[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Rules and Regulations]
[Pages 28840-28847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11479]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[WC Docket No. 10-90, CC Docket No. 01-92; DA 14-434]


Connect America Fund; Developing a Unified Intercarrier 
Compensation Regime

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission's 
Wireline Competition Bureau clarifies and amends certain provisions of 
the Commission's new rules relating to intercarrier compensation 
transformation reforms adopted in the USF/ICC Transformation Order.

DATES: Effective June 19, 2014.

FOR FURTHER INFORMATION CONTACT: Pamela Arluk, Wireline Competition 
Bureau, Pricing Policy Division (202) 418-1520 or (202) 418-0484 (TTY); 
or Robin Cohn, Wireline Competition Bureau, Pricing Policy Division 
(202) 418-1520 or (202) 418-0484 (TTY).

SUPPLEMENTARY INFORMATION: This is a summary of the Wireline 
Competition Bureau's Order in WC Docket No. 10-90 and CC Docket No. 01-
92, adopted and released on March 31, 2014. The full text of this 
document is available electronically via ECFS at http://fjallfoss.fcc.gov/ecfs/ or may be downloaded at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-14-434A1.pdf. The full 
text of this document is also available for public inspection during 
regular business hours in the FCC Reference Center, 445 12th Street 
SW., Room CY-A257, Washington, DC 20554. The complete text may be 
purchased from the Commission's copy contractor, Best Copy and 
Printing, Inc. (BCPI), 445 12th Street SW., Room CY-B402, Washington, 
DC 20554, (202) 488-5300 (voice) or (202) 488-5563 (facsimile) or via 
email at [email protected]. To request materials in accessible formats 
for people with disabilities (e.g. braille, large print, electronic 
files, audio format, etc.) or to request reasonable accommodations 
(e.g. accessible format documents, sign language interpreters, CART, 
etc.), send an email to [email protected] or call the Consumer & 
Governmental Affairs Bureau at (202) 418-0530 (voice) or (202) 418-0432 
(TTY).

I. Introduction

    1. In the USF/ICC Transformation Order, the Commission delegated to 
the Wireline Competition Bureau (Bureau) the authority to make any rule 
revisions necessary to ensure that the reforms adopted by the 
Commission are properly reflected in the rules, including correction of 
any conflicts between the new or revised rules and addressing of any 
omissions or oversights. In this Order, the Bureau acts pursuant to its 
delegated authority to clarify and correct certain rules relating to 
implementation of the intercarrier compensation (ICC) transition 
adopted in the USF/ICC Transformation Order. Specifically, the Bureau 
clarifies language in sections 51.907 and 51.909 to reflect ongoing 
rate parity in the transition process for price cap and rate-of-return 
local exchange carriers (LECs), consistent with the intent of the USF/
ICC Transformation Order. The Bureau also clarifies certain aspects of 
the Commission's rules relating to the transition of terminating end 
office access rates and the calculation of Eligible Recovery for price 
cap and rate-of-return carriers beginning in 2014. Finally, the Bureau 
clarifies issues related to duplicative recovery and the true-up of 
regulatory fees and revenue calculations.

II. Background

    2. The USF/ICC Transformation Order adopted, among other things, an 
ICC reform timeline including rules that require carriers to adjust, 
over a period of years, many of their legacy ICC rates effective on 
July 1 of each of those years, with the ultimate goal of transitioning 
to a bill-and-keep regime. The Commission also adopted a recovery 
mechanism to mitigate the impact of reduced ICC revenues on carriers 
and to facilitate continued investment in broadband infrastructure 
while providing greater certainty and predictability going forward. The 
recovery mechanism allows incumbent LECs to recover ICC revenues 
reduced due to the ICC reforms, up to an amount defined for each year 
of the transition, which is referred to as ``Eligible Recovery.'' A 
carrier may recover a limited portion of its Eligible Recovery each 
year from its end users through a fixed monthly charge called the 
Access Recovery Charge (ARC), and the remainder of its Eligible 
Recovery for the year, if it so elects, from Connect America Fund ICC 
support.
    3. The Bureau previously clarified and corrected several rules 
adopted in the USF/ICC Transformation Order in response to requests for 
clarification or correction in prior years. In this Order, we clarify 
and correct several rules pertaining to future filings that price cap 
and rate-of-return carriers will make in the 2014 annual access charge 
tariff filings and beyond.

III. Discussion

A. Rate Parity for Interstate and Intrastate Terminating End Office 
Access Service

    4. In 2013, both price cap and rate-of-return regulated incumbent 
LECs were required to reduce certain intrastate switched access rates 
that exceeded comparable interstate switched access rates to interstate 
rate levels using the interstate rate structure. Carriers whose 
intrastate switched access rates were below comparable interstate rates 
generally were not allowed to increase such rates. Beginning in 2014, 
price cap carriers must reduce terminating switched end office and 
reciprocal compensation rates ``by one-third of the differential 
between end office rates and

[[Page 28841]]

