[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Notices]
[Pages 80941-80944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-33152]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

[WC Docket Nos. 10-90 and 05-337; DA 11-2026]


Request for Connect America Fund Cost Models

AGENCY: Federal Communications Commission.

ACTION: Notice; solicitation of comments.

-----------------------------------------------------------------------

SUMMARY: In this document, the Federal Communications Commission 
(Commission) requests interested parties to submit forward-looking cost 
models, consistent with the USF/ICC Transformation Order, for 
consideration in this proceeding. The Commission also requests parties 
to notify the Wireline Competition Bureau of their intention to submit 
a forward-looking cost model. The Commission's goal is to adopt a 
specific model to be used for estimating support amounts in price cap 
areas in order to provide support.

DATES: Interested parties should notify the Wireline Competition Bureau 
of their intent to file a forward-looking cost model consistent with 
the USF/ICC Transformation Order no later than December 30, 2011. 
Interested parties may submit forward-looking cost models or file 
comments no later than February 1, 2012.

ADDRESSES: You may submit forward looking cost models or file comments, 
identified by WC Docket Nos. 10-90 and 05-337, by any of the following 
methods:
     Electronic Filers: Comments may be filed electronically 
using the Internet by

[[Page 80942]]

accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
     People with Disabilities: To request materials in 
accessible formats for people with disabilities (Braille, large print, 
electronic files, audio format), send an email to [email protected] or 
call the Consumer & Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (tty). For detailed instructions for submitting 
comments and additional information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Patrick Halley, Wireline Competition 
Bureau at (202) 418-7550 or TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: 1. On November 18, 2011, the Commission 
released the USF/ICC Transformation Order, 76 FR 73830, November 29, 
2011, which comprehensively reforms and modernizes the universal 
service and intercarrier compensation systems into a new Connect 
America Fund (CAF) to ensure that robust, affordable voice and 
broadband service are available to Americans throughout the nation. 
Among other things, the Commission adopted a methodology for providing 
CAF support in areas served by price cap carriers that will use a 
forward-looking cost model to estimate the costs of deploying 
broadband-capable networks in high-cost areas and identify at a 
granular level the areas where support will be available. Using the 
cost model, the Commission will offer each price cap local exchange 
carrier (LEC) annual support for a period of five years in exchange for 
a commitment to offer voice service across its service territory within 
a state and broadband service to supported locations within that 
service territory. The Commission also intends to use the forward-
looking cost model to identify extremely high-cost and remote areas (in 
both price cap and rate-of-return territories) that should receive 
support from the Remote Areas Fund. As with the current model, we 
expect that the new model will be readily available to support 
recipients and the public for their ongoing use.
    2. Timetable. Our goal is to adopt a specific model to be used for 
estimating support amounts in price cap areas by the end of 2012 in 
order to provide support beginning January 1, 2013. To meet this 
timetable and to ensure that interested parties have adequate time to 
evaluate the models and inputs under consideration, the Wireline 
Competition Bureau (Bureau) hereby requests parties to submit forward-
looking cost models, consistent with the Commission's order, for 
consideration in this proceeding as soon as possible, but no later than 
February 1, 2012. Parties should notify the Bureau of their intention 
to do so no later than three days after publication of this public 
notice in the Federal Register or by December 30, 2011, whichever comes 
later, so that there is sufficient time before the February 1 deadline 
to craft the terms of any protective order(s) necessary to resolve any 
issues related to licensing of third party data and making appropriate 
arrangements for providing access to the public.
    3. After a model or models are filed, the Bureau will evaluate the 
extent to which the models meet the criteria laid out below. Following 
that, and with input from the public, the Bureau may decide there is a 
need to make certain modifications and changes, which may include 
combining elements of multiple models into a new model. In addition, 
the Bureau will identify the data sources and input values that will be 
used to determine support areas and amounts. The final model and inputs 
will be developed through an open, deliberative process, and there will 
be opportunity for further public input before a final model is adopted 
and support levels are established.
    4. Public Access to Submitted Models. In the USF/ICC Transformation 
Order and FNPRM, the Commission reaffirmed criteria that any forward-
looking cost model used to determine federal high-cost support must 
meet, stating that the ``model and all underlying data, formulae, 
computations, and software associated with the model must be available 
to all interested parties for review and comment. All underlying data 
should be verifiable, engineering assumptions reasonable, and outputs 
plausible.'' Models and input values submitted in this proceeding may 
be subject to reasonable restrictions to protect commercially sensitive 
information and proprietary data, but the models and data must be 
available for public scrutiny and potential modification. A copy of all 
models' underlying source code must be available to Commission staff 
and interested parties, who must also have meaningful access to the 
relevant data, and the ability to change input values, run sensitivity 
tests, and analyze the results of various model runs. Access to models 
may not be restricted by use of a paywall (i.e., access to the model 
cannot be conditioned on paying a fee). In addition, any need to 
procure additional data or intellectual property to make use of or 
modifications to models will be taken into account in evaluating 
submissions.
    5. Model Capabilities. The following paragraphs describe the 
capabilities the Bureau seeks in models filed in the record to support 
the policy choices specified by the Commission. We seek to balance the 
benefits of obtaining the most robust model submissions possible with 
the need to conclude the model development process expeditiously, so 
that we can begin distributing model-based support in January 2013. We 
understand it may not be practical to include all preferred 
capabilities in the final model in the timeframe established by the 
Commission, but we will evaluate submissions based on the capabilities 
they provide, in light of the model requirements set forth in the USF/
ICC Transformation Order and FNPRM. In particular, we describe the 
geographic requirements (paragraph 6), the model capabilities to ensure 
the model is forward-looking and economically efficient (paragraphs 7-
9), the types of cost that the model should calculate (paragraph 10), 
and other capabilities (paragraph 11). There will be one or more public 
notices seeking comment on specific issues that must be resolved before 
we adopt a final model.
    6. Consistent with the Commission's order, the adopted model should 
be capable of estimating the forward-looking economic costs of an 
efficient wireline provider at a granular level--census block or 
smaller--in all areas of the country, including Alaska, Hawaii, Puerto 
Rico, the U.S. Virgin Islands, Guam, American Samoa, and Northern 
Marianas Islands. These granular cost estimates should capture the 
effects of scale and low utilization rates on costs. Thus, for example, 
models should take into account that in less densely populated areas 
the cost of shared facilities is spread over fewer locations, driving 
up the cost per location. In addition, it may be appropriate to 
estimate higher per-unit costs for small providers, or to reflect 
savings on costs such as overhead for large providers to reflect 
economies of scale. Models must also be capable of excluding areas 
served by unsubsidized competitors. Because available data will likely 
change between the deadline for filing models and the time a model is 
adopted and support levels are set, models should be able to 
incorporate changes to underlying data sources.
    7. The Commission directed the Bureau ``to ensure that the model 
design

