83_FR_23019 83 FR 22923 - Regulation of Business Data Services for Rate-of-Return Local Exchange Carriers

83 FR 22923 - Regulation of Business Data Services for Rate-of-Return Local Exchange Carriers

FEDERAL COMMUNICATIONS COMMISSION

Federal Register Volume 83, Issue 96 (May 17, 2018)

Page Range22923-22938
FR Document2018-10338

In this document, the Commission proposes to allow rate-of- return carriers receiving universal service support under the Alternative Connect America Cost Model (A-CAM) to voluntarily migrate their lower speed circuit-based business data service (BDS) offerings to incentive regulation. It also seeks comment on whether to remove ex ante pricing regulation from these carriers' higher speed BDS offerings and on whether further regulatory relief is warranted for these carriers' lower-speed circuit-based BDS in areas deemed competitive by a potential competitive market test. Additionally, the document proposes to allow other rate-of-return carriers receiving fixed support to opt into the same incentive regulation proposed for A-CAM carriers. Finally, the Commission seeks comment on proposed rule changes that would implement the proposals made in this document, including corrections to inaccuracies contained in its current rules.

Federal Register, Volume 83 Issue 96 (Thursday, May 17, 2018)
[Federal Register Volume 83, Number 96 (Thursday, May 17, 2018)]
[Proposed Rules]
[Pages 22923-22938]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-10338]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 32, 51, 61, and 69

[WC Docket No. 17-144; FCC 18-46]


Regulation of Business Data Services for Rate-of-Return Local 
Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission proposes to allow rate-of-
return carriers receiving universal service support under the 
Alternative Connect America Cost Model (A-CAM) to voluntarily migrate 
their lower speed circuit-based business data service (BDS) offerings 
to incentive regulation. It also seeks comment on whether to remove ex 
ante pricing regulation from these carriers' higher speed BDS offerings 
and on whether further regulatory relief is warranted for these 
carriers' lower-speed circuit-based BDS in areas deemed competitive by 
a potential competitive market test. Additionally, the document 
proposes to allow other rate-of-return carriers receiving fixed support 
to opt into the same incentive regulation proposed for A-CAM carriers. 
Finally, the Commission seeks comment on proposed rule changes that 
would implement the proposals made in this document, including 
corrections to inaccuracies contained in its current rules.

DATES: Comments are due on or before June 18, 2018; reply comments are 
due on or before July 2, 2018. Parties that believe this document may 
contain new or modified information collection requirements may submit 
written Paperwork Reduction Act (PRA) comments to the Office of 
Management and Budget (OMB), and other interested parties on or before 
July 16, 2018.

ADDRESSES: You may submit comments, identified by WC Docket No. 17-144, 
by any of the following methods:
     Federal Communications Commission's Website: http://apps.fcc.gov/ecfs//. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 888-835-5322.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Justin Faulb, Wireline Competition 
Bureau, Pricing Policy Division at 202-418-1589 or via email at 
[email protected].
    For additional information concerning any potential information 
collection requirements contained in this document, send an email to 
[email protected] or contact Nicole Ongele at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), WC Docket No. 17-144; FCC 18-46, adopted 
on April 17, 2018 and released on April 18, 2018. The full-text of this 
document may be found at the following internet address: https://apps.fcc.gov/edocs_public/attachmatch/FCC-18-46A1.doc.
    Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document in Dockets WC 17-144. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS).
     Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: http://apps.fcc.gov/ecfs/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. If more than one docket 
or rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary: 
Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Drive, 
Annapolis Junction, MD 20701.
     U.S. Postal Service first-class, Express, and Priority 
mail must be

[[Page 22924]]

addressed to 445 12th Street SW, Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (TTY).

Synopsis

I. Introduction

    1. The Commission has long recognized that, because it promotes 
efficiency and reduces regulatory burdens, incentive regulation is 
preferable to rate-of-return regulation. Therefore, in a series of 
steps over the last three decades, the Commission provided incentives 
to encourage incumbent local exchange carriers (LECs) to move from 
rate-of-return regulation to incentive regulation. In this NPRM, we 
take more steps along that path by proposing to allow rate-of-return 
carriers that receive universal service support under the Alternative 
Connect America Cost Model (A-CAM) to voluntarily migrate their lower 
speed business data services (BDS) offerings to incentive regulation. 
Because A-CAM carriers that elect to move away from rate-of-return 
regulation for their BDS offerings (electing A-CAM carriers) will no 
longer need to provide cost-based justification for their rates, we 
propose to relieve them of burdensome cost-based pricing regulation, 
including the obligation to conduct cost studies for purposes of 
ratemaking. At the same time, because we recognize that ex ante pricing 
regulation is of limited use--and often harmful--in a dynamic and 
increasingly competitive market, we seek comment on identifying areas 
served by electing A-CAM carriers that are sufficiently competitive 
that their lower speed BDS offerings should be relieved of ex ante 
pricing regulation, and we seek comment on whether to relieve electing 
A-CAM carriers' higher speed BDS offerings from ex ante pricing 
regulation. And, because there are other rate-of-return carriers that 
receive model-based or fixed support, and would benefit from less 
burdensome regulation, we propose to provide the same relief to those 
carriers as we propose to provide to A-CAM carriers. Taken together we 
expect these actions will spur entry, innovation, and competition in 
the affected BDS markets.

II. Background

    2. We start from the premise that incentive regulation encourages 
carriers to be efficient by granting them at least a share of profits 
obtained from cost reductions and allowing them to more aggressively 
serve consumers (including by reducing prices) in the face of 
competitive pressures. By contrast, rate-of-return regulation provides 
incentives for firms to ``pad'' their rate base and to make 
inefficiently high use of capital inputs. Additionally, rate-of-return 
regulation requires carriers to account for the costs they incur in 
providing service to justify their rates and universal service support 
and thus unavoidably involves substantial regulatory burdens.
    3. In 1990, the Commission began the process of shifting away from 
cost-based regulation by adopting price cap rules that govern how the 
largest incumbent LECs establish their interstate access charges. Price 
cap regulation was intended to avoid the counterproductive incentives 
of rate-of-return regulation in part by divorcing the annual rate 
adjustments from the actual costs of each individual LEC, and in part 
by adjusting the cap based on actual industry productivity experience. 
In more recent years, a number of midsize carriers have voluntarily 
converted from rate-of-return to price cap regulation.
    4. In 2011, as part of comprehensive reform and modernization of 
the universal service and intercarrier compensation systems, the 
Commission adopted rate caps for switched access services for rate-of-
return carriers, thereby removing switched access services from rate-
of-return regulation. In 2016, the Commission gave rate-of-return 
carriers the option of receiving forward looking model-based support 
from the high-cost universal service support program, the A-CAM, 
designed to estimate the cost of operating and maintaining an efficient 
modern network. More than 200 carriers opted to receive A-CAM support 
which eliminated the need for those carriers to conduct cost studies to 
quantify the amount of high-cost support they receive. The Commission 
observed that ``the election of model-based support places those 
carriers in a different regulatory paradigm'' and that ``[e]ffectively, 
the carriers that choose to take the voluntary path to the model are 
electing incentive regulation for common line offerings.'' As a result, 
rate-of-return carriers that elected the A-CAM support option are 
currently subject to rate-of-return regulation and the attendant 
requirement to conduct cost studies only for their BDS offerings.
    5. In 2017, ITTA and USTelecom (together, Petitioners) filed a 
joint petition requesting that the Commission allow A-CAM carriers and 
other rate-of-return carriers that receive model-based support to opt 
into the regulatory framework for BDS that the Commission recently 
adopted for price cap carriers. The Petition explains that for such 
carriers, ``continued compliance with rate-o[f]-return-based rate 
regulation . . . entails significant costs.'' It further explains that 
because carriers that receive universal service support based on a cost 
model no longer have cost-based switched access charges, ``the need to 
perform annual cost studies now applies only with respect to BDS.'' It 
also claims that rate-of-return regulation deters investment in 
networks and harms competition. The Wireline Competition Bureau 
(Bureau) sought and received comment on the Petition. A number of 
commenters support the Petition, arguing that cost savings and lighter 
touch pricing regulation of model-based carriers' BDS would spur 
competition, incentivize investment, benefit consumers, and eliminate 
unnecessary administrative burdens. Other commenters expressed 
concerns, including whether sufficient competition exists in A-CAM 
study areas to justify reduced regulation.
    6. In addition to facilitating rate-of-return carriers' move to 
incentive regulation, the Commission has taken major steps to reduce 
regulation for carriers that face competition. Given the inherent 
inefficiencies of regulation, the Commission relies on competition to 
the extent possible to ensure carriers' rates and practices are just 
and reasonable. In 1999, the Commission granted pricing flexibility to 
price cap carriers that provided service in areas where carriers could 
demonstrate threshold levels of deployment by competitive providers. 
The Pricing Flexibility Order adopted competitive triggers designed to 
measure the extent to which competitors had made irreversible, sunk 
investment in collocation and transport facilities. The Commission gave 
price cap carriers that satisfied those triggers the flexibility to 
offer BDS at unregulated rates through generally available and 
individually negotiated tariffs. In addition, starting in 2007, upon 
finding that competitive providers for BDS services existed in the 
relevant price cap areas, the Commission granted a number of price cap 
incumbent LECs forbearance from dominant carrier regulation, including 
tariffing and price cap regulation, for their newer packet-based 
broadband services. These forbearance orders concluded that a number of 
competing providers exist for broadband BDS. They also concluded that 
forbearance from burdensome regulations when competition exists

