[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Rules and Regulations]
[Pages 3837-3843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00556]


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

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[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 12-137]


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; petition for reconsideration.

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

SUMMARY: In this document, the Federal Communications Commission 
(Commission) reconsiders and clarifies certain aspects of the USF/ICC 
Transformation Order, in response to various petitions for 
reconsideration and/or clarification. We grant in part petitions 
related to the financial reporting obligations of eligible 
telecommunications carriers (ETCs) that are privately held rate of 
return companies. This Order also provides additional guidance and 
clarifications regarding the standard and process for requests for 
waiver of our universal service reforms.

DATES: Effective February 19, 2013, except for the amendments made to 
Sec.  54.313(f)(2)(i) through (iii) in this document, 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 that section.

FOR FURTHER INFORMATION CONTACT: Alexander Minard, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Fifth 
Order on Reconsideration 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 12-137, adopted on November 13, 2012 and released on 
November 16, 2012. 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://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0514/FCC-12-52A1.pdf.

I. Introduction

    1. In this Order, we reconsider and clarify certain aspects of the 
USF/ICC Transformation Order, 76 FR 73830, November 29, 2011, in 
response to various petitions for reconsideration and/or clarification. 
The USF/ICC Transformation Order represents a careful balancing of 
policy goals, equities, and budgetary constraints. This balance was 
required in order to advance the fundamental goals of universal service 
and intercarrier compensation reform within a defined budget while 
simultaneously providing sufficient transitions for stakeholders to 
adapt.
    2. As a preliminary matter regarding our review of a number of the 
specific issues discussed below, we observe that, under Commission 
rules, if a petition for reconsideration simply repeats arguments that 
were previously considered and rejected in the proceeding, it will not 
likely warrant reconsideration.
    3. With this standard in mind, we take several limited actions 
stemming from reconsideration petitions. Specifically, this Order 
grants in part petitions related to the financial reporting obligations 
of eligible telecommunications carriers (ETCs) that are privately-held 
rate-of-return companies. This Order also provides additional guidance 
and clarifications regarding the standard and process for requests for 
waiver of our universal service reforms.

II. Financial Reporting Requirements for Privately Held Rate-of-Return 
Carriers

    4. In the USF/ICC Transformation Order, the Commission required all 
privately-held rate of return carriers to provide a report on their 
financial condition and operations and provided two options for doing 
so: (1) File a copy of the carrier's audited financial statement; or 
(2) file a copy of the Department of Agriculture's Rural Utility 
Service (RUS) Form 479, a financial reporting requirement for carriers 
that borrow money from RUS. The USF/ICC Transformation Order requires 
this information to be filed with the Commission, the Universal Service 
Administrative Company (USAC), and the relevant state commission, 
relevant authority in a U.S. Territory, or Tribal governments, as 
appropriate. Only one party commented generally on the NPRM proposal to 
require audited financial statements certified by an independent CPA, 
and no privately held carrier opposed the proposal at that time.

[[Page 3838]]

