[Federal Register Volume 78, Number 109 (Thursday, June 6, 2013)]
[Proposed Rules]
[Pages 34016-34020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13361]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90; DA 13-1112]


Wireline Competition Bureau Seeks Comment on Options To Promote 
Rural Broadband in Rate-Of-Return Areas

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Wireline Competition Bureau seeks 
comment on options to promote the availability of modern voice and 
broadband-capable networks in rural areas served by rate-of-return 
carriers. In particular, the Bureau seeks comment on two possible 
frameworks that could provide rate-of-return carriers with additional 
incentives to efficiently advance broadband deployment.

DATES: Comments are due on or before June 17, 2013 and reply comments 
are due on or before July 15, 2013.

ADDRESSES: Interested parties may file comments on or before June 17, 
2013 and reply comments on or before July 15, 2013. All pleadings are 
to reference WC Docket No. 10-90. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS) or by filing paper 
copies, by any of the following methods:
     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 one copy of each filing.
     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: Ted Burmeister, Wireline Competition 
Bureau at (202) 418-7389 or TTY (202) 418-0484.

[[Page 34017]]


SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's Public Notice (Notice) in WC Docket No. 10-90; DA 
13-1112, released May 16, 2013. The complete text of this document is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street SW., 
Room CY-A257, Washington DC 20554. The document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via Internet at http://www.bcpiweb.com.
    1. By this Public Notice, the Wireline Competition Bureau (Bureau) 
seeks comment on options to promote the availability of modern voice 
and broadband-capable networks in rural areas served by rate-of-return 
carriers. In particular, we seek comment on two possible frameworks 
that could provide rate-of-return carriers with additional incentives 
to efficiently advance broadband deployment. First, rate-of-return 
carriers have urged the Commission to take steps to make universal 
service fund support available to support broadband lines even where 
their consumers choose not to purchase voice telephony service. To that 
end, we seek additional targeted comment on several aspects of a 
proposal made by the rural carrier associations regarding changes to 
the existing framework set forth in the Commission's rules to make 
support available for network infrastructure that provides standalone 
broadband service. Second, we seek comment on facilitating rate-of-
return carriers' voluntary participation in Connect America Phase II. 
Connect America Phase II will feature clearly defined support amounts 
for a defined period of time along with specific service deployment 
obligations. Certain rate-of-return carriers may find advantages to 
participating in Connect America Phase II and seek to opt in to this 
support mechanism. Recognizing that rate of return carriers already 
have the option of voluntary conversion to price cap regulation, we 
seek comment what steps we could take to facilitate such conversions 
and other issues related to the provision of Connect America Fund Phase 
II support to rate-of-return carriers.

