue Reduction is equal to one-half of the difference between 
the amount calculated in paragraph (b)(2)(i) of this section and the 
amount calculated in paragraph (b)(2)(ii) of this section.
    (iv) A Price Cap Carrier may elect to establish rates for 
Transitional Intrastate Access Service using its intrastate access rate 
structure. Carriers using this option shall establish rates for 
Transitional Intrastate Access Service such that Transitional 
Intrastate Access Service revenue at the proposed rates is no greater 
than Transitional Intrastate Access Service revenue at the intrastate 
rates in effect as of December 29, 2011 less the Step 1 Access Revenue 
Reduction, using Fiscal Year 2011 demand. Carriers electing to 
establish rates for Transitional Intrastate Access Service in this 
manner shall notify the appropriate state regulatory authority of their 
election in the filing required by Sec.  51.907(b)(1).
    (v) In the alternative, a Price Cap Carrier may elect to apply its 
interstate access rate structure and interstate rates to Transitional 
Intrastate Access Service. In addition to applicable interstate access 
rates, the carrier may, between July 1, 2012 and July 1, 2013, assess a 
transitional per-minute charge on Transitional Intrastate Access 
Service end office switching minutes (previously billed as intrastate 
access). The transitional per-minute charge shall be no greater than 
the Step 1 Access Revenue Reduction divided by Fiscal Year 2011 
Transitional Intrastate Access Service end office switching minutes. 
Carriers electing to establish rates for Transitional Intrastate Access 
Service in this manner shall notify the appropriate state regulatory 
authority of their election in the filing required by Sec.  
51.907(b)(1).
    (vi) Nothing in this section obligates or allows a Price Cap 
Carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions to increase such rates.
    (c) Step 2. Beginning July 1, 2013, notwithstanding any other 
provision of the Commission's rules:
    (1) Transitional Intrastate Access Service rates shall be no higher 
than the Price Cap Carrier's interstate access rates. Once the Price 
Cap Carrier's Transitional Intrastate Access Service rates are equal to 
its functionally equivalent interstate access rates, they shall be 
subject to the same rate structure and all subsequent rate and rate 
structure modifications. Nothing in this section obligates or allows a 
Price Cap Carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions to increase such rates.
    (2) In cases where a Price Cap Carrier does not have intrastate 
rates that permit it to determine composite intrastate End Office 
Access Service rates, the carrier shall establish End Office Access 
Service rates such that the ratio between its composite intrastate End 
Office Access Service revenues and its total intrastate switched access 
revenues may not exceed the ratio between its composite interstate End 
Office Access Service revenues and its total interstate switched access 
revenues.
    (3) Nothing in this section obligates or allows a Price Cap Carrier 
that has intrastate rates lower than its functionally equivalent 
interstate rates to make any intrastate tariff filing or intrastate 
tariff revisions to increase such rates.
    (d) Step 3. Beginning July 1, 2014, notwithstanding any other 
provision of the Commission's rules:
    (1) A Price Cap Carrier shall establish separate originating and 
terminating rate elements for all per-minute components within 
interstate and intrastate End Office Access Service. For fixed charges, 
the Price Cap Carrier shall divide the rate between originating and 
terminating rate elements based on relative originating and terminating 
end office switching minutes. If sufficient originating and terminating 
end office switching minute data is not available, the carrier shall 
divide such charges equally between originating and terminating 
elements.
    (2) Each Price Cap Carrier shall establish rates for interstate or 
intrastate terminating End Office Access Service using the following 
methodology:
    (i) Each Price Cap Carrier shall calculate the 2011 Baseline 
Composite Terminating End Office Access Rate. The 2011 Baseline 
Composite Terminating End Office Access Rate means the Composite 
Terminating End Office Access Rate calculated using Fiscal Year 2011 
demand and the End Office Access Service rates at the levels in effect 
on December 29, 2011.
    (ii) Each Price Cap Carrier shall calculate its 2014 Target 
Composite Terminating End Office Access Rate. The 2014 Target Composite 
Terminating End Office Access Rate means $0.0007 per minute plus two-
thirds of any difference between the 2011 Baseline Composite 
Terminating End Office Access Rate and $0.0007 per minute.
    (iii) Beginning July 1, 2014, no Price Cap Carrier's interstate or 
intrastate Composite Terminating End Office Access Rate shall exceed 
its 2014 Target Composite Terminating End Office Access Rate. In the 
alternative, any Price Cap Carrier may elect to implement a single per 
minute rate element for terminating End Office Access Service no 
greater than the 2014 Target Composite Terminating End Office Access 
Rate.
    (iv) Nothing in this section obligates or allows a Price Cap 
Carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions increasing such rates.
    (e) Step 4. Beginning July 1, 2015, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Price Cap Carrier shall establish interstate or intrastate 
rates for terminating End Office Access Service using the following 
methodology:
    (i) Each Price Cap Carrier shall calculate its 2015 Target 
Composite Terminating End Office Access Rate. The 2015 Target Composite 
Terminating End Office Access Rate means $0.0007

[[Page 73859]]

per minute plus one-third of any difference between the 2011 Composite 
Terminating End Office Access Rate and $0.0007 per minute.
    (ii) Beginning July 1, 2015, no Price Cap Carrier's interstate or 
intrastate Composite Terminating End Office Access Rate shall exceed 
its 2015 Target Composite Terminating End Office Access Rate. In the 
alternative, any Price Cap Carrier may elect to implement a single per 
minute rate element for terminating End Office Access Service no 
greater than the 2015 Target Composite Terminating End Office Access 
Rate.
    (2) Nothing in this section obligates or allows a Price Cap Carrier 
that has intrastate rates lower than its functionally equivalent 
interstate rates to make any intrastate tariff filing or intrastate 
tariff revisions raising such rates.
    (f) Step 5. Beginning July 1, 2016, notwithstanding any other 
provision of the Commission's rules, each Price Cap Carrier shall 
establish interstate and intrastate per minute terminating End Office 
Access Service rates such that its Composite Terminating End Office 
Access Service rate does not exceed $0.0007 per minute. Nothing in this 
section obligates or allows a Price Cap Carrier that has intrastate 
rates lower than its functionally equivalent interstate rates to make 
any intrastate tariff filing or intrastate tariff revisions raising 
such rates.
    (g) Step 6. Beginning July 1, 2017, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Price Cap Carrier shall, in accordance with a bill-and-
keep methodology, refile its interstate access tariffs and any state 
tariffs, in accordance with Sec.  51.905(b)(2), removing any 
intercarrier charges for terminating End Office Access Service.
    (2) Each Price Cap Carrier shall establish, for interstate and 
intrastate terminating traffic traversing a tandem switch that the 
terminating carrier or its affiliates owns, Tandem-Switched Transport 
Access Service rates no greater than $0.0007 per minute.
    (3) Nothing in this section obligates or allows a Price Cap Carrier 
that has intrastate rates lower than its functionally equivalent 
interstate rates to make any intrastate tariff filing or intrastate 
tariff revisions raising such rates.
    (h) Step 7. Beginning July 1, 2018, notwithstanding any other 
provision of the Commission's rules, each Price Cap carrier shall, in 
accordance with bill-and-keep, as defined in Sec.  51.713, revise and 
refile its interstate switched access tariffs and any state tariffs to 
remove any intercarrier charges applicable to terminating tandem-
switched access service traversing a tandem switch that the terminating 
carrier or its affiliate owns.


Sec.  51.909  Transition of rate-of-return carrier access charges.

    (a) Notwithstanding any other provision of the Commission's rules, 
on December 29, 2011, a Rate-of-Return Carrier shall:
    (1) Cap the rates for all rate elements for services contained in 
the definitions of End Office Access Service, Tandem Switched Transport 
Access Service, and Dedicated Transport Access Service, as well as all 
other interstate switched access rate elements, in its interstate 
switched access tariffs at the rate that was in effect on the December 
29, 2011; and
    (2) Cap, in accordance with Sec.  51.505(b)(2), the rates for rate 
all elements in its intrastate switched access tariffs associated with 
the provision of terminating End Office Access Service and terminating 
Tandem-Switched Transport Access Service at the rates that were in 
effect on the December 29, 2011,
    (i) Using the terminating rates if specifically identified; or
    (ii) Using the rate for the applicable rate element if the tariff 
does not distinguish between originating and terminating.
    (3) Nothing in this section obligates or allows a Rate-of-Return 
Carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions raising such rates.
    (b) Step 1. Beginning July 1, 2012, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Rate-of-Return Carrier shall file intrastate access tariff 
provisions, in accordance with Sec.  51.505(b)(2), that set forth the 
rates applicable to Transitional Intrastate Access Service in each 
state in which it provides Transitional Intrastate Access Service.
    (2) Each Rate-of-Return Carrier shall establish the rates for 
Transitional Intrastate Access Service using the following methodology:
    (i) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's interstate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (ii) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's intrastate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (iii) Calculate the Step 1 Access Revenue Reduction. The Step 1 
Access Revenue Reduction is equal to one-half of the difference between 
the amount calculated in (b)(2)(i) of this section and the amount 
calculated in (b)(2)(ii) of this section.
    (iv) A Rate-of-Return Carrier may elect to establish rates for 
Transitional Intrastate Access Service using its intrastate access rate 
structure. Carriers using this option shall establish rates for 
Transitional Intrastate Access Service such that Transitional 
Intrastate Access Service revenue at the proposed rates is no greater 
than Transitional Intrastate Access Service revenue at the intrastate 
rates in effect as of December 29, 2011 less the Step 1 Access Revenue 
Reduction, using Fiscal Year 2011 intrastate switched access demand. 
Carriers electing to establish rates for Transitional Intrastate Access 
Service in this manner shall notify the appropriate state regulatory 
authority of their election in the filing required by Sec.  
51.907(b)(1).
    (v) In the alternative, a Rate-of-Return Carrier may elect to apply 
its interstate access rate structure and interstate rates to 
Transitional Intrastate Access Service. In addition to applicable 
interstate access rates, the carrier may, between July 1, 2012 and July 
1, 2013, assess a transitional per-minute charge on Transitional 
Intrastate Access Service end office switching minutes (previously 
billed as intrastate access). The transitional per-minute charge shall 
be no greater than the Step 1 Access Revenue Reduction divided by 
Fiscal Year 2011 Transitional Intrastate Access Service end office 
switching minutes. Carriers electing to establish rates for 
Transitional Intrastate Access Service in this manner shall notify the 
appropriate state regulatory authority of their election in the filing 
required by Sec.  51.907(b)(1).
    (3) Nothing in this section obligates or allows a Rate-of-Return 
carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions raising such rates.
    (c) Step 2. Beginning July 1, 2013, notwithstanding any other 
provision of the Commission's rules, Transitional Intrastate Access 
Service rates shall be no higher than the Rate-of-Return Carrier's 
interstate Terminating End Office Access Service and Terminating 
Tandem-Switched Transport Access Service rates and subject to the same 
rate structure and all subsequent rate and rate structure 
modifications.

[[Page 73860]]

    (d) Step 3. Beginning July 1, 2014, notwithstanding any other 
provision of the Commission's rules:
    (1) Notwithstanding the rate structure rules set forth in Sec.  
69.106 of this chapter or anything else in the Commission's rules, a 
Rate-of-Return Carrier shall establish separate originating and 
terminating interstate and intrastate rate elements for all components 
within interstate End Office Access Service. For fixed charges, the 
Rate-of-Return Carrier shall divide the amount based on relative 
originating and terminating end office switching minutes. If sufficient 
originating and terminating end office switching minute data is not 
available, the carrier shall divide such charges equally between 
originating and terminating elements.
    (2) Nothing in this Step shall affect Tandem-Switched Transport 
Access Service or Dedicated Transport Access Service.
    (3) Each Rate-of-Return Carrier shall establish rates for 
interstate and intrastate terminating End Office Access Service using 
the following methodology:
    (i) Each Rate-of-Return Carrier shall calculate the 2011 Baseline 
Composite Terminating End Office Access Rate. The 2011 Baseline 
Composite Terminating End Office Access Rate means the Composite 
Terminating End Office Access Rate calculated using Fiscal Year 2011 
interstate demand and the interstate End Office Access Service rates at 
the levels in effect on December 29, 2011.
    (ii) Each Rate-of-Return Carrier shall calculate its 2014 
interstate Target Composite Terminating End Office Access Rate. The 
2014 interstate Target Composite Terminating End Office Access Rate 
means $0.005 per minute plus two-thirds of any difference between the 
2011 Baseline Composite Terminating End Office Access Rate. and $0.005 
per minute.
    (iii) Beginning July 1, 2014, no Rate-of-Return Carrier's 
interstate or intrastate Composite Terminating End Office Access Rate 
shall exceed its 2014 interstate Target Composite Terminating End 
Office Access Rate. In the alternative, any Rate-of-Return Carrier may 
elect to implement a single per minute rate element for terminating End 
Office Access Service no greater than the 2014 interstate Target 
Composite Terminating End Office Access Rate.
    (4) Nothing in this section obligates or allows a Rate-of-Return 
Carrier that has intrastate rates lower than its functionally 
equivalent interstate rates to make any intrastate tariff filing or 
intrastate tariff revisions raising such rates.
    (e) Step 4. Beginning July 1, 2015, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Rate-of-Return Carrier shall establish rates for 
interstate and intrastate terminating End Office Access Service using 
the following methodology:
    (i) Each Rate-of-Return Carrier shall calculate its 2015 interstate 
Target Composite Terminating End Office Access Rate. The 2015 
interstate Target Composite Terminating End Office Access Rate means 
$0.005 per minute plus one-third of any difference between the 2011 
Baseline Composite Terminating End Office Access Rate and $0.005 per 
minute.
    (ii) Beginning July 1, 2015, no Rate-of-Return Carrier's interstate 
or intrastate Composite Terminating End Office Access Rate shall exceed 
its 2015 Target Composite Terminating End Office Access Rate. In the 
alternative, any Rate-of-Return Carrier may elect to implement a single 
per minute rate element for terminating End Office Access Service no 
greater than the 2015 interstate Target Composite Terminating End 
Office Access Rate.
    (2) [Reserved]
    (f) Step 5. Beginning July 1, 2016, notwithstanding any other 
provision of the Commission's rules, each Rate-of-Return Carrier shall 
establish interstate and intrastate per minute terminating End Office 
Access Service rates such that its Composite Terminating End Office 
Access Service rate does not exceed $0.005 per minute. Nothing in this 
section obligates or allows a Rate-of-Return Carrier that has 
intrastate rates lower than its functionally equivalent interstate 
rates to make any intrastate tariff filing or intrastate tariff 
revisions raising such rates.
    (g) Step 6. Beginning July 1, 2017, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Rate-of-Return Carrier shall establish rates for 
terminating End Office Access Service using the following methodology:
    (i) Each Rate-of-Return Carrier shall calculate its 2017 interstate 
Target Composite Terminating End Office Access Rate. The 2017 
interstate Target Composite Terminating End Office Access Rate means 
$0.0007 per minute plus two-thirds of any difference between that 
carrier's Terminating End Office Access Service Rate as of July 1, 2016 
and $0.0007 per minute.
    (ii) Beginning July 1, 2017, no Rate-of-Return Carrier's interstate 
or intrastate Composite Terminating End Office Access Rate shall exceed 
its 2017 interstate Target Composite Terminating End Office Access 
Rate. In the alternative, any Rate-of-Return Carrier may elect to 
implement a single per minute rate element for terminating End Office 
Access Service no greater than the 2017 interstate Target Composite 
Terminating End Office Access Rate.
    (2) [Reserved]
    (h) Step 7. Beginning July 1, 2018, notwithstanding any other 
provision of the Commission's rules:
    (1) Each Rate-of-Return Carrier shall establish rates for 
terminating End Office Access Service using the following methodology:
    (i) Each Rate-of-Return Carrier shall calculate its 2018 interstate 
Target Composite Terminating End Office Access Rate. The 2018 
interstate Target Composite Terminating End Office Access Rate means 
$0.0007 per minute plus one-third of any difference between that 
carrier's Terminating End Office Access Service Rate as of July 1, 2016 
and $0.0007 per minute.
    (ii) Beginning July 1, 2018, no Rate-of-Return Carrier's interstate 
or intrastate Composite Terminating End Office Access Rate shall exceed 
its 2018 interstate Target Composite Terminating End Office Access 
Rate. In the alternative, any Rate-of-Return Carrier may elect to 
implement a single per minute rate element for terminating End Office 
Access Service no greater than the 2018 interstate Target Composite 
Terminating End Office Access Rate.
    (2) [Reserved]
    (i) Step 8. Beginning July 1, 2019, notwithstanding any other 
provision of the Commission's rules, each Rate-of-Return Carrier shall 
establish interstate and intrastate rates for terminating End Office 
Access Service that do not exceed $0.0007 per minute.
    (j) Step 9. Beginning July 1, 2020, notwithstanding any other 
provision of the Commission's rules, each Rate-of-Return Carrier shall, 
in accordance with a bill-and-keep methodology, revise and refile its 
federal access tariffs and any state tariffs to remove any intercarrier 
charges for terminating End Office Access Service.
    (k) As set forth in FCC 11-161, states will facilitate 
implementation of changes to intrastate access rates to ensure 
compliance with the Order. Nothing in this section shall alter the 
authority of a state to monitor and oversee filing of intrastate 
tariffs.


Sec.  51.911  Access reciprocal compensation rates for competitive 
LECs.

