[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Rules and Regulations]
[Pages 38227-38234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15297]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 10-90; FCC 13-73]


Connect America Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) provides for a second round of Phase I funding to occur in 
2013 and revises the rules for Phase I going forward to further 
leverage private investment in rural America and accelerate the 
availability of broadband to consumers who lack access.

DATES: Effective July 26, 2013, except for Sec. Sec.  54.312(c)(4) 
through (c)(6), 54.312(c)(8), and 54.313(b), which contain new or 
modified information collection requirements that will not be effective 
until approved by the Office of Management and Budget. The Federal 
Communications Commission will publish a document in the Federal 
Register announcing the effective date for those sections.

[[Page 38228]]


FOR FURTHER INFORMATION CONTACT: Ryan Yates, Wireline Competition 
Bureau, (202) 418-0886 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in WC Docket No. 10-90; FCC 13-73, adopted on May 21, 2013 
and released on May 22, 2013. The full text of this document is 
available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street SW., Washington, DC 
20554. Or at the following Internet address: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-13-73A1.pdf

I. Introduction

    1. On November 18, 2011, the Commission released the USF/ICC 
Transformation Order, 76 FR 73830, November 29, 2011, which 
comprehensively reformed and modernized the high-cost universal service 
and intercarrier compensation systems. Recognizing, among other facts, 
that over 80 percent of the more than 18 million Americans who were 
unserved by broadband at that time lived in price cap territories, the 
Commission provided for two phases of funding to make broadband-capable 
networks available to as many unserved locations as possible in those 
areas. In Connect America Phase I, the Commission froze existing high-
cost support for price cap carriers and provided up to $300 million of 
additional, incremental support in 2012 in order to advance deployment 
of broadband-capable infrastructure pending implementation of Phase II 
subject to strict accountability and efficiency measures. Approximately 
$115 million was accepted, which will deliver new broadband service to 
nearly 400,000 unserved Americans.
    2. We now provide for a second round of Connect America Phase I 
incremental funding in 2013 to further leverage private investment in 
rural America and accelerate the availability of broadband to consumers 
who lack access. We allocate $300 million for this second round. Price 
cap carriers will be able to accept support to extend broadband-capable 
networks under the rules for the first round of Phase I. In addition, 
they will have an opportunity to deploy into newly eligible areas that 
are unserved by broadband, so long as they comply with additional 
requirements discussed below. We also adopt a process to challenge the 
eligibility of particular census blocks, establish two different per-
location support amounts based on the existing level of Internet access 
($550 for homes with low-speed Internet access and $775, as in the 
first round, for homes with only dial-up access), and make certain 
other rule changes to encourage participation and ensure accountability 
and oversight. Especially in light of several major carriers' 
commitments to match new Connect America funding with an equal new 
investment of private capital, the additional funding we make available 
has the potential to expand broadband access to hundreds of thousands 
of additional, currently unserved Americans. We expect this to be the 
last round of Phase I funding, given the significant progress to date 
on Phase II implementation.

II. Discussion

    3. Overview. In this Order, the Commission provides for a second 
round of Phase I funding to occur in 2013 and revises the rules for 
Phase I going forward. We allocate a maximum of $300 million for this 
second round of Phase I incremental support. Price cap carriers will be 
allocated funds through the same system used in the first round of 
Phase I. However, carriers will have the option to accept above their 
allocated support, so as to have an opportunity to receive additional 
funding if other carriers decline the support. Additionally, Phase I 
eligibility is expanded to any location currently unserved by Internet 
service with speeds of 3 Mbps downstream and 768 kbps upstream (3 Mbps/
768 kbps) or higher, though a lower dollar amount of support is 
provided for locations that already have some level of Internet access. 
We adopt a process for challenges to the eligibility of specific areas 
where price cap carriers propose to extend broadband-capable 
infrastructure. We require information regarding Phase I elections to 
be public and for carriers to provide geocoded location information 
when making certifications regarding their buildout to facilitate the 
Commission's oversight.
    4. Second Round of Connect America Phase I. While the Bureau has 
made significant progress in implementing Phase II of Connect America, 
we conclude that a second round of Phase I is an appropriate way to 
promote the rapid and efficient expansion of broadband-capable 
infrastructure to serve consumers lacking broadband that meets the 
Commission's definition. We therefore instruct the Bureau to provide a 
new round of Connect America Phase I incremental support for 2013.
    5. The budget for the new round of Phase I is set at $300 million. 
The Commission previously set the budget for an additional round of 
Phase I support in 2013 at $300 million and provided the Bureau 
discretion to pro rate that amount if Phase II was implemented during 
2013. We now conclude that $300 million would be an appropriate amount 
for a second round of Phase I incremental support to be provided in 
2013, given the remaining funding from 2012 and the progress of Phase 
II implementation. A $300 million budget should provide a reasonable 
amount to accommodate potential demand for funding that leverages 
private investment to accelerate deployment of broadband-capable 
infrastructure to consumers who can quickly be served in the near-term. 
As with the first round of Phase I, it is not our goal that all $300 
million will be accepted. Rather, we seek to use these funds now to 
spur rapid broadband deployment to ``lower-cost areas where there is no 
private sector business case for deployment of broadband.'' Any Phase I 
support that remain unclaimed at the end of the second round of support 
will be added to the budget for Phase II, pro-rated in equal annual 
amounts over the Phase II time period. This will have the effect of 
increasing the yearly budget for Phase II by an amount equal to one-
fifth of the unclaimed funds.
    6. Price cap carriers will be allocated Phase I incremental support 
using the same allocations as in the first round of Phase I. Carriers 
will have 75 days from the release of this Order to make their 
elections.
    7. As with the first round of Phase I, each carrier may elect to 
receive all, none, or a portion of its allocated Phase I incremental 
support. However, in contrast to Phase I, a carrier may also elect to 
receive an amount above its allocated incremental support, up to the 
total budget of $300 million for this second round of Phase I. To the 
extent other carriers decline to accept Phase I incremental support, 
any remaining funds will be redistributed to carriers that are willing 
to commit to additional deployment if they receive funding above their 
initial allocations. If the total demand of all carriers exceeds $300 
million, we authorize up to an additional $185 million in funding. 
Under this approach, each carrier is assured of its allotted amount to 
expand broadband-capable infrastructure to unserved consumers, while at 
the same time providing additional funds to those carriers willing and 
able to expand to more Phase I eligible locations.
    8. We delegate authority to the Bureau to set the specific 
deadlines, including the deadlines for any certifications, for a second 
round of Phase I support and to take other steps to implement a