$0.0007.'' Rate-of-return carriers must also begin making similar 
reductions using a target rate of $0.005 rather than $0.0007 to 
calculate the reductions. Because some end office rate elements are 
assessed on a per-minute basis and others on a flat-rated basis, the 
transition rules employed composite terminating end office access rates 
to determine the amount by which terminating end office access rates 
were required to be reduced in each year of the transition. The rules 
also employed separate interstate and intrastate composite terminating 
end office access rates to establish the actual rates. To the extent 
any flat-rated elements are included in end office rates, the use of 
separate interstate and intrastate composites in determining rate 
reductions would take interstate and intrastate rates out of parity as 
terminating end office access rates are reduced.
    5. Price cap carriers work cooperatively with Bureau staff each 
year to develop tariff review plan spreadsheets that support their 
annual access filings. In the course of such discussions, some carriers 
have questioned whether the use of separate interstate and intrastate 
rate composites to measure whether intrastate terminating end office 
access rates do not exceed interstate terminating end office access 
rates is consistent with the USF/ICC Transformation Order. These 
carriers assert that the Commission intended for interstate and 
intrastate rates to remain at parity as the rate transition proceeds, 
which one interpretation of the existing rules would not always 
achieve. We agree that the Commission intended in the USF/ICC 
Transformation Order for rate parity to be maintained during the 
transition of terminating end office access rates to bill-and-keep 
beginning in 2014. The Commission noted that varying access rates 
``have created incentives for arbitrage and pervasive competitive 
distortions within the industry.'' The Commission further noted that 
``[b]y transitioning all traffic in a coordinated manner, we will 
minimize opportunities for arbitrage that could be presented by 
disparate intrastate rates.'' Having reached rate parity whenever 
possible in 2013, and reduced rate disparity in other cases, we find 
that a methodology that could be interpreted to increase rate disparity 
for two years, only to return to rate parity in the succeeding year, is 
inconsistent with the objectives described above. Thus, we clarify that 
the Commission intended to achieve parity between interstate and 
intrastate rates, not interstate and intrastate composite rates. While 
the composite rate is necessary to calculate the required rate 
reductions, we clarify that sole reliance on composite rates, rather 
than the rates themselves, is unnecessary to ensure that intrastate 
terminating end office access rates do not exceed comparable interstate 
terminating end office access rates. Therefore, as set forth in the 
Appendix, we revise sections 51.907 and 51.909 to clarify that 
achieving rate parity for the access rates themselves, not the 
composite rate for price cap and rate-of-return LECs, was the intent of 
the USF/ICC Transformation Order. Under this approach, carriers may 
continue to establish interstate terminating end office access rate 
caps that do not exceed the target composite terminating end office 
access rate for each year in the transition in the manner the adopted 
rules require. To achieve rate parity, the interstate rate caps so 
determined will be used in setting intrastate rate caps for the 
comparable intrastate terminating end office access elements rather 
than developing new intrastate rate caps that would satisfy a 
separately determined intrastate composite terminating end office 
access rate. To ensure the maximum rate parity, intrastate terminating 
end office rates will be set at the interstate rate level for the 
comparable rate element unless the intrastate rate for that rate 
element is lower, in which case the lower rate will be used. As 
terminating end office rates decrease, intrastate terminating end 
office rates that are below comparable interstate rates will begin to 
be reduced when rate parity is reached. This approach to developing 
reduced rates best achieves the Commission's goals of maintaining rate 
parity during the transition process.
    6. An overview of the calculations necessary for reducing 
terminating end office access rates beginning July 1, 2014, as 
described above, is as follows. In broad terms, the reductions are 
based on rates developed to comply with targets developed from 
interstate rates and demand, with the interstate rates generally being 
used to establish intrastate rate levels. Using 2014 as a model, 
carriers first establish the 2011 Baseline Composite Terminating End 
Office Access Rate, which reflects interstate rates and demand. Next, 
carriers must calculate the 2014 Target Composite Terminating End 
Office Access Rate, by reducing the 2011 Baseline Composite Terminating 
End Office Access Rate by one-third of the difference between the 2011 
Baseline Composite Terminating End Office Access Rate and $0.0007 for 
price cap carriers and $0.005 for rate-of-return carriers. Carriers 
will then develop terminating interstate end office access rates for 
their interstate tariffs that are consistent with the target composite 
rate. These terminating interstate end office access rates will be used 
to establish terminating intrastate end office access rates for 
comparable rate elements unless the intrastate rate for a rate element 
is lower than the interstate rate for that element. Carriers have the 
option to elect to charge a single per minute rate element for 
terminating end office access in both their interstate and intrastate 
tariffs that is no greater than the target terminating end office 
access rate for the year in question. This option is contingent on such 
an electing carrier's intrastate terminating end office access rates 
being at parity with the interstate rates if separate rates for 
different rate elements were used. Below, we clarify certain aspects of 
these calculations to ensure consistent implementation among carriers.

B. Calculation of Terminating End Office Access Rates

    7. 2011 Baseline Composite Terminating End Office Access Rate. 
Section 51.907(d) and 51.909(d) of the Commission's rules specify the 
access charge rate reductions that price cap and rate-of-return 
carriers, respectively, must make to terminating end office access 
rates in 2014. The first step in this process is for carriers to 
calculate the ``2011 Baseline Composite Terminating End Office Access 
Rate,'' which is calculated using Fiscal Year 2011 demand and the End 
Office Access Service rates at the levels in effect on December 29, 
2011. This composite rate is calculated this one time, and is used in 
making calculations in subsequent years. Section 51.907(d)(2)(i), which 
is applicable to price cap carriers, does not specify whether price cap 
carriers should use interstate or intrastate demand and rates in making 
this calculation, although the comparable rule applicable to rate-of-
return carriers specifies that it should be interstate rates and 
demand. The absence of a jurisdictional designation for the demand and 
rates to be used by price cap carriers creates potential ambiguity in 
the calculation of the required rate reductions.
    8. We clarify that the 2011 Fiscal Year interstate demand and rates 
are to be utilized for the reasons explained below. The ICC rate 
transition started by capping interstate and intrastate switched access 
rates for price cap carriers at December 29, 2011, levels. The 2012 and 
2013 transition steps reduced ``Transitional Intrastate Access

[[Page 28842]]