A. Rural Association Proposal for Standalone Broadband Lines

    2. The rural carrier associations have advocated for a ``Connect 
America Fund that supports broadband-capable networks that enable 
advanced communications and enhanced consumer choice in all rural 
areas.'' Of course, as the rural carrier associations have acknowledged 
in other contexts, existing universal service support for rate-of-
return carriers supports such networks, and indeed, under the USF/ICC 
Transformation Order, 76 FR 73830, November 29, 2011, carriers are 
required to deploy broadband-capable infrastructure as a condition of 
receiving such support. The rural carrier associations have noted that 
``[t]he Order adopts a number of broadband-related public interest 
obligations for ETCs, including RLECs[,] . . . [including a] 
requirement[] that RLECs offer broadband services meeting minimum speed 
and latency requirements upon `reasonable request'.'' The rural carrier 
associations suggest that the Commission should provide high-cost 
support for standalone broadband loops provided by rate-of-return 
carriers to further advance this goal.
    3. Today, a rate-of-return carrier may provide broadband 
transmission in one of two ways: over a loop that provides both voice 
and broadband, or over a standalone broadband transmission loop. 
However, universal service support--in the form of High-Cost Loop 
Support (``HCLS'') and Interstate Common Line Support (``ICLS'')--is 
available for a broadband-capable loop provided by a rate-of-return 
carrier only if the end user customer purchases voice service. When the 
loop is used to deliver both voice and broadband transmission services 
on a Title II basis, the loop is considered a ``joint use'' loop. Under 
current Commission rules, the costs of that loop are considered 
regulated costs, with most of those costs allocated to the intrastate 
jurisdiction. HCLS and ICLS provide support for interstate and 
intrastate loop costs. The costs of a loop are only recovered once 
under the Commission's cost allocation and pricing procedures. Loop 
costs associated with joint-use facilities are allocated between the 
state and federal jurisdictions on a 75/25 percent basis. These joint-
use loops may receive HCLS and ICLS. The costs of these joint-use 
facilities, therefore, are recovered through a combination of 
intrastate end user charges for voice service, interstate charges (such 
as the subscriber line charge) and universal service support. 
Typically, the only costs recovered through the special access tariff 
for the broadband transmission service are the incremental costs 
associated with making the loop broadband-capable. In contrast, if the 
loop only is used to deliver Title II broadband transmission service, 
and not voice, all of the costs associated with that loop are 
jurisdictionally interstate and are allocated to special access, and 
the underlying broadband transmission is tariffed as special access. 
Broadly speaking, 100 percent of line costs associated with special 
access services are directly assigned to either the interstate or 
intrastate jurisdiction, dependent on the jurisdictional usage of the 
line. Special access costs (loop and other incremental costs) are 
recovered in the appropriate jurisdiction through tariffed rates for 
the involved services without the benefit of any universal service 
support. See generally 47 CFR parts 36 and 69. There is no universal 
service support mechanism for costs associated with special access 
provided by rate-of-return carriers. The rural carrier associations 
contend this lack of support for standalone broadband transmission 
service in high cost areas contributes to a significant variance in the 
rates consumers pay for broadband bundled with voice service compared 
to standalone broadband.
    4. The Commission originally sought comment on this proposal in the 
USF/ICC Transformation Order FNPRM, 76 FR 73830, November 29, 2011 and 
76 FR 78384, December 16, 2011, where it inquired about the legal and 
policy implications to providing USF support for lines where the end 
user customer does not subscribe to voice service from the eligible 
telecommunications carrier (ETC), including the monetary impact on the 
Connect America Fund if the Commission were to provide support for 
standalone broadband provided by rate-of-return carriers. The 
Commission also inquired about what rule changes would help provide 
appropriate incentives for investment in broadband-capable networks, 
while limiting unrestrained growth in support provided to rate-of-
return carriers.
    5. Since that time, the rural associations have made additional 
filings regarding this matter, arguing, among other things, that 
providing support for standalone broadband would promote broadband 
adoption and competition in voice services. First, the rural 
associations suggest that the Commission should ``consider technical 
fixes to its rules that would permit loop costs to remain in the Common 
Line pool (and thus eligible for USF cost recovery) even where a 
consumer declines to take an offer of voice telephony and instead 
elects only to take broadband service from an RLEC.'' The rural 
associations argue that ``[s]uch simple part 69 rule changes are needed 
to fulfill the express and plainly stated intent of the Commission's 
reform order,

[[Page 34018]]