[[Page 38229]]

second round, subject to the requirement that the amount of support 
offered does not exceed the total budget of $300 million.
    9. With the exception of the rules we explicitly change in this 
Order, all the rules and requirements from the first round of Phase I 
apply mutatis mutandis to the second round of Phase I.
    10. Expanding Eligible Areas. To meet its Phase I service 
obligations, a carrier must deploy to locations unserved by broadband. 
Under the USF/ICC Transformation Order, however, only a subset of 
unserved locations was originally eligible for Phase I for support: 
specifically, only those locations that lacked Internet access service 
with speeds of at least 768 kbps/200 kbps (i.e. only dial-up Internet 
access). In the Phase I FNPRM, 77 FR 76435, December 28, 2012, the 
Commission sought comment on whether to expand eligibility to a larger 
pool of locations unserved by broadband meeting the Commission's 4 
Mbps/1 Mbps standard.
    11. In addition to areas lacking 768 kbps/200 kbps Internet access, 
we now expand eligibility for Phase I support to any location that 
lacks 3 Mbps/768 kbps Internet access. We do so in recognition that 
carriers evaluate the economics of extending fiber to an area on a 
project-by-project basis, with each project potentially containing some 
customers lacking 768 kbps/200 kbps, some lacking 1.5 Mbps/768 kbps, 
and others lacking 3 Mbps/768 kbps. By providing some support for those 
locations that lack 1.5 Mbps/768 kbps or 3 Mbps/768 kbps, carriers 
should find it more economical to extend fiber closer to those 
locations that only have dial-up Internet access. Thus, expanding 
eligibility to include locations with minimal non-dial-up Internet 
access, but without broadband, should also improve the economics of 
extending service to those customers who lack even 768 kbps/200 kbps 
Internet access. Moreover, upgrading the most distant locations to 
receive service meeting our 4 Mbps/1 Mbps standard should have the 
added benefit of providing many consumers currently lacking broadband 
with access to speeds in excess of our 4 Mbps/1 Mbps standard.
    12. At the same time, we remain committed to prioritizing 
broadband-capable infrastructure to those areas that completely lack 
even 768 kbps/200 kbps Internet access. Therefore, we place certain 
strictures on carriers that seek to avail themselves of the opportunity 
to count towards their deployment obligation locations in the expanded 
areas of availability. First, price cap carriers must accept support 
for a second round of Phase I under the rules governing the first 
round, to the extent they are able to do so, before they may avail 
themselves of the expanded eligibility of areas adopted in this Order. 
Specifically, a carrier may not accept funding for locations already 
served by Internet access with speeds of 768 kbps/200 kbps unless the 
carrier has already accepted funding for all projects or routes 
including locations unserved by 768 kbps/200 kbps that can economically 
be built with $775 in Connect America funding for each location 
unserved by 768 kbps/200 kbps plus an equal amount of non-Connect 
America carrier capital expenditure funding. For example, to the extent 
a carrier analyzed its network under the previous Phase I rules to 
identify projects to extend broadband-capable infrastructure to 
locations lacking 768 kbps/200 kbps service, and the identified 
projects would be economic to build with a one-to-one match of Connect 
America and carrier resources, the carrier must prioritize these 
projects when it accepts funding, and may not count toward satisfaction 
of its deployment obligation locations already served by Internet 
access with speeds of 768 kbps/200 kbps, regardless of the fact that 
some locations served by 768 kbps/200 kbps but not 3 Mbps/768 kbps will 
be reached through these identified projects.
    13. Second, if a carrier has accepted funding for all projects or 
routes to locations unserved by 768/200 kbps that can be economically 
reached as noted in the preceding paragraph, it may also accept funding 
for routes to locations unserved by 3 Mbps/768 kbps that would count 
toward satisfaction of its deployment obligation. However, to the 
extent that carrier has multiple projects or routes for which it would 
be economic to extend service with a one-for-one match of Connect 
America funding, it must prioritize funded projects or routes so as to 
maximize the number of newly served locations that are currently 
unserved by Internet access with speeds of 768 kbps/200 kbps that will 
receive service as a result of Phase I funding. To accept new Phase I 
funding and count deployment to locations served by 768 kbps/200 kbps 
but unserved by 3 Mbps/768 kbps, carriers will be required to certify 
that they have met both conditions.
    14. In conjunction with these rule changes, we adopt a different 
metric for the dollar amount of support for those locations lacking 3 
Mbps/768 kbps, compared to the $775 available for locations unserved by 
768 kbps/200 kbps. We conclude that it is appropriate for carriers to 
be permitted to meet buildout obligations by deploying broadband-
capable infrastructure to locations that have service of 768 kbps/200 
kbps but not 3 Mbps/768 kbps for $550 per location. Less fiber should 
be needed to upgrade the locations with some form of Internet access, 
as they are likely to be closer to the central office or remote 
terminal.
    15. In addition to expanding eligible locations to any location 
lacking 3 Mbps/768 kbps Internet access, we also provide limited 
eligibility for locations shown on the current version of the National 
Broadband Map (data as of June 2012) as served by 3 Mbps/768 Internet 
access. A carrier may satisfy its Phase I obligations by deploying to 
certain locations in its own service territory that are shown on the 
National Broadband Map as being served by 3 Mbps/768 kbps where it is 
likely that such service is not in fact delivered, so long as no other 
provider is offering service at speeds of 3 Mbps/768 kbps to those 
locations. The carrier must identify those specific locations and 
certify that the locations are currently served from a copper-fed 
digital subscriber line access multiplexer (DSLAM) and are shown on the 
National Broadband Map as receiving speeds of 3 Mbps/768 kbps or less. 
It is likely that while locations served by a copper-fed DSLAM are 
shown as having an advertised speed of 3 Mbps/768 kbps, actual speeds 
to such locations fall below that. As noted in the record, copper-fed 
DSLAMs have a maximum of 12 Mbps of backhaul available; as consumers 
increasingly use bandwidth-intensive applications, such as streaming 
video, the aggregate demand for bandwidth of all users on a DSLAM 
exceeds the DSLAM's backhaul capacity, resulting in reduced speeds to 
the end user.
    16. We will also limit support for any census block containing a 
project that received funding under the Broadband Initiatives Program 
(BIP) or the Broadband Technology Opportunities Program (BTOP), so long 
as the project meets the speed requirement that would disqualify the 
location from Phase I (i.e., the project will eventually provide speeds 
of 3 Mbps/768 kbps or greater). It would be an inefficient use of 
public funds to provide government support to two different projects 
aimed at serving the same location. If a carrier wishes to satisfy its 
Phase I deployment obligations by building in census blocks with BIP or 
BTOP projects, it must certify that it has engaged in due diligence and 
reviewed publicly available data sources to ensure that the particular 
locations it plans to serve do

[[Page 38230]]

