[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Rules and Regulations]
[Pages 70881-70888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28341]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[WC Docket Nos. 10-90; DA 13-2115]
Connect America Fund
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
specifies service obligations of price cap carriers that accept Connect
America Phase II model-based support through the state-level commitment
process, and addressed how to determine what areas are considered as
served by an unsubsidized competitor. Specifically, the Commission sets
out how a price cap carrier satisfies the latency, usage allowance, and
pricing requirements for Connect America Phase II. This document also
addresses how these metrics will apply in determining what areas will
be considered as served by an unsubsidized competitor.
DATES: Effective December 27, 2013, except for Sec. 54.313(a)(11),
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 that section.
FOR FURTHER INFORMATION CONTACT: Ryan Yates, Wireline Competition
Bureau, (202) 418-0886 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline
Competition Bureau's Report and Order in WC Docket No. 10-90, and DA
13-2115, released on October 31, 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. These documents may
also be purchased from the Commission's duplicating contractor, Best
Copy and Printing, Inc. (BCPI), 445 12th Street SW., Room CY-B402,
Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893,
facsimile (202) 863-2898, or via the Internet at http://www.bcpiweb.com. It is also available on the Commission's Web site at
http://www.fcc.gov. Or at the following Internet address: http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db1031/DA-13-2115A1.pdf.
I. Introduction
1. In the USF/ICC Transformation Order, 78 FR 38227, June 26, 2013,
the Federal Communications Commission (Commission) comprehensively
reformed and modernized the universal service and intercarrier
compensation systems to maintain voice service and extend broadband-
capable infrastructure to millions of Americans. As part of the reform,
the Commission adopted a framework for providing support to areas
served by price cap carriers, known as the Connect America Fund,
through ``a combination of competitive bidding and a new forward-
looking model of the cost of constructing modern multi-purpose
networks.'' In particular, the Commission will offer each price cap
carrier monthly model-based support for a period of five years in
exchange for a state-level commitment to serve specified areas within
the state that are not served by an unsubsidized competitor, and if
that offer is not accepted, will determine support through a
competitive process.
2. In this Report and Order (Order), the Wireline Competition
Bureau (Bureau) takes further action to implement the Commission's
direction that price cap carriers may elect to receive model-based
support in certain areas in exchange for making a state-level
commitment to meet the Commission's service obligations. The Bureau
specifies the service obligations of price cap carriers that accept
Phase II model-based support through the state-level commitment
process. Specifically, the Bureau provides two options for a price cap
carrier accepting model-based support to meet the Commission's
requirements for reasonably comparable pricing of voice and broadband
services. In addition, the Bureau specifies a 100 gigabyte (GB) minimum
usage allowance that will initially apply to a price cap carrier
accepting model-based support for Phase II-funded locations, to the
extent the carrier chooses to set usage allowances in such areas. The
Bureau also specifies latency requirements--specifically, that price
cap carriers must have a provider round trip latency of 100
milliseconds (ms) or less, and provide two options for how they may
test and report compliance with this requirement. Finally, the Bureau
addresses how we will apply these metrics to determine what areas we
will consider as served by an unsubsidized competitor.
II. Discussion
A. Price Cap Carrier Obligations
3. In this section, the Bureau discusses the specific metrics that
will be used to determine compliance of recipients of model-based Phase
II support with the Commission's service obligations. By setting these
standards, the Bureau provides clarity to price cap carriers
contemplating accepting Phase II support through the state-level
commitment process. The Bureau details how compliance with the
Commission's requirements will be evaluated, while creating a
straightforward framework for oversight and accountability in Phase II.
Price cap carriers should use the standards in this Order when making
their annual certifications. The Commission will review these annual
reports to ensure the standards set forth in this Order are being met
and to evaluate price cap carriers' continuing eligibility for Phase II
support.
4. Price. The USF/ICC Transformation Order calls for rates for both
voice and broadband between urban and rural areas to be reasonably
comparable. The Bureau has adopted a survey instrument to conduct a
rate survey, and the Bureau is working to conduct this survey in the
near future. The Bureau anticipates that the rate survey data will be
available, and the benchmarks set, prior to the deadline for Phase II
state-level
[[Page 70882]]
commitment elections. Once these benchmarks are adopted, a price cap
carrier accepting model-based support can certify that its rates
conform to the reasonable comparability benchmark.
5. Consistent with the Commission's approach when it adopted rules
for the second round of Connect America Phase I incremental support,
the Commission also adopted an alternative means for showing reasonable
rate comparability: A carrier's rate for both voice and broadband will
be presumed reasonably comparable if the carrier certifies that it is
offering fixed services meeting our voice and broadband requirements
for the same or lower prices in rural areas as urban areas. To qualify
for this presumption, the qualifying service plan must have
substantially similar terms and conditions in both urban and rural
areas. This approach recognizes that if rates in rural areas are the
same as urban areas, that by definition complies with the reasonable
comparability principles set forth in section 254(b). In order to
certify that rates are reasonably comparable under this presumption,
the rates in Phase II-funded areas must be the same or lower than rates
for fixed wireline services in urban areas. The Bureau does not require
the carrier to offer a particular rate nationwide; rather, it is
sufficient if the carrier offers the same rate in an urban area in the
state where it accepts Phase II funding.