    (a) Caps on Access Reciprocal Compensation and switched access 
rates. Notwithstanding any other provision of the Commission's rules:
    (1) In the case of Competitive LECs operating in an area served by 
a Price

[[Page 73861]]

Cap Carrier, no such Competitive LEC may increase the rate for any 
originating or terminating intrastate switched access service above the 
rate for such service in effect on December 29, 2011.
    (2) In the case of Competitive LEC operating in an area served by 
an incumbent local exchange carrier that is a Rate-of-Return Carrier or 
Competitive LECs that are subject to the rural exemption in Sec.  
61.26(e) of this chapter, no such Competitive LEC may increase the rate 
for any originating or terminating intrastate switched access service 
above the rate for such service in effect on December 29, 2011, with 
the exception of intrastate originating access service. For such 
Competitive LECs, intrastate originating access service subject to this 
subpart shall remain subject to the same state rate regulation in 
effect December 31, 2011, as may be modified by the state thereafter.
    (b) Beginning July 1, 2012, notwithstanding any other provision of 
the Commission's rules, each Competitive LEC that has tariffs on file 
with state regulatory authorities shall file intrastate access tariff 
provisions, in accordance with Sec.  51.505(b)(2), that set forth the 
rates applicable to Transitional Intrastate Access Service in each 
state in which it provides Transitional Intrastate Access Service. Each 
Competitive Local Exchange Carrier shall establish the rates for 
Transitional Intrastate Access Service using the following methodology:
    (1) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's interstate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (2) Calculate total revenue from Transitional Intrastate Access 
Service at the carrier's intrastate access rates in effect on December 
29, 2011, using Fiscal Year 2011 intrastate switched access demand for 
each rate element.
    (3) Calculate the Step 1 Access Revenue Reduction. The Step 1 
Access Revenue Reduction is equal to one-half of the difference between 
the amount calculated in (b)(1) of this section and the amount 
calculated in (b)(2) of this section.
    (4) A Competitive Local Exchange Carrier may elect to establish 
rates for Transitional Intrastate Access Service using its intrastate 
access rate structure. Carriers using this option shall establish rates 
for Transitional Intrastate Access Service such that Transitional 
Intrastate Access Service revenue at the proposed rates is no greater 
than Transitional Intrastate Access Service revenue at the intrastate 
rates in effect as of December 29, 2011 less the Step 1 Access Revenue 
Reduction, using Fiscal year 2011 intrastate switched access demand.
    (5) In the alternative, a Competitive Local Exchange Carrier may 
elect to apply its interstate access rate structure and interstate 
rates to Transitional Intrastate Access Service. In addition to 
applicable interstate access rates, the carrier may assess a 
transitional per-minute charge on Transitional Intrastate Access 
Service end office switching minutes (previously billed as intrastate 
access). The transitional charge shall be no greater than the Step 1 
Access Revenue Reduction divided by Fiscal year 2011 intrastate 
switched access demand
    (6) Nothing in this section obligates or allows a Competitive LEC 
that has intrastate rates lower than its functionally equivalent 
interstate rates to make any intrastate tariff filing or intrastate 
tariff revisions raising such rates.
    (c) Beginning July 1, 2013, notwithstanding any other provision of 
the Commission's rules, all Competitive Local Exchange Carrier Access 
Reciprocal Compensation rates for switched exchange access services 
subject to this subpart shall be no higher than the Access Reciprocal 
Compensation rates charged by the competing incumbent local exchange 
carrier, in accordance with the same procedures specified in Sec.  
61.26 of this chapter.


Sec.  51.913  Transition for VoIP-PSTN traffic.

    (a) Access Reciprocal Compensation subject to this subpart 
exchanged between a local exchange carrier and another 
telecommunications carrier in Time Division Multiplexing (TDM) format 
that originates and/or terminates in IP format shall be subject to a 
rate equal to the relevant interstate access charges specified by this 
subpart. Telecommunications traffic originates and/or terminates in IP 
format if it originates from and/or terminates to an end-user customer 
of a service that requires Internet protocol-compatible customer 
premises equipment.
    (b) Notwithstanding any other provision of the Commission's rules, 
a local exchange carrier shall be entitled to assess and collect the 
full Access Reciprocal Compensation charges prescribed by this subpart 
that are set forth in a local exchange carrier's interstate or 
intrastate tariff for the access services defined in Sec.  51.903 
regardless of whether the local exchange carrier itself delivers such 
traffic to the called party's premises or delivers the call to the 
called party's premises via contractual or other arrangements with an 
affiliated or unaffiliated provider of interconnected VoIP service, as 
defined in 47 U.S.C. 153(25), or a non-interconnected VoIP service, as 
defined in 47 U.S.C. 153(36), that does not itself seek to collect 
Access Reciprocal Compensation charges prescribed by this subpart for 
that traffic. This rule does not permit a local exchange carrier to 
charge for functions not performed by the local exchange carrier itself 
or the affiliated or unaffiliated provider of interconnected VoIP 
service or non-interconnected VoIP service. For purposes of this 
provision, functions provided by a LEC as part of transmitting 
telecommunications between designated points using, in whole or in 
part, technology other than TDM transmission in a manner that is 
comparable to a service offered by a local exchange carrier constitutes 
the functional equivalent of the incumbent local exchange carrier 
access service.


Sec.  51.915  Recovery mechanism for price cap carriers.

    (a) Scope. This section sets forth the extent to which Price Cap 
Carriers may recover certain revenues, through the recovery mechanism 
outlined below, to implement reforms adopted in FCC 11-161 and as 
required by Sec.  20.11(b) of this chapter, and Sec. Sec.  51.705 and 
51.907.
    (b) Definitions. As used in this section and Sec.  51.917, the 
following terms mean:
    (1) CALLS Study Area. A CALLS Study Area means a Price Cap Carrier 
study area that participated in the CALLS plan at its inception. See 
Access Charge Reform, Price Cap Performance Review for Local Exchange 
Carriers, Low-Volume Long-Distance Users, Federal-State Joint Board on 
Universal Service, Sixth Report and Order in CC Docket Nos. 96-262 and 
94-1, Report and Order in CC Docket No. 99-249, Eleventh Report and 
Order in CC Docket No. 96-45, 15 FCC Rcd 12962 (2000).
    (2) CALLS Study Area Base Factor. The CALLS Study Area Base Factor 
is equal to ninety (90) percent.
    (3) CMRS Net Reciprocal Compensation Revenues. CMRS Net Reciprocal 
Compensation Revenues means the reduction in net reciprocal 
compensation revenues required by Sec.  20.11 of this chapter 
associated with CMRS traffic as described in Sec.  51.701(b)(2), which 
is equal to its Fiscal Year 2011 net reciprocal compensation revenues 
from CMRS carriers.
    (4) Expected Revenues for Access Recovery Charges. Expected 
Revenues for Access Recovery Charges are calculated using the tariffed 
Access Recovery Charge rate for each class of service and the forecast 
demand for each class of service.

[[Page 73862]]

    (5) Initial Composite Terminating End Office Access Rate. Initial 
Composite Terminating End Office Access Rate means Fiscal Year 2011 
terminating interstate End Office Access Service revenue divided by 
Fiscal Year 2011 terminating interstate end office switching minutes.
    (6) Lifeline Customer. A Lifeline Customer is a residential 
lifeline subscriber as defined by Sec.  54.400(a) of this chapter that 
does not pay a Residential and/or Single-Line Business End User Common 
Line Charge.
    (7) Net Reciprocal Compensation. Net Reciprocal Compensation means 
the difference between a carrier's reciprocal compensation revenues 
from non-access traffic less its reciprocal compensation payments for 
non-access traffic during a stated period of time. For purposes of the 
calculations made under Sec. Sec.  51.915 and 51.917, the term does not 
include reciprocal compensation revenues for non-access traffic 
exchanged between Local Exchange Carriers and CMRS providers; recovery 
for such traffic is addressed separately in these sections.
    (8) Non-CALLS Study Area. Non-CALLS Study Area means a Price Cap 
Carrier study area that did not participate in the CALLS plan at its 
inception.
    (9) Non-CALLS Study Area Base Factor. The Non-CALLS Study Area Base 
Factor is equal to one hundred (100) percent for five (5) years 
beginning July 1, 2012. Beginning July 1, 2017, the Non-CALLS Price Cap 
Carrier Base Factor will be equal to ninety (90) percent.
    (10) Price Cap Carrier Traffic Demand Factor. The Price Cap Carrier 
Traffic Demand Factor, as used in calculating eligible recovery, is 
equal to ninety (90) percent for the one-year period beginning July 1, 
2012. It is reduced by ten (10) percent of its previous value in each 
subsequent annual tariff filing.
    (11) Rate Ceiling Component Charges. The Rate Ceiling Component 
Charges consists of the federal end user common line charge and the 
Access Recovery Charge; the flat rate for residential local service 
(sometimes know as the ``1FR'' or ``R1'' rate), mandatory extended area 
service charges, and state subscriber line charges; per-line state high 
cost and/or state access replacement universal service contributions, 
state E911 charges, and state TRS charges.
    (12) Residential Rate Ceiling. The Residential Rate Ceiling, which 
consists of the total of the Rate Ceiling Component Charges, is set at 
$30 per month. The Residential Rate Ceiling will be the higher of the 
rate in effect on January 1, 2012, or the rate in effect on January 1 
in any subsequent year.
    (13) True-up Revenues for Access Recovery Charge. True-up revenues 
for Access Recovery Charge are equal to Expected Access Recovery Charge 
Revenues minus ((projected demand minus actual realized demand for 
Access Recovery Charges) times the tariffed Access Recovery Charge). 
This calculation shall be made separately for each class of service and 
shall be adjusted to reflect any changes in tariffed rates for the 
Access Recovery Charge. Realized demand is the demand for which payment 
has been received, or has been made, as appropriate, by the time the 
true-up is made.
    (c) 2011 Price Cap Carrier Base Period Revenue. 2011 Price Cap 
Carrier Base Period Revenue is equal to the sum of the following three 
components:
    (1) Terminating interstate end office switched access revenues and 
interstate Tandem-Switched Transport Access Service revenues for Fiscal 
Year 2011 received by March 31, 2012;
    (2) Fiscal Year 2011 revenues from Transitional Intrastate Access 
Service received by March 31, 2012; and
    (3) Fiscal Year 2011 reciprocal compensation revenues received by 
March 31, 2012, less fiscal year 2011 reciprocal compensation payments 
made by March 31, 2012.
    (d) Eligible recovery for Price Cap Carriers.
    (1) Notwithstanding any other provision of the Commission's rules, 
a Price Cap Carrier may recover the amounts specified in this paragraph 
through the mechanisms described in paragraphs (e) and (f) of this 
section.
    (i) Beginning July 1, 2012, a Price Cap Carrier's eligible recovery 
will be equal to the CALLS Study Area Base Factor and/or the Non-CALLS 
Study Area Base Factor, as applicable, multiplied by the sum of the 
following three components:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) multiplied 
by the Price Cap Carrier Traffic Demand Factor;
    (B) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor; and
    (C) A Price Cap Carrier's reductions in Fiscal Year 2011 net 
reciprocal compensation revenues resulting from rate reductions 
required by Sec.  51.705, other than those associated with CMRS traffic 
as described in Sec.  51.701(b)(2), which may be calculated in one of 
the following ways:
    (1) Calculate the reduction in Fiscal Year 2011 net reciprocal 
compensation revenue as a result of rate reductions required by Sec.  
51.705 using Fiscal Year 2011 reciprocal compensation demand, and then 
multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2012 
multiply by the appropriate Fiscal Year 2011 demand, and then multiply 
by the Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (ii) Beginning July 1, 2013, a Price Cap Carrier's eligible 
recovery will be equal to the CALLS Study Area Base Factor and/or the 
Non-CALLS Study Area Base Factor, as applicable, multiplied by the sum 
of the following three components:
    (A) The cumulative amount of the reduction in Transitional 
Intrastate Access Service revenues determined pursuant to Sec.  
51.907(b)(2) and (c) multiplied by the Price Cap Carrier Traffic Demand 
Factor; and
    (B) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor; and
    (C) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal

[[Page 73863]]

compensation payments by dividing its Fiscal Year 2011 reciprocal 
compensation receipts and payments by their respective Fiscal Year 2011 
demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2013, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (iii) Beginning July 1, 2014, a Price Cap Carrier's eligible 
recovery will be equal to the CALLS Study Area Base Factor and/or the 
Non-CALLS Study Area Base Factor, as applicable, multiplied by the sum 
of the amounts in paragraphs (d)(1)(iii)(A) through (d)(1)(iii)(E), of 
this section, and then adding the amount in paragraph (d)(1)(iii)(F) of 
this section to that amount:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) and (c) 
multiplied by the Price Cap Carrier Traffic Demand Factor; and
    (B) The reduction in interstate switched access revenues equal to 
the difference between the Initial Composite Terminating End Office 
Access Rate and the 2014 Target Composite Terminating End Office Access 
Rate determined pursuant to Sec.  51.907(d) using 2011 terminating 
interstate end office switching minutes, and then multiply by the Price 
Cap Carrier Traffic Demand Factor;
    (C) If the 2014 Intrastate Composite Terminating End Office Access 
Rate is higher than the 2014 Target Composite Terminating End Office 
Access Rate, the reduction in revenues equal to the difference between 
the intrastate 2014 Composite Terminating End Office Access Rate and 
the intrastate 2014 Target Composite Terminating End Office Access Rate 
determined pursuant to Sec.  51.907(d) using Fiscal Year 2011 
terminating intrastate end office switching minutes, and then multiply 
by the Price Cap Carrier Traffic Demand Factor;
    (D) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor; and
    (E) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2014, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (F) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2012.
    (iv) Beginning July 1, 2015, a Price Cap Carrier's eligible 
recovery will be equal to the CALLS Study Area Base Factor and/or the 
Non-CALLS Study Area Base Factor, as applicable, multiplied by the sum 
of the amounts in paragraphs (d)(1)(iv)(A) through (d)(1)(iv)(E) of 
this section and then adding the amount in paragraph (d)(1)(iv)(F) of 
this section to that amount:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) and (c) 
multiplied by the Price Cap Carrier Traffic Demand Factor;
    (B) The reduction in interstate switched access revenues equal to 
the difference between the Initial Composite Terminating End Office 
Access Rate and the 2015 Target Composite Terminating End Office Access 
Rate determined pursuant to Sec.  51.907(e) using Fiscal Year 2011 
terminating interstate end office switching minutes, and then multiply 
by the Price Cap Carrier Traffic Demand Factor;
    (C) If the 2014 Intrastate Composite Terminating End Office Access 
Rate is higher than the 2015 Target Composite Terminating End Office 
Access Rate, the reduction in intrastate switched access revenues equal 
to the difference between the intrastate 2014 Composite Terminating End 
Office Access Rate and the 2015 Target Composite Terminating End Office 
Access Rate determined pursuant to Sec.  51.907(e) using Fiscal Year 
2011 terminating intrastate end office switching minutes, and then 
multiply by the Price Cap Carrier Traffic Demand Factor; and
    (D) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor;
    (E) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2015, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this

[[Page 73864]]

option, it may not change its election at a later date.
    (F) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2013.
    (v) Beginning July 1, 2016, a Price Cap Carrier's eligible recovery 
will be equal to the CALLS Study Area Base Factor and/or the Non-CALLS 
Study Area Base Factor, as applicable, multiplied by the sum of the 
amounts in paragraphs (d)(1)(v)(A) through (d)(1)(v)(E), of this 
section and then adding the amount in paragraph (d)(1)(v)(F) of this 
section to that amount:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) and (c) 
multiplied by the Price Cap Carrier Traffic Demand Factor;
    (B) The reduction in interstate switched access revenues equal to 
the difference between the Initial Composite Terminating End Office 
Access Rate and $0.0007 determined pursuant to Sec.  51.907(f) using 
Fiscal Year 2011 terminating interstate end office switching minutes, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (C) If the 2014 Intrastate Composite Terminating End Office Access 
Rate is higher than $0.0007, the reduction in revenues equal to the 
difference between the intrastate 2014 Composite Terminating End Office 
Access Rate and $0.0007 determined pursuant to Sec.  51.907(f) using 
Fiscal Year 2011 terminating intrastate end office minutes, and then 
multiply by the Price Cap Carrier Traffic Demand Factor;
    (D) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor;
    (E) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2016, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (F) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2014.
    (vi) Beginning July 1, 2017, a Price Cap Carrier's eligible 
recovery will be equal to ninety (90) percent of the sum of the amounts 
in paragraphs (d)(1)(vi) through (d)(1)(vi)(F) of this section, and 
then adding the amount in paragraph (d)(1)(vi)(G) f this section to 
that amount:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) and (c) 
multiplied by the Price Cap Carrier Traffic Demand Factor; and
    (B) The reduction in interstate switched access revenues equal to 
the Initial Composite terminating End Office Access Rate using Fiscal 
Year 2011 terminating interstate end office switching minutes, and then 
multiply by the Price Cap Carrier Traffic Demand Factor;
    (C) The reduction in revenues equal to the intrastate 2014 
Composite terminating End Office Access Rate using Fiscal Year 2011 
terminating intrastate end office switching minutes, and then multiply 
by the Price Cap Carrier Traffic Demand Factor;
    (D) The reduction in revenues resulting from reducing the 
terminating Tandem-Switched Transport Access Service rate to $0.0007 
pursuant to Sec.  51.907(g)(2) using Fiscal Year 2011 terminating 
tandem-switched minutes, and then multiply by the Price Cap Carrier 
Traffic Demand Factor;
    (E) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor; and
    (F) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2017, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (G) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2015.
    (vii) Beginning July 1, 2018, a Price Cap Carrier's eligible 
recovery will be equal to ninety (90) percent of the sum of the amounts 
in paragraphs (d)(1)(vii)(A) though (d)(1)(vii)(G) of this section, and 
then adding the amount in paragraph (d)(1)(vii)(H) of this section to 
that amount:
    (A) The amount of the reduction in Transitional Intrastate Access 
Service revenues determined pursuant to Sec.  51.907(b)(2) and (c) 
multiplied by the Price Cap Carrier Traffic Demand Factor; and:
    (B) The reduction in interstate switched access revenues equal to 
the Initial Composite terminating End Office Access Rate using Fiscal 
Year 2011 terminating interstate end office switching minutes, and then 
multiply