Service'' rates (which included reduction of end office rates that were 
above interstate switched access rates to interstate switched access 
rate levels), but did not require any changes to interstate switched 
access rates during that period. The 2014 annual access tariff filing 
begins the transition process of focusing annual rate reductions to 
interstate and intrastate Terminating End Office Access rates from 
their 2013-14 rate levels. Because intrastate switched access rates 
above comparable interstate rates are now reduced to interstate levels, 
2011 intrastate rate and demand data are no longer relevant to the 
calculation of a baseline from which to reduce Terminating End Office 
Access Service rates in 2014. The calculation of the 2011 Baseline 
Composite Terminating End Office Access Rate, which is made for the 
first time this year, thus should only include 2011 Fiscal Year 
interstate demand and rates. We revise section 51.907(d)(2)(i) 
accordingly, as set forth in the Appendix, to eliminate any ambiguity 
and to facilitate the annual tariff filing process. We note further 
that using interstate rates and demand in calculating the required 
terminating end office access rate reductions for price cap carriers is 
consistent with how we require rate-of-return carriers to calculate 
their 2011 Baseline Composite Terminating End Office Access Rates.
    9. Target Composite Terminating End Office Access Rate. Beginning 
this year, the ICC transition steps require carriers to calculate a 
Target Composite Terminating End Office Access Rate in certain years in 
which a target rate is not specified to determine the amount of 
reductions that must be made that year. Carriers have raised the 
question of whether separate interstate and intrastate target composite 
rates are required. The above clarification that the Commission 
intended rate parity between interstate and intrastate rates to apply 
during the reductions in terminating end office access rates renders 
this question moot. We therefore clarify that there is only one Target 
Composite Terminating End Office Access Rate each year, which is to be 
determined consistent with sections 51.907(d)(2)(iii) and 
51.909(d)(3)(ii).
    10. To begin the implementation of rate parity, a carrier may 
develop terminating end office access rates for the interstate 
jurisdiction whose composite rate does not exceed the composite target 
terminating end office access rate for the year in question. The 
carrier's intrastate terminating end office access rates may not exceed 
the carrier's interstate terminating end office access rates so 
developed for the comparable rate elements. A carrier's terminating 
intrastate end office access rates are further constrained in that the 
carrier may not increase any existing intrastate rate during this 
transition. Alternatively, the carrier may assess the target 
terminating end office access rate in both the interstate and 
intrastate jurisdictions as long as the carrier's intrastate 
terminating end office access rates would all be at parity with the 
interstate rates under the preceding approach. We amend the rules 
accordingly, as set forth in the Appendix.

C. Other Corrections or Clarifications

    11. Recovery Mechanism Calculations. Sections 51.915(d)(1)(iii)(C), 
(iv)(C), and (v)(C) refer to the ``[i]ntrastate 2014 Composite 
Terminating End Office Access Rate'' in the process for establishing 
the rate level from which reductions in terminating end office rates 
are to be measured for purposes of determining a price cap carrier's 
Eligible Recovery for 2014. However, no methodology for calculating a 
2014 Composite Terminating End Office Access Rate is specified in the 
rules. We clarify the procedure to be used by adding a definition of 
``Intrastate 2014 Composite Terminating End Office Access Rate'' that 
specifies the required calculation method for price cap carriers. This 
definition is consistent with the calculation required under section 
51.907(d) and uses 2011 Fiscal Year demand to weight the different 
rates used in calculating the composite rate in the same manner that 
the corresponding price cap carrier ICC rate transition rules weight 
different rates used to calculate composites. Consistent with the 
clarification that rate parity was to be maintained during the 
transition, we revise the introductory language in sections 
51.915(d)(1)(iii)(C), (iv)(C) and (v)(C) that relied on composite rate 
comparisons to determine if rates had been reduced. The clarifying 
language makes clear that the recovery permitted by subparagraphs (d), 
(e), and (f) is allowed only if intrastate Terminating End Office 
Access Service rates are reduced in the year in question.
    12. We also correct an inadvertent omission in section 51.907(f) by 
adding language clarifying that a price cap carrier has the option, in 
2016, to implement a single per minute rate element for terminating End 
Office Access Service at a rate no greater than the 2016 Target 
Composite Terminating End Office Access Rate. This clarification is 
consistent with price cap carrier options in 2014 and 2015 and thus 
tracks the description in sections 51.907(d)(2)(iii) and (e)(1)(ii) of 
the Commission's rules specifying a price cap carrier's pricing options 
for terminating end office access service in those years.
    13. We also make the following clarifications and corrections to 
the rate-of-return ICC transition and recovery rules. First, we delete 
the word ``interstate'' in each instance when it referred to a 
particular year's target composite rate. This change reflects our 
clarification that there is only one target composite rate each year 
starting in 2014, not separate interstate and intrastate target 
composite rates. Second, we clarify that in calculating the target 
composite terminating end office access rates in 2017 and 2018, rate-
of-return carriers should use the 2016 Target Composite Terminating End 
Office Access Rate rather than the Terminating End Office Access 
Service Rate as of July 1, 2016 as the initial rate to reflect the 
uniform transition the Commission intended rather than requiring a 
carrier with a very low terminating rate to have to further reduce its 
rates before the uniform target rate falls below its rates. Finally, we 
add or delete ``interstate'' or ``intrastate'' in several places to 
more clearly reflect the intended rates.
    14. Access Recovery Charge True-Up. Section 51.917(d) outlines the 
process for determining Eligible Recovery for rate-of-return carriers. 
The Eligible Recovery calculation set forth in section 
51.917(d)(1)(iii)(D) requires rate-of-return carriers to, among other 
things, subtract from their Base Period Revenues (as reduced by 
multiplying these revenues by the Rate-of-Return Carrier Baseline 
Adjustment Factor) ``an amount equal to True-up Revenues for Access 
Recovery Charges for the year beginning July 1, 2012.'' In the 2013 ICC 
Clarification Order, we substituted a defined term for the previous 
calculation of the ARC true-up. This substitution resulted in 
inadvertently reversing the order of the calculation, which would have 
the effect of reducing Eligible Recovery when it should have been 
increased, or vice versa. To correct this error in the rule language, 
we add the clause ``multiplied by negative one'' to the rule language 
in order to have the calculation described in the rule produce the 
intended result.
    15. True-Up of Regulatory Fees. For rate-of-return carriers, 
telecommunications relay services (TRS) fees, regulatory fees, and 
North American Numbering Plan administration (NANPA) fees were 
historically recovered, in part, through interstate switched access 
rates. When