6. The Bureau recognizes that, in comparing urban and rural
offerings, carriers may not offer service plans that exactly match the
minimum service obligations for Connect America. Therefore, in
certifying that rural rates are at or below urban rates, the basis for
comparison should be the lowest cost non-promotional rate for an urban
service offering that meets or exceeds each dimension of the service
obligations set in this Order.
7. In adopting this presumption, the Bureau concludes that the
relevant comparison for a price cap carrier accepting model-based
support is to rates and usage allowances for fixed wireline services in
urban areas. Some carriers eligible for Phase II funding offer a fixed
wireless product in urban areas that may meet all of the service
obligations described herein, but such offerings are typically offered
at a higher price for a given amount of data usage than typical
wireline offerings. Given the Commission's reference in its discussion
of capacity to the typical data allowances of wireline broadband
offerings, the Bureau does not believe it would be consistent with the
Commission's framework for a price cap carrier accepting model-based
support to meet its reasonable comparability obligations by relying on
uniform pricing for fixed wireless offerings. Rather, a price cap
carrier making a reasonable comparability certification for model-based
support must look to the prices and usage allowances of its fixed
wireline offerings in urban areas.
8. This presumption may be overcome in extreme circumstances where
other evidence strongly suggests that the price cap carrier is relying
on the existence of a rate plan in urban areas to which few consumers
subscribe. For example, it would not be reasonable for a price cap
carrier to rely on the offering of the same service at the same rate in
urban and rural areas when only a de minimus number of customers
subscribe to the service offering in the urban area. Similarly, the
presumption may be overcome if a carrier is only offering the service
plan in a very small portion of the urban area.
9. As proposed in the Phase II Service Obligations Public Notice,
78 FR 16456, March 15, 2013, an urban area is defined as any ``urban
area'' or ``urban cluster'' that sits within a Metropolitan Statistical
Area, as defined by the Census Bureau. A carrier need only make the
offering in part of the ``urban area'' or ``urban cluster'' to qualify.
The presumption of reasonable comparability under this alternative
provides carriers needed certainty in making their elections and is
supported by parties in the record.
10. The rate survey benchmarks, once adopted, will serve as a safe
harbor. To the extent the rates in question for funded locations are at
or below the benchmarks established through the rate survey, that will
be sufficient to meet the Commission's reasonable comparability
requirements.
11. Usage Allowance. Under the USF/ICC Transformation Order, Phase
II recipients must provide broadband with usage allowances reasonably
comparable to those available through comparable offerings in urban
areas. The Commission set some guide posts as to what would be deemed
reasonably comparable, noting that a 250 GB per month usage allowance
would likely be reasonably comparable, while a 10 GB per month usage
allowance would not. The Commission delegated to the Bureau the task of
setting a specific minimum usage allowance and specified that minimum
should be adjusted over time.
12. In the Service Obligations Public Notice, the Bureau sought
comment on two methods of setting the minimum usage allowance: The
first method was based on what activities could be undertaken with a
particular data allowance, and the second method was based on current
consumer data usage patterns. The Bureau also inquired as to whether
the minimum usage allowance should be a fixed standard, or whether it
should grow during the term of Phase II.
13. The Commission envisioned that price cap carriers accepting
model-based support would build ``robust, scalable networks.'' As such,
the Bureau does not expect those carriers accepting model-based support
would impose the kind of usage allowances that typically exist today
for many wireless and satellite offerings. Indeed, such usage
allowances would be incompatible with the fiber-based forward looking
cost model approach that the Bureau has adopted. To provide clarity in
the event a price cap carrier sets any usage allowance for the service
offering that it relies upon to meet its universal service obligations
for acceptance of model-based support, however, we specify an initial
minimum allowed usage limit of 100 GB per month, with the opportunity
to obtain additional data usage at a reasonable price to the extent the
price cap carrier chooses to offer a plan providing the minimum
specified amount. The Bureau concludes that 100 GB is a reasonable
initial usage allowance for price cap carriers making a state-level
commitment. According to the Commission's most recent data, 80 percent
of cable/fiber users--most of which are likely to be in urban areas--
currently use less than 100 GB per month. As discussed in the Phase II
Service Obligations Public Notice and shown in the chart below, this
would provide for a mid-level basket of video related activities,
including viewing over 20 hours of video per week and the ability to
load hundreds of Web sites each day. And, the Bureau emphasizes that
the 100 GB per month is the minimum usage--price cap carriers are free
to offer plans with additional usage and indeed the Bureau encourages
price cap carriers to offer a variety of plans in rural areas as they
do in urban areas.