not and will not receive funding under BIP or BTOP for the construction 
of a network meeting our broadband standards. We direct the Bureau to 
work with the Universal Service Administrative Company (USAC), the 
National Telecommunications and Information Administration, and/or the 
Rural Utilities Service, as appropriate, to take steps necessary to 
ensure Phase I support is not provided to areas receiving BIP or BTOP 
support.
    17. Also, in order to use Connect America funds in the most 
efficient manner possible and avoid providing excess support to an 
area, we direct the Bureau to ensure the funding is not provided to the 
same census blocks under both Phase I incremental support and Phase II. 
No carrier should be allowed to satisfy its Phase I obligations in any 
census block where it receives Phase II support. Carriers must be 
prepared to deploy to an equivalent number of locations that are 
unserved in a census block where they are not receiving Phase II 
support. If a carrier accepts Phase II support in a census block where 
it had initially planned to deploy broadband-capable networks to 
locations in order to meet its Phase I obligations, it must identify 
and deploy to the requisite number of locations in another census block 
for which it did not receive Phase II support.
    18. Service Obligations. A carrier electing to receive second round 
Phase I support must deploy to a number of unserved locations. The 
number of locations varies depending on the speed of service currently 
available to that location. As noted above, deploying broadband-capable 
infrastructure to an area lacking Internet access with speeds of 768 
kbps/200 kbps will satisfy a greater portion of a carrier's public 
service obligation than deploying to areas with some level of non-
broadband Internet access (i.e., a location that is served by Internet 
access at 768 kbps/200 kbps but not 4 Mbps/1 Mbps). Deploying to a 
location unserved by 768 kbps/200 kbps will satisfy $775 of a carrier's 
Phase I obligations. Deploying to a location served by 768 kbps/200 
kbps but unserved by 3 Mbps/768 kbps, as specified above, will satisfy 
$550 of a carrier's Phase I obligation.
    19. As in the first round of Phase I, when electing to accept 
support, the carrier must provide a list identifying the census blocks 
and wire centers in which it plans to use support. In addition, the 
carrier must specify how many $775 locations and how many $550 
locations it will deploy to. The carrier must certify that that 
deployment funded through Phase I incremental support will occur in 
areas shown on the most current version of the National Broadband Map 
(data as of June 2012) as unserved by fixed Internet access with a 
minimum speed of 3 Mbps/768 kbps or that the carrier is challenging the 
National Broadband Map's designation, and that, to the best of the 
carrier's knowledge, the locations are, in fact, unserved by fixed 
Internet access with a minimum speed of 3 Mbps/768 kbps. The carrier 
must also certify that its current capital improvement plan did not 
already include plans to complete broadband deployment to that area 
within the next three years, and that Phase I incremental support will 
not be used to satisfy any merger commitment or similar regulatory 
obligations.
    20. As a change from the first round of Phase I, and as described 
above, the carrier must additionally make the following certifications 
regarding locations that it seeks to count to satisfy Phase I 
deployment obligations. The carrier must certify to the best of its 
knowledge that no locations are the subject of funding under BIP or 
BTOP for projects that will provide Internet access with speeds of at 
least 3 Mbps/768 kbps. If a carrier seeks to count locations in its own 
service territory that are shown on the current version of the National 
Broadband Map (data as of June 2012) as served 3 Mbps/768 kbps, the 
carrier must certify that those locations are served through a copper-
fed DSLAM. If the carrier seeks to satisfy any of its obligations by 
deploying to locations served by 768 kbps/200 kbps but not 3 Mbps/768 
kbps Internet service, it must certify that it has committed to all 
projects or routes to locations unserved by 768 kbps/200 kbps that can 
economically be built with $775 in Connect America funds plus an equal 
amount of non-Connect America carrier capital expenditure funding, and 
that it has prioritized funded routes so as to maximize the number of 
newly served locations that are currently unserved by Internet access 
with speeds of 768 kbps/200 kbps.
    21. The buildout obligations mirror those in the first round of 
Phase I. A carrier accepting Phase I support must complete deployment 
of broadband-capable infrastructure to two-thirds of the required 
number of locations within two years and must complete deployment to 
all required locations within three years. As a condition of this 
support, a carrier must offer broadband service to such locations of at 
least 4 Mbps downstream and 1 Mbps upstream, with latency sufficiently 
low to enable the use of real-time communications, including Voice over 
Internet Protocol, and with usage allowances, if any, associated with a 
specified price for a service offering that are reasonably comparable 
to comparable offerings in urban areas.
    22. Phase I funding recipients will report that their networks meet 
the above standards through a process of self-certification. We note 
that the Wireline Competition Bureau, the Wireless Telecommunications 
Bureau, and Office of Engineering & Technology have not specified a 
methodology for testing the performance of a funding recipient's 
broadband-capable network. As Phase I incremental support is designed 
to provide one-time support for deployment to specific locations, we 
now conclude that the potential effort to implement a testing regime 
for Phase I incremental support recipients would exceed any marginal 
benefit that is gained as compared to self-certification. To the extent 
there are any issues with broadband performance, the consumer complaint 
process will help to inform the Commission of such instances.
    23. Confidentiality. The Commission sought comment on whether Phase 
I elections should be afforded confidentiality. We now decide that 
Phase I elections in the second round should not be treated as 
confidential. We strongly encourage Phase I recipients to discuss their 
elections with Commission staff at least 15 days prior to the election 
deadline in order to ensure facial compliance with the filing 
requirements. While these discussions and documents related to them may 
be afforded confidentiality, the finalized elections must be filed 
publicly. Public disclosure is generally preferred, especially when the 
use of public funds is at issue. Furthermore, we find that the 
competitive harm to carriers from this disclosure is likely minimal. 
Indeed, not all carriers requested confidentiality for first round 
Phase I filings.
    24. Challenge Process. In the Phase I FNPRM, the Commission 
proposed conducting a challenge process whereby parties could challenge 
the status of census blocks as shown on the National Broadband Map. We 
conclude that such a challenge process would improve the accuracy and 
efficacy of a second round of Phase I support, allowing support to be 
appropriately targeted to unserved areas consistent with our 
overarching goals for Phase I. Consistent with the guidance contained 
herein, we delegate to the Bureau authority to implement the challenge 
process.
    25. Based on our review of the record, we are persuaded that the 
appropriate way to conduct a Phase I challenge process is to require 
price cap carriers first to identify the specific census