[[Page 80943]]

maximizes the number of locations that will receive robust, scalable 
broadband within the budgeted amounts.'' The Commission also delegated 
to the Bureau the choice of a greenfield or brownfield broadband model. 
To meet these objectives and evaluate alternative policy choices, 
models should be capable of estimating the costs of both brownfield and 
greenfield builds for multiple wireline technologies. In particular, 
models should be capable of estimating the costs of fiber-to-the-
premises (FTTP) and digital subscriber loop (DSL) of varying loop 
lengths (e.g., short-loop, VDSL-capable, 3,000-foot-loop DSL to 12,000-
foot-loop DSL).
    8. The forward-looking costs of an efficient provider calculated by 
models must be based on reasonable engineering assumptions. As the 
Commission noted, newer models can significantly improve the accuracy 
of modeled forward-looking costs by estimating the costs of efficient 
routing along roads. Models should also reflect how an efficient 
provider would likely evaluate deployment decisions. Given the five-
year time horizon of CAF Phase II funding, existing deployments, and 
the economics of new investments, some deployments may not be 
appropriate for an efficient provider (e.g., a brownfield FTTP, or a 
greenfield DSL build-out). Decisions regarding what type of network to 
model will be made following further public input.
    9. Similarly, models should be capable of estimating the costs of 
providing service over a shared network to all households, businesses 
and community anchor institutions within a geographic area, and 
appropriately allocating costs and capacity among those different 
users. By including all locations models will be capable of reflecting 
the economies of scale and scope associated with providing services 
over a shared network, thereby reducing the per-location cost of 
serving residential customers.
    10. Next, models should be capable of incorporating a comprehensive 
range of different costs. Cost models created by the Commission in the 
past were capable of estimating initial capital costs (capex) as well 
as ongoing capex and operating expenses (opex); reflected variations in 
construction costs in different areas due not only to plant mix, but 
also to costs such as labor or transportation; and captured the impact 
on cost of economic and accounting lives of plant and equipment, and 
the impact of taxes and the cost of capital. Models for CAF support 
should capture a similarly comprehensive set of costs. In addition, 
prior models have allowed averaging of costs over different 
geographies, whether defined by the census (e.g., census blocks or 
counties) or wireline networks (e.g., wire centers or study areas); 
models for CAF support should have a similar capability.
    11. Additional capabilities in models might prove useful, but could 
conceivably lead to a delay that outstrips the incremental value of 
those capabilities. To the extent these additional capabilities are 
present in any model submitted, or could be added easily, the Bureau 
will take that into account in evaluating the model. For example, one 
capability that could be useful could be the ability to model revenue 
in each geographic area, allowing the Bureau to take revenue into 
account in determining support thresholds, or to calculate cash flows 
for each year of a modeled five-year period of network costs, rather 
than steady-state (levelized) cost.
    12. Areas Served by Unsubsidized Competitors. In the USF/ICC 
Transformation Order and FNPRM, the Commission directed the Bureau to 
publish, following adoption of the cost model, a list of all census 
blocks in price cap areas eligible for support. Areas eligible for 
support would exclude areas served by an ``unsubsidized competitor.'' 
Any models submitted should have the capability to carve out areas 
served by an unsubsidized competitor.
    13. Price cap ETCs that accept a state-level commitment must offer 
broadband at actual speeds of at least 4 Mbps downstream and 1 Mbps 
downstream, and must offer at least 6 Mbps/1.5 Mbps by the end of the 
fifth year to a number of locations to be specified. The State 
Broadband Initiative (SBI) data used in the National Broadband Map are 
collected at a sufficiently granular level--census block or smaller--
but none of the speed tiers corresponds to 4 Mbps/1Mbps. Breakpoints 
closest to the 4 Mbps downstream speed are 3 Mbps and 6 Mbps; 
breakpoints closest to 1 Mbps are 768 kbps and 1.5 Mbps. The Commission 
