Federal-State Joint Board on Universal Service: Promoting Deployment and Subscribership in Unserved and Underserved Areas, Including Tribal and Insular Areas

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 99-204]

Federal-State Joint Board on Universal Service: Promoting

Deployment and Subscribership in Unserved and Underserved Areas,

Including Tribal and Insular Areas

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document concerning the responsibilities and potential

actions of the Federal-State Joint Board on Universal Service addresses

the unique issues that may limit telecommunications deployment and

subscribership in the unserved or underserved regions of our Nation,

including on tribal lands and in insular areas. The Commission seeks

comment on current levels of deployment and subscribership in unserved,

tribal and insular areas, including penetration rates, availability of

telecommunications services, and possible impediments to increased

deployment and penetration. With respect to tribal areas, the

Commission seeks comment on issues that may be affecting the

availability of universal service in tribal areas, including who has

jurisdiction, how eligible telecommunications carriers may be

designated, and possible modifications to federal high-cost and low-

income support mechanisms that may be necessary to promote deployment

and subscribership in these areas.

DATES: Comments are due November 29, 1999 and reply comments are due

December 29, 1999.

ADDRESSES: All filings must be sent to the Commission's Secretary,

Magalie Roman Salas, Office of the Secretary, Federal Communications

Commission, 445 Twelfth Street, SW, TW-A325, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Jack Zinman, Attorney, Common Carrier

Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's

Further Notice of Proposed Rulemaking released on September 3, 1999.

The full text of this document is available for public inspection

during regular business hours in the FCC Reference Center, Room CY-

A257, 445 Twelfth Street, SW, Washington, DC 20554.

[[Page 52739]]

I. Introduction

1. An important goal of the Telecommunications Act of 1996 is to

preserve and advance universal service in a competitive

telecommunications environment. The 1996 Act mandates that ``consumers

in all regions of the Nation, including low-income consumers and those

in rural, insular, and high[-] cost areas, should have access to

telecommunications and information services * * *.'' Congress also

directed that the support mechanisms employed by the Commission for

this task should be ``specific, predictable and sufficient.'' Through

decisions adopted over the past two years, the Commission has been

striving to ensure that federal universal service support mechanisms

for high-cost areas, low-income consumers, schools and libraries, and

rural health care providers, enable consumers to obtain

telecommunications services that would otherwise be prohibitively

expensive.

2. The absence of telecommunications service in a home puts its

occupants at a tremendous disadvantage in today's society. Parents

cannot be reached when urgent situations arise at school. Job seekers

cannot offer prospective employers a quick and convenient means of

communication. People in immediate need of emergency services cannot

contact police departments, fire departments, or medical providers. In

short, telephone service provides a vital link between individuals and

society as a whole. Given the importance of telephone service in modern

society, it is imperative that the Commission take swift and decisive

action to promote the deployment of facilities to unserved and

underserved areas and to provide the support necessary to increase

subscribership in these areas.

3. The Commission took additional steps in the Thirteenth Order on

Reconsideration, 64 FR 30917 (June 9, 1999), toward realizing

Congress's goal of bringing telecommunications services to all regions

of the Nation. Specifically, in consultation with the Federal-State

Joint Board on Universal Service (Joint Board), we adopted the

framework for a new, forward-looking high-cost support mechanism for

non-rural carriers. This new high-cost support mechanism is intended to

ensure that high-cost areas receive support that is specific,

predictable, and sufficient, even as local competition develops.

Moreover, we believe that the forward-looking methodology, as opposed

to a methodology based on book costs, will encourage efficient entry

and investment in high-cost areas because forward-looking costs drive

market decisions.

4. In addition to adopting the methodology for the new high-cost

support mechanism for non-rural carriers, the Thirteenth Order on

Reconsideration also sought comment on certain issues regarding the

implementation of the new mechanism. The Commission intends to resolve

these implementation issues in the fall of 1999, so that the new high-

cost support mechanism will begin providing support to non-rural

carriers beginning on January 1, 2000. In addition, the Commission

reaffirmed its intention that rural carriers will receive support based

on the forward-looking costs of providing supported services, but not

before January 1, 2001, and only after further review by the

Commission, the Joint Board, and a Rural Task Force appointed by the

Joint Board. In the meantime, rural carriers will continue to receive

high-cost support based on the existing mechanism until the Commission

adopts an appropriate forward-looking mechanism for determining rural

support.

5. The Commission has also recognized that, despite the steps it

had taken to achieve the universal service goals of the 1996 Act, some

areas of the nation remain unserved or inadequately served. In the

First Report and Order, 62 FR 32862 (June, 17, 1999), the Commission

stated that it would revisit certain issues pertaining to the

availability of service in unserved areas and universal service support

in insular areas. In its Second Recommended Decision, 63 FR 67837

(December 9, 1998), the Joint Board recommended that the special needs

of unserved areas be investigated and subjected to a more comprehensive

evaluation in a separate proceeding. Telephone penetration rates among

low-income consumers, and in insular, high-cost, and tribal lands lag

behind the penetration rates in the rest of the country. Indeed, while

approximately 94.2 percent of all households in the United States have

telephone service today, subscribership levels for very low income

households (78.3 percent), insular areas, certain high-cost areas, and

tribal lands (46.6 percent), are significantly lower than the national

average. The Commission has stated that these low penetration rates are

largely the result of ``income disparity, compounded by the unique

challenges these areas face by virtue of their location.''

6. The Commission has been particularly concerned that Indians on

reservations, in comparison to other Americans, have less access even

to basic telecommunications services. In 1998, the Commission began

formally examining its relationship with Indian tribes and the unique

issues involved in providing access to telephone service for Indians on

reservations. As a first step, Commissioners and staff met with many

tribal leaders and other Indian representatives to obtain their input.

In meetings on April 30, 1998, and July 7, 1998, Commissioners and

staff heard from a variety of tribal leaders, tribal telephone company

representatives, academics, government personnel, and others with

experience and expertise in the deployment of telecommunications

services on reservations. Experts discussed problems ranging from

geographic isolation to lack of information to economic barriers. These

meetings provided an unprecedented opportunity for the Commission to

hear about the variety of interrelated obstacles that have resulted in

the lowest penetration rates in the country. Following these meetings,

several of the experts returned in the fall of 1998, to provide a

tutorial on Indian law for Commission staff.

7. Based on this informal dialogue with experts, the Commission

determined that it would conduct public hearings to explore further the

reasons for the lack of telephone service and to determine what

specific actions the Commission could take that would improve access to

telephone service on Indian reservations. The hearings, entitled

``Overcoming Obstacles to Telephone Service for Indians on

Reservations,'' BO Docket No. 99-11, provided an opportunity to obtain

formal testimony and comments on the range of problems the Commission

had begun to identify. The first field hearing was held on January 29,

1999 at the Indian Pueblo Cultural Center in Albuquerque, New Mexico.

The second field hearing was held on March 23, 1999 at the Gila River

Indian Community in Chandler, Arizona. Each hearing consisted of three

panels representing tribal authorities and tribal telephone companies,

industry, and government and consumer groups. The Commission heard

extensive testimony on issues including the costs of delivering

services to remote areas having very low population densities; the

impact of the size and extent of local calling areas on affordability

of service; the quality of telephone service on reservations; the

complexities of governmental jurisdiction and sovereignty issues; and

the effects on telephone service of low incomes and high unemployment

on reservations. Transcripts of the hearings and comments filed by

interested parties are

[[Page 52740]]

available on the Commission's website. Comments filed in BO Docket

Number 99-11 will be incorporated, where relevant, into the record of

this proceeding.

8. Further, in connection with each of the field hearings,

Commissioners and staff made site visits to Indian reservations and

tribally-owned telephone companies. These included visits to the

Rosebud Reservation, the Santa Domingo, Jemez, and Picuris Pueblos, and

to Saddleback Communications, the Gila River Telephone Company, the

Salt River Pima-Maricopa Reservation, the Navajo Nation, the Hopi

Reservation, and the Havasupai Reservation. These site visits provided

an opportunity for Commissioners and staff to observe firsthand the

state of telephone service in these reservations and pueblos and to

hear directly from tribal members about their experiences. For example,

Commissioners and staff visited the home of an elderly couple who could

not afford the cost of installing a telephone in their home. The

husband of the couple explained that he was suffering from a chronic

illness, but was unable to reach the hospital or his doctor by

telephone to schedule medical appointments and discuss his treatment.

During another site visit, a tribal member stated that a relative had

died during a medical emergency when his family was unable to call an

ambulance in time when critical medical attention was needed. In

addition, the trips to Saddleback Communications and the Gila River

Telephone Company enabled Commission staff to view the successful

operations of some tribally-owned telephone companies.

9. In this Further Notice of Proposed Rulemaking (Further Notice),

the Commission addresses the unique issues that may limit

telecommunications deployment and subscribership in the unserved or

underserved regions of our Nation, including on tribal lands and in

insular areas. In particular, the Commission seeks comment on current

levels of deployment and subscribership in unserved, tribal and insular

areas, including penetration rates, availability of telecommunications

services, and possible impediments to increased deployment and

penetration. With respect to tribal areas, the Commission seeks comment

on issues that may be affecting the availability of universal service

in tribal areas, including the assignment of jurisdiction, designation

of eligible telecommunications carriers, and possible modifications to

federal high-cost and low-income support mechanisms that may be

necessary to promote deployment and subscribership in these areas. In

particular, the Commission seeks comment on the possibility of allowing

carriers to establish separate tribal study areas, raising the cap on

the high-cost fund to allow for growth based on separate tribal study

areas, and revisions to its Lifeline rules. In a companion Notice of

Proposed Rulemaking we are adopting today, we seek comment on the

potential of wireless technology to provide basic telephone service to

tribal lands.

10. With respect to unserved areas, the Commission seeks further

comment regarding the implementation of section 214(e)(3) of the Act,

which permits the Commission or state commissions to order a carrier to

provide service to an unserved community, including the possibility of

adopting a competitive bidding mechanism to identify the carrier or

carriers best able to serve an unserved area. The Commission also seeks

comment on possible modifications to the federal low-income and rural

health care support mechanisms in underserved areas, including tribal

and insular areas, including the possibility of expanding LinkUp to

include facilities based charges, and providing support for intrastate

toll-calling and rural health care infrastructure. The Commission seeks

comment on rule changes designed to enhance the availability of support

for rural health care providers in insular areas, including determining

the urban rate and the nearest large city. Through these efforts, we

seek to ensure that unserved and underserved areas have access to

telecommunications services. With respect to tribal lands, we also seek

to ensure that our efforts are consistent with principles of tribal

sovereignty, the federal trust relationship, and support for tribal

self-determination.

II. Current Levels of Deployment and Subscribership

A. Penetration Rates

11. The Industry Analysis Division of the Common Carrier Bureau

publishes a Subscribership Report three times per year. The data in

this report is based on the Current Population Survey (CPS), conducted

monthly by the Census Bureau to keep track of the unemployment rate and

other socio-economic conditions. The survey, however, is based on

information from only 50,000 households nationwide and does not

identify geographic areas with fewer than 100,000 people. Because many

unserved, tribal and insular areas fall below this population

threshold, the CPS cannot be used to estimate penetration rates for

these areas. In addition, this data does not include areas of the

United States that are not states, including Puerto Rico and the Virgin

Islands. The long form of the decennial census, which is delivered to

millions of households, contains a question about telephone

subscribership. As a result, the census data can be used to estimate

telephone penetration for smaller geographic areas. This data, however,

is collected only every ten years and it takes the Census Bureau one

year to compile results.

12. We seek detailed information, to the extent that it is

available, on penetration rates in high-cost areas, insular areas,

tribal lands, and any other areas considered to be underserved. By the

term penetration rate, we mean the percentage of households within a

specified area that have telephone service in the housing unit. We seek

this information on a national level, on a state-by-state or territory-

by-territory level, and on an area-by-area level. To the extent

possible, we encourage commenters to provide the following additional

information in each of the areas, and on each of the levels, where they

measure penetration rates: (1) total population; (2) population

density; (3) average annual income; and (4) average unemployment rate.

We also ask that commenters briefly explain the methods by which they

gather their data (e.g., census data, statistical sampling, etc.). We

also seek comment on the difficulty of getting such information, such

as the difficulty of mapping a telephone service territory onto the

census territories (such as census block groups) because the boundaries

may not always coincide, and questions concerning the definitions of

the terms ``household'' and ``telephone service.''

