[Federal Register Volume 89, Number 70 (Wednesday, April 10, 2024)]
[Rules and Regulations]
[Pages 25147-25163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06292]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 36, 51, and 54

[WC Docket Nos. 10-90, 23-328, 14-58, 09-197; WT Docket No. 10-208; FCC 
23-87; FR ID 204795]


Connect America Fund, Alaska Connect Fund, ETC Annual Reports and 
Certifications, Telecommunications Carriers Eligible To Receive 
Universal Service Support, Universal Service Reform--Mobility Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission (FCC 
or Commission) adopts a Report and Order (Order) amending existing 
rules and requirements governing the management and administration of 
the

[[Page 25148]]

Commission's Universal Service Fund (USF) high-cost program. The 
modifications adopted in the Order streamline processes, align 
timelines, and refine certain rules to more precisely address specific 
situations experienced by carriers.

DATES: Effective May 10, 2024, except for the amendments to Sec. Sec.  
36.4 (amendatory instruction 2), 54.205 (amendatory instruction 7), 
54.313 (amendatory instruction 10), 54.314 (amendatory instruction 11), 
54.316 (amendatory instruction 13), 54.903 (amendatory instruction 18), 
and 54.1306 (amendatory instruction 22), which are delayed 
indefinitely. The Commission will publish a document in the Federal 
Register announcing the effective date.

FOR FURTHER INFORMATION CONTACT: For further information, please 
contact, Nissa Laughner, Attorney Advisor, Telecommunications Access 
Policy Division, Wireline Competition Bureau, at [email protected] 
or 202-418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
in WC Docket Nos. 10-90, 23-328, 14-58, 09-197 and WT Docket No. 10-
208; FCC 23-87, adopted on October 19, 2023, and released on October 
20, 2023, with an Erratum issued by the Wireline Competition Bureau on 
Feb. 13, 2024. The full text of this document is available at the 
following internet address: https://docs.fcc.gov/public/attachments/FCC-23-87A1.pdf.

I. Adopting High-Cost Program Administrative Improvements

    1. The Commission adopts its proposal to revise Sec.  54.313(i) of 
its rules to streamline the process for submitting annual high-cost 
information and certifications by requiring that such filings be made 
only with the universal service program administrator, i.e., the 
Universal Service Administrative Company (USAC). Currently, this rule 
requires high-cost support recipients to file this information with the 
Commission, with USAC, and with the relevant state commission or 
relevant authority in a U.S. Territory, or Tribal government, as 
appropriate, resulting in redundant and unnecessary administrative 
burdens on high-cost support recipients. In addition to relieving 
recipients of these burdens, this rule change is warranted because the 
Commission can take advantage of technological advances to make this 
information more readily available to all interested parties by using 
the benefits of a centralized, online collection of information and 
improving access and records management. Several commenters support 
this change, and the Nebraska Public Service Commission asks the 
Commission to ensure that states retain full access to the annual 
reports. The Commission agrees that states should retain full access to 
the annual reports and it directs USAC to continue to provide access to 
this information to the States, U.S. Territories, and Tribal 
governments electronically via links to the data on USAC's website. 
Accordingly, the Commission finds that modifying Sec.  54.313(i) of its 
rules to limit submission of the annual high-cost report to USAC is 
well warranted.
    2. The Commission similarly adopts its proposal to revise Sec.  
54.314 of its rules to require states that desire Eligible 
Telecommunication Carriers (ETCs) to receive high-cost support and ETCs 
not subject to state jurisdiction to file annual reports with USAC 
only, rather than both USAC and the Commission's Office of the 
Secretary (OSEC). Several commenters support this modification, and 
none opposes. The Commission notes that its staff coordinates routinely 
with USAC, so this modification should have no impact on its ability to 
review and monitor these filings as part of its program oversight. The 
Wireless internet Service Providers Association (WISPA) supports this 
modification but only if reports are made publicly available so that 
funding recipients can ensure that the certification has been received 
and can demonstrate this to third parties, such as potential investors. 
The Commission finds that WISPA's request is reasonable. The Commission 
thus modifies its rules to require the submission of annual 
certifications under Sec.  54.314 of the Commission's rules with USAC 
only and commit to making this information publicly available.
    3. Third, the Commission adopts its proposal to more closely align 
support reductions with an ETC's failure to certify by the deadlines 
established in its rules. Current rules provide that support reductions 
do not occur until January of the year following the year when the ETC 
misses a reporting deadline. The revised rules the Commission adopts in 
this document will instead reduce support in the month immediately 
following the notice of support reduction to the eligible 
telecommunications carrier from USAC or as soon as feasible thereafter. 
Because support reductions are based on the number of days late, and 
payments usually occur mid-month, in situations where a filing is not 
received in time for USAC to calculate the requisite support reduction 
for the next month's payment, USAC will implement the support reduction 
as soon as feasible. No commenter opposes this change and CTIA--The 
Wireless Association (CTIA) agrees that requiring USAC to implement 
late filing support reductions more promptly by reducing support in the 
month immediately following the issuance of a notice of support 
reduction or as soon as feasible immediately thereafter avoids 
confusion and improves accountability.
    4. The Commission modifies the reporting requirements for 
performance testing to require all high-cost support recipients serving 
fixed locations to report and certify performance testing results on a 
quarterly basis, rather than annually. High-cost support recipients 
must perform broadband performance testing one week out of each 
quarter. All high-cost support recipients, including those that are in 
compliance with speed and latency requirements, will be required to 
report and certify the results of the performance tests quarterly 
rather than annually. This modification will allow the Commission to 
better assess whether carriers are on track to meeting the Commission's 
performance measures requirements and to determine whether there are 
significant problems with a carrier's network that may interfere with 
consumer service. The Wireline Competition Bureau (Bureau) will 
continue to assess compliance with program requirements based on the 
annual testing results (i.e., annual calculations), and carriers found 
not compliant will have support withheld until the carrier achieves a 
full quarter of compliance. No commenter opposes this modification, and 
NTCA--The Rural Broadband Association (NTCA) supports quarterly 
certification of performance test results for all high-cost support 
recipients, stating that reporting and certifying a carrier's 
performance testing results on a quarterly basis so the burden is 
minimal while also ensuring access to results enhances the Commission's 
oversight.
    5. Carriers are required to report and certify locations in the 
High Cost Universal Broadband portal (HUBB) by March 1st annually but 
some carriers may not have reported locations when scheduled to begin 
performance pre-testing or testing. As a result, the Commission 
recognizes that certification of HUBB locations on March 1st may impede 
the carrier's ability to complete some of its testing. In these 
circumstances, the Bureau may exercise discretion when assessing the 
scope of a carrier's compliance or when implementing support 
withholdings.

[[Page 25149]]

    6. Currently, the Commission requires quarterly reporting of 
carriers' pre-testing data, reflecting the results of tests conducted 
prior to the commencement of the official test period. Those quarterly 
testing results must be reported and certified within one week after 
the end of the quarter in which the tests are conducted, to provide 
insight into carriers' experience with the testing process. The 
Commission adopts a similar schedule of quarterly reporting filings for 
all high-cost carriers' testing. Once effective, all high-cost carriers 
will be required to report and certify their quarterly performance 
testing results within two weeks, rather than within one week, after 
the end of the quarter in which the tests are conducted. The Commission 
provides two weeks to offset the fact that, for administrative ease, it 
declines to adopt any grace period: first quarter testing results will 
be due April 15th, second quarter results will be due July 15th, third 
quarter results will be due October 15th, and fourth quarter results 
will be due January 15th. The Commission directs the Bureau to announce 
when quarterly reporting and certification will go into effect.
    7. The Commission believes that establishing a specific reporting 
schedule will provide certainty, promote accountability, and conform 
with timelines for other testing protocols to minimize confusion. Given 
that carriers will be certifying locations quarterly, support 
withholding for non-compliance may be implemented sooner than when 
reports were due by July 1st annually. This will ensure that the 
withholding is closer in time to the determination of noncompliance and 
encourage the non-compliant carrier to improve its performance so that 
it can regain the withheld support.
    8. Under this new quarterly certification schedule, the Commission 
implements support reductions for late performance measures reporting 
based on the current framework under Sec.  54.313(j) that reduces 
support based on the number of days late, but factoring in that it is 
requiring quarterly filing certifications. Support reductions due to 
late filings will be assessed at the end of the fourth quarter and will 
be based on total number of days late divided by four, then rounded to 
the nearest whole number. When that number is between 1 and 7, a 
carrier will have its support reduced an amount equivalent to seven 
days in support; when that number is 8 or higher, a carrier will have 
its support reduced on a pro-rata basis equivalent to the period of 
non-compliance (i.e., the number of days), plus the minimum seven-day 
reduction.
    9. The Commission declines to relieve privately held rate-of-return 
carriers that receive Alternative Connect America Model (A-CAM) support 
or Alaska Plan support of the requirement to file annually a report of 
the company's financial conditions and operations. NTCA had sought this 
relief for all privately held rate-of-return carriers that receive A-
CAM support or other fixed support mechanisms, such as the Alaska Plan, 
and the Commission sought comment on this issue in the Administrative 
Notice of Proposed Rulemaking (NPRM), 87 FR 36283, June 16, 2022.
    10. Although NTCA and the Alaska Telecom Association (ATA) support 
eliminating this requirement, the Commission is not persuaded by their 
arguments. Moreover, the Commission has determined that the public 
interest benefits of collecting the information--understanding the 
efficacy of the model and helping to ensure that support is sufficient 
but not excessive--outweigh any burdens.
    11. The Commission concluded in the USF/Intercarrier Compensation 
(ICC) Transformation Order, 76 FR 73830, November 29, 2011, that it is 
not necessary to require publicly traded companies to submit financial 
information because it could obtain such information directly for 
Securities and Exchange Commission registrants. At the same time, it 
declined to impose such a requirement on privately held price cap 
carriers receiving model-based support because the Commission 
``expect[ed] that a model developed through a transparent and rigorous 
process will produce support levels that are sufficient but not 
excessive.''
    12. NTCA argues that A-CAM carriers are similarly ``recipients of 
fixed support, which the Commission has already recognized leads them 
to being `disciplined by market forces' and which should be the 
dispositive factor here.'' However, what the Commission actually stated 
was that ``support awarded through competitive processes,'' not model-
based support, ``will be disciplined by market forces.'' And while the 
Commission concedes that, as NTCA notes, ``it is not true across the 
board'' that recipients of Connect America Fund (CAF) Phase II model-
based support were publicly traded companies, the vast majority were, 
and as such their financial information was publicly available. Given 
these circumstances, it was sound policy not to require this 
information in that context. In contrast, there are many more rate-of-
return carriers receiving A-CAM support, and many more of them are 
privately held and, thus, their information is not readily available to 
the Commission. The availability of support recipients' financial 
information enables the Commission to evaluate whether model-based 
support is actually sufficient but not excessive. Moreover, all high-
cost support recipients have an obligation to use such support only for 
its intended purpose, and financial information helps the Commission 
validate compliance with this requirement. Thus, the Commission finds 
that the availability of the financial information of A-CAM carriers 
will help it evaluate whether A-CAM produces support levels that are 
sufficient but not excessive, and as such, it is important for the 
Commission to continue to collect such information.
    13. ATA argues that Alaska Plan carriers' support is ``parallel to 
model-based support in that it is frozen at a set level'' and 
``intended to be sufficient to support a carrier's performance 
obligations, but is not excessive because the support was frozen at a 
historic cost-based level which has in effect declined over time as 
costs increased.'' However, just because Alaska Plan support is frozen, 
does not ensure that the support is not excessive. The Commission finds 
that the continued availability of the financial information of Alaska 
carriers enables it to evaluate whether Alaska Plan carriers' support 
is sufficient but not excessive.
    14. The Commission adopts its proposal to modify its rules to 
create a consistent, one-time grace period for all compliance filings 
with grace periods. Specifically, the Commission establishes a grace 
period that allows filers to submit compliance filings ``within four 
business days'' of the relevant due date without risking a finding of 
non-compliance for missing the filing deadline. Establishing a uniform 
grace period will reduce confusion and is supported by all commenters 
who addressed the issue, although WISPA prefers that the grace period 
be set at five business days instead of four. The Commission finds that 
a four-day grace period is adequate. As the Commission explained in the 
Administrative NPRM, it proposed to establish a set grace period to 
eliminate confusion. Currently, several Commission rules identify a 
specific date, after the due date, by which carriers could file reports 
without a support reduction if they had not previously missed a 
deadline, while other rules identified the grace period as three or 
four days after the filing deadline. The Commission also clarifies that 
the due date is day zero, so the day after the due date is day one. For