    5. The record on reconsideration indicates, however, that a number 
of rate-of-return carriers do not currently have audited financial 
statements. Several petitioners argue that the financial reporting 
requirement is unduly burdensome. For example, Comporium urges ``the 
Commission to clarify and/or reconsider its decision and revise its 
rules by determining that companies with multiple study areas under 
common ownership or control may submit basic financial schedules * * * 
for regulated operations only, accompanied by an officer affidavit.'' 
Another party requests that we replace the current financial reporting 
requirement with a requirement that ``all privately held rate of return 
carriers file a form approved by the FCC that is based on the RUS Form 
479.'' Finally, several petitioners argue that the Commission should 
allow carriers to file these financial statements confidentially.
    6. After reviewing the Petitions for Reconsideration, along with 
comments filed in the docket, we conclude that some adjustments in the 
financial reporting rule are appropriate for administrative efficiency 
and to lessen the potential burden on companies that are not audited in 
the ordinary course of business. Therefore, we grant in part the 
reconsideration requests and hereby revise new section 54.313(f)(2) of 
the Commission's rules.
    7. RUS Borrowers. On reconsideration, we require that all privately 
held rate-of-return carriers that are RUS borrowers to file their RUS 
Operating Report for Telecommunications Borrowers with the Commission, 
USAC, and the relevant state commission, relevant authority in a U.S. 
Territory, or Tribal governments, as appropriate, as part of their 
annual Sec.  54.313 filing. Requiring these ETCs to submit a copy of an 
existing RUS Operating Report for Telecommunications Borrowers should 
impose negligible burden on them, while helping the Commission monitor 
the impact of its reforms on this group of rate-of-return companies. As 
one commenter recognizes, one benefit of mandating that RUS borrowers 
submit information in the RUS format is that it will provide the 
Commission with readily accessible information in a consistent format. 
The RUS Operating Report for Telecommunications Borrowers is 
consolidated across all study areas and includes all operations, both 
regulated and non-regulated, of the borrowing entity. While the RUS 
Report itself is not audited, the underlying data are audited, and the 
borrower's auditor must review the information being reported to RUS. 
We further require that the ETC must make the underlying audit and 
related workpapers and financial information available upon request by 
the Commission, USAC, or the relevant state commission, relevant 
authority in a U.S. Territory, or Tribal governments, as appropriate.
    8. Non-RUS Borrowers That Are Audited. For non-RUS borrowers that 
are audited in the ordinary course of business, we provide two options. 
Such carriers may either: (1) File their audited financial statements; 
or (2) provide their financial information in a form consistent with 
the RUS Operating Report for Telecommunications Borrowers and 
accompanied by a management letter from their auditors. For those 
carriers that already are audited in the ordinary course of business--
whether as a condition of a loan from a bank or for other reasons, 
producing a copy of that audit report to the Commission should impose 
negligible burden. We agree with those parties that suggest it would be 
beneficial to the Commission to have all carrier financial reporting 
information in a consistent format, but also recognize that requiring 
submission of the information in a form similar to the RUS format would 
require additional effort for companies that are not RUS borrowers. We 
therefore provide the option of submitting the information in a format 
comparable to what is required by RUS for its borrowers, but do not 
make that mandatory for such filers. We further require that the ETC 
must make the underlying audit and related workpapers and financial 
information available upon request by the Commission, USAC, or the 
relevant state commission, relevant authority in a U.S. Territory, or 
Tribal government, as appropriate.
    9. Carriers That Are Not Audited. With respect to privately held 
rate-of-return companies that are not audited in the ordinary course of 
business, we balance the relative costs and benefits of requiring 
carriers to comply with a financial reporting requirement that requires 
submission of an audited financial statement. We conclude on 
reconsideration that our core objectives can be met, while lessening 
regulatory burden, by revising new section 54.313(f)(2) to provide two 
options for privately held rate-of-return carriers that are not audited 
in the ordinary course of business: (1) File a financial statement that 
has been subject to review by a CPA or (2) file financial information 
in a format consistent with the RUS form. In the latter instance, the 
underlying information must be subject to a CPA review, with that 
review and related workpapers and financial information to be made 
available upon request by the Commission, USAC, or the relevant state 
commission, relevant authority in a U.S. Territory, or Tribal 
government, as appropriate. For either of these two options, the filing 
must be accompanied by an officer certification that: (1) The carrier 
is not audited in the ordinary course of business; and (2) the reported 
data are accurate.
    10. We conclude that requiring the underlying financial information 
to be subject to a CPA review, rather than a CPA audit, provides 
sufficient assurance that we will obtain a reasonable understanding of 
the affected companies' financial picture. A financial review requires 
the auditor to make inquiries of management and perform analytical 
procedures to determine whether the financial statements conform with 
generally accepted accounting principles. An audit requires the auditor 
additionally to obtain an understanding of the internal controls 
environment for the company, which requires the development of certain 
documentation, such as internal controls procedures, that would not 
have been prepared but for the audit. Typically an audit will perform 
more in-depth testing of individual transactions posted to the general 
ledger. Both an audit and a review require the auditor to determine, 
however, whether the financial statements prepared by management are 
consistent with generally accepted accounting principles.
    11. Because a review does not require the auditor to develop a 
detailed understanding of the internal controls environment, a CPA 
review generally is less costly than a full audit. Requiring a CPA 
review of the underlying information and an officer certification 
regarding the accuracy of the reported data still provides the 
accountability of an independent review, while minimizing the economic 
impact on these generally small carriers associated with an audit. In 
contrast, we are not persuaded by Comporium's proposal to allow 
privately-held rate-of-return carriers to provide the Commission with a 
financial report that has not been subject to any form of independent 
scrutiny by a CPA. We recognize that some state commissions allow 
carriers to file self-prepared financial reports only accompanied by an 
officer certification. Given our responsibility as stewards of the USF, 
however, we conclude that requiring a CPA review--which requires the 
CPA to determine whether any material modifications are required in 
order for the financial statements to be in conformity with

