Proposed Six-Month Extension of the Interim Indexed Cap on the Total Level of the Universal Service Fund

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 80-286; FCC 95-416]

Proposed Six-Month Extension of the Interim Indexed Cap on the

Total Level of the Universal Service Fund

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Communications Commission proposes to extend the

duration of the interim indexed cap on the total level of the Universal

Service Fund (USF) for an additional six months. The cap was intended

to be

[[Page 52360]]

effective as an interim measure moderating the growth of the USF during

the pendency of a broader rulemaking revising the Part 36

jurisdictional separations rules governing the USF. The Federal

Communications Commission proposes to extend the interim cap, which

expires January 1, 1996, for an additional six months while that

rulemaking is completed.

DATES: Comments must be filed on or before October 18, 1995, and reply

comments must be filed on or before October 27, 1995.

ADDRESSES: Comments should be addressed to Office of the Secretary,

Federal Communications Commission, 1919 M Street, NW., Washington, DC

20554.

FOR FURTHER INFORMATION CONTACT:

Deborah A. Dupont, Senior Attorney, 202-418-0873, Accounting and Audits

Division, Common Carrier Bureau.

SUPPLEMENTARY INFORMATION:

I. Introduction

In this Notice of Proposed Rulemaking we propose extending the

duration of the two-year indexed cap (``interim cap'') on the total

level of the Universal Service Fund (``USF'').\1\ The cap was intended

to be effective as an interim measure moderating the growth of the USF

during the pendency of our broader rulemaking revising the Part 36

jurisdictional separations rules governing the USF.\2\ We propose to

extend the interim cap for an additional six months while we complete

that rulemaking.

\1\ 47 CFR 36.601(c) (1994). Under the interim cap, growth in

the total level of the USF is indexed to growth in the total number

of working loops. Id.; see also Amendment of Part 36 of The

Commission's Rules And Establishment of a Joint Board, Report and

Order, 9 FCC Rcd 303, 305, para. 20 (1993) (Interim Order). A

working loop is ``[a] revenue producing pair of wires, or its

equivalent, between a customer's station and the central office from

which the station is served.'' 47 CFR Part 36, Appendix-Glossary

(1994).

\2\ Interim Order, supra note 1, at 303, paras. 1-2.

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2. We request comment on our proposed extension of the interim cap.

We also refer the proposed extension of the interim cap on the Federal-

State Joint Board in this proceeding for a recommended decision, as

required by Section 410(c) of the Communications Act of 1934, as

amended.\3\

\3\ 47 U.S.C. 410(c).

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3. To continue to moderate the growth of the USF effectively during

the entire rulemaking period, the six-month extension must be effective

by the January 1, 1996 expiration \4\ of the interim cap. For this

reason, and because we are proposing only to extend the current interim

rules for a limited duration, we set a relatively short comment cycle.

Comments will be due on October 18, 1985, and reply comments will be

due on October 27, 1995.

\4\ 47 CFR 36.601(c).

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II. Background

4. The USF rules were adopted in 1984 to promote universally

available telephone services at reasonable rates.\5\ The rules allow

local exchange carriers (``LECs'') with an average unseparated loop

cost per working loop \6\ (``average cost per loop'') above the

assistance threshold to allocate a percentage of these costs to the

interstate jurisdiction.\7\ The current rules offer the most assistance

to smaller LEC study areas \8\ with higher average cost per loop,\9\

although all study areas with average cost per loop above the

assistance threshold receive some assistance.\10\

\5\ Amendment of Part 67 of the Commission's Rules and

Establishment of a Joint Board, Decision and Order, 96 FCC 2d 781,

794, para. 29 (1984).

\6\ The costs included in the unseparated loop costs are

enumerated in 47 CFR 36.621(a) (1994). The number of working loops

within a LEC study area is defined in 47 CFR 36.611(a)(8) (1994).

The average unseparated loop cost per working loop and national

average unseparated loop cost per working loop are defined in 47 CFR

36.622 (1994).