[[Page 38231]]

blocks and wire centers where they propose to deploy broadband-capable 
infrastructure with second round Phase I support. This will reduce the 
burden on parties both making and responding to challenges, and the 
administrative burden of processing such challenges. The price cap 
carriers should identify where they intend to build based on the 
current version of the National Broadband Map (i.e., the map reflecting 
data as of June 2012).
    26. In the first round of Phase I, several carriers initially 
sought to meet their Phase I deployment commitments in areas that were 
already served or failed to identify enough census blocks to account 
for the required number of newly served locations. To ensure that 
carriers properly identify the blocks that will be subject to the 
challenge process, we strongly encourage those electing funding to 
submit their intended elections and planned buildout locations by 
census block to the Bureau on a confidential basis at least 15 days in 
advance of the acceptance deadline. The Bureau will evaluate the 
submissions to determine facial compliance with our requirements and 
will work with Phase I recipients to resolve any possible 
inconsistencies prior to the acceptance deadline. To the extent 
carriers do not avail themselves of this procedure, they run the risk 
of having their respective commitment amounts reduced, to the extent 
they fail to identify enough census blocks to account for the required 
number of new locations; carriers will not be permitted to amend their 
elections once the challenge process has commenced to add additional 
census blocks. Once the Bureau completes its review of the elections 
made on the deadline, it will publicly announce the acceptance amounts 
and census blocks for planned buildout. The challenge process then will 
be conducted, as described below.
    27. When electing to receive second round Phase I support, price 
cap carriers must provide a list of census blocks unserved by 3 Mbps/
768 kbps Internet access in which they intend to deploy to meet their 
buildout obligations. In submitting such a list, price cap carriers may 
argue no providers in the area are offering broadband, challenging the 
National Broadband Map's designation of a census block as being served 
by 3 Mbps/768 kbps Internet access or as being served by 768 kbps/200 
kbps Internet access. When making an election to accept Phase I 
support, a price cap carrier may condition all or a portion of its 
acceptance on its challenge being granted. To eliminate the incentive 
to make blanket challenges in areas where the carrier has little intent 
to serve, however, if a carrier challenges the designation of a census 
block as served on the National Broadband Map and that challenge is 
ultimately granted, it will be obligated to deploy in that particular 
census block, absent extraordinary circumstances beyond its control.
    28. Following the price cap carriers' initial submissions 
identifying where they intend to serve and which census blocks they are 
challenging the National Broadband Map classification as served, the 
Bureau will publish a list of all census blocks that carriers propose 
to serve to meet their Phase I obligations. Interested parties will 
have 30 days to challenge this list by demonstrating that the block is 
in fact served by fixed Internet access with speeds of 3 Mbps/768 kbps 
or higher. Carriers will then be given an additional 30 days to respond 
to these challenges. To the extent a more recent National Broadband Map 
becomes available in this time period, interested parties are free to 
bring new information regarding availability as shown on the map to the 
Bureau's attention.
    29. All filings in the challenge process, whether from a price cap 
carrier or another provider, must be supported by some form of 
documented evidence. The Bureau should not consider conclusory 
assertions without supporting evidence that a census block's 
designation as served or unserved should be changed. In cases where 
another provider contests the price cap carrier's intention to serve, 
the Bureau may consider such evidence as a signed certification from an 
officer of the provider under penalty of perjury that it offers 3 Mbps/
768 kbps Internet service to customers in that particular census block. 
Such a certification could be accompanied by current customer billing 
records, appropriately redacted to preserve customer privacy. In cases 
where the price cap carrier seeks to contest the classification of a 
census block on the map as served by broadband, the Bureau may consider 
such evidence as statements from residents of an area noting that they 
have attempted and failed to receive service from a putative 
unsubsidized competitor. The Bureau may also consider FCC Form 477 data 
in evaluating whether a provider is providing broadband in a particular 
census block. Where the Bureau finds it more likely than not that the 
status of a census block should be treated differently than the status 
shown on the National Broadband Map, the Bureau will deem that census 
block as served or unserved, as appropriate, for the purposes of 
Connect America Phase I.
    30. Reporting Requirements. We adopt our two proposals regarding 
the reporting requirements for Phase I of Connect America. These 
changes apply both to support already accepted in the first round of 
Phase I and support that will be accepted in the second round of Phase 
I. We also adopt measures to ensure greater transparency for the public 
about how Phase I funds are being used, in response to a commenter's 
suggestions.
    31. First, in their two- and three-year milestone certifications, 
recipients of Phase I support must provide geocoded latitude and 
longitude location information, along with census block and wire center 
information, for each location the carrier intends to count toward its 
deployment requirement. As recipients should know by that point in time 
to which locations they are deploying in order to satisfy their 
buildout requirements, it is unlikely this additional reporting 
requirement will substantially burden Phase I recipients. While the 
additional burden will be minimal, requiring geocoded location 
information will considerably improve the Commission's ability to 
ensure accountability of Phase I funds. We direct the Bureau to work 
with USAC to publish a map indicating the location of projects funded 
with Phase I incremental support.
    32. Second, in the event a recipient intends to deploy to areas 
other than those identified in its initial acceptance, it is permitted 
(but not required) to make a supplemental filing providing updated 
deployment plans at any time. Compliance with the deployment 
requirements will be determined based on the recipient's final 
deployment certification. As this interim reporting is completely 
optional, it should not unnecessarily burden any recipient that decides 
to file such reports.
    33. In addition, we require carriers that elect to take Phase I 
funding under these revised rules to report annually on the dollar 
amount of investment they have made in the prior calendar year, using 
Phase I incremental support, beginning with the annual report due July 
1, 2015. In their annual reports required under section 54.313, 
recipients should provide the total amount of capital funding expended 
in the previous year in meeting Connect America Phase I deployment 
obligations, accompanied by a list of census blocks indicating where 
funding was spent.
    34. Alternative Proposals. We are not persuaded by arguments we 
should make more fundamental changes to Phase I. The Commission is 
implementing a multi-faceted strategy to