[[Page 3839]]

generally accepted accounting principles--is necessary to fulfill our 
core objective of ensuring financial accountability by USF recipients. 
Based on the record on reconsideration, we therefore conclude that a 
review will be sufficient to meet our objectives of providing the 
Commission with an accurate picture of the financial condition of these 
privately held rate-of-return carriers, without imposing undue burdens 
on carriers whose financial statements are not already audited.
    12. Fiscal Year 2011 Financial Statements. Once PRA approval is 
received for Sec.  54.313(f)(2) as adopted in this Order, we require 
any privately held rate-of-return carrier to file with the Commission, 
USAC, the relevant state commission, relevant authority in a U.S. 
Territory, or Tribal government, as appropriate, pursuant to this rule 
within a reasonable time, as follows:
     If a carrier receives RUS loans, that carrier must file 
its 2011 RUS Operating Report for Telecommunications Borrowers.
     If a carrier does not receive RUS loans, but its financial 
statements for 2011 have been audited, that carrier must file a copy of 
the audited 2011 financial statement, or a financial report in a format 
comparable to RUS Operating Report for Telecommunications Borrowers 
accompanied by a copy of a management letter issued by the independent 
certified public accountant that performed the company's financial 
audit, with the Commission, USAC, the relevant state commission, 
relevant authority in a U.S. Territory, or Tribal government, as 
appropriate.
     If a carrier does not receive RUS loans, but its financial 
statements for 2011 have been subject to review by an independent 
certified public accountant, that carrier must file a copy of their 
reviewed 2011 financial statement, or a financial report in a format 
comparable to RUS Operating Report for Telecommunications Borrowers 
with the underlying information subjected to a review by an independent 
certified public accountant and accompanied by an officer certification 
the carrier was not audited in the ordinary course of business for the 
preceding fiscal year and that the reported data are accurate.
    13. We find that there is not a significant additional burden for 
ETCs to file such information because these financial statements 
already exist. We determine that receiving some 2011 financial 
statements will assist the Commission and states with verifying whether 
these carriers are efficiently and appropriately using high-cost 
support for its intended purposes. Finally, we expect all privately 
held rate-of-return carriers to file on July 1, 2013, pursuant to this 
rule and subject to PRA approval, Fiscal Year 2012 financial 
statements.
    14. Submission of Consolidated Information. We clarify that 
privately held rate-of-return carriers are not required to submit the 
financial information on a study area basis. As pointed out in the 
record on reconsideration, audits of RUS borrowers are not done on a 
study area basis, and the RUS Operating Report for Telecommunications 
Borrowers is submitted by the borrowing entity, which could encompass 
multiple study areas. Several petitioners note that many companies with 
multiple study areas under common ownership or control prepare a 
consolidated audit report, which minimizes audit expenses. The 
Commission has already concluded that holding company level information 
for RUS borrowers is acceptable, when it concluded that such borrowers 
could submit the RUS Operating Report for Telecommunications Borrowers 
to meet the financial reporting requirement. Nothing in the codified 
rule requires that financial reporting be done on a study area basis. 
In fact, imposing a requirement that privately held rate-of-return 
carriers must be audited on a study-area basis would have an 