\7\ LECs with average cost per loop above 115% of the national

average cost per loop can allocate a specified percentage of these

costs to the interstate jurisdiction. 47 CFR 36.631 (c), (d) (1994).

This allocation is in addition to the interstate allocation allowed

under our general jurisdictional separations rules. See 47 CFR

36.154(c) (1994).

\8\ 47 CFR 36.631(c) (allowing LEC study areas with 200,000 or

fewer working loops to allocate to the interstate jurisdiction 65%

or more of their average cost per loop above 115% of the national

average cost per loop) with Sec. 36.631(d) (allowing LEC study areas

with greater than 200,000 working loops to allocate to the

interstate jurisdiction 60% or more of their average cost per loop

above 200% of the national average cost per loop and 10% to 30% of

their average cost per loop above 115% and at or below 200% of the

national average cost per loop).

\9\ Compare 47 CFR 36.631(c)(1) (allowing LEC study areas with

200,000 or fewer working loops to allocate to the interstate

jurisdiction 65% of their average cost per loop above 115% and at or

below 150% of the national average cost per loop) with

Sec. 36.631(c)(2) (allowing LEC study areas with 200,000 or fewer

working loops to allocate to the interstate jurisdiction 75% of

their average cost per loop above 150% of the national average cost

per loop); compare Sec. 36.631(d)(1) (allowing LEC study areas with

greater than 200,000 working loops to allocate to the interstate

jurisdiction 10% of their average cost per loop above 115% and at or

below 160% of the national average cost per loop) with

Sec. 36.631(d)(4) (allowing LEC study areas with greater than

200,000 working loops to allocate to the interstate jurisdiction 75%

of their average cost per loop above 250% of the national average

cost per loop).

\10\ LECs of any size with average cost per loop above 115% of

the national average cost per loop can allocate some portion of

these costs to the interstate jurisdiction. 47 CFR 36.631 (c), (d).

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5. In 1993, in response to pronounced and erratic growth in the

total level of the USF, we stated our intention to reappraise the USF

high-cost assistance mechanisms to determine whether changes were

needed to better serve our underlying public policy goals.\11\ The

completion of the eight-year USF phase-in period and ``numerous

regulatory, technological, and market changes in the telecommunications

industry'' also supported a reevaluation of the high-cost assistance

mechanisms at that time.\12\ We intended to address possible changes in

the Part 36 USF rules through a notice of proposed rulemaking.\13\ An

indexed cap on the total level of the USF was imposed for the purpose

of moderating growth in the USF for the anticipated duration of that

rulemaking period.\14\ The interim cap expires on January 1, 1996.\15\

\11\ Amendment of Part 36 of The Commission's Rules And

Establishment of a Joint Board, Notice of Proposed Rulemaking, FCC

Rec 7114, 7114-15, paras. 2, 11-15 (1993) (Interim Notice). 58 FR

48815, September 20, 1993.

\12\ Interim Order, supra note 1, at 305, para. 15.

\13\ Id. at 303, paras. 1-2.

\14\ Id. at 303, para. 1.

\15\ 47 CFR 36.601(c).

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6. In order to focus the issues in advance of the proposed

rulemaking,\16\ we requested comments on several policy questions

relating to the goals and effects of high-cost assistance.\17\ We also

requested comment on two broad alternative approaches to the high-cost

assistance mechanisms of Part 36.\18\ Under the first approach,

assistance would be based on actual reported costs, as is the case

under our present rules.\19\ Under the second, proxy factors reasonably

correlated with either the need for assistance or with costs would be

used to determine assistance.\20\

\16\ Amendment of Part 36 of The Commission's Rules And

Establishment of a Joint Board, Notice of Inquiry, 9 FCC Rec 7404,

7406 n.5 (1994) 59 FR 46606, September 9, 1994.

\17\ Id. at 7406, para. 2.

\18\ Id.

\19\ Id. at 7414-15, para. 26.

\20\ Id. at 7426-27, paras. 61-64.

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7. On July 13, 1995, we issued a Notice of Proposed Rulemaking and

Notice of Inquiry (``Notice'') proposing revisions to our USF rules.