[[Page 73865]]

by the Price Cap Carrier Traffic Demand Factor;
    (C) The reduction in revenues equal to the intrastate 2014 
Composite terminating End Office Access Rate using Fiscal Year 2011 
terminating intrastate end office switching minutes, and then multiply 
by the Price Cap Carrier Traffic Demand Factor;
    (D) The reduction in revenues resulting from reducing the 
terminating Tandem-Switched Transport Access Service rate to $0.0007 
pursuant to Sec.  51.907(g)(2) using Fiscal Year 2011 terminating 
tandem-switched minutes, and then multiply by the Price Cap Carrier 
Traffic Demand Factor;
    (E) The reduction in revenues resulting from moving from a 
terminating Tandem-Switched Transport Access Service rate tariffed at a 
maximum of $0.0007 to removal of intercarrier charges pursuant to Sec.  
51.907(h), if applicable, using Fiscal Year 2011 terminating tandem-
switched minutes, and then multiply by the Price Cap Carrier Traffic 
Demand Factor;
    (F) CMRS Net Reciprocal Compensation Revenues multiplied by the 
Price Cap Carrier Traffic Demand Factor; and
    (G) A Price Cap Carrier's cumulative reductions in Fiscal Year 2011 
net reciprocal compensation revenues other than those associated with 
CMRS traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Calculate the cumulative reduction in Fiscal Year 2011 net 
reciprocal compensation revenue as a result of rate reductions required 
by Sec.  51.705 using Fiscal Year 2011 reciprocal compensation demand, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Calculate the difference between each of the composite 
reciprocal compensation rates and the target reciprocal compensation 
rate set forth in Sec.  51.705 for the year beginning July 1, 2018, 
using the appropriate Fiscal Year 2011 demand, and then multiply by the 
Price Cap Carrier Traffic Demand Factor; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Price Cap Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (H) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2016.
    (viii) Beginning July 1, 2019, and in subsequent years, a Price Cap 
Carrier's eligible recovery will be equal to the amount calculated in 
paragraph (d)(1)(vii)(A) through (d)(1)(vii)(H) of this section before 
the application of the Price Cap Carrier Traffic Demand Factor 
applicable in 2018 multiplied by the appropriate Price Cap Carrier 
Traffic Demand Factor for the year in question, and then adding an 
amount equal to True-up Revenues for Access Recovery Charges less 
Expected Revenues for Access Recovery Charges for the year beginning 
July 1 two years earlier.
    (2) If a Price Cap Carrier recovers any costs or revenues that are 
already being recovered as Eligible Recovery through Access Recovery 
Charges or the Connect America Fund from another source, that carrier's 
ability to recover reduced switched access revenue from Access Recovery 
Charges or the Connect America Fund shall be reduced to the extent it 
receives duplicative recovery.
    (3) A Price Cap Carrier seeking revenue recovery must annually 
certify as part of its tariff filings to the Commission and to the 
relevant state commission that the carrier is not seeking duplicative 
recovery in the state jurisdiction for any Eligible Recovery subject to 
the recovery mechanism.
    (e) Access Recovery Charge. (1) A charge that is expressed in 
dollars and cents per line per month may be assessed upon end users 
that may be assessed an end user common line charge pursuant to Sec.  
69.152 of this chapter, to the extent necessary to allow the Price Cap 
Carrier to recover some or all of its eligible recovery determined 
pursuant to paragraph (d) of this section, subject to the caps 
described in paragraph (e)(5) of this section. A Price Cap Carrier may 
elect to forgo charging some or all of the Access Recovery Charge.
    (2) Total Access Recovery Charges calculated by multiplying the 
tariffed Access Recovery Charge by the projected demand for the year in 
question may not recover more than the amount of eligible recovery 
calculated pursuant to paragraph (d) of this section for the year 
beginning on July 1.
    (3) For the purposes of this section, a Price Cap Carrier holding 
company includes all of its wholly-owned operating companies that are 
price cap incumbent local exchange carriers. A Price Cap Carrier 
Holding Company may recover the eligible recovery attributable to any 
price cap study areas operated by its wholly-owned operating companies 
through assessments of the Access Recovery Charge on end users in any 
price cap study areas operated by its wholly owned operating companies 
that are price cap incumbent local exchange carriers.
    (4) Distribution of Access Recovery Charges among lines of 
different types. (i) A Price Cap Carrier holding company that does not 
receive ICC-replacement CAF support (whether because it elects not to 
or because it does not have sufficient eligible recovery after the 
Access Recovery Charge is assessed or imputed) may not recover a higher 
fraction of its total revenue recovery from Access Recovery Charges 
assessed on Residential and Single Line Business lines than:
    (A) The number of Residential and Single-Line Business lines 
divided by
    (B) The sum of the number of Residential and Single-Line Business 
lines and two (2) times the number of End User Common Line charges 
assessed on Multi-Line Business customers.
    (ii) For purposes of this subpart, Residential and Single Line 
Business lines are lines (other than lines of Lifeline Customers) 
assessed the residential and single line business end user common line 
charge and lines assessed the non-primary residential end user common 
line charge.
    (iii) For purposes of this subpart, Multi-Line Business Lines are 
lines assessed the multi-line business end user common line charge.
    (5) Per-line caps and other limitations on Access Recovery Charges
    (i) For each line other than lines of Lifeline Customers assessed a 
primary residential or single-line business end user common line charge 
or a non-primary residential end user common line charge pursuant to 
Sec.  69.152 of this Chapter, a Price Cap Carrier may assess an Access 
Recovery Charge as follows:
    (A) Beginning July 1, 2012, a maximum of $0.50 per month for each 
line;
    (B) Beginning July 1, 2013, a maximum of $1.00 per month for each 
line;
    (C) Beginning July 1, 2014, a maximum of $1.50 per month for each 
line;
    (D) Beginning July 1, 2015, a maximum of $2.00 per month for each 
line; and

[[Page 73866]]

    (E) Beginning July 1, 2016, a maximum of $2.50 per month for each 
line.
    (ii) For each line assessed a multi-line business end user common 
line charge pursuant to Sec.  69.152 of this chapter, a Price Cap 
Carrier may assess an Access Recovery Charge as follows:
    (A) Beginning July 1, 2012, a maximum of $1.00 per month for each 
multi-line business end user common line charge assessed;
    (B) Beginning July 1, 2013, a maximum of $2.00 per month for each 
multi-line business end user common line charge assessed;
    (C) Beginning July 1, 2014, a maximum of $3.00 per month for each 
multi-line business end user common line charge assessed;
    (D) Beginning July 1, 2015, a maximum of $4.00 per month for each 
multi-line business end user common line charge assessed; and
    (E) Beginning July 1, 2016, a maximum of $5.00 per month for each 
multi-line business end user common line charge assessed.
    (iii) The Access Recovery Charge allowed by paragraph (e)(5)(i) of 
this section may not be assessed to the extent that its assessment 
would bring the total of the Rate Ceiling Component Charges above the 
Residential Rate Ceiling on January 1 of that year. This limitation 
applies only to the first residential line obtained by a residential 
end user and does not apply to single-line business customers.
    (iv) The Access Recovery Charge allowed by paragraph (e)(5)(ii) of 
this section may not be assessed to the extent that its assessment 
would bring the total of the multi-line business end user common line 
charge and the Access Recovery Charge above $12.20 per line.
    (v) The Access Recovery Charge assessed on lines assessed the non-
primary residential line end user common line charge in a study area 
may not exceed the Access Recovery Charge assessed on residential end-
users' first residential line in that study area.
    (vi) The Access Recovery Charge may not be assessed on lines of any 
Lifeline Customers.
    (vii) If in any year, the Price Cap Carrier's Access Recovery 
Charge is not at its maximum, the succeeding year's Access Recovery 
Charge may not increase more than $.0.50 per line per month for charges 
assessed under paragraph (e)(5)(i) of this section or $1.00 per line 
per month for charges assessed under paragraph (e)(5)(ii) of this 
section.
    (f) Price Cap Carrier eligibility for CAF ICC Support.
    (1) A Price Cap Carrier shall elect in its July 1, 2012 access 
tariff filing whether it will receive CAF ICC Support under this 
paragraph. A Price Cap Carrier eligible to receive CAF ICC Support 
subsequently may elect at any time not to receive such funding. Once it 
makes the election not to receive CAFF ICC Support, it may not elect to 
receive such funding at a later date.
    (2) Beginning July 1, 2012, a Price Cap Carrier may recover any 
eligible recovery allowed by paragraph (d) that it could not have 
recovered through charges assessed pursuant to paragraph (e) of this 
section from CAF ICC Support pursuant to Sec.  54.304. For this 
purpose, the Price Cap Carrier must impute the maximum charges it could 
have assessed under paragraph (e)of this section.
    (3) Beginning July 1, 2017, a Price Cap Carrier may recover two-
thirds (\2/3\) of the amount it otherwise would have been eligible to 
recover under paragraph (f)(2) from CAF ICC Support.
    (4) Beginning July 1, 2018, a Price Cap Carrier may recover one-
third (1/3) of the amount it otherwise would have been eligible to 
recover under paragraph (f)(2) of this section from CAF ICC Support.
    (5) Beginning July 1, 2019, a Price Cap Carrier may no longer 
recover any amount related to revenue recovery under this paragraph 
from CAF ICC Support.
    (6) A Price Cap Carrier that elects to receive CAF ICC support must 
certify with its 2012 annual access tariff filing and on April 1st of 
each subsequent year that it has complied with paragraphs (d) and (e) 
of this section, and, after doing so, is eligible to receive the CAF 
ICC support requested pursuant to paragraph (f) of this section.


Sec.  51.917  Revenue recovery for Rate-of-Return Carriers.

    (a) Scope. This section sets forth the extent to which Rate-of-
Return Carriers may recover, through the recovery mechanism outlined in 
paragraphs (d) through (f) of this section, a portion of revenues lost 
due to rate reductions required by Sec.  20.11(b) of this chapter, and 
Sec. Sec.  51.705 and 51.909.
    (b) Definitions.
    (1) 2011 Interstate Switched Access Revenue Requirement. 2011 
Interstate Switched Access Revenue Requirement means:
    (i) For a Rate-of-Return Carrier that participated in the NECA 2011 
annual switched access tariff filing, its projected interstate switched 
access revenue requirement associated with the NECA 2011 annual 
interstate switched access tariff filing;
    (ii) For a Rate-of-Return Carrier subject to Sec.  61.38 of this 
chapter that filed its own annual access tariff in 2010 and did not 
participate in the NECA 2011 annual switched access tariff filing, its 
projected interstate switched access revenue requirement in its 2010 
annual interstate switched access tariff filing; and
    (iii) For a Rate-of-Return Carrier subject to Sec.  61.39 of this 
chapter that filed its own annual switched access tariff in 2011, its 
historically-determined annual interstate switched access revenue 
requirement filed with its 2011 annual interstate switched access 
tariff filing.
    (2) Expected Revenues. Expected Revenues from an access service are 
calculated using the default transition rate for that service specified 
by Sec.  51.909 and forecast demand for that service. Expected Revenues 
from a non-access service are calculated using the default transition 
rate for that service specified by Sec.  20.11 of this chapter or Sec.  
51.705 of this chapter and forecast net demand for that service.
    (3) Rate-of-Return Carrier Baseline Adjustment Factor. The Rate-of-
Return Carrier Baseline Adjustment Factor, as used in calculating 
eligible recovery for Rate-of-Return Carriers, is equal to ninety-five 
(95) percent for the period beginning July 1, 2012. It is reduced by 
five (5) percent of its previous value in each subsequent annual tariff 
filing.
    (4) Revenue Requirement. Revenue Requirement is equal to a 
carrier's regulated operating costs plus an 11.25 percent return on a 
carrier's net rate base calculated in compliance with the provisions of 
parts 36, 65 and 69 of this chapter. For an average schedule carrier, 
its Revenue Requirement shall be equal to the average schedule 
settlements it received from the pool, adjusted to reflect an 11.25 
percent rate of return, or what it would have received if it had been a 
participant in the pool. If the reference is to an operating segment, 
these references are to the Revenue Requirement associated with that 
segment.
    (5) True-up Adjustment. The True-up Adjustment is equal to the 
Expected Revenues less the True-up Revenues for any particular service 
for the period in question.
    (6) True-up Revenues. True-up Revenues from an access service are 
equal to Expected Revenues minus ((projected demand minus actual 
realized demand for that service) times the default transition rate for 
that service specified by Sec.  51.909). True-up Revenues from a non-
access service are equal to Expected Revenues minus ((projected demand 
minus actual

[[Page 73867]]

realized net demand for that service) times the default transition rate 
for that service specified by 20.11(b) of this chapter or 51.705). 
Realized demand is the demand for which payment has been received, or 
has been made, as appropriate, by the time the true-up is made.
    (7) 2011 Rate-of-Return Carrier Base Period Revenue. 2011 Rate-of-
Return Carrier Base Period Revenue is the sum of:
    (i) 2011 Interstate Switched Access Revenue Requirement;
    (ii) Fiscal Year 2011 revenues from Transitional Intrastate Access 
Service received by March 31, 2012; and
    (iii) Fiscal Year 2011 reciprocal compensation revenues received by 
March 31, 2012, less Fiscal Year 2011 reciprocal compensation payments 
paid and/or payable by March 31, 2012
    (c) 2011 Rate-of-Return Carrier Base Period Revenue shall be 
adjusted to reflect the removal of any increases in revenue requirement 
or revenues resulting from access stimulation activity the Rate-of-
Return Carrier engaged in during the relevant measuring period. A Rate-
of-Return Carrier should make this adjustment for its initial July 1, 
2012, tariff filing, but the adjustment may result from a subsequent 
Commission or court ruling.
    (d) Eligible Recovery for Rate-of-Return Carriers.
    (1) Notwithstanding any other provision of the Commission's rules, 
a Rate-of-Return Carrier may recover the amounts specified in this 
paragraph through the mechanisms described in paragraphs (e) and (f) of 
this section.
    (i) Beginning July 1, 2012, a Rate-of-Return Carrier's eligible 
recovery will be equal to the Rate-of-Return Carrier Baseline 
Adjustment Factor multiplied by the sum of:
    (A) The Fiscal Year 2011 revenues from Transitional Intrastate 
Access Service less the Expected Revenues from Transitional Intrastate 
Access Service for the year beginning July 1, 2012, reflecting the rate 
transition contained in Sec.  51.909;
    (B) 2011 Base Period Revenue Requirement less the Expected Revenues 
from interstate switched access for the year beginning July 1, 2012, 
reflecting the rate transition contained in Sec.  51.909;
    (C) CMRS Net Reciprocal Compensation Revenues; and
    (D) A Rate-of-Return Carrier's reductions in Fiscal Year 2011 net 
reciprocal compensation revenues other than those associated with CMRS 
traffic as described in Sec.  51.701(b)(2) of this part resulting from 
rate reductions required by Sec.  51.705, which may be calculated in 
one of the following ways:
    (1) Fiscal Year 2011 net reciprocal compensation revenue less the 
Expected Revenues from net reciprocal compensation for the year 
beginning July 1, 2012, reflecting the rate reductions required by 
Sec.  51.705;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Estimate the expected reduction in net reciprocal compensation 
for the year beginning July 1, 2012, by calculating the expected 
difference between the Fiscal Year 2011 composite reciprocal 
compensation rates and the target reciprocal compensation rate set 
forth in Sec.  51.705 for the year beginning July 1, 2012 using 
projected 2012 demand; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Rate-of-Return Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (ii) Beginning July 1, 2013, a Rate-of-Return Carrier's eligible 
recovery will be equal to the Rate-of-Return Carrier Baseline 
Adjustment Factor multiplied by the sum of:
    (A) The Fiscal Year 2011 revenues from Transitional Intrastate 
Access Service less the Expected Revenues from Transitional Intrastate 
Access Service for the year beginning July 1, 2013, reflecting the rate 
transition contained in Sec.  51.909;
    (B) 2011 Rate-of-Return Carrier Base Period Revenue Requirement 
less the Expected Revenues from interstate switched access for the year 
beginning July 1, 2013.
    (C) CMRS Net Reciprocal Compensation Revenues;
    (D) A Rate-of-Return Carrier's reductions in Fiscal Year 2011 net 
reciprocal compensation revenues other than those associated with CMRS 
traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:
    (1) Fiscal Year 2011 net reciprocal compensation revenue less the 
Expected Revenues from net reciprocal compensation for the year 
beginning July 1, 2013, reflecting the rate reductions required by 
51.705;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Estimate the expected reduction in net reciprocal compensation 
for the year beginning July 1, 2013, by calculating the expected 
difference between the Fiscal Year 2011 composite reciprocal 
compensation rates and the target reciprocal compensation rate set 
forth in Sec.  51.705 for the year beginning July 1, 2013 using 
projected 2013 demand; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Rate-of-Return Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (iii) Beginning July 1, 2014, a Rate-of-Return Carrier's eligible 
recovery will be equal to the Rate-of-Return Carrier Baseline 
Adjustment Factor multiplied by the sum of the amounts in paragraphs 
(d)(1)(iii)(A) through (d)(1)(iii)(D) of this section, and by adding 
the amount in paragraph (d)(1)(iii)(E) of this section to that amount:
    (A) The Fiscal Year 2011 revenues from Transitional Intrastate 
Access Service less the Expected Revenues from Transitional Intrastate 
Access Service for the year beginning July 1, 2014, reflecting the rate 
transitions contained in Sec.  51.909 (including the reduction in 
intrastate End Office Switched Access Service rates), adjusted to 
reflect the True-Up Adjustment for Transitional Intrastate Access 
Service for the year beginning July 1, 2012;
    (B) 2011 Base Period Revenue Requirement less the Expected Revenues 
from interstate switched access for the year beginning July 1, 2014, 
adjusted to reflect the True-Up Adjustment for Interstate switched 
Access for the year beginning July 1, 2012;
    (C) CMRS Net Reciprocal Compensation Revenues; and
    (D) A Rate-of-Return Carrier's reductions in Fiscal Year 2011 net 
reciprocal compensation revenues other than those associated with CMRS 
traffic as described in Sec.  51.701(b)(2) resulting from rate 
reductions required by Sec.  51.705 may be calculated in one of the 
following ways:

[[Page 73868]]