unreasonably disparate impact on the respective burdens associated with 
this reporting requirement for those privately held carriers that are 
non-RUS borrowers compared to RUS borrowers. We clarify that the 
language in paragraph 599 of the Order that directs non-RUS borrowers 
to submit ``financial information as kept in accordance with Part 32'' 
was not intended to require financial reporting by study area, but 
rather was focusing on the fact that companies are already required to 
maintain financial information by study area pursuant to existing 
Commission requirements. In response to the petitions for 
reconsideration and/or clarification, we clarify that the Commission 
did not intend to require financial information broken out by study 
areas for non-RUS borrowers, and such companies under common ownership 
or control may file financial reports on a consolidated basis.
    15. Requirement That Financial Disclosures Be Publicly Available. 
In the USF/ICC Transformation Order, we stated that the financial 
reporting information required to be filed by ETCS would be made 
publicly available. Some petitioners encourage the Commission to 
revisit that requirement. Upon reconsideration, we conclude that in 
some instances there could be a potential for competitors to use the 
submitted financial data of private rural rate-of-return carriers in an 
anti-competitive manner, and therefore, as several commenters 
suggested, we will allow privately held ETCs to file the financial data 
pursuant to Sec.  54.313(f)(2) of the Commission's rules subject to a 
Protective Order.
    16. As we stated in the USF/ICC Transformation Order, recipients of 
high-cost and/or Connect America support receive extensive public 
funding, and therefore the public has a legitimate interest in being 
able to verify the efficient use of those funds. Moreover, as we 
stated, by making this financial information public, the Commission 
will be assisted in its oversight duties by public interest watchdogs, 
consumer advocates, and others who seek to ensure that recipients of 
support receive funding that is sufficient, but not excessive. On the 
other hand, we agree that, for example, small ETCs serving only one 
study area could face competitive harm if their financial data are made 
available to an overlapping or neighboring competitor. Where an ETC 
serving a large geographic area across multiple states files a 
consolidated financial statement, it is not possible to determine the 
revenues and, thus, profits associated with a particular study area. 
However, where a small ETC serves only one study area, all reported 
revenues and profits are attributable to that one study area, thus 
making it easier for competitors to craft business plans that 
capitalize on their knowledge of the small ETC's reported finances.
    17. We conclude that the public interest would best be served by 
making the private financial data being requested from privately-held 
rate of return carriers available only subject to the provisions of the 
Protective Order, and we delegate authority to the Wireline Competition 
Bureau to adopt such an order consistent with this decision. In 
particular, as specified in more detail in the Protective Order, we 
restrict availability of this material as follows: (1) In the case of 
commercial entities having a competitive or business relationship with 
the company whose confidential information it seeks, to In-House 
Counsel not involved in competitive decision-making, and to their 
Outside Counsel of Record, their Outside Consultants and experts whom 
they retain to assist them in this and related proceedings, and 
employees of such Outside Counsel and Outside Consultants; (2) to 
employees and representatives of commercial entities having no 
competitive or business