and . . . allow consumers in rural areas to have the same choices as 
those in urban areas with respect to their communications services.'' 
What specific part 69 rule changes would be required? Are any other 
rule changes necessary? What is the near-term impact to the HCLS and 
ICLS mechanisms? Would making these modifications to the Commission's 
rules change the HCLS allocation among carriers? Would such changes 
increase ICLS support?
    6. We also invite interested parties to comment on several issues 
related to establishing separate loop categories to account for joint-
use lines and standalone broadband lines. First, we invite parties to 
comment on whether there are definitional issues relating to Part 69 
implementation that would need to be addressed to define rate elements 
necessary to offer standalone broadband service. Parties should address 
whether a loop element and a port element structure similar to the 
structure currently used for joint-use loops should be used and, if so, 
how different speeds should be handled within the rate structure. For 
example, can speed differences be addressed through a circuit 
equipment/port charge while having a line rate that is uniform for all 
speeds? Parties should also address whether the Commission should 
create classes of standalone broadband, with the costs of certain 
standalone broadband transmission services remaining in the Common Line 
pool, while the costs associated with other broadband transmission 
services would not. If the Commission were to do so, how should it 
define the characteristics of the different classes? For example, 
should the Commission maintain a class of special access broadband 
transmission? As noted above, standalone broadband service is currently 
in the special access category. And, carriers have had significant 
flexibility in establishing special access rates. The pricing 
principles for the new loop Common Line service must be clear to avoid 
potential misuse, such as supporting special access services. We invite 
parties to comment on the need for cost allocation procedures to be 
used to establish the price of a standalone broadband loop offering. 
Commenters should address procedures for allocating direct, indirect, 
and overhead costs. Commenters should also discuss any revisions to the 
Commission's rules required to implement any cost allocation 
procedures.
    7. Second, the rural associations suggest that ``[w]hile some of 
these issues require further analysis'' a standalone broadband funding 
mechanism is ultimately necessary to ``ensure that broadband is 
available at affordable, reasonably comparable rates for consumers in 
high-cost areas.'' We seek comment on how such a mechanism would impact 
providers' investment plans and service offerings, as well as consumer 
choices and rates. We invite commenters to provide data on the specific 
percentages of residential end users that currently purchase retail 
broadband Internet access without landline service in rural areas 
served by rate-of-return carriers and in rural areas served by price 
cap carriers. We also invite comment on how a standalone broadband 
funding mechanism could be structured. If implemented, how would a 
transition to such a mechanism work, and would there be an impact on 
the total amount of support received by rate-of-return carriers? How 
would such a mechanism be implemented within the overall high-cost 
Connect America Fund framework, which established a budget of ``up to 
$2 billion'' annually for rate-of-return territories, including 
intercarrier compensation recovery? Would it make sense to limit 
support provided through such a mechanism, or to adopt such a mechanism 
in conjunction with overall limits on support?

B. Voluntary Election of Connect America Phase II Model-Based Support

    8. Facilitating a path for carriers to opt in to Connect America 
Phase II, including through the existing process to convert to price 
cap regulation, is consistent with the Commission's longstanding goal 
of providing support to all carriers through incentive-based 
mechanisms. We seek comment on whether creating a more explicit 
voluntary pathway to model-based support would be an additional way to 
promote efficient new broadband deployment in rural rate-of-return 
areas.
    9. In the USF/ICC Transformation Order, the Commission adopted the 
framework for the Connect America Fund Phase II, which will provide 
support in areas served by price cap carriers. While price cap 
conversion is generally available to carriers, the Commission did not 
specifically address the circumstance in which a rate-of-return carrier 
that is not affiliated with a price cap holding company would seek to 
participate in Connect America Phase II. The Commission decided that 
Phase II support should be based on the forward-looking costs of 
deploying voice and broadband-capable networks in high-cost areas, with 
support calculated at a granular area. The Commission delegated to the 
Bureau the authority to develop a model and establish support 
thresholds. Based on the support amounts derived from the model, the 
Commission will offer each price cap carrier, and any rate-of-return 
LEC affiliates of a price cap carrier, annual support for the five-year 
period in exchange for a commitment to offer a specified level of 
service within that service territory. For all territories for which 
price cap LECs decline to make that commitment, the Commission will 
award ongoing support through a competitive bidding mechanism. At the 
end of the five-year Connect America Fund Phase II period, the 
Commission expects to distribute all Connect America Fund support in 
price cap areas pursuant to a market-based mechanism.
    10. In adopting the framework for the Connect America Fund Phase 
II, the Commission did not explicitly address how this model might be 
applied to determine support amounts in non-price cap territories. We 
now seek to further develop the record on how Connect America Fund 
Phase II could be provided in areas that currently are served by rate-
of-return carriers to provide additional incentives for deployment of 
broadband-capable networks.
    11. We invite parties to comment on the advantages and 
disadvantages of this pathway, both from the perspective of potential 
recipients of support and for achievement of the Commission's overall 
goals for reform. In particular, parties should address the extent to 
which rate-of-return carriers would find it beneficial to receive Phase 
II support rather than the support provided by the current HCLS and 
ICLS programs. Would individual carriers conclude the potential 
benefits of receiving a steady, model-derived support amount for a 
multi-year period, combined with an incentive-based structure that 
allows carriers to capture the benefits of efficiency, are sufficient 
to pursue this option? We seek comment on how facilitating a transition 
for rate-of-return carriers to model-based support would impact 
providers' investment plans and service offerings, as well as consumer 
choices and rates.
    12. Timing. Nothing in the USF/ICC Transformation Order precludes 
current rate-of-return carriers from electing to convert to price cap 
regulation in order to receive Connect America Phase II model-based 
support. Given that significant progress has been made on Phase II 
implementation, however, it may be unlikely that a rate-of-return 
carrier could complete the process of converting to price cap 
regulation before the Bureau adopts a cost model and specifies the 
amount of model-based support that will be offered to price cap