[[Page 70883]]
Broadband Applications Possible With 100 GB of Usage
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Video Applications (Education (including 95 Hours.
digital learning), Healthcare, Business,
Community Engagement and Other Activities
Such As Video Conferencing with Family).
plus E-mails Sent/Received for Personal 5,000 E-mails.
and Professional Correspondence.
plus Websites Loaded (Activities Such As 14,500 Websites.
Job Searching, Education, Banking,
Health, and Government Services).
------------------------------------------------------------------------
14. Other parties have called for a lower minimum usage limit, with
some advocating for limits at or below 20 GB per month and others
suggesting 60 GB. However, a 20 GB limit would fall well short of
existing fixed broadband usage levels--over two-thirds of cable and
fiber subscribers currently consume in excess of 20 GB of data per
month. Nor is the Bureau convinced we should establish a minimum usage
allowance of 60 GB for price cap carriers accepting model-based
support. Over 30 percent of current fiber and cable subscribers
consumed in excess of 60 GB of data per month, and consumers are likely
to consume more, not less, over time. The Bureau is guided by the
Commission's statement that ``Americans should have access to broadband
that is capable of enabling the kinds of key applications that drive
our efforts to achieve universal broadband, including education (e.g.,
distance/online learning), health care (e.g., remote health
monitoring), and person-to-person communications (e.g., VoIP or online
video chat with loved ones serving overseas).'' While the Commission
recognized that service obligations may need to be relaxed in some
fashion for extremely high cost areas, the Bureau concludes that a
usage limit of 20 GB, or 60 GB, for price cap carriers accepting model-
based support is not consistent with the robust, scalable networks that
the Commission expects such providers to deploy.
15. The Bureau requires price cap carriers accepting model-based
Phase II support to offer a minimum usage allowance over the course of
Phase II's five-year term that remains consistent with trends in usage
for 80 percent of consumers using cable or fiber-based fixed broadband
services. As an alternative to any national data set (such as Measuring
Broadband America) that demonstrates trends in usage over time, the
Bureau will deem a price cap carrier to be in compliance with this
usage allowance requirement in future years if its minimum usage
allowance for Connect America funded locations is at least 100 GB and
is at or above the usage level for 80 percent of all of its broadband
subscribers, including those subscribers that live outside of Phase II
funded areas. Given the size and scale of most price cap carriers, it
is reasonable to presume that their individual data would be consistent
with national data, and this alternative will enable price cap carriers
to anticipate how their usage allowances may change in the future.
16. Latency. In the USF/ICC Transformation Order, the Commission
required Phase II recipients to provide latency sufficient for real-
time applications, such as VoIP. In this section, the Bureau describes
how they will implement this requirement for price cap carriers that
accept Phase II model-based support.
17. The Bureau agrees with WISPA that because latency can be
defined and measured in many ways, ``a clear, workable, measureable
definition of `latency''' is necessary. The Bureau also agrees with
commenters that argue the Commission should base its performance
metrics on ``empirical data.'' After consideration of the record, the
Bureau therefore bases our standard on the International
Telecommunication Union (ITU) G.114 design objectives. ITU Standard
G.114 provides that consumers are ``very satisfied'' with the quality
of VoIP calls up to a mouth-to-ear latency of approximately 200 ms. The
ITU has determined that consumers become less satisfied with the
quality of VoIP calls when total mouth-to-ear latency is above 200 ms.
Therefore, the Bureau concludes that a reasonable approach is a
framework that should result in mouth-to-ear latency of 200 ms or less.
18. The Bureau recognizes that price cap carriers accepting model-
based support may not presently have a way to measure end-to-end
latency, and therefore adopt an approach that allows them to certify
they are meeting the Commission's requirements based on a provider
round-trip latency measure. The ITU latency calculations are ``mouth-
to-ear'' one-way path measurements which include: The signal conversion
at the input (the conversion of the speaker's voice to digital
packets); the broadband provider's network path from the input device
to the Internet core; the path through the Internet core; the broadband
provider's network path from the Internet core over the provider's
network to the output device; and the signal conversion at the output
device (the conversion of the digital packets back to voice for the
listener). ITU Standard Y.1541 calculates input and output terminal
conversion delays together to be between 50 and 80 ms. Based on these
ITU calculations and other research, we use 75 ms for purposes of
calculating conversion delays. An assumed conversion delay of 75 ms
means that the total latency for the network path to the Internet core,
the Internet core, and the network path from the Internet core to the
output device would need to be no greater than 125 ms if 200 ms mouth-
to-ear latency limit is to be maintained.
[[Page 70884]]
[GRAPHIC] [TIFF OMITTED] TR27NO13.021
19. Based on ITU calculations and reported core latencies in the
contiguous United States, the Bureau assumes 50 ms as the roundtrip (25
ms one way) core Internet latency in our calculations. The assumed 75
ms for conversion delay and assumed 50 ms (25 ms one way) for the
Internet core path means that the provider network path from the input
device to the Internet core and from the Internet core to the output
device must be no more than 100 ms (50 for each provider segment) in
order to maintain an overall mouth-to-ear latency limit of 200 ms.