[[Page 28843]]

the Commission adopted a cap on interstate switched access rate 
elements in the USF/ICC Transformation Order, it did not address how 
carriers should recover any increases in these regulatory fees, or 
reflect any reductions in such fees in future years. In 2012, we 
clarified that increases in these regulatory fees that would have been 
assigned to capped interstate switched access services could be 
recovered through subscriber line charges (SLC) and/or Eligible 
Recovery under certain conditions. We have been asked informally 
whether any regulatory fees recovered pursuant to this methodology in 
the 2012-13 tariff period are to be trued-up in the calculation of 
2014-15 Eligible Recovery. Regulatory fees are based on projected 
amounts just as is going-forward, tariff-year demand for rate elements 
in the calculation of a carrier's Eligible Recovery. Given the 
projected nature of these items, similar treatment in the true-up 
process is warranted. We clarify that if a rate-of-return carrier 
included an amount for these fees in its Eligible Recovery calculation 
in any year, it should reflect the amounts of any true-ups for the 
referenced regulatory fees as increases in, or reductions to, Eligible 
Recovery calculations on the same schedule that ARCs are trued-up--
i.e., two years following their initial inclusion.
    16. Duplicative Recovery. Sections 51.915(d)(2) and 
51.917(d)(1)(vii) prohibit price cap and rate-of-return carriers, 
respectively, from duplicative recovery. Specifically, the rules 
provide that if a carrier ``recovers any costs or revenues that are 
already being recovered as Eligible Recovery through Access Recovery 
Charges or the Connect America Fund from another source, that carrier's 
ability to recover reduced switched access revenue from Access Recovery 
Charges or the Connect America Fund shall be reduced to the extent it 
receives duplicative recovery.'' The rules do not, however, specify how 
Eligible Recovery should be adjusted to reflect any duplicative 
recovery, and carriers have informally inquired about how such 
adjustments should be made. We address this omission by revising the 
rules as set forth in the Appendix to provide that any duplicative 
recovery shall be reflected through reductions to the carrier's 
Eligible Recovery in its annual tariff supporting materials. This 
approach to addressing duplicative recovery is appropriate because it 
is carrier-specific and narrowly tailored to result in necessary 
Eligible Recovery reductions in specific years.
    17. Single Per-Minute Rate Element for Terminating End Office 
Access Service. Beginning in 2014, the ICC transition rules permit both 
price cap and rate-of-return carriers, under certain conditions, to 
elect to implement a single per-minute rate element for Terminating End 
Office Access Service that is no greater than the Target Composite 
Terminating End Office Access rate for the respective year. Beginning 
on July 1, 2014, many carriers will begin to assess rates for several 
terminating end office rate elements, one of which will be a local 
switching charge assessed on all terminating minutes of use. Several 
carriers have informally asked whether, if they assess the single 
composite rate, which would be assessed on all terminating end office 
traffic, they can tariff it as a terminating switched access rate to 
avoid the expenses associated with revising their billing systems to 
create a new rate element. We believe that this approach implements the 
reforms adopted in the USF/ICC Transformation Order in a manner that 
would reduce implementation costs and burdens without any offsetting 
negative concerns. We thus clarify that both price cap and rate-of-
return carriers may tariff the single composite rate as a terminating 
local switching access rate, consistent with the ICC transition, as 
long as all other rate elements associated with terminating end office 
access service are reduced to zero. If its Target Composite Terminating 
End Office Access Rate is higher than the terminating local switching 
rate such carrier tariffed the previous year that will not constitute 
an impermissible rate increase.
    18. Revenue True-Ups. Carriers are required this year to begin 
making true-ups to certain revenue amounts projected in 2012 to reflect 
differences between projected and actual demand. To measure actual 
demand for purposes of making the true-up calculation, carriers will 
need to establish a cutoff date for finalizing the measured demand. 
Sections 51.917(d)(1)(v) and (vi) direct rate-of-return carriers who 
receive ARC or other revenues after the period used to measure the 
adjustments to reflect the differences between estimated and actual 
revenues, to treat such payments as actual revenue in the year the 
payment is received, and to reflect this as an additional adjustment 
for that year. This requirement addresses the potential that carriers 
could affect the true-up calculation by shifting the timing of the 
collection of revenues absent a requirement that later collections will 
need to be recognized in subsequent filings. The codified price cap 
rules are silent as to how to apply ARC revenues received after the 
cutoff date to adjust price cap carriers' eligible recovery in future 
years. This was clearly an omission because the USF/ICC Transformation 
Order did not specify that it was treating carriers differently in this 
regard--thus, the silence in the price cap rules is best interpreted 
consistently with the approach expressly adopted for rate-of-return 
carriers. To correct this omission, we amend the codified rules, as set 
forth in the Appendix, to make clear that price cap carriers will 
comply with the same requirements as rate-of-return carriers with 
respect to ARC revenues. We also take this opportunity to clarify that 
carriers should use revenues for services provided in tariff year 2012-
13, collected through December 31, 2013, as a cut-off for making their 
true-ups this year. This will ensure that filings are consistent among 
carriers and will ease review, and the December 31 date gives carriers 
sufficient time to prepare their filings. Carriers shall also use 
December 31 as the cutoff date in future true-up calculations.
    19. NECA has asked whether, in making the true-up calculations, it 
could use the difference between projected revenues and realized 
revenues. The rules generally provide for this calculation to be made 
by multiplying the rate for the service in question by projected demand 
less actual realized demand. Because projected and realized revenues 
are summations of the results of the calculations (including rates and 
demand), the proposed methodology should produce the same results as 
the process provided for in the rules, as long as the carrier is 
charging the maximum allowed rate. We find that the proposed 
methodology will significantly simplify the process and therefore 
clarify that all carriers may use revenue differences in making their 
true-up adjustments, as long as the carrier is charging the maximum 
allowed rate.