B. Availability and Cost of Telecommunications Services

13. In each of the areas, and on each of the levels described, we

seek to determine the nature of the telecommunications services

available and the costs of such services. In particular, we seek

comment on the extent to which these areas receive the following

service, if any: basic telephone service, services included within the

definition of universal service, and/or advanced telecommunications

services. We also seek comment on whether any carrier is providing the

following services and the approximate number of households served by

each service: wireline, wireless, Basic Exchange Telecommunications

Radio Systems (BETRS), or other telecommunications

[[Page 52741]]

services; cable television; direct broadcast satellite service; other

satellite services that provide voice and data, such as those provided

through VSAT networks; Internet service; and electric service. In

addition, we seek comment on the monthly rate for each of these

services. With specific regard to basic telephone service, we seek

comment on the average monthly bill for local service, local toll

service, and long-distance service.

14. To the extent that underserved, high-cost, insular, and/or

tribal lands have basic telephone service, we seek comment on whether

the local calling area includes the nearest metropolitan area or other

area where the nearest medical, government, cultural or entertainment

facilities exist, i.e., the ``community of interest.'' For unserved

areas, and in particular tribal lands, we also seek comment to

determine whether these areas fall within the designated service area

of existing carriers, regardless of whether such carriers are providing

service to the area.

15. We seek comment on the extent to which existing facilities

currently used to provide other services (e.g., radio broadcast towers,

cable television plant, electrical poles and satellite infrastructure)

could be adapted to provide the services included within the definition

of universal service. We also seek comment on whether specific services

included within the definition of universal service could not be

provided via these facilities. We seek comment on the extent to which

facilities used to provide telecommunications service to customers

outside the unserved or underserved areas exist adjacent to or nearby

the unserved or underserved areas. In particular, we seek comment on

whether railroad tracks, or towers used for the placement of antennas,

are found in these adjacent areas. We seek comment on what role the

Commission might play in encouraging the use of these other facilities

to provide service in underserved areas. For example, we seek comment

on whether the Commission, or some other entity, should develop a

database to maintain information about facilities that could be used to

provide service in currently unserved or underserved areas, including

tribal lands and insular areas.

16. We also seek comment on the possible shared use of existing

federal telecommunications infrastructure, facilities or other

resources, including government rights-of-way, to provide service in

unserved or underserved areas, including tribal and insular areas. We

seek comment on whether federal telecommunications resources could be

made available in the short term to serve as connecting backbone

infrastructure for health and safety telecommunications in unserved

areas. We encourage federal entities with government owned

telecommunications resources, particularly the Bureau of Indian

Affairs, to comment on this issue.

17. Individuals from Indian communities, state agencies and the

telecommunications industry have commented that satellite and

terrestrial wireless systems may represent practical and cost-effective

alternatives for providing service in unserved areas, including tribal

lands. In the pending 2 GHz proceeding, which proposes policies and

rules for licensing and operation of the 2 GHz mobile satellite service

(MSS) systems in the United States, the Commission sought comment on

incentives and policies to encourage provision of satellite services to

unserved, rural, insular or economically isolated areas. The commenters

generally support the Commission's tentative conclusion that satellites

represent an excellent technology for providing basic and advanced

telecommunications services to unserved areas, including tribal lands.

Several commenters stated that the Commission should take positive

steps to encourage access to Universal Service Funds by satellite

operators or service providers. Several commenters also requested that

the Commission should identify express and implicit regulatory

provisions that may prevent satellite providers from seeking universal

support subsidies and reform those provisions, or forbear from imposing

these provisions, so that MSS providers can fully participate in the

Universal Service Support initiative.

18. Satellite networks, used either on a stand alone basis or in

combination with a terrestrial wireless network, may offer a cost

advantage over wireline or other alternatives in remote areas where a

limited population may not provide the economies of scale to support

the deployment of wireline or other networks for each community.

Because satellites have large coverage areas, and in many cases, can

reach an entire nation, satellite providers may achieve greater

economies of scale in serving isolated areas since the costs of

deployment could be spread across a number of communities. The basic

build-out required to obtain satellite service is for earth stations to

transmit and receive satellite signals. We seek comment on why

satellite or terrestrial wireless systems have not been used more

extensively to serve these areas. Specifically, we seek comments

regarding the particular characteristics of satellite or terrestrial

wireless systems that render these technologies suited for serving

unserved areas, the costs associated with deployment, the availability

of federal universal service support, and any other impediments to

deployment. To the extent that costs deter satellite and terrestrial

wireless deployment, we seek comment on what actions the Commission

should take to support the establishment and maintenance of satellite

and terrestrial wireless services. We ask parties to comment on whether

specific aspects of our universal service rules may deter both current

and future satellite services providers from providing service to

rural, insular, and other unserved communities, and what specific steps

the Commission can undertake to encourage the use of universal service

support by satellite service providers. We also seek comment on any

other actions the Commission should take to encourage the deployment of

the most cost-effective, practical solution in these geographically

extreme areas.

C. Impediments to Increased Penetration

19. In addition to identifying impediments to increased penetration

rates, we also ask commenters to discuss potential solutions for

overcoming those impediments. We do not reach tentative conclusions on

any of the proposals discussed. Instead, we seek comment on the need

for the Commission to address the specific concerns set forth and the

costs and benefits of the proposals discussed. We seek comment on how

the Commission should measure its success in satisfying the mandate in

the 1996 Act that consumers in all regions of the nation have access to

telecommunications services. We seek comment on what measure we could

use, other than penetration rates, to evaluate our success in achieving

this goal.

1. Demographic Factors

20. We ask commenters to supply data for high-cost, insular, and

tribal lands regarding: (1) total population; (2) population density;

(3) average annual income; and (4) average unemployment rate. Bureau of

Census data indicates that income and education levels greatly affect

telephone penetration rates and that geographic location can also make

a difference. In this section, we seek specific comments on how these

demographic factors affect penetration rates. For example, do income

levels have a greater effect on penetration rates than population

density? Do the

[[Page 52742]]

combined effects of low income and low population density have an

exponential effect on penetration rates? We seek comment on whether

other demographic factors significantly affect penetration rates in

high-cost, insular, and tribal lands, e.g., education levels.

2. Geographic Factors

21. One of the more obvious explanations for low penetration rates

in high-cost, insular, and tribal lands is that these areas are

unusually expensive to serve. Distance appears to be one reason line

extension charges are so high. During the New Mexico and Arizona Field

Hearings, several tribes testified about the remoteness of their

locations and the challenges that remote locations presented in terms

of telecommunications services. For example, in 1997, the Navajo

Communications Company issued 72 line extension charge estimates that

averaged more than $40,000, including eight over $100,000 and one over

$157,000. The cost for installation of a line on the Salt River Pima-

Maricopa Indian Community (located in the heart of metropolitan

Phoenix) is $5,000. We seek comment on the general terrain, including

the existence of mountains, plains, swamps, water, plateaus, canyons,

etc., that create challenges in providing telecommunications services.

We also seek comment on the extent to which the absence of necessary

infrastructure, for example roads or electrical capacity, constitutes a

barrier to deployment in rural, insular, high-cost, and tribal lands.

3. Financial Factors

22. We seek comment on whether difficulties in obtaining access to

financing limits the ability of carriers to provide service in unserved

or underserved rural, insular, high-cost, and tribal lands. We seek

comment on any specific provisions in loan agreements that serve to

deter deployment in these areas. We also seek comment on any measures

the Commission could take that would diminish the risks faced by

investors and would enhance the ability of carriers to attract

financing necessary to provide service in unserved or underserved

rural, insular, high-cost, and tribal lands. We also seek comment on

the availability and utility of existing programs that may provide

funding and assistance to carriers seeking to provide

telecommunications service in unserved areas and underserved areas,

including tribal and insular areas, including whether the availability

of existing sources of funding and assistance is adequately publicized.

4. Cultural Factors

23. We seek comment on the extent to which cultural values or

lifestyle preferences deter consumer interest in subscribing to

telecommunications services in unserved or underserved areas. For

example, we seek comment on whether concerns about cultural

preservation, religion, identity, and values may affect the willingness

of tribal authorities to allow or promote the availability of

telecommunications services in their communities. Similarly, we seek

comment on whether there are a significant number of individuals that

simply do not want telecommunications services because of personal

lifestyle choices. We also seek comment on the extent to which carriers

justify the lack of deployment in unserved or underserved rural,

insular, high-cost, and tribal lands based on concerns for cultural

preservation and whether these concerns are legitimate. In addition, we

seek comment on whether the Commission's efforts to promote deployment

and subscribership in unserved and underserved areas should be

constrained by the cultural choices expressed by tribal authorities or

other local leadership.

5. Regulatory Factors

24. We seek comment on impediments imposed by various laws,

regulations or practices that may deter carriers from providing service

to unserved or underserved areas, including federal, state, tribal or

insular authorities.

25. Federal Regulatory Impediments. We seek comment on the current

process for obtaining access to rights-of-way on tribal lands and to

what extent this process deters carriers from providing service on

tribal lands. Under the Right-of-Way Act of 1948, there are three

critical components for obtaining rights-of-way over tribal land: (1)

the Secretary of the Interior through the Bureau of Indian Affairs must

grant the easement for the right-of-way; (2) compensation of not less

than fair market value, as determined by the Secretary, plus severance

damages must be paid to the property owner; and (3) tribal consent must

be obtained. The first of these requires a service provider to undergo

environmental assessments and secure cultural and archaeological

clearances from the Bureau of Indian Affairs. The second component

requires the service provider to obtain the standard appraisal it would

for any easement but under standards set by Bureau of Indian Affairs.

Finally, the service provider must also meet any conditions imposed by

the particular tribe because the tribe has the ultimate authority to

accept or reject the right-of-way. Carriers have indicated that this

process is a significant barrier to entry. Tribal authorities have

expressed concern about the ability of carriers to use existing rights-

of-way to establish new terrestrial networks without obtaining the

consent of the tribal authority. In addition, carriers and tribal

authorities appear to have concerns concerning appropriate compensation

for use of rights-of-way in tribal lands. To the extent rights-of-way

management issues pose a barrier to entry on tribal lands, we seek

comment on what role, if any, the Commission could play in addressing

these issues.

26. We also seek comment on whether any aspect of our universal

service rules deters carriers from providing service to unserved and

underserved areas. For example, does the definition of supported

services deter terrestrial wireless or satellite service providers from

providing services in these areas? In our ongoing proceeding to reform

the high-cost universal service support mechanism for non-rural

carriers, several parties representing rural carriers have filed

comments asking that we adjust or eliminate the cap on the high-cost

loop fund to coincide with the anticipated transition of non-rural

carriers to a new forward-looking support mechanism on January 1, 2000.

We observe that the cap on the existing high-cost fund properly allows

for growth based on the rate of growth in the total number of working

loops nationwide. We also observe that carriers do invest in facilities

in an amount greater than that which is supported through federal

universal service support mechanisms. We seek comment regarding the

extent to which the interim cap on the high-cost fund is a factor

contributing to the lack of deployment in unserved areas, including

tribal and insular areas.

27. We comment on whether existing LATA boundaries prevent calls

from unserved or underserved areas, including tribal lands, to the

nearest metropolitan area or community of interest from being included

in local service. We seek comment on any other federal rules or

Commission regulations which may deter carriers from providing service

to unserved or underserved areas. We also observe that issues specific

to wireless providers will be addressed in a separate proceeding.

28. State Regulations. We also seek comment on regulations or

actions at the state level that may impact deployment and

subscribership in unserved and underserved areas. We seek comment on

the extent to which

[[Page 52743]]

statewide rate-averaging requirements or limited local calling areas

may make the costs of telecommunications service unaffordable to low-

income consumers living in unserved or underserved areas. We also seek

comment on existing state programs designed to ensure that rates in

remote and tribal lands are affordable.

29. Tribal/Insular Regulatory Impediments. We seek comment on any

regulations or requirements imposed by tribal or insular authorities

that may deter entry in tribal lands or in insular areas. For example,

we seek comment on whether local governments own or operate the local

exchange carrier in their areas and what impact this may have on

competitive entry from other cost-effective wireline, terrestrial

wireless, or satellite service providers. We seek comment on whether

government ownership or operation affects the provision of services

supported by universal service mechanisms in these areas. We seek

comment on any ownership or employment requirements imposed by tribal

authorities that may impair the ability of carriers to provide service

and/or compete with tribally-owned carriers. For example, we seek

comment on the extent to which tribes require an ownership interest in

a carrier as a prerequisite to allowing the carrier to provide service

on tribal lands. We seek comment on the impact such requirements may

have on the deployment of telecommunications facilities and services on

tribal lands.