    (1) Fiscal Year 2011 net reciprocal compensation revenue less the 
Expected Revenues from net reciprocal compensation for the year 
beginning July 1, 2014, reflecting the rate reductions required by 
51.705 adjusted to reflect the True-Up Adjustment for reciprocal 
compensation for the year beginning July 1, 2012;
    (2) By using a composite reciprocal compensation rate as follows:
    (i) Establish a composite reciprocal compensation rate for its 
Fiscal Year 2011 reciprocal compensation receipts and its Fiscal Year 
2011 reciprocal compensation payments by dividing its Fiscal Year 2011 
reciprocal compensation receipts and payments by their respective 
Fiscal Year 2011 demand;
    (ii) Estimate the expected reduction in net reciprocal compensation 
for the year beginning July 1, 2014, by calculating the expected 
difference between the Fiscal Year 2011 composite reciprocal 
compensation rates and the target reciprocal compensation rate set 
forth in Sec.  51.705 for the year beginning July 1, 2014, adjusted to 
reflect the True-Up Adjustment for reciprocal compensation for the year 
beginning July 1, 2012; or
    (3) For the purpose of establishing its recovery for net reciprocal 
compensation, a Rate-of-Return Carrier may elect to forgo this step and 
receive no recovery for reductions in net reciprocal compensation. If a 
carrier elects this option, it may not change its election at a later 
date.
    (E) An amount equal to True-up Revenues for Access Recovery Charges 
less Expected Revenues for Access Recovery Charges for the year 
beginning July 1, 2012.
    (iv) Beginning July 1, 2015, and for all subsequent years, a Rate-
of-Return Carrier's eligible recovery will be calculated by updating 
the procedures set forth in paragraph (d)(1)(iii) of this section for 
the period beginning July 1, 2014, to reflect the passage of an 
additional year in each subsequent year.
    (v) If a Rate-of-Return Carrier receives payments for intrastate or 
interstate switched access services or for Access Recovery Charges 
after the period used to measure the adjustments to reflect the 
differences between estimated and actual revenues, it shall treat such 
payments as actual revenue in the year the payment is received and 
shall reflect this as an additional adjustment for that year.
    (vi) If a Rate-of-Return Carrier receives or makes reciprocal 
compensation payments after the period used to measure the adjustments 
to reflect the differences between estimated and actual net reciprocal 
compensation revenues, it shall treat such amounts as actual revenues 
or payments in the year the payment is received or made and shall 
reflect this as an additional adjustment for that year.
    (vii) If a Rate-of-Return Carrier recovers any costs or revenues 
that are already being recovered as Eligible Recovery through Access 
Recovery Charges or the Connect America Fund from another source, that 
carrier's ability to recover reduced switched access revenue from 
Access Recovery Charges or the Connect America Fund shall be reduced to 
the extent it receives duplicative recovery. A Rate-of-Return Carrier 
seeking revenue recovery must annually certify as part of its tariff 
filings to the Commission and to the relevant state commission that the 
carrier is not seeking duplicative recovery in the state jurisdiction 
for any Eligible Recovery subject to the recovery mechanism.
    (e) Access Recovery Charge. (1) A charge that is expressed in 
dollars and cents per line per month may be assessed upon end users 
that may be assessed a subscriber line charge pursuant to Sec.  69.104 
of this chapter, to the extent necessary to allow the Rate-of-Return 
Carrier to recover some or all of its Eligible Recovery determined 
pursuant to paragraph (d) of this section, subject to the caps 
described in paragraph (e)(6) of this section. A Rate-of-Return Carrier 
may elect to forgo charging some or all of the Access Recovery Charge.
    (2) Total Access Recovery Charges calculated by multiplying the 
tariffed Access Recovery Charge by the projected demand for the year 
may not recover more than the amount of eligible recovery calculated 
pursuant to paragraph (d) of this section for the year beginning on 
July 1.
    (3) For the purposes of this section, a Rate-of-Return Carrier 
holding company includes all of its wholly-owned operating companies. A 
Rate-of-Return Carrier Holding Company may recover the eligible 
recovery attributable to any Rate-of-Return study areas operated by its 
wholly-owned operating companies that are Rate-of-Return incumbent 
local exchange carriers through assessments of the Access Recovery 
Charge on end users in any Rate-of-Return study areas operated by its 
wholly-owned operating companies that are Rate-of-Return incumbent 
local exchange carriers.
    (4) Distribution of Access Recovery Charges among lines of 
different types
    (i) A Rate-of-Return Carrier that does not receive ICC-replacement 
CAF support (whether because they elect not to or because they do not 
have sufficient eligible recovery after the Access Recovery Charge is 
assessed or imputed) may not recover a higher ratio of its total 
revenue recovery from Access Recovery Charges assessed on Residential 
and Single Line Business lines than the following ratio (using holding 
company lines):
    (A) The number of Residential and Single-Line Business lines 
assessed an End User Common Line charge (excluding Lifeline Customers), 
divided by
    (B) The sum of the number of Residential and Single-Line Business 
lines assessed an End User Common Line charge (excluding Lifeline 
Customers), and two (2) times the number of End User Common Line 
charges assessed on Multi-Line Business customers.
    (5) For purposes of this subpart, Residential and Single Line 
Business lines are lines (other than lines of Lifeline Customers) 
assessed the residential and single line business end user common line 
charge.
    (i) For purposes of this subpart, Multi-Line Business Lines are 
lines assessed the multi-line business end user common line charge.
    (ii) [Reserved]
    (6) Per-line caps and other limitations on Access Recovery Charges.
    (i) For each line other than lines of Lifeline Customers assessed a 
primary residential or single-line business end user common line charge 
pursuant to Sec.  69.104 of this chapter, a Rate-of-Return Carrier may 
assess an Access Recovery Charge as follows:
    (A) Beginning July 1, 2012, a maximum of $0.50 per month for each 
line;
    (B) Beginning July 1, 2013, a maximum of $1.00 per month for each 
line;
    (C) Beginning July 1, 2014, a maximum of $1.50 per month for each 
line;
    (D) Beginning July 1, 2015, a maximum of $2.00 per month for each 
line;
    (E) Beginning July 1, 2016, a maximum of $2.50 per month for each 
line; and
    (F) Beginning July 1, 2017, a maximum of $3.00 per month for each 
line.
    (ii) For each line assessed a multi-line business end user common 
line charge pursuant to Sec.  69.104 of this chapter, a Rate-of-Return 
Carrier may assess an Access Recovery Charge as follows:
    (A) Beginning July 1, 2012, a maximum of $1.00 per month for each 
multi-line business end user common line charge assessed;
    (B) Beginning July 1, 2013, a maximum of $2.00 per month for each

[[Page 73869]]

multi-line business end user common line charge assessed;
    (C) Beginning July 1, 2014, a maximum of $3.00 per month for each 
multi-line business end user common line charge assessed;
    (D) Beginning July 1, 2015, a maximum of $4.00 per month for each 
multi-line business end user common line charge assessed;
    (E) Beginning July 1, 2016, a maximum of $5.00 per month for each 
multi-line business end user common line charge assessed; and
    (F) Beginning July 1, 2017, a maximum of $6.00 per month for each 
multi-line business end user common line charge assessed.
    (iii) The Access Recovery Charge allowed by paragraph (e)(6)(i) of 
this section may not be assessed to the extent that its assessment 
would bring the total of the Rate Ceiling Component Charges above the 
Residential Rate Ceiling. This limitation does not apply to single-line 
business customers.
    (iv) The Access Recovery Charge allowed by paragraph (e)(6)(ii) of 
this section may not be assessed to the extent that its assessment 
would bring the total of the multi-line business end user common line 
charge and the Access Recovery Charge above $12.20 per line.
    (v) The Access Recovery Charge may not be assessed on lines of 
Lifeline Customers.
    (vi) If in any year, the Rate of return carriers' Access Recovery 
Charge is not at its maximum, the succeeding year's Access Recovery 
Charge may not increase more than $0.50 per line for charges under 
paragraph (e)(6)(i) of this section or $1.00 per line for charges 
assessed under paragraph (e)(6)(ii) of this section.
    (vii) A Price Cap Carrier with study areas that are subject to 
rate-of-return regulation shall recover its eligible recovery for such 
study areas through the recovery procedures specified in this section. 
For that purpose, the provisions of paragraph (e)(3) of this section 
shall apply to the rate-of-return study areas if the applicable 
conditions in paragraph (e)(3) of this section are met.
    (f) Rate-of-Return Carrier eligibility for CAF ICC Recovery. (1) A 
Rate-of-Return Carrier shall elect in its July 1, 2012 access tariff 
filing whether it will receive CAF ICC Support under this paragraph. A 
Rate-of-Return Carrier eligible to receive CAF ICC Support subsequently 
may elect at any time not to receive such funding. Once it makes the 
election not to receive CAF ICC Support, it may not elect to receive 
such funding at a later date.
    (2) Beginning July 1, 2012, a Rate-of-Return Carrier may recover 
any eligible recovery allowed by paragraph (d) of this section that it 
could not have recovered through charges assessed pursuant to paragraph 
(e) of this section from CAF ICC Support pursuant to Sec.  54.304. For 
this purpose, the Rate-of-Return Carrier must impute the maximum 
charges it could have assessed under paragraph (e) of this section.
    (3) A Rate-of-Return Carrier that elects to receive CAF ICC support 
must certify with its 2012 annual access tariff filing and on April 1st 
of each subsequent year that it has complied with paragraphs (d) and 
(e), and, after doing so, is eligible to receive the CAF ICC support 
requested pursuant to paragraph (f) of this section.


Sec.  51.919  Reporting and monitoring.

    (a) A Price Cap Carrier that elects to participate in the recovery 
mechanism outlined in Sec.  51.915 shall, beginning in 2012, file with 
the Commission the data consistent with Section XIII (f)(3) of FCC 11-
161 with its annual access tariff filing.
    (b) A Rate-of-Return Carrier that elects to participate in the 
recovery mechanism outlined in Sec.  51.917 shall file with the 
Commission the data consistent with Section XIII (f)(3) of FCC 11-161 
with its annual interstate access tariff filing, or on the date such a 
filing would have been required if it had been required to file in that 
year.

PART 54--UNIVERSAL SERVICE

0
32. The authority citation for part 54 is revised to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, 219, 220, 254, 
303(r), 403, and 1302 unless otherwise noted.

Subpart A--General Information

0
33. Amend Sec.  54.5 by adding definitions of ``community anchor 
institutions,'' ``high-cost support,'' ``Tribal lands'' and 
``unsubsidized competitor,'' and by revising the definition of ``rate-
of-return carrier'' to read as follows:


Sec.  54.5  Terms and Definitions.

* * * * *
    Community anchor institutions. For the purpose of high-cost 
support, ``community anchor institutions'' refers to schools, 
libraries, health care providers, community colleges, other 
institutions of higher education, and other community support 
organizations and entities.
* * * * *
    High-cost support. ``High-cost support'' refers to those support 
mechanisms in existence as of October 1, 2011, specifically, high-cost 
loop support, safety net additive and safety valve provided pursuant to 
subpart F of part 36, local switching support pursuant to Sec.  54.301, 
forward-looking support pursuant to Sec.  54.309, interstate access 
support pursuant to Sec. Sec.  54.800 through 54.809, and interstate 
common line support pursuant to Sec. Sec.  54.901 through 54.904, 
support provided pursuant to Sec. Sec.  51.915, 51.917, and 54.304, 
support provided to competitive eligible telecommunications carriers as 
set forth in Sec.  54.307(e), Connect America Fund support provided 
pursuant to Sec.  54.312, and Mobility Fund support provided pursuant 
to subpart L of this part.
* * * * *
    Rate-of-return carrier. ``Rate-of-return carrier'' shall refer to 
any incumbent local exchange carrier not subject to price cap 
regulation as that term is defined in Sec.  61.3(aa) of this chapter.
* * * * *
    Tribal lands. For the purposes of high-cost support, ``Tribal 
lands'' include any federally recognized Indian Tribe's reservation, 
pueblo or colony, including former reservations in Oklahoma, Alaska 
Native regions established pursuant to the Alaska Native Claims 
Settlements Act (85 Stat. 688) and Indian Allotments, see Sec.  
54.400(e), as well as Hawaiian Home Lands--areas held in trust for 
native Hawaiians by the state of Hawaii, pursuant to the Hawaiian Homes 
Commission Act, 1920, July 9, 1921, 42 Stat. 108, et seq., as amended.
    Unsubsidized competitor. An ``unsubsidized competitor'' is a 
facilities-based provider of residential fixed voice and broadband 
service that does not receive high-cost support.
* * * * *

0
34. Revise Sec.  54.7 to read as follows:


Sec.  54.7  Intended use of federal universal service support.

    (a) A carrier that receives federal universal service support shall 
use that support only for the provision, maintenance, and upgrading of 
facilities and services for which the support is intended.
    (b) The use of federal universal service support that is authorized 
by paragraph (a) of this section shall include investments in plant 
that can, either as built or with the addition of plant elements, when 
available, provide access to advanced telecommunications and 
information services.

[[Page 73870]]

Subpart B--Services Designated for Support

0
35. Revise Sec.  54.101 to read as follows:


Sec.  54.101  Supported services for rural, insular and high cost 
areas.

    (a) Services designated for support. Voice telephony service shall 
be supported by federal universal service support mechanisms. The 
functionalities of eligible voice telephony services include voice 
grade access to the public switched network or its functional 
equivalent; minutes of use for local service provided at no additional 
charge to end users; access to the emergency services provided by local 
government or other public safety organizations, such as 911 and 
enhanced 911, to the extent the local government in an eligible 
carrier's service area has implemented 911 or enhanced 911 systems; and 
toll limitation for qualifying low-income consumers (as described in 
subpart E of this part).
    (b) An eligible telecommunications carrier must offer voice 
telephony service as set forth in paragraph (a) of this section in 
order to receive federal universal service support.

Subpart C--Carriers Eligible for Universal Service Support

0
36. Revise Sec.  54.202 to read as follows:


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

    (a) In order to be designated an eligible telecommunications 
carrier under section 214(e)(6), any common carrier in its application 
must:
    (1)(i) Certify that it will comply with the service requirements 
applicable to the support that it receives.
    (ii) Submit a five-year plan that describes with specificity 
proposed improvements or upgrades to the applicant's network throughout 
its proposed service area. Each applicant shall estimate the area and 
population that will be served as a result of the improvements.
    (2) Demonstrate its ability to remain functional in emergency 
situations, including a demonstration that it has a reasonable amount 
of back-up power to ensure functionality without an external power 
source, is able to reroute traffic around damaged facilities, and is 
capable of managing traffic spikes resulting from emergency situations.
    (3) Demonstrate that it will satisfy applicable consumer protection 
and service quality standards. A commitment by wireless applicants to 
comply with the Cellular Telecommunications and Internet Association's 
Consumer Code for Wireless Service will satisfy this requirement. Other 
commitments will be considered on a case-by-case basis.
    (b) Public Interest Standard. Prior to designating an eligible 
telecommunications carrier pursuant to section 214(e)(6), the 
Commission determines that such designation is in the public interest.
    (c) A common carrier seeking designation as an eligible 
telecommunications carrier under section 214(e)(6) for any part of 
Tribal lands shall provide a copy of its petition to the affected 
Tribal government and Tribal regulatory authority, as applicable, at 
the time it files its petition with the Federal Communications 
Commission. In addition, the Commission shall send any public notice 
seeking comment on any petition for designation as an eligible 
telecommunications carrier on Tribal lands, at the time it is released, 
to the affected Tribal government and Tribal regulatory authority, as 
applicable, by the most expeditious means available.

Subpart D--Universal Service Support for High-Cost Areas

0
37. Amend Sec.  54.301 by revising paragraph (a)(1), revising the first 
sentence of paragraph (b), and by revising the first sentence of 
paragraph (e)(1) to read as follows:


Sec.  54.301  Local switching support.

    (a) * * *
    (1) Beginning January 1, 1998 and ending December 31, 2011, an 
incumbent local exchange carrier that has been designated an eligible 
telecommunications carrier and that serves a study area with 50,000 or 
fewer access lines shall receive support for local switching costs 
using the following formula: The carrier's projected annual unseparated 
local switching revenue requirement, calculated pursuant to paragraph 
(d) of this section, shall be multiplied by the local switching support 
factor. Beginning January 1, 2012 and ending June 30, 2012, a rate-of-
return carrier, as that term is defined in Sec.  54.5 of this chapter, 
that is an incumbent local exchange carrier that has been designated an 
eligible telecommunications carrier and that serves a study area with 
50,000 or fewer access lines and is not affiliated with a price cap 
carrier, as that term is defined in Sec.  61.3(aa) of this chapter, 
shall receive support for local switching costs frozen at the same 
support level received for calendar year 2011, subject to true-up. For 
purposes of this section, local switching costs shall be defined as 
Category 3 local switching costs under part 36 of this chapter. 
Beginning January 1, 2012, no carrier that is a price cap carrier, as 
that term is defined in Sec.  61.3(aa) of this chapter, or a rate-of-
return carrier, as that term is defined in Sec.  54.5 of this chapter, 
that is affiliated with a price cap carrier, shall receive local 
switching support. Beginning July 1, 2012, no carrier shall receive 
local switching support.
* * * * *
    (b) Submission of data to the Administrator. Until October 1, 2011, 
each incumbent local exchange carrier that has been designated an 
eligible telecommunications carrier and that serves a study area with 
50,000 or fewer access lines shall, for each study area, provide the 
Administrator with the projected total unseparated dollar amount 
assigned to each account listed below for the calendar year following 
each filing. * * *
* * * * *
    (e) True-up adjustment--(1) Submission of true-up data. Until 
December 31, 2012, each incumbent local exchange carrier that has been 
designated an eligible telecommunications carrier and that serves a 
study area with 50,000 or fewer access lines shall, for each study 
area, provide the Administrator with the historical total unseparated 
dollar amount assigned to each account listed in paragraph (b) of this 
section for each calendar year no later than 12 months after the end of 
such calendar year. * * *
* * * * *

0
38. Add Sec.  54.302 to subpart D to read as follows:


Sec.  54.302  Monthly per-line limit on universal service support.

    (a) Beginning July 1, 2012 and until June 30, 2013, each study 
area's universal service monthly support (not including Connect America 
Fund support provided pursuant to Sec.  54.304) on a per-line basis 
shall not exceed $250 per-line plus two-thirds of the difference 
between its uncapped per-line monthly support and $250. Beginning July 
1, 2013 and until June 30, 2014, each study area's universal service 
monthly support on a per-line basis shall not exceed $250 per-line plus 
one third of the difference between its uncapped per-line monthly 
support and $250. Beginning July 1, 2014, each study area's universal 
service monthly per-line support shall not exceed $250.
    (b) For purposes of this section, universal service support is 
defined as

[[Page 73871]]

the sum of the amounts calculated pursuant to Sec. Sec.  36.605 and 
36.631, of this chapter and Sec. Sec.  54.301, 54.305, and 54.901 
through .904. Line counts for purposes of this section shall be as of 
the most recent line counts reported pursuant to Sec.  36.611(h) of 
this chapter.
    (c) The Administrator, in order to limit support to $250 for 
affected carriers, shall reduce safety net additive support, high-cost 
loop support, safety valve support, and interstate common line support 
in proportion to the relative amounts of each support the study area 
would receive absent such limitation.


Sec.  54.303  [Removed]

0
39. Section 54.303 is removed.

0
40. Add Sec.  54.304 to subpart D to read as follows:


Sec.  54.304  Administration of Connect America Fund Intercarrier 
Compensation Replacement.