The Notice requested comments by September 12 and reply comments by

October 12.\21\ The Notice invited comment on three proposals for

revising our USF rules.\22\ The first proposal presented three specific

alternative modifications to the existing rules that would continue to

[[Page 52361]]

base high-cost assistance on actual costs reported by LECs.\23\ Under

the second proposal, assistance would be distributed on the basis of

factors related to the cost of providing service rather than on the

basis of actual reported costs.\24\ The third proposal suggested the

distribution of assistance among the States, with State utility

commissions deciding the allocation of assistance among the carriers

serving the State under distribution plans developed under Commission

guidelines and reviewed by the Commission.\25\ In addition to the three

proposals, comment was solicited on the use of credits, or customer

vouchers, directing assistance to LECs selected by the customer.\26\

Finally, the Notice invited comment on the abolition, revision, or

combination with USF assistance of dial equipment minute (``DEM'')

weighting, which currently allows LEC study areas with fewer than

50,000 loops to allocate part of their local switching costs to the

interstate jurisdiction.\27\

\21\ Amendment of Part 36 of The Commission's Rules And

Establishment of a Joint Board, CC Docket No. 80-286, FCC 95-282,

36, para. 91 (released July 13, 1995), 60 FR 46803, September 8,

1995.

\22\ Id. at 10, para. 17.

\23\ Id, at 17, paras. 37-38, at 22, para. 47, at 23-24, para.

51.

\24\ Id. at 25-31, paras. 56-75.

\25\ Id. at 32, paras. 76-77.

\26\ Id. at 10, para. 17.

\27\ Id. at 7-9, paras. 9-12.

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8. On August 31, we granted requests from interested parties,

including the Alaska Public Utilities Commission, for an extension of

time for the filing of comments and reply comments, because we were

persuaded that an extension would serve the public interest.\28\ We

noted that an extension would encourage more detailed analysis by

interested parties of the complex issues presented in the Notice for

their consideration.\29\ The new deadlines for filing comments are

October 10 and November 9, 1995.\30\

\28\ Amendment of Part 36 of the Commission's Rules and

Establishment of a Joint Board, Order, CC Docket No. 80-286, DA 95-

1876, 2 para. 4 (released September 1, 1995).

\29\ Id.

\30\ Id. at 2, para. 5.

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III. Discussion

9. We proposed the interim cap for the purpose of moderating growth

in the total level of the USF for the duration of an intended

rulemaking that would address possible permanent changes to the USF

rules.\31\ In imposing the interim cap, we noted that previous changes

to the jurisdictional separations rules involved lengthy phase-in

periods to ease the transition for affected carriers.\32\ Since the

intended rulemaking could result in new USF rules retargeting

assistance, we concluded that the interim cap would facilitate our

ability to implement the new rules in a timely manner.\33\

\31\ Interim Notice, supra note 11, at 7114, paras. 1-2.

\32\ Interim Order, supra note 1, at 305, paras. 17-18.

\33\ Id. at 305, paras. 16-18.

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10. We note that the Commission had limited the duration of the

interim cap to two years in the belief that two years would be

sufficient for the completion of the rulemaking.\34\ We specifically

stated that should rulemaking conclude prior to the expiration of the

cap, the new rules would replace the interim cap.\35\ The issues

addressed in this rulemaking are complex, however, and despite diligent

effort by the Commission staff and interested parties, it is now clear

that their resolution will take more time than the anticipated two

years.

\34\ Interim Notice, supra note 11, at 7114, para. 4.

\35\ Id. at 7114 n. 2; Interim Order, supra note 1 at 306, para.

24.

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11. In view of the progress in the rulemaking process to date, we

believe that an additional six months should be sufficient to complete

it. Given the scope of the proposals presently under consideration for

amending the jurisdictional separations rules,\36\ we conclude that the

extension of the interim cap for the purpose of continuing to moderate

the growth of the USF for the remainder of the rulemaking period is

prudent. We propose extending the interim cap for an additional six

months while we complete the rulemaking. We seek comment on this

proposed extension of the interim rules. We also invite interested

parties to propose longer or shorter extensions, with accompanying

justifications for the length of time proposed.