[[Page 22925]]

increases the amount of competition in the marketplace, ensuring that 
rates and practices for services are just, reasonable, and not 
unreasonably discriminatory.
    7. The BDS Order the Commission adopted last year took another step 
toward reducing regulation in response to the growth of competition. In 
that order, the Commission found that reducing government intervention 
and allowing market forces to continue working would further spur 
entry, innovation, and competition in BDS markets served by price cap 
carriers. The Commission applied ex ante rate regulation ``only where 
competition is expected to materially fail to ensure just and 
reasonable rates'' and stated its preference to rely ``on competition 
rather than regulation, wherever purchasers can realistically turn to a 
supplier beyond the incumbent LEC.'' Based on the record before it, the 
Commission found that, on balance, competition was sufficient to ensure 
just and reasonable rates for packet-based business data services, TDM 
transport services, and higher bandwidth (i.e. above DS3) TDM services 
(including OCn services) in areas served by price cap carriers. It also 
adopted a competitive market test for TDM end user channel terminations 
in price cap areas and refrained from ex ante pricing regulation of 
those services in areas deemed competitive by that test.

III. Path Forward For Lower Speed Services

    8. We seek comment on a regulatory framework that would provide 
electing A-CAM carriers a path to allow a move from rate-of-return 
regulation to a more efficient system of incentive regulation for their 
TDM transport and end user channel terminations at speeds at or below a 
DS3. In so doing, we propose to require that each A-CAM carrier's 
decision about whether to move their BDS offerings out of rate-of-
return regulation be made on an all-or-nothing basis for all of an A-
CAM carrier's study areas that receive A-CAM support. We also invite 
comment on what would be an appropriate market analysis for these lower 
speed services and on a competitive market test that would allow us to 
distinguish between markets that are sufficiently competitive so as not 
to warrant the burdens of ex ante pricing regulation from those that 
are not. Although the sections below focus on A-CAM carriers, because 
we are proposing to allow other rate-of-return carriers that receive 
model-based or other types of fixed support the opportunity to elect 
the same or similar lighter-touch BDS regulation that we propose for A-
CAM carriers, we also seek comment on providing a path forward for 
regulating such carriers' BDS offerings. As commenters respond to the 
requests for comment below, we encourage discussion of how such a path 
forward could work for other such rate-of-return carriers.

A. Incentive Regulation for Lower Capacity TDM Transport and End User 
Channel Termination Services

    9. We propose to allow electing A-CAM carriers to convert their 
lower capacity TDM BDS offerings to an incentive regulatory approach 
modelled on the rules the Commission adopted for price cap carriers' 
lower speed BDS in noncompetitive areas, while still allowing such 
carriers to be subject to the switched access rate transition and the 
Eligible Recovery rules applicable to rate-of-return carriers. We 
propose to allow conversion to incentive regulation for TDM transport 
and end user channel termination services offered at speeds at or below 
a DS3, as well as other generally lower speed non-packet-based services 
that are commonly considered special access services. Are there other 
special access offerings by rate-of-return carriers that we should 
include in the incentive regulation option for A-CAM carriers? For 
example, are there any telecommunications service components associated 
with either residential digital subscriber line services or dedicated 
internet access services that would qualify as special access services 
that we should also allow to migrate to incentive regulation? We 
anticipate that this approach will encourage competition for BDS in 
areas served by electing A-CAM carriers and reduce unnecessary 
regulatory burdens on electing A-CAM carriers. We seek comments on this 
proposal, including on the benefits and costs of this approach.
    10. The Commission has consistently acknowledged that incentive 
regulation can foster appropriate incentives for carriers to be 
efficient and to innovate. Under price cap regulation, as opposed to 
cost-based regulation, carriers have the incentive to become more 
efficient, to reduce costs, and to innovate as a means of increasing 
their profits. Moreover, an appropriate X-factor and periodic review by 
the Commission can ensure that carriers share some or all of these 
efficiencies with their customers. We invite parties to identify with 
specificity any short-comings in the proposal and to suggest 
alternatives that could achieve the objectives more efficiently. Given 
the well-recognized benefits of incentive regulation, we also seek 
comment on whether we should make this election mandatory for all A-CAM 
carriers.
1. Relieving Electing A-CAM Carriers of Rate-of-Return Regulation for 
Their Lower Speed TDM BDS Offerings
    11. We propose to relieve electing A-CAM carriers of a variety of 
regulatory obligations that pertain to rate-of-return regulation, 
including the obligation to perform cost studies. Rate-of-return 
carriers are required by our rules to perform relatively burdensome 
cost studies to support their rate development. Petitioners and other 
commenters identify elimination of cost studies as a primary benefit of 
allowing A-CAM carriers to elect incentive regulation. We invite 
parties to quantify the burdens of preparing cost studies (including 
costs and/or hours of labor) and comment on whether cost studies impose 
any special burdens on smaller carriers. We also seek comment on 
whether data from A-CAM carriers' cost studies are necessary in the 
performance of any Commission regulatory function. If so, will the 
benefits of the data collected from electing A-CAM carriers' cost 
studies outweigh the burden of requiring them to continue to provide 
that data when they are no longer offering cost-based services? Are 
there other, less burdensome ways of collecting the relevant data from 
electing A-CAM carriers that we should explore? Are there other issues 
we need to address before relieving A-CAM carriers of the burden of 
cost studies? If so, how shall we address them?
    12. We also propose to allow electing A-CAM carriers pricing 
flexibility for their lower capacity TDM services similar to that 
granted by the Commission in the BDS Order to price cap carriers in 
their provision of lower capacity TDM services in counties deemed 
noncompetitive by the competitive market test we adopted for price cap 
carriers. We propose to allow electing A-CAM carriers to offer term and 
volume discounts and contract-based services for their TDM transport 
and end user channel termination services offered at speeds at or below 
a DS3. Electing A-CAM carriers would be required to maintain generally 
available tariffed rates subject to incentive regulation for these 
lower speed TDM transport and end user channel terminations, and other 
special access services included in their tariffs. We seek comment on 
these proposals.
    13. We also propose to allow electing A-CAM carriers to remain in 
the NECA traffic-sensitive tariff for switched access services, and to 
continue to be subject to the switched access rate cap provisions of 
section 51.909 and the

[[Page 22926]]