    (a) The Administrator shall administer CAF ICC support pursuant to 
Sec.  51.915 and Sec.  51.917 of this chapter.
    (b) The funding period is the period beginning July 1 through June 
30 of the following year.
    (c) For price cap carriers that are eligible and elect, pursuant to 
Sec.  51.915(f) of this chapter, to receive CAF ICC support, the 
following provisions govern the filing of data with the Administrator, 
the Commission, and the relevant state commissions and the payment by 
the Administrator to those carriers of CAF ICC support amounts that the 
carrier is eligible to receive pursuant to Sec.  51.915 of this 
chapter.
    (1) A price cap carrier seeking CAF ICC support pursuant to Sec.  
51.915 of this chapter shall file data with the Administrator, the 
Commission, and the relevant state commissions no later than June 30, 
2012, for the first year, and no later than March 31, in subsequent 
years, establishing the amount of the price cap carrier's eligible CAF 
ICC funding during the upcoming funding period pursuant to Sec.  51.915 
of this chapter. The amount shall include any true-ups, pursuant to 
Sec.  51.915 of this chapter, associated with an earlier funding 
period.
    (2) The Administrator shall monthly pay each price cap carrier one-
twelfth (1/12) of the amount the carrier is eligible to receive during 
that funding period.
    (d) For rate-of-return carriers that are eligible and elect, 
pursuant to Sec.  51.917(f) of this chapter, to receive CAF ICC 
support, the following provisions govern the filing of data with the 
Administrator, the Commission, and the relevant state commissions and 
the payment by the Administrator to those carriers of CAF ICC support 
amounts that the rate-of-return carrier is eligible to receive pursuant 
to Sec.  51.917 of this chapter.
    (1) A rate-of-return carrier seeking CAF ICC support shall file 
data with the Administrator, the Commission, and the relevant state 
commissions no later than June 30, 2012, for the first year, and no 
later than March 31, in subsequent years, establishing the rate-of-
return carrier's projected eligibility for CAF ICC funding during the 
upcoming funding period pursuant to Sec.  51.917 of this chapter. The 
projected amount shall include any true-ups, pursuant to Sec.  51.917 
of this chapter, associated with an earlier funding period.
    (2) The Administrator shall monthly pay each rate-of-return carrier 
one-twelfth (1/12) of the amount the carrier is to be eligible to 
receive during that funding period.

0
41. Amend Sec.  54.305 by adding a sentence at the end of paragraph (a) 
and by adding a sentence at the beginning of paragraph (b) to read as 
follows:


Sec.  54.305  Sale or transfer of exchanges.

    (a) * * * After December 31, 2011, the provisions of this section 
shall not be used to determine support for any price cap incumbent 
local exchange carrier or a rate-of-return carrier, as that term is 
defined in Sec.  54.5 that is affiliated with a price cap incumbent 
local exchange carrier.
    (b) Beginning January 1, 2012, any carrier subject to the 
provisions of this paragraph shall receive support pursuant to this 
paragraph or support based on the actual costs of the acquired 
exchanges, whichever is less. * * *
* * * * *

0
42. Amend Sec.  54.307 by adding paragraph (e) to read as follows:


Sec.  54.307  Support to a competitive eligible telecommunications 
carrier.

* * * * *
    (e) Support Beginning January 1, 2012. Competitive eligible 
telecommunications carriers will, beginning January 1, 2012, receive 
support based on the methodology described in this paragraph and not 
based on paragraph (a) of this section.
    (1) Baseline Support Amount. Each competitive eligible 
telecommunication carrier will have a ``baseline support amount'' equal 
to its total 2011 support in a given study area, or an amount equal to 
$3,000 times the number of reported lines for 2011, whichever is lower. 
Each competitive eligible telecommunications carrier will have a 
``monthly baseline support amount'' equal to its baseline support 
amount divided by twelve.
    (i) ``Total 2011 support'' is the amount of support disbursed to a 
competitive eligible telecommunication carrier for 2011, without regard 
to prior period adjustments related to years other than 2011 and as 
determined by the Administrator on January 31, 2012.
    (ii) For the purpose of calculating the $3,000 per line limit, the 
average of lines reported by a competitive eligible telecommunication 
carrier pursuant to line count filings required for December 31, 2010, 
and December 31, 2011 shall be used.
    (2) Monthly Support Amounts. Competitive eligible 
telecommunications carriers shall receive the following support 
amounts, except as provided in paragraphs (e)(3) through (e)(6) of this 
section.
    (i) From January 1, 2012, to June 30, 2012, each competitive 
eligible telecommunications carrier shall receive its monthly baseline 
support amount each month.
    (ii) From July 1, 2012 to June 30, 2013, each competitive eligible 
telecommunications carrier shall receive 80 percent of its monthly 
baseline support amount each month.
    (iii) From July 1, 2013, to June 30, 2014, each competitive 
eligible telecommunications carrier shall receive 60 percent of its 
monthly baseline support amount each month.
    (iv) From July 1, 2014, to June 30, 2015, each competitive eligible 
telecommunications carrier shall receive 40 percent of its monthly 
baseline support amount each month.
    (v) From July 1, 2015, to June 30, 2016, each competitive eligible 
telecommunications carrier shall receive 20 percent of its monthly 
baseline support amount each month.
    (vi) Beginning July 1, 2016, no competitive eligible 
telecommunications carrier shall receive universal service support 
pursuant to this section.
    (3) Delayed Phase Down for Remote Areas in Alaska. Certain 
competitive eligible telecommunications carriers serving remote areas 
in Alaska shall have their support phased down on a later schedule than 
that described in paragraph (e)(2) of this section.
    (i) Remote Areas in Alaska. For the purpose of this paragraph, 
``remote areas in Alaska'' includes all of Alaska except;
    (A) The ACS-Anchorage incumbent study area;
    (B) The ACS-Juneau incumbent study area;
    (C) The fairbankszone1 disaggregation zone in the ACS-Fairbanks 
incumbent study area; and
    (D) The Chugiak 1 and 2 and Eagle River 1 and 2 disaggregation 
zones of

[[Page 73872]]

the Matunuska Telephone Association incumbent study area.
    (ii) Carriers Subject to Delayed Phase Down. A competitive eligible 
telecommunications carrier shall be subject to the delayed phase down 
described in paragraph (e)(3) of this section to the extent that it 
serves remote areas in Alaska, and it certified that it served covered 
locations in its September 30, 2011, filing of line counts with the 
Administrator. To the extent a competitive eligible telecommunications 
carrier serving Alaska is not subject to the delayed phase down, it 
will be subject to the phase down of support on the schedule described 
in paragraph (e)(2) of this section.
    (iii) Baseline for Delayed Phase Down. For purpose of the delayed 
phase down for remote areas in Alaska, the baseline amount shall be 
calculated in the same manner as described in paragraph (e)(1) of this 
section, except that support amounts from 2013 shall be used.
    (iv) Monthly Support Amounts. Competitive eligible 
telecommunications carriers subject to the delayed phase down for 
remote areas in Alaska shall receive the following support amounts, 
except as provided in paragraphs (e)(4) through (e)(6) of this section.
    (A) From January 1, 2014, to June 30, 2014, each competitive 
eligible telecommunications carrier shall receive its monthly baseline 
support amount each month.
    (B) From July 1, 2014 to June 30, 2015, each competitive eligible 
telecommunications carrier shall receive 80 percent of its monthly 
baseline support amount each month.
    (C) From July 1, 2015, to June 30, 2016, each competitive eligible 
telecommunications carrier shall receive 60 percent of its monthly 
baseline support amount each month.
    (D) From July 1, 2016, to June 30, 2017, each competitive eligible 
telecommunications carrier shall receive 40 percent of its monthly 
baseline support amount each month.
    (E) From July 1, 2017, to June 30, 2018, each competitive eligible 
telecommunications carrier shall receive 20 percent of its monthly 
baseline support amount each month.
    (F) Beginning July 1, 2018, no competitive eligible 
telecommunications carrier serving remote areas in Alaska shall receive 
universal service support pursuant to this section.
    (v) Interim Support for Remote Areas in Alaska. From January 1, 
2012, until December 31, 2013, competitive eligible telecommunications 
carriers subject to the delayed phase down for remote areas in Alaska 
shall continue to receive support as calculated pursuant to paragraph 
(a) of this section, provided that the total amount of support for all 
such competitive eligible telecommunications carriers shall be capped.
    (A) Cap Amount. The total amount of support available on an annual 
basis for competitive eligible telecommunications carriers subject to 
the delayed phase down for remote areas in Alaska shall be equal to the 
sum of ``total 2011 support,'' as defined in paragraph (e)(1)(i) of 
this section, received by all competitive eligible telecommunications 
carriers subject to the delayed phase down for serving remote areas in 
Alaska.
    (B) Reduction Factor. To effectuate the cap, the Administrator 
shall apply a reduction factor as necessary to the support that would 
otherwise be received by all competitive eligible telecommunications 
carriers serving remote areas in Alaska subject to the delayed phase 
down. The reduction factor will be calculated by dividing the total 
amount of support available amount by the total support amount 
calculated for those carriers in the absence of the cap.
    (4) Further reductions. If a competitive eligible 
telecommunications carrier ceases to provide services to high-cost 
areas it had previously served, the Commission may reduce its baseline 
support amount.
    (5) Implementation of Mobility Fund Phase II Required. In the event 
that the implementation of Mobility Fund Phase II has not occurred by 
June 30, 2014, competitive eligible telecommunications carriers will 
continue to receive support at the level described in paragraph 
(e)(2)(iv) of this section until Mobility Fund Phase II is implemented. 
In the event that Mobility Fund Phase II for Tribal lands is not 
implemented by June 30, 2014, competitive eligible telecommunications 
carriers serving Tribal lands shall continue to receive support at the 
level described in paragraph (e)(2)(iv) of this section until Mobility 
Fund Phase II for Tribal lands is implemented, except that competitive 
eligible telecommunications carriers serving remote areas in Alaska and 
subject to paragraph (e)(3) of this section shall continue to receive 
support at the level described in paragraph (e)(3)(iv)(A) of this 
section.
    (6) Eligibility after Implementation of Mobility Fund Phase II. If 
a competitive eligible telecommunications carrier becomes eligible to 
receive high-cost support pursuant to the Mobility Fund Phase II, it 
will cease to be eligible for phase-down support in the first month for 
which it receives Mobility Fund Phase II support.
    (7) Line Count Filings. Competitive eligible telecommunications 
carriers, except those subject to the delayed phase down described in 
paragraph (e)(3) of this section, shall no longer be required to file 
line counts beginning January 1, 2012. Competitive eligible 
telecommunications carriers subject to the delayed phase down described 
in paragraph (e)(3) of this section shall no longer be required to file 
line counts beginning January 1, 2014.

0
43. Amend Sec.  54.309 by adding paragraph (d) to read as follows:


Sec.  54.309  Calculation and distribution of forward-looking support 
for non-rural carriers.

* * * * *
    (d) Support After December 31, 2011. Beginning January 1, 2012, no 
carrier shall receive support under this rule.


Sec.  54.311  [Removed]

0
44. Section 54.311 is removed.

0
45. Section 54.312 is added to read as follows:


Sec.  54.312  Connect America Fund for Price Cap Territories--Phase I

    (a) Frozen High-Cost Support. Beginning January 1, 2012, each price 
cap local exchange carrier and rate-of-return carrier affiliated with a 
price cap local exchange carrier will have a ``baseline support 
amount'' equal to its total 2011 support in a given study area, or an 
amount equal to $3,000 times the number of reported lines for 2011, 
whichever is lower. For purposes of this section, price cap carriers 
are defined pursuant to Sec.  61.3(aa) of this chapter and affiliated 
companies are determined by Sec.  32.9000 of this chapter. Each price 
cap local exchange carrier and rate-of-return carrier affiliated with a 
price cap local exchange carrier will have a ``monthly baseline support 
amount'' equal to its baseline support amount divided by twelve. 
Beginning January 1, 2012, on a monthly basis, eligible carriers will 
receive their monthly baseline support amount.
    (1) ``Total 2011 support'' is the amount of support disbursed to a 
price cap local exchange carrier or rate-of-return carrier affiliated 
with a price cap local exchange carrier for 2011, without regard to 
prior period adjustments related to years other than 2011 and as 
determined by USAC on January 31, 2012.
    (2) For the purpose of calculating the $3,000 per line limit, the 
average of lines reported by a price cap local

[[Page 73873]]

exchange carrier or rate-of-return carrier affiliated with a price cap 
local exchange carrier pursuant to line count filings required for 
December 31, 2010, and December 31, 2011 shall be used.
    (3) A carrier receiving frozen high cost support under this rule 
shall be deemed to be receiving Interstate Access Support and 
Interstate Common Line Support equal to the amount of support the 
carrier to which the carrier was eligible under those mechanisms in 
2011.
    (b) Incremental Support. Beginning January 1, 2012, support in 
addition to baseline support defined in paragraph (a) of this section 
will be available for certain price cap local exchange carriers and 
rate-of-return carriers affiliated with price cap local exchange 
carriers as follows.
    (1) For each carrier for which the Wireline Competition Bureau 
determines that it has appropriate data or for which it determines that 
it can make reasonable estimates, the Bureau will determine an average 
per-location cost for each wire center using a simplified cost-
estimation function derived from the Commission's cost model. 
Incremental support will be based on the wire centers for which the 
estimated per-location cost exceeds the funding threshold. The funding 
threshold will be determined by calculating which funding threshold 
would allocate all available incremental support, if each carrier that 
would be offered incremental support were to accept it.
    (2) An eligible telecommunications carrier accepting incremental 
support must deploy broadband to a number of unserved locations, as 
shown as unserved by fixed broadband on the then-current version of the 
National Broadband Map, equal to the amount of incremental support it 
accepts divided by $775.
    (3) A carrier may elect to accept or decline incremental support. A 
holding company may do so on a holding-company basis on behalf of its 
operating companies that are eligible telecommunications carriers, 
whose eligibility for incremental support, for these purposes, shall be 
considered on an aggregated basis. A carrier must provide notice to the 
Commission, relevant state commissions, and any affected Tribal 
government, stating the amount of incremental support it wishes to 
accept and identifying the areas by wire center and census block in 
which the designated eligible telecommunications carrier will deploy 
broadband to meet its deployment obligation, or stating that it 
declines incremental support. Such notification must be made within 90 
days of being notified of any incremental support for which it would be 
eligible. Along with its notification, a carrier accepting incremental 
support must also submit a certification that the locations to be 
served to satisfy the deployment obligation are shown as unserved by 
fixed broadband on the then-current version of the National Broadband 
Map; that, to the best of the carrier's knowledge, the locations are, 
in fact, unserved by fixed broadband; that the carrier's current 
capital improvement plan did not already include plans to complete 
broadband deployment within the next three years to the locations to be 
counted to satisfy the deployment obligation; and that incremental 
support will not be used to satisfy any merger commitment or similar 
regulatory obligation.
    (4) An eligible telecommunications carrier must complete deployment 
of broadband to two-thirds of the required number of locations within 
two years of providing notification of acceptance of funding, and must 
complete deployment to all required locations within three years. To 
satisfy its deployment obligation, the eligible telecommunications 
carrier must offer broadband service to such locations of at least 4 
Mbps downstream and 1 Mbps upstream, with latency sufficiently low to 
enable the use of real-time communications, including Voice over 
Internet Protocol, and with usage caps, if any, that are reasonably 
comparable to comparable offerings in urban areas.

0
46. Revise Sec.  54.313 to read as follows:


Sec.  54.313  Annual reporting requirements for high-cost recipients.

    (a) Any recipient of high-cost support shall provide:
    (1) A progress report on its five-year service quality improvement 
plan pursuant to Sec.  54.202(a), including maps detailing its progress 
towards meeting its plan targets, an explanation of how much universal 
service support was received and how it was used to improve service 
quality, coverage, or capacity, and an explanation regarding any 
network improvement targets that have not been fulfilled in the prior 
calendar year. The information shall be submitted at the wire center 
level or census block as appropriate;
    (2) Detailed information on any outage in the prior calendar year, 
as that term is defined in 47 CFR 4.5, of at least 30 minutes in 
duration for each service area in which an eligible telecommunications 
carrier is designated for any facilities it owns, operates, leases, or 
otherwise utilizes that potentially affect
    (i) At least ten percent of the end users served in a designated 
service area; or
    (ii) A 911 special facility, as defined in 47 CFR 4.5(e).
    (iii) Specifically, the eligible telecommunications carrier's 
annual report must include information detailing:
    (A) The date and time of onset of the outage;
    (B) A brief description of the outage and its resolution;
    (C) The particular services affected;
    (D) The geographic areas affected by the outage;
    (E) Steps taken to prevent a similar situation in the future; and
    (F) The number of customers affected.
    (3) The number of requests for service from potential customers 
within the recipient's service areas that were unfulfilled during the 
prior calendar year. The carrier shall also detail how it attempted to 
provide service to those potential customers;
    (4) The number of complaints per 1,000 connections (fixed or 
mobile) in the prior calendar year;
    (5) Certification that it is complying with applicable service 
quality standards and consumer protection rules;
    (6) Certification that the carrier is able to function in emergency 
situations as set forth in Sec.  54.202(a)(2);
    (7) The company's price offerings in a format as specified by the 
Wireline Competition Bureau;
    (8) The recipient's holding company, operating companies, 
affiliates, and any branding (a ``dba,'' or ``doing-business-as 
company'' or brand designation), as well as universal service 
identifiers for each such entity by Study Area Codes, as that term is 
used by the Administrator. For purposes of this paragraph, 
``affiliates'' has the meaning set forth in section 3(2) of the 
Communications Act of 1934, as amended;
    (9) To the extent the recipient serves Tribal lands, documents or 
information demonstrating that the ETC had discussions with Tribal 
governments that, at a minimum, included:
    (i) A needs assessment and deployment planning with a focus on 
Tribal community anchor institutions;
    (ii) Feasibility and sustainability planning;
    (iii) Marketing services in a culturally sensitive manner;
    (iv) Rights of way processes, land use permitting, facilities 
siting, environmental and cultural preservation review processes; and
    (v) Compliance with Tribal business and licensing requirements. 
Tribal