[[Page 34019]]

carriers. We therefore focus on how a rate-of-return carrier might 
convert to price cap regulation and receive model-based support after 
Phase II is offered to the price cap carriers. Should there be a 
deadline for rate-of-return carriers to file for such a voluntary 
conversion to price caps in order to receive model-based support?
    13. Amount of Support. We seek comment on the amount of support to 
be offered to future converts to price cap regulation under Connect 
America Fund Phase II. Because the funding threshold and ``extremely 
high-cost'' threshold will have been determined and model cost 
estimates for the converting carriers will be available at the time of 
the conversion, one option would be to provide the converting carrier 
with the level of support calculated by the model. We seek comment on 
this method for determining support for price cap converts.
    14. Budgetary Impact. We seek comment on the monetary impact on the 
Connect America Fund of providing a voluntary path for current rate-of-
return carriers to opt-in to model-based support, and how this might 
impact the Commission's budget for price cap territories versus rate-
of-return territories. To what extent would this option only be elected 
by carriers for whom model-based support is equal to or greater than 
their current support? How likely is it that some rate-of-return 
carriers may choose this voluntary path even if they would receive less 
support in the near term, for the advantage of having a steady 
universal service revenue stream for a defined period of years?
    15. We also seek comment on the effect of a price cap conversion on 
high-cost loop support. We note that, in the USF/ICC Transformation 
Order, the Commission rebased the cap on HCLS to reflect that price cap 
carriers and their rate-of-return affiliates would be receiving support 
pursuant to Connect America and would no longer be eligible for HCLS. 
Consistent with this precedent, the Bureau proposes that HCLS should be 
similarly rebased if a rate-of-return carrier converts to price cap 
regulation in the future. The Bureau seeks comment on this proposal.
    16. Commitment to Accept Model-Based Support. Existing price cap 
carriers will be provided an opportunity to make a state-level 
commitment for model-based support after the Bureau releases a public 
notice indicating the census blocks eligible for funding and how much 
Connect America Phase II support will be offered to them. We seek 
comment regarding whether new price cap regulated carriers should 
similarly be provided an opportunity to accept or decline model-based 
support, or if the act of becoming a price cap carrier effectively 
should be deemed an acceptance of support for the relevant census 
blocks. Would there be any instance in which a price cap conversion 
could be granted, and the converting carrier could be permitted to 
decline the support, which then could be assigned through competitive 
bidding? Should rate-of-return carriers be permitted to decline model-
determined support if that occurs before the time to finalize the 
census blocks that will be subject to bidding in the competitive 
process following the offer of state-level support to price cap 
carriers? Should carriers in this situation be required to elect 
support on a state-wide basis, if they have multiple study areas within 
a state, or should they be permitted to elect support on a study area 
basis? Are there any other issues relating to the process of accepting 
model-based support that would need to be resolved for new price cap 
converts?
    17. Term for Connect America Phase II Support. The USF/ICC 
Transformation Order specifies that Connect America Phase II will last 
five years. We seek comment regarding whether carriers converting to 
price cap regulation after Connect America Phase II commences should 
receive Connect America Phase II support on the same time table as 
other price cap carriers. One option would be that the Commission would 
determine successor mechanisms for all carriers receiving Connect 
America Phase II support, regardless of when the carrier began 
receiving support. For example, if a rate-of-return carrier converted 
to price cap regulation at the end of year 3 of the Connect America 
Phase II, the carrier would only participate in Connect America Phase 
II for years 4 and 5. Transitioning from Connect America Phase II to 
any subsequent mechanisms for all areas at the same time will ensure 
that the market-based mechanisms anticipated by the Commission will 
have the widest applicable area, which in turn could maximize 
efficiencies. We seek comment on this proposal. Alternatively, should 
carriers that voluntarily elect to receive model-based support receive 
such support for a term of five years, commencing with the date they 
first receive such support? Or, should current rate-of-return carriers 
that voluntarily elect to receive model-based support be provided 
support for a period longer than five years, such as a period of time 
to coincide with the intercarrier compensation transition for rate-of-
return carriers. We seek comment on these alternatives, as well as any 
other proposals for Connect America Phase II terms that parties may put 
forth in the record.
    18. Service Obligations. Carriers receiving support pursuant to 
Connect America Fund Phase II will be subject to specific service 
obligations and reporting requirements to demonstrate compliance with 
those obligations. We seek comment on whether or how those obligations 
should be modified for carriers that convert to price cap regulation 
after the implementation of model-based support for current price cap 
carriers and their rate-of-return affiliates. One option would be for 
all service obligations to remain the same for price cap converts as 
for current price cap carriers, except that the number of locations 
served with broadband could be adjusted on a sliding scale to reflect 
the shorter time for buildout. We seek comment on this proposal, and 
also invite commenters to suggest alternatives that would be consistent 
with the Commission's goals in establishing service obligations for 
Connect America Fund Phase II.
    19. Alternatives to Price Cap Conversion. We also seek comment on 
an alternative to providing Phase II model-based support only to 
carriers who convert to price cap regulation, as discussed above. We 
ask parties to comment on whether the Commission should allow rate-of-
return carriers to elect to receive model-based support in lieu of HCLS 
and ICLS, but otherwise remain regulated under rate-of-return 
regulation. Parties should address the extent to which this alternative 
would encourage or allow carriers to shift costs from the common line 
category to the special access category and the ability of, and the 
measures needed for, the Commission to monitor such activities. Parties 
should identify any rules that would need to be revised to implement 
this alternative, including any rule changes necessary to ensure that a 
carrier does not receive both Phase II support and support under the 
existing mechanisms for rate-of-return companies (i.e., HCLS and ICLS). 
We also ask parties to address the matters discussed in the preceding 
paragraphs as they relate to this alternative approach.