Because existing network management systems, ping tests, or other
commonly available network measurement tools typically calculate
latency as a round-trip measurement, we adopt a 100 ms provider latency
round-trip limit, which is consistent with the 50 ms one-way latency
assumption for the path from the input device to the Internet core.
[GRAPHIC] [TIFF OMITTED] TR27NO13.022
20. To show that it is meeting this standard, a price cap carrier
accepting model-based support will need to certify that 95 percent or
more of all peak period measurements (also referred to as observations)
of network round trip latency are at or below 100 ms. As suggested in
the Phase II Service Obligations Public Notice, measurements should be
taken during peak period (defined as weeknights between 7:00 p.m. to
11:00 p.m. local time) between the customer premises and the closest
designated Internet core peering interconnection point (often referred
to as an Internet Exchange Point--IXP). The measurements should be
conducted over a minimum of two consecutive weeks during peak hours for
at least 50 randomly-selected customer locations within the census
blocks of each state for which the provider is receiving model-based
support using existing network management systems, ping tests, or other
commonly available network measurement tools.
21. The Bureau acknowledges that measuring latency is a complex
task that requires detailed testing protocols. To minimize the cost of
testing and ensure that it can be done relatively quickly, the Bureau
will allow providers to rely on existing network management systems,
ping tests, or other commonly available network measurement tools.
Although the Bureau recognizes that these types of tests have
drawbacks, such as a possible low priority handling/response times at
target servers, low quality of service (QoS) handling/packet drops in
intermediate nodes, and generally small packet sizes, the Bureau
concludes that this approach strikes the appropriate balance of
implementing Phase II quickly, with some assurance that Phase II funded
locations will have the service that the Commission expects, without
requiring carriers accepting model-based support to make a significant
investment in testing infrastructure.
22. As an alternative to conducting ping-like tests, carriers
participating in the MBA program may use the results from that testing
to support certification that they meet the latency requirement. To use
MBA results, carriers will need to deploy at least 50 white boxes to
customers within the Phase II-funded areas within each state, i.e. at
least 50 white boxes per state distributed throughout the Phase II-
funded areas within that state. The white box costs and any associated
administrative costs imposed by the MBA program would be the carrier's
responsibility. Because white boxes take measurements on a continuous
basis, a carrier would prove
[[Page 70885]]
compliance with the latency limit by certifying that 95 percent or more
of the measurements taken during peak periods for a period of two weeks
were at or below 100 ms.
23. The Bureau is not persuaded by AT&T's argument that the
Commission should not set a specific numerical latency standard and
should instead ``assume that wireline networks capable of delivering
speeds of 4/1 and greater will meet the latency requirements for real-
time applications such as VoIP.'' Although results from the most recent
MBA testing show that providers using fiber, cable, or DSL technology
are generally able to meet or exceed 100 ms provider-round trip latency
95 percent limit, MBA testing is currently limited to only large
providers. Not all of the price cap carriers eligible for Phase II
support are participating in this program and, in any event, we have no
assurance that the measurements taken in MBA are taken at Phase II-
funded locations. Moreover, MBA testing results show that there can be
a great disparity in latency among different locations served by a
single provider. The Bureau concludes it is necessary for carriers to
test latency in the census blocks where they will be receiving Phase II
funding, and not rely on MBA data that may be derived from other
locations.
24. The Bureau also disagrees with ViaSat's argument that ``network
latency need not impact the end-user experience'' and that adoption of
a numerical latency standard could ``violate the Commission's policy of
technological neutrality.'' To the contrary, the ITU's extensive VoIP
calculations show that consumer satisfaction is improved by lower
latency. Further, adoption of a numerical standard designed to meet
reasonable regulatory objectives does not violate technological
neutrality simply because some technologies or service providers cannot
meet that standard. Failing to specify how the Commission's
requirements will be enforced in practical terms that can be
incorporated into business planning would be a disservice both to price
cap carriers accepting Phase II support and to consumers that stand to
benefit from Phase II deployments. Quantifiable metrics provide
certainty to these price cap carriers at the time they accept funding:
they are aware of the specific performance standards they must meet in
order to satisfy their obligations. These metrics also give federal and
state regulators a bright line standard against which to hold these
Phase II recipients accountable, ensuring that they perform in line
with expectations. Failing to provide such clarity would result in
obligations that are difficult to anticipate, difficult to measure, and
difficult to enforce.
25. The Bureau notes that they are adopting a more lenient approach
than the 60 ms average latency standard they originally proposed in the
Public Notice. The Bureau does so after consideration of the ITU
conclusion that consumers are ``very satisfied'' with the quality of
VoIP calls up to an ear-to-mouth latency of approximately 200 ms and
the record received in this proceeding. The Bureau agrees that the ITU
data for a VoIP call are an appropriate basis for determining latency
sufficient for this aspect of Phase II, and we believe the 100 ms limit
adopted herein is consistent with ITU data.