[[Page 73874]]

business and licensing requirements include business practice licenses 
that Tribal and non-Tribal business entities, whether located on or off 
Tribal lands, must obtain upon application to the relevant Tribal 
government office or division to conduct any business or trade, or 
deliver any goods or services to the Tribes, Tribal members, or Tribal 
lands. These include certificates of public convenience and necessity, 
Tribal business licenses, master licenses, and other related forms of 
Tribal government licensure.
    (10) Beginning April 1, 2013. A letter certifying that the pricing 
of the company's voice services is no more than two standard deviations 
above the applicable national average urban rate for voice service, as 
specified in the most recent public notice issued by the Wireline 
Competition Bureau and Wireless Telecommunications Bureau; and
    (11) Beginning April 1, 2013. The results of network performance 
tests pursuant to the methodology and in the format determined by the 
Wireline Competition Bureau, Wireless Telecommunications Bureau, and 
Office of Engineering and Technology and the information and data 
required by this paragraphs (a)(1) through (7) of this section 
separately broken out for both voice and broadband service.
    (b) In addition to the information and certifications in paragraph 
(a) of this section, any recipient of incremental CAF Phase I support 
pursuant to Sec.  54.312(b) shall provide:
    (1) In its next annual report due after two years after filing a 
notice of acceptance of funding pursuant to Sec.  54.312(b), a 
certification that the company has deployed to no fewer than two-thirds 
of the required number of locations; and
    (2) In its next annual report due after three years after filing a 
notice of acceptance of funding pursuant to Sec.  54.312(b), a 
certification that the company has deployed to all required locations 
and that it is offering broadband service of at least 4 Mbps downstream 
and 1 Mbps upstream, with latency sufficiently low to enable the use of 
real-time communications, including Voice over Internet Protocol, and 
with usage caps, if any, that are reasonably comparable to those in 
urban areas.
    (c) In addition to the information and certifications in paragraph 
(a) of this section, price cap carriers that receive frozen high-cost 
support pursuant to Sec.  54.312(a) shall provide:
    (1) By April 1, 2013. A certification that frozen high-cost support 
the company received in 2012 was used consistent with the goal of 
achieving universal availability of voice and broadband;
    (2) By April 1, 2014. A certification that at least one-third of 
the frozen-high cost support the company received in 2013 was used to 
build and operate broadband-capable networks used to offer the 
provider's own retail broadband service in areas substantially unserved 
by an unsubsidized competitor;
    (3) By April 1, 2015. A certification that at least two-thirds of 
the frozen-high cost support the company received in 2014 was used to 
build and operate broadband-capable networks used to offer the 
provider's own retail broadband service in areas substantially unserved 
by an unsubsidized competitor; and
    (4) By April 1, 2016 and in subsequent years. A certification that 
all frozen-high cost support the company received in the previous year 
was used to build and operate broadband-capable networks used to offer 
the provider's own retail broadband service in areas substantially 
unserved by an unsubsidized competitor.
    (d) In addition to the information and certifications in paragraph 
(a) of this section, beginning April 1, 2013, price cap carriers 
receiving high-cost support to offset reductions in access charges 
shall provide a certification that the support received pursuant to 
Sec.  54.304 in the prior calendar year was used to build and operate 
broadband-capable networks used to offer provider's own retail service 
in areas substantially unserved by an unsubsidized competitor.
    (e) In addition to the information and certifications in paragraph 
(a) of this section, any recipient of CAF Phase II support shall 
provide:
    (1) In the calendar year no later than three years after 
implementation of CAF Phase II. A certification that the company is 
providing broadband service to 85% of its supported locations at actual 
speeds of at least 4 Mbps downstream/1 Mbps upstream, with latency 
suitable for real-time applications, including Voice over Internet 
Protocol, and usage capacity that is reasonably comparable to 
comparable offerings in urban areas as determined in an annual survey.
    (2) In the calendar year no later than five years after 
implementation of CAF Phase II. A certification that the company is 
providing broadband service to 100% of its supported locations at 
actual speeds of at least 4 Mbps downstream/1 Mbps upstream, and a 
percentage of supported locations, to be specified by the Wireline 
Competition Bureau, at actual speeds of at least 6 Mbps downstream/1.5 
Mbps upstream, with latency suitable for real-time applications, 
including Voice over Internet Protocol, and usage capacity that is 
reasonably comparable to comparable offerings in urban areas as 
determined in an annual survey.
    (3) Beginning April 1, 2014. A progress report on the company's 
five-year service quality plan pursuant to Sec.  54.202(a), including 
the following information:
    (i) A letter certifying that it is meeting the interim deployment 
milestones as set forth, and that it is taking reasonable steps to meet 
increased speed obligations that will exist for all supported locations 
at the expiration of the five-year term for CAF Phase II funding; and
    (ii) The number, names, and addresses of community anchor 
institutions to which the ETC newly began providing access to broadband 
service in the preceding calendar year.
    (f) In addition to the information and certifications in paragraph 
(a) of this section, any rate-of-return carrier shall provide:
    (1) Beginning April 1, 2014. A progress report on its five-year 
service quality plan pursuant to Sec.  54.202(a) that includes the 
following information:
    (i) A letter certifying that it is taking reasonable steps to 
provide upon reasonable request broadband service at actual speeds of 
at least 4 Mbps downstream/1 Mbps upstream, with latency suitable for 
real-time applications, including Voice over Internet Protocol, and 
usage capacity that is reasonably comparable to comparable offerings in 
urban areas as determined in an annual survey, and that requests for 
such service are met within a reasonable amount of time; and
    (ii) The number, names, and addresses of community anchor 
institutions to which the ETC newly began providing access to broadband 
service in the preceding calendar year.
    (2) Privately held rate-of-return carriers only. A full and 
complete annual report of the company's financial condition and 
operations as of the end of the preceding fiscal year, which is audited 
and certified by an independent certified public accountant in a form 
satisfactory to the Commission, and accompanied by a report of such 
audit. The annual report shall include balance sheets, income 
statements, and cash flow statements along with necessary notes to 
clarify the financial statements. The income statements shall itemize 
revenue, including non-regulated revenue, by its sources.

[[Page 73875]]

    (g) Areas with No Terrestrial Backhaul. Carriers without access to 
terrestrial backhaul that are compelled to rely exclusively on 
satellite backhaul in their study area must certify annually that no 
terrestrial backhaul options exist. Any such funding recipients must 
certify they offer broadband service at actual speeds of at least 1 
Mbps downstream and 256 kbps upstream within the supported area served 
by satellite middle-mile facilities. To the extent that new terrestrial 
backhaul facilities are constructed, or existing facilities improve 
sufficiently to meet the relevant speed, latency and capacity 
requirements then in effect for broadband service supported by the CAF, 
within twelve months of the new backhaul facilities becoming 
commercially available, funding recipients must provide the 
certifications required in paragraphs (e) or (f) of this section in 
full. Carriers subject to this paragraph must comply with all other 
requirements set forth in the remaining paragraphs of this section.
    (h) Additional voice rate data. All incumbent local exchange 
carrier recipients of high-cost support must report all of their flat 
rates for residential local service, as well as state fees as defined 
pursuant to Sec.  54.318(e) of this subpart. Carriers must also report 
all rates that are below the local urban rate floor as defined in Sec.  
54.318 of this subpart, and the number of lines for each rate 
specified. Carriers shall report lines and rates in effect as of 
January 1.
    (i) All reports pursuant to this section shall be filed with the 
Office of the Secretary of the Commission clearly referencing WC Docket 
No. 10-90, and with the Administrator, and the relevant state 
commissions, relevant authority in a U.S. Territory, or Tribal 
governments, as appropriate.
    (j) Filing deadlines. In order for a recipient of high-cost support 
to continue to receive support for the following calendar year, or 
retain its eligible telecommunications carrier designation, it must 
submit the annual reporting information required by this section no 
later than April 1, 2012, except as otherwise specified in this section 
to begin in a subsequent year, and thereafter annually by April 1 of 
each year. Eligible telecommunications carriers that file their reports 
after the April 1 deadline shall receive support pursuant to the 
following schedule:
    (1) Eligible telecommunication carriers that file no later than 
July 1 shall receive support for the second, third and fourth quarters 
of the subsequent year.
    (2) Eligible telecommunication carriers that file no later than 
October 1 shall receive support for the third and fourth quarters of 
the subsequent year.
    (3) Eligible telecommunication carriers that file no later than 
January 1 of the subsequent year shall receive support for the fourth 
quarter of the subsequent year.
    (k) This section does not apply to recipients that solely receive 
support from the Phase I Mobility Fund.

0
47. Revise Sec.  54.314 to read as follows:


Sec.  54.314  Certification of support for eligible telecommunications 
carriers.

    (a) Certification. States that desire eligible telecommunications 
carriers to receive support pursuant to the high-cost program must file 
an annual certification with the Administrator and the Commission 
stating that all federal high-cost support provided to such carriers 
within that State was used in the preceding calendar year and will be 
used in the coming calendar year only for the provision, maintenance, 
and upgrading of facilities and services for which the support is 
intended. High-cost support shall only be provided to the extent that 
the State has filed the requisite certification pursuant to this 
section.
    (b) Carriers not subject to State jurisdiction. An eligible 
telecommunications carrier not subject to the jurisdiction of a State 
that desires to receive support pursuant to the high-cost program must 
file an annual certification with the Administrator and the Commission 
stating that all federal high-cost support provided to such carrier was 
used in the preceding calendar year and will be used in the coming 
calendar year only for the provision, maintenance, and upgrading of 
facilities and services for which the support is intended. Support 
provided pursuant to the high-cost program shall only be provided to 
the extent that the carrier has filed the requisite certification 
pursuant to this section.
    (c) Certification format. (1) A certification pursuant to this 
section may be filed in the form of a letter from the appropriate 
regulatory authority for the State, and must be filed with both the 
Office of the Secretary of the Commission clearly referencing WC Docket 
No. 10-90, and with the Administrator of the high-cost support 
mechanism, on or before the deadlines set forth in paragraph (d) of 
this section. If provided by the appropriate regulatory authority for 
the State, the annual certification must identify which carriers in the 
State are eligible to receive federal support during the applicable 12-
month period, and must certify that those carriers only used support 
during the preceding calendar year and will only use support in the 
coming calendar year for the provision, maintenance, and upgrading of 
facilities and services for which support is intended. A State may file 
a supplemental certification for carriers not subject to the State's 
annual certification. All certificates filed by a State pursuant to 
this section shall become part of the public record maintained by the 
Commission.
    (2) An eligible telecommunications carrier not subject to the 
jurisdiction of a State shall file a sworn affidavit executed by a 
corporate officer attesting that the carrier only used support during 
the preceding calendar year and will only use support in the coming 
calendar year for the provision, maintenance, and upgrading of 
facilities and services for which support is intended. The affidavit 
must be filed with both the Office of the Secretary of the Commission 
clearly referencing WC Docket No. 10-90, and with the Administrator of 
the high-cost universal service support mechanism, on or before the 
deadlines set forth in paragraph (d) of this section. All affidavits 
filed pursuant to this section shall become part of the public record 
maintained by the Commission.
    (d) Filing deadlines. In order for an eligible telecommunications 
carrier to receive federal high-cost support, the State or the carrier, 
if not subject to the jurisdiction of a State, must file an annual 
certification, as described in paragraph (c) of this section, with both 
the Administrator and the Commission. Upon the filing of the 
certification described in this section, support shall be provided in 
accordance with the following schedule:
    (1) Certifications filed on or before October 1. Carriers subject 
to certifications filed on or before October 1 shall receive support in 
the first, second, third, and fourth quarters of the succeeding year.
    (2) Certifications filed on or before January 1. Carriers subject 
to certifications filed on or before January 1 shall receive support in 
the second, third, and fourth quarters of that year. Such carriers 
shall not receive support in the first quarter of that year.
    (3) Certifications filed on or before April 1. Carriers subject to 
certifications filed on or before April 1 shall receive support in the 
third and fourth quarters of that year. Such carriers shall not receive 
support in the first or second quarters of that year.
    (4) Certifications filed on or before July 1. Carriers subject to 
certifications filed on or before July 1 shall receive

[[Page 73876]]

support beginning in the fourth quarter of that year. Such carriers 
shall not receive support in the first, second, or third quarters of 
that year.
    (5) Certifications filed after July 1. Carriers subject to 
certifications filed after July 1 shall not receive support in that 
year.
    (6) Newly designated eligible telecommunications carriers. 
Notwithstanding the deadlines in paragraph (d) of this section, a 
carrier shall be eligible to receive support as of the effective date 
of its designation as an eligible telecommunications carrier under 
section 214(e)(2) or (e)(6) of the Act, provided that it files the 
certification described in paragraph (b) of this section or the state 
commission files the certification described in paragraph (a) of this 
section within 60 days of the effective date of the carrier's 
designation as an eligible telecommunications carrier. Thereafter, the 
certification required by paragraphs (a) or (b) of this section must be 
submitted pursuant to the schedule in paragraph (d) of this section.


Sec.  54.316  [Removed]

0
48. Section 54.316 is removed.

0
49. Add Sec.  54.318 to subpart D to read as follows:


Sec.  54.318  High-cost support; limitations on high-cost support.

    (a) Beginning July 1, 2012, each carrier receiving high-cost 
support in a study area under this subpart will receive the full amount 
of high-cost support it otherwise would be entitled to receive if its 
flat rate for residential local service plus state regulated fees as 
defined in paragraph (e) of this section exceeds a local urban rate 
floor representing the national average of local urban rates plus state 
regulated fees under the schedule specified in paragraph (f) of this 
section..
    (b) Carriers whose flat rate for residential local service plus 
state regulated fees offered for voice service are below the specified 
local urban rate floor under the schedule below plus state regulated 
fees shall have high-cost support reduced by an amount equal to the 
extent to which its flat rate for residential local service plus state 
regulated fees are below the local urban rate floor, multiplied by the 
number of lines for which it is receiving support.
    (c) This section will apply to rate-of-return carriers as defined 
in Sec.  54.5 and carriers subject to price cap regulation as that term 
is defined in Sec.  61.3 of this chapter.
    (d) For purposes of this section, high-cost support is defined as 
the support available pursuant to Sec.  36.631 of this chapter and 
support provided to carriers that formerly received support pursuant to 
Sec.  54.309.
    (e) State regulated fees. (1) Beginning on July 1, 2012, for 
purposes of calculating limitations on high-cost support under this 
section, state regulated fees shall be limited to state subscriber line 
charges, state universal service fees and mandatory extended area 
service charges, which shall be determined as part of a local rate 
survey, the results of which shall be published annually.
    (2) Federal subscriber line charges shall not be included in 
calculating limitations on high-cost support under this section.
    (f) Schedule. High-cost support will be limited where the flat rate 
for residential local service plus state regulated fees are below the 
local urban rate floor representing the national average of local urban 
rates plus state regulated fees under the schedule specified in this 
paragraph. To the extent end user rates plus state regulated fees are 
below local urban rate floors plus state regulated fees, appropriate 
reductions in high-cost support will be made by the Universal Service 
Administrative Company.
    (1) Beginning on July 1, 2012, and ending June 30, 2013, the local 
urban rate floor shall be $10.
    (2) Beginning on July 1, 2013, and ending June 30, 2014, the local 
urban rate floor shall be $14.
    (3) Beginning July 1, 2014, and thereafter, the local urban rate 
floor will be announced annually by the Wireline Competition Bureau.
    (g) Any reductions in high-cost support under this section will not 
be redistributed to other carriers that receive support pursuant to 
Sec.  36.631 of this chapter.

0
50. Add Sec.  54.320 to subpart D to read as follows:


Sec.  54.320  Compliance and recordkeeping for the high-cost program.

    (a) Eligible telecommunications carriers authorized to receive 
universal service high-cost support are subject to random compliance 
audits and other investigations to ensure compliance with program rules 
and orders.
    (b) All eligible telecommunications carriers shall retain all 
records required to demonstrate to auditors that the support received 
was consistent with the universal service high-cost program rules. This 
documentation must be maintained for at least ten years from the 
receipt of funding. All such documents shall be made available upon 
request to the Commission and any of its Bureaus or Offices, the 
Administrator, and their respective auditors.
    (c) Eligible telecommunications carriers authorized to receive 
high-cost support that fail to comply with public interest obligations 
or any other terms and conditions may be subject to further action, 
including the Commission's existing enforcement procedures and 
penalties, reductions in support amounts, potential revocation of ETC 
designation, and suspension or debarment pursuant to Sec.  54.8.

Subpart H--Administration

0
51. Amend Sec.  54.702 by revising paragraphs (a), (b), (c), and (h) to 
read as follows:


Sec.  54.702  Administrator's functions and responsibilities.

    (a) The Administrator, and the divisions therein, shall be 
responsible for administering the schools and libraries support 
mechanism, the rural health care support mechanism, the high-cost 
support mechanism, and the low income support mechanism.
    (b) The Administrator shall be responsible for billing 
contributors, collecting contributions to the universal service support 
mechanisms, and disbursing universal service support funds.
    (c) The Administrator may not make policy, interpret unclear 
provisions of the statute or rules, or interpret the intent of 
Congress. Where the Act or the Commission's rules are unclear, or do 
not address a particular situation, the Administrator shall seek 
guidance from the Commission.
* * * * *
    (h) The Administrator shall report quarterly to the Commission on 
the disbursement of universal service support program funds. The 
Administrator shall keep separate accounts for the amounts of money 
collected and disbursed for eligible schools and libraries, rural 
health care providers, low-income consumers, and high-cost and insular 
areas.
* * * * *

0
52. Amend Sec.  54.709 by adding three sentences to the end of 
paragraph (b) to read as follows:


Sec.  54.709  Computations of required contributions to universal 
service support mechanisms.

* * * * *
    (b) * * * The Commission may instruct the Administrator to treat 
excess contributions in a manner other than as prescribed in this 
paragraph (b). Such instructions may be made in the form of a 
Commission Order or a public

[[Page 73877]]

notice released by the Wireline Competition Bureau. Any such public 
notice will become effective fourteen days after release of the public 
notice, absent further Commission action.
* * * * *

0
53. Amend Sec.  54.715 by revising paragraph (c) to read as follows:


Sec.  54.715  Administrative expenses of the Administrator.

* * * * *
    (c) The Administrator shall submit to the Commission projected 
quarterly budgets at least sixty (60) days prior to the start of every 
quarter. The Commission must approve the projected quarterly budgets 
before the Administrator disburses funds under the federal universal 
service support mechanisms. The administrative expenses incurred by the 
Administrator in connection with the schools and libraries support 
mechanism, the rural health care support mechanism, the high-cost 
support mechanism, and the low income support mechanism shall be 
deducted from the annual funding of each respective support mechanism. 
The expenses deducted from the annual funding for each support 
mechanism also shall include the Administrator's joint and common costs 
allocated to each support mechanism pursuant to the cost allocation 
manual filed by the Administrator under Sec.  64.903 of this chapter.