C. Procedural Matters

1. Initial Regulatory Flexibility Act Analysis
    20. The USF/ICC Transformation Order and FNPRM included an Initial 
Regulatory Flexibility Analysis (IRFA) pursuant to 5 U.S.C. 603, 
exploring the

[[Page 34020]]

potential impact on small entities of the Commission's proposal. We 
invite parties to file comments on the IRFA in light of this additional 
notice.
2. Initial Paperwork Reduction Act of 1995 Analysis
    21. This document seeks comment on a potential new or revised 
information collection requirement. If the Commission adopts any new or 
revised information collection requirement, the Commission will publish 
a separate notice in the Federal Register inviting the public to 
comment on the requirement, as required by the Paperwork Reduction Act 
of 1995, Public Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant 
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how 
it might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''
3. Filing Requirements
    22. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy 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.
    (1) All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    (2) 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.
    (3) U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    23. 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).
    24. This matter shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. Persons 
making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within 
two business days after the presentation (unless a different deadline 
applicable to the Sunshine period applies). Persons making oral ex 
parte presentations are reminded that memoranda summarizing the 
presentation must (1) list all persons attending or otherwise 
participating in the meeting at which the ex parte presentation was 
made, and (2) summarize all data presented and arguments made during 
the presentation. If the presentation consisted in whole or in part of 
the presentation of data or arguments already reflected in the 
presenter's written comments, memoranda or other filings in the 
proceeding, the presenter may provide citations to such data or 
arguments in his or her prior comments, memoranda, or other filings 
(specifying the relevant page and/or paragraph numbers where such data 
or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with Sec.  1.1206(b). In proceedings governed by 
Sec.  1.49(f) or for which the Commission has made available a method 
of electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

Federal Communications Commission.
Kimberly A. Scardino,
Division Chief, Telecommunications Access Policy Division, Wireline 
Competition Bureau.
[FR Doc. 2013-13361 Filed 6-5-13; 8:45 am]
BILLING CODE 6712-01-P