02-15840. Multi-Association Group (MAG) Plan for Regulation of Interstate Services of Non-Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers; Federal-State Joint Board on Universal Service

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Commission waives, on its own motion, the requirement that carriers file annual certifications on June 30, 2002, in order to receive Interstate Common Line Support (ICLS). The Commission finds that this requirement is unnecessary because carriers have already filed such certifications on April 18, 2002, for the ICLS funding year beginning July 1, 2002. The Commission also amends its rules to permit adjustments to Long Term Support (LTS) to reflect projected revenues of carriers that participate in the National Exchange Carrier Association (NECA) common line pool. This amendment conforms the rules governing the calculation of LTS to the Commission's intent in the MAG Order, ensures appropriate LTS funding levels, and will enable NECA to file common line tariffs that comply with the Commission's rules.

DATES:

Effective June 24, 2002.

FOR FURTHER INFORMATION CONTACT:

Theodore Burmeister, Attorney, Telecommunications Access Policy Division, Wireline Competition Bureau, [phone].

SUPPLEMENTARY INFORMATION:

This is a summary of a Commission's Order and Second Order on Reconsideration in CC Docket Nos. 00-256 and 96-45 released on June 13, 2002. 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.

I. Introduction

1. In this Order we waive, on our own motion, the requirement that carriers file annual certifications on June 30, 2002, in order to receive Interstate Common Line Support (ICLS). We find that this requirement is unnecessary because carriers have already filed such certifications on April 18, 2002, for the ICLS funding year beginning July 1, 2002. We also amend our rules to permit adjustments to Long Term Support (LTS) to reflect projected revenues of carriers that participate in the National Exchange Carrier Association (NECA) common line pool. This amendment conforms the rules governing calculation of LTS to the Commission's intent in the MAG Order, 66 FR 59719, November 30, 2001, ensures appropriate LTS funding levels, and will enable NECA to file common line tariffs that comply with part 69 of the Commission's rules.

II. Waiver of the June 30, 2002, Filing Requirement

A. Discussion

2. We waive, on our own motion, the requirement that carriers file an annual certification on June 30, 2002. The Commission may exercise its discretion to waive a rule where special circumstances make strict compliance with the rule inconsistent with the public interest. We find that special circumstances exist here to warrant a waiver. Generally, the requirement that carriers file a certification on June 30 of each year serves the public interest by ensuring that carriers use ICLS only for the “provision, maintenance, and upgrading of facilities and services for which the support is intended,” in accordance with section 254(e). In the initial ICLS funding year, however, the June 30 filing requirement merely duplicates the earlier filing required on April 18, 2002, which covers the same certification period. The duplicative filing requirement is therefore unnecessary. We therefore conclude that special circumstances warrant a waiver of the June 30, 2002 filing requirement.

III. Long Term Support Rules

A. Discussion

3. On our own motion, we amend our rules to permit LTS to be adjusted so that it does not exceed the difference between each carrier's projected common line revenue requirement and its projected revenues from SLCs, other common line end-user charges, and transitional CCL charges. This amendment conforms the rules governing the calculation of LTS to our intent in the MAG Order, ensures appropriate LTS funding levels, and will enable NECA to file common line tariffs that comply with our rules.

4. Amendment of our LTS rule is necessary to fulfill our goals in reforming the interstate universal service support mechanisms and access rate structure in the MAG Order. The current LTS rule does not take into account the increased SLC revenues resulting from the reforms adopted in the MAG Order. This makes no difference for the vast majority of carriers, whose common line revenue requirements will exceed their revenues from SLCs, other end-user common line charges, transitional CCL charges, and LTS. For some carriers, however, the reforms adopted in the MAG Order reduced the need for high-cost support for interstate loop costs below the amount of LTS they currently receive. Failure to adjust LTS for these carriers would lead to earnings in excess of their common line revenue requirements. We retained LTS in the MAG Order solely for the purpose of stabilizing membership in the common line pool during the transition to a more efficient rate structure. We did not intend to negate our cost recovery rules for rate-of-return carriers and permit the carriers to recover more than their common line revenue requirements, nor did we intend that any carrier would have a “negative” ICLS amount. Accordingly, we conclude that amendment of the LTS rule is necessary.

5. We also find that this amendment is necessary to ensure the appropriate LTS funding levels. This amendment will prevent waste of universal service support by ensuring that LTS is not distributed to any rate-of-return carrier except to the extent that it is required to maintain the affordability of the carrier's interstate common line services. We conclude that the potential alternatives to adjusting LTS would not serve the public interest. For example, we decline to require NECA to reduce its tariffed SLC or transitional CCL rates to offset the excess LTS payments. Reducing SLCs would use universal service funds to subsidize rates below the caps the Commission has set. Reducing the transitional CCL rate would undermine the decision to use a transitional CCL charge to gradually implement the reforms adopted in the MAG Order.

6. Finally, this amendment will enable NECA to file common line tariffs that comply with our part 69 rules. Rate-of-return carriers, including members of the common line pool, are limited to recovery of their costs plus a prescribed rate of return. The common line pool would over earn if NECA filed tariffs for SLCs and CCL charges that reflect the aggregate cost and revenue data included in the April 18 projected ICLS filing, without adjustment of LTS. If NECA files a tariff that on its face permits excessive recovery, any ratepayer—end users or interexchange carriers subject to CCL charges-could request that the Commission suspend the tariff to prevent over-recovery.