[[Page 38232]]

expand the availability of broadband, both fixed and mobile, throughout 
the nation. We decline at this time to revisit the relative allocation 
of funding among the various programs designed to achieve our broadband 
objectives for the nation. Phase I was limited to price cap carriers in 
order to address a specific issue: over 80 percent of unserved 
Americans live in price cap territories. The most direct and expedient 
way to address that issue is to provide a discrete amount of support to 
price cap carriers that will leverage their private capital in exchange 
for a clearly defined obligation to deploy to those unserved locations 
in the near term. A second round of Phase I can be quickly implemented 
in the months ahead. In contrast, other proposals, such as developing 
an auction by which to distribute Phase I funds, would take longer to 
implement. Thus, Phase I as refined today is a reasonable step forward 
in achieving our goal of rapidly deploying broadband-capable 
infrastructure to unserved Americans living in price cap territories.

III. Procedural Matters

A. Paperwork Reduction Act

    35. This document contains modified information collection 
requirements subject to the PRA. It 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 or modified information collection requirements 
contained in this proceeding. In addition, we note that pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, we 
previously sought specific comment on how the Commission might further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees.
    36. In this present document, we have assessed the effects of 
requiring carriers to submit new elections for the second round of 
Connect America Phase I support, as well as requiring geocoded location 
information for all Phase I certifications, and find that it will not 
impact businesses with fewer than 25 employees. Only price cap carriers 
or rate-of-return carriers affiliated with price cap carriers are 
eligible for Phase I support. All such entities have more than 25 
employees.

B. Final Regulatory Flexibility Certification

    37. 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 SBA.
    38. This document modifies and clarifies the Phase I rules adopted 
by the Commission in USF/ICC Transformation Order. These modifications 
and clarifications do not create any burdens, benefits, or requirements 
that were not addressed by the Final Regulatory Flexibility Analysis 
attached to USF/ICC Transformation Order. Therefore, we certify that 
the requirements adopted in this Report and Order will not have a 
significant economic impact on a substantial number of small entities. 
The Commission will send a copy of the Order, including a copy of this 
final certification, in a report to Congress pursuant to SBREFA. In 
addition, the Report and Order and this certification will be sent to 
the Chief Counsel for Advocacy of the SBA, and will be published in the 
Federal Register.

C. Congressional Review Act

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

IV. Ordering Clauses

    40. Accordingly, it is ordered, pursuant to the authority contained 
in sections 1, 4(i), 4(j), 5, 201(b), 214, 218-220, and 254 of the 
Communications Act of 1934, as amended, and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 151, 154(i), 154(j), 155, 
201(b), 214, 218-220, 254, 1302, that this Report and Order is adopted, 
effective July 26, 2013, except for Sec. Sec.  54.312(c)(4) through 
(c)(6), 54.312(c)(8), and 54.313(b), which contain new or modified 
information collection requirements that will not be effective until 
approved by the Office of Management and Budget. The Federal 
Communications Commission will publish a document in the Federal 
Register announcing the effective date for those sections.
    41. It is further ordered that authority to implement a Connect 
America Phase I challenge process is delegated to the Wireline 
Competition Bureau, consistent with paragraphs 24-29 of this Report and 
Order.
    42. It is further ordered that authority to set the timeline for a 
second round of Phase I support, including certifications related to 
the second round of Connect America Phase I, is delegated to the 
Wireline Competition Bureau.
    43. It is further ordered that part 54 of the Commission's rules, 
47 CFR part 54, is amended as set forth below, and such rule amendments 
shall be effective July 26, 2013, except for Sec. Sec.  54.312(c)(4) 
through (c)(6), 54.312(c)(8), and 54.313(b), which contain new or 
modified information collection requirements that will not be effective 
until approved by the Office of Management and Budget. The Federal 
Communications Commission will publish a document in the Federal 
Register announcing the effective date for those sections.
    44. It is further ordered that the Commission shall send a copy of 
this Report and Order to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, see 5 U.S.C. 
801(a)(1)(A).
    45. It is further ordered, that the Commission's Consumer and 
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 record keeping 
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 is revised to read as follows:

    Authority: Sections 1, 4(i), 5, 201, 205, 214, 219, 220, 254, 
303(r), and 403 of the Communications Act of 1934, as amended, and 
section 706 of the Communications Act of 1996, as amended; 47 U.S.C. 
151, 154(i), 155, 201, 205, 214, 219, 220, 254, 303(r), 403, and 
1302 unless otherwise noted.