III. Tribal Lands

30. For our universal service support mechanisms to be effective on

tribal lands, we seek to promote active involvement and collaboration

between the Commission and tribal authorities. As a general matter, we

seek comment on how we can increase Indian participation in the

Commission's decision-making process. At a more specific level, we seek

comment throughout this section on issues unique to tribal lands that

may affect the goals and incentives of federal universal service

support mechanisms and consider additional, targeted assistance the

Commission may want to provide to promote deployment and subscribership

on tribal lands. As described, the trust relationship between the

federal government and Indians as well as principles of tribal

sovereignty suggest that the federal government may have the authority

to implement particularized measures to address the factors causing the

unusually low subscribership on tribal lands. We emphasize that these

proposals are not meant to imply that the states have not, or will not,

do their share in promoting the availability of universal service on

tribal lands. In fact, many states have made significant efforts in

this area. We commend them for doing so and we encourage them to

continue. In this proceeding, however, we consider measures the

Commission may take to fulfill its obligation to address

telecommunications needs on tribal lands.

A. Jurisdiction

1. Issues for Comment

31. We recognize that principles of Indian law, including the trust

relationship between the federal government and Indian tribes, tribal

sovereignty, and tribal self-determination, must apply with equal force

in the area of telecommunications. With respect to telecommunications

services provided by tribal carriers on or off the reservation or by

non-tribal carriers within tribal lands (all of which are referred to

jointly as ``tribal telecommunications'') the parameters of federal,

state and tribal authority, however, are not always clear. The Supreme

Court, itself, has acknowledged that ``generalizations on this subject

have become treacherous.'' Nonetheless, some of the proposals presented

in this Further Notice necessitate an effort to evaluate these

jurisdictional relationships. In this Further Notice, we seek comment

to determine how best to give effect to principles of Indian law in the

context of rule changes intended to benefit unserved and underserved

tribal lands.

32. State Jurisdiction. Three of the proposals detailed later in

this Further Notice deal with provisions of sections 254 and 214 of the

Act, and of our existing rules that are triggered when the state lacks

jurisdiction over a carrier providing telephone exchange or access

service in a particular area. First, the determination of whether a

state has jurisdiction over a common carrier providing telephone

exchange service and exchange access is key in determining whether the

Commission is required to designate telecommunications carriers as

eligible to receive federal universal service support in high-cost

areas. Second, in unserved areas where the state lacks jurisdiction the

Commission, pursuant to section 214(e)(3) shall determine which common

carrier or carriers are best able to provide service. Third, we propose

that revisions to our Lifeline rules to address the situation faced by

carriers not subject to state jurisdiction.

33. The issue of the extent to which tribal authorities or state

governments have authority to regulate activities occurring on tribal

lands, whether by tribal members or not, has a long and complex legal

history, involving considerations of whether state regulation is

preempted by federal regulation, whether state regulation is consistent

with tribal sovereignty and self-determination, and whether tribes have

consented to state jurisdiction, either in treaties or pursuant to the

Indian Civil Rights Act of 1968. In addition, Indian law jurisprudence

finds state law generally inapplicable when states attempt to regulate

the conduct of Indians directly within reservation boundaries.

34. We recognize that some state commissions have asserted

jurisdiction over carriers seeking to provide service on tribal lands

and regulate certain aspects of the provision of telecommunications

service on tribal lands. We seek comment, in particular from state

commissions as well as any other interested parties, concerning the

extent of state and tribal regulation of telecommunications provided on

tribal lands and by tribally-owned or operated carriers. In particular,

we seek comment on the appropriate jurisdictional authority in the

following situations: (1) tribally-owned or operated carriers providing

service within the reservation (a) to tribal members, (b) to non-tribal

members, and (c) to non-tribal members living on non-native fee lands

(within the reservation); (2) non-tribally owned or operated carriers

offering service both inside and outside of the reservation; and (3)

tribally-owned or operated carriers offering service outside of the

reservation. We refer parties commenting on these issues to the various

ways in which tribal lands could be defined, as discussed, and seek

comment on how these definitions inform the jurisdictional analysis

requested in this section.

35. In addition, we seek comment on the jurisdictional treatment of

the following geographic entities, as classified by the Bureau of the

Census: (1) American Indian Reservations, which are areas with

boundaries established by treaty, statute and /or executive or court

order; (2) Trust Lands, which are real property held in trust by the

federal government that is associated with a specific American Indian

reservation or tribe and which may be located within or outside the

reservation; (3) Tribal Jurisdiction Statistical Areas, which are

delineated by those Federally-recognized tribes in Oklahoma that no

longer have a reservation; (3) Tribal Designated

[[Page 52744]]

Statistical Areas, which encompasses federally and state-recognized

tribes without reservation or trust lands; (4) Alaska Native Regional

Corporations, which are corporate entities established under the Alaska

Native Claims Settlement Act of 1972 (ANCSA) to conduct the commercial

and nonprofit business of Alaska Natives; and (5) Alaska Village

Statistical Areas, which are tribes, bands, clans, groups, villages,

communities, or associations in Alaska that are recognized pursuant to

the ANCSA.

36. We seek comment on whether there are any other kinds of tribal

relationships that would inform our jurisdictional analysis. We seek

comment on whether the state commission has jurisdiction over

telecommunications in the situations described, the legal authority for

such jurisdiction (e.g. the state constitution, state statute, Indian

treaty, etc.); and the extent to which the particular state commission

exercises that jurisdiction. We also seek comment on the existence of

any concurrent jurisdiction.

37. In addition, we observe that wireline telephone calls between

Indian tribal lands and the state in which tribal land is located are

currently treated as intrastate calls, subject to state jurisdiction.

We seek comment on whether this treatment is consistent with principles

of tribal sovereignty and the Indian law jurisprudence regarding the

limits of state authority, referenced. We also seek comment on whether

the treatment of these calls as intrastate is consistent with the

division of jurisdiction between the Commission and the states under

section 2 of the Act. We seek comment as well on the need, impact, and

Commission's authority to reclassify these calls as interstate for the

purpose of giving effect to principles of tribal sovereignty.

38. We observe further that state jurisdiction may be preempted by

the operation of federal law ``if it interferes with or is incompatible

with federal and tribal interests reflected in federal law, unless the

state interests at stake are sufficient to justify the assertion of

state authority.'' An express Congressional statement of preemption is

not required. Instead, a preemption analysis ``requires a

particularized examination of the relevant state, federal and tribal

interests.'' We seek comment on state interests in regulating

telecommunications on tribal lands, including the ability to ensure

reasonable rates, quality service, and the continued viability of local

exchange carriers (LECs). We also seek comment from each tribal

government, and any other interested parties, on the extent to which

the state's exercise of jurisdiction over telecommunications on tribal

lands and over tribal carriers that serve areas both inside and outside

Indian sovereign territory is warranted.

39. Tribal Regulation. We seek comment from each tribal government,

and any other interested parties, on the extent of tribal authority

over regulation of telecommunications on tribal lands. As a threshold

matter, we note that the Commission has previously spoken to some

aspects of this issue in the A.B. Fillins Order, in which the

Commission considered the extent of tribal regulatory authority over

the provision of cellular service within a tribal reservation. In that

order, the Commission held that under well-settled case law, the

Communications Act applies with equal force to tribal reservations as

to other areas, and that the Commission has sole authority under Title

III of the Act with respect to management and licensing of radio

spectrum in tribal areas. The Commission also concluded, however, that

the Communications Act does not preempt tribal authority over access by

telecommunications carriers to tribal lands, because the provisions of

the Act that preempt state and local impediments to entry do not apply

to tribal authorities.

40. In light of this statutory framework, we seek comment on the

current extent to which tribal authorities have engaged in

telecommunications regulation and on any future plans of tribal

authorities to regulate telecommunications in tribal areas. We seek

comment on the extent to which tribal authorities consider regulation

of tribal telecommunications important to the right to self-government

and self-determination. We also seek comment on whether tribal

authorities should be considered as comparable to state authorities for

purposes of regulating telecommunications services, and the degree to

which the federal-tribal relationship on communications matters is

similar or dissimilar to the federal-state relationship. Finally, while

we have determined in the A.B. Fillins Order that tribal authorities

are not subject to preemption under provisions of the Act applicable to

state and local governments, we seek comment on what authority, if any,

the Commission has to preempt tribal regulations that may be

inconsistent with our federal regulatory scheme.

41. Tribal Self-determination and Universal Service Goals. We seek

comment to determine how principles of Indian law and federal support

for tribal self-determination affect the Commission's statutory mandate

to ensure that consumers in all regions of the nation have access to

the services supported by federal universal service support mechanisms.

Pursuant to the Act, the Commission is bound by its statutory mandate

to promote the availability of the services supported by federal

universal service support mechanisms in all regions of the Nation. We

seek comment on whether this statutory obligation is affected or

constrained by any contrary interests, for cultural or other reasons,

of certain tribal authorities. We seek comment, in particular from

tribal authorities, to ascertain whether tribal authorities share the

goals established by the 1996 Act, which the Commission is bound to

implement. We seek comment on the extent to which tribal authorities

seek to promote the availability of telecommunications services and

competition among telecommunications providers.

42. We also seek comment on whether the services supported by

federal universal service support mechanisms are consistent with the

interests of tribal authorities in promoting service in tribal lands.

We recognize that some tribal authorities may prefer a different mix of

services to be supported. For example, some tribes may prefer support

for terrestrial wireless or satellite services, rather than wireline

services. Other tribes may want to prioritize the ability for each

member to receive basic telecommunications service, rather than the

entire package of services included in the definition of universal

service. We seek comment on whether the Commission has the authority to

and whether it should develop a procedure by which the Commission, the

Joint Board and the sovereign Indian tribes could identify a single

alternative definition of the services supported by federal universal

service support mechanisms in tribal lands. We seek comment on

additional administrative burdens that would be associated with

implementing this procedure.

B. Defining ``Tribal Lands''

43. The definition we adopt of ``tribal lands'' will be used to

identify those areas in which, for reasons based on principles of

Indian sovereignty, the Commission seeks comment to determine whether

possible modifications to our federal universal service policies and

rules may be warranted. In defining tribal lands, we seek to ensure

that we limit the reach of these proposals to those areas in which

principles of tribal sovereignty and tribal self-determination apply.

We also seek to balance the reasonable exercise

[[Page 52745]]

of federal jurisdiction with appropriate deference to state sovereignty

and jurisdiction.

44. We seek comment on defining tribal lands as all land within the

limits of any Indian reservation under the jurisdiction of the United

States Government, notwithstanding the issuance of any patent, and,

including rights-of-way running through the reservation. Alternatively,

we seek comment on defining tribal lands to have the same meaning as

the term ``Indian country,'' as that term is defined by the Bureau of

Indian Affairs. ``Indian country'' means (a) all land within the limits

of any Indian reservation under the jurisdiction of the United States

Government, notwithstanding the issuance of any patent, and, including

rights-of-way running through the reservation, (b) all dependent Indian

communities within the borders of the United States whether within the

original or subsequently acquired territory thereof, and whether within

or without the limits of a state, and (c) all Indian allotments, the

Indian titles to which have not been extinguished, including rights-of-

way running through the same.

45. In addition, we seek comment on whether the geographic

entities, as classified by the Bureau of the Census, should be included

in the definition of tribal lands: (1) American Indian Reservations,

which are areas with boundaries established by treaty, statute and/or

executive or court order; (2) Trust Lands, which are real property held

in trust by the federal government that is associated with a specific

American Indian reservation or tribe and which may be located within or

outside the reservation; (3) Tribal Jurisdiction Statistical Areas,

which are delineated by those Federally-recognized tribes in Oklahoma

that no longer have a reservation; (4) Tribal Designated Statistical

Areas, which encompasses federally and state-recognized tribes without

reservation or trust lands; (5) Alaska Native Regional Corporations,

which are corporate entities established under the ANCSA to conduct the

commercial and nonprofit business of Alaska Natives; and (6) Alaska

Village Statistical Areas, which are tribes, bands, clans, groups,

villages, communities, or associations in Alaska that are recognized

pursuant to the ANCSA.

46. We observe that, with the exception of the first category,

American Indian Reservations, the listed classifications used by the

Bureau of the Census would not be encompassed in a definition of tribal

lands that is limited to ``all land within the limits of any Indian

reservation under the jurisdiction of the United States Government.''