[[Page 3840]]

relationship with the company whose confidential information it seeks; 
and (3) to employees and representatives of non-commercial entities 
having no competitive or business relationship with the company whose 
confidential information it seeks. In sum, we recognize the need to 
balance the public's legitimate interest in being able to verify the 
efficient use of universal service high-cost support with the potential 
competitive harm of such financial data being publicly available. We 
conclude that adopting such procedures in a Protective Order will give 
appropriate access to the interested members of the public while 
protecting especially competitively sensitive information from improper 
disclosure, and that disclosure pursuant to the Protective Order 
thereby serves the public interest.

III. Waiver Standard For USF Reforms

    18. The National Exchange Carrier Association, Inc., the 
Organization for the Promotion and Advancement of Small 
Telecommunications Companies, and the Western Telecommunications 
Alliance (Rural Associations) seek reconsideration of the USF waiver 
standard articulated in the USF/ICC Transformation Order and ask that 
the Commission ``discard the various hurdles specified in the Order and 
instead simply apply the `good cause' standard applicable to waiver 
requests generally under Sec.  1.3 of the rules.'' The Rural 
Associations request that a carrier continue to receive support 
pursuant to the prior, no-longer-in-effect rules while the carrier's 
petition for waiver of any new rule is pending. They also argue that 
the Commission should make the waiver process ``less burdensome'' and 
``more equitable and attainable'' for small companies. In particular, 
the Rural Associations ask that the Commission: (i) Waive the filing 
fee applicable to USF-related waivers; (ii) exclude costs incurred in 
preparing a waiver request from corporate operations expenses counted 
toward the caps; (iii) permit carriers to submit information from 
intrastate earnings reviews and rate cases or Universal Service 
Administrative Company (USAC) audits in lieu of the financial 
information the Commission identified in the USF/ICC Transformation 
Order; (iv) require carriers to only submit information that relates to 
the use of supported plant; (v) not require carriers to provide 
geographic data or data about end user rate plans to the extent the 
Commission already has such information in its possession; (vi) clarify 
that standard protective order procedures are available for waiver 
requests; (vii) clarify that carriers are not required to provide 
additional information about unused or spare capacity as long as they 
comply with Parts 32 and 36 of the Commission's rules; and (viii) not 
require carriers to provide additional information about corporate 
operations expenses except in cases where a carrier seeks a waiver 
specifically of the corporate operations expense cap.
    19. We note that the Commission's intent in discussing waivers 
relating to reductions in USF support was not to replace the ordinary 
standard for granting waivers under Sec.  1.3 of the Commission's 
rules, but rather to provide guidance in advance to potential 
applicants of the circumstances that would be persuasive and compelling 
grounds for grant of a waiver under that waiver standard to assist 
potential applicants in effectively formulating their waiver petitions. 
While we decline to ``discard'' this guidance, we modify it in several 
respects, and clarify it in others, based on specific concerns raised 
by petitioners.
    20. In the USF/ICC Transformation Order, the Commission stated that 
``[w]e envision granting relief only in those circumstances in which 
the petitioner can demonstrate that the reduction in existing high-cost 
support would put consumers at risk of losing voice services, with no 
alternative terrestrial providers available to provide voice telephony 
service using the same or other technologies that provide the 
functionalities required for supported voice service.'' This language 
in the Order reflected the Commission's longstanding historical 
commitment to ensuring ubiquitous voice availability and a recognition 
that the supported service today remains voice telephony. At the same 
time, we recognize that for the first time, the Commission has now 
established as explicit goals the preservation and advancement of voice 
service and ensuring universal availability of voice and broadband, 
both fixed and mobile, at reasonably comparable rates to reasonably 
comparable services available in urban areas, while minimizing 
universal service contribution burdens on consumers and businesses. 
Accordingly, we now clarify that the Commission will consider the 
impact of reforms not only on voice service alone, but also on 
continued operation of a broadband-capable network and the effect on 
consumer rates.
    21. Specifically, we envision granting relief to incumbent 
telephone companies only in those circumstances in which the petitioner 
can demonstrate that consumers served by such carriers face a 
significant risk of losing access to a broadband-capable network that 
provides both voice as well as broadband today, at reasonably 
comparable rates, in areas where there are no alternative providers of 
voice or broadband. To the extent carriers have already made the 
investment in such broadband-capable networks, reductions in support 
that would threaten their ability to continue to maintain and operate 
those existing networks offering service at reasonably comparable rates 
in areas where consumers have no alternatives would be a public policy 
concern. A waiver petition claiming that support reductions are 
substantial, by itself, would be insufficient. The petition must also 
establish that consumers will suffer loss of services with no 
alternative or that consumers in the relevant study area would not be 
paying reasonably comparable rates to urban consumers. We emphasize 
that support reductions do not necessarily translate into equivalent 
rate increases for consumers. Rather, we expect that carriers would 
look for ways to reduce costs and increase revenues--in addition to 
ensuring that consumer rates are reasonably comparable--in considering 
whether to pursue a petition for waiver.
    22. In determining whether to provide full or partial relief to a 
waiver applicant, we also are mindful of the Commission's longstanding 
commitment to providing support that is ``sufficient but not 
excessive.'' An important component of the Commission's review of 
whether a carrier needs additional support is having an accurate 
picture of the financial operations of the waiver applicant. 
Information such as financial statements for the past three fiscal 
years and any outstanding loans should be readily available to any 
carrier. Such information is the sort of information that any company 
would maintain to manage its business, and would be part of any 
financial showing that a company would submit as part of any loan 
application process. Incumbent carriers are already required by 
Commission rules to comply with the Uniform System of Accounts 
specified in part 32, the affiliate transaction rules specified in 
Sec.  32.27, and the cost allocation rules specified in Sec. Sec.  
64.901 through 64.902, so providing information regarding compliance 
with those rules should not be burdensome for any such carrier. 
Information regarding end user rates and the services provided to 
subscribers likewise should be readily available to any service 
provider. In keeping with