Eligible Recovery rules in section 51.917 of the Commission's rules. We 
propose to require electing A-CAM carriers to remove their special 
access services from the NECA traffic-sensitive tariff. We seek comment 
on these proposals.
    14. We recognize that our proposed approach for electing A-CAM 
carriers treats TDM transport differently than the BDS Order does for 
price cap carriers. While the Commission found TDM transport to be 
competitive in price cap areas generally, here we propose to allow 
electing A-CAM carriers to convert lower speed TDM transport services 
to incentive regulation but not to immediately eliminate ex ante 
pricing regulation for them. We propose this different approach given 
that competition for such services may not be as robust in the less 
dense, more rural areas that A-CAM carriers typically serve. We seek 
comment on this aspect of our proposal, and on what data exist to 
confirm or invalidate our assumption. The Commission observed in the 
BDS Order that competitive transport services are typically deployed at 
locations where sufficient demand is aggregated to enable a competitor 
to justify investment. To what extent is there sufficient aggregated 
demand in A-CAM areas to justify the deployment of competitive 
transport? Are there instances where demand for TDM transport services 
may be increasing, creating the precondition for competitive entry in 
the future? Alternatively, has the overall decline in demand for TDM 
services also affected the demand for lower speed TDM transport 
services in A-CAM areas? Finally, we seek comment on allowing 
additional regulatory relief for A-CAM carriers' TDM transport offered 
at speeds at or below a DS3 in areas deemed competitive by a 
competitive market test we seek comment on below.
    15. We do not propose to transition electing A-CAM carriers to 
incentive regulation for switched access services. The transition 
provisions for switched access rates and Eligible Recovery rules for 
rate-of-return carriers adopted by the USF/ICC Transformation Order are 
well established, have been upheld on appeal, and have been partially 
implemented; disrupting these transitions would likely impose 
additional costs and increase uncertainty, deterring investment and 
deployment. We also seek comment on the benefits and costs of our 
proposed approach. The Petition sought an ``exception'' to Sec.  61.41 
of the Commission's rules (the so-called ``all or nothing'' rule), 
which requires all of a price cap carrier's study areas and rates, 
including those of affiliates and carriers it purchases or merges with, 
to be subject to price cap regulation. We propose to amend Sec.  61.41 
to create an exception for the alternative regulatory structure we 
propose in this NPRM, and we seek comment on this proposal. Are there 
any other rules we should consider waiving or amending in the context 
of this proceeding?
2. Implementing Optional Incentive Regulation for Lower Capacity TDM 
Services
    16. In this section, we make specific proposals regarding the terms 
of the incentive regulation we propose to adopt for electing A-CAM 
carriers and seek comment on these proposals.
a. Election
    17. We propose to require carriers that elect to move off rate-of-
return regulation for their BDS services to move to incentive 
regulation at the holding company level for study areas in all states 
that elected to receive A-CAM support rather than electing on an 
individual carrier or study area basis, as proposed by Petitioners. 
Requiring election at the holding company level will ensure cost 
savings from the elimination of annual cost studies to be realized by 
all affiliated carriers electing A-CAM support. Carriers have already 
had the opportunity to elect between A-CAM and cost-based support at a 
state-wide level. Allowing A-CAM carriers to elect regulatory treatment 
at a more disaggregated level would appear to be inconsistent with the 
underlying premise of price caps, which assumed a broad representation 
of carrier operations to provide a basis for establishing an industry-
wide productivity factor. Currently, there are 262 A-CAM companies when 
calculated at the state level and 207 when calculated at the holding 
company level. We invite parties to comment on the proposed level of 
election. Parties believing the proposed holding company level is too 
high should explain why a more disaggregated level would be in the 
public interest. Any explanation should include concrete examples of 
why the proposed level would preclude a significant number of A-CAM 
carriers from electing incentive regulation. Parties should address 
whether other aspects of the proposal could be modified to make the 
proposed level of election more acceptable.
    18. We propose to make incentive regulation for electing A-CAM 
carriers effective on the July 1st following adoption of an order in 
this proceeding, which is the deadline for the annual access tariff 
filing. Using July 1st will simplify the tariffing process for 
implementing any change and is consistent with the price cap rules' use 
of the prior calendar-year demand data for their price cap 
calculations. We invite parties to comment on this proposal, and to 
suggest other timing options that may work, identifying the benefits 
and drawbacks of such proposals. The proposals should address the 
periods for determining cost and demand for electing A-CAM carriers. We 
also invite parties to comment on whether we should allow a one-time 
opportunity to elect, or whether additional election opportunities 
should be allowed. If more than one opportunity to elect is offered, 
what should the timing be for any additional election opportunities?
    19. We have recently proposed making a second A-CAM offer. In the 
event that additional rate-of-return carriers become A-CAM carriers, we 
propose that they may elect to adopt incentive regulation at the next 
annual tariff filing date that follows their election. We also propose 
to allow the new electing A-CAM carriers to adopt the other lighter 
touch regulatory options that are available to electing A-CAM carriers 
at that time. We invite parties to comment on these proposals.
b. Initial Rate Levels
    20. We propose to allow electing A-CAM carriers that currently file 
their own tariffed rates for BDS offerings to use their existing rates 
to set their initial BDS rates under incentive regulation. The 
Commission used this method when allowing rate-of-return carriers 
filing their own rates to convert to price cap regulation. The demand 
to be used for the incentive regulation calculations would be that of 
the previous calendar year. The carrier would then apply the prescribed 
X-factor and the inflation factor, two variables in the Commission's 
existing formula for the price cap index (PCI), which would result in 
the proposed rates in the first year of incentive regulation, and each 
year thereafter. We invite parties to comment on this proposal. We ask 
that any party disagreeing with this approach submit a detailed 
proposal for setting initial rates, including an explanation of why its 
preferred approach would be equal to or better than the approach we 
propose.
    21. Establishing initial BDS rates for electing A-CAM carriers 
participating in the NECA traffic-sensitive pool is more complicated 
because they are charging a pooled rate, which does not reflect the 
actual costs of the pooling carrier. The NECA pool BDS rates are

[[Page 22927]]

therefore not the proper rates to use as initial BDS rates. We 
therefore propose that each electing A-CAM carrier in the pool 
establish its initial BDS rates by multiplying the NECA pool rate the 
carrier has been charging by a net contribution/recipient factor. Thus, 
an A-CAM carrier with more BDS revenues than the BDS settlements it 
receives from the pool would have its pool rate reduced commensurately. 
The opposite would occur for an electing A-CAM carrier that received 
more BDS settlements than the BDS revenues it produced. The carrier 
would then apply the prescribed X-factor and the inflation factor, 
which would result in the proposed rates in the first year of incentive 
regulation, and each year thereafter. This approach avoids the 
necessity of doing new cost studies for each study area of the electing 
A-CAM carriers. We invite parties to comment on this approach. 
Alternatively, commenters may suggest other approaches, such as doing 
cost studies for the preceding calendar year, or other twelve-month 
period. Parties making such alternative proposals should address the 
manner in which the alternative time period data would be incorporated 
into the incentive regulation calculations.
    22. Are there other approaches we should take in determining how 
electing A-CAM carriers should establish initial BDS rates? Are there 
other adjustments that we should make to our proposed initial rate 
setting process? For example, should the initial rates be lower than 
current rates because of the cost savings electing carriers will 
realize by moving to incentive regulation? If so, how much should be 
shared with consumers and how should such amount be determined? In a 
2012 waiver petition seeking to move from rate-of-return to price cap 
status, FairPoint Communications, Inc., proposed reducing its special 
access rates by a percentage of the anticipated cost savings. We invite 
parties to comment on these issues and to suggest how such amounts 
should be determined, especially if another cost study is to be 
avoided.
c. Special Access Basket, Categories and Subcategories
    23. Consistent with the BDS Order, we propose to retain the special 
access basket, categories and subcategories, and the attendant rules 
governing the allowed annual adjustments. We propose to require each 
electing A-CAM carrier to initialize its PCI for the special access 
basket and associated service band indices (SBIs) at 100 and to use the 
rate adjustment rules for price cap carriers contained in sections 
61.45-48 of our rules, as appropriate, to reflect the prescribed 
productivity factor, the inflation factor, and any required exogenous 
cost adjustment in the PCI, to ensure that the Actual Price Index (API) 
does not exceed the PCI, and that the SBIs for each category or 
subcategory do not exceed their upper limits. The category and sub-
category requirements are designed to limit the degree to which a 
carrier can raise rates in any given year in an effort to avoid anti-
competitive pricing. We invite parties to comment on this proposal. Are 
there other approaches we should take? Are there other categories or 
sub-categories needed for A-CAM carriers that were not necessary for 
price cap carriers? We request that parties recommending that we modify 
the categories or sub-categories explain why such a change would 
improve the functioning of the incentive regulation plan and/or the BDS 
market and produce benefits for consumers.
d. Productivity Factor and Measure of Inflation
    24. Consistent with the BDS Order, we also propose to adopt an X-
factor of two percent to reflect the productivity growth that electing 
A-CAM carriers are likely to experience in the provision of these 
services relative to productivity growth in the overall economy in the 
foreseeable future and to use Gross Domestic Product-Price Index (GDP-
PI) as the measure of inflation that electing A-CAM carriers will use 
in their PCI calculations. We do not propose to incorporate a consumer 
productivity dividend (CPD) adjustment into this X-factor. Based on the 
industry-wide analysis provided in the BDS Order and Petitioners' 
proposal that we use a two percent X-Factor, we believe an X-factor of 
two percent will ensure just and reasonable rates for BDS offered by 
electing A-CAM carriers, and that use of the GDP-PI is appropriate. We 
seek comment on this proposal.
    25. Are there reasons we should use a different productivity factor 
for electing A-CAM providers than we use for price cap carriers? We 
request that any party proposing a different productivity factor or 
measure of inflation factor describe with specificity how their 
proposed X-Factor is derived and why it would be a better forecast of 
the expected pattern of growth than what we propose herein.
    26. We also seek comment on the extent to which the voluntary 
nature of the election interacts with the appropriate level of the X-
Factor. For example, are there relationships between different factors 
that could warrant that the Commission increase or decrease the X-
Factor? Should the level of the X-Factor be affected by whether the 
carrier election is for all A-CAM study areas, or made on a more 
disaggregated level?
e. Exogenous Costs
    27. We seek comment on the treatment that should be accorded 
exogenous costs if we allow A-CAM carriers to elect to move to 
incentive regulation. Exogenous costs are those costs that are beyond 
the control of the carrier, as determined by the Commission. Section 
61.45(d) of our rules provides for an exogenous cost adjustment for 
price cap carriers to be apportioned on a cost-causative basis between 
price cap services as a group, and excluded services as a group. 
Exogenous cost changes attributed to price cap services are recovered 
from services other than those used to calculate the average traffic-
sensitive charge. A-CAM carriers have been removed from rate-of-return 
regulation for universal service purposes and for interstate access 
services other than BDS. We invite parties to address how the principle 
of cost causation should be applied in determining the amount of any 
exogenous costs to be assigned to the BDS basket for electing A-CAM 
carriers. We propose that exogenous costs be allocated based on a ratio 
of BDS revenues to total revenues from all regulated services and A-CAM 
universal service support payments. We invite parties to address 
whether some other basis would be preferable, including the rationale 
for the alternative approach.
f. Low-End Adjustment
    28. Consistent with the BDS Order, we propose to adopt a low-end 
adjustment mechanism to provide an appropriate backstop to ensure that 
electing A-CAM carriers are not subject to protracted periods of low 
earnings. Failure to include any adjustment for such circumstances 
could harm customers as well as shareholders of such a carrier as a 
below-normal rate-of-return over a prolonged period could threaten the 
carrier's ability to raise the capital necessary to provide modern, 
efficient services to customers. The low-end adjustment mechanism would 
permit a one-time adjustment to a single year's BDS rates to avoid 
back-to-back annual earnings below a set benchmark. If an electing A-
CAM carrier's BDS earnings fall below the low-end adjustment mark in a 
base year period, it would be entitled to adjust its rates upward to 
target earnings to the benchmark. We propose that, consistent with past