26. The Bureau disagrees with ACS that ``[i]t is particularly
important to develop testing solutions not dependent on customer usage,
as there is an expected increase in latency over Internet Protocol
networks as customer usage nears the peak capacity of the service.''
Although the Bureau agrees that latency is affected by customer usage,
this does not lead to a conclusion that testing should be done at times
of low customer usage. Latency sufficient for real-time applications
such as VoIP must be available to consumers during the time they use
the Internet. A network with low latency does not benefit most
consumers if the low latency is only available when few customers are
using the Internet. Therefore, the Bureau has adopted testing
specifications that require testing to be conducted during the peak
hours, weeknights between 7:00 p.m. to 11:00 p.m. local time. The
Bureau believes that measurements conducted during the peak period will
demonstrate the latency experienced by the majority of customers.
27. The Bureau does not believe that the testing methodology they
have adopted will impose an undue burden on providers, as there are
readily available hardware and software solutions for conducting such
testing. The latency testing requires only 50 Phase II-funded locations
in a state to be measured over a two-week period per quarter using
existing or readily acquired network management or performance
management systems. Many providers already perform network management
tests to monitor network performance. Network devices commonly support
ICMP and SNMP, as well as other vendor-specific tests such as Cisco's
IP service level agreement (SLA) command line. In addition, for those
carriers that either currently participate in or join the MBA program,
the Bureau will allow the use of MBA test results from Phase II-funded
locations as an alternative basis for certifying compliance with our
requirements. Therefore, even if a provider does not already have a
testing mechanism in use for its network, the means to conduct such
testing are readily available.
28. The Bureau is not persuaded by USTelecom's claims that testing
should be ``between the customer premises to the provider's transit or
peering interconnection point, at least in cases where there is a
transit or peering interconnection point located in the same state as
the customer premises being measured.'' The Commission determined that
latency should be sufficient to allow consumers to make use of real-
time applications such as VoIP. Testing latency on only a portion of
the network connecting a consumer to the Internet core will not show
whether that customer is able to enjoy high-quality real-time
applications because it is network performance from the customer's
location to the destination that determines the quality of the service
from the customer's perspective.
29. Further, while a price cap carrier accepting Phase II model-
based support may not have direct control over any middle-mile or
transit providers with which it connects, it does have influence over
its transit providers. For example, a last-mile provider can compare
the quality of service offered by transit providers and select one with
a higher quality of service. In addition, the last-mile provider can
improve its latency by purchasing additional capacity from the transit
provider or by negotiating a SLA. Last-mile providers can also
implement dual homing to more than one transit provider to ensure a
higher quality of service. Measuring latency from the customer location
to designated Internet exchange points will show if customers are being
provided with service that allows use of real-time applications by
giving price cap carriers accepting Phase II model-based support strong
incentives to maintain a high-quality network and to use sufficient,
high-quality transit providers.
30. The Bureau concludes that the metrics adopted today provide
sufficient flexibility that price cap carriers serving markets with
unique conditions, such as Alaska, will be able to make the necessary
certifications. ACS argues that when measuring broadband latency in
Alaska, the Commission must take into account the long transmission
facilities in Alaska, which often include point-to-point microwave,
satellite transport, and
[[Page 70886]]
undersea cable, as well as the remote location of Internet exchange
points. The Bureau does not believe that that the use of point-to-point
microwave links will adversely affect the latency of broadband services
in most cases. ITU planning values for delays of different technologies
indicate that coaxial fiber has a higher delay time at 5 microseconds
per kilometer whereas microwave transmissions (radio-relay) are at 4
microseconds per kilometer. Indeed, there has recently been renewed
interest in microwave technology to support low-latency applications.
31. Conversely, the use of geostationary satellite technologies
would substantially affect a price cap carrier's ability to meet the
200 ms end-to-end latency standard we adopt herein. Although satellite
transmissions travel at rates faster than copper, cable, or fiber
transmissions, the satellite's distance from Earth makes achievement of
the 200 ms end-to-end transmission (100 ms limit for the round-trip
carrier portion) impossible. Therefore, the Bureau presumes that ACS
would not include customers served by satellite technologies in the 50
measurement locations required for latency testing. ACS has not alleged
that a majority, or even a substantial number, of its customers are
served by satellite technologies, so elimination of satellite customers
from testing calculations should resolve this concern.
32. ACS also alleges that the use of undersea cable in its network
and the distance between customers and Internet exchange points could
affect ACS's ability to meet the latency standard. It is possible that
the use of undersea cable, depending upon the type and length of cable,
could affect latency determinations for providers serving Alaska.