[[Page 38233]]


0
2. Amend Sec.  54.312 by revising paragraph (b) introductory text and 
adding paragraph (c) to read as follows:


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

* * * * *
    (b) Incremental Support in 2012. From January 1, 2012, to December 
31, 2012, support in addition to baseline support defined in paragraph 
(a) of this section will be available for certain price cap local 
exchange carriers and rate-of-return carriers affiliated with price cap 
local exchange carriers as follows.
* * * * *
    (c) Incremental Support in 2013. From January 1, 2013, to December 
31, 2013, support in addition to baseline support defined in paragraph 
(a) of this section will be available for certain price cap local 
exchange carriers and rate-of-return carriers affiliated with price cap 
local exchange carriers as follows:

    (1) For each carrier for which the Wireline Competition Bureau 
determines that it has appropriate data or for which it determines 
that it can make reasonable estimates, the Bureau will determine an 
average per-location cost for each wire center using a simplified 
cost-estimation function derived from the Commission's high-cost 
proxy model. Incremental support will be based on the wire centers 
for which the estimated per-location cost exceeds the funding 
threshold. The funding threshold will be determined by calculating 
which funding threshold would allocate all available incremental 
support, if each carrier that would be offered incremental support 
were to accept it.
    (2) An eligible telecommunications carrier accepting incremental 
support must deploy broadband to a number of unserved locations, 
shown as unserved by fixed Internet access with speeds of at least 
768 kbps downstream and 200 kbps upstream on the then-current 
version of the National Broadband Map, equal to the amount of 
incremental support it accepts divided by $775.
    (3) An eligible telecommunications carrier must accept funding 
pursuant to paragraph (c)(2) of this section before it may accept 
funding pursuant to paragraph (c)(3) of this section. If an eligible 
telecommunications carrier has committed to deploy to all locations 
eligible for support under paragraph (c)(2) of this section on 
routes or projects that can economically be built with $775 in 
Connect America funding for each location unserved by 768 kbps 
downstream and 200 kbps upstream plus an equal amount of non-Connect 
America carrier capital expenditure funding, but the carrier has not 
fully utilized its allotted funding, it may also count towards its 
deployment obligation locations shown as unserved by fixed Internet 
access with speeds of at least 3 Mbps downstream and 768 kbps 
upstream equal to the amount of remaining incremental support 
divided by $550.
    (4) A carrier may elect to accept or decline incremental 
support. A holding company may do so on a holding-company basis on 
behalf of its operating companies that are eligible 
telecommunications carriers, whose eligibility for incremental 
support, for these purposes, shall be considered on an aggregated 
basis. A carrier must provide notice to the Commission, the 
Administrator, relevant state commissions, and any affected Tribal 
government, stating the amount of incremental support it wishes to 
accept, the number of locations at the $775 amount, the number of 
locations at the $550 amount, and identifying the areas by wire 
center and census block in which the designated eligible 
telecommunications carrier will deploy broadband to meet its 
deployment obligation, or stating that it declines incremental 
support. Such notification must be made within 75 days of being 
notified of any incremental support for which it would be eligible.
    (5) Along with its notification, an eligible telecommunications 
carrier accepting incremental support must submit the following 
certifications:
    (i) The locations to be served to satisfy the deployment 
obligation are not shown as served by fixed broadband at the speeds 
specified in paragraph (c)(2) or (c)(3) of this section provided by 
any entity other than the certifying entity or its affiliate on the 
then-current version of the National Broadband Map or that it is 
challenging the National Broadband Map's designation of that census 
block under the challenge process in paragraph (c)(7) of this 
section;
    (ii) To the best of the carrier's knowledge, the locations are, 