IV. Procedural Matters

A. Supplemental Final Regulatory Flexibility Analysis

7. In compliance with the Regulatory Flexibility Act (RFA), this Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) supplements the Final Regulatory Flexibility Analysis (FRFA) included in the MAG Order, to the extent that changes to that Order adopted here on reconsideration require changes in the conclusions reached in the FRFA. We note that we do not find that this Order on Reconsideration creates a significant economic impact on small entities. We could therefore meet our obligations under the RFA by certifying that there is no significant economic impact on small entities, rather than including this SFRFA. We nonetheless include this Supplemental FRFA to demonstrate that we have considered the impact of our action on small entities in adopting this Order on Reconsideration.

1. Need For, and Objective of, the Second Order on Reconsideration

8. This Second Order on Reconsideration is necessary to conform the rules governing the calculation of LTS to our intent in the MAG Order, ensure appropriate LTS funding levels, and enable NECA to file common line tariffs that comply with our rules. Section 254 of the Communications Act of 1934, as amended by the 1996 Act, requires the Commission to promulgate rules to preserve and advance universal service support. Pursuant to that mandate, the Commission, in the MAG Order, adopted reforms to the interstate access rate structure and universal service support mechanisms for rate-of-return carriers. In making these reforms, the Commission created ICLS to provide explicit universal service support for the interstate common line, but left the existing interstate support mechanism, LTS, unchanged for the July 1, 2002-June 30, 2003, funding year. We now conclude that it is necessary to amend LTS to permit reductions of LTS to certain carriers in certain circumstances. As described, this is necessary in order to permit NECA to file a tariff on behalf pooling carriers that does not result in revenues in excess of their authorized rate-of-return. This is consistent with our intent in adopting the reforms in the MAG Order.

2. Summary of Significant Issues Raised by Public Comments

9. No petitions were submitted in response to the previous FRFA.

3. Description and Estimate of the Number of Small Entities to Which This Order on Reconsideration Will Apply

10. In the previous FRFA at paragraphs 289-300 of the MAG Order, we described and estimated the number of small entities that would be affected by the new universal service rules. These included local exchange carriers, interexchange carriers, competitive service providers, and providers of wireless telephony, rural radiotelephone service, fixed microwave services, and 39 GHz service. The rule amendment adopted herein may apply to the same entities affected by the rules adopted in that order. We therefore incorporate by reference paragraphs 289-300 of the MAG Order.

4. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

11. The rule amendment adopted in this Second Order on Reconsideration contains no new reporting, recordkeeping, or other compliance requirement.

5. Steps Taken To Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered

12. As noted, the amendment to our rules adopted in this Order on Reconsideration does not have a significant impact on small entities. We take action to reaffirm the ability of rate-of-return carriers to recover their costs plus the Commission-approved rate of return on investment. Although the amendment does limit the carriers' ability to recover its revenue from a particular source, LTS, it has no net impact on their overall ability to recover their costs and rate return.

13. We did consider other alternatives that would have limited carriers revenue recovery from other sources, but concluded that reducing the tariffed SLC rates or transitional CCL charge rates imposed by these carriers would not be in the public interest. Reducing SLCs would use universal service funds to subsidize rates below the caps the Commission has set. Reducing the transitional CCL rate would undermine the decision to use a transitional CCL charge to gradually implement the reforms adopted in the MAG Order.

6. Report to Congress

14. The Commission will send a copy of this Second Order on Reconsideration, including this Supplemental FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of this Second Order on Reconsideration, including the Supplemental FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the Second Order on Reconsideration and Supplemental FRFA (or summaries thereof) will also be published in the Federal Register. See 5 U.S.C. 604(b).

B. Paperwork Reduction Act

15. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 (PRA) and found to impose no new or modified reporting or recordkeeping requirements or burdens to the public.

V. Ordering Clauses

16. Pursuant to the authority contained in sections 1-4, 10, 201-02, and 254 of the Communications Act of 1934 as amended, 47 U.S.C. 1-4, 10, 201-02, and 254, and §§ 1.3 and 1.103 of the Commission's rules, this Order and Second Order on Reconsideration is adopted.

17. Section 54.904(d) is waived with respect to the filing required pursuant to that rule on June 30, 2002.

18. Section 54.303(b) of the Commission's rules is amended, effective June 24, 2002. Good cause exists to make this effective June 24, 2002. The actions we take in this Order on Reconsideration are intended to facilitate compliance other Commission rules. It is necessary that the amendment take effect as soon as possible in order to best fulfill this purpose.

19. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Second Order on Reconsideration, including the Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects 47 CFR Part 54

• Reporting and recordkeeping requirements
• Telecommunications
• Telephone

Federal Communications Commission.

Marlene Dortch,

Secretary.

Rule Change

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 54 as follows:

PART 54—UNIVERSAL SERVICE

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

Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless otherwise noted.

2. Section 54.303 is amended by adding paragraph (b)(5) to read as follows:

§ 54.303

Long term support.

* * * * *

(b) * * *

(5)(i) Beginning July 1, 2002, each carrier will be eligible to receive LTS equal to the lesser of:

(A) The LTS for which the carrier would be eligible pursuant to paragraph (b)(4) of this section, or

(B) Its common line revenue requirement as calculated in accordance with part 69 of this chapter, minus:

(1) The study area revenues obtained from end-user common line charges at their allowable maximum as determined by §§ 69.104(n) and 69.104(o) of this chapter;

(2) The carrier common line charge revenues to be phased out pursuant to § 69.105 of this chapter;

(3) The special access surcharges pursuant to § 69.114 of this chapter; and

(4) The line port costs in excess of basic analog service pursuant to § 69.130 of this chapter.

(ii) Under no circumstance shall a carrier have LTS that is less than zero.

(iii) In calculating an LTS amount pursuant to paragraph (b)(5)(i)(B) of this section, the Administrator shall use data filed pursuant to § 54.903 of this chapter.