FCC Issues Clarification of Universal Service Fund and Intercarrier Compensation Order

February 7, 2012

On Friday, February 3, 2012, the US Federal Communications Commission's Wireline Competition Bureau ("WCB") issued an order (the "Order") revising and clarifying issues related to the Commission's recent universal service fund ("USF") and intercarrier compensation ("ICC") reform order (the "USF/ICC Reform Order").

View the full text of the WCB's Order (PDF)

This Order also modifies certain rules associated with the recently adopted carrier reporting requirements. These modifications come as over two dozen petitions for reconsideration are considered by the Commission, which will likely yield additional rule changes.

Universal Service Rule Modifications

• The WCB clarified the following issues relating to the newly imposed reporting requirements under section 54.313 of the Commission's rules. Specifically, the WCB made the following modifications or clarifications to the Commissions rules regarding filing requirements:
• ETCs previously designated by the Commission are required to file a progress report on their existing five-year build-out plans on file with the Commission on April 1, 2012 rather than October 1, 2012. Order, ¶ 6.
• ETCs that have been designated by a state commission should continue to comply with state requirements, if any, regarding service improvement plans. If a state commission previously required an ETC to file a service quality improvement plan or annual updates with the state commission then the ETC should do so, but that ETC is not required to send a copy to the Commission. Id., ¶ 7.
• ETCs that have been designated by the Commission are still required to provide information regarding outages, unfulfilled service requests, and complaints per section 54.313(a)(2)-(6). However, this year the reports will be due April 1 rather than October 1. Beginning April 1, 2013, those ETCs must separately file information for broadband services. Id., ¶ 9.
• If state-designated ETCs are subject to similar reporting requirements at the state level, they should file a copy of any relevant information provided to the state with the FCC in 2012. Id., ¶ 10.
• ETCs required to certify that they have complied with the Tribal engagement obligations will only be required to do so for 2012 after the Commission's Office of Native Affairs and Policy ("ONAP) provides engagement process guidance and providing reporting on such engagement in the carrier's April 1, 2013 filing and annually thereafter. Id., ¶ 11.
• High-cost support recipients will not be required to provide ownership information until the FCC requires the necessary Paperwork Reduction Act ("PRA") approval for the requirement, at which time the FCC will provide sufficient time for ETCs to comply with that requirements. Id., ¶ 12.
• The WCB will not enforce the April 1, 2012 filing deadline for privately-held rate-of-return carriers to provide financial reporting statements if the necessary Paperwork Reduction Act analysis has not been completed. The Bureau will provide sufficient time for affected companies to comply once PRA approval is obtained. Id., ¶ 13.
• The WCB also modified section 54.313(f)(2) to permit rate-of-return carriers that receive loans from the Rural Utilities service to file their annual RUS reports with the Commission in lieu of an audited financial statement. Id., ¶ 16.

The WCB also eliminated certain rules that if found to be obsolete in light of the October USF/ICC Reform Order. First, the WCB clarified that, because the identical support rule was eliminated by the USF/ICC Reform Order, section 54.903(a)(2), which required some ILECs to file quarterly line counts solely for the purpose of calculating support under the identical support rule, was also eliminated. Id., ¶ 17. The WCB also deleted rule 54.301(f), which required USAC to file a proposed formula for calculating LSS for average schedule companies in the next year as obsolete under the new USF/ICC regime. Id., ¶ 18.

The WCB issued a clarification of the "rate floor" benchmark established by the Commission in October. The WCB clarified how the offsets will apply to frozen high-cost support provided pursuant to Phase I of the Connect America Fund ("CAF"). The Order explains that for the purposes of calculating certain interstate rates, frozen CAF Phase I support remains attributable to the interstate jurisdiction to the extent that the frozen CAF Phase I support replaces Interstate Access Support. Id., ¶ 3.

The WCB also further explained the operation of the $3000 per-line annual support cap for competitive ETCs. Under the modified rules, the CETC's support limit will be calculated based upon the competitive ETCs at the incumbent's study area level. For example, if a competitive ETC receives an average of $2000 per loop per year serving multiple incumbent study areas, but it receives $3500 per loop per year in one of the study areas, the cap will constrain the competitive ETC's support in that study area. (¶ 15) In addition, the WCB eliminated a rule, 47 C.F.R. 54.315, which allowed for disaggregation of support within a study area since disaggregation is no longer necessary in light of the elimination the identical support rule. Id., ¶ 16.

Finally, the WCB issued clarification regarding the operation of the Commission's newly-created Mobility Fund and its "access to spectrum" requirement. The WCB issued guidance that a party would be deemed to have access to spectrum and thereby qualify for participation in the Mobility Fund Phase I even if access to that spectrum is contingent upon the party obtaining support via the auction. Id., ¶ 19. It should be noted, however, that an applicant must have obtained any Commission approvals necessary for spectrum access prior to submitting an application to participate in the competitive bidding process.

Intercarrier Compensation Updates

• The WCB also issued several modifications clarifications to the new ICC rules. Specifically:
• The WCB modified and corrected Section 51.917(d)(1)(i) of the Commission's Rules to correctly calculate a rate-of-return carrier's right to intercarrier compensation recovery opportunity under the new access replacement mechanism. Id., ¶ 20.
• The WCB asserted that an ILEC's data filing requirements for compliance monitoring and for ARC justification will be as consistent as possible, and will be in the same or similar format in order to reduce or eliminate burdens associated with filing. Id., ¶ 21.
• The WCB clarified that the prospective VoIP-PSTN framework adopted in the USF/ICC Reform Order applies to the interstate rate as well as the interstate structure, including both per-minute (usage sensitive) and flat-rated (dedicated) charges. Id., ¶ 22.
• The WCB clarified that the adoption of default percentage of VoIP traffic is just one means by which a carrier could identify the amount of traffic subject to the VoIP-PSTN framework, and stated that carriers are free to utilize traffic studies, or other reasonable and auditable metrics to determine the percentage of traffic subject to the VoIP-PSTN framework. Id., ¶ 23.
• The WCB clarified that when a carrier's tariffed intrastate access rate is lower than the carrier's corresponding interstate access rate, that carrier may not, in its intrastate tariff, include a rate for toll VoIP-PSTN traffic that is higher than its intrastate access rate. Id., ¶ 24.
• The WCB reaffirmed its previous rulings regarding access charges and clarified that any arrangement between a LEC and another party that results in the generation of switched access traffic to the LEC and provides for the net payment of consideration of any kind to the other party is considered to be "access stimulation" and subject to the FCC's rules on that practice. Id., ¶¶ 25-27.
• The WCB stated that in adopting its interim default rule allocating responsibility for transport costs applicable to non-access traffic exchanged between CMRS providers and rural, rate of return regulated LECs, the Commission did not modify the existing rules governing points of interconnection between CMRS providers and price cap carriers. Id., ¶ 28.