Subpart J--Interstate Access Universal Service Support Mechanism

0
54. Amend Sec.  54.801 by adding paragraph (f) to read as follows:


Sec.  54.801  General

* * * * *
    (f) Beginning January 1, 2012, no incumbent or competitive eligible 
telecommunications carrier shall receive support pursuant to this 
subpart, nor shall any incumbent or competitive eligible 
telecommunications carrier be required to complete any filings pursuant 
to this subpart after March 31, 2012.

Subpart K--Interstate Common Line Support Mechanism for Rate-of-
Return Carriers

0
55. Amend Sec.  54.901 by adding paragraphs (b)(4), (c) and (d) to read 
as follows:


Sec.  54.901  Calculation of Interstate Common Line Support.

* * * * *
    (b) * * *
    (4) Beginning January 1, 2012, competitive eligible 
telecommunications carriers shall not receive Interstate Common Line 
Support pursuant to this subpart and will instead receive support 
consistent with Sec.  54.307(e).
    (c) Beginning January 1, 2012, for purposes of calculating 
Interstate Common Line Support, corporate operations expense allocated 
to the Common Line Revenue Requirement, pursuant to Sec.  69.409 of 
this chapter, shall be limited to the lesser of:
    (1) The actual average monthly per-loop corporate operations 
expense; or
    (2) A monthly per-loop amount computed pursuant to Sec.  
36.621(a)(4)(iii) of this chapter.
    (d) Support After December 31, 2011. Notwithstanding paragraph (a) 
of this section, beginning January 1, 2012, no carrier that is a rate-
of-return carrier, as that term is defined in Sec.  54.5 affiliated 
with a price cap local exchange carrier, as that term is defined in 
Sec.  61.3(aa) of this chapter, shall receive support under this 
subpart.

0
56. Add subpart L to part 54 as follows:
Subpart L--Mobility Fund
Sec.
54.1001 Mobility Fund--Phase I.
54.1002 Geographic areas eligible for support.
54.1003 Provider eligibility.
54.1004 Service to Tribal Lands.
54.1005 Application process.
54.1006 Public interest obligations.
54.1007 Letter of credit.
54.1008 Mobility Fund Phase I disbursements.
54.1009 Annual reports.
54.1010 Record retention for Mobility Fund Phase I.

Subpart L--Mobility Fund


Sec.  54.1001  Mobility Fund--Phase I.

    The Commission will use competitive bidding, as provided in part 1, 
subpart AA, of this chapter, to determine the recipients of support 
available through Phase I of the Mobility Fund and the amount(s) of 
support that they may receive for specific geographic areas, subject to 
applicable post-auction procedures.


Sec.  54.1002  Geographic areas eligible for support.

    (a) Mobility Fund Phase I support may be made available for census 
blocks identified as eligible by public notice.
    (b) Except as provided in Sec.  54.1004, coverage units for 
purposes of conducting competitive bidding and disbursing support based 
on designated road miles will be identified by public notice for each 
census block eligible for support.


Sec.  54.1003  Provider eligibility.

    (a) Except as provided in Sec.  54.1004, an applicant shall be an 
Eligible Telecommunications Carrier in an area in order to receive 
Mobility Fund Phase I support for that area. The applicant's 
designation as an Eligible Telecommunications Carrier may be 
conditional subject to the receipt of Mobility Fund support.
    (b) An applicant shall have access to spectrum in an area that 
enables it to satisfy the applicable performance requirements in order 
to receive Mobility Fund Phase I support for that area. The applicant 
shall certify, in a form acceptable to the Commission, that it has such 
access at the time it applies to participate in competitive bidding and 
at the time that it applies for support and that it will retain such 
access for five (5) years after the date on which it is authorized to 
receive support.
    (c) An applicant shall certify that it is financially and 
technically qualified to provide the services supported by Mobility 
Fund Phase I in order to receive such support.


Sec.  54.1004  Service to Tribal Lands.

    (a) A Tribally-owned or -controlled entity that has pending an 
application to be designated an Eligible Telecommunications Carrier may 
participate in any Mobility Fund Phase I auction, including any auction 
for support solely in Tribal lands, by bidding for support in areas 
located within the boundaries of the Tribal land associated with the 
Tribe that owns or controls the entity. To bid on this basis, an entity 
shall certify that it is a Tribally-owned or -controlled entity and 
identify the applicable Tribe and Tribal lands in its application to 
participate in the competitive bidding. A Tribally-owned or -controlled 
entity shall receive Mobility Fund Phase I support only after it has 
become an Eligible Telecommunications Carrier.
    (b) In any auction for support solely in Tribal lands, coverage 
units for purposes of conducting competitive bidding and disbursing 
support based on designated population will be identified by public 
notice for each census block eligible for support.
    (c) Tribally-owned or -controlled entities may receive a bidding 
credit with respect to bids for support within the boundaries of 
associated Tribal lands. To qualify for a bidding credit, an applicant 
shall certify that it is a Tribally-owned or -controlled entity and 
identify the applicable Tribe and Tribal lands in its application to 
participate in the competitive bidding. An applicant that qualifies 
shall have its bid(s) for

[[Page 73878]]

support in areas within the boundaries of Tribal land associated with 
the Tribe that owns or controls the applicant reduced by twenty-five 
(25) percent or purposes of determining winning bidders without any 
reduction in the amount of support available.
    (d) A winning bidder for support in Tribal lands shall notify and 
engage the Tribal governments responsible for the areas supported.
    (1) A winning bidder's engagement with the applicable Tribal 
government shall consist, at a minimum, of discussion regarding:
    (i) A needs assessment and deployment planning with a focus on 
Tribal community anchor institutions;
    (ii) Feasibility and sustainability planning;
    (iii) Marketing services in a culturally sensitive manner;
    (iv) Rights of way processes, land use permitting, facilities 
siting, environmental and cultural preservation review processes; and
    (v) Compliance with Tribal business and licensing requirements.
    (2) A winning bidder shall notify the appropriate Tribal government 
of its winning bid no later than five (5) business days after being 
identified by public notice as a winning bidder.
    (3) A winning bidder shall certify in its application for support 
that it has substantively engaged appropriate Tribal officials 
regarding the issues specified in Sec.  54.1004(d)(1), at a minimum, as 
well as any other issues specified by the Commission, and provide a 
summary of the results of such engagement. A copy of the certification 
and summary shall be sent to the appropriate Tribal officials when it 
is sent to the Commission.
    (4) A winning bidder for support in Tribal lands shall certify in 
its annual report, pursuant to Sec.  54.1009(a)(5), and prior to 
disbursement of support, pursuant to Sec.  54.1008(c), that it has 
substantively engaged appropriate Tribal officials regarding the issues 
specified in Sec.  54.1004(d)(1), at a minimum, as well as any other 
issues specified by the Commission, and provide a summary of the 
results of such engagement. A copy of the certification and summary 
shall be sent to the appropriate Tribal officials when it is sent to 
the Commission.


Sec.  54.1005  Application process.

    (a) Application to Participate in Competitive Bidding for Mobility 
Fund Phase I Support. In addition to providing information specified in 
Sec.  1.21001(b) of this chapter and any other information required by 
the Commission, an applicant to participate in competitive bidding for 
Mobility Fund Phase I support also shall:
    (1) Provide ownership information as set forth in Sec.  1.2112(a) 
of this chapter;
    (2) Certify that the applicant is financially and technically 
capable of meeting the public interest obligations of Sec.  54.1006 in 
each area for which it seeks support;
    (3) Disclose its status as an Eligible Telecommunications Carrier 
in any area for which it will seek support or as a Tribal entity with a 
pending application to become an Eligible Telecommunications Carrier in 
any such area, and certify that the disclosure is accurate;
    (4) Describe the spectrum access that the applicant plans to use to 
meet obligations in areas for which it will bid for support, including 
whether the applicant currently holds a license for or leases the 
spectrum, and certify that the description is accurate and that the 
applicant will retain such access for at least five (5) years after the 
date on which it is authorized to receive support;
    (5) Certify that it will not bid on any areas in which it has made 
a public commitment to deploy 3G or better wireless service by December 
31, 2012; and
    (6) Make any applicable certifications required in Sec.  54.1004.
    (b) Application by Winning Bidders for Mobility Fund Phase I 
Support.
    (1) Deadline. Unless otherwise provided by public notice, winning 
bidders for Mobility Fund Phase I support shall file an application for 
Mobility Fund Phase I support no later than 10 business days after the 
public notice identifying them as winning bidders.
    (2) Application Contents.
    (i) Identification of the party seeking the support, including 
ownership information as set forth in Sec.  1.2112(a) of this chapter.
    (ii) Certification that the applicant is financially and 
technically capable of meeting the public interest obligations of Sec.  
54.1006 in the geographic areas for which it seeks support.
    (iii) Proof of the applicant's status as an Eligible 
Telecommunications Carrier or as a Tribal entity with a pending 
application to become an Eligible Telecommunications Carrier in any 
area for which it seeks support and certification that the proof is 
accurate.
    (iv) A description of the spectrum access that the applicant plans 
to use to meet obligations in areas for which it is the winning bidder 
for support, including whether the applicant currently holds a license 
for or leases the spectrum, and a certification that the description is 
accurate and that the applicant will retain such access for at least 
five (5) years after the date on which it is authorized to receive 
support.
    (v) A detailed project description that describes the network, 
identifies the proposed technology, demonstrates that the project is 
technically feasible, discloses the budget and describes each specific 
phase of the project, e.g., network design, construction, deployment, 
and maintenance. The applicant shall indicate whether the supported 
network will provide third generation (3G) mobile service within the 
period prescribed by Sec.  54.1006(a) or fourth generation (4G) mobile 
service within the period prescribed by Sec.  54.1006(b).
    (vi) Certifications that the applicant has available funds for all 
project costs that exceed the amount of support to be received from 
Mobility Fund Phase I and that the applicant will comply with all 
program requirements.
    (vii) Any guarantee of performance that the Commission may require 
by public notice or other proceedings, including but not limited to the 
letters of credit required in Sec.  54.1007, or a written commitment 
from an acceptable bank, as defined in Sec.  54.1007(a)(1), to issue 
such a letter of credit.
    (viii) Certification that the applicant will offer service in 
supported areas at rates that are within a reasonable range of rates 
for similar service plans offered by mobile wireless providers in urban 
areas for a period extending until five (5) years after the date on 
which it is authorized to receive support.
    (ix) Any applicable certifications and showings required in Sec.  
54.1004.
    (x) Certification that the party submitting the application is 
authorized to do so on behalf of the applicant.
    (xi) Such additional information as the Commission may require.
    (3) Application Processing. (i) No application will be considered 
unless it has been submitted in an acceptable form during the period 
specified by public notice. No applications submitted or demonstrations 
made at any other time shall be accepted or considered.
    (ii) Any application that, as of the submission deadline, either 
does not identify the applicant seeking support as specified in the 
public notice announcing application procedures or does not include 
required certifications shall be denied.
    (iii) An applicant may be afforded an opportunity to make minor 
modifications to amend its application or correct defects noted by the 
applicant, the Commission, the

[[Page 73879]]

Administrator, or other parties. Minor modifications include correcting 
typographical errors in the application and supplying non-material 
information that was inadvertently omitted or was not available at the 
time the application was submitted.
    (iv) Applications to which major modifications are made after the 
deadline for submitting applications shall be denied. Major 
modifications include, but are not limited to, any changes in the 
ownership of the applicant that constitute an assignment or change of 
control, or the identity of the applicant, or the certifications 
required in the application.
    (v) After receipt and review of the applications, a public notice 
shall identify each winning bidder that may be authorized to receive 
Mobility Fund Phase I support after the winning bidder submits a Letter 
of Credit and an accompanying opinion letter as required by Sec.  
54.1007, in a form acceptable to the Commission, and any final 
designation as an Eligible Telecommunications Carrier that any 
Tribally-owned or -controlled applicant may still require. Each such 
winning bidder shall submit a Letter of Credit and an accompanying 
opinion letter as required by Sec.  54.1007, in a form acceptable to 
the Commission, and any required final designation as an Eligible 
Telecommunications Carrier no later than 10 business days following the 
release of the public notice.
    (vi) After receipt of all necessary information, a public notice 
will identify each winning bidder that is authorized to receive 
Mobility Fund Phase I support.


Sec.  54.1006  Public interest obligations.

    (a) Deadline for Construction--3G networks. A winning bidder 
authorized to receive Mobility Fund Phase I support that indicated in 
its application that it would provide third generation (3G) service on 
the supported network shall, no later than two (2) years after the date 
on which it was authorized to receive support, submit data from drive 
tests covering the area for which support was received demonstrating 
mobile transmissions supporting voice and data to and from the network 
covering 75% of the designated coverage units in the area deemed 
uncovered, or a higher percentage established by Public Notice prior to 
the competitive bidding, and meeting or exceeding the following:
    (1) Outdoor minimum data transmission rates of 50 kbps uplink and 
200 kbps downlink at vehicle speeds appropriate for the roads covered;
    (2) Transmission latency low enough to enable the use of real time 
applications, such as VoIP.
    (b) Deadline for Construction--4G networks. A winning bidder 
authorized to receive Mobility Fund Phase I support that indicated in 
its application that it would provide fourth generation (4G) service on 
the supported network shall, no later than three (3) years after the 
date on which it was authorized to receive support, submit data from 
drive tests covering the area for which support was received 
demonstrating mobile transmissions supporting voice and data to and 
from the network covering 75% of the designated coverage units in the 
area deemed uncovered, or an applicable higher percentage established 
by public notice prior to the competitive bidding, and meeting or 
exceeding the following:
    (1) Outdoor minimum data transmission rates of 200 kbps uplink and 
768 kbps downlink at vehicle speeds appropriate for the roads covered;
    (2) Transmission latency low enough to enable the use of real time 
applications, such as VoIP.
    (c) Coverage Test Data. Drive tests submitted in compliance with a 
recipient's public interest obligations shall cover roads designated in 
the public notice detailing the procedures for the competitive bidding 
that is the basis of the recipient's support. Scattered site tests 
submitted in compliance with a recipient's public interest obligations 
shall be in compliance with standards set forth in the public notice 
detailing the procedures for the competitive bidding that is the basis 
of the recipient's authorized support.
    (d) Collocation Obligations. During the period when a recipient 
shall file annual reports pursuant to Sec.  54.1009, the recipient 
shall allow for reasonable collocation by other providers of services 
that would meet the technological requirements of Mobility Fund Phase I 
on newly constructed towers that the recipient owns or manages in the 
area for which it receives support. In addition, during this period, 
the recipient may not enter into facilities access arrangements that 
restrict any party to the arrangement from allowing others to collocate 
on the facilities.
    (e) Voice and Data Roaming Obligations. During the period when a 
recipient shall file annual reports pursuant to Sec.  54.1009, the 
recipient shall comply with the Commission's voice and data roaming 
requirements that were in effect as of October 27, 2011, on networks 
that are built through Mobility Fund Phase I support.
    (f) Liability for Failing To Satisfy Public Interest Obligations. A 
winning bidder authorized to receive Mobility Fund Phase I support that 
fails to comply with the public interest obligations in this paragraph 
or any other terms and conditions of the Mobility Fund Phase I support 
will be subject to repayment of the support disbursed together with an 
additional performance default payment. Such a winning bidder may be 
disqualified from receiving Mobility Fund Phase I support or other USF 
support. The additional performance default amount will be a percentage 
of the Mobility Fund Phase I support that the winning bidder has been 
and is eligible to request be disbursed to it pursuant to Sec.  
54.1008. The percentage will be determined as specified in the public 
notice detailing competitive bidding procedures prior to the 
commencement of competitive bidding. The percentage will not exceed 
twenty percent.


Sec.  54.1007  Letter of credit.

    (a) Before being authorized to receive Mobility Fund Phase I 
support, a winning bidder shall obtain an irrevocable standby letter of 
credit which shall be acceptable in all respects to the Commission. 
Each winning bidder authorized to receive Mobility Fund Phase I support 
shall maintain its standby letter of credit or multiple standby letters 
of credit in an amount equal to the amount of Mobility Fund Phase I 
support that the winning bidder has been and is eligible to request be 
disbursed to it pursuant to Sec.  54.1008 plus the additional 
performance default amount described in Sec.  54.1006(f), until at 
least 120 days after the winning bidder receives its final distribution 
of support pursuant to Sec.  54.1008(b)(3).
    (1) The bank issuing the letter of credit shall be acceptable to 
the Commission. A bank that is acceptable to the Commission is
    (i) Any United States Bank that
    (A) Is among the 50 largest United States banks, determined on the 
basis of total assets as of the end of the calendar year immediately 
preceding the issuance of the letter of credit,
    (B) Whose deposits are insured by the Federal Deposit Insurance 
Corporation, and
    (C) Who has a long-term unsecured credit rating issued by Standard 
& Poor's of A- or better (or an equivalent rating from another 
nationally recognized credit rating agency); or
    (ii) Any non-U.S. bank that
    (A) Is among the 50 largest non-U.S. banks in the world, determined 
on the

[[Page 73880]]

basis of total assets as of the end of the calendar year immediately 
preceding the issuance of the letter of credit (determined on a U.S. 
dollar equivalent basis as of such date),
    (B) Has a branch office in the District of Columbia or such other 
branch office agreed to by the Commission,
    (C) Has a long-term unsecured credit rating issued by a widely-
recognized credit rating agency that is equivalent to an A- or better 
rating by Standard & Poor's, and
    (D) Issues the letter of credit payable in United States dollars.
    (2) [Reserved]
    (b) A winning bidder for Mobility Fund Phase I support shall 
provide with its Letter of Credit an opinion letter from its legal 
counsel clearly stating, subject only to customary assumptions, 
limitations, and qualifications, that in a proceeding under Title 11 of 
the United States Code, 11 U.S.C. 101 et seq. (the ``Bankruptcy 
Code''), the bankruptcy court would not treat the letter of credit or 
proceeds of the letter of credit as property of the winning bidder's 
bankruptcy estate under section 541 of the Bankruptcy Code.
    (c) Authorization to receive Mobility Fund Phase I support is 
conditioned upon full and timely performance of all of the requirements 
set forth in Sec.  54.1006 and any additional terms and conditions upon 
which the support was granted.
    (1) Failure by a winning bidder authorized to receive Mobility Fund 
Phase I support to comply with any of the requirements set forth in 
Sec.  54.1006 or any other term or conditions upon which support was 
granted, or its loss of eligibility for any reason for Mobility Fund 
Phase I support, will be deemed an automatic performance default, will 
entitle the Commission to draw the entire amount of the letter of 
credit, and may disqualify the winning bidder from the receipt of 
Mobility Fund Phase I support or additional USF support.
    (2) A performance default will be evidenced by a letter issued by 
the Chief of either the Wireless Bureau or Wireline Bureau or their 
respective designees, which letter, attached to a standby letter of 
credit draw certificate, shall be sufficient for a draw on the standby 
letter of credit for the entire amount of the standby letter of credit.