IV. Procedural Matters

A. Paperwork Reduction Act

    20. This document does not contain any new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA). Therefore, the Order does not contain any new or modified 
information collection burdens for small businesses with fewer than 25 
employees, pursuant to the Small Business Paperwork Relief Act of 2002.

B. Final Regulatory Flexibility Act Certification

    21. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires

[[Page 28844]]

agencies to prepare a regulatory flexibility analysis 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).
    22. We hereby certify that the rule revisions adopted in this Order 
will not have a significant economic impact on a substantial number of 
small entities. This Order amends rules adopted in the USF/ICC 
Transformation Order by correcting conflicts between the new or revised 
rules and existing rules, as well as addressing omissions or 
oversights. These revisions do not create any burdens, benefits, or 
requirements that were not addressed by the Final Regulatory 
Flexibility Analysis attached to the USF/ICC Transformation Order. The 
Commission will send a copy of this Order, including a copy of this 
final certification, to the Chief Counsel for Advocacy of the SBA. In 
addition, the Order (or a summary thereof) and certification will be 
published in the Federal Register.

C. Congressional Review Act

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

V. Ordering Clauses

    24. Accordingly, it is ordered, that pursuant to the authority 
contained in sections 1, 2, 4(i), 201-203, 220, 251, 252, 254, 303(r) 
and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
152, 154(i), 201-203, 220, 251, 252, 254, 303(r) and 403, and pursuant 
to sections 0.91, 0.201(d), 0.291, 1.3, and 1.427 of the Commission's 
rules, 47 CFR 0.91, 0.201(d), 0.291, 1.3 and 1.427, and pursuant to the 
delegation of authority in paragraph 1404 of 26 FCC Rcd 17663 (2011), 
this Order is adopted, effective thirty (30) days after publication of 
the text or summary thereof in the Federal Register.
    25. It is further ordered that part 51 of the Commission's rules, 
47 CFR sections 51.907, 51.909, 51.915, and 51.917 are amended as set 
forth in the document, and such rule amendments shall be effective 30 
days after the date of publication of the rule amendments in the 
Federal Register.
    26. It is further ordered that the Commission shall send a copy of 
this Order to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act.
    27. 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.


Federal Communications Commission.
Deena M. Shetler,
Associate Bureau Chief, Wireline Competition Bureau.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 51 as follows:

PART 51--INTERCONNECTION

0
1. The authority citation for part 51 continues to read as follows:

    Authority: Sections 1-5, 7, 201-05, 207-09, 218, 220, 225-27, 
251-54, 256, 271, 303(r), 332, 706 of the Telecommunication Act of 
1996, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-
05, 207-09, 218, 220, 225-27, 251-54, 256, 271, 303(r), 332, 1302, 
47 U.S.C. 157 note, unless otherwise noted.

Subpart J--Transitional Access Service Pricing

0
2. Amend Sec.  51.907 by revising paragraphs (d)(2)(i) and (iii), 
(e)(1)(ii), and (f) to read as follows:


Sec.  51.907  Transition of price cap carrier access charges.

* * * * *
    (d) * * *
    (2) * * *
    (i) Each Price Cap Carrier shall calculate the 2011 Baseline 
Composite Terminating End Office Access Rate. The 2011 Baseline 
Composite Terminating End Office Access Rate means the Composite 
Terminating End Office Access Rate calculated using Fiscal Year 2011 
interstate demand multiplied by the interstate End Office Access 
Service rates at the levels in effect on December 29, 2011, and then 
dividing the result by 2011 Fiscal Year interstate local switching 
demand.
* * * * *
    (iii) Beginning July 1, 2014, no Price Cap Carrier's interstate 
Composite Terminating End Office Access Rate shall exceed its 2014 
Target Composite Terminating End Office Access Rate. A price cap 
carrier shall determine compliance by calculating interstate Composite 
Terminating End Office Access Rates using the relevant Fiscal Year 2011 
interstate demand multiplied by the respective interstate rates as of 
July 1, 2014, and then dividing the result by the relevant 2011 Fiscal 
Year interstate terminating local switching demand. A price cap 
carrier's intrastate terminating end office access rates may not exceed 
the comparable interstate terminating end office access rates. In the 
alternative, any Price Cap Carrier may elect to implement a single per 
minute rate element for both interstate and intrastate terminating End 
Office Access Service no greater than the 2014 Target Composite 
Terminating End Office Access Rate if its intrastate terminating end 
office access rates would be at rate parity with its interstate 
terminating end office access rates.
* * * * *
    (e) * * *
    (1) * * *
    (ii) Beginning July 1, 2015, no Price Cap Carrier's interstate 
Composite Terminating End Office Access Rate shall exceed its 2015 
Target Composite Terminating End Office Access Rate. A price cap 
carrier shall determine compliance by calculating interstate Composite 
Terminating End Office Access Rates using the relevant Fiscal Year 2011 
interstate demand multiplied by the respective interstate rates as of 
July 1, 2015, and then dividing the result by the relevant 2011 Fiscal 
Year interstate terminating local switching demand. A price cap 
carrier's intrastate terminating end office access rates may not exceed 
the comparable interstate terminating end office access rates. In the 
alternative, any Price Cap Carrier may elect to implement a single per 
minute rate element for both interstate and intrastate terminating End 
Office Access Service no greater than the 2015 Target Composite 
Terminating End Office Access Rate if its intrastate terminating end 
office access rates would be at rate parity with its interstate 
terminating end office access rates.
* * * * *
    (f) Step 5. Beginning July 1, 2016, notwithstanding any other 
provision of the Commission's rules, each Price Cap Carrier shall 
establish interstate terminating End Office Access Service rates such 
that its Composite