Therefore, providers in noncontiguous areas of the United States should
conduct their latency network testing from the customer location to a
point at which traffic is consolidated for transport to an Internet
exchange point in the continental United States. For example,
speedtest.net has five servers located in Anchorage, Alaska, and one in
Fairbanks, Alaska, that could be used for network testing. Although the
Bureau allows providers in noncontiguous areas of the United States to
conduct their latency network testing from the customer location to a
point at which traffic is consolidated for undersea cable transport to
an IXP in the continental United States, the Bureau may not extend this
exception to other circumstances without additional evidence that such
an exception is warranted. The Bureau notes that MBA 2013 data results
show that the 25 Time Warner Cable-based customer locations in Hawaii
were able to meet the 100 ms limit 95 percent or more of the time.
Hawaii, at approximately 2,500 miles from the continental United
States, is over double the undersea cable distance from a continental
United States-based IXP as Anchorage, Alaska.
33. ACS notes that with peering points ``over a thousand miles away
in Oregon and Washington,'' its ability to conduct testing and improve
results is limited. The Bureau's decision that testing for
noncontiguous parts of the United States should be conducted between
the customer location and the point at which traffic is aggregated for
transport to the continental United States via undersea cable should
resolve this issue. Moreover, for remote points within Alaska, MBA
testing data shows that although there is a correlation between
distance and latency, the 200 ms end-to-end standard (100 ms roundtrip
limit 95 percent or more of the time for the carrier portion) is
reasonable for distances of 700 or more miles, as data from Measuring
Broadband America testing in Hawaii shows. The MBA February 2013 Report
shows that the mean latency for measurements 700 miles from the test
server was 44.7 ms roundtrip. Thus, even for customer locations in
Alaska located a substantial distance from a point used for aggregating
traffic for transport to the continental United States, an Alaska
provider should be able to meet the 200 ms end-to-end standard (100 ms
roundtrip limit for the carrier portion).
34. Buildout Measurement. In order to satisfy their state-level
commitment, Phase II recipients must deploy voice and broadband-capable
networks and offer services meeting the above performance metrics to a
specified number of locations. The Bureau expects to release a Public
Notice specifying the number of locations that recipients of model-
based support will be required to serve, based on the Connect America
Cost Model, state by state, so that carriers are aware at the time of
acceptance the required number of locations. Three years after making a
state-level commitment, a carrier must have deployed voice and
broadband-capable networks to 85 percent of the specified number of
locations in the given state. Five years after making a state-level
commitment, a carrier must have deployed voice and broadband-capable
networks to the total number of locations as specified by the Bureau.
35. Generally, all deployment must occur in census blocks funded
under the Connect America Cost Model. However, the USF/ICC
Transformation Order states that ``[i]n meeting its obligation to serve
a particular number of locations in a state, an incumbent that has
accepted the state-level commitment may choose to serve some census
blocks with costs above the highest cost threshold instead of eligible
census blocks (i.e., census blocks with lower costs), provided that it
meets the public interest obligations in those census blocks, and
provided that the total number of unserved locations and the total
number of locations covered is greater than or equal to the number of
locations in the eligible census blocks.'' Thus, a carrier could build
to one of these higher-cost locations in lieu of building to a location
in one of its eligible census blocks as originally planned.
B. Unsubsidized Competitors
36. In adopting the USF/ICC Transformation Order, the Commission
directed that Phase II support should not go to any ``areas where an
unsubsidized competitor offers broadband service that meets the
broadband performance requirements'' of Phase II. An unsubsidized
competitor is defined as a facilities-based provider of residential
terrestrial fixed voice and broadband service that does not receive
high-cost support. The Commission delegated to the Bureau the task of
implementing the specific requirements of the unsubsidized competitor
rule and determining what areas should be considered as served by an
unsubsidized competitor. In the Phase II Challenge Process Order, 78 FR
32991, June 3, 2013, the Bureau determined that an area would be
presumed as served by an unsubsidized competitor if the area was shown
on the National Broadband Map as served by a provider with speeds of 3
Mbps/768 kbps, and that provider was shown on Form 477 data as
providing voice service in that state. Thus, a potential unsubsidized
provider need only make a showing regarding the metrics discussed in
this Order in two circumstances: first, if it challenges an area
initially designated as unserved, claiming that the area should instead
be treated as served; or second, if it is responding to a challenger's
claim that one of the census blocks shown as served by the provider is
in fact unserved.
37. Consistent with the Commission's direction in the USF/ICC
Transformation Order, the Bureau concludes that unsubsidized
competitors should meet the same standards we require of Phase II price
cap carrier recipients. To exclude an area from Phase II support, an
unsubsidized competitor must be
[[Page 70887]]
offering broadband and voice service that would meet the Commission's
requirements for price cap carriers receiving model-based support.
However, certain adjustments are necessary, not only to make an
administrable system for determining what areas should be excluded from
support, but also to account for the diversity of circumstances that
potential unsubsidized competitors face.