[[Page 3841]]

the focus on providing support that is sufficient but not excessive, 
Commission staff have asked for additional information from waiver 
applicants, such as annual compensation provided to the ten most highly 
paid employees, and the size and nature of payments made to affiliated 
companies. Again, this information should be readily available, and 
potential waiver applicants can expedite review of their requests by 
including such information when initially filing their waiver 
petitions. Such information can be relevant to a determination of 
whether there are opportunities for reductions in operating expenses 
that would lessen the burden on the Fund, and also to assessing whether 
carriers are complying with our affiliate transaction rules.
    23. We decline the request that carriers should receive support 
under the Commission's previous rules until their waiver petitions are 
resolved. To the extent immediate or interim relief is necessary while 
a waiver petition is evaluated, such relief can be provided on a case-
by-case basis, and such relief has been provided in one instance to 
date. But we do not typically permit carriers to excuse themselves from 
complying with our rules, even on a temporary basis, simply by filing a 
request for waiver, and we are not persuaded that such a blanket policy 
is warranted in this context when case-by-case relief may be available.
    24. Filing Fee and Confidentiality. We also address the Rural 
Associations' specific suggestions regarding the Commission's fee for 
filing a waiver petition and the confidential treatment of the waiver 
process. As an initial matter, we issue a blanket waiver of the filing 
fee for carriers seeking a waiver of the high-cost loop support (HCLS) 
benchmark rule contained in Sec.  36.621(a)(5) of our rules. We observe 
that Sec.  1.1105 does not currently require a filing fee in connection 
with petitions for waiver of rules contained in part 54 of the 
Commission's rules. By codifying the benchmark rule in part 36 rather 
than part 54, the Commission inadvertently subjected applicants seeking 
a waiver of the benchmark rule to the part 36 filing fee, even though 
parties seeking a waiver of other universal service reforms, such as 
the $250 per line cap, are not subject to any filing fee. We conclude 
that this disparity in treatment does not serve the public interest, 
and we address the situation by issuing a blanket waiver of the fee for 
parties seeking a waiver of Sec.  36.621(a)(5). We also clarify, as the 
Rural Associations request, that carriers filing waiver requests may 
seek confidential treatment pursuant to the Commission's existing 
rules.
    25. Submission of Geographic Information. Based on our review of 
the waiver applications received to date, and consistent with the Rural 
Associations' request, we reconsider the language in the USF/ICC 
Transformation Order regarding submission of information regarding the 
geographic and other characteristics of the areas that contribute to 
its high costs. Paragraph 542 of the Order stated that petitions should 
include, among other things, the following information: ``Density 
characteristics of the study area or other relevant geographic area 
including total square miles, subscribers per square mile, road miles, 
subscribers per road mile, mountains, bodies of water, lack of roads, 
remoteness, challenges and costs associated with transporting fuel, 
lack of scalability per community, satellite and backhaul availability, 
extreme weather conditions, challenging topography, short construction 
season or any other characteristics that contribute to the area's high 
costs.''
    26. On reconsideration, we conclude that this language in paragraph 
542 should be viewed as illustrative examples of factors that could be 
relevant in the waiver analysis, to assist applicants in crafting well 
formulated waiver petitions in support of their requested relief. To 
the extent applicants choose to address such factors in their waiver 
petitions, we presume they would be providing information that is 
readily available, not requiring any additional expenditures or the 
devotion of substantial staff resources to compile.
    27. Submission of Information Regarding Spare or Unused Equipment. 
On reconsideration, we also modify the language in paragraph 542 
requesting information regarding spare or unused equipment. Paragraph 
542 of the Order stated that petitions should include information 
regarding accounting for spare or unused equipment. We observe that 
waiver applicants to date have included a cursory recitation their 
waiver requests that they account for such equipment in accordance with 
the Commission's rules. On reconsideration, we conclude that it is not 
necessary for carriers to reaffirm that they are in compliance with 
existing accounting rules. To the extent there are questions about such 
issues, however, the Bureau still may request such information. At this 
time, we cannot conclude that additional information relating to unused 
or spare equipment would be unnecessary in all instances.
    28. Submission of Audits and Information from State Rate Cases. We 
are not persuaded that waiver applicants should be permitted to file 
USAC audits in lieu of their financial statements. Compliance with the 
Commission's high-cost rules prior to the USF/ICC Transformation Order 
is not likely to be dispositive of whether there is an ongoing need for 
more support than the current rules would allow. As previously 
discussed, financial information is needed to ensure that support is 
sufficient, but not excessive, in granting additional support through 
the waiver process. A USAC audit does not provide such information and, 
therefore, is not an adequate substitute for a carrier's financial 
statements.
    29. In contrast, information developed in intrastate earnings and 
rate cases is more likely to be of assistance when reviewing requests 
for waiver of support reductions, and could serve as a substitute for 
the submission of financial statements in some cases, depending on the 
specifics of the prior rate case or earnings review. We encourage 
carriers that would like to rely on such information, rather than 
financial statements, to bring it to staff's attention when preparing 
their waiver requests. We generally encourage staff to provide, and for 
potential waiver applicants to seek, guidance on the contents of a 
waiver request, and with respect to financial reviews by state 
commissions, we specifically encourage applicants to seek staff's input 
on the substitutability of such information for the company's financial 
statements.
    30. Information About Corporate Operations Expenses. We decline to 
adopt the suggestion that carriers not provide information about their 
corporate operations expenses unless they are seeking a waiver 
specifically related to the corporate operations expense cap. As 
discussed above, a full understanding of a carrier's financial 
circumstances is necessary when considering a waiver seeking additional 
support in order to ensure that support overall is sufficient but not 
excessive. Corporate operations expenses, including expenses such as 
executive salaries, are relevant to the determination of overall 
support levels in the face of a claim that existing rules provide 
inadequate support.
    31. Request to Exempt Costs of Waivers from Calculation of Caps. 
The record lacks sufficient detail for us to evaluate how we would 
exempt costs incurred in preparing a waiver request from the 
calculation of corporate operations expenses that would count toward 
any caps. Accordingly, we