[[Page 22928]]

practice, the low-end adjustment benchmark should be set 100 basis 
points below the authorized rate of return for rate-of-return carriers. 
We propose that electing A-CAM carriers that exercise downward pricing 
flexibility (for example, by entering into a contract tariff with a 
customer), or elect the option to use generally accepted accounting 
practices (GAAP) rather than the Part 32 Uniform System of Accounts as 
set forth in our recent Part 32 Accounting Order, will be ineligible 
for a low-end adjustment.
    29. We invite interested parties to comment on the proposal to 
adopt a low-end adjustment mechanism. We ask parties to comment on 
whether this measure will ensure that electing A-CAM carriers have the 
opportunity to attract sufficient capital. We note that an A-CAM 
carrier would have to present cost data to support a claim for a low-
end adjustment. Because eliminating the need for cost studies is one of 
the driving objectives behind Petitioners' proposal, we ask parties to 
comment on whether there are alternative ways to make the required 
determinations short of performing a full cost study. Parties offering 
suggestions should explain the proposed mechanism in sufficient detail 
that a comparison to the results of a cost study can be made. We also 
seek comment on the appropriateness of setting the benchmark for the 
low-end adjustment at 100 basis points below the authorized rate of 
return for rate-of-return carriers. We note that this proposal would 
allow the benchmark to track the gradual reduction in the authorized 
rate-of-return as it transitions down.
g. Cost Assignment and Jurisdictional Separations Rules
    30. Pursuant to section 10 of the Act, and to implement our new 
incentive regulation for those A-CAM carriers that elect incentive 
regulation, we propose to forbear from application of our cost 
assignment rules, including jurisdictional separations requirements. 
Consistent with our previous forbearance orders for price cap carriers, 
we propose to define cost assignment rules to include the rules 
governing the assignment of costs and revenues by carriers. We seek 
comment on our proposed definition.
    31. In providing similar forbearance to price cap carriers, the 
Commission observed that such rules ``were developed when the ILECs' 
interstate rates and many of their intrastate rates were set under 
rate-based, cost-of-service regulation. The Commission has explained 
that `because price cap regulation severs the direct link between 
regulated costs and prices, a carrier is not able automatically to 
recoup misallocated non-regulated costs by raising basic service 
rates,' thus reducing incentives to shift non-regulated costs to 
regulated services.'' Does the same reasoning for forbearance apply to 
A-CAM carriers electing incentive regulation? Will the operation of the 
incentive regulation rules we propose make enforcement of the cost 
assignment and separations rules unnecessary to ensure just, reasonable 
and not unjustly or unreasonably discriminatory charges, practices, 
classifications, and regulations, or make enforcement of those rules 
unnecessary to protect consumers from unjust, unreasonable, and 
unjustly or unreasonably discriminatory rates, practices, 
classifications, and regulations? Is enforcement of such regulations 
unnecessary to protect consumers? Would forbearance be consistent with 
the public interest and would the reduction of regulatory burdens 
improve market competitiveness?
    32. We further propose to condition any grant of forbearance from 
application of the cost assignment and jurisdictional separations rules 
for an electing A-CAM carrier that froze their separations category 
relationships on its conducting a cost study for the preceding calendar 
year. The A-CAM carrier would then adjust the initialized BDS rates 
determined pursuant to the procedures described above by the results of 
the cost study. We invite parties to comment on this proposal and to 
identify any constraints that should be placed on application of the 
cost study results to the development of revised access charges, 
including BDS rates. For example, should a carrier be limited in the 
extent it may adjust the relative price relationships between business 
data services that may be established?
    33. Above, we propose procedures for electing A-CAM carriers to use 
in establishing initial BDS rates under incentive regulation that 
assume other factors remained unchanged. Forbearing from cost 
allocation and jurisdictional separations requirements for A-CAM 
carriers electing incentive regulation, however, would change one of 
the controlled factors. We invite comment on what adjustments, if any, 
we should allow an A-CAM carrier that elects to freeze its category 
relationships to make to its rates to ensure that its BDS rates are 
just and reasonable pursuant to section 201 of the Act.
h. GAAP Accounting
    34. We propose to allow electing A-CAM carriers to use GAAP for 
keeping their accounts, should they choose to do so. The Commission 
recently revised the Part 32 rules to allow price cap LECs to elect to 
use GAAP in recording and reporting their financial data, subject to 
two targeted accounting requirements. Electing carriers may either (a) 
calculate an Implementation Rate Difference between the attachment 
rates calculated by the price cap carrier under the Uniform System of 
Accounts (USOA) and under GAAP as of the last full year preceding the 
carrier's initial opting-out of Part 32 USOA accounting requirements; 
or (b) comply with GAAP accounting for all purposes other than those 
associated with setting pole attachment rates while continuing to use 
the Part 32 accounts and procedures necessary to establish and evaluate 
pole attachment rates. Electing carriers must adjust their annually 
computed GAAP-based rates by the Implementation Rate Difference for a 
period of 12 years after the election. This frees price cap carriers 
from having to maintain two sets of books: One for financial reporting 
purposes consistent with GAAP and one for regulatory reporting purposes 
consistent with the accounting requirements of Part 32. For the same 
reasons, we propose to allow electing A-CAM carriers to have the option 
to use GAAP. We propose to require electing A-CAM carriers that choose 
to use GAAP accounting to be subject to the same data provisioning 
requirements as price cap carriers, including the requirements relating 
to the calculation of pole attachment rates. As a result, such carriers 
will have to determine an Implementation Rate Difference to apply in 
calculating their pole attachment rates. We seek comment on this 
proposal. Are there other issues with allowing electing A-CAM carriers 
to use GAAP accounting that we should consider?

B. Providing a Path To Relieve Electing A-CAM Carriers of Ex Ante 
Pricing Regulation for Lower Speed End User Channel Terminations and 
TDM Transport in Competitive Areas

    35. We seek comment on whether we should adopt a competitive market 
test (CMT) to assess the availability of actual and likely competitive 
options in the provision of transport and last-mile services in areas 
served by electing A-CAM carriers and to remove from ex ante pricing 
regulation DS1 and DS3 end user channel terminations, TDM transport at 
speeds at or below a DS3, and other generally lower speed BDS

[[Page 22929]]