[[Page 28845]]

Terminating End Office Access Service rate does not exceed $0.0007 per 
minute. A price cap carrier shall determine compliance by calculating 
interstate Composite Terminating End Office Access Rates using the 
relevant Fiscal Year 2011 interstate demand multiplied by the 
respective interstate rates as of July 1, 2016, and then dividing the 
result by the relevant 2011 Fiscal Year interstate terminating local 
switching demand. A price cap carrier's intrastate terminating end 
office access rates may not exceed the comparable interstate 
terminating end office access rates. In the alternative, any Price Cap 
Carrier may elect to implement a single per-minute rate element for 
both interstate and intrastate Terminating End Office Access Service no 
greater than the 2016 Target Composite Terminating End Office Access 
Rate if its intrastate terminating end office access rates would be at 
rate parity with its interstate terminating end office access rates. 
Nothing in this section obligates or allows a Price Cap Carrier that 
has intrastate rates lower than its functionally equivalent interstate 
rates to make any intrastate tariff filing or intrastate tariff 
revisions raising such rates.
* * * * *

0
3. Amend 51.909 by revising paragraphs (d)(3)(ii) and (iii), (e)(1)(i) 
and (ii), (f), (g)(1) introductory text, (g)(1)(i) and (ii), (h)(1) 
introductory text, and (h)(1)(i) and (ii) to read as follows:


Sec.  51.909  Transition of rate-of-return carrier access charges.

* * * * *
    (d) * * *
    (3) * * *
    (ii) Each Rate-of-Return Carrier shall calculate its 2014 Target 
Composite Terminating End Office Access Rate. The 2014 Target Composite 
Terminating End Office Access Rate means $0.005 per minute plus two-
thirds of any difference between the 2011 Baseline Composite 
Terminating End Office Access Rate and $0.005 per minute.
    (iii) Beginning July 1, 2014, no Rate-of-Return Carrier's 
interstate Composite Terminating End Office Access Rate shall exceed 
its 2014 Target Composite Terminating End Office Access Rate. A rate-
of-return carrier shall determine compliance by calculating interstate 
Composite Terminating End Office Access Rates using the relevant 
projected interstate demand for the tariff period multiplied by the 
respective interstate rates as of July 1, 2014, and then dividing by 
the projected interstate terminating end office local switching demand 
for the tariff period. A rate-of-return carrier's intrastate 
terminating end office access rates may not exceed the comparable 
interstate terminating end office access rates. In the alternative, any 
Rate-of-Return Carrier may elect to implement a single per minute rate 
element for both interstate and intrastate terminating End Office 
Access Service no greater than the 2014 Target Composite Terminating 
End Office Access Rate if its intrastate terminating end office access 
rates would be at rate parity with its interstate terminating end 
office access rates.
* * * * *
    (e) * * *
    (1) * * *
    (i) Each Rate-of-Return Carrier shall calculate its 2015 Target 
Composite Terminating End Office Access Rate. The 2015 Target Composite 
Terminating End Office Access Rate means $0.005 per minute plus one-
third of any difference between the 2011 Baseline Composite Terminating 
End Office Access Rate and $0.005 per minute.
    (ii) Beginning July 1, 2015, no Rate-of-Return Carrier's interstate 
Composite Terminating End Office Access Rate shall exceed its 2015 
Target Composite Terminating End Office Access Rate. A rate-of-return 
carrier shall determine compliance by calculating interstate Composite 
Terminating End Office Access Rates using the relevant projected 
interstate demand for the tariff period multiplied by the respective 
interstate rates as of July 1, 2015, and then dividing by the projected 
interstate terminating end office local switching demand for the tariff 
period. A rate-of-return carrier's intrastate terminating end office 
access rates may not exceed the comparable interstate terminating end 
office access rates. In the alternative, any Rate-of-Return Carrier may 
elect to implement a single per minute rate element for both interstate 
and intrastate terminating End Office Access Service no greater than 
the 2015 Target Composite Terminating End Office Access Rate if its 
intrastate terminating end office access rates would be at rate parity 
with its interstate terminating end office access rates. Nothing in 
this section obligates or allows a Rate-of-Return Carrier that has 
intrastate rates lower than its functionally equivalent interstate 
rates to make any intrastate tariff filing or intrastate tariff 
revisions raising such rates.
* * * * *
    (f) Step 5. Beginning July 1, 2016, notwithstanding any other 
provision of the Commission's rules, each Rate-of-Return Carrier shall 
establish interstate terminating End Office Access Service rates such 
that its interstate Composite Terminating End Office Access Service 
rate does not exceed $0.005 per minute. A rate-of-return carrier shall 
determine compliance by calculating interstate Composite Terminating 
End Office Access Rates using the relevant projected interstate demand 
for the tariff period multiplied by the respective interstate rates as 
of July 1, 2016, and then dividing by the projected interstate 
terminating end office local switching demand for the tariff period. A 
rate-of-return carrier's intrastate terminating end office access rates 
may not exceed the comparable interstate terminating end office access 
rates. In the alternative, any Rate-of-Return Carrier may elect to 
implement a single per minute rate element for both interstate and 
intrastate terminating End Office Access Service no greater than the 
2016 Target Composite Terminating End Office Access Rate if its 
intrastate terminating end office access rates would be at rate parity 
with its interstate terminating end office access rates. Nothing in 
this section obligates or allows a Rate-of-Return Carrier that has 
intrastate rates lower than its functionally equivalent interstate 
rates to make any intrastate tariff filing or intrastate tariff 
revisions raising such rates.
    (g) * * *
    (1) Each Rate-of-Return Carrier shall establish interstate and 
intrastate rates for terminating End Office Access Service using the 
following methodology:
    (i) Each Rate-of-Return Carrier shall calculate its 2017 Target 
Composite Terminating End Office Access Rate. The 2017 Target Composite 
Terminating End Office Access Rate means $0.0007 per minute plus two-
thirds of any difference between that carrier's 2016 Target Composite 
Terminating End Office Access Rate and $0.0007 per minute.
    (ii) Beginning July 1, 2017, no Rate-of-Return Carrier's interstate 
Composite Terminating End Office Access Rate shall exceed its 2017 
Target Composite Terminating End Office Access Rate. A rate-of-return 
carrier shall determine compliance by calculating interstate Composite 
Terminating End Office Access Rates using the relevant projected 
interstate demand for the tariff period multiplied by the respective 
interstate rates as of July 1, 2017, and then dividing by the projected 
interstate terminating end office local switching demand for the tariff 
period. A rate-of-return carrier's intrastate terminating end office 
access rates may not exceed the comparable interstate terminating end 
office access rates. In the

[[Page 28846]]

alternative, any Rate-of-Return Carrier may elect to implement a single 
per minute rate element for both interstate and intrastate terminating 
End Office Access Service no greater than the 2017 Target Composite 
Terminating End Office Access Rate if its intrastate terminating end 
office access rates would be at rate parity with its interstate 
terminating end office access rates. Nothing in this section obligates 
or allows a Rate-of-Return Carrier that has intrastate rates lower than 
its functionally equivalent interstate rates to make any intrastate 
tariff filing or intrastate tariff revisions raising such rates.
* * * * *
    (h) * * *
    (1) Each Rate-of-Return Carrier shall establish interstate and 
intrastate rates for terminating End Office Access Service using the 
following methodology:
    (i) Each Rate-of-Return Carrier shall calculate its 2018 Target 
Composite Terminating End Office Access Rate. The 2018 Target Composite 
Terminating End Office Access Rate means $0.0007 per minute plus one-
third of any difference between that carrier's 2016 Target Composite 
Terminating End Office Access Rate and $0.0007 per minute.
    (ii) Beginning July 1, 2018, no Rate-of-Return Carrier's interstate 
Composite Terminating End Office Access Rate shall exceed its 2018 
Target Composite Terminating End Office Access Rate. A rate-of-return 
carrier shall determine compliance by calculating interstate Composite 
Terminating End Office Access Rates using the relevant projected 
interstate demand for the tariff period multiplied by the respective 
interstate rates as of July 1, 2018 and then dividing by the projected 
interstate terminating end office local switching demand for the tariff 
period. A rate-of-return carrier's intrastate terminating end office 
access rates may not exceed the comparable interstate terminating end 
office access rates. In the alternative, any Rate-of-Return Carrier may 
elect to implement a single per minute rate element for both interstate 
and intrastate terminating End Office Access Service no greater than 
the 2018 interstate Target Composite Terminating End Office Access Rate 
if its intrastate terminating end office access rates would be at rate 
parity with its interstate terminating end office access rates. Nothing 
in this section obligates or allows a Rate-of-Return Carrier that has 
intrastate rates lower than its functionally equivalent interstate 
rates to make any intrastate tariff filing or intrastate tariff 
revisions raising such rates.
* * * * *

0
4. Amend Sec.  51.915 by adding paragraph (b)(14) and revising 
paragraphs (d)(1)(iii)(B) and (C), (d)(1)(iv)(B) and (C), (d)(1)(v)(B) 
and (C), (d)(1)(vi)(B), (d)(1)(vii)(B), and (d)(2) and adding paragraph 
(d)(4) to read as follows:


Sec.  51.915  Recovery mechanism for price cap carriers.

* * * * *
    (b) * * *
    (14) Intrastate 2014 Composite Terminating End Office Access Rate. 
The Intrastate 2014 Composite Terminating End Office Access Rate as 
used in this section is determined by
    (i) If a separate terminating rate is not already generally 
available, developing separate intrastate originating and terminating 
end office rates in accordance with Sec.  51.907(d)(1) using end office 
access rates at their June 30, 2014, rate caps;
    (ii) Multiplying the existing terminating June 30, 2014, intrastate 
end office access rates, or the terminating rates developed in 
paragraph (b)(14)(i) of this section, by the relevant Fiscal Year 2011 
intrastate demand; and
    (iii) Dividing the sum of the revenues determined in paragraph 
(b)(14)(ii) of this section by 2011 Fiscal Year intrastate terminating 
local switching minutes.
* * * * *
    (d) * * *
    (1) * * *
    (iii) * * *
    (B) The reduction in interstate switched access revenues equal to 
the difference between the 2011 Baseline Composite Terminating End 
Office Access Rate and the 2014 Target Composite Terminating End Office 
Access Rate determined pursuant to Sec.  51.907(d) using Fiscal Year 
2011 terminating interstate end office switching minutes, and then 
multiply by the Price Cap Carrier Traffic Demand Factor;
    (C) If the carrier reduced its 2014 Intrastate Terminating End 
Office Access Rate(s) pursuant to Sec.  51.907(d)(2), the reduction in 
revenues equal to the difference between either the Intrastate 2014 
Composite Terminating End Office Access Rate and the Composite 
Terminating End Office Access Rate based on the maximum terminating end 
office rates that could have been charged on July 1, 2014, or the 2014 
Target Composite Terminating End Office Access Rate, as applicable, 
using Fiscal Year 2011 terminating intrastate end office switching 
minutes, and then multiply by the Price Cap Carrier Traffic Demand 
Factor;
* * * * *
    (iv) * * *
    (B) The reduction in interstate switched access revenues equal to 
the difference between the 2011 Baseline Composite Terminating End 
Office Access Rate and the 2015 Target Composite Terminating End Office 
Access Rate determined pursuant to Sec.  51.907(e) using Fiscal Year 
2011 terminating interstate end office switching minutes, and then 
multiply by the Price Cap Carrier Traffic Demand Factor;
    (C) If the carrier reduced its Intrastate Terminating End Office 
Access Rate(s) pursuant to Sec.  51.907(e)(1), the reduction in 
intrastate switched access revenues equal to the difference between 
either the intrastate 2014 Composite Terminating End Office Access Rate 
and the Composite Terminating End Office Access Rate based on the 
maximum terminating end office rates that could have been charged on 
July 1, 2015, or the 2015 Target Composite Terminating End Office 
Access Rate, as applicable, using Fiscal Year 2011 terminating 
intrastate end office switching minutes, and then multiply by the Price 
Cap Carrier Traffic Demand Factor; and
* * * * *
    (v) * * *
    (B) The reduction in interstate switched access revenues equal to 
the difference between the 2011 Baseline Composite Terminating End 
Office Access Rate and $0.0007 determined pursuant to Sec.  51.907(f) 
using Fiscal Year 2011 terminating interstate end office switching 
minutes, and then multiply by the Price Cap Carrier Traffic Demand 
Factor;
    (C) If the carrier reduced its Intrastate Terminating End Office 
Access Rate(s) pursuant to Sec.  51.907(f), the reduction in revenues 
equal to the difference between either the Intrastate 2014 Composite 
Terminating End Office Access Rate and $0.0007 based on the maximum 
terminating end office rates that could have been charged on July 1, 
2016, or the 2016 Target Composite Terminating End Office Access Rate, 
as applicable, using Fiscal Year 2011 terminating intrastate end office 
minutes, and then multiply by the Price Cap Carrier Traffic Demand 
Factor;
* * * * *
    (vi) * * *
    (B) The reduction in interstate switched access revenues equal to 
the 2011 Baseline Composite Terminating End Office Access Rate using 
Fiscal Year 2011 terminating interstate end

[[Page 28847]]

office switching minutes, and then multiply by the Price Cap Carrier 
Traffic Demand Factor;
* * * * *
    (vii) * * *
    (B) The reduction in interstate switched access revenues equal to 
the 2011 Baseline Composite Terminating End Office Access Rate using 
Fiscal Year 2011 terminating interstate end office switching minutes, 
and then multiply by the Price Cap Carrier Traffic Demand Factor;
* * * * *
    (2) If a Price Cap Carrier recovers any costs or revenues that are 
already being recovered through Access Recovery Charges or the Connect 
America Fund from another source, that carrier's ability to recover 
reduced switched access revenue from Access Recovery Charges or the 
Connect America Fund shall be reduced to the extent it receives 
duplicative recovery. Any duplicative recovery shall be reflected as a 
reduction to a carrier's Eligible Recovery calculated pursuant to Sec.  
51.915(d).
* * * * *
    (4) If a Price Cap Carrier receives payment for Access Recovery 
Charges after the period used to measure the adjustment to reflect the 
differences between estimated and actual revenues, it shall treat such 
payments as actual revenues in the year the payment is received and 
shall reflect this as an additional adjustment for that year.
* * * * *

0
5. Amend Sec.  51.917 by revising (d)(1)(iii)(D) and (d)(1)(vii) to 
read as follows:


Sec.  51.917  Revenue recovery for rate-of-return carriers.

* * * * *
    (d) * * *
    (1) * * *
    (iii) * * *
    (D) An amount equal to True-up Revenues for Access Recovery Charges 
for the year beginning July 1, 2012 multiplied by negative one.
* * * * *
    (vii) If a Rate-of-Return Carrier recovers any costs or revenues 
that are already being recovered as Eligible Recovery through Access 
Recovery Charges or the Connect America Fund from another source, that 
carrier's ability to recover reduced switched access revenue from 
Access Recovery Charges or the Connect America Fund shall be reduced to 
the extent it receives duplicative recovery. Any duplicative recovery 
shall be reflected as a reduction to a carrier's Eligible Recovery 
calculated pursuant to Sec.  51.917(d). A Rate-of-Return Carrier 
seeking revenue recovery must annually certify as part of its tariff 
filings to the Commission and to the relevant state commission that the 
carrier is not seeking duplicative recovery in the state jurisdiction 
for any Eligible Recovery subject to the recovery mechanism.
* * * * *
[FR Doc. 2014-11479 Filed 5-19-14; 8:45 am]
BILLING CODE 6712-01-P