recognized that the best data available at this time to determine 
whether broadband is available at speeds at or above the 4 Mbps/1 Mbps 
speed threshold will likely be data on availability at 3 Mbps 
downstream and 768 kbps upstream, which is collected pursuant to SBI 
and the Commission's Form 477. It further noted that such data may be 
used as a proxy for the availability of 4 Mbps/1 Mbps broadband. Models 
should therefore have the ability to use the 3 Mbps/768 kbps tier from 
the SBI data to identify areas served by unsubsidized competitors. In 
addition, we note that the 6 Mbps/1.5 Mbps target for the end of the 
five-year funding period corresponds to speeds available directly from 
SBI and Form 477 data. Ideally, models should therefore also have the 
capability to incorporate SBI and 477 data regarding areas that have 6 
Mbps/1.5 Mbps broadband. It may also be desirable for models to allow 
use of these data sources in combination with data from Warren Media, 
Nielsen, or other sources to identify areas with cable coverage. We 
will seek comment on appropriate data sources to identify areas served 
by ``unsubsidized competitors'' in a subsequent notice.
    14. Alaska, Hawaii, and U.S. Territories. The Commission directed 
the Bureau to consider the unique circumstances of Alaska, Hawaii, 
Puerto Rico, the U.S. Virgin Islands and Northern Marianas Islands when 
adopting a cost model, and consider whether the model ultimately 
adopted adequately accounts for the costs faced by carriers serving 
these areas. In evaluating models, we will therefore consider the 
extent to which they are able to account for the costs of providing 
service in these areas. We will seek comment on these issues, including 
what data sources we could use to develop appropriate model inputs for 
these areas in a subsequent notice.
    15. Interested parties may submit models or file comments on or 
before February 1, 2012. All pleadings are to reference WC Docket Nos. 
10-90 and 05-337. Comments may be filed using the Commission's 
Electronic Comment Filing System (ECFS), or by filing paper copies.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
    All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. All hand deliveries 
must be held together with rubber bands or fasteners. Any

[[Page 80944]]

envelopes must be disposed of before entering the building. The filing 
hours are 8 a.m. to 7 p.m. Commercial overnight mail (other than U.S. 
Postal Service Express Mail and Priority Mail) must be sent to 9300 
East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service 
first-class, Express, and Priority mail must be addressed to 445 12th 
Street SW., Washington DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (Braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 
418-0432 (tty).
    In addition, one copy of each pleading must be sent to each of the 
following:
    (1) The Commission's duplicating contractor, Best Copy and 
Printing, Inc., 445 12th Street SW., Room CY-B402, Washington, DC 
20554, www.bcpiweb.com; phone: (202) 488-5300 fax: (202) 488-5563;
    (2) Katie King, Telecommunications Access Policy Division, Wireline 
Competition Bureau, 445 12th Street SW., Room 5-A317, Washington, DC 
20554; email: [email protected]; and
    (3) Charles Tyler, Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A452, 
Washington, DC 20554; email: [email protected].
    Filings and comments are also available for public inspection and 
copying during regular business hours at the FCC Reference Information 
Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 
20554. They may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street, 
SW., Room CY-B402, Washington, DC 20554, telephone: (202) 488-5300, 
fax: (202) 488-5563, or via email www.bcpiweb.com.
    This matter shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentations must contain summaries of the substance 
of the presentation and not merely a listing of the subjects discussed. 
More than a one or two sentence description of the views and arguments 
presented generally is required. Other rules pertaining to oral and 
written ex parte presentations in permit-but-disclose proceedings are 
set forth in Sec.  1.1206(b) of the Commission's rules.
    For further information, please contact Patrick Halley, Wireline 
Competition Bureau at (202) 418-7550 or TTY (202) 418-0484.

Federal Communications Commission.
Trent Harkrader,
Division Chief, Wireline Competition Bureau.
[FR Doc. 2011-33152 Filed 12-23-11; 8:45 am]
BILLING CODE 6712-01-P