We recognize that tribes encompassed by these classifications may face

obstacles in obtaining telecommunications services that are similar to

those faced by tribes in living in American Indian Reservations.

Commenters supporting the inclusion of any of these categories should

explain the source of the Commission's authority to implement the

additional measures proposed in this item with respect to these areas,

including noting any jurisdictional arguments provided in response to

questions raised.

C. High-Cost Support Mechanisms

1. Federal Share of High-Cost Support

47. As discussed, because the trust relationship creates a unique

relationship between the federal government and Indian tribes, the

federal government may have authority to undertake additional measures

to promote deployment and subscribership on tribal lands and to provide

universal service support necessary to offset the particular challenges

facing these areas. With respect to high-cost support on tribal lands,

we seek comment on the extent to which states currently support the

costs of universal service in tribal lands and whether the Commission

should provide an additional portion of the universal service support

calculated by the federal support methodology in high-cost, tribal

lands. For instance, with regard to the forward-looking high-cost

support mechanism for non-rural carriers, we seek comment on whether,

rather than providing support for costs that exceed both a national

cost benchmark and the individual state's resources to support those

costs, the mechanism should provide support for all costs in unserved

tribal lands that exceed the national benchmark.

2. Separate Study Areas Option for Tribal Lands

48. In order to provide additional high-cost support to tribal

lands, we seek comment on modifications to our study area rules. Our

study area rules provide a mechanism through which the Commission has

controlled the growth of the high-cost universal service support

mechanism. Universal service support for high-cost areas is determined

on the basis of average loop costs throughout a study area. Averaging

costs on a study-area wide basis spreads the burden of serving high-

cost areas among all of the telecommunications subscribers in that

study area. As a result, however, carriers with relatively low average

loop costs in a particular study area receive no support for serving

additional customers in a high-cost portion of that study area if the

loop costs in the high-cost portion do not raise the overall average

loop costs for the study area above a specific national benchmark,

currently 115% of the national average cost per loop. By freezing study

area boundaries, the Commission sought to eliminate incentives for

carriers to place high-cost exchanges in separate study areas in order

to receive additional support for providing service to those study

areas. As a result of these two policies, however, certain carriers may

experience strong financial disincentives to serving unprofitable high-

cost customers in their study areas and other carriers may lack

incentives to purchase those unserved exchanges.

49. In order to promote the deployment of universal services on

tribal lands, we seek comment on modifying our rules to permit carriers

to treat tribal lands as a distinct study area. We seek comment on

whether, by providing an exception to our study area rules, we can

eliminate regulatory requirements that may deter carriers from serving

high-cost, tribal lands. For example, one option may be that the tribal

study area for a carrier will consist of all of the tribal lands served

by the carrier within the borders of a single state. This means that

carriers may have a tribal study area in each state in which it

provides service on tribal lands. We seek comment on whether the tribal

study area should include all of the tribal lands in a state (rather

than, for example, a single nationwide tribal study area) because

states use study areas for purposes of determining intrastate revenue

requirements.

50. We emphasize that the proposal to allow tribal study areas is

not related to the issue of the area over which costs are averaged to

determine support using the new high-cost mechanisms, which is pending

in the high-cost proceeding. We seek comment on how allowing a separate

tribal study area could affect whether the carrier serving that area

falls within the statutory definition of a rural carrier for providing

service to that area. If a carrier designates the tribal lands within a

state as a separate study area, the number of access lines or

inhabitants in that newly created study area may qualify the carrier as

a rural carrier with respect to that study area. We seek comment on

whether this may result in some carriers, currently designated as non-

rural, being considered rural for purposes of receiving universal

service support in certain tribal study areas.

[[Page 52746]]

3. Interim Cap on the High-Cost Fund

51. In the First Report and Order, the Commission concluded that it

would maintain the cap on the existing high-cost loop support mechanism

until all carriers receive support based on the new high-cost funding

mechanism. The cap on the high-cost loop fund was initially intended as

an interim measure. Commission rules require that if total support,

based on each carrier's actual costs, is above the total allowed capped

amount, each recipient of high-cost loop support will receive a reduced

amount of support to keep the total fund at the capped amount. The cap

has served its purpose in controlling excessive growth in the size of

the fund during the past six years as the Commission has reformed its

universal service support mechanisms. We have stated that the rural

carriers will receive support based on the new high-cost funding

mechanism no earlier than January 1, 2001. The Commission has not

established a timetable for moving rural carriers to a forward-looking

high-cost support mechanism. Rather, this undertaking is on hold

pending the Rural Task Force making its recommendation to the Joint

Board; the Joint Board may recommend that the Commission conduct

further proceedings on certain issues.

52. Allowing carriers to designate separate tribal study areas, as

proposed, could mean that additional carriers may be entitled to a

portion of the high-cost support fund. We seek comment on the need for

the Commission to provide additional high-cost support under the

existing mechanisms to tribal lands. In order to do so, the Commission

may either lift the cap on the high-cost fund to allow for growth in

the size of the fund attributable to the separate study area proposal

or reallocate the existing funds among the expanded category of

recipients. We seek comment on these options. We also seek comment on

any other options that may assist the Commission in achieving the goal

of targeting additional federal high-cost support to tribal lands.

D. Revisions to Lifeline

53. The Commission's Lifeline support program for low-income

consumers is designed to reduce the monthly billed cost of basic

service for low-income consumers, which we anticipate will increase

telephone penetration. Lifeline provides carriers with three elements

of universal service support. The support must be passed through to

each qualifying low-income consumer by an equivalent reduction in his

or her monthly bill for telephone service. All carriers receive a

baseline amount of $3.50 per month per Lifeline customer in the form of

a waiver of the federal subscriber line charge (SLC). An additional

$1.75 per month is available per Lifeline customer if ``the state

commission approves an additional reduction of $1.75 in the amount paid

by consumers * * *'' Finally, carriers can receive federal matching

funds of fifty percent of the amount of state Lifeline support, up to a

maximum of an additional $1.75 per month, as long as the entire amount

is passed on to subscribers. Federal Lifeline support per qualifying

low-income consumer is capped at $7.00 per month.

1. State Commission Approval

54. The Commission has received petitions for waiver of our

Lifeline rules to allow carriers not subject to the jurisdiction of a

state commission to receive the second tier of federal support where no

regulations issued by local authorities (including state commissions

and tribal authorities) exist that would prevent an equivalent

reduction in the monthly telephone bills of qualifying low-income

consumers. In drafting our rule, we did not consider the situation

faced by carriers not subject to the jurisdiction of a state

commission. Based on these waiver petitions, it appears that our rule

has given rise to certain situations that we did not anticipate. The

requirement of state consent prior to making available the second tier

of federal Lifeline support was intended to reflect deference to the

states in such areas of traditional state expertise and authority. We

did not intend to require carriers not subject to state commission

jurisdiction to seek either state commission action or a Commission

waiver in order to receive the additional $1.75 available under federal

support mechanisms, where that additional support would be passed

through to consumers. For these reasons, we propose to modify our rule

to state that an additional $1.75 per qualifying low-income consumer

will be provided to the carrier where the additional support will

result in an equivalent reduction in the monthly bill of each

qualifying low-income consumer. This proposed revision maintains

deference to the state commission because the additional support will

not be provided where a state commission with jurisdiction to do so has

not permitted an equivalent reduction in the consumer's bill. The

proposed revision is intended to eliminate the need for carriers not

subject to the jurisdiction of a state commission to seek state

commission action or a Commission waiver. We seek comment on the

proposed revision.

2. Federal Support on Tribal Lands

55. In addition, in keeping with principles of tribal sovereignty,

we seek comment on modifying our rule to provide that the third tier of

federal support, a maximum of $1.75 per month per low-income consumer,

is available to customers on tribal lands. As described, the federal

government has a special trust relationship with Indian tribes, and

this entails special responsibilities, particularly where tribal

reservations appear to be particularly disadvantaged by a lack of

important resources, like telecommunications. With respect to tribal

lands, we seek comment on the extent to which states currently provide

the support necessary to qualify for matching funds for the third tier

of Lifeline support. We also seek comment on whether the federal

government, in light of its trust relationship with Indian tribes,

should provide carriers serving tribal lands the third tier of Lifeline

support, $1.75 per qualifying Lifeline customer, as long as all such

Lifeline customers receive an equivalent reduction in their bills.

Unlike in other areas, this federal support amount would not be

contingent upon the state in which the tribal lands are located

providing support.

3. Amendments to Consumer Qualification Criteria

56. We seek comment on whether the Commission should expand the

consumer qualifications for Lifeline assistance to ensure that low

income consumers on tribal lands are able to participate fully in the

Lifeline assistance program. Under our current rules, in states that

provide intrastate matching funds, a consumer must meet the criteria

established by the state commission to receive federal Lifeline

support. In most states, a consumer can meet the criteria by

demonstrating or certifying that he or she participates in one of

several narrowly targeted low income assistance programs. We are

concerned that some state commissions have established Lifeline

criteria that may inadvertently exclude low income consumers on tribal

lands because the criteria do not include low income assistance

programs that are specifically targeted toward Indians living on tribal

lands. Similarly, in those states that do not provide intrastate

matching funds (and thus do not establish the consumer qualifications

for Lifeline participation), a consumer seeking Lifeline support must

certify his or her participation in one of the following Commission-

[[Page 52747]]

designated low income assistance programs: Medicaid; food stamps;

Supplemental Security Income; federal public housing assistance; or

Low-Income Home Energy Assistance Program.

57. We seek comment on how the Commission might expand the consumer

qualifications for Lifeline support to enable low income consumers on

tribal lands to participate in the Lifeline assistance program. In

particular, we seek comment about whether we should amend our rules to

allow low income consumers on tribal lands to qualify for Lifeline

support by certifying their participation in additional means tested

assistance programs, such as the programs administered by the Bureau of

Indian Affairs or Indian Health Services. We encourage commenters to

indicate whether there might be other suitable criteria--based solely

on income or factors related to income--that should be used to

determine qualification for low income members of tribal lands. We ask

commenters to indicate whether providing Indians living on tribal lands

with greater access to Lifeline assistance might increase incentives

for eligible telecommunications carriers to serve these tribal lands.

Finally, we seek comment on whether the Commission could apply any new

criteria specifically targeted to low income Indians living on tribal

lands both to states that do not provide matching funds and states that

do provide such funds.

IV. Designating Eligible Telecommunications Carriers Pursuant to

Section 214(e)(6)

58. Pursuant to section 254(e) of the 1996 Act, not all

telecommunications providers are eligible for federal universal service

support. For purposes of the universal service support mechanisms for

high-cost areas and low income consumers ``only an eligible

telecommunications carrier designated under section 214(e) shall be

eligible'' to receive federal universal service support. To be

designated as an eligible telecommunications carrier, a carrier must:

(A) offer the services that are supported by Federal universal

service support mechanisms under section 254(c), either using its

own facilities or a combination of its own facilities and resale of

another carrier's services (including the services offered by

another eligible telecommunications carrier); and

(B) advertise the availability of such services and the charges

therefor using media of general distribution.

59. Under section 214(e), the primary responsibility for

designating a prospective carrier as an eligible telecommunications

carrier lies with the state commission. In a situation where there is

no common carrier willing to provide supported services to an unserved

community that requests such services, section 214(e)(3) states that:

[T]he Commission, with respect to interstate services * * * or a

State commission, with respect to intrastate services, shall

determine which common carrier or carriers are best able to provide

such service to the requesting unserved community or portion thereof

and shall order such carrier or carriers to provide such service for

that unserved community or portion thereof.

In the event that a common carrier is not subject to the jurisdiction

of a state commission, section 214(e)(6) authorizes the Commission,

upon request, to designate the carrier as an eligible

telecommunications carrier, for a service area designated by the

Commission, if the carrier meets the qualifications for eligible

telecommunications carrier status.

60. Section 214(e) of the Act states that only an ``eligible

telecommunications carrier'' designated under section 214(e) shall be

eligible to receive federal universal service support. Pursuant to

section 214(e)(2) and (e)(5) of the Act, state commissions are

generally responsible for designating eligible telecommunications

carriers and for designating service areas for such carriers.