provided (or some subset of these services) by electing A-CAM carriers 
in areas that the CMT finds competitive. If so, what should be the 
elements of such a test and what are the costs and benefits of adopting 
such a test? We also seek comment on whether we should use different 
metrics and/or different tests to measure the competitiveness of lower 
speed end user channel terminations as compared to lower speed TDM 
transport services.
    36. If we adopt a CMT for electing A-CAM carriers, should we use 
the CMT the Commission adopted in the BDS Order for price cap carriers 
(the existing CMT) as a starting point? The existing CMT features two 
prongs, based on data from price cap study areas. The first measures 
whether 50 percent of the locations with BDS demand in a county are 
within a half-mile of a location that was served by a competitive 
provider, based on the 2015 Collection. The second uses Form 477 data 
to measure whether a cable operator offers a minimum of 10/1 Mbps 
broadband service in 75 percent of the census blocks in the county. If 
either prong is satisfied, that county is deemed competitive for price 
cap carriers' BDS. Below, we seek comment on several options for a CMT 
for electing A-CAM carriers, some of which include the use of the 
existing CMT. Beside the options we offer below, are there other 
options we should consider if we choose to adopt a CMT? What are the 
costs and benefits of each?
1. CMT Options
a. Rerun the Second Prong of the Existing CMT Using 477 Data for A-CAM 
Areas
    37. First, we seek comment on adopting a CMT that uses only a 
version of the second prong of the existing CMT using data from areas 
served by A-CAM carriers. Under this approach, we would rerun the 
second prong of the existing CMT using FCC Form 477 data only from 
electing A-CAM carriers' study areas. We would then deem competitive, 
for purposes of relieving electing A-CAM carriers' lower speed TDM BDS 
services from ex ante pricing regulation, any county where a cable 
operator or other competitive provider offers a minimum of 10/1 Mbps 
broadband service in 75 percent of the census blocks in the portion of 
the county served by an electing A-CAM carrier. This approach has the 
benefit of simplicity. It would allow us to use FCC Form 477 data that 
we regularly collect and would identify areas served by electing A-CAM 
carriers that competitors or potential competitors already serve. 
Because we would not be using the first prong of the existing CMT, 
there would be no need to conduct a BDS data collection for A-CAM 
carriers akin to the 2015 Collection. For a variety of reasons, we are 
not inclined to adopt an approach that would require another such 
large-scale data collection. The burdens associated with such a data 
collection would be substantial for A-CAM carriers and other providers 
of data, and could significantly delay Commission action without 
corresponding benefits. However, we invite comment on this issue. 
Because of the lack of cable service in many rate-of-return study 
areas, we recognize that this test will likely result in very few A-CAM 
counties being deemed competitive. Does that suggest this test is 
accurate in identifying competition in A-CAM areas? Are there other 
costs and benefits to this approach that we should consider?
b. Use the Results of the Existing CMT
    38. Petitioners propose that we apply the existing CMT to electing 
A-CAM carriers' BDS offerings. Under this proposal, an electing A-CAM 
carrier's lower speed TDM BDS offerings would be relieved of ex ante 
pricing regulation in those counties that have already been deemed 
competitive by the existing CMT. Petitioners recognize that there are 
78 purely rate-of-return counties that were not analyzed by the 
existing CMT. They propose to use the second prong of the existing CMT 
to determine whether those counties should be considered competitive. 
Petitioners argue that this approach would involve minimal 
administrative and compliance burdens and would avoid the need for 
revising and re-running the CMT for electing A-CAM carriers or 
analyzing any additional data.
    39. We seek comment on Petitioners' proposed approach. The existing 
CMT was developed for price cap carriers' service areas and involved 
analysis of competition only in price cap areas. The Commission did not 
consider competition in A-CAM markets. Is an analysis of existing or 
potential competition in price cap areas of a county an appropriate way 
to determine whether competition or potential competition exists in 
areas of that county served by an electing A-CAM carrier? Is it likely 
to result in deregulating lower speed TDM-based BDS services offered by 
electing A-CAM carriers in counties where such carriers will not face 
competitive pressure in pricing those services? Are there other 
benefits or drawbacks to this approach that we should consider?
c. Apply a Modified Two-Prong CMT to Areas Served by Electing A-CAM 
Carriers
    40. Another option would be to adopt a CMT for electing A-CAM 
carriers using prongs similar to those of the existing CMT, but using 
data specific to areas served by electing A-CAM carriers. We seek 
comment on this approach. We recognize that for purposes of the first 
prong of the new CMT, this approach would require a data collection 
sufficient to allow us to identify for each county served by an 
electing A-CAM carrier whether 50 percent of the locations with BDS 
demand in that part of the county are within a half-mile of a location 
that was served by a competitive provider. Such a collection could be 
limited to electing A-CAM carriers and their competitors. Nonetheless, 
we have reservations about the relative costs and benefits of 
conducting such a data collection. And, the current record is split on 
whether we should consider a new data collection. We seek comment on 
how to most efficiently collect relevant data and on whether the 
burdens of such a data collection outweigh the benefits. We also seek 
comment on other benefits and drawbacks to this option.
d. Adopt a CMT Based on a Market Analysis Specific to Areas Served by 
A-CAM Carriers
    41. A fourth option is to create a whole new CMT based on a 
competitive market analysis specific to BDS services in areas served by 
electing A-CAM carriers. Petitioners argue that the BDS market analysis 
conducted in the BDS Order with respect to price cap areas applies 
equally to rate-of-return areas served by A-CAM carriers. We seek 
comment on Petitioners' argument.
    42. In the BDS Order, the Commission conducted a broad, data-
driven, multi-faceted market analysis based on a comprehensive data 
collection to evaluate the extent of competition for BDS in price cap 
areas. The Commission's market analysis was informed by, but not 
limited to, traditional antitrust principles, such as the market power 
analysis performed by U.S. antitrust agencies. The Commission analyzed 
the product market, geographic market, barriers to entry, and other 
characteristics of price cap BDS markets.
    43. If we conduct a new market analysis, should it be similar to 
the market analysis conducted by the Commission in the BDS Order as a 
precondition to determining whether competition is sufficient to 
warrant lighter touch regulation in certain BDS

[[Page 22930]]

markets? If we do conduct a new market analysis, we propose to consider 
product and geographic markets, competitive entry, and other market 
attributes to ascertain the extent to which nearby potential BDS 
competitors are likely to temper price, resulting in reasonably 
competitive prices over the short- to medium-term (i.e., up to three to 
five years). Would this be the right approach to assessing the level of 
competition for BDS in A-CAM areas? What other approaches should we 
consider taking? How should we analyze transport under our market 
analysis? Would a competitive market analysis give us sufficient basis 
to go beyond the incremental deregulation of lower speed transport that 
we propose above? We ask commenters to support their positions with 
data that would help us determine whether markets are sufficiently 
competitive to warrant deregulatory treatment.
    44. Data for a Market Analysis. If we conduct a market analysis, 
what relevant data are available and what are the potential utility and 
limitations of the available data? Should we review FCC Form 477 data 
on mass market broadband service to determine the extent to which they 
serve as evidence of the presence of network facilities capable of 
delivering reasonably competitive BDS over the short- to medium-term 
(three to five years) in A-CAM areas? We seek comment on the data, 
methodologies, and modeling used to develop the A-CAM study area 
boundaries, including state-level location density data, the A-CAM 
model, and geocoded location data submitted to USAC and the extent they 
can assist us in analyzing the BDS market in A-CAM areas.
    45. To the extent the Commission's existing data sources are 
insufficient, we seek data from commenters on facilities-based BDS 
providers serving A-CAM areas that would help us to ascertain markets 
with reasonably competitive conditions to justify lighter touch 
regulatory treatment. Are there existing data similar to data collected 
as part of the 2015 Collection that would help us better understand or 
estimate the location of BDS demand in A-CAM areas, including consumers 
and business locations served (or readily served) by BDS, as well as 
data on market structure, demand, pricing, and competitive pressures in 
those areas? Does similar data exist that could identify BDS demand for 
transport in A-CAM areas? If we have to collect new data, what data 
should we collect and what is the most efficient way to collect it? 
Does the cost of conducting and analyzing such a data collection 
outweigh the benefits of conducting an A-CAM specific market analysis?
    46. Product Market. If we conduct a new market analysis, should we 
use the same analysis to define the product market for lower speed TDM 
end user channel terminations and transport in A-CAM areas as we used 
to define the product market for BDS in price cap areas in the BDS 
Order? We anticipate that the product market for BDS in A-CAM areas 
will closely resemble the BDS product market delineated in the BDS 
Order for price cap areas and seek comment on this belief and on 
potential differences that may exist between the two types of markets. 
Despite these similarities, we recognize that there may be differences 
between price cap areas and A-CAM areas that may affect the BDS product 
markets in these areas. Are there products that were marketed or 
supplied to BDS customers in price cap areas that are not in demand, 
marketed, or otherwise supplied in A-CAM areas as a BDS substitute, and 
to what extent do products that are not in the same BDS product market 
nonetheless exert competitive pressure on prices for BDS in A-CAM 
areas?
    47. Geographic Market. In the BDS Order, the Commission defined the 
geographic market in terms of ``the area to which consumers can 
`practically turn for alternative sources,' and within which providers 
can reasonably compete.'' Consistent with the BDS Order, should we 
define the geographic market as an area where customers have medium-
term competitive choices for BDS based on customer locations within a 
half mile of a location served over the facilities of at least one non-
incumbent competitive provider? We encourage commenters to provide data 
and analysis to support their positions.
    48. Competitive Entry. As part of our analysis, and consistent with 
the BDS Order, should we consider how varying market characteristics 
impact entry by non-incumbent competing BDS providers in A-CAM areas, 
along with evidence of entry barriers being overcome by traditional and 
non-traditional competing providers? We seek comment on identifiable 
market features in A-CAM areas, including carrier market share, number 
and size distribution of competing firms, the nature of competitors' 
barriers to entry, the availability of reasonably substitutable 
services, the level of demand elasticity, and whether a firm controls 
bottleneck facilities to help us identify where competition is 
sufficient to make imposing the burdens of ex ante pricing regulation 
unnecessary and counterproductive.
    49. We seek comment on the number, type, size, concentration, and 
market share of nearby BDS competitors (i.e., within a half-mile) that 
operate in A-CAM study areas, in the form of facilities-based wired 
communications network providers, that temper prices to reasonably 
competitive levels in the short- to medium-term.
    50. Consistent with the BDS Order, should we consider as part of 
our market analysis the extent to which providers and potential 
providers face barriers to enter the BDS marketplace in A-CAM areas? We 
seek comment on the timeliness, likelihood, and sufficiency of a 
competitor's entry into the BDS market in A-CAM areas. We seek comment 
on the barriers facing carriers for both lower speed TDM end user 
channel terminations and transport. How are the markets different? For 
example, in the BDS Order, the Commission found lower entry barriers 
for deploying TDM transport services than for end user channel 
termination services. Is this accurate for A-CAM carrier study areas as 
well? Would buildout and entry by an entrant be rapid enough to render 
incumbent LECs' attempts to set prices above competitive levels 
unprofitable? Would such entry occur over a longer timeframe, such as 
three to five years, and, if so, would that justify taking the same 
light touch regulatory approach here as taken in the BDS Order? To what 
extent is market entry profitable (and thus likely) based on projected 
expenditures and revenues from customers and potential customers? Is 
the presence of a second provider in the relevant geographic market, 
whether a non-incumbent LEC or a cable operator, sufficient to 
constrain prices to competitive levels? To what extent does the half-
mile test that was derived from the market analysis of price cap areas 
relate to demand densities in those areas that may not be present in A-
CAM areas? Finally, we seek comment on the extent incumbents and non-
incumbent entrants, particularly cable companies, are upgrading or 
building out their networks to sources of BDS demand in A-CAM study 
areas.
2. Updating CMT Results for A-CAM Carriers
    51. The BDS Order directed the Bureau to review the existing price 
cap CMT every three years using the second prong of the test based on 
Form 477 data. If we adopt a CMT for electing A-CAM carriers, we seek 
comment on whether we should conduct similar periodic reviews of any 
CMT we adopt for such carriers. For administrative ease, should we 
target the timing of our

[[Page 22931]]

initial review of the results of a CMT for electing A-CAM carriers to 
coincide with our initial review of price cap served areas? Under the 
BDS Order, counties that were determined to be competitive were no 
longer subject to review of their status in subsequent updates of the 
CMT. Should we treat A-CAM areas similarly? If not, we seek comment on 
alternatives to grandfathering those A-CAM areas.
3. Regulation in Areas Deemed Competitive by the CMT
    52. If we adopt a CMT for areas served by electing A-CAM carriers, 
consistent with the BDS Order, we propose to refrain from ex ante 
pricing regulation for lower speed transport and TDM end-user channel 
terminations in areas deemed competitive. We also seek comment on 
whether forbearing from section 203 tariffing requirements for these 
services in these areas would meet the statutory criteria of section 10 
of the Act. As we did in the BDS Order, we recognize the continuing 
applicability and importance of sections 201, 202, and 208 of the Act 
to ensure that consumers will remain protected from unjust and 
unreasonable rates in areas deemed competitive. We seek comment on this 
proposal.