[[Page 3842]]

decline to allow such exemption at this time.
    32. Grounds for Waiver. Finally, we also clarify that we will 
generally not require a thorough financial review of carriers that seek 
a limited waiver of our rules, such as a temporary waiver of a deadline 
for meeting our reporting requirements or a waiver seeking to provide 
broadband that does not meet our upstream requirements (i.e., 768 kbps 
upstream instead of 1 Mbps upstream). In such cases, we would expect a 
waiver application would explain why waiver is warranted under Sec.  
1.3 of the Commission's rules. Likewise, to the extent a carrier seeks 
a waiver of the HCLS benchmark rule based on a showing that there is a 
factual error with respect to one or more input values that results in 
an inaccurate calculation of the cap value, we would not need to 
conduct a full review of that carrier's finances. Rather, we would 
undertake a thorough financial review in those circumstances where the 
waiver applicant is not seeking to correct an error, but is contending 
that absent waiver, support levels would be insufficient for the 
carrier to achieve the purposes of section 254.

IV. Procedural Matters

A. Paperwork Reduction Act

    33. This Fifth Order on Reconsideration contains new information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. It has been or 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.

B. Final Regulatory Flexibility Act Certification

    34. The Regulatory Flexibility Act (``RFA'') requires that agencies 
prepare a regulatory flexibility analysis for notice-and-comment 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' The RFA generally defines ``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 Small Business Administration 
(SBA).
    35. We hereby certify that the rule revisions in this Fifth Order 
on Reconsideration will not have a significant economic impact on a 
substantial number of small entities. This Order modifies certain of 
our reporting requirements. We conclude that these minor revisions, 
though they may possibly have some impact on some carriers, are not 
likely to have a significant economic impact on a substantial number of 
small entities. The Commission will send a copy of this Order, 
including this certification, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the Order (or a summary 
thereof) and certification will be published in the Federal Register.

C. Congressional Review Act

    36. The Commission will send a copy of this Order to Congress and 
the Government Accountability Office pursuant to the Congressional 
Review Act.