Sec.  54.1008  Mobility Fund Phase I disbursements.

    (a) A winning bidder for Mobility Fund Phase I support will be 
advised by public notice whether it has been authorized to receive 
support. The public notice will detail how disbursement will be made 
available.
    (b) Mobility Fund Phase I support will be available for 
disbursement to authorized winning bidders in three stages.
    (1) One-third of the total possible support, if coverage were to be 
extended to 100 percent of the units deemed unserved in the geographic 
area, when the winning bidder is authorized to receive support.
    (2) One-third of the total possible support with respect to a 
specific geographic area when the recipient demonstrates coverage of 50 
percent of the coverage requirements of Sec.  54.1006(a) or (b), as 
applicable.
    (3) The remainder of the total support, based on the final total 
units covered, when the recipient demonstrates coverage meeting the 
requirements of Sec.  54.1006(a) or (b), as applicable.
    (c) A recipient accepting a final disbursement for a specific 
geographic area based on coverage of less than 100 percent of the units 
in the area previously deemed unserved waives any claim for the 
remainder of potential Mobility Fund Phase I support with respect to 
that area.
    (d) Prior to each disbursement request, a winning bidder for 
support in a Tribal land will be required to certify that it has 
substantively engaged appropriate Tribal officials regarding the issues 
specified in Sec.  54.1004(d)(1), at a minimum, as well as any other 
issues specified by the Commission and to provide a summary of the 
results of such engagement.
    (e) Prior to each disbursement request, a winning bidder will be 
required to certify that it is in compliance with all requirements for 
receipt of Mobility Fund Phase I support at the time that it requests 
the disbursement.


Sec.  54.1009  Annual reports.

    (a) A winning bidder authorized to receive Mobility Fund Phase I 
support shall submit an annual report no later than April 1 in each 
year for the five years after it was so authorized. Each annual report 
shall include the following, or reference the inclusion of the 
following in other reports filed with the Commission for the applicable 
year:
    (1) Electronic Shapefiles site coverage plots illustrating the area 
newly reached by mobile services at a minimum scale of 1:240,000;
    (2) A list of relevant census blocks previously deemed unserved, 
with road miles and total resident population and resident population 
residing in areas newly reached by mobile services (based on Census 
Bureau data and estimates);
    (3) If any such testing has been conducted, data received or used 
from drive tests, or scattered site testing in areas where drive tests 
are not feasible, analyzing network coverage for mobile services in the 
area for which support was received;
    (4) Certification that the applicant offers service in supported 
areas at rates that are within a reasonable range of rates for similar 
service plans offered by mobile wireless providers in urban areas;
    (5) Any applicable certifications and showings required in Sec.  
54.1004; and
    (6) Updates to the information provided in Sec.  54.1005(b)(2)(v).
    (b) The party submitting the annual report must certify that they 
have been authorized to do so by the winning bidder.
    (c) Each annual report shall be submitted to the Office of the 
Secretary of the Commission, clearly referencing WT Docket No. 10-208; 
the Administrator; and the relevant state commissions, relevant 
authority in a U.S. Territory, or Tribal governments, as appropriate.


Sec.  54.1010  Record retention for Mobility Fund Phase I.

    A winning bidder authorized to receive Mobility Fund Phase I 
support and its agents are required to retain any documentation 
prepared for, or in connection with, the award of Mobility Fund Phase I 
support for a period of not less than ten (10) years after the date on 
which the winning bidder receives its final disbursement of Mobility 
Fund Phase I support.

PART 61--TARIFFS

0
57. The authority citation for part 61 continues to read as follows:

    Authority: Secs. 1, 4(i), 4(j), 201-205 and 403 of the 
Communications Act of 1934, as amended; 47 U.S.C. 151, 154(i), 
154(j), 201-205 and 403, unless otherwise noted.

0
58. Add Sec.  61.3(bbb) to read as follows:


Sec.  61.3  Definitions.

* * * * *
    (bbb) Access stimulation.
    (1) A rate-of-return local exchange carrier or a Competitive Local 
Exchange Carrier engages in access stimulation when it satisfies the 
following two conditions:
    (i) Has an access revenue sharing agreement, whether express, 
implied, written or oral, that, over the course of the agreement, would 
directly or indirectly result in a net payment to the other party 
(including affiliates) to the agreement, in which payment by the rate-
of-return local exchange carrier or Competitive Local Exchange Carrier 
is based on the billing or collection of

[[Page 73881]]

access charges from interexchange carriers or wireless carriers. When 
determining whether there is a net payment under this rule, all 
payments, discounts, credits, services, features, functions, and other 
items of value, regardless of form, provided by the rate-of-return 
local exchange carrier or Competitive Local Exchange Carrier to the 
other party to the agreement shall be taken into account; and
    (ii) Has either an interstate terminating-to-originating traffic 
ratio of at least 3:1 in a calendar month, or has had more than a 100 
percent growth in interstate originating and/or terminating switched 
access minutes of use in a month compared to the same month in the 
preceding year.
    (2) The local exchange carrier will continue to be engaging in 
access stimulation until it terminates all revenue sharing arrangements 
covered in paragraph (a)(1)(i) of this section. A local exchange 
carrier engaging in access stimulation is subject to revised interstate 
switched access charge rules under Sec.  61.38 and Sec.  69.3(e)(12) of 
this chapter.

0
59. Revise Sec.  61.26 to read as follows:


Sec.  61.26  Tariffing of competitive interstate switched exchange 
access services.

    (a) Definitions. For purposes of this section, the following 
definitions shall apply:
    (1) CLEC shall mean a local exchange carrier that provides some or 
all of the interstate exchange access services used to send traffic to 
or from an end user and does not fall within the definition of 
``incumbent local exchange carrier'' in 47 U.S.C. 251(h).
    (2) Competing ILEC shall mean the incumbent local exchange carrier, 
as defined in 47 U.S.C. 251(h), that would provide interstate exchange 
access services, in whole or in part, to the extent those services were 
not provided by the CLEC.
    (3) Switched exchange access services shall include:
    (i) The functional equivalent of the ILEC interstate exchange 
access services typically associated with the following rate elements: 
Carrier common line (originating); carrier common line (terminating); 
local end office switching; interconnection charge; information 
surcharge; tandem switched transport termination (fixed); tandem 
switched transport facility (per mile); tandem switching;
    (ii) The termination of interexchange telecommunications traffic to 
any end user, either directly or via contractual or other arrangements 
with an affiliated or unaffiliated provider of interconnected VoIP 
service, as defined in 47 U.S.C. 153(25), or a non-interconnected VoIP 
service, as defined in 47 U.S.C. 153(36), that does not itself seek to 
collect reciprocal compensation charges prescribed by this subpart for 
that traffic, regardless of the specific functions provided or 
facilities used.
    (4) Non-rural ILEC shall mean an incumbent local exchange carrier 
that is not a rural telephone company under 47 U.S.C. 153(44).
    (5) The rate for interstate switched exchange access services shall 
mean the composite, per-minute rate for these services, including all 
applicable fixed and traffic-sensitive charges.
    (6) Rural CLEC shall mean a CLEC that does not serve (i.e., 
terminate traffic to or originate traffic from) any end users located 
within either:
    (i) Any incorporated place of 50,000 inhabitants or more, based on 
the most recently available population statistics of the Census Bureau 
or
    (ii) An urbanized area, as defined by the Census Bureau.
    (b) Except as provided in paragraphs (c), (e), and (g) of this 
section, a CLEC shall not file a tariff for its interstate switched 
exchange access services that prices those services above the higher 
of:
    (1) The rate charged for such services by the competing ILEC or
    (2) The lower of:
    (i) The benchmark rate described in paragraph (c) of this section 
or
    (ii) In the case of interstate switched exchange access service, 
the lowest rate that the CLEC has tariffed for its interstate exchange 
access services, within the six months preceding June 20, 2001.
    (c) The benchmark rate for a CLEC's switched exchange access 
services will be the rate charged for similar services by the competing 
ILEC. If an ILEC to which a CLEC benchmarks its rates, pursuant to this 
section, lowers the rate to which a CLEC benchmarks, the CLEC must 
revise its rates to the lower level within 15 days of the effective 
date of the lowered ILEC rate.
    (d) Except as provided in paragraph (g) of this section, and 
notwithstanding paragraphs (b) and (c) of this section, in the event 
that, after June 20, 2001, a CLEC begins serving end users in a 
metropolitan statistical area (MSA) where it has not previously served 
end users, the CLEC shall not file a tariff for its exchange access 
services in that MSA that prices those services above the rate charged 
for such services by the competing ILEC.
    (e) Rural exemption. Except as provided in paragraph (g) of this 
section, and notwithstanding paragraphs (b) through (d) of this 
section, a rural CLEC competing with a non-rural ILEC shall not file a 
tariff for its interstate exchange access services that prices those 
services above the rate prescribed in the NECA access tariff, assuming 
the highest rate band for local switching. In addition to that NECA 
rate, the rural CLEC may assess a presubscribed interexchange carrier 
charge if, and only to the extent that, the competing ILEC assesses 
this charge. Beginning July 1, 2013, all CLEC reciprocal compensation 
rates for intrastate switched exchange access services subject to this 
subpart also shall be no higher than that NECA rate.
    (f) If a CLEC provides some portion of the switched exchange access 
services used to send traffic to or from an end user not served by that 
CLEC, the rate for the access services provided may not exceed the rate 
charged by the competing ILEC for the same access services, except if 
the CLEC is listed in the database of the Number Portability 
Administration Center as providing the calling party or dialed number, 
the CLEC may assess a rate equal to the rate that would be charged by 
the competing ILEC for all exchange access services required to deliver 
interstate traffic to the called number.
    (g) Notwithstanding paragraphs (b) through (e) of this section:
    (1) A CLEC engaging in access stimulation, as that term is defined 
in Sec.  61.3(bbb), shall not file a tariff for its interstate exchange 
access services that prices those services above the rate prescribed in 
the access tariff of the price cap LEC with the lowest switched access 
rates in the state.
    (2) A CLEC engaging in access stimulation, as that term is defined 
in Sec.  61.3(bbb), shall file revised interstate switched access 
tariffs within forty-five (45) days of commencing access stimulation, 
as that term is defined in Sec.  61.3(bbb), or within forty-five (45) 
days of [date] if the CLEC on that date is engaged in access 
stimulation, as that term is defined in Sec.  61.3(bbb).

[[Page 73882]]


0
60. Revise Sec.  61.39 paragraph (a) and add paragraph (g) to read as 
follows:


Sec.  61.39  Optional supporting information to be submitted with 
letters of transmittal for Access Tariff filings by incumbent local 
exchange carriers serving 50,000 or fewer access lines in a given study 
area that are described as subset 3 carriers in Sec.  69.602.

    (a) Scope. Except as provided in paragraph (g) of this section, 
This section provides for an optional method of filing for any local 
exchange carrier that is described as a subset 3 carrier in Sec.  
69.602 of this chapter, which elects to issue its own Access Tariff for 
a period commencing on or after April 1, 1989, and which serves 50,000 
or fewer access lines in a study area as determined under Sec.  
36.611(a)(8) of this chapter. However, the Commission may require any 
carrier to submit such information as may be necessary for review of a 
tariff filing. This section (other than the preceding sentence of this 
paragraph) shall not apply to tariff filings of local exchange carriers 
subject to price cap regulation.
* * * * *
    (g) A local exchange carrier otherwise eligible to file a tariff 
pursuant to this section may not do so if it is engaging in access 
stimulation, as that term is defined in Sec.  61.3(bbb) of this part, 
and has not terminated its access revenue sharing agreement(s). A 
carrier so engaged must file interstate access tariffs in accordance 
with Sec.  61.38, and Sec.  69.3(e)(12)(1) of this chapter.

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
61. The authority citation for part 64 is revised to read as follows:

    Authority: 47 U.S.C. 151, 152, 154, 254(k), 227; secs. 
403(b)(2)(B), (c), 1302, Pub. L. 104-104, 100 Stat. 56. Interpret or 
apply 47 U.S.C. 201, 218, 222, 225, 226, 207, 228, and 254(k) unless 
otherwise noted.

0
62. In Sec.  64.1600, redesignate paragraphs (f) through (j) as 
paragraphs (g) through (k) respectively and add new paragraph (f) to 
read as follows:


Sec.  64.1600  Definitions.

* * * * *
    (f) Intermediate Provider. The term Intermediate Provider means any 
entity that carries or processes traffic that traverses or will 
traverse the PSTN at any point insofar as that entity neither 
originates nor terminates that traffic.
* * * * *

0
63. Revise Sec.  64.1601(a) to read as follows:


Sec.  64.1601  Delivery requirements and privacy restrictions.

    (a) Delivery. Except as provided in paragraphs (d) and (e) of this 
section:
    (1) Telecommunications carriers and providers of interconnected 
Voice over Internet Protocol (VoIP) services, in originating interstate 
or intrastate traffic on the public switched telephone network (PSTN) 
or originating interstate or intrastate traffic that is destined for 
the PSTN (collectively ``PSTN Traffic''), are required to transmit for 
all PSTN Traffic the telephone number received from or assigned to or 
otherwise associated with the calling party to the next provider in the 
path from the originating provider to the terminating provider. This 
provision applies regardless of the voice call signaling and 
transmission technology used by the carrier or VoIP provider. Entities 
subject to this provision that use Signaling System 7 (SS7) are 
required to transmit the calling party number (CPN) associated with all 
PSTN Traffic in the SS7 ISUP (ISDN User Part) CPN field to 
interconnecting providers, and are required to transmit the calling 
party's charge number (CN) in the SS7 ISUP CN field to interconnecting 
providers for any PSTN Traffic where CN differs from CPN. Entities 
subject to this provision who use multi-frequency (MF) signaling are 
required to transmit CPN, or CN if it differs from CPN, associated with 
all PSTN Traffic in the MF signaling automatic numbering information 
(ANI) field.
    (2) Intermediate providers within an interstate or intrastate call 
path that originates and/or terminates on the PSTN must pass unaltered 
to subsequent providers in the call path signaling information 
identifying the telephone number, or billing number, if different, of 
the calling party that is received with a call. This requirement 
applies to SS7 information including but not limited to CPN and CN, and 
also applies to MF signaling information or other signaling information 
intermediate providers receive with a call. This requirement also 
applies to VoIP signaling messages, such as calling party and charge 
information identifiers contained in Session Initiation Protocol (SIP) 
header fields, and to equivalent identifying information as used in 
other VoIP signaling technologies, regardless of the voice call 
signaling and transmission technology used by the carrier or VoIP 
provider.
* * * * *

PART 69--ACCESS CHARGES

0
64. The authority citation for part 69 continues to read as follows:

    Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 
403. 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403.

0
65. Add paragraph (d) to Sec.  69.1 to read as follows:


Sec.  69.1  Application of access charges.

* * * * *
    (d) To the extent any provision contained in 47 CFR part 51 
subparts H and J conflict with any provision of this part, the 47 CFR 
part 51 provision supersedes the provision of this part.

0
66. Revise Sec.  69.3 paragraphs (e)(6) and (e)(9) and add paragraph 
(e)(12) to read as follows:


Sec.  69.3  Filing of access service tariffs.

* * * * *
    (e) * * *
    (6) Except as provided in paragraph (e)(12) of this section, a 
telephone company or companies that elect to file such a tariff shall 
notify the association not later than March 1 of the year the tariff 
becomes effective, if such company or companies did not file such a 
tariff in the preceding biennial period or cross-reference association 
charges in such preceding period that will be cross-referenced in the 
new tariff. A telephone company or companies that elect to file such a 
tariff not in the biennial period shall file its tariff to become 
effective July 1 for a period of one year. Thereafter, such telephone 
company or companies must file its tariff pursuant to paragraphs (f)(1) 
or (f)(2) of this section.
* * * * *
    (9) Except as provided in paragraph (e)(12) of this section, a 
telephone company or group of affiliated telephone companies that 
elects to file its own Carrier Common Line tariff pursuant to paragraph 
(a) of this section shall notify the association not later than March 1 
of the year the tariff becomes effective that it will no longer 
participate in the association tariff. A telephone company or group of 
affiliated telephone companies that elects to file its own Carrier 
Common Line tariff for one of its study areas shall file its own 
Carrier Common Line tariff(s) for all of its study areas.
* * * * *
    (12)(i) A local exchange carrier, or a group of affiliated carriers 
in which at least one carrier is engaging in access stimulation, as 
that term is defined in Sec.  61.3(bbb) of this chapter, shall file its 
own access tariffs within forty-five (45) days of commencing access 
stimulation, as that term is defined in Sec.  61.3(bbb) of this 
chapter, or within forty-five (45) days of December 29, 2011 if the 
local exchange carrier on that date is engaged

[[Page 73883]]

in access stimulation, as that term is defined in Sec.  61.3(bbb) of 
this chapter.
    (ii) Notwithstanding paragraphs (e)(6) and (e)(9) of this section, 
a local exchange carrier, or a group of affiliated carriers in which at 
least one carrier is engaging in access stimulation, as that term is 
defined in Sec.  61.3(bbb) of this chapter, must withdraw from all 
interstate access tariffs issued by the association within forty-five 
(45) days of engaging in access stimulation, as that term is defined in 
Sec.  61.3(bbb) of this chapter, or within forty-five (45) days of 
December 29, 2011 if the local exchange carrier on that date is engaged 
in access stimulation, as that term is defined in Sec.  61.3(bbb) of 
this chapter.
    (iii) Any such carrier(s) shall notify the association when it 
begins access stimulation, or on December 29, 2011 if it is engaged in 
access stimulation, as that term is defined in Sec.  61.3(bbb) of this 
chapter, on that date, of its intent to leave the association tariffs 
within forty-five (45) days.

[FR Doc. 2011-30378 Filed 11-28-11; 8:45 am]
BILLING CODE 6712-01-P