in fact, unserved by fixed Internet access with speeds of at least 3 
Mbps downstream and 768 kbps upstream, or 768 kbps downstream and 
200 kbps upstream, as appropriate;
    (iii) The carrier's current capital improvement plan did not 
already include plans to complete broadband deployment within the 
next three years to the locations to be counted to satisfy the 
deployment obligation;
    (iv) Incremental support will not be used to satisfy any merger 
commitment or similar regulatory obligation; and
    (v) The carrier has undertaken due diligence to determine the 
locations in question are not within the service area of either 
Broadband Initiatives Program or the Broadband Technology 
Opportunities Program projects that will provide Internet access 
with speeds of at least 3 Mbps downstream and 768 upstream.
    (6) An eligible telecommunications carrier deploying to 
locations unserved by 3 Mbps downstream and 768 kbps upstream under 
paragraph (c)(3) of this section must also certify that it has 
prioritized its planned projects or routes so as to maximize the 
deployment of broadband-capable infrastructure to locations lacking 
Internet access with speeds of 768 kbps downstream and 200 kbps 
upstream.
    (7) A person may challenge the designation of a census block as 
served or unserved by a certain speed as shown on the National 
Broadband Map. When the Wireline Competition Bureau determines that 
the evidence presented makes it more likely than not that the census 
block should be designated as served by broadband with speeds of at 
least 3 Mbps downstream and 768 kbps upstream, that locations in 
that census block will be treated as served by broadband and 
therefore ineligible to be counted for the purposes of paragraph 
(c)(3) of this section. When the Wireline Competition Bureau 
determines that the evidence presented makes it more likely than not 
that the census block should be designated as served by Internet 
service with speeds of 768 kbps downstream and 200 kbps upstream, 
but unserved by broadband with speeds of at least 3 Mbps downstream 
and 768 kbps upstream, locations in that census block will be 
treated as served by Internet access with speeds of 768 kbps 
downstream and 200 kbps upstream and therefore eligible to be 
counted for the purposes of paragraph (c)(3) of this section. When 
the Wireline Competition Bureau determines that the evidence 
presented makes it more likely than not that the census block should 
be designated as unserved by Internet service with speeds of 768 
kbps downstream and 200 kbps upstream, locations in that census 
block will be treated as unserved by Internet access with speeds of 
768 kbps downstream and 200 kbps upstream and therefore eligible to 
be counted for the purposes of paragraph (c)(2) of this section.
    (8) If no entity other than the carrier or its affiliate 
provides Internet service with speeds of 3 Mbps downstream and 768 
kbps upstream or greater as shown on the National Broadband Map or 
as determined by the process described in paragraph (c)(7), the 
carrier may satisfy its deployment obligations at a location shown 
by the National Broadband Map as being served by that carrier or its 
affiliate with such service by certifying that it is the only entity 
providing such service, that the location does not actually receive 
speeds of 3 Mbps downstream and 768 kbps upstream, and the location 
is served through a copper-fed digital subscriber line access 
multiplexer. The carrier must specifically identify such locations 
in its election. Such locations will be treated the same as 
locations under paragraph (c)(3) of this section.
    (9) An eligible telecommunications carrier must complete 
deployment of broadband-capable infrastructure to two-thirds of the 
required number of locations within two years of providing 
notification of acceptance of funding, and must complete deployment 
to all required locations within three years. To satisfy its 
deployment obligation, the eligible telecommunications carrier must 
offer broadband service to such locations of at least 4 Mbps 
downstream and 1 Mbps upstream, with latency sufficiently low to 
enable the use of real-time communications, including Voice over 
Internet Protocol, and with usage allowances, if any, associated 
with a specified price for a service offering that are reasonably 
comparable to comparable offerings in urban areas.