\36\ See supra para. 7.

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IV. Procedural Matters

A. Ex Parte

12. This is a non-restricted notice and comment rulemaking

proceeding. ``Ex parte'' presentations are permitted, except during the

Sunshine Agenda period, provided they are disclosed as provided in the

Commission's rules.\37\

\37\ See generally 47 CFR 1.1202, 1.1203, 1.1206(a) (1994).

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B. Regulatory Flexibility

13. We certify that the Regulatory Flexibility Act of 1980 does not

apply to this rulemaking proceeding because if the proposals in this

proceeding are adopted, there will not be a significant economic impact

on a substantial number of small business entities, as defined by

Section 601(3) of the Regulatory Flexibility Act.\38\ Because of the

nature of local exchange and access service, the Commission has

concluded that LECs, including small LECs, are dominant in their fields

of operation and therefore are not ``small entities'' as defined by

that act.\39\ The Secretary shall send a copy of this Notice of

Proposed Rulemaking, including the certification, to the Chief Counsel

for Advocacy of the Small Business Administration in accordance with

Section 603(a) of that act.\40\

\38\ 5 U.S.C. 601(3).

\39\ See MTS and WATS Market Structure, 93 FCC 2d 241, 338-39

(1983).

\40\ 5 U.S.C. 603(a).

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C. Comment Dates

14. We invite comment on the proposals and tentative conclusions

set forth above. Pursuant to applicable procedures set forth in

Sections 1.415 and 1.419 of the Commission's Rules,\41\ interested

parties may file comments on or before October 18, 1995, and reply

comments on or before October 27, 1995. To file formally in this

proceeding, you must file an original and four copies of all comments,

reply comments, and supporting comments. If you want each Commissioner

to receive a personal copy of your comments, you must file an original

plus nine copies. You should send comments and reply comments to Office

of the Secretary, Federal Communications Commission, Washington, D.C.

20554. Parties should send one copy of any documents filed in this

docket to the Commission's copy contractor, International Transcription

Service (ITS), 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

We also ask that parties send a copy of their comments to each member

of the Federal State Joint Board and its staff, as indicated in the

attached service list. Comments and reply comments will be available

for public inspection during regular business hours in the FCC

Reference Center, Room 239, 1919 M Street, N.W., Washington, D.C.

20554.

\41\ 47 CFR 1.415, 1.419 (1994).

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V. Ordering Clauses

15. Accordingly, it is ordered that, pursuant to Sections 1, 4(i),

4(j), and 403 of the Communications Act of 1934, as amended, 47 U.S.C.

Sec. Sec. 151, 154(i), 154(j), and 403, notice is hereby given of

proposed interim amendments to Part 36, Subpart F of the Commission's

Rules, 47 C.F.R. Part 36, Subpart F, as described in the Notice of

Proposed Rulemaking.

16. It is further ordered, pursuant to Section 410(c) of the

Communications Act of 1934, as amended, 47 U.S.C.

[[Page 52362]]

410(c), that the issues relating to interim amendments to Part 36,

Subpart F of the Commission's Rules, 47 C.F.R. Part 36, Subpart F, as

described in the Notice of Proposed Rulemaking, shall be and hereby are

referred to the Federal State Joint Board established in this

proceeding for a recommended decision.

List of Subjects in 47 CFR Part 36

Communications commoncarriers; Reporting and recordkeeping

requirements; Telephone; Uniform System of Accounts.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Federal-State Joint Board Service List

The Honorable Sharon L. Nelson, Chairman; Washington Utilities and

Transportation Commission; Chandler Plaza Building; 1300 South Evergeen

Park Drive, S.W.; Olympia, Washington 98504-7250

The Honorable Cheryl L. Parrino, Chair; Wisconsin Public Service

Commission; Post Office Box 7854; Madison, Wisconsin 53707-7854

The Honorable Stephen O. Hewlett, Commissioner; Tennessee Public

Service Commission; 460 James Robertson Parkway; Nashville, Tennessee

37243-0505

The Honorable Laska Schoenfelder, Chairman; South Dakota Public

Utilities Commission; State Capitol Building; Pierre, South Dakota

57501-5070

The Honorable Reed E. Hundt, Chairman; Federal Communications

Commission; 1919 M Street, N.W.--Room 814; Washington, D.C. 20554

The Honorable Andrew C. Barrett, Commissioner; Federal Communications

Commission; 1919 M Street, N.W.--Room 826, Stop 0105; Washington, D.C.