38. Unsubsidized competitor. The Commission directed the Bureau to
exclude areas with unsubsidized competitors from Phase II funding. The
codified rule states that an unsubsidized competitor is one that ``does
not receive high-cost support.'' The Commission's intent in adopting
this rule was to preclude support to areas where voice and broadband is
available without burdening the federal support mechanisms. The Bureau
will presume that any recipient of high-cost support at the time the
challenge process is conducted does not meet the literal terms of the
definition, but will entertain challenges to that presumption from any
competitive eligible telecommunications carrier that otherwise meets or
exceeds the performance obligations established herein and whose high-
cost support is scheduled to be eliminated during the five-year term of
Phase II. This will provide an opportunity for the Commission to
consider whether to waive application of the ``unsubsidized'' element
of the unsubsidized competitor definition in situations that would
result in Phase II support being used to overbuild an existing
broadband-capable network.
39. Speed. In the Phase II Service Obligations Public Notice, the
Bureau sought comment on what proxy we should use for the requirement
that an unsubsidized competitor provides 4 Mbps/1 Mbps service.
Providers meeting this proxy would be presumed to meet the speed
requirement of an unsubsidized competitor. The Bureau concludes that
the proxy for 4 Mbps/1 Mbps broadband should be set at 3 Mbps/768 kbps,
as data on 3 Mbps/768 kbps deployment are available on the National
Broadband Map. This is consistent with the precedent established by the
Commission in the USF/ICC Transformation Order, as well as its
conclusions in the Phase I Order, 78 FR 38227, June 26, 2013.
Commenters note that areas served by an unsubsidized competitor with
speeds of 3 Mbps/768 kbps are often already served by speeds of 4 Mbps/
1 Mbps. If the Bureau were to use a 6 Mbps/1.5 Mbps proxy, areas served
by speeds of only 4 Mbps/1 Mbps would be presumed unserved. This would
have the effect of burdening potential unsubsidized competitors, many
of which are small businesses, requiring them to come forward in the
challenge process discussed in the Phase II Challenge Process Order and
show that they are actually providing 4 Mbps/1 Mbps service.
40. Pricing. Under the presumptions the Bureau adopted in the Phase
II Challenge Process Order, a provider would be initially presumed to
meet the reasonably comparable pricing requirement, so long as it was
shown on the National Broadband Map as offering 3 Mbps/768 kbps service
and shown on Form 477 data as offering voice service in the relevant
state. The Bureau now adopts a conclusive presumption that a potential
unsubsidized competitor is offering reasonably comparable prices if it
offers the same or lower rates in rural markets as it does for fixed
wireline offerings meeting the requisite standards in urban markets. In
such circumstances, the Commission's policy objective of ensuring
consumers have access to reasonably comparable services at reasonably
comparable rates should be achieved.
41. The Bureau also adopts a conclusive presumption that if a
potential unsubsidized competitor is competing in a particular census
block with the incumbent price cap carrier, and both are offering
services that offer at least 4 Mbps downstream, and at least 1 Mbps
upstream, and at least 100 GB of data, the pricing of the competitor
will be deemed reasonable, and not subject to challenge. Given the
finite $1.8 billion budget for Phase II, the Bureau did not find it
efficient to target funding to such areas that already have two
providers offering service meeting the Phase II standards for price cap
carriers, when there are likely to be other census blocks where the
average cost exceeds the funding threshold that have no providers at
all.
42. The Bureau now turns to situations where the potential
competitor does not offer fixed wireline service in urban areas, or
does not serve an area where the incumbent itself offers broadband.
Once the Bureau adopts the urban rate benchmark, the pricing of such a
potential competitor will not be subject to challenge if it at or below
the urban rate benchmark. Stated differently, there will be a
conclusive presumption that the pricing of any operator with non-
promotional rates below the urban rate benchmark is reasonable. In the
event the challenge process is underway prior to the publication of the
urban rate benchmark resulting from the urban rate survey, however, the
Bureau will need a simple, administratively workable method of
determining whether the price cap carrier has made a prima facie case
regarding pricing that shifts the burden to the other provider to
respond. In the Phase II Service Obligations Public Notice, the Bureau
sought comment on whether to adopt on an interim basis reasonable
comparability benchmarks of $37 for voice service and $60 for broadband
service. The Bureau now adopts such an approach on an interim basis,
which will enable the Bureau to quickly and efficiently adjudicate
challenges to the extent that process occurs before the adoption of the
urban rate benchmark.