Initially, section 214(e) did not include a provision for designating

carriers not subject to the jurisdiction of a state commission. The Act

was amended in 1997 to address this ``oversight.'' Section 214(e)(6)

authorizes the Commission to designate as an eligible

telecommunications carrier ``a common carrier providing telephone

exchange service and exchange access that is not subject to the

jurisdiction of a State Commission.'' We tentatively conclude that, by

adding section 214(e)(6), Congress sought to ensure that carriers

serving all regions of the United States have access to a mechanism

that will allow them to be designated as eligible telecommunications

carriers, if they meet the statutory requirements. Recognizing that the

designation of eligible telecommunications carriers is primarily a

state commission function, Congress granted this Commission the

authority for this task in the event that a carrier is not subject to

the jurisdiction of a state commission.

61. Although some of the legislative history of section 214(e)(6)

focuses on the ability of tribally-owned carriers to be designated as

eligible telecommunications carriers, the statutory language and other

legislative history is not so limited. The other legislative history

states that ``the intent of this bill is to cover such situations where

a State commission lacks jurisdiction over a carrier, in which case the

FCC determines who is eligible to receive federal universal service

support.'' The legislative history also makes clear that ``nothing in

this bill is intended to impact litigation regarding jurisdiction

between State and federally recognized tribal entities'' or to ``expand

or restrict the existing jurisdiction of State commissions over any

common carrier or provider in any particular situation.'' In the

following paragraphs, we seek comment on how section 214(e)(6) should

be interpreted and implemented with respect to carriers (whether

tribally owned or otherwise) that provide telecommunications services

to tribal areas.

62. First, however, we seek comment identifying other situations in

which carriers providing telephone exchange and exchange access

services to areas other than tribal lands are not subject to state

commission jurisdiction and thus must seek designation as eligible

telecommunications carriers from the Commission. In this context, we

seek comment on whether the Commission, rather than state commissions,

has the jurisdiction to designate terrestrial wireless or satellite

carriers as eligible telecommunications carriers. If such carriers

submit applications for designation pursuant to section 214(e)(6)

during the pendency of this proceeding, we will consider them on a case

by case basis in light of the statutory language and the showings made

by the affected parties. We also note that our analysis of the scope of

the designation provision of section 214(e)(6) is not intended to

affect any other decision with respect to the authority of state

commissions or tribal authorities to regulate telecommunications on

tribal lands or over terrestrial wireless or satellite carriers.

63. The statutory language of section 214(e)(6) is ambiguous with

respect to when the Commission's authority to designate eligible

telecommunications carriers is triggered. It is not clear whether the

Commission's authority is triggered when a carrier is not subject to

the jurisdiction of a state commission or when the service or access

the carrier provides is not subject to the jurisdiction of a state

commission. Thus, the initial question in interpreting section

214(e)(6) with respect to the provision of telecommunications service

[[Page 52748]]

in tribal lands is under what circumstances the Commission may

designate carriers as eligible telecommunications carriers. The title

of section 214(e)(6), ``Common Carriers not Subject to State Commission

Jurisdiction,'' suggests that the triggering inquiry is whether the

carrier is subject to state commission jurisdiction. We tentatively

conclude, however, that the better interpretation of section 214(e)(6)

is that the determination of whether a carrier is subject to the

jurisdiction of a state commission depends in turn on the nature of the

service provided (e.g. telephone exchange or access service provided by

wire, satellite or terrestrial wireless) or the geographic area in

which the service is being provided (e.g. tribal lands). This

interpretation is supported by the legislative history of section

214(e)(6). Representative Tauzin stated that ``S.1354 makes a technical

correction to the Act that will make it possible for telephone

companies serving areas not subject to the jurisdiction of a State

Commission, to be eligible to receive federal Universal Service

support.'' Our tentative conclusion that the nature of the service or

the geographic area in which the carrier provides it should be the

basis for distinguishing between the designation authority of the

Commission and state commission under section 214(e)(6), is consistent

with other provisions of the Act. Section 2 of the Act similarly

distinguishes between federal and state jurisdiction over

telecommunications services based on the geographic area in which the

service is provided. Section 332(3) of the Act limits state authority

on the basis of the service provided (i.e. commercial and private

mobile service). We seek comment on this analysis and on any other

factors which may be relevant to this determination.

64. Our next question then is under what circumstances are

telecommunications carriers providing telecommunications services on

tribal lands subject to state commission authority? We seek comment on

the extent to which a state commission has jurisdiction over tribally-

owned carriers seeking to provide telecommunications service on tribal

lands and over non-tribally-owned carriers seeking to provide such

service on tribal lands. The answer to these questions will determine

whether the Commission may designate carriers seeking to provide

service on tribal lands as eligible telecommunications carriers. With

respect to tribally-owned carriers seeking to provide

telecommunications service on tribal lands, we note that state law is

generally inapplicable when states attempt to regulate the conduct of

tribal members directly within reservation boundaries, except in

``exceptional circumstances.'' We seek comment on whether, for the

purpose of eligible telecommunications carrier designation, tribally-

owned carriers providing telecommunications services within tribal

reservations would be subject to state regulatory authority.

65. We further recognize that when states seek to regulate non-

tribal members and their activities conducted within a reservation, the

appropriateness of the state's assertion of regulatory authority is

determined by a ``particularized inquiry'' into the nature of the

state, federal, and tribal interests at stake. Specifically, the

analysis turns ``on whether state authority is pre-empted by the

operation of federal law; and `[s]tate jurisdiction is pre-empted * * *

if it interferes or is incompatible with federal and tribal interests

reflected in federal law, unless the state interests at stake are

sufficient to justify the assertion of state authority.' The inquiry is

to proceed in light of traditional notions of Indian sovereignty and

the congressional goal of Indian self-government, including its

`overriding goal' of encouraging tribal self-sufficiency and economic

development.'' We recognize that this inquiry is a particularized one,

and thus specific to each state and the facts and circumstances

surrounding the provision of telecommunications services by non-tribal

members within those tribal lands. However, we seek comment on whether

there are any general federal, state and tribal interests at stake

which might inform the inquiry and help provide general guidance on the

proper boundaries of state authority in this case. Specifically, we

seek comment on the federal government's interest in assuming authority

over the designation of eligible telecommunications services, and the

extent to which state authority would be preempted by the operation of

federal law--namely section 214 or other relevant provisions or other

federal or tribal interests reflected in federal law.

66. We also seek comment on the states' interests in designating

eligible telecommunications carriers, as well as the implications of

state designation on Indian sovereignty, self-government and ``tribal

self-sufficiency and economic development.'' We recognize, however,

that some state commissions have asserted jurisdiction over carriers

seeking to provide service on tribal lands, and that these commissions

regulate certain aspects of a carrier's provisions of service on tribal

lands.

67. In implementing section 214(e)(6), we are concerned that the

fact intensiveness and the legal complexity of determining whether a

state has jurisdiction over carriers seeking designation as an eligible

telecommunications carrier may lead to confusion, duplication of

efforts and needless controversy among carriers, tribal authorities,

state commissions and this Commission, which could undermine efforts to

achieve our universal service goals. For these reasons, we propose the

following process to treat applications for the Commission's

designation of eligible telecommunications companies eligible to

receive universal service support for serving tribal land. Carriers

seeking designation as an eligible telecommunications carrier from this

Commission, whether to serve tribal lands or on the basis of other

jurisdictional arguments, should consult with the relevant tribal

authority, where appropriate, and the state commission on the issue of

whether the state commission has jurisdiction to designate the carrier.

In situations where the tribal authority and the state commission agree

that the state has jurisdiction, we anticipate that the state would

conduct the designation proceeding. In instances where the tribal

authority challenges the state's exercise of jurisdiction, we encourage

the carriers, with the support of the tribal authority, to apply to

this Commission for designation. In the public comment period

subsequent to a carrier's application for designation as an eligible

telecommunications carrier, the carriers and tribal authorities would

be expected to demonstrate why Commission designation is appropriate.

Interested parties, including the state commission, that disagree with

the Commission's exercise of jurisdiction would also be expected to

raise their challenges in that proceeding. We seek comment on this

proposal and suggestions for other ways in which the determination of

whether the designation must be performed by the Commission or a state

commission could be simplified or streamlined.

V. Unserved Areas--Implementation of Section 214(e)(3)

A. Defining ``Unserved Area''

68. In order to determine whether an allegedly unserved community

is eligible for relief pursuant to section 214(e)(3), we must first

decide whether the area at issue is unserved. Only after making this

initial determination can

[[Page 52749]]

we proceed with the rest of the analysis required by section 214(e)(3).

We propose defining an unserved area as ``any area in which facilities

would need to be deployed in order for its residents to receive each of

the services designated for support by the universal service support

mechanisms.'' In the First Report and Order, we identified the services

that would be supported by universal service support mechanisms as:

single-party service; voice grade access to the public switched

network; DTMF signaling or its functional equivalent; access to

emergency services; access to operator services; access to

interexchange service; access to directory assistance; and toll

limitation services for qualifying low-income consumers. These services

were identified based on the statutory directive embodied in section

254(c)(1)(A)-(D), requiring the Joint Board and the Commission to

``consider the extent to which * * * telecommunications services''

included in the definition of universal service: (1) Are essential to

education, public health, or public safety; (2) have, through the

operation of market choices by customers, been subscribed to by a

substantial majority of residential customers; (3) are being deployed

in public telecommunications networks by telecommunications carriers;

and (4) are consistent with the public interest, convenience and

necessity.

69. The proposed definition is based on whether facilities would

need to be deployed to provide the supported services to distinguish

unserved areas from areas in which a large percentage of the population

does not subscribe to available services. This definition is intended

to help further our statutory mandate to promote the availability of

services supported by federal universal service support mechanisms. We

recognize that this definition may result in certain areas being deemed

unserved, even though those areas are receiving some level of service

that includes less than all of the services designated for support by

the universal service support mechanisms. We also recognize that this

definition may result in the existence of relatively small unserved

areas within larger areas that are currently receiving service. We seek

comment on whether this definition will enable us to appropriately

target our efforts to those areas that do not receive all of the

services supported by federal universal service support mechanisms.

70. We emphasize, however, that determining whether a particular

area meets the definition of unserved area is only the beginning of the

analysis under section 214(e)(3). To obtain relief pursuant to section

214(e)(3), each of the steps discussed must be followed. We seek

comment on this analysis and we invite commenters to propose

alternative definitions.

B. Determining When a Community Is Unserved

71. The language ``or any portion thereof'' in section 214(e)(3)

suggests that we are not meant to impose minimum size requirements on

the number of potential subscribers needed to invoke the authority of

section 214(e)(3). We seek comment on whether the language should be

interpreted differently or suggests a particular definition.

C. Determining When No Common Carrier Will Provide Service

72. By its terms, the relief afforded in section 214(e)(3) is not

triggered until a determination is made that ``no common carrier will

provide'' the services supported by the federal universal service

support mechanisms. Therefore, we seek comment on the meaning of the

phrase ``no common carrier will provide'' the supported services.

73. As an initial matter, section 214(e)(3) does not specify

whether the request for service must be received from members of the

unserved community or whether state, local, or tribal authorities must

make an official request for service from the carrier on behalf of the

unserved members of the community. We tentatively conclude that

limitations on who may issue the request are not warranted by the terms

of the statute or the goals it seeks to achieve. We seek comment on

this tentative conclusion.

74. We tentatively conclude that the language ``no common carrier

will provide'' the services supported by the federal universal service

support mechanisms means something more than no common carrier is

actually providing the supported services. We seek comment on how we

can determine that no common carrier is willing to provide the

supported services. We seek comment on which common carriers must be

asked in order to reach the conclusion that no common carrier will

provide the service. We seek comment on how a satellite services

provider should be treated for this issue, given that they can

potentially provide service to these unserved areas. We also seek

comment on whether the reasons for the common carrier's refusal to

provide service are relevant to a determination that the area is

unserved. For example, what if the refusal to provide service is based

on the poor credit histories of the individuals requesting service or

an existing overdue debt? Given the extremely low annual incomes, on

average, on tribal lands, it seems possible that inadequate credit

histories of the potential customers may cause a carrier to be

unwilling to provide service.

D. Identifying Carrier or Carriers Best Able To Serve Unserved Areas

75. Section 214(e)(3) authorizes the Commission, with respect to

interstate service or an areas served by a carrier to which section

214(e)(6) applies, and state commissions, with respect to intrastate

service, to determine which carrier or carriers are best able to

provide service to the requesting, unserved community and order that

carrier or carriers to provide service. We seek comment on the relative

roles that the Commission and the states should play in determining

which carriers are best able to provide the supported services in

unserved areas, including any coordination that should occur in making

this determination.