[[Page 25150]]

example, where a filing is due March 1, recipients must file by the end 
of March 5 or be subject to a support reduction. Consistent with the 
Commission's Computation of Time rule, if March 5 falls on a weekend or 
holiday, the filing must be made by the end of the next business day to 
avoid the support reduction. The Commission also clarifies that, by 
this rule modification, it is not establishing a new opportunity to 
utilize a grace period for carriers that have already taken advantage 
of the one-time grace period available to them.
    15. The Commission modifies its rules to adopt uniform deployment, 
certification, and location reporting deadlines for all CAF Phase II 
auction support recipients (including recipients of support allocated 
through New York's New NY Broadband program). In doing so, the 
Commission codifies and makes permanent the Bureau's decision to waive 
recipient-specific reporting deadlines based on the date of 
authorization in favor of uniform reporting deadlines for all of these 
recipients, finding that this approach alleviates unnecessary 
administrative burdens and better facilitates Commission oversight. Two 
commenters support this change, and none oppose it. Accordingly, the 
Commission modifies its rules to provide that all CAF Phase II auction 
support recipients must comply with deployment milestones by deadlines 
occurring at the end of the specified calendar year (rather than the 
date the Bureau authorized the support recipient to receive support) 
and must meet annual certification and location reporting requirements 
(annual deployment report) as of March 1st annually, including 
reporting necessary to demonstrate compliance with the prior year 
milestone. In addition, the Commission modifies Sec.  54.316(b)(7) of 
its rules regarding the certification deadlines for the Bringing Puerto 
Rico Together Fund stage 2 fixed program and the Connect USVI Fund 
stage 2 fixed program to make explicit the annual March 1st deadline, 
as specified in the respective authorization public notices, which 
aligns those programs' rules with the rules for other high-cost support 
mechanisms.
    16. The Commission declines to amend Sec.  54.316(a) of its rules 
to require ETCs receiving high-cost support and subject to defined 
deployment obligations to report the ``maximum speeds actually being 
offered, advertised, or delivered to customers.'' The Commission agrees 
with WISPA and CTIA, the only commenters to weigh in on this proposal, 
that such an amendment would result in collection of information 
similar to data the Commission already collects through its performance 
testing program and in fulfillment of its Broadband Data Collection 
(BDC) responsibilities. Through the performance testing program, the 
Commission assesses compliance with public service requirements, 
including speed and latency standards, by requiring high-cost support 
recipients to perform a minimum of one download test and one upload 
test per testing hour at a certain number of randomly chosen testing 
locations and to report this information to the Commission. Ultimately, 
the Commission will use this information to assess performance 
throughout the provider's entire supported service area. In addition, 
under the BDC, each facilities-based provider of fixed broadband 
internet access service must report maximum advertised download and 
upload speeds at the location level (with reference to the Broadband 
Serviceable Location Data Fabric). For these reasons, the proposed 
modification of Sec.  54.316(a) would result in a largely redundant 
reporting requirement, and the Commission declines to adopt it.
    17. The Commission adopts its proposal to amend Sec.  54.316(a)(1) 
of its rules to more accurately reflect the deployed locations 
reporting obligations of support recipients. Currently, this rule 
directs ``recipients of high-cost support with defined broadband 
deployment obligations'' to ``provide to [USAC] on a recurring basis 
information regarding the locations to which the [ETC] is offering 
broadband service in satisfaction of its public interest obligations. . 
. .'' All filers subject to this requirement have a specific annual 
deadline for submitting this information, and the Commission finds that 
this section's reference to ``recurring'' filings is superfluous. 
Accordingly, the Commission modifies the rule to remove this language.
    18. The Commission modifies its voice and broadband rate 
certification rules to clarify the reporting period. Specifically, the 
Commission makes explicit that carriers submitting the annual FCC Form 
481 are certifying compliance with both the annual voice and broadband 
pricing benchmarks adopted in the prior calendar year ending the last 
day of December. As explained in the Administrative NPRM, when the 
Commission moved the annual FCC Form 481 filing deadline to July 1st, 
the Commission moved the date for the relevant voice rates to the rates 
in place as of June 1st the year the report was filed, as opposed to 
the prior year. Maintaining the rule's unique time period for voice 
rate certifications creates unnecessary confusion. Prior to the 
adoption of the rate floor provision, all certifications in Form 481 
applied to the preceding calendar year, a uniformity to which the 
Commission returns with the adoption of this rule modification. For 
example, the support recipient submitting a Form 481 on July 1, 2024, 
will certify compliance during 2023 with voice and broadband benchmarks 
set for the 2023 calendar year (as announced in 2022). The Commission 
further updates the rule to reflect that the annual public notice 
announcing the benchmarks is issued by the Bureau and Office of 
Economics and Analytics.
    19. Relatedly, in its comments, Teleguam Holdings LLC (GTA) asserts 
that the Commission should release its reasonable comparability 
benchmark rates earlier in the year (or extend the filing deadline for 
this certification) in order to allow support recipients sufficient 
time to modify their rates. The Commission agrees with GTA that release 
of these benchmark rates too close to the year-end can impose on 
support recipients, especially smaller companies, significant 
administrative burdens in effectuating rate changes at the start of the 
applicable year. Therefore, the Commission will endeavor to release 
these rates earlier in the year.
    20. The Commission amends Sec.  54.316(a) of its rules to make 
clear that it will permit high-cost support recipients to report and 
certify locations that should have been reported for a prior reporting 
year, even after the reporting deadline for that year, in future annual 
deployment reports and to count these locations (hereinafter ``late-
reported locations'') toward their defined deployment obligations. To 
ensure that support recipients are motivated to submit complete and 
timely annual deployment reports, the Commission adopts a support 
reduction mechanism that will apply to all late-reported locations due 
to be reported after the effective date of the Order. For the 
submission of late-reported locations that should have reported before 
the effective date of the Order, the Commission exercises its 
discretion to not apply this mechanism.
    21. Under Sec.  54.316(a) of the Commission's rules, support 
recipients reporting in the HUBB have a duty to report all qualifying 
locations to which the support recipient deployed service during the 
relevant reporting period (the prior year) by March 1st, including 
locations that, if reported, would result in a carrier exceeding an 
interim or final milestone. As explained in the

[[Page 25151]]

Administrative NPRM, there is currently no mechanism by which support 
recipients can later submit and certify locations toward satisfaction 
of defined deployment obligations if the recipient missed the reporting 
deadline for those locations. Creating such a mechanism also better 
facilitates compliance with support recipients' general duty under 
Sec.  1.17 of the Commission's rules to correct or amend information 
reported to the Commission and helps ensure that the Commission may 
effectively assess these recipients' progress in deploying service.
    22. In the Administrative NPRM, the Commission proposed a formula 
for a support reduction mechanism for late-reported locations that 
would take into account the relative due diligence of support 
recipients in identifying and reporting locations. Specifically, the 
Commission proposed ``a support reduction mechanism where recipients' 
support will be reduced for [late-reported] locations based on the 
percentage of a recipient's total locations for the reporting year 
being reported after the deadline and the number of days after the 
deadline.'' The Commission adopts this formula with certain 
modifications to address concerns raised by commenters and to balance 
accountability with administrative burden.
    23. As an initial matter, the Commission rejects NTCA's argument 
that any support reduction is unnecessary because support recipients 
are already sufficiently motivated to report and amend their filings to 
avoid possible default consequences and to gain the benefits of 
demonstrating to the public their deployment efforts. While, 
ultimately, support recipients may need to submit late-reported 
locations to avoid default, they would have no particular motivation to 
do so unless and until default is imminent, absent any consequence for 
late reporting. Indeed, acceptance of late-reported locations for the 
purpose of counting these locations toward defined deployment 
obligations at any time during the deployment period without 
consequence would encourage a lackadaisical approach to identifying and 
reporting locations on a timely basis and potentially could delay or 
disrupt verifications of compliance with milestones. Further, many 
support recipients are likely to delay deployment to the most difficult 
to serve areas where locations can be more difficult to assess, e.g., 
where newly deployed areas are missing postal addresses. Support 
recipients may thus be motivated to delay reporting of certain easily 
identifiable locations in other earlier deployed areas in order to 
increase the likelihood of passing verification for later milestones, 
i.e., by closing the non-compliance gap or increasing the probability 
of passing under the statistical measures used in the verification 
process. Finally, customers' goodwill toward their service providers is 
unlikely to be greatly affected by reporting delays unless the number 
of unreported locations is substantial and/or causes a milestone 
failure, and therefore, this concern is unlikely to be a significant 
factor in motivating support recipients to accurately assess and timely 
report or amend their annual deployment reports.
    24. In their comments, GCI Communication Corp. (GCI) and NTCA 
object to the use of the support reduction mechanism as proposed in the 
Administrative NPRM, asserting that it would result in large 
variability in support reductions and have a disproportionately 
negative impact on those support recipients with fewer locations to 
serve and/or slower deployments at the beginning of their deployment 
term. While the Commission acknowledges that carriers with fewer 
deployed locations in a given year risk a larger support reduction for 
submitting late-reported locations for that year, it also notes that 
the time and effort associated with identifying and correctly reporting 
deployed locations should generally scale based on the number of 
locations deployed in a given year. In other words, as the number of 
deployed locations reported in a given year increases, so too do the 
burdens on carriers assessing locations and the associated likelihood 
of omitting a deployed location. Accordingly, this ratio is a 
reasonable measure of the relative due diligence by the reporting 
carrier warranting its incorporation in the support reduction formula.
    25. GCI also asserts that ``[t]he penalties for providers who 
timely certified their deployed locations and need to add additional 
locations should not be worse than the penalties for failure to deploy 
on time,'' i.e., a scaled withholding of support during a set time 
frame (cure period) during which time the carrier may recover withheld 
support upon demonstration of compliance. The Commission rejects GCI's 
attempt to analogize late reporting to delayed deployment. The cure 
period serves the Commission's overriding interest in maximizing 
deployment benefits by providing noncompliant carriers with the time to 
come into compliance by continuing to build the network. Carriers that 
seek to report late-reported locations do not need a cure period to 
provide them with additional time to file the locations. There may be 
circumstances where the support recipient has acted in good faith when 
deploying its network and reporting locations, only to learn of 
reporting errors during the verification process, such as the reporting 
of ineligible locations as eligible locations. In these circumstances, 
the support recipients may come into compliance by reporting locations 
newly deployed within the cure period (without support reduction) and/
or reporting late-reported locations subject to the support withholding 
the Commission adopts here. Accordingly, all carriers reporting late-
reported locations, whether they are in the cure period or not, are 
similarly situated in terms of support reduction consequences.
    26. The Commission does, however, recognize that in certain 
circumstances application of the proposed formula would result in a 
significant support reduction that could threaten the ability of the 
support recipient to complete deployment, meet performance standards, 
and satisfy public interest obligations. The Commission also recognizes 
that some limited modification to the withholding formula would produce 
greater consistency in the amount of support withheld among support 
recipients with similar obligations and receiving similar support 
amounts, thus addressing some of GCI's expressed concerns. Accordingly, 
the Commission modifies the proposed formula to provide for a maximum 
per-day, per-location reduction of seven dollars ($7). The Commission 
also caps the duration multiplier at 15 days if the late-reported 
locations are filed as of the next reporting deadline after the 
locations should have been filed and at 30 days (for each instance of 
late reporting) if the late-reported locations are filed at any time 
thereafter. Further, the Commission adopts a one-time de minimis 
exception from support withholding for late-reported locations deployed 
in any single year that are less than five percent of the locations 
that were filed in the relevant reporting year. The Commission thus 
acknowledges GCI's and NTCA's concerns regarding the likelihood that 
carriers will make a minimum number of ``inevitable'' errors in 
reporting despite the exercise of due diligence, while also striking an 
appropriate balance to ensure that support recipients will make best 
efforts to avoid such errors.
    27. Finally, and contrary to the Commission's tentative conclusion 
in the Administrative NPRM, it adopts a one-time grace period for 
amending an