IV. Removing Ex Ante Pricing Regulation From Packet-Based BDS and TDM-
Based BDS Providing Bandwidth in Excess of a DS3

    53. We also seek comment on whether we should eliminate ex ante 
pricing regulation of packet-based and TDM-based business data services 
providing bandwidth in excess of a DS3 offered by those carriers that 
elect to move their lower speed BDS offerings from rate-of-return 
regulation to incentive regulation. If so, should we provide 36 months 
for such a transition? If we transition these high-speed services, 
consistent with the BDS Order, we would continue to recognize the 
applicability and importance of sections 201, 202, and 208 of the Act 
in protecting consumers from unjust and unreasonable practices.
    54. With respect to price cap areas, the Commission's market 
analysis did ``not show compelling evidence of market power'' in 
incumbent LECs' provision of packet-based services and higher capacity 
TDM-based business data services (in excess of the bandwidth of a DS3), 
particularly for higher bandwidth services. We seek comment on whether 
these observations offer any insights on the nature and extent of 
competition in A-CAM areas. Are markets for higher capacity TDM-based 
BDS offerings (above the bandwidth of a DS3) and packet-based services 
likely to be sufficiently competitive in A-CAM areas over the next 
three to five years such that the harms of price regulation in these 
markets, most notably in terms of discouraging the extension of 
competition, are likely to be greater than any harms that may occur 
were we not to regulate? Are these markets sufficiently competitive to 
outweigh any benefits of ex ante pricing regulation? Parties are 
encouraged to provide evidence to support their arguments. We seek 
comment on the extent to which Commission or other data could 
facilitate our evaluation of competition in these areas, including Form 
477 mass market broadband data, A-CAM study area boundary data, A-CAM 
modeling data, and geocoded location data submitted to USAC. We invite 
commenters to identify specific data sources that could be useful to 
our inquiry and to explain their utility.
    55. The Commission also found that sales of TDM-based BDS by price 
cap carriers were declining due to product substitution, including 
customer loss to cable operators and other competitive providers. To 
what extent are purchasers substituting packet-based services for TDM-
based services in A-CAM areas? Are TDM-based services declining in A-
CAM areas at a rate similar to the decline in price cap areas? The 
Commission found declining prices for packet-based BDS across all 
bandwidths in price cap areas to be evidence of competitive conditions. 
Have prices for packet-based BDS in A-CAM areas also declined across 
all bandwidths? Are lower bandwidth packet-based services (at or below 
the level of a DS3) experiencing price changes in A-CAM areas as in 
price cap areas?
    56. We recognize that price cap carriers' provision of these 
services was generally relieved of ex ante pricing regulation prior to 
the BDS Order in a series of forbearance decisions. In contrast, A-CAM 
carriers provide these services subject to rate-of-return regulation. 
Would removing ex ante pricing regulation for these services for 
electing A-CAM carriers encourage competitive entry and network 
investment and provide an incentive for the transition to packet-based 
technologies as we found to be the case for price cap carriers? In the 
foregoing, we seek comment on the parameters of this potential 
transition. Are there other issues we should consider as we evaluate 
whether to remove ex ante pricing regulation for all packet-based and 
TDM-based services providing bandwidth in excess of a DS3 offered by 
electing A-CAM carriers?
    57. We seek comment on granting forbearance from section 203 
tariffing requirements for A-CAM carriers' provision of certain BDS 
after they elect incentive regulation. In the BDS Order, the Commission 
granted forbearance from the application of section 203 to each price 
cap LEC in its provision of any packet-based BDS and of circuit-based 
BDS above the DS3 bandwidth level. The Commission also granted 
forbearance from the application of section 203 to price cap incumbent 
LECs in their provision of BDS that comprise transport pursuant to 
section 69.709(a)(4) of the Commission's rules, and to DS1 and DS3 end 
user channel termination services and any other special access services 
currently tariffed in competitive counties or in non-competitive 
counties previously subject to Phase II pricing flexibility. The 
Commission concluded that ``[w]here a price cap LEC provides these 
services in competitive markets, application of section 203, including 
its tariffing requirement, is not necessary to ensure that the LEC's 
charges, practices, classifications, or regulations are just, 
reasonable, and not unjustly or unreasonably discriminatory. Nor is 
application of section 203 necessary to protect consumers.''
    58. While the Petition does not expressly request forbearance from 
tariffing requirements, we seek comment on whether to de-tariff certain 
electing A-CAM BDS offerings by granting forbearance from section 203 
tariffing obligations. We seek comment on whether we should remove ex 
ante pricing regulation of packet-based BDS and higher capacity TDM-
based services providing bandwidth in excess of a DS3 for A-CAM 
carriers that elect incentive regulation. Would forbearing from the 
tariffing requirement for these services meet the statutory criteria 
set by section 10 of the Act? Would de-tariffing these services promote 
competitive market conditions? Would de-tariffing reduce compliance 
costs, increase regulatory flexibility, increase incentives to invest 
in innovative products and services and thereby facilitate the 
technology transitions, or otherwise be in the public interest as the 
Petition asserts? If the Commission decides to forbear from section 
203, should it mandate or simply allow de-tariffing? Would mandatory 
de-tariffing further promote competition and drive down prices by 
requiring electing carriers to negotiate agreements to provide the de-
tariffed services that they offer?

[[Page 22932]]

V. Transition Mechanisms

    59. We seek comment on how to transition electing A-CAM carriers 
and the areas they serve if the Commission adopts a new lighter touch 
regulatory framework for their provision of BDS. The BDS Order provided 
certain mechanisms to facilitate the transition to the new regulatory 
framework that it established for price cap carriers. These mechanisms 
included a thirty-six month transition period in which de-tariffing is 
permitted but not mandated, a six month freeze of tariffed rates for 
end-user channel terminations in newly deregulated counties, and a 
grandfathering of existing contractual or other long-term BDS 
arrangements. We seek comment on the appropriateness of these and other 
mechanisms to aid in the transition of electing A-CAM areas to any new 
regulatory framework we establish for them. Are there other transition 
issues and mechanisms that may be unique to A-CAM carriers and the 
areas they serve that would help ensure an orderly transition? For 
example, should the Commission consider any additional mechanisms that 
would facilitate transitions for electing A-CAM carriers that 
participate in NECA pooling arrangements?

VI. Other Carriers

    60. We propose to offer the opportunity to elect the same type of 
regulatory relief that we propose to provide to electing A-CAM carriers 
to other rate-of-return carriers that currently receive fixed universal 
service support, rather than receiving support based on their costs. 
Such carriers include traditional rate-of-return carriers that are 
affiliated with price cap carriers and are therefore receiving support 
based on the Connect America Cost Model (CACM); rate-of-return carriers 
participating in the Commission's ``Alaska Plan''; and carriers that 
accept further offers of A-CAM support.
    61. Like A-CAM carriers, the members of each of these three groups 
of rate-of-return carriers all receive non-cost-based universal service 
support and therefore are routinely required to prepare cost studies 
only for their BDS. What are the costs and benefits of relieving them 
of existing pricing regulations and allowing them to elect the type of 
incentive pricing regulation we propose? Should we modify our proposed 
incentive regulation in any way to reflect differences in any of these 
types of carriers' circumstances? Are there any other types of carriers 
that should be eligible for our incentive regulation proposal and, if 
so, based on what rationale?

VII. ITTA/USTelecom Petition

    62. Throughout this NPRM, we seek comment on various aspects of the 
Petition for rulemaking filed by ITTA and USTelecom. However, the 
Petition differs in some ways from what we propose in this NPRM. Most 
fundamentally, it proposes that subject to certain conditions we simply 
allow model-based carriers to elect the same regulatory framework that 
the BDS Order provided for price cap carriers. It also proposes 
providing electing A-CAM carriers an opportunity for a one-time 
unfreezing of category relationships for purposes of jurisdictional 
separations. To the extent we have not already done so, we invite 
comment on the Petition and each of the proposals made therein.