43. In order to make a prima facie case to proceed with a challenge
in situations where the conclusive presumptions discussed above do not
apply, a price cap carrier seeking to overturn the classification of a
particular block as served based on a lack of reasonably comparable
pricing would need to demonstrate that the provider's advertised non-
promotional price for the lowest cost broadband service offering is
above $60 and/or the provider's advertised non-promotional price for
the lowest cost voice service offering is above $37. If the price cap
carrier successfully makes such a showing, the burden then would shift
to the other provider to submit evidence that its rates are in fact
reasonably comparable. The provider can defeat the challenge by
demonstrating either that: (1) It does in fact offer a qualifying
broadband offering at a price at or below $60 and a voice offering at
or below $37; (2) its rates nonetheless should be deemed reasonably
comparable because it offers a more robust broadband service than the
minimum requirements established for price cap carriers accepting Phase
II support; or (3) its rates are the same as those of other providers
in nearby urban markets where there are two or more providers offering
fixed services meeting the Commission's standards.
44. The Bureau now addresses what showing is necessary when a
provider is challenging the initial designation of a census block as
unserved, arguing that instead the block should be treated as served by
the provider. Prior to adoption of the urban rate benchmark, the
provider may demonstrate that (1) it offers a qualifying broadband
offering at a price at or below $60 and a voice offering at or below
$37; (2) its rates nonetheless should be deemed reasonably comparable
because it offers a more robust broadband service than the minimum
requirements established for price cap carriers accepting Phase II
[[Page 70888]]
support; (3) it offers service meeting or exceeding the specified
performance requirements for the same or lower rates in rural areas as
it does for fixed wireline offerings in urban areas; or (4) both it and
the price cap carrier are serving that census block and therefore its
rates should be presumed reasonably comparable. After the adoption of
the urban rate benchmark, the provider may present evidence that its
rates are lower than the benchmark. If it successfully makes any of
these showings, and the price cap carrier fails to offer sufficient
contrary evidence, the provider will be deemed to be offering
reasonably comparable rates. In responding to an unserved-to-served
challenge, price cap carriers may contest the factual assertions made
by the provider.
III. Procedural Matters
A. Paperwork Reduction Act
45. This document contains new information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. 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, the Bureau notes that pursuant to the Small
Business Paperwork Relief Act of 2002, they previously sought specific
comment on how the Commission might further reduce the information
collection burden for small business concerns with fewer than 25
employees.
46. In this present document, the Bureau has assessed the effects
of requiring price cap carriers to report certain information related
to their Phase II service obligations. As all price cap carriers employ
more than 25 employees, these changes will have no impact on businesses
with fewer than 25 employees. Some changes adopted in this Order affect
how unsubsidized competitors report information related to the
challenge process. Unsubsidized competitors may be businesses with
fewer than 25 employees. However, the changes adopted herein fall under
previous OMB approval for the Phase II challenge process.
B. Final Regulatory Flexibility Certification
47. The Regulatory Flexibility Act of 1980, as amended (RFA)
requires that a regulatory flexibility analysis be prepared for
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).
48. The metrics and standards for determining compliance with the
Commission's service requirements contained in the ``Price Cap Carrier
Obligations'' section of this Order do not have a significant economic
impact on a substantial number of small entities. The requirements in
that section only directly affect price cap carriers that ultimately
elect to accept Phase II support through the state-level commitment.
The vast majority of these affected carriers are not small businesses.
As separate and independent grounds, we also conclude that articulating
objective quantitative metrics for demonstrating compliance with the
standards adopted by the Commission creates only a de minimis economic
impact. The metrics and standards adopted in the ``Unsubsidized
Competitors'' section of this Order could affect a substantial number
of small entities, depending on how many such entities participate in
the challenge process. However, in setting the proxy by which we will
determine whether an unsubsidized competitor offers 4 Mbps/1 Mbps
service and stating a how an unsubsidized competitor can make a showing
that its rates are reasonably comparable, we create only a de minimis
economic impact. Therefore, we certify that the requirements of this
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 the Small Business Regulatory Enforcement Fairness Act of
1996, see 5 U.S.C. 801(a)(1)(A). In addition, the order and this
certification will be sent to the Chief Counsel for Advocacy of the
Small Business Administration, and will be published in the Federal
Register. See 5 U.S.C. 605(b).
C. Congressional Review Act
49. The Commission will send a copy of this order to Congress and
the Government Accountability Office pursuant to the Congressional
Review Act.
IV. Ordering Clauses
50. Accordingly, it is ordered that, pursuant to sections 1, 4(i),
5(c), 201(b), 214, 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), 155(c), 201(b), 214, 254, 1302, sections 0.91 and
0.291 of the Commission's rules, 47 CFR 0.91, 0.291, and the
delegations of authority in paragraphs 112, 170, and 171 of the USF/ICC
Transformation Order, FCC 11-161, this Report and Order is adopted,
effective thirty (30) days after publication of the text or summary
thereof in the Federal Register, except for the provisions subject to
the PRA, which will become effective upon announcement in the Federal
Register of OMB approval of the subject information collection
requirements.
Federal Comunications Commission.
Kimberly A. Scardino,
Chief, Telecommunications Access Policy Division, Wireline Competition
Bureau.
[FR Doc. 2013-28341 Filed 11-26-13; 8:45 am]
BILLING CODE 6712-01-P