76. We seek comment on whether the Commission is authorized to and

whether it should establish national guidelines by which states may or

must make this determination, when they have jurisdiction to do so. We

recognize that the selection of the carrier to serve some unserved

areas pursuant to section 214(e)(3) of the Act is to be made by state

commissions. We seek comment on whether a consistent, national approach

is necessary to further the universal service goals of the Act or to

provide certainty to carriers regarding the possible application of

this important provision. We seek comment on whether, in situations

where the state has jurisdiction to designate eligible

telecommunications carriers, all aspects of this decision should be

left to the states because states have more familiarity with the areas

in question. We also seek comment on the role of tribal authorities

with respect to the Commission's determination of the carrier or

carriers best able to serve unserved, tribal lands. We also seek

comment to determine whether the Commission's obligation to identify

and order a carrier to provide service in tribal lands should be

affected by the interests of the tribal authorities.

77. One approach for making a determination pursuant to section

214(e)(3) would be to conduct a fact-intensive inquiry, polling common

carriers serving nearby or surrounding areas to determine where

existing facilities are deployed, to estimate the costs for each

carrier to provide the supported services, and to consider other

possible factors that may be

[[Page 52750]]

relevant to the conclusion that a carrier is ``best able.'' We

tentatively conclude, however, that our preferred approach would be to

adopt a competitive bidding mechanism for identifying the carrier or

carriers best able to provide service in unserved areas for which the

Commission has authority to order carriers to provide service. We seek

comment on the use of a competitive bidding mechanism. We seek comment

on whether it is within our authority to require states to adopt a

competitive bidding mechanism to determine which carrier or carriers

will be ordered to provide intrastate service in unserved areas to

which section 214(e)(6) does not apply.

78. If the competitive bidding mechanism does not give rise to a

carrier willing and able to provide the supported services in the

unserved area at a reasonable cost, we seek comment on whether the

Commission should then initiate an inquiry to determine the carrier or

carriers best-able to provide service to the area. We seek comment on

whether the following factors would be relevant in making that

determination: (1) Whether the area falls within the designated service

area of an existing carrier; (2) the extent to which a carrier has

deployed facilities capable of providing supported services in the

surrounding area; (3) the cost for that carrier to build facilities

capable of providing the supported services; (4) the quality of

services that would be provided; (5) the financial strength of the

carrier; (6) the proportionate impact serving the area would have on

the number of lines and the geographic area served by the carrier; (7)

the amount of time required for the carrier to deploy facilities; and

(8) a carrier's status as either an incumbent LEC or a competitive

eligible telecommunications carrier. We seek comment on any other

factors that may be relevant. We also seek comment on whether our

inquiry must be limited to incumbent LECs and competitive eligible

telecommunications carriers or whether we may also include other

competitive LECs, interexchange carriers, terrestrial wireless or

satellite service providers, or providers of cable or electric services

that would be capable of providing the supported services to the

unserved area. We seek comment on whether to exclude certain carriers

from consideration, for example, carriers that are considered small

entities for purposes of the Regulatory Flexibility Act. Finally, we

seek comment on whether the preferences of the unserved community for a

particular carrier or technology should be considered in making a

determination of which carrier is best able to provide service to the

area.

1. Competitive Bidding Proposal

79. We tentatively conclude that we should adopt a competitive

bidding mechanism to identify the carrier or carriers best able to

provide the supported services in unserved tribal lands and to set the

level of support provided for serving the area. We are hopeful that we

may be able to design a competitive bidding mechanism that will

generate public awareness of the needs of a particular area for service

and elicit proposals from one or more carriers that could be compared

before determining which carrier or carriers should be designated as an

eligible telecommunications carrier for the area. We seek comment on

this proposal.

80. We seek comment on whether the possibility that a carrier will

be ordered to provide service pursuant to section 214(e)(3) will

provide incentives for carriers to participate in the competitive

bidding mechanism in order to be able to set the terms on which they

will provide service. We seek comment on whether the competitive

bidding mechanism could bring unserved areas to the attention of

carriers previously unaware of the need for telecommunications services

in those areas and thus identify carriers that would be willing to

provide service to the area for a support amount equal to or lower than

the amount that would be provided under existing federal universal

service support mechanisms. In addition, we seek comment on possible

negative incentives and distortions that may be created by using a

competitive bidding mechanism. For example, we seek comment on whether

a competitive bidding approach will likely lead carriers to provide the

lowest-cost, lowest-quality service that meets the definition of

supported services, unfairly depriving residents of higher quality or

advanced services.

81. We also seek comment on whether the Commission should conduct a

trial to determine whether a competitive bidding mechanism is the most

efficient means of identifying the carrier or carriers best able to

provide the supported services in unserved areas. We seek comment on

how large a service area would be appropriate for such a trial. We seek

comment on whether the Commission should solicit volunteers from Indian

tribes that currently have large unserved areas.

(a) Participants. 82. We seek comment on the possible participants

in a competitive bidding proceeding. Section 214(e)(3) states that any

carrier ordered to provide service pursuant to this section shall meet

the requirements necessary and be designated an eligible

telecommunications carrier for the unserved area. We seek comment on

whether a carrier must first be designated an eligible

telecommunications carrier for the area prior to participating in the

competitive bidding mechanism. We seek comment on whether any carrier

that can demonstrate that it can meet the requirements of section

214(e)(1) may participate in the competitive bidding mechanism. We seek

comment on what kind of showing is necessary to demonstrate that a

carrier can meet the requirements of section 214(e)(1). We seek comment

on whether terrestrial wireless or satellite providers will be able to

participate in the competitive bidding mechanism. We also seek comment

on the number of bidders we should anticipate for auctions in the

universal service context, and the extent to which we should consider

that number in deciding the type of auction that should be used, as

discussed.

(b) Number of Winners. 83. We seek comment on whether the

characteristics of the unserved tribal lands may be such that it is not

economically practical to support more than one provider to serve

unserved, tribal lands. To the extent that supporting a single provider

is more economical, permitting multiple providers to receive federal

universal service support may not be in the public interest. In

addition, if all carriers were entitled to receive support at the level

determined in the competitive bidding auctions, bidders would have no

incentive to bid below the opening level; that is, competitive bidding

would not reveal the minimum amount of support necessary to provide

service to the area. For these reasons, we propose that qualified

eligible telecommunications carriers bid to secure an exclusive right

to receive universal service support for serving the unserved tribal

area. That is, the winning bidder would be the only carrier designated

as an eligible telecommunications carrier for providing the supported

services to the unserved, tribal lands subject to competitive bidding.

84. We seek comment on whether the Commission has the authority to

and whether we should try to attract carriers by agreeing to designate

only one carrier to serve the unserved tribal land or permitting only

one carrier to receive federal universal service support for serving

the area. We seek comment on whether a decision to limit support to a

single carrier is consistent with the universal service provisions and

pro-

[[Page 52751]]

competitive goals of the Act. We observe that, in the case of an area

served by a rural carrier, the Commission ``may'' designate more than

one eligible telecommunications carrier but must make a specific

showing that an additional eligible telecommunications carrier would

serve the public interest. With respect to all other carriers, the

Commission ``shall'' designate more than one common carrier as an

eligible telecommunications carrier. We seek comment on whether these

provisions apply with respect to an unserved area. We seek comment on

whether the statutory language that the Commission ``shall determine

which carrier or carriers are best able to provide such service''

indicates that the Commission may determine that a single carrier shall

be designated. Finally, we seek comment concerning the ability of

bidders to accurately estimate the possible future challenges from

other carriers for the more profitable customers in the previously

unserved, tribal lands.

85. As an alternative to a single winner, we consider the

possibility of supporting two or more winning bidders. We generally

believe that customers benefit most when multiple providers are

available, because competition leads to lower prices and provides an

alternative where service quality is unsatisfactory. Supporting two

winning bidders means that a second carrier would be able to compete

vigorously with the lowest bidder. We seek comment on whether to use

the competitive bidding mechanism to identify a level of support which

would be provided for serving the area and to allow any carrier with a

bid within a specific range of the winning bidder, who also satisfies

the requirements of section 214(e)(1) of the Act, to receive that level

of support for providing service to the area. We seek comment on

whether the possibility of having multiple carriers receive support for

these previously unserved areas would substantially diminish or even

eliminate any incentives carrier might have to participate in

competitive bidding. We seek comment on whether providing support

sufficient to allow competing carriers to build the necessary

infrastructure would generate customer benefits over the long-term that

would offset the additional cost associated with supporting two

carriers. In making this determination, we must consider the duration

of the service term and the rate of change in network technology. For

example, if technological change were so rapid that both the new

entrant and incumbent carrier would need to install and recover the

cost of new facilities for each contract term, the benefits of creating

competing carriers would be significantly reduced. We seek comment on

these issues.

(c) Term of Exclusivity Period. 86. If the Commission determines

that a bidder should win the exclusive right to federal universal

service support, we would seek to establish an exclusivity period that

is of an adequate length to provide incentives for carriers to deploy

facilities yet does not result in unnecessary support being provided.

We seek comment on the appropriate duration of any exclusivity period.

After the exclusivity period has ended, we could choose to re-auction

the service obligation and consider multiple providers if the costs of

providing service decreased or market conditions improved so that

multiple providers became practical. we anticipate that the length of

the exclusivity period will affect the bids for monthly support levels.

In addition, the length of the exclusivity period will affect the

average administrative and transaction costs for conducting the

auction. Granting exclusivity periods that are too short could be

harmful because the winning carrier is likely to need time to establish

its network, and to amortize its investments. In addition, more

frequent auctions entail increased administrative costs. Granting

periods that are too long, however, also could be harmful.

Technological advances over time can create more efficient means of

providing communications, which would enable firms to offer service at

a lower cost. To the extent that the winning bidder is shielded from

competition during the exclusivity period, the benefits of adopting a

more efficient technology will accrue to the carrier, rather than the

customer. In addition, with longer contract terms, the carriers'

prediction of their costs at later stages in the contract becomes more

speculative, which could translate into higher bids in the auction. We

seek comment on this analysis and the appropriate length of the

exclusivity period. We suggest that commenters review the competitive

bidding proposals and mechanisms summarized that may assist in

determining the length of the exclusivity requirement.

(d) Bidding Process. 87. We seek comment on whether to use a

single-round, sealed bid process or a descending, multi-round auction.

Each bidder would submit an amount of support necessary per line given

our universal service technical specifications. We observe that the

Commission has successfully implemented multi-round auctions in other

contexts. We seek comment on whether a descending multi-round bidding

system would be preferable to a single-round sealed bid auction.

88. We also seek comment on how to establish the reservation

price--the highest bid that would qualify for support--for the

competitive bidding mechanism. One option would be to use the new high-

cost mechanism to estimate the amount of support that would be

available for providing the supported services in the unserved, tribal

area and set that as the reservation price. We seek comment on what

incentives carriers would have, if any, to bid an amount lower than the

reservation price determined by the model. Alternatively, we seek

comment on whether we should set a reservation price that is some

percentage above the support amount determined under the new high-cost

mechanisms. We seek comment on whether a rational percentage can be

identified. We also seek comment on whether of conduct an auction

without establishing a particular reservation price or specifically

identifying the amount that would be provided under the new high-cost

mechanism in an effort to determine the amount of support each carrier

believes is necessary. We seek comment on whether, if we were to

proceed in this manner, the Commission should reserve the right to

conclude that the competitive bidding mechanism was not successful and

to proceed to the fact-based inquiry.

(e) Support Amount. 89. A well-designed auction should provide

incentives for carriers to disclose the minimum amount of support they

require, even though this information may be competitively sensitive.

We seek comment on how to provide incentives for carriers to reveal the

minimum amount of support necessary to provide service to the unserved

area. We seek comment on whether we should employ a ``Second Price'' or

`'Vickrey'' auction, in which the successful bidder gets support at the

level of the lowest bid made by a non-successful bidder. In theory,

this style of auction appears to induce bidders to reveal their actual

costs and would thereby generate the same total support requirements as

a first price, sealed bid auction. Another factor relevant in setting

the support level is whether the federal support provided constitutes

the entire amount of subsidy available to the carrier. We tentatively

conclude that we would need to establish that the competitive bidding

mechanism for unserved areas would be used to determine the entire

amount of support to be divided and the relevant share of support would

be

[[Page 52752]]

allocated to the federal and state authorities, in whatever proportion

is established for the high-cost support mechanism in general. We seek

comment on this analysis.