VIII. Proposed Rule Changes

    63. We seek comment on the proposed rule changes that can be found 
in Appendix A. Those rule changes largely track the proposals made in 
this NPRM. They also include some corrections to what appear to be 
inaccuracies in our current rules. These proposed changes include 
changing (1) the cross reference to Sec.  61.3(aa) in Sec.  51.903(g) 
to Sec.  61.3(bb), (2) the cross reference to Sec.  61.3(ee) in Sec.  
61.41(d) to Sec.  61.3(ff), (3) the cross reference to Sec.  61.3(x) in 
Sec.  69.114 to Sec.  61.3(ff), and (4) the cross reference to Sec.  
69.801(g) in Sec.  69.805(a) to Sec.  69.801(h). These cross references 
have been rendered inaccurate because of changes in the definitions 
contained in Sec.  61.3 that occurred in other rulemaking proceedings 
or because they were incorrectly stated when added to our rules.

IX. Procedural Matters

    64. This proceeding shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. Persons 
making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within 
two business days after the presentation (unless a different deadline 
applicable to the Sunshine period applies). Persons making oral ex 
parte presentations are reminded that memoranda summarizing the 
presentation must (1) list all persons attending or otherwise 
participating in the meeting at which the ex parte presentation was 
made, and (2) summarize all data presented and arguments made during 
the presentation. If the presentation consisted in whole or in part of 
the presentation of data or arguments already reflected in the 
presenter's written comments, memoranda or other filings in the 
proceeding, the presenter may provide citations to such data or 
arguments in his or her prior comments, memoranda, or other filings 
(specifying the relevant page and/or paragraph numbers where such data 
or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
Rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

A. Initial Regulatory Flexibility Analysis

    65. Pursuant to the Regulatory Flexibility Act (RFA), the 
Commission has prepared an Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities of 
the policies and actions considered in this Notice of Proposed 
Rulemaking. The text of the IRFA is set forth in Appendix B. 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 comment 
on the Notice of Proposed Rulemaking. The Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, will send a 
copy of this Notice of Proposed Rulemaking, including the IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration (SBA).

B. Paperwork Reduction Act

    66. This document may contain proposed new or modified information 
collection requirements. The Commission, as part of its continuing 
effort to reduce paperwork burdens, invites the general public and the 
Office of Management and Budget (OMB) to comment on the information 
collection requirements contained in this document, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. In addition, 
pursuant to the Small Business Paperwork Relief Act of 2002,

[[Page 22933]]

Public Law 107-198, we seek specific comment on how we might further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees.

X. Initial Regulatory Flexibility Analysis

    67. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on small entities by the policies and rules proposed in this Notice of 
Proposed Rulemaking (NPRM). The Commission requests written public 
comments on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments provided on the 
first page of the NPRM. The Commission will send a copy of the NPRM, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the NPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.

A. Need for, and Objectives of, the Proposed Rules

    68. In this NPRM, we propose changes to, and seek comment on, our 
rate-of-return and business data services rules as they are applied to 
rate-of-return carriers that receive universal service support based on 
the Alternative-Connect America Cost Model (A-CAM), or under the 
Commission's universal service support mechanism for Alaska-based 
carriers (Alaska Plan), or is an affiliate of a price cap local 
exchange carrier operating pursuant to a waiver of Sec.  61.41 of our 
rules. In the NPRM, the Commission proposes to adopt a form of 
incentive regulation for A-CAM carriers' provision of business data 
services (BDS), conduct a market analysis to evaluate the 
characteristics of BDS markets served by A-CAM carriers, and adopt a 
new lighter touch regulatory framework for A-CAM carriers' BDS that in 
most respects parallels the framework recently adopted for price cap 
carriers in the BDS Order.

B. Legal Basis

    69. The legal basis for any action that may be taken pursuant to 
this NPRM is contained in sections 1, 4(i), 10, and 201(b) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 160, and 
201(b).

C. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    70. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules and by the rule revisions on which the 
NPRM seeks comment, if adopted. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small-business concern'' under the Small Business 
Act. A ``small-business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
1. Total Small Entities
    71. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe here, at 
the outset, three broad groups of small entities that could be directly 
affected herein. First, while there are industry specific size 
standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the SBA's Office of 
Advocacy, in general a small business is an independent business having 
fewer than 500 employees. These types of small businesses represent 
99.9% of all businesses in the United States which translates to 28.8 
million businesses.
    72. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of August 2016, there were approximately 356,494 small 
organizations based on registration and tax data filed by nonprofits 
with the Internal Revenue Service (IRS).
    73. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, towns, 
townships, villages, school districts, or special districts, with a 
population of less than fifty thousand.'' U.S. Census Bureau data from 
the 2012 Census of Governments indicates that there were 90,056 local 
governmental jurisdictions consisting of general purpose governments 
and special purpose governments in the United States. Of this number 
there were 37,132 general purpose governments (county, municipal and 
town or township) with populations of less than 50,000 and 12,184 
special purpose governments (independent school districts and special 
districts) with populations of less than 50,000. The 2012 U.S. Census 
Bureau data for most types of governments in the local government 
category shows that the majority of these governments have populations 
of less than 50,000. Based on these data we estimate that at least 
49,316 local government jurisdictions fall in the category of ``small 
governmental jurisdictions.''
2. Broadband Internet Access Service Providers
    74. Internet Service Providers (Broadband). Broadband internet 
service providers include wired (e.g., cable, DSL) and VoIP service 
providers using their own operated wired telecommunications 
infrastructure fall in the category of Wired Telecommunication 
Carriers. Wired Telecommunications Carriers are comprised of 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies. The SBA size 
standard for this category classifies a business as small if it has 
1,500 or fewer employees. U.S. Census data for 2012 show that there 
were 3,117 firms that operated that year. Of this total, 3,083 operated 
with fewer than 1,000 employees. Consequently, under this size standard 
the majority of firms in this industry can be considered small.
3. Wireline Providers
    75. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``establishments primarily engaged in 
operating and/or providing access to transmission facilities and 
infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services, wired (cable) audio and video programming 
distribution, and wired broadband internet services. By exception, 
establishments providing satellite

[[Page 22934]]

television distribution services using facilities and infrastructure 
that they operate are included in this industry.'' The SBA has 
developed a small business size standard for Wired Telecommunications 
Carriers, which consists of all such companies having 1,500 or fewer 
employees. Census data for 2012 show that there were 3,117 firms that 
operated that year. Of this total, 3,083 operated with fewer than 1,000 
employees. Thus, under this size standard, the majority of firms in 
this industry can be considered small.
    76. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent LEC services. The closest applicable size 
standard under SBA rules is for the category Wired Telecommunications 
Carriers as defined above. Under that size standard, such a business is 
small if it has 1,500 or fewer employees. According to Commission data, 
3,117 firms operated in that year. Of this total, 3,083 operated with 
fewer than 1,000 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by the rules and policies adopted. A total of 
1,307 firms reported that they were incumbent local exchange service 
providers. Of this total, an estimated 1,006 have 1,500 or fewer 
employees.
    77. Competitive Local Exchange Carriers (Competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate NAICS Code category is Wired 
Telecommunications Carriers, as defined above. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
U.S. Census data for 2012 indicate that 3,117 firms operated during 
that year. Of that number, 3,083 operated with fewer than 1,000 
employees. Based on this data, the Commission concludes that the 
majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, 
and Other Local Service Providers, are small entities. According to 
Commission data, 1,442 carriers reported that they were engaged in the 
provision of either competitive local exchange services or competitive 
access provider services. Of these 1,442 carriers, an estimated 1,256 
have 1,500 or fewer employees. In addition, 17 carriers have reported 
that they are Shared-Tenant Service Providers, and all 17 are estimated 
to have 1,500 or fewer employees. Also, 72 carriers have reported that 
they are Other Local Service Providers. Of this total, 70 have 1,500 or 
fewer employees. Consequently, based on internally researched FCC data, 
the Commission estimates that most providers of competitive local 
exchange service, competitive access providers, Shared-Tenant Service 
Providers, and Other Local Service Providers are small entities.
    78. We have included small incumbent LECs in this present RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. We have therefore included 
small incumbent LECs in this RFA analysis, although we emphasize that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    79. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition for Interexchange Carriers. The closest 
NAICS Code category is Wired Telecommunications Carriers as defined 
above. The applicable size standard under SBA rules is that such a 
business is small if it has 1,500 or fewer employees. U.S. Census data 
for 2012 indicates that 3,117 firms operated during that year. Of that 
number, 3,083 operated with fewer than 1,000 employees. According to 
internally developed Commission data, 359 companies reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Of this total, an estimated 317 have 1,500 or 
fewer employees. Consequently, the Commission estimates that the 
majority of IXCs are small entities that may be affected by our 
proposed rules.
    80. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. The 
Telecommunications Resellers industry comprises establishments engaged 
in purchasing access and network capacity from owners and operators of 
telecommunications networks and reselling wired and wireless 
telecommunications services (except satellite) to businesses and 
households. Establishments in this industry resell telecommunications; 
they do not operate transmission facilities and infrastructure. Mobile 
virtual network operators (MVNOs) are included in this industry. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, all operated with fewer than 
1,000 employees. Thus, under this category and the associated small 
business size standard, the majority of these prepaid calling card 
providers can be considered small entities.
    81. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless telecommunications services (except 
satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. The SBA has developed a small business 
size standard for the category of Telecommunications Resellers. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, 1,341 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of these resellers can be 
considered small entities. According to Commission data, 881 carriers 
have reported that they are engaged in the provision of toll resale 
services. Of this total, an estimated 857 have 1,500 or fewer 
employees. Consequently, the Commission estimates that the majority of 
toll resellers are small entities.
    82. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition for small businesses specifically applicable to 
Other Toll Carriers. This category includes toll carriers that do not 
fall within the categories of interexchange carriers, operator service 
providers, prepaid calling card providers, satellite service carriers, 
or toll resellers. The closest applicable NAICS Code category is for 
Wired Telecommunications Carriers as defined above. Under the 
applicable SBA size standard, such a business is small if it has 1,500 
or fewer employees. Census data for 2012 show that there