V. Ordering Clauses

    37. Accordingly, it is ordered, pursuant to the authority contained 
in sections 1, 2, 4(i), 201-206, 214, 218-220, 251, 252, 254, 256, 
303(r), 332, and 403 of the Communications Act of 1934, as amended, and 
section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 152, 
154(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, 
1302, and Sec. Sec.  1.1 and 1.429 of the Commission's rules, 47 CFR 
1.1, 1.429, that this Fifth Order on Reconsideration is adopted, 
effective February 19, 2013, except for those rules and requirements 
involving Paperwork Reduction Act burdens, which shall become effective 
immediately upon announcement in the Federal Register of OMB approval.
    38. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.331 and 1.429 of the Commission's rules, 47 CFR 
0.331 and 1.429, that the Petition for Partial Reconsideration filed by 
the Blooston Rural Carriers on December 29, 2011 is denied.
    39. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.331 and 1.429 of the Commission's rules, 47 CFR 
0.331 and 1.429, that the Petition for Reconsideration filed by NTCH, 
Inc. on December 29, 2011 is denied in part to the extent described 
herein.
    40. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and sections 0.331 and 1.429 of the Commission's rules, 47 CFR 
0.331 and 47 CFR 1.429, that the Petition for Reconsideration filed by 
General Communications, Inc. on December 23, 2011 is denied in part to 
the extent described herein.
    41. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.331 and 1.429 of the Commission's rules, 47 CFR 
0.331 and 1.429, that the Petition for Clarification or Partial 
Reconsideration filed by Townes Telecommunications, Inc. on December 
29, 2011 is denied.
    42. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.291 and 1.429 of the Commission's rules, 47 CFR 
0.291 and 1.429, the Petition for Reconsideration of National Exchange 
Carrier Association, Inc., Organization for the Promotion and 
Advancement of Small Telecommunications Companies, and Western 
Telecommunications Alliance is granted in part to the extent described 
herein, and is denied in part to the extent described herein.
    43. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.291 and 1.429 of the Commission's rules, 47 CFR 
0.291 and 1.429, the Petition for Reconsideration of Rock Hill 
Telephone Company d/b/a Comporium, Lancaster Telephone Company d/b/a 
Comporium, Fort Mill Telephone Company d/b/a Comporium, PBT Telecom, 
Inc. d/b/a Comporium, and Citizens Telephone Company d/b/a Comporium is 
granted in part to the extent described herein, and is denied in part 
to the extent described herein.
    44. It is further ordered that, pursuant to the authority contained 
in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 
405, and Sec. Sec.  0.291 and 1.429 of the Commission's rules, 47 CFR 
0.291 and 1.429, the Petition for Reconsideration of United States 
Telecom Association is granted in part to the extent described herein, 
and is denied in part to the extent described herein.
    45. It is further ordered that the Commission shall send a copy of 
this Order to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    46. It is further ordered, that the Commission's Consumer and

[[Page 3843]]

Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order, including the Final Regulatory Flexibility 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects in 47 CFR Part 54

    Communications common carriers, reporting and recordkeeping 
requirements, telecommunications, telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rule

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

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority:  Secs. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155.

Subpart D--Universal Service Support for High Cost Areas

0
2. Amend Sec.  54.313 by revising paragraph (f)(2) to read as follows:


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

* * * * *
    (f) * * *
    (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.
    (i) Recipients of loans from the Rural Utility Service (RUS) shall 
provide copies of their RUS Operating Report for Telecommunications 
Borrowers as filed with the RUS. Such carriers must make their 
underlying audit and related workpapers and financial information 
available upon request by the Commission, USAC, or the relevant state 
commission, relevant authority in a U.S. Territory, or Tribal 
government, as appropriate.
    (ii) All privately held rate-of-return carriers that are not 
recipients of loans from the RUS and whose financial statements are 
audited in the ordinary course of business must provide either: A copy 
of their audited financial statement; or a financial report in a format 
comparable to RUS Operating Report for Telecommunications Borrowers, 
accompanied by a copy of a management letter issued by the independent 
certified public accountant that performed the company's financial 
audit. A carrier choosing the latter option must make its audit and 
related workpapers and financial information available upon request by 
the Commission, USAC, or the relevant state commission, relevant 
authority in a U.S. Territory, or Tribal government, as appropriate.
    (iii) All other privately held rate-of-return carriers must provide 
either: A copy of their financial statement which has been subject to 
review by an independent certified public accountant; or a financial 
report in a format comparable to RUS Operating Report for 
Telecommunications Borrowers, with the underlying information subjected 
to a review by an independent certified public accountant and 
accompanied by an officer certification that: The carrier was not 
audited in the ordinary course of business for the preceding fiscal 
year; and that the reported data are accurate. If the carrier elects 
the second option, it must make the review and related workpapers and 
financial information available upon request by the Commission, USAC, 
or the relevant state commission, relevant authority in a U.S. 
Territory, or Tribal government, as appropriate.
* * * * *
[FR Doc. 2013-00556 Filed 1-16-13; 8:45 am]
BILLING CODE 6712-01-P