(f) Obligations Assumed by Winning Bidder. 90. We tentatively

conclude that, pursuant to section 214(e), a successful bidder must

provide the services supported by the universal service support

mechanisms to all customers requesting service in the designated area

and advertise the availability of such service throughout the service

area. We seek comment on this tentative conclusion.

2. Other Proposals and Examples of Competitive Bidding

91. A number of parties submitted competitive bidding proposals in

the universal service docket, the most detailed of which were submitted

by GTE, consultants to Ameritech, and Frank Kelly and Richard Steinberg

of Cambridge University, Great Britain. These proposals were designed

to determine the carrier or carriers entitled to receive universal

service support and the level of support to be provided. In addition,

other government agencies have used competitive bidding systems that

may have features relevant to the market at issue here. We seek comment

on these other competitive bidding proposals, because aspects of these

proposals may be preferable to the competitive bidding approach

proposed.

E. Ordering Carriers To Provide Service

92. We seek comment on the ramifications of ordering a carrier to

provide service in an unserved area. We tentatively conclude that this

requirement entails an obligation to deploy the facilities necessary to

provide the services supported by federal universal service support

mechanisms, to offer the services to all customers requesting service

in the designated area, and to advertise the availability of such

service throughout the service area. These requirements are consistent

with the language in section 214(e)(3) of the Act, stating that the

carrier ordered to provide service shall meet the requirements of

section 214(e)(1) of the Act. We seek comment on this tentative

conclusion.

93. We also seek comment whether additional measures may be

necessary to ensure that the carrier ordered to provide service is able

to earn an appropriate return on its investment. For example, a carrier

may deploy facilities, advertise the availability of services and offer

service to all customers and yet an inadequate number of customers may

subscribe to the service, rendering the operation unprofitable. This

result may occur due to faulty estimations by the carrier, but it may

also be the result of unpredictable demand. Similarly, it is possible

that carriers may provide services to all requesting customers, yet the

customers might default on their bills. If the carrier is ordered to

provide service, to what extent must it retain customers who cannot pay

overdue debts or with poor credit records? How will the carrier recover

its investment on the facilities deployed to provide service to

subscribers who do not pay their bills? We seek comment on these

issues, including the appropriate role for the Commission and state

commissions to play in addressing these issues.

VI. Underserved Areas

94. In this section of the Further Notice, the Commission considers

whether additional support for low-income consumers is necessary to

promote subscribership in unserved and underserved areas, including

tribal and insular areas.

A. Defining ``Underserved Area''

95. In the Thirteenth Order on Reconsideration, the Commission

observed that there may be inadequately served areas that are

characterized by extremely low penetration, low population density, and

high costs. We seek comment on the need for the Commission to establish

a definition of ``underserved area'' that would be used in targeting

supplemental universal service support to those areas. For example, a

community may be considered underserved if the penetration rate of the

community is significantly below the national average. In addition to

the number of supported services available, and the percentage of the

population receiving those supported services, there may be other

identifying characteristics that describe an underserved area. We seek

comment on an appropriate definition for underserved area. For example,

we could define underserved area as a geographic area that meets

certain statistical benchmarks, i.e., a penetration rate below a

certain percentage, a population density below a certain level, costs

of providing supported services above a certain level, etc. We also

seek comment on whether there is sufficient, readily available

statistical data to make such a definitional approach viable.

B. Expanding LinkUp to Include Facilities-Based Charges

96. We seek comment on whether increasing federal support to offset

initial connection charges may be necessary to increase the success of

our universal service support mechanisms in underserved areas,

including insular and tribal lands. In the proceeding leading up to the

Second Recommended Decision, the Arizona Corporation Commission

(Arizona Commission) submitted a proposal to use a portion of federal

support to address the problem of unserved areas and the inability of

low-income residents to obtain telecommunications service because they

cannot afford to pay the required line extension or construction costs.

The Arizona Commission's proposal was not intended to be a

comprehensive alternative to the high-cost fund distribution model, but

rather to address a discrete concern related to low-income residents in

remote areas. We seek comment on the Arizona Commission's proposal and

the extent to which the problem identified by the Arizona Commission is

widespread. In particular, we seek further data on the cost of line

extensions in rural areas and regarding the number of residents that

are deprived of telecommunications services because of high line

extension or construction costs and areas in which this problem is

acute.

97. The Joint Board recognized that investments in line extensions

historically have been an issue addressed by the states through

intrastate proceedings that establish reasonable rates for line

extension agreements and encourage carriers to minimize unserved

regions of the states. The Joint Board suggested that these issues

should continue to be dealt with by states, to the extent that the

states are able to do so. We note that regulators generally require

carriers to use rate averaging to reduce the rates for their highest-

cost customers in rural and insular areas, but those regulators often

still permit carriers to charge particularly isolated customers a

supplementary ``initial connection'' charge for installing a new line.

Moreover, while regulators also generally require carriers to amortize

the cost of installing new lines, if there is a reasonable chance that

those lines will not be used over their full life-span, regulators

often permit carriers to charge most, if not all, of the initial

connection charge up front. These charges can be prohibitive. We seek

comment on whether states have the ability to address this problem, or,

in the

[[Page 52753]]

alternative, whether federal assistance, in some instances, may be

necessary.

98. We seek comment on what role the Commission might play in

trying to alleviate this problem. We seek comment on whether we might

provide additional support through the LinkUp America program--which

provides federal support to reduce the price of initial connection

charges--at least for locations with significantly lower than average

telecommunications penetration rates, e.g., below 75 percent.

Commenters supporting such an approach should also explain whether

support would be provided as a one-time payment or over a number of

years. We also seek comment on what we might do to encourage carriers

to offer installment loans for such extensions over a practical time

frame. We seek comment on these and any other alternatives that might

be more effective ways of addressing this problem. For example, we seek

comment on whether the provision of telecommunication service to remote

areas using terrestrial wireless or satellite technologies might allow

service at lower cost compared to the cost of line extension or

construction of wireline facilities. Commenters offering proposals

should also explain how their proposals would avoid encouraging

uneconomic investments in relatively high-cost technologies.

C. Support for Intrastate Toll Calling

99. We seek comment on the extent to which limited local calling

areas impose a barrier to increased penetration in certain underserved

areas. For example, the local calling area for the Jemez Pueblo in New

Mexico includes only about half a dozen other towns. It does not

include any other Pueblos or hospitals nor the cities of Albuquerque or

Santa Fe, where most residents work. Similarly, the calling area for

the Picuris Pueblo does not even include 911 calls. To the extent that

limited local calling areas impose a barrier to increased penetration,

we seek comment on how to remove this barrier. For example, expanding

the local calling area to include the unserved or underserved area and

the nearest metropolitan area or community of interest may entice more

consumers to request service. Expanding local calling areas, however,

would likely cause upward pressure on local rates. We seek comment on

how expanded local calling areas would impact local rates, including

rates for consumers living in communities outside of tribal lands. We

seek comment on what role, if any, the Commission is authorized to and

should play in seeking to address impediments caused by limited local

calling areas.

100. We seek comment on whether federal universal service support

mechanisms should provide additional support for low-income consumers

living in remote areas or low-income consumers living on tribal lands.

For example, the Commission could provide support for calls outside of

the local calling area that fall within specified federally-designated

support areas. Similarly, federal universal service support could be

provided to pay for a foreign exchange (FX) line service from the

remote or tribal area to the nearest metropolitan area or community of

interest. We seek comment on whether such proposals would eliminate

incentives for states to ensure affordable local rates. We also seek

comment on whether the provision of service by terrestrial wireless or

satellite providers would alleviate any problems associated with

limited local calling areas.

D. Expanded Availability of Toll Limitation Devices

101. Many households may forgo telecommunications service because

of past or anticipated future problems with high telephone bills. The

general prevalence of this bill management problem was documented in a

GTE-Pacific Bell commissioned survey done in 1993 by the Field Research

Corp. for the California PUC. The Commission sought to address the

problem, however, by requiring carriers offering low-income subscribers

``Lifeline'' service, to permit those subscribers to secure a ``toll

limitation'' service--either toll blocking or toll control. We believe

that our actions in this regard should alleviate this bill management

problem. We seek comment on whether expanded options for toll-control

or toll-blocking would make telecommunications service more desirable

in unserved and underserved areas, including tribal lands. We ask that

commenters identify any specific toll-control or toll-blocking features

that would be useful, including, for example, the ability to require

the use of a Personal Identification Number (PIN) in order to restrict

access to toll calls. We also recognize that the benefits of these

options are minimal if consumers are not aware of them. We seek comment

on what additional measures, if any, the Commission should undertake to

ensure consumers are educated about the availability of toll-limitation

devices.

E. Publicizing Availability of Low-Income Support

102. We observe that customers may fail to subscribe to

telecommunications service because they are unaware of the Commission's

Lifeline and LinkUp programs, which are intended to make service more

affordable, and the availability of toll-control and toll-blocking,

which are intended to help low-income consumers control the amount of

their monthly bills. Although the Commission's Lifeline and LinkUp

programs have been providing universal service support to eligible

customers for more than a decade, we are concerned that carriers may

have failed to publicize the programs in some areas, particularly on

Indian reservations. Unfortunately, it appears that in markets where

carriers find it unprofitable to provide service, they have no

particular incentive to publicize the availability of Lifeline and

LinkUp. Thus, the Commission found that none of the representatives of

the pueblos testifying in the January, 1999 Albuquerque field hearings

were aware of the Lifeline and LinkUp programs. Furthermore, despite

the 60-percent unemployment rate in the Cheyenne River Sioux Telephone

Authority area, only about 10-percent of the subscribers there receive

Lifeline service.

103. We seek comment on whether the Commission should play a role

in ensuring the spread of information on tribal lands, or in other low-

income, underserved areas, about the availability of low-income support

that may make telecommunications service affordable. We recognize that

carriers already have an incentive to convince potential customers of

the value of their service--assuming the customers will be profitable

to serve. We are concerned about those consumers whom carriers may

consider unprofitable to serve. We tentatively conclude that a lack of

information may contribute to the significantly low penetration rates

on tribal lands.

104. We seek comment on what options the Commission may have to

promote awareness of low-income support mechanisms on tribal lands.

Section 214(e)(1)(B) of the Act requires an eligible telecommunications

carrier to ``advertise the availability of'' the services supported by

federal universal service support mechanisms ``and the charges therefor

using media of general distribution.'' We seek comment on the

possibility of amending our current universal service rules to require

carriers to publicize the availability of Lifeline and LinkUp and toll-

limitation options. For example, we could revise section 54.405 of our

rules by adding the following italicized language:

All telecommunications carriers shall (a) make available

Lifeline service, as defined in

[[Page 52754]]

Sec. 54.401, to qualifying low-income consumers, and (b) publicize

the availability of Lifeline service in a manner reasonably designed

to reach those likely to qualify for the services.

105. We seek comment on the costs and benefits of requiring

carriers to publicize the availability of Lifeline, LinkUp and toll-

control devices. Alternatively, the Commission could encourage and

participate in other marketing and information dissemination efforts,

such as preparing consumer information fact-sheets that would be

distributed in local communities. We seek comment on whether there is,

or should be, some entity that would collect and verify the accuracy of

data on Lifeline rates for each reservation, the eligibility standards

for Lifeline in the relevant state, and how individuals who desired

Lifeline service could confirm their eligibility and how they could

sign up for service. We also seek comment on the best ways to

disseminate this information to the relevant audience of potential

Lifeline subscribers. We seek comment on any research or other data

that indicates the most effective way of marketing to this population,

whether via broadcast, print, wireline, or other media; whether

separately or in combination with the marketing efforts of other social

programs seeking to reach this audience; and whether on a federal,

state or tribal level. Commenters aware of a particularly effective

program are requested to provide us with sufficient information to

enable us to contact that program administrator.

F. Support for Rural Health Care Infrastructure

106. We seek comment on the technical limitations of the

telecommunications services available to rural health care providers

throughout the United States, including Alaska and insular areas. We

ask commenters to provide as much detail as possible regarding the

extensions or improvements needed in areas lacking adequate

infrastructure. We ask that commenters identify the most urgent needs,

such as those that would address threats to the health and safety of

residents. We particularly encourage providers of fixed satellite

services, geo-stationary satellites, and emerging technologies, to

describe the capability of these technologies to serve Alaska and

insular areas, and ask these providers to estimate the costs, provide a

timetable for deploying particular technologies, and provide

information regarding the capability of different technologies to

support telehealth and telemedicine applications. We ask providers of

other technologies, such as fixed wireless technology, to describe

whether these technologies could effectively supplement the apparently

inadequate infrastructure in the rural areas of Alaska, insular areas,

and the mainland United States.