[[Page 22935]]

were 3,117 firms that operated that year. Of this total, 3,083 operated 
with fewer than 1,000 employees. Thus, under this category and the 
associated small business size standard, the majority of Other Toll 
Carriers can be considered small. According to internally developed 
Commission data, 284 companies reported that their primary 
telecommunications service activity was the provision of other toll 
carriage. Of these, an estimated 279 have 1,500 or fewer employees. 
Consequently, the Commission estimates that most Other Toll Carriers 
are small entities that may be affected by rules adopted pursuant to 
the Second Further Notice of Proposed Rulemaking.
    83. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate size standard under SBA 
rules is for the category Wired Telecommunications Carriers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 33 carriers have reported that 
they are engaged in the provision of operator services. Of these, an 
estimated 31 have 1,500 or fewer employees and two have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
OSPs are small entities.
    84. Prepaid Calling Card Providers. The SBA has developed a 
definition for small businesses within the category of 
Telecommunications Resellers. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to the 
Commission's Form 499 Filer Database, 500 companies reported that they 
were engaged in the provision of prepaid calling cards. The Commission 
does not have data regarding how many of these 500 companies have 1,500 
or fewer employees. Consequently, the Commission estimates that there 
are 500 or fewer prepaid calling card providers that may be affected by 
the rules.
4. Wireless Providers--Fixed and Mobile
    85. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular services, paging 
services, wireless internet access, and wireless video services. The 
appropriate size standard under SBA rules is that such a business is 
small if it has 1,500 or fewer employees. For this industry, U.S. 
Census data for 2012 show that there were 967 firms that operated for 
the entire year. Of this total, 955 firms had employment of 999 or 
fewer employees and 12 had employment of 1000 employees or more. Thus 
under this category and the associated size standard, the Commission 
estimates that the majority of wireless telecommunications carriers 
(except satellite) are small entities.
    86. The Commission's own data--available in its Universal Licensing 
System--indicate that, as of October 25, 2016, there are 280 Cellular 
licensees that will be affected by our actions today. The Commission 
does not know how many of these licensees are small, as the Commission 
does not collect that information for these types of entities. 
Similarly, according to internally developed Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service, 
and Specialized Mobile Radio Telephony services. Of this total, an 
estimated 261 have 1,500 or fewer employees, and 152 have more than 
1,500 employees. Thus, using available data, we estimate that the 
majority of wireless firms can be considered small.
    87. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions.
    88. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As noted, the SBA has developed a small business 
size standard for Wireless Telecommunications Carriers (except 
Satellite). Under the SBA small business size standard, a business is 
small if it has 1,500 or fewer employees. According to Commission data, 
413 carriers reported that they were engaged in wireless telephony. Of 
these, an estimated 261 have 1,500 or fewer employees and 152 have more 
than 1,500 employees. Therefore, a little less than one third of these 
entities can be considered small.
5. Satellite Service Providers
    89. Satellite Telecommunications Providers. This category comprises 
firms ``primarily engaged in providing telecommunications services to 
other establishments in the telecommunications and broadcasting 
industries by forwarding and receiving communications signals via a 
system of satellites or reselling satellite telecommunications.'' 
Satellite telecommunications service providers include satellite and 
earth station operators. The category has a small business size 
standard of $32.5 million or less in average annual receipts, under SBA 
rules. For this category, U.S. Census Bureau data for 2012 show that 
there were a total of 333 firms that operated for the entire year. Of 
this total, 299 firms had annual receipts of less than $25 million. 
Consequently, we estimate that the majority of satellite 
telecommunications providers are small entities.
6. Cable Service Providers
    90. Because section 706 requires us to monitor the deployment of 
broadband using any technology, we anticipate that some broadband 
service providers may not provide telephone service. Accordingly, we 
describe below other types of firms that may provide broadband 
services, including cable companies, MDS providers, and utilities, 
among others.
    91. Cable and Other Subscription Programming. This industry 
comprises establishments primarily engaged in operating studios and 
facilities for the broadcasting of programs on a subscription or fee 
basis. The broadcast programming is typically narrowcast in nature 
(e.g. limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own 
facilities or acquire programming from external sources. The 
programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. The SBA has established a size standard for this industry 
stating that a business in this industry is small if it has 1,500 or 
fewer employees. The 2012 Economic Census indicates that 367 firms were 
operational for that entire year. Of this total, 357 operated with less 
than 1,000 employees. Accordingly we conclude that a substantial 
majority of firms in this industry are small under the applicable SBA 
size standard.
    92. Cable Companies and Systems (Rate Regulation). The Commission 
has developed its own small business size standards for the purpose of 
cable rate

[[Page 22936]]

regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers nationwide. Industry data 
indicate that there are currently 4,600 active cable systems in the 
United States. Of this total, all but eleven cable operators nationwide 
are small under the 400,000-subscriber size standard. In addition, 
under the Commission's rate regulation rules, a ``small system'' is a 
cable system serving 15,000 or fewer subscribers. Current Commission 
records show 4,600 cable systems nationwide. Of this total, 3,900 cable 
systems have fewer than 15,000 subscribers, and 700 systems have 15,000 
or more subscribers, based on the same records. Thus, under this 
standard as well, we estimate that most cable systems are small 
entities.
    93. Cable System Operators (Telecom Act Standard). The 
Communications Act also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' There are approximately 52,403,705 cable video 
subscribers in the United States today. Accordingly, an operator 
serving fewer than 524,037 subscribers shall be deemed a small operator 
if its annual revenues, when combined with the total annual revenues of 
all its affiliates, do not exceed $250 million in the aggregate. Based 
on available data, we find that all but nine incumbent cable operators 
are small entities under this size standard. The Commission neither 
requests nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million. Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250 million, we are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    94. All Other Telecommunications. ``All Other Telecommunications'' 
is defined as follows: This U.S. industry is comprised of 
establishments that are primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. 
Establishments providing internet services or voice over internet 
protocol (VoIP) services via client-supplied telecommunications 
connections are also included in this industry. The SBA has developed a 
small business size standard for ``All Other Telecommunications,'' 
which consists of all such firms with gross annual receipts of $32.5 
million or less. For this category, census data for 2012 show that 
there were 1,442 firms that operated for the entire year. Of these 
firms, a total of 1,400 had gross annual receipts of less than $25 
million. Consequently, we estimate that the majority of All Other 
Telecommunications firms are small entities that might be affected by 
our action.
7. Electric Power Generators, Transmitters, and Distributors
    95. Electric Power Generators, Transmitters, and Distributors. This 
U.S. industry is comprised of establishments that are primarily engaged 
in providing specialized telecommunications services, such as satellite 
tracking, communications telemetry, and radar station operation. This 
industry also includes establishments primarily engaged in providing 
satellite terminal stations and associated facilities connected with 
one or more terrestrial systems and capable of transmitting 
telecommunications to, and receiving telecommunications from, satellite 
systems. Establishments providing internet services or voice over 
internet protocol (VoIP) services via client-supplied 
telecommunications connections are also included in this industry. The 
closest applicable SBA category is ``All Other Telecommunications''. 
The SBA's small business size standard for ``All Other 
Telecommunications,'' consists of all such firms with gross annual 
receipts of $32.5 million or less. For this category, U.S. Census data 
for 2012 show that there were 1,442 firms that operated for the entire 
year. Of these firms, a total of 1,400 had gross annual receipts of 
less than $25 million. Consequently, we estimate that under this 
category and the associated size standard the majority of these firms 
can be considered small entities.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    96. This NPRM proposes changes to, and seeks comment on, the 
Commission's rate-of-return and business data services rules. The 
objective of the proposed modifications is to reduce the unnecessary 
regulatory burdens and inflexibility of rate-of-return regulation for 
BDS services for A-CAM carriers, which are for the most part small 
businesses. These rule modifications would provide additional 
incentives for competitive entry, network investment and the migration 
to IP-based network technologies and services. The NPRM seeks comment 
on proposed rules that would generally reduce compliance requirements 
for A-CAM carriers that choose to opt into the new incentive regulation 
and regulatory framework for the provision of BDS.
    97. Under the Commission's rate-of-return rules, rates for business 
data services are based on costs derived from carrier-specific cost 
studies which