0
3. Amend Sec.  54.313 by revising paragraph (b) to read as follows:


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

* * * * *

[[Page 38234]]

    (b) In addition to the information and certifications in paragraph 
(a) of this section:

    (1) Any recipient of incremental Connect America Phase I support 
pursuant to Sec.  54.312(b) and (c) shall provide:
    (i) In its next annual report due after two years after filing a 
notice of acceptance of funding pursuant to Sec.  54.312(b) and (c), 
a certification that the company has deployed to no fewer than two-
thirds of the required number of locations; and
    (ii) In its next annual report due after three years after 
filing a notice of acceptance of funding pursuant to Sec.  54.312(b) 
and (c), a certification that the company has deployed to all 
required locations and that it is offering broadband service of at 
least 4 Mbps downstream and 1 Mbps upstream, with latency 
sufficiently low to enable the use of real-time communications, 
including Voice over Internet Protocol, and with usage allowances, 
if any, associated with a specified price for a service offering 
that are reasonably comparable to comparable offerings in urban 
areas.
    (2) In addition to the information and certifications required 
in paragraph (b)(1) of this section, any recipient of incremental 
Connect America Phase I support pursuant to Sec.  54.312(c) shall 
provide:
    (i) In its annual reports due after one, two, and three years 
after filing a notice of acceptance of funding pursuant to Sec.  
54.312(c), a certification that, to the best of the recipient's 
knowledge, the locations in question are not receiving support under 
the Broadband Initiatives Program or the Broadband Technology 
Opportunities Program for projects that will provide broadband with 
speeds of at least 4 Mbps/1 Mbps; and
    (ii) In its annual reports due after one, two, and three years 
after filing a notice of acceptance of funding pursuant to Sec.  
54.312(c), a statement of the total amount of capital funding 
expended in the previous year in meeting Connect America Phase I 
deployment obligations, accompanied by a list of census blocks 
indicating where funding was spent.
* * * * *

[FR Doc. 2013-15297 Filed 6-25-13; 8:45 am]
BILLING CODE 6712-01-P