107. We seek comment on whether and to what extent improvements to

the telecommunications network required to meet the telecommunications

needs of rural health care providers should be supported by federal

universal service mechanisms and whether other mechanisms exist that

would provide support for improving infrastructure. We ask parties to

submit detailed descriptions of any programs supporting infrastructure

development that would assist rural health care providers. We

specifically ask the sponsors of programs cited in the State Health

Care Report and other commenters familiar with these programs to detail

their scope, identify any needs that are unmet by existing programs,

and explain why.

108. We invite commenters to submit specific proposals that they

have already prepared for expanding the federal universal service

support for rural health care providers to include infrastructure

improvement costs of telecommunications carriers. Any commenter

submitting a proposal should analyze the extent to which the proposal

is competitively neutral, technically feasible, and economically

reasonable, as required pursuant to section 254(h)(2). Commenters

should also file detailed cost information for any proposal submitted.

We recognize that some improvements to the telecommunications network

made to provide service to rural health care providers may also be used

to provide commercial services. We seek comment on whether and to what

extent we should take account of such additional revenue sources in the

event that support is provided to extend or improve telecommunications

networks.

VII. Insular Areas

A. Defining ``Insular Area''

109. In articulating the principle that consumers in all regions of

the nation should have access to telecommunications services, Congress

explicitly included insular areas within this mandate. As the Joint

Board noted in the Recommended Decision, however, the Act does not

define the phrase insular areas. We tentatively conclude that we should

adopt a definition of insular areas to provide clarity regarding the

availability of universal service support in those areas.

110. We observe that, in other statutes, the term insular area

generally refers to the island portions of the United States that are

not states or portions of states. In addition, we observe that in

common usage, the term insular area means ``of, or having the form of

an island.'' Accordingly, we propose the following definition of

insular areas: ``islands that are territories or commonwealths of the

United States.'' By including the phrase ``territories or

commonwealths,'' we intend to restrict the definition to areas that are

populated islands that have a local government. We also observe that

the proposed definition comports with publications of the Department of

Interior's Office of Insular Affairs (OIA) and various provisions of

the United States Code. We seek comment on this proposal.

111. We seek comment on whether the definition of insular areas

should include only those areas that are subject to the laws of the

United States, and for which carriers serving those areas would be

required to contribute to our universal service support mechanisms,

and, if so, we seek comment on whether the proposed definition

satisfies this goal. We seek comment on whether the definition of

insular areas should exclude sovereign states that are not subject to

the laws of the United States nor eligible to receive universal service

support under the Act, unpopulated islands, and insular areas subject

to the jurisdiction of, and receiving telecommunications service from,

the United States military. We tentatively conclude that Puerto Rico,

American Samoa, CNMI, Guam, and the U.S. Virgin Islands are properly

included in the definition of insular areas and seek comment on this

tentative conclusion.

112. We seek comment on whether the Freely Associated States (FAS),

including the Republic of the Marshall Islands, the Federated States of

Micronesia, and the Republic of Palau, should be included in the

definition of insular areas. These islands are associated with the

United States through the terms of a Compact of Free Association, which

gives the Commission authority and jurisdiction over various

telecommunications services in the FAS, but carriers are not subject to

universal service contribution requirements for the services they

provide on these islands. We also observe that Midway Atoll is being

transferred from the jurisdiction of the United States Navy to the U.S.

Fish & Wildlife Service of the Department of Interior and has a

population of 450 persons. We seek comment on whether Midway Atoll

should be included in the

[[Page 52755]]

definition of insular areas. We invite commenters to provide

alternative definitions of ``insular areas'' and to describe which

areas would and would not be included with any alternative definition.

113. We seek comment on whether similarities between the historical

experience of Indians and persons living in insular areas warrant the

extension of federal trust-type principles, including supplemental

measures to promote the availability of universal service, to insular

areas.

B. Rural Health Care Support

114. Parties have already submitted information to us demonstrating

that insular areas may have few hospitals and substantial undeveloped

terrain and that travel between insular areas and more developed states

or countries nearest to them may be very expensive. For these reasons,

we anticipate that telehealth and telemedicine initiatives may be

particularly important in insular areas. We encourage interested

parties to highlight previous comments they have made on this issue or

present any relevant new information to us. We are particularly

interested in the differences between the needs and opportunities of

rural health care providers in insular areas and those located in the

remainder of the United States.

115. Urban Rates. In the First Report and Order, the Commission

adopted rules requiring carriers to provide rural health care providers

with access to telecommunications services permitting speeds up to 1

Mbps at rates comparable to those offered in urban areas. Consistent

with the statute, the Commission's rules for rural health care

providers calculate support amounts on the basis of the difference

between the ``urban rate'' and the ``rural rate'' for the supported

service. The urban rate is determined with reference to the rates

charged other commercial customers of a similar service in the nearest

large city in the state. The nearest large city is defined as having a

population of at least 50,000 people.

116. In the First Report and Order, the Commission found that the

mechanism of using urban rates as a benchmark for reasonable rates may

be ill-suited to certain insular areas that are relatively rural all

over. The Commission concluded that it required additional information

about whether telecommunications rates differ in urban and non-urban

areas or insular areas, including areas of the Pacific Islands and the

U.S. Virgin Islands. Accordingly, we seek comment on whether the rules

concerning calculation of rural health care support need modifications

to address the geographic or demographic situation in insular areas. We

invite commenters to propose specific revisions in this regard.

117. Nearest Large City. Consistent with the statute, the

Commission's rules for providing universal service support to rural

health care providers limit the length of the supported service to the

distance between the health care provider and the point farthest from

that provider on the jurisdictional boundary of the nearest large city

in the state. The Governor of Guam proposed that we modify this rule to

provide support for telecommunications services between an insular

area's medical facilities and a supporting medical center in an urban

area outside the insular area, such as in Hawaii or on the west coast

of the continental United States. We seek comment on this proposal. We

encourage commenters supporting this proposal to present detailed

estimates of the cost of such a proposal and steps that must be taken

to implement it. Commenters favoring this proposal should also provide

legal analysis explaining whether it would be consistent with section

254 to treat insular areas differently from the remainder of the United

States, where support is only provided based on intrastate distances,

as section 254(h)(1)(A) appears to require.

118. Finally, we seek comment on whether health care providers and

telecommunications carriers that serve insular areas face unique

challenges that have not been documented previously in the record of

this proceeding, and, if so, how we should tailor additional support

mechanisms to address those problems, consistent with the statute. We

encourage commenters to present proposals for additional support

mechanisms through which rural health care providers located in insular

areas could have access to the telecommunications services available in

urban areas of the nation at affordable rates.

C. Access to Toll-Free Services in Insular Areas

119. Because of their traditional treatment as international

destinations, the Pacific Island areas have faced high rates for

interexchange service and have had limited ability to obtain access to

toll-free and advanced services. Calls between these insular areas and

the remainder of the United States also required callers to use the

``011'' international access code. Recent changes have begun to address

these problems. Specifically, the 1996 Act requires that insular areas

become subject to rate integration and averaging, which means that

interexchange carriers are required to offer domestic interstate

service using a uniform rate structure throughout the United States. In

addition, many insular areas have been integrated into the North

American Numbering Plan (NANP). In the First Report and Order, the

Commission permitted residents of CNMI and Guam to access toll-free

(e.g., 800) services by using 880 and 881 codes and paying the cost of

reaching Hawaii where the calls could be connected thereafter toll-free

to the called party until July 1, 1998, and that date was subsequently

extended indefinitely.

120. In the First Report and Order, the Commission determined that

``these changes will have a significant impact on how residents of

the[se] islands place interexchange calls and the rates that they, and

toll-free access customers, will pay for the calls they place.'' Based

upon the recommendation of the Joint Board, the Commission concluded

that it should delay, until after July 1, 1998, consideration of

whether the Commission should provide additional support for toll-free

access and access to advanced and information services for insular

areas so that the impact of rate integration and averaging and

incorporation into the NANP could be evaluated. We seek comment on

whether rate integration, rate-averaging, and incorporating insular

areas into the NANP are leading toll-free customers to include insular

areas in their toll-free calling areas. We seek comment on whether

additional universal service support is needed to support toll-free

calling from insular areas. We ask commenters to present any evidence

that the marketplace will not fully solve this problem.

VIII. Procedural Matters

A. Ex Parte Procedures

121. The Further Notice 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.

B. Comment Filing Procedures

122. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules,

interested parties may file comments as follows: comments are due

November 29, 1999 and reply comments are due December 29, 1999.

Comments may filed using the Commission's Electronic Comment Filing

System (ECFS) or by filing paper copies.

123. Comments filed through the ECFS can be sent as an electronic

file

[[Page 52756]]

via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally,

only one copy of an electronic submission must be filed. If multiple

docket or rulemaking numbers appear in the caption of this proceeding,

however, commenters must transmit one electronic copy of the comments

to each docket or rulemaking number referenced in the caption. In

completing the transmittal screen, commenters should include their full

name, Postal Service mailing address, and the applicable docket or

rulemaking number. Parties may also submit an electronic copy by

Internet e-mail. To get filing instructions for e-mail comments,

commenters should send an e-mail to [email protected], and should include

the following words in the body of the message: ``get form .'' A sample form and directions will be sent in reply.

124. Parties who choose to file by paper must file an original and

four copies of each filing. If more than one docket or rulemaking

number appears in the caption of this proceeding, commenters must

submit two additional copies for each additional docket or rulemaking

number. All paper filings must be sent to the Commission's Secretary,

Magalie Roman Salas, Office of the Secretary, Federal Communications

Commission, 445 Twelfth Street S.W., Room TW-A325, Washington, DC

20554.

125. Parties who choose to file by paper should also submit their

comments on diskette to Sheryl Todd, Accounting Policy Division, Common

Carrier Bureau, Federal Communications Commission, 445 Twelfth Street

SW, Room 5-A523, Washington, DC 20554. Such a submission should be on a

3.5 inch diskette formatted in an IBM-compatible format using

WordPerfect 5.1 for Windows or a compatible software. The diskette

should be accompanied by a cover letter and should be submitted in

``read-only'' mode. The diskette should be clearly labeled with the

commenter's name, proceeding, including the lead docket number in the

proceeding (CC Docket No. 96-45), type of pleading (comment or reply

comment), date of submission, and the name of the electronic file on

the diskette. The label should also include the following phrase

(``Disk Copy--Not an Original.'') Each diskette should contain only one

party's pleadings, preferably in a single electronic file. In addition,

commenters should sent diskette copies to the Commission's copy

contractor, International Transcription Service, Inc., 1231 20th St.

NW, Washington DC 20037.

C. Initial Regulatory Flexibility Act Analysis

126. The Regulatory Flexibility Act (RFA) requires a Regulatory

Flexibility Act analysis whenever an agency publishes a notice of

proposed rulemaking or promulgates a final rule, unless the agency

certifies that the proposed or final rule will not have ``a significant

economic impact on a substantial number of small entities,'' and

includes the factual basis for such certification. Pursuant to section

603 of the RFA, the Commission has prepared an Initial Regulatory

Flexibility Analysis (IRFA) of the possible significant economic impact

on small entities by the policies and actions considered in this

Further Notice. The text of the IRFA is set forth. Written public

comments are requested on this IRFA. Comments must be identified as

responses to the IRFA and must be filed by the deadlines for comments

provided. The Commission will send a copy of the Further Notice,

including the IRFA, to the Chief Counsel for Advocacy of the Small

Business Administration. In addition, summaries of the Further Notice

and IRFA will be published in the Federal Register.

IX. Ordering Clauses

127. Accordingly, it is ordered that, pursuant to the authority

contained in sections 1-4, 201-205, 214(e), and 254 of the

Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-205,

214(e), and 254, this Further Notice of Proposed Rulemaking is hereby

adopted and comments are requested as described.

128. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Further Notice of Proposed Rulemaking, including the Initial Regulatory

Flexibility Act Analysis, to the Chief Counsel for Advocacy of the

Small Business Administration.

List of Subjects in 47 CFR Part 54

Universal service.

Federal Communications Commission.

Shirley Suggs,

Chief, Publication Branch.

[FR Doc. 99-25479 Filed 9-29-99; 8:45 am]

BILLING CODE 6712-01-P