20554

The Honorable Susan Ness, Commissioner; Federal Communications

Commission; 1919 M Street, N.W.--Room 832; Washington, D.C. 20554

Deborah A. Dupont, FCC Joint Board Staff Chair; Federal Communications

Commission; Common Carrier Bureau--Accounting & Audits Div.; 2000 L

Street, N.W.--Room 257; Washington, D.C. 20036

Teresa Pitts, State Joint Board Staff Chair; Washington Utilities and

Transportation Commission; 1300 South Evergreen Park Drive, S.W.;

Olympia, Washington 98504-7250

Charles Bolles; South Dakota Public Utilities Commission; State Capitol

Building; Pierre, South Dakota 57501-5070

Elton Calder; Georgia Public Service Commission; 162 State Office

Building; 244 Washington Street, S.W.; Atlanta, Georgia 30334

Ronald Choura; Michigan Public Service Commission; 6545 Mercantile Way;

Lansing, Michigan 48910

Rowland Curry; Texas Public Utility Commission; 7800 Shoal Creek

Blvd.--Suite 400N; Austin, Texas 78757

Ann Dean; Maryland Public Service Commission; 6 St. Paul Centre;

Baltimore, Maryland 21202

Dean Evans; California Public Utilities Commission; 505 Van Ness

Avenue--Room 4004; San Francisco, California 94102

William Howden; Federal Communications Commission; Common Carrier

Bureau--Accounting & Audits Div.; 2000 L Street, N.W.--Room 812;

Washington, D.C. 20036

George Johnson; Federal Communications Commission; Common Carrier

Bureau--Accounting & Audits Div.; 2000 L Street, N.W.--Room 257;

Washington, D.C. 20036

Chris Klein; Tennessee Public Service Commission; 460 James Robertson

Parkway; Nashville, Tennessee 37243-0505

Robert Loube; Public Service Commission of District of Columbia; 450

Fifth Street, N.W.; Washington, D.C. 20001

Sam Loudenslager; Arkansas Public Service Commission; 1000 Center

Street; Post Office Box C-400; Little Rock, Arkansas 72203

Rafi Mohammed; Federal Communications Commission; Common Carrier

Bureau--Accounting and Audits Div.; 2000 L Street--Room 812;

Washington, D.C. 20036

Paul Pederson; Missouri Public Service Commission; Post Office Box 360;

Jefferson City, Missouri 65102

James Bradford Ramsay; National Association of Regulatory Utility

Commissioners; 1102 ICC Building; Constitution Avenue & 12th Street,

N.W.; Post Office Box 684; Washington, D.C. 20044

Jonathan Reel; Federal Communications Commission; Common Carrier

Bureau--Accounting and Audits Div.; 2000 L Street, N.W.--Room 257;

Washington, D.C. 20036

Jeff Richter; Wisconsin Public Service Commission; Post Office Box

7854; Madison, Wisconsin 53707-7854

Gary Seigel; Federal Communications Commission; Common Carrier Bureau--

Accounting & Audits Div.; 2000 L. Street, N.W.--Room 812; Washington,

D.C. 20036

Joel B. Shifman; Maine Public Utilities Commission; State House Station

# 18; Augusta, Maine 04333

Fred Sistarenik; New York Public Service Commission; 3 Empire State

Plaza; Albany, New York 12223

Mary Steele; North Carolina Utilities Commission; Box 29510; Raleigh,

North Carolina 27626-0510

[FR Doc. 95-25036 Filed 10-5-95; 8:45 am]

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