[[Page 25152]]

annual filing with additional locations consistent with the grace 
period afforded support recipients that fail to submit their annual 
filing in Sec.  54.316(c)(2)(iii) of its rules. The Commission finds 
that such one-time grace period, like that granted for late annual 
filings, places a minimum burden on the resources dedicated to program 
administration and evaluation of location information while 
accommodating the potential for a one-time administrative error. This 
is a particularly opportune time for the adoption of this grace period 
as carriers have been in the process of assessing their deployed 
locations for the mandatory BDC filings. The Commission will apply the 
support reduction for the filing of late-reported locations in the next 
month immediately following the notice of support reduction to the 
eligible telecommunications carrier from USAC or as soon as feasible 
thereafter.
    28. To encourage support recipients to complete annual reviews of 
already served areas to identify unreported or misreported locations 
and to immediately report those locations even if the support recipient 
does not perceive such locations as necessary to meet interim 
deployment milestones, the Commission will not apply the support 
reduction consequence to any locations that were deployed in years 
prior to the effective date of this rule change but reported after the 
effective date of this rule. The Commission thus dismisses as moot all 
pending petitions for waiver to allow such reporting.
    29. In addition, the Commission will not reduce support for late-
reported locations reported after the support recipient has 
demonstrated compliance with the final milestone. Reducing support 
under these circumstances, where the benefit to carriers of such 
reporting is significantly less, would likely result in some support 
recipients failing to amend their filings. In addition, after the 
conclusion of the deployment period (including any cure period), the 
Commission will have a lesser stake in motivating timely reporting of 
every deployed location with a support reduction mechanism because such 
reporting will not threaten to disrupt verification processes. The 
Commission makes clear, however, that its approach to late-reported 
locations adopted here is independent of the obligation to amend 
filings under Sec.  1.17 of its rules that attaches from the moment of 
filing and which could lead to forfeiture consequences, even in the 
absence of intentional misreporting and even after the demonstration of 
compliance with final deployment requirements. Support recipients have 
a continuing obligation to timely amend every annual deployment report 
upon discovery of an inaccuracy or omission.
    30. In this document the Commission amends its rules to provide a 
simpler process for rate-of-return local exchange carriers (LECs) 
seeking to merge, consolidate, or acquire one or more rate-of-return 
study areas to calculate the new entity's Access Recovery Charge (ARC), 
CAF--Intercarrier Compensation (ICC) support, and reciprocal 
compensation and switched access rate caps. The Commission finds that 
the rule revisions proposed in the Administrative NPRM will 
significantly reduce the administrative burdens on rate-of-return LECs 
seeking to increase efficiencies and productivity through these 
transactions and provide predictability to carriers considering such 
transactions, ultimately benefiting consumers. The limited record 
received on the rule revisions proposed in the Administrative NPRM 
supports the proposed revisions, with one commenter agreeing that the 
proposals ``reflect a practical and effective step forward to 
streamline the merger and acquisition process. . . .'' No party opposes 
these proposed changes. Accordingly, the Commission now adopts those 
proposed changes and revises its rules to eliminate the need for a 
rate-of-return LEC that is involved in a merger, consolidation, or 
acquisition with another rate-of-return carrier to obtain a waiver of 
the applicable intercarrier compensation rules when certain conditions 
apply. The Commission also adopts a streamlined process that will apply 
in those cases where carriers are still required to seek a waiver of 
the Commission's rules.
    31. In the USF/ICC Transformation Order, the Commission capped 
rate-of-return carriers' reciprocal compensation and interstate 
switched access rates and most intrastate switched access rates at the 
rates in effect on December 29, 2011. At the same time, the Commission 
adopted a multi-year transition for reducing most terminating switched 
access rates to bill-and-keep. As part of these reforms, the Commission 
adopted the ARC, which allows rate-of-return carriers to recover from 
end-users a portion of the intercarrier compensation revenues lost due 
to the Commission's reforms, up to a defined amount (Eligible Recovery) 
for each year of the transition. If the projected ARC revenues are not 
sufficient to cover the entire Eligible Recovery amount, rate-of-return 
carriers may elect to collect the remainder in CAF ICC support.
    32. The calculation of a rate-of-return LEC's Eligible Recovery 
begins with its Base Period Revenue. A rate-of-return carrier's Base 
Period Revenue is the sum of certain terminating intrastate switched 
access revenues and net reciprocal compensation revenues received by 
March 31, 2012, for services provided during Fiscal Year (FY) 2011, and 
the projected revenue requirement for interstate switched access 
services for the 2011-2012 tariff period. A rate-of-return LEC's Base 
Period Revenue is calculated only once, but is adjusted during each 
step of the intercarrier compensation recovery mechanism calculations 
for each year of the transition. Specifically, the Base Period Revenue 
for rate-of-return carriers has been reduced by five percent each year, 
beginning in 2012, the first year of reform. A rate-of-return carrier's 
Eligible Recovery is equal to the adjusted Base Period Revenue for the 
year in question, less, for the relevant year of the transition, the 
sum of: (1) projected terminating intrastate switched access revenue; 
(2) projected interstate switched access revenue; and (3) projected net 
reciprocal compensation revenue. Eligible Recovery is also adjusted to 
reflect certain demand true-ups.
    33. The Commission's existing rules for calculating Eligible 
Recovery do not address the adjustments that are necessary when study 
areas are merged after one company acquires all or a portion of 
another. Because a carrier's Base Period Revenue and interstate revenue 
requirement are study-area-specific, as are a carrier's capped switched 
access rates, combining two study areas requires a decision about how 
best to combine two different Base Period Revenues and interstate 
revenue requirements, and--when the study areas do not have the same 
capped rates--a waiver of the Commission's rules to establish the 
proper rate levels.
    34. Since the Eligible Recovery rules have taken effect, several 
rate-of-return LECs have partially or fully merged study areas or 
acquired new study areas. Because the intercarrier compensation and CAF 
ICC rules adopted in the USF/ICC Transformation Order do not 
contemplate study area changes, these carriers have had to file 
petitions for waiver of portions of Sec.  51.917 of the Commission's 
rules to reset the applicable Base Period Revenue associated with the 
study areas they have merged or acquired. In this line of waiver 
orders, the Bureau has permitted carriers to add together the relevant 
interstate revenues from FY 2011 of the merging study areas and the 
2011-2012 interstate revenue requirement of the merging study areas. 
This calculation then creates a combined Base Period

[[Page 25153]]

Revenue which serves as the baseline for calculating the Eligible 
Recovery of the company serving the combined study area going forward. 
To facilitate mergers for entities that participate in the National 
Exchange Carrier Association (NECA) traffic-sensitive tariff, the 
Bureau has granted waivers of Sec.  51.909 of the Commission's rules to 
allow NECA to place the consolidated study area in the rate bands that 
most closely approximate the merged entities' cost characteristics. The 
rate for each rate band then becomes the rate cap for the corresponding 
rate element in the merged study area.
    35. In the Administrative NPRM, the Commission observed that the 
waiver process imposes costs and administrative burdens on rate-of-
return LECs and, in some cases, may delay the closing of transactions. 
The Commission determined that rule revisions reflecting the pattern of 
outcomes in prior waiver orders would reduce these costs and 
administrative burdens by eliminating the need for carriers to obtain 
individual waivers when certain conditions apply. No party disputed 
these conclusions or identified any issues with the proposed rule 
revisions. In fact, the only comments addressing these proposals were 
filed by NECA, which agreed that the proposed rule changes would ease 
administrative burdens and provide carriers with predictability when 
considering mergers and/or acquisitions.
    36. The Commission concludes that adopting the proposed rules will 
reduce regulatory costs and burdens, avoid potential delay, and allow 
carriers to assess the effects of a proposed transaction more 
accurately. For these reasons, the Commission adopts the rule revisions 
proposed in the Administrative NPRM and amends the intercarrier 
compensation rules in Sec. Sec.  51.917 and 51.909 to address study 
area changes resulting from transactions involving rate-of-return 
carriers.
    37. Base Period Revenue calculation. The Commission revises Sec.  
51.917 to provide guidance on calculating Base Period Revenues for 
rate-of-return study areas affected by a transaction, thereby 
permitting rate-of-return carriers to adjust their Base Period Revenues 
without the need for a waiver. Specifically, the Commission revises 
Sec.  51.917 of its rules to provide that when two or more entire rate-
of-return study areas are merged, the LEC shall combine the Base Period 
Revenue and interstate revenue requirements of the merging study areas 
for purposes of calculating Eligible Recovery. This approach is 
supported by NECA and consistent with the approach the Commission has 
taken previously in addressing transactions where study areas have 
merged. In the case of a partial study area change, the revised rules 
provide that rate-of-return LECs shall allocate the Base Period Revenue 
and interstate revenue requirement levels of the partial study area 
based on the proportion of access lines acquired compared to the total 
access lines in the pre-merger study area of the remaining entity.
    38. Setting rate caps. The Commission revises Sec.  51.909 to 
establish procedures for setting new rate caps for merging rate-of-
return LECs and adopt a streamlined waiver process if the rates for the 
new combined study area would result in the new entity's CAF ICC 
support exceeding a certain threshold. Specifically, for carriers that 
file their own tariffs, the new rate cap for each rate element shall be 
the weighted average of the preexisting rates in each of the affected 
study areas. This approach is consistent with precedent and there was 
no opposition in the record to this logical and straightforward 
approach to establishing new rate caps for merging rate-of-return LECs 
that do not participate in NECA tariffs.
    39. For merging rate-of-return LECs that participate in the NECA 
traffic-sensitive tariff and that have to establish a single switched 
access rate for a rate element, the revised rules provide that the new 
consolidated rate, as determined by NECA pursuant to the rate bands in 
its traffic-sensitive tariff, shall be the new rate cap if the merged 
entity's CAF ICC support will not increase as a result of the merger by 
more than two percent above the amount received by the merging entities 
prior to the transaction, using the demand and rate data for the 
preceding calendar year. In prior orders, the Bureau allowed NECA to 
place the consolidated study area in the rate bands that most closely 
approximated the merged entities' cost characteristics and NECA worked 
cooperatively with the Bureau to ensure that the most accurate rate 
bands are used for the merged entities. Under this approach, the rate 
for each rate band will become the rate cap for the corresponding rate 
element in the merged study area. The Commission expects that NECA will 
continue to evaluate the circumstances of each transaction, select the 
appropriate rate bands, and coordinate with the Bureau as appropriate.
    40. The Commission proposed a two-percent threshold based on 
recently submitted petitions for waiver, which predicted increases 
between zero and two percent to CAF ICC as a result of the waiver. No 
party objected to this particular threshold or suggested an alternative 
one and increases in CAF ICC support of two percent or less will not 
materially impact the CAF ICC fund. Thus, the Commission now adopts the 
proposed two-percent threshold for carriers participating in the NECA 
traffic-sensitive tariff and eliminates the need for a waiver in 
circumstances where the CAF ICC increase is at or below two percent.
    41. Streamlined waiver process. The Administrative NPRM also 
proposed revised rules that would streamline the waiver process for 
NECA tariff participants if the impact of rate banding exceeds the two-
percent threshold. In such circumstances, the revised rules require 
carriers to file a petition for waiver specifying the impact of the 
merger, acquisition, or consolidation on the new entity's rates and CAF 
ICC support. Any petition for waiver should include information such 
as: (1) a description of the merging study areas, or portions of study 
areas involved; (2) the intrastate and interstate switched access 
demand for each rate element; (3) the relevant pre- and post-merger 
intrastate and interstate switched access rates for the study areas 
involved, as proposed; (4) the relevant pre-and post-merger intrastate 
and interstate switched access revenues, including the effects of 
interstate switched access revenue pooling, for the study areas 
involved; (5) the effect on CAF ICC resulting from the merger; and (6) 
a brief statement of the public interest benefits of the merger. The 
petition must be submitted for consideration via the Electronic Comment 
Filing System and a courtesy copy must be emailed to the Chief, Pricing 
Policy Division, Wireline Competition Bureau.
    42. Under the new streamlined process, once the petition for waiver 
is filed, the Bureau will release a public notice announcing receipt of 
the waiver petition and establishing a 30-day comment period with an 
additional 15-day period for replies. If there is no opposition to the 
petition, the waiver will be deemed granted on the 60th day after the 
release of the public notice, unless the Bureau or the Commission acts 
to prevent the ``automatic'' grant. If an opposition is filed, the 
petition will no longer be eligible for the streamlined grant process 
and will instead be subject to the Commission's rules for waiver 
petitions generally. Because no party opposes this proposal or 
suggested changes to the proposed process or waiver requirements, the 
Commission adopts this streamlined process and delegates to the Bureau 
the authority to

[[Page 25154]]

review, analyze, and approve these petitions for waiver.
    43. For the reasons specified in the Administrative NPRM, the 
Commission amends Sec.  54.902 of its rules--which governs the amount 
of CAF Broadband Loop Support (BLS) a rate-of-return carrier receives 
when it acquires exchanges from another incumbent LEC--to better 
reflect the current state of the high-cost program. Currently, Sec.  
54.902(a) describes how CAF BLS support is calculated when a rate-of-
return carrier acquires exchanges from another rate-of-return carrier, 
while Sec.  54.902(b) specifies that in situations where a rate-of-
return carrier acquires exchanges from a price cap carrier, the 
acquired exchanges remain subject to the support amounts and 
obligations established for frozen and model-based support. The 
Commission modifies Sec.  54.902(a) to provide that only transferred 
exchanges that are already eligible for CAF BLS would be eligible for 
CAF BLS after their transfers. The Commission further modifies Sec.  
54.902(b) to provide that any acquired exchanges subject to Sec.  
54.902(b) continue to be subject to the support obligations in place at 
the time that the exchange is acquired, including obligations 
associated with frozen and auction-based support. As explained in the 
Administrative NPRM, these modifications are consistent generally with 
the rules as originally adopted, when all rate-of-return carriers were 
subject to the Interstate Common Line Support mechanism (which was 
renamed CAF BLS when modernized by the Commission in 2016), and 
consider changes to the high-cost program after the current rule went 
into effect: specifically, the creation of a voluntary pathway for 
rate-of-return carriers to select model-based support and the 
introduction of auction mechanisms permitting rate-of-return carriers 
to acquire exchanges from carriers that are not subject to rate-or-
return or price cap regulation.
    44. The Commission modifies the study area boundary process to 
require waivers for all study area boundary changes. The Commission 
finds that the original purpose of the study area boundary freeze--to 
prevent incumbent LECs from establishing separate study areas made up 
of only high-cost exchanges to maximize their receipt of high-cost 
universal service support--is best served by providing the Wireline 
Competition Bureau (WCB) with the opportunity to review such changes. 
By requiring waivers for all study area boundary changes, the 
Commission eliminates the exceptions adopted in 1996 by the then Common 
Carrier Bureau (now the WCB). Requiring all changes in study area 
boundaries to be reviewed by the Bureau will ensure that any proposed 
changes are not approved until the effects on the Fund are taken into 
account.
    45. Since the exceptions to the study area boundary waiver 
requirement were adopted in 1996, the Commission has substantially 
reformed how universal service support is awarded. Incumbent LECs now 
receive support in different ways, including model-based support and 
auction support, in addition to traditional rate-of-return regulation 
(legacy support). Under the Commission's current rules, when a carrier 
that owns multiple study areas within a state wants to merge these 
commonly-owned study areas, the carrier is not required to petition the 
Commission. However, allowing carriers to merge study areas that 
receive support under different mechanisms creates opportunities for 
carriers to manipulate the Commission's support. For example, if a 
carrier seeks to merge two study areas in a state, one of which 
receives legacy rate-of-return support and another that receives model-
based support, it would be difficult for the Commission to determine 
which lines in the new study area are entitled to rate-of-return 
support, which typically increases as the number of lines increases. 
Similarly, such a merger could create confusion regarding tracking 
carrier mandatory build-out obligations by changing the areas in which 
they must deploy broadband. For example, an A-CAM carrier receives a 
fixed amount of support in exchange for deploying broadband to a 
specific number of locations based on costs as determined by a model. 
If the A-CAM carrier merges its study area with a legacy rate-of-return 
study area in the same state owned by the same carrier, it would then 
be harder to track the deployment obligations under each program.
    46. In addition, allowing carriers to add unserved areas to their 
study areas, even if those areas are not within an existing study area, 
could undermine the Commission's goal of distributing universal service 
support in the most efficient manner possible. In furtherance of this 
objective, the Commission has encouraged the transition to model-based 
support and auction-awarded support over traditional rate-of-return 
regulation. If rate-of-return carriers can extend their existing study 
area into unserved areas, this could result in the use of legacy 
support in additional areas when such areas could be served with 
broadband more efficiently using model-based or auction-based support.
    47. The Nebraska Public Service Commission, the only party 
commenting on this issue, supports a streamlined mechanism for study 
area boundary changes, and suggests that any study area changes that 
have been previously approved by a state should be eligible for the 
streamlined review process. The Commission notes that it already has 
adopted a streamlined process to address all study area waiver 
petitions in the 2011 USF/ICC Transformation Order, and this 
streamlined process would apply to the waiver applications required 
here. The process takes into consideration whether the state commission 
having regulatory authority over the transferred exchanges does not 
object to the transfer, and whether the transfer is in the public 
interest. Evaluation of the public interest benefits of a proposed 
study area waiver include: (1) the number of lines at issue; (2) the 
projected universal service fund cost per line; and (3) whether such a 
grant would result in consolidation of study areas that facilitates 
reductions in cost by taking advantage of the economies of scale, i.e., 
reduction in cost per line due to the increased number of lines. Under 
the streamlined process, once a carrier submits a petition the Bureau 
will issue a public notice seeking comment and noting whether the 
waiver is appropriate for streamlined treatment. Absent any further 
action by the Bureau, if the waiver is subject to streamlined 
treatment, it is granted on the 60th day after the reply comment due 
date. Alternatively, if the petition requires further analysis and 
review, the public notice will state that the petition is not suitable 
for streamlined treatment.
    48. Requiring waivers for all study area boundary changes will help 
to avoid the issues created by merging study areas receiving different 
types of support or the expanded use of less efficient support 
methodologies. Requiring changes in study area boundaries to be 
reviewed by the Bureau will ensure that any proposed changes are not 
approved until the effects on the Fund are taken into account. Because 
the Commission has already established a streamlined process for such 
waivers, those requests that do not present any support or other 
concerns can be swiftly granted, thereby minimizing the burden on those 
carriers proposing mergers that promote efficiency and are clearly in 
the public interest.
    49. As proposed in the Administrative NPRM, the Commission 
eliminates optional quarterly line count reporting for CAF BLS support 
recipients, finding that the mandatory annual line count

[[Page 25155]]

reporting set forth in Sec. Sec.  54.313(h)(5) and 54.903(a)(1) of its 
rules suffices for the purposes of setting per line caps. No commenter 
filed comments on this proposal or the Commission's alternative 
proposal to update the schedule to file optional quarterly line counts 
to better align with the deadline for mandatory annual line count 
filings.
    50. The optional quarterly reporting deadlines, falling on 
September 30th, December 31st, and March 31st, pertain to line counts 
as of six months prior to the filing deadline. The Commission notes 
that the December 31st optional quarterly line count update is due on 
the same day as the mandatory annual line count report for the prior 
reporting year, making this optional quarterly filing obsolete. All 
other quarterly line count reports have a six-month lag time, i.e., 
each quarterly report reports line counts as of six months earlier. 
These optional quarterly line count filings also have limited utility. 
While USAC uses these quarterly line count updates to administer the 
monthly per-line cap on high-cost universal service support each 
quarter, only a very limited number of carriers have filed these 
updates in recent years, many of which are not subject to the per-line 
cap. USAC also uses quarterly line count data to determine preliminary 
(CAF BLS) amounts for a carrier that has acquired exchanges from 
another CAF BLS support recipient, but those amounts are ultimately 
subject to a true-up based on the acquiring carrier's actual cost and 
revenue data for their exchange (including the acquired exchange). 
Because the Commission can generally rely on the mandatory annual line 
counts due on March 31st to monitor line counts with minimum impact on 
reporting carriers and with minimum limitation on accuracy, it 
concludes that eliminating the optional quarterly line count filings is 
a more efficient modification than merely updating the filing schedule 
for these filings. Accordingly, the Commission eliminates these 
optional quarterly line count filings and modifies all related rules 
regarding these quarterly line counts.
    51. The Commission revises Sec.  54.205 of its rules to require an 
ETC designated by a state authority and seeking to relinquish its ETC 
designation to also provide advance notice to the Commission. The 
Commission sought comment on this proposal, which was supported by 
NTCA. As per this proposal, the Commission will also require the former 
ETC to notify it of the state's decision to permit or deny such 
relinquishment by submitting the relevant state order or other document 
issued by the state within 10 days of such issuance in the Electronic 
Comment Filing System, WC Docket No. 09-197. The Commission will 
require these filings regardless of whether the ETC is currently 
receiving Federal support, consistent with long standing precedent that 
states that obligations run with the ETC designation. The Commission's 
decision to require notice of relinquishment will help deter waste, 
fraud, and abuse by enabling swift discontinuance of support payments 
to non-ETCs, and, where applicable, allow the Commission to initiate 
default and potentially enforcement proceedings where it becomes clear 
that the support recipient has failed to fulfill its obligations. The 
Commission notes that these changes are applicable to all ETCs, 
including Lifeline-only ETCs. The Commission makes these modifications 
pursuant to authority granted under section 254 and as reasonably 
ancillary thereto. These changes will apply to all ETCs submitting 
requests for relinquishment after the effective date of these rule 
changes.
    52. The Commission adopts several minor changes to its rules to 
correct inaccuracies associated with subsequent rule changes. 
Specifically, the Commission makes the following corrections:
     Section 54.314(d)(2) of the Commission's rules cross 
references Sec.  54.313(a)(8). Section 54.313 was revised and 
renumbered, and Sec.  54.313(a)(8) became Sec.  54.313(a)(4), while 
Sec.  54.313(a)(8) was eliminated. Accordingly, the Commission takes 
this opportunity to revise Sec.  54.314(d)(2) to reference Sec.  
54.313(a)(4) rather than Sec.  54.313(a)(8).
     Section 54.315(c)(4) of the Commission's rules currently 
indicates that the failure of CAF Phase II auction support recipients 
to meet service milestones will trigger reporting obligations and 
support withholding consistent with Sec.  54.320(c) of the Commission's 
rules. This rule section should instead cross reference Sec.  
54.320(d).
     Similarly, Sec.  54.1508(e)(1) of the Commission's rules 
also includes an incorrect cross reference. Specifically, when the 
section references milestones, it should cross reference Sec.  
54.320(d) instead of Sec.  54.320(c).
     Subpart K of part 54 of title 47 is titled ``Interstate 
Common Line Support Mechanism for Rate-of-Return Carriers.'' In 2016, 
the Commission reformed this mechanism to provide support for stand-
alone broadband, now known as CAF BLS. Consistent with this reform, the 
Commission retitles subpart K to read ``Connect America Fund Broadband 
Loop Support for Rate-of-Return Carriers.''
     Similarly, Sec. Sec.  54.701(c)(1)(iii) and 54.705(c) of 
the Commission's rules describe the high-cost support mechanisms to 
include ``interstate access universal service support mechanism for 
price cap carriers described in subpart J of this part, and the 
interstate common line support mechanism for rate-of-return carriers 
described in subpart K of this part.'' The Commission deleted subpart J 
of part 54 to reflect its decision in the USF/ICC Transformation Order 
to eliminate the Interstate Access Support mechanism as a stand-alone 
support mechanism. In 2016, the Commission replaced the interstate 
common line support mechanism. In subsequent years, the Commission also 
created several new high-cost support mechanisms for rate-of-return and 
price-cap carriers. Accordingly, the Commission revises Sec. Sec.  
54.701(c)(1)(iii) and 54.705(c) to remove the references to 
``interstate access universal service support mechanism for price cap 
carriers described in subpart J of this part,'' and ``interstate common 
line support mechanism.'' The Commission adds to these sections a 
reference to the high-cost support mechanisms described in subparts J, 
K, M, and O of the part, and the low-income support mechanisms 
described in subpart E of the part.
    53. GTA has submitted proposals as part of its comments in this 
proceeding to apply the newly adopted Alaska rate benchmarks as 
suitable proxy for all insular territories in the United States. This 
proposal is not sufficiently related to those proposals raised in the 
Administrative NPRM to provide the requisite notice and comment periods 
for rulemakings as specified in the Administrative Procedure Act. 
Accordingly, the Commission declines to address them as part of the 
Order. These issues would need to be raised in a petition for 
rulemaking. The Commission does note that in its comments in this 
proceeding, GTA did not provide sufficient arguments or evidence for it 
to evaluate the reasonableness of the proposal, so the Commission would 
expect any such petition to include substantial additional information.

II. Procedural Matters

A. Paperwork Reduction Act

    54. The Order contains new and modified 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

[[Page 25156]]

(OMB) for review under section 3507(d) of the PRA. OMB, the general 
public, and other Federal agencies will be invited to comment on the 
new and modified information collection requirements contained in this 
proceeding. In addition, the Commission notes that, pursuant to the 
Small Business Paperwork Relief Act of 2002, it previously sought 
specific comment on how the Commission might further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees. The Commission describes impacts that might affect 
small businesses, which includes most businesses with fewer than 25 
employees in this document.
    55. Congressional Review Act. The Commission has determined, and 
the Administrator of the Office of Information and Regulatory Affairs, 
OMB, concurs, that this rule is ``non-major'' under the Congressional 
Review Act, 5 U.S.C. 804(2). The Commission will send a copy of the 
Order to Congress and the Government Accountability Office pursuant to 
5 U.S.C. 801(a)(1)(A).
    56. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Administrative NPRM released in May of 2022. The 
Commission sought written public comment on the proposals in the 
Administrative NPRM, including comment on the IRFA. No comments were 
filed addressing the IRFA. This Final Regulatory Flexibility Analysis 
conforms to the RFA.
    57. In the Order, the Commission adopts several changes to its 
rules that will improve the administration of the high-cost program to 
enhance its efficiency and efficacy, better safeguard USF, and 
streamline annual reporting and certification requirements for high-
cost support recipients. First, the Commission adopts its proposal to 
streamline the process for submitting annual high-cost information and 
certifications by requiring that such filings be made only with the 
USAC, rather than with both USAC and the Commission's OSEC. Second, the 
Commission similarly adopts its proposal to require states that desire 
ETCs to receive high-cost support and ETCs not subject to state 
jurisdiction to file annual reports with USAC only. Third, the 
Commission adopts its proposal to more closely align support reductions 
with an ETC's failure to certify locations by the deadlines established 
in its rules. Fourth, the Commission modifies the reporting 
requirements for performance testing to require all high-cost support 
recipients serving fixed locations to report and certify performance 
testing results on a quarterly basis, rather than annually. Fifth, the 
Commission retains annual financial reporting for privately held rate-
of-return carriers that receive A-CAM support or Alaska Plan support. 
Sixth, the Commission adopts its proposal to modify its rules to create 
a consistent one-time grace period for all compliance filings with 
grace periods to ``within four business days.'' Seventh, the Commission 
modifies its rules to adopt uniform deployment, certification, and 
location reporting deadlines for all CAF Phase II auction support 
recipients. Eighth, the Commission declines to amend Sec.  54.316(a) of 
its rules to require ETCs receiving high-cost support and subject to 
defined deployment obligations to report the maximum speeds offered, 
advertised, or delivered to customers. Ninth, the Commission adopts its 
proposal to amend Sec.  54.316(a)(1) to more accurately reflect the 
deployed locations reporting obligations of support recipients. Tenth, 
the Commission modifies its voice and broadband rate certification 
rules to clarify the reporting period. The Commission also amends Sec.  
54.316(a) to clarify that it will permit high-cost support recipients 
to report and certify late-reported locations in future annual 
deployment reports and to count these locations toward their defined 
deployment obligations.
    58. In addition, the Order amends the Commission's rules to provide 
a simpler process for rate-of-return LECs seeking to merge, 
consolidate, or acquire one or more rate-of-return study areas to 
calculate the new entity's ARC, CAFF ICC support, and reciprocal 
compensation and switched access rate caps. The Commission amends Sec.  
54.902 of its rules to better reflect the current state of the high-
cost program. The Commission modifies the study area boundary process 
to require waivers for all study area boundary changes. The Order also 
eliminates optional quarterly line count reporting for CAF BLS support 
recipients and revises Sec.  54.205 of the Commission's rules to 
require an ETC designated by a state authority and seeking to 
relinquish its ETC designation to provide advance notice to the 
Commission.
    59. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the rules adopted herein. The RFA generally defines the 
term ``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 that: (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).
    60. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. The Commission's actions, over time, may affect small 
entities that are not easily categorized at present. The Commission 
therefore describes, at the outset, three broad groups of small 
entities that could be directly affected herein. First, while there are 
industry specific size standards for small businesses that are used in 
the regulatory flexibility analysis, according to data from the SBA's, 
Office of Advocacy, in general a small business is an independent 
business having fewer than 500 employees. These types of small 
businesses represent 99.9% of all businesses in the United States, 
which translates to 33.2 million businesses.
    61. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 
or less to delineate its annual electronic filing requirements for 
small exempt organizations. Nationwide, for tax year 2020, there were 
approximately 447,689 small exempt organizations in the U.S. reporting 
revenues of $50,000 or less according to the registration and tax data 
for exempt organizations available from the IRS.
    62. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2017 Census of Governments indicate there were 
90,075 local governmental jurisdictions consisting of general purpose 
governments and special purpose governments in the United States. Of 
this number, there were 36,931 general purpose governments (county, 
municipal, and town or township) with populations of less than 50,000 
and 12,040 special purpose governments--independent school districts 
with enrollment populations of less than 50,000. Accordingly, based on 
the 2017 U.S. Census of Governments data, the Commission estimates that 
at least

[[Page 25157]]

48,971 entities fall into the category of ``small governmental 
jurisdictions.''
    63. Small entities potentially affected by the rules herein include 
Wired Telecommunications Carriers, LECs, Incumbent LECs, Competitive 
LECs, Interexchange Carriers (IXCs), Local Resellers, Toll Resellers, 
Other Toll Carriers, Prepaid Calling Card Providers, Wireless 
Telecommunications Carriers (except Satellite), Cable and Other 
Subscription Programming, Cable Companies and Systems (Rate 
Regulation), Cable System Operators (Telecom Act Standard), All Other 
Telecommunications, Wired Broadband Internet Access Service Providers 
(Wired ISPs), Wireless Broadband Internet Access Service Providers 
(Wireless ISPs or WISPs), Internet Service Providers (Non-Broadband), 
All Other Information Services.
    64. In the Order, the Commission adopts measures to improve the 
management, administration, and oversight of the high-cost program that 
may impact small entities, including: streamlining reporting and 
certification requirements; improving review of mergers between rate-
of-return local exchange carriers; clarifying support for exchanges 
acquired by a CAF BLS recipient; establishing a streamlined process to 
merge jointly-owned study areas; improving the process to relinquish 
ETC status, and improving the Commission's audit program.
    65. The Commission revises Sec.  54.313(i) of its rules to 
streamline the process for submitting annual high-cost information and 
certifications by requiring that such filings be made only with the 
USAC which administers the program, rather than both USAC and the 
Commission's OSEC. The Commission similarly revises Sec.  54.314 of its 
rules to require that high-cost support recipients file annual reports 
with USAC only. Additionally, the Commission more closely aligns 
support reductions with an ETC's failure to certify locations by the 
deadlines established in the Commission's rules. The Commission also 
modifies the reporting requirements for performance testing to apply to 
all high-cost support recipients serving fixed locations, not just 
those carriers that are not in compliance with speed and latency 
requirements. These carriers will be required to report and certify 
performance testing results on a quarterly basis instead of annually, 
and the Commission will allow for an additional week to file the 
report. Further, the Commission modifies its rules to create a 
consistent one-time grace period for all compliance filings to ``within 
four business days.'' The Commission updates its rules to adopt uniform 
deployment, certification, and location reporting deadlines for all CAF 
Phase II auction support recipients (including recipients of support 
allocated through the New York's New NY Broadband program). Section 
54.316(a)(1) of the Commission's rules is amended to more accurately 
reflect the reporting obligations of support recipients in reporting 
deployed locations. The Commission's voice rate certification rule is 
updated to require carriers submitting an annual FCC Form 481 to 
certify compliance with the annual voice and broadband benchmarks 
adopted for the preceding calendar year ending the last day of December 
rather than those benchmarks applicable to the year that the report is 
filed. The Commission modifies and amends its rules to permit high-cost 
support recipients that have deployed locations in years prior to the 
annual reporting year to submit these locations (late-reported 
locations) and to count these locations toward their defined deployment 
obligations.
    66. The Commission amends its rules to provide a simpler process 
for rate-of-return LECs seeking to merge, consolidate, or acquire one 
or more rate-of-return study areas to calculate the new entity's ARC, 
CAF ICC support, and reciprocal compensation and switched access rate 
caps. Section 51.917 is modified to provide guidance on calculating 
Base Period Revenues for rate-of-return study areas affected by a 
transaction, thereby permitting rate-of-return carriers to adjust their 
Base Period Revenues without the need for a waiver. Specifically, the 
Commission revises Sec.  51.917 of its rules to provide that when two 
or more entire rate-of-return study areas are merged, the LEC shall 
combine the Base Period Revenue and interstate revenue requirements of 
the merging study areas for purposes of calculating Eligible Recovery. 
The Commission modifies Sec.  51.909 to establish procedures for 
setting new rate caps for merging rate-of-return LECs and adopt a 
streamlined waiver process if the rates for the new combined study area 
would result in the new entity's CAF ICC support exceeding a certain 
threshold. Specifically, for carriers that file their own tariffs, the 
new rate cap for each rate element shall be the weighted average of the 
preexisting rates in each of the affected study areas. Revising the 
waiver process will reduce costs and administrative burdens by 
eliminating the need for carriers, including small entities, to obtain 
individual waivers when certain conditions apply.
    67. The Commission modifies Sec.  54.902(a) to limit eligibility 
for CAF BLS support to those transactions where the acquiring carrier 
would only be eligible to receive CAF BLS support for exchanges 
acquired from existing CAF BLS recipients, and revises Sec.  54.902(b) 
to include any model-based, auction-based, or frozen support. The 
Commission updates the study area boundary process to require waivers 
for all study area boundary changes. The Commission eliminates optional 
quarterly line count reporting for CAF BLS support recipients, finding 
that the mandatory annual line count reporting set forth in Sec. Sec.  
54.313(h)(5) and 54.903(a)(1) of the Commission's rules suffices for 
the purposes of setting per line caps. The Commission revises Sec.  
54.205 of the Commission's rules to require an ETC designated by a 
state authority and seeking to relinquish its ETC designation to also 
provide advance notice to the Commission. In addition, the Commission 
requires former ETCs designated by a state authority that have 
relinquished their designation to provide notice of such relinquishment 
within 10 days of the effective date of this rule modification. The 
Commission adopts several minor changes to its rules to correct 
inaccuracies associated with subsequent rule changes.
    68. The Commission modifies Sec.  54.902(a) to limit eligibility 
for CAF BLS support to those transactions where the acquiring carrier 
would only be eligible to receive CAF BLS support for exchanges 
acquired from existing CAF BLS recipients, and revise Sec.  54.902(b) 
to include any model-based, auction-based, or frozen support. The 
Commission updates the study area boundary process to require waivers 
for all study area boundary changes. The Commission eliminates optional 
quarterly line count reporting for CAF BLS support recipients, finding 
that the mandatory annual line count reporting set forth in Sec. Sec.  
54.313(h)(5) and 54.903(a)(1) of its rules suffices for the purposes of 
setting per line caps. The Commission revises Sec.  54.205 of its rules 
to require an ETC designated by a state authority and seeking to 
relinquish its ETC designation to also provide advance notice to the 
Commission. In addition, the Commission requires former ETCs designated 
by a state authority that have relinquished their designation to 
provide notice of such relinquishment within 10 days of the effective 
date of this rule modification. The Commission adopts several minor 
changes to its rules to correct inaccuracies associated with subsequent 
rule changes.
    69. The record does not provide sufficient information to allow the

[[Page 25158]]

Commission to determine whether small entities will be required to hire 
professionals to comply with its decisions. The Commission anticipates 
the approaches it has taken to implement the requirements will have 
minimal cost implications because it expects that much of the required 
information is already collected to ensure compliance with the terms 
and conditions of support. Further, the changes the Commission makes to 
streamline waiver processes and eliminate duplicative filing 
requirements may reduce administrative costs and compliance 
requirements for small entities that may have smaller staff and fewer 
resources.
    70. The RFA requires an agency to provide, ``a description of the 
steps the agency has taken to minimize the significant economic impact 
on small entities . . . including a statement of the factual, policy, 
and legal reasons for selecting the alternative adopted in the final 
rule and why each one of the other significant alternatives to the rule 
considered by the agency which affect the impact on small entities was 
rejected.''
    71. In reaching its final conclusions and through its actions in 
this proceeding, the Commission has considered the economic impact of, 
and alternatives to, proposals that may affect small entities. The 
rules that the Commission adopts in the Order will benefit small and 
other entities by improving and streamlining annual reporting and 
certification, as well as by eliminating ambiguity and reducing 
administrative burdens. Additionally, the Commission adopts consistent 
grace periods of four business days which will eliminate confusion for 
all entities from grace periods falling on a weekend or holiday. The 
Commission also eliminates the need for rate-of-return LECs, most of 
which are small entities, that are involved in a merger, consolidation, 
or acquisition with another rate-of-return carrier to obtain a waiver 
of certain intercarrier compensation rules. For carriers that do not 
satisfy the criteria identified for transactions when waiver is not 
required, the Commission adopts a streamlined CAF ICC merger approval 
process. Specifically, the Commission modifies Sec.  54.314 to require 
the submission of annual certifications of its rules with USAC only, 
instead of USAC and the Commission. Revisions to Sec.  54.316(a) 
clarify high-cost support recipients obligations for late-reported 
locations, addressing commenters concerns by modifying the support 
reduction and capping the duration multiplier if timely filing is made 
by the next deadline. The Commission, however, declines to amend Sec.  
54.316(a) to require ETCs receiving high-cost support and subject to 
defined deployment obligations to report the maximum speeds offered or 
delivered to customers because similar information is collected through 
fulfillment of their BDC responsibilities.
    72. To the extent the Commission retains certification and 
reporting requirements, it finds that the importance of monitoring the 
use of the public's funds outweighs the burden of filing the required 
information on all entities, including small entities, particularly 
because much of the information that the Commission requires they 
report is information it expects they will already be collecting to 
ensure they comply with the terms and conditions of support and they 
will be able to submit their location data on a rolling basis to help 
minimize the burden of uploading a large number of locations at once. 
For example, the Commission declines proposals to relieve privately 
held rate-of-return carriers that receive A-CAM support or Alaska Plan 
support of the requirement to file annually a report of the company's 
financial conditions and operations, because the public interest 
benefits evaluating the efficacy outweigh the burdens. The Commission 
considered proposals that sought to apply the newly adopted Alaska rate 
benchmarks as suitable proxy for all insular territories in the United 
States, but declines to address them in the Order because they are not 
sufficiently related to the proposals in the Administrative NPRM, and 
recommend that commenters submit a petition for rulemaking to address 
this issue.

III. Ordering Clauses

    73. Accordingly, it is ordered, pursuant to the authority contained 
in sections 4(i), 214, 218-220, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 214, 218-220, 
254, 303(r), and 403, and Sec. Sec.  1.1 and 1.425 of the Commission's 
rules, 47 CFR 1.1 and 1.425 the Order is adopted. The Order shall be 
effective thirty days after publication in the Federal Register, except 
for those portions containing information collection requirements in 
Sec. Sec.  36.4, 54.205, 54.313(a)(2), (3), and (6), (i), and (j), 
54.314(a) through (d), 54.316(a) through (d), 54.903(a)(2), and 54.1306 
of the Commission's rules that have not been approved by OMB.
    74. It is further ordered that parts 36, 51, and 54 of the 
Commission's rules are amended as set forth in this document, and that 
any such rule amendments that contain new or modified information 
collection requirements that require approval by the OMB under the PRA 
shall be effective after announcement in the Federal Register or OMB 
approval of the Commission's rules, and on the effective date announced 
therein.

List of Subjects

47 CFR Part 36

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications, Telephone, Uniform System of 
Accounts.

47 CFR Part 51

    Communications, Communications common carriers, Telecommunications, 
Telephone.

47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, Internet, Libraries, Puerto Rico, Reporting and recordkeeping 
requirements, Schools, Telecommunications, Telephone, Virgin Islands.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 36, 51, and 54 as 
follows:

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

0
1. The authority citation for part 36 continues to read as follows:

    Authority:  47 U.S.C. 151, 152, 154(i) and (j), 201, 205, 220, 
221(c), 254, 303(r), 403, 410, and 1302 unless otherwise noted.


0
2. Delayed indefinitely, amend Sec.  36.4 by adding paragraph (c) to 
read as follows:


Sec.  36.4  Streamlining procedures for processing petitions for waiver 
of study area boundaries.

* * * * *
    (c) Petitions for waiver required. Effective as of [30 DAYS AFTER 
THE EFFECTIVE DATE OF THIS PARAGRAPH (c)], local exchange carriers 
seeking a change in study area boundaries must file a study area 
petition consistent with the procedures

[[Page 25159]]

set out in paragraphs (a) and (b) of this section notwithstanding any 
prior exemption from such waiver requests including, but not limited 
to, when a company is combining previously unserved territory with one 
of its study areas or a holding company is consolidating existing study 
areas within the same state. The Wireline Competition Bureau or the 
Office of Economics and Analytics are permitted to accept study area 
boundary corrections without a waiver.

PART 51--INTERCONNECTION

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

    Authority:  47 U.S.C. 151-55, 201-05, 207-09, 218, 225-27, 251-
52, 271, 332 unless otherwise noted.


0
4. Amend Sec.  51.909 by adding paragraph (a)(7) to read as follows:


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

    (a) * * *
    (7) Rate-of-return carriers subject to Sec.  51.917 that merge 
with, consolidate with, or acquire, other rate-of-return carriers shall 
establish new rate caps as follows:
    (i) If the merged entity will file its own access tariff, the new 
rate cap for each rate element shall be the average of the preexisting 
rates of each study area weighted by the number of access lines in each 
study area; or
    (ii) If the merged entity participates in the Association traffic-
sensitive tariff and has to establish a single switched access rate for 
one or more rate elements, the new consolidated rate reflecting the 
cost characteristics of the merged entity, as determined by the 
Association, will serve as the new rate cap if the merged entity's 
Connect America Fund Intercarrier Compensation (CAF ICC) support will 
not be more than two percent higher than the combined amount received 
by the entities prior to merger, using rate and demand levels for the 
preceding calendar year. A merging entity that does not satisfy the 
requirement in this paragraph (a)(7)(ii) may file a streamlined waiver 
petition that will be subject to the following procedure:
    (A) Public notice and review period. The Wireline Competition 
Bureau will issue a public notice seeking comment on a petition for 
waiver of the two-percent threshold established by this paragraph 
(a)(7)(ii).
    (B) Comment cycle. Comments on petitions for waiver may be filed 
during the first 30 days following public notice, and reply comments 
may be filed during the first 45 days following public notice, unless 
the public notice specifies a different pleading cycle. All comments on 
petitions for waiver shall be filed electronically, and shall satisfy 
such other filing requirements as may be specified in the public 
notice.
    (C) Effectuating waiver grant. A waiver petition filed pursuant to 
this paragraph (a)(7)(ii)(C) will be deemed granted 60 days after the 
release of the public notice seeking comment on the petition, unless 
opposed or the Commission acts to prevent the waiver from taking 
effect. The Association and the petitioner shall coordinate the timing 
of any tariff filing necessary to effectuate this change. The revised 
rate filed by the Association shall be the rate cap for purposes of 
applying paragraph (a) of this section.
* * * * *

0
5. Amend Sec.  51.917 by revising paragraph (c) to read as follows:


Sec.  51.917  Revenue recovery for Rate-of-Return Carriers.

* * * * *
    (c) Base Period Revenue--(1) Adjustment for Access Stimulation 
activity. 2011 Rate-of-Return Carrier Base Period Revenue shall be 
adjusted to reflect the removal of any increases in revenue requirement 
or revenues resulting from Access Stimulation activity the Rate-of-
Return Carrier engaged in during the relevant measuring period. A Rate-
of-Return Carrier should make this adjustment for its initial July 1, 
2012, tariff filing, but the adjustment may result from a subsequent 
Commission or court ruling.
    (2) Adjustment for merger, consolidation, or acquisition. Rate-of-
Return Carriers subject to this section that merge with, consolidate 
with, or acquire, other Rate-of-Return Carriers shall establish 
combined Base Period Revenue and interstate revenue requirement levels 
as follows:
    (i) If the merger or acquisition is of two or more study areas, the 
Base Period Revenue and interstate revenue requirement levels of the 
study areas shall be added together to establish a new Base Period 
Revenue and interstate revenue requirement for the newly combined 
entity; or
    (ii) If a portion of a study area is being acquired and merged into 
another study area, the Base Period Revenue and interstate revenue 
requirement levels of the partial study area shall be based on the 
proportion of access lines acquired compared to the total access lines 
in the pre-merger study area.
* * * * *

PART 54--UNIVERSAL SERVICE

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

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
229, 254, 303(r), 403, 1004, 1302, 1601-1609, and 1752, unless 
otherwise noted.


0
7. Delayed indefinitely, amend Sec.  54.205 by revising paragraph (a) 
and adding paragraphs (c) and (d) to read as follows:


Sec.  54.205  Relinquishment of universal service.

    (a) A state commission shall permit an eligible telecommunications 
carrier to relinquish its designation as such a carrier in any area 
served by more than one eligible telecommunications carrier. An 
eligible telecommunications carrier that seeks to relinquish its 
eligible telecommunications carrier designation for an area served by 
more than one eligible telecommunications carrier shall give notice to 
the state commission and to the Federal Communications Commission of 
such intention to relinquish. The notice to the Federal Communications 
Commission shall be filed with the Office of the Secretary of the 
Commission clearly referencing WC Docket No. 09-197.
* * * * *
    (c) Where a state authority permits an eligible telecommunications 
carrier to relinquish its designation, the former eligible 
telecommunications carrier must submit a copy of the state authority's 
order or other document permitting relinquishment to the Commission 
within 10 days of the state authority's decision.
    (d) All notices to the Commission must be filed regardless of 
whether the eligible telecommunications carrier received or is 
receiving universal service support at the time of relinquishment.

0
8. Amend Sec.  54.305 by revising paragraph (d) to read as follows:


Sec.  54.305  Sale or transfer of exchanges.

* * * * *
    (d) Transferred exchanges in study areas operated by rural 
telephone companies that are subject to the limitations on loop-related 
universal service support in paragraph (b) of this section may be 
eligible for a safety valve loop cost expense adjustment based on the 
difference between the rural incumbent local exchange carrier's index 
year expense adjustment and subsequent year loop cost expense 
adjustments for the acquired exchanges. Safety valve loop cost expense 
adjustments shall only be available to

[[Page 25160]]

rural incumbent local exchange carriers that, in the absence of 
restrictions on high-cost loop support in paragraph (b) of this 
section, would qualify for high-cost loop support for the acquired 
exchanges under Sec.  54.1310.
    (1) For carriers that buy or acquire telephone exchanges on or 
after January 10, 2005, from an unaffiliated carrier, the index year 
expense adjustment for the acquiring carrier's first year of operation 
shall equal the selling carrier's loop-related expense adjustment for 
the transferred exchanges for the 12-month period prior to the transfer 
of the exchanges. At the acquiring carrier's option, the first year of 
operation for the transferred exchanges, for purposes of calculating 
safety valve support, shall commence at the beginning of either the 
first calendar year or the next calendar quarter following the transfer 
of exchanges. For the first year of operation, a loop cost expense 
adjustment, using the costs of the acquired exchanges submitted in 
accordance with Sec.  54.1305 shall be calculated pursuant to Sec.  
54.1310 and then compared to the index year expense adjustment. Safety 
valve support for the first period of operation will then be calculated 
pursuant to paragraph (d)(3) of this section. The index year expense 
adjustment for years after the first year of operation shall be 
determined using cost data for the first year of operation of the 
transferred exchanges. Such cost data for the first year of operation 
shall be calculated in accordance with Sec. Sec.  54.1305 and 54.1310. 
For each year, ending on the same calendar quarter as the first year of 
operation, a loop cost expense adjustment, using the loop costs of the 
acquired exchanges, shall be submitted and calculated pursuant to 
Sec. Sec.  54.1305 and 54.1310 and will be compared to the index year 
expense adjustment. Safety valve support for the second year of 
operation and thereafter will then be calculated pursuant to paragraph 
(d)(3) of this section.
    (2) For carriers that bought or acquired exchanges from an 
unaffiliated carrier before January 10, 2005, and are not subject to 
the exception in paragraph (c) of this section, the index year expense 
adjustment for acquired exchange(s) shall be equal to the rural 
incumbent local exchange carrier's high-cost loop expense adjustment 
for the acquired exchanges calculated for the carrier's first year of 
operation of the acquired exchange(s). At the carrier's option, the 
first year of operation of the transferred exchanges shall commence at 
the beginning of either the first calendar year or the next calendar 
quarter following the transfer of exchanges. The index year expense 
adjustment shall be determined using cost data for the acquired 
exchange(s) submitted in accordance with Sec.  54.1305 and shall be 
calculated in accordance with Sec.  54.1310. For each subsequent year, 
ending on the same calendar quarter as the index year, a loop cost 
expense adjustment, using the costs of the acquired exchanges, will be 
calculated pursuant to Sec.  54.1310 and will be compared to the index 
year expense adjustment. Safety valve support is calculated pursuant to 
paragraph (d)(3) of this section.
* * * * *

0
9. Amend Sec.  54.310 by revising paragraph (c) introductory text to 
read as follows:


Sec.  54.310  Connect America Fund for Price Cap Territories--Phase II.

* * * * *
    (c) Deployment obligation. Recipients of Connect America Phase II 
model-based support must complete deployment to 40 percent of supported 
locations by December 31, 2017, to 60 percent of supported locations by 
December 31, 2018, to 80 percent of supported locations by December 31, 
2019, and to 100 percent of supported locations by December 31, 2020. 
Recipients of Connect America Phase II support awarded through a 
competitive bidding process, including New York's New NY Broadband 
Program, must complete deployment to 40 percent of supported locations 
by December 31, 2022, to 60 percent of supported locations December 31, 
2023, to 80 percent of supported locations by December 31, 2024, and to 
100 percent of supported locations by December 31, 2025. Compliance 
shall be determined based on the total number of supported locations in 
a state.
* * * * *

0
10. Delayed indefinitely, amend Sec.  54.313 by:
0
a. Revising the section heading and paragraphs (a)(2), (3), and (6);
0
b. Removing the heading from paragraph (g);
0
c. Revising paragraph (i); and
0
d. Revising and republishing paragraph (j);
    The revisions read as follows:


Sec.  54.313  Annual reporting requirements and quarterly performance 
reporting for high-cost recipients.

    (a) * * *
    (2) A certification that the pricing of the company's voice 
services during the prior calendar year is no more than two standard 
deviations above the applicable national average urban rate for voice 
service, as specified in the public notice issued by the Wireline 
Competition Bureau and the Office of Economics and Analytics;
    (3) A certification that the pricing of a service that meets the 
Commission's broadband public interest obligations during the prior 
calendar year is no more than the applicable benchmark to be announced 
annually in a public notice issued by the Wireline Competition Bureau 
and the Office of Economics and Analytics, or is no more than the non-
promotional price charged for a comparable fixed wireline service in 
urban areas in the states or U.S. Territories where the eligible 
telecommunications carrier receives support;
* * * * *
    (6) The results of quarterly network performance tests pursuant to 
the methodology and in the format determined by the Wireline 
Competition Bureau, Wireless Telecommunications Bureau, and Office of 
Engineering and Technology must be submitted on the following dates per 
year:
    (i) By April 15th. Filing and certification for network performance 
test results for first quarter testing.
    (ii) By July 15th. Filing and certification for network performance 
test results for second quarter testing.
    (iii) By October 15th. Filing and certification for network 
performance test results for third quarter testing.
    (iv) By January 15th. Filing and certification for network 
performance test results for the previous fourth quarter testing.
* * * * *
    (i) All reports pursuant to this section shall be filed with the 
Administrator.
    (j)(1) Other than for certifications under paragraph (a)(6) of this 
section, in order for a recipient of high-cost support to continue to 
receive support for the following calendar year, or to retain its 
eligible telecommunications carrier designation, it must submit the 
annual reporting information required by this section annually by July 
1 of each year. Eligible telecommunications carriers that file their 
reports after the July 1 deadline shall receive a reduction in support 
pursuant to the following schedule:
    (i) An eligible telecommunications carrier that files after the 
July 1 deadline, but by July 8, will have its support reduced in an 
amount equivalent to seven days in support; and
    (ii) An eligible telecommunications carrier that files on or after 
July 9 will have its support reduced on a pro-rata daily basis 
equivalent to the period of non-compliance, plus the minimum seven-day 
reduction.

[[Page 25161]]

    (2) An eligible telecommunications carrier that submits the annual 
reporting information required by this section after July 1 but within 
4 business days will not receive a reduction in support if the eligible 
telecommunications carrier and its holding company, operating 
companies, and affiliates as reported pursuant to paragraph (a)(4) of 
this section have not missed the July 1 deadline in any prior year.
    (3) For certifications under paragraph (a)(6) of this section, in 
order for a recipient of high-cost support to continue to receive 
support amount for the following calendar year, or retain its eligible 
telecommunications carrier designation, it must submit information 
required under paragraph (a)(6) by the required dates set. Reductions 
in support for late filings shall be calculated after the deadline 
under paragraph (a)(6)(iv) of this section by adding the total days 
late for each quarter and dividing that number by four (days late). 
Eligible telecommunications carriers that file their reports after the 
quarterly filing deadline will not receive a grace period for late 
filings, and shall receive a reduction in support pursuant to the 
following schedule:
    (i) An eligible telecommunications carrier that is one to seven 
days late, will have its support reduced in an amount equivalent to 
seven days in support; and
    (ii) An eligible telecommunications carrier that is 8 days late or 
more will have its support reduced on a pro-rata basis equivalent to 
the number of days late plus the minimum seven-day reduction.
    (4) Any support reductions resulting from a failure to timely make 
required filing pursuant to this section shall be applied in the month 
following the notice of support reduction to the eligible 
telecommunications carrier from the Administrator or as soon as 
feasible thereafter.
* * * * *

0
11. Delayed indefinitely, revise and republish Sec.  54.314 to read as 
follows:


Sec.  54.314  Certification of support for eligible telecommunications 
carriers.

    (a) Certification. States that desire eligible telecommunications 
carriers to receive support pursuant to the high-cost program must file 
an annual certification with the Administrator stating that all federal 
high-cost support provided to such carriers within that State was used 
in the preceding calendar year and will be used in the coming calendar 
year only for the provision, maintenance, and upgrading of facilities 
and services for which the support is intended. High-cost support shall 
only be provided to the extent that the State has filed the requisite 
certification pursuant to this section.
    (b) Carriers not subject to State jurisdiction. An eligible 
telecommunications carrier not subject to the jurisdiction of a State 
that desires to receive support pursuant to the high-cost program must 
file an annual certification with the Administrator stating that all 
federal high-cost support provided to such carrier was used in the 
preceding calendar year and will be used in the coming calendar year 
only for the provision, maintenance, and upgrading of facilities and 
services for which the support is intended. Support provided pursuant 
to the high-cost program shall only be provided to the extent that the 
carrier has filed the requisite certification pursuant to this section.
    (c) Certification format. (1) A certification pursuant to this 
section may be filed in the form of a letter from the appropriate 
regulatory authority for the State, and must be filed with the 
Administrator of the high-cost universal mechanism, on or before the 
deadlines set forth in paragraph (d) of this section. If provided by 
the appropriate regulatory authority for the State, the annual 
certification must identify which carriers in the State are eligible to 
receive Federal support during the applicable 12-month period, and must 
certify that those carriers only used support during the preceding 
calendar year and will only use support in the coming calendar year for 
the provision, maintenance, and upgrading of facilities and services 
for which support is intended. A State may file a supplemental 
certification for carriers not subject to the State's annual 
certification.
    (2) An eligible telecommunications carrier not subject to the 
jurisdiction of a State shall file a sworn affidavit executed by a 
corporate officer attesting that the carrier only used support during 
the preceding calendar year and will only use support in the coming 
calendar year for the provision, maintenance, and upgrading of 
facilities and services for which support is intended. The affidavit 
must be filed with the Administrator of the high-cost universal service 
support mechanism, on or before the deadlines set forth in paragraph 
(d) of this section.
    (d) Filing deadlines. (1) In order for an eligible 
telecommunications carrier to receive Federal high-cost support, the 
State or the eligible telecommunications carrier, if not subject to the 
jurisdiction of a State, must file an annual certification, as 
described in paragraph (c) of this section, with the Administrator by 
October 1 of each year. If a State or eligible telecommunications 
carrier files the annual certification after the October 1 deadline, 
the carrier subject to the certification shall receive a reduction in 
its support pursuant to the following schedule:
    (i) An eligible telecommunications carrier subject to 
certifications filed after the October 1 deadline, but by October 8, 
will have its support reduced in an amount equivalent to seven days in 
support.
    (ii) An eligible telecommunications carrier subject to 
certifications filed on or after October 9 will have its support 
reduced on a pro-rata daily basis equivalent to the period of non-
compliance, plus the minimum seven-day reduction.
    (iii) Any support reductions resulting from a failure to timely 
make required filing pursuant to this section shall be applied in the 
month following the notice of support reduction to the eligible 
telecommunications carrier from the Administrator or as soon as 
feasible thereafter.
    (2) If an eligible telecommunications carrier or state submits the 
annual certification required by this section after October 1 but 
within 4 business days, the eligible telecommunications carrier subject 
to the certification will not receive a reduction in support if the 
eligible telecommunications carrier and its holding company, operating 
companies, and affiliates as reported pursuant to Sec.  54.313(a)(4) 
have not missed the October 1 deadline in any prior year.

0
12. Amend Sec.  54.315 by revising the first sentence of paragraph 
(c)(4)(i) to read as follows:


Sec.  54.315  Application process for Connect America Fund Phase 
Connect America Fund Phase II support distributed through competitive 
bidding.

* * * * *
    (c) * * *
    (4) * * *
    (i) Failure by a Phase II auction support recipient to meet its 
service milestones as required by Sec.  54.310 will trigger reporting 
obligations and the withholding of support as described in Sec.  
54.320(d). * * *
* * * * *

0
13. Delayed indefinitely, amend Sec.  54.316 by revising paragraph 
(a)(1), the introductory text of paragraph (b), and paragraphs (b)(4) 
and (7) and (c) and adding paragraph (d) to read as follows:

[[Page 25162]]

Sec.  54.316  Broadband deployment reporting and certification 
requirements for high-cost recipients.

    (a) * * *
    (1) Recipients of high-cost support with defined broadband 
deployment obligations pursuant to Sec.  54.308(a) or (c) or Sec.  
54.310(c) shall provide to the Administrator information regarding the 
locations to which the eligible telecommunications carrier is offering 
broadband service in satisfaction of its public interest obligations, 
as defined in either Sec.  54.308 or Sec.  54.309.
* * * * *
    (b) Broadband deployment certifications. ETCs that receive support 
to serve fixed locations shall have the following broadband deployment 
certification obligations:
* * * * *
    (4) Recipients of Connect America Phase II auction support, 
including recipients of support made available through the New York's 
New NY Broadband Program, shall provide, no later than March 1, 2023, 
and on March 1 every year thereafter ending March 1, 2026, a 
certification that by the end of the prior calendar year, it was 
offering broadband meeting the requisite public interest obligations 
specified in Sec.  54.309 to the required percentage of its supported 
locations in each state as set forth in Sec.  54.310(c).
* * * * *
    (7) Recipients of Uniendo a Puerto Rico Fund Stage 2 fixed and 
Connect USVI Fund fixed Stage 2 fixed support shall provide: no later 
than March 1 following each service milestone in Sec.  54.1506, a 
certification that by the end of the prior support year, it was 
offering broadband meeting the requisite public interest obligations 
specified in Sec.  54.1507 to the required percentage of its supported 
locations in Puerto Rico and the U.S. Virgin Islands as set forth in 
Sec.  54.1506. The annual certification shall quantify the carrier's 
progress toward or, as applicable, completion of deployment in 
accordance with the resilience and redundancy commitments in its 
application and in accordance with the detailed network plan it 
submitted to the Wireline Competition Bureau.
    (c) Filing deadlines. In order for a recipient of high-cost support 
to continue to receive support for the following calendar year, or 
retain its eligible telecommunications carrier designations, it must 
submit the annual reporting information by March 1 as described in 
paragraphs (a) and (b) of this section. ETCs that file their reports 
after the March 1 deadline shall receive a reduction in support 
pursuant to the following schedule:
    (1) An ETC that certifies after the March 1 deadline, but by March 
8, will have its support reduced in an amount equivalent to seven days 
in support.
    (2) An ETC that certifies on or after March 9 will have its support 
reduced on a pro-rata daily basis equivalent to the period of non-
compliance, plus the minimum seven-day reduction.
    (3) An ETC that certifies the information required by this section 
within 4 business days of March 1 will not receive a reduction in 
support if the ETC and its holding company, operating companies, and 
affiliates as reported pursuant to Sec.  54.313(a)(4) in their report 
due July 1 of the prior year, have not missed the deadline in any prior 
year.
    (4) Any support reductions resulting from a failure to timely make 
required filing pursuant to this section shall be applied in the next 
month following the notice of support reduction to the eligible 
telecommunications carrier from the Administrator or as soon as 
feasible thereafter.
    (d) Reporting locations pursuant to paragraph (a)(1) of this 
section after the March 1st annual deadline. (1) An ETC that did not 
report and certify specific locations by March 1 of the year following 
the year in which the locations were deployed (late-reported locations) 
may report and certify those locations in a future year for the purpose 
of counting those locations toward fulfillment of future defined 
deployment obligations and/or for curing any noncompliance with such 
obligations in accordance with the terms of Sec.  54.320. To do so, the 
ETC must indicate that the late-reported locations are being filed for 
this purpose.
    (2) An ETC filing late-reported locations will be subject to a 
reduction in support calculated by multiplying the following numbers:
    (i) The per diem per location support received by the ETC, subject 
to a maximum per-day, per-location reduction of seven dollars.
    (ii) The number of days between the March 1 deadline for the 
reporting year in which the late-reported locations were deployed and 
the date that the ETC reported, certified, and indicated that the 
location should be counted toward defined deployment obligations, 
subject to a 15 day limit if the late-reported locations are filed as 
of the next reporting deadline after the locations should have been 
filed and at 30 day limit if the late-reported locations are filed at 
any time thereafter (for each instance of late reporting).
    (iii) The number of late-reported locations as a percentage of the 
total number of locations that the ETC filed for the reporting year in 
which the untimely filed location should have been reported.
    (3) If an ETC has not reported any untimely locations previously, 
the ETC is not subject to the reduction in support specified in 
paragraph (d)(2) of this section for a number of untimely reported 
locations deployed in any single year constituting 5% or less of the 
ETC's reported locations for the relevant reporting year.
    (4) If an ETC has not reported any late-reported locations 
previously and the ETC filed a timely annual report, the ETC may amend 
the annual filing to include additional locations within four business 
days of the reporting deadline without being subject to the reduction 
in support specified in paragraph (d)(2) of this section.
    (5) The reduction in support for the filing of the late-reported 
locations shall be applied in the next month following the notice of 
support reduction to the eligible telecommunications carrier from the 
Administrator or as soon as feasible thereafter.

0
14. Amend Sec.  54.701 by revising paragraph (c)(1)(iii) to read as 
follows:


Sec.  54.701  Administrator of universal service support mechanisms.

* * * * *
    (c) * * *
    (1) * * *
    (iii) The High Cost and Low Income Division, which shall perform 
duties and functions in connection with the high cost support 
mechanisms described in subparts J, K, M, and O of this part, and the 
low income support mechanisms described in subpart E of this part, 
under the direction of the High Cost and Low Income Committee of the 
Board, as set forth in Sec.  54.705(c).
* * * * *

0
15. Amend Sec.  54.705 by revising paragraph (c) to read as follows:


Sec.  54.705  Committees of the Administrator's Board of Directors.

* * * * *
    (c) High Cost and Low Income Committee--(1) Committee functions. 
The High Cost and Low Income Committee shall oversee the administration 
of the high cost and low income support mechanisms described in 
subparts J, K, M, O, and E of this part. The High Cost and Low Income 
Committee shall have the authority to make decisions concerning:
    (i) How the Administrator projects demand for the high cost and low 
income support mechanisms;
    (ii) Development of applications and associated instructions as 
needed for the

[[Page 25163]]

high cost and low income, support mechanisms;
    (iii) Administration of the application process, including 
activities to ensure compliance with Federal Communications Commission 
rules and regulations;
    (iv) Performance of audits of beneficiaries under the high cost and 
low income support mechanisms; and
    (v) Development and implementation of other functions unique to the 
high cost and low income support mechanisms.
    (2) [Reserved]
* * * * *

0
16. Revise the heading for subpart K to read as follows:

Subpart K--Connect America Fund Broadband Loop Support for Rate-of-
Return Carriers

0
17. Amend Sec.  54.902 by revising the introductory text of paragraph 
(a) and paragraph (b) to read as follows:


Sec.  54.902  Calculation of CAF BLS Support for transferred exchanges.

    (a) In the event that a rate-of-return carrier receiving CAF BLS 
acquires exchanges from an entity that also receives CAF BLS, CAF BLS 
for the transferred exchanges shall be distributed as follows:
* * * * *
    (b) In the event that a rate-of-return carrier receiving CAF BLS 
acquires exchanges from an entity receiving frozen support, model-based 
support, or auction-based support, absent further action by the 
Commission, the exchanges shall receive the same amount of support and 
be subject to the same public interest obligations as specified 
pursuant to the frozen, model-based, or auction-based program.
* * * * *


Sec.  54.903  [Amended]

0
18. Delayed indefinitely, amend Sec.  54.903 by removing and reserving 
paragraph (a)(2).

0
19. Amend Sec.  54.1301 by revising paragraph (b) to read as follows:


Sec.  54.1301  General.

* * * * *
    (b) The expense adjustment will be computed on the basis of data 
for a preceding calendar year.

0
20. Amend Sec.  54.1302 by revising paragraph (a) to read as follows:


Sec.  54.1302  Calculation of the incumbent local exchange carrier 
portion of the nationwide loop cost expense adjustment for rate-of-
return carriers.

    (a) Beginning January 1, 2013, and each calendar year thereafter, 
the total annual amount of the incumbent local exchange carrier portion 
of the nationwide loop cost expense adjustment shall not exceed the 
amount for the immediately preceding calendar year, multiplied times 
one plus the Rural Growth Factor calculated pursuant to Sec.  54.1303. 
Beginning January 1, 2021, and each calendar year thereafter, the base 
amount of the nationwide loop cost expense adjustment shall be the 
annualized amount of the final six months of the preceding calendar 
year. The total amount of the incumbent local exchange carrier portion 
of the nationwide loop cost expense adjustment for the first six months 
of the calendar year shall be the base amount divided by two and for 
the second six months of the calendar year shall be the base amount 
divided by two, multiplied times one plus the Rural Growth Factor 
calculated pursuant to Sec.  54.1303.
* * * * *

0
21. Amend Sec.  54.1305 by revising paragraph (a) to read as follows:


Sec.  54.1305  Submission of information to the National Exchange 
Carrier Association (NECA).

    (a) In order to allow determination of the study areas and wire 
centers that are entitled to an expense adjustment pursuant to Sec.  
54.1310, each incumbent local exchange carrier (LEC) must provide the 
National Exchange Carrier Association (NECA) (established pursuant to 
part 69 of this chapter) with the information listed for each study 
area in which such incumbent LEC operates, with the exception of the 
information listed in paragraph (h) of this section, which must be 
provided for each study area. This information is to be filed with NECA 
by July 31st of each year. Rural telephone companies that acquired 
exchanges subsequent to May 7, 1997, and incorporated those acquired 
exchanges into existing study areas shall separately provide the 
information required by paragraphs (b) through (i) of this section for 
both the acquired and existing exchanges.
* * * * *


Sec.  54.1306  [Removed and Reserved]

0
22. Delayed indefinitely, remove and reserve Sec.  54.1306.

0
23. Amend Sec.  54.1309 by revising paragraph (b) to read as follows:


Sec.  54.1309  National and study area average unseparated loop costs.

* * * * *
    (b) Study area average unseparated loop cost per working loop. This 
is equal to the unseparated loop costs for the study area as calculated 
pursuant to Sec.  54.1308(a) divided by the number of working loops 
reported in Sec.  54.1305(i) for the study area.
* * * * *


Sec.  54.1310  [Amended]

0
24. Amend Sec.  54.1310 by removing and reserving paragraph (c).

0
25. Amend Sec.  54.1508 by revising the first sentence of paragraph 
(e)(1) to read as follows:


Sec.  54.1508  Letter of credit for stage 2 fixed support recipients.

* * * * *
    (e) * * *
    (1) Failure by a Uniendo a Puerto Rico Fund and the Connect USVI 
Fund Stage 2 fixed support recipient to meet its service milestones as 
required by Sec.  54.1506 will trigger reporting obligations and the 
withholding of support as described in Sec.  54.320(d). * * *
* * * * *
[FR Doc. 2024-06292 Filed 4-9-24; 8:45 am]
BILLING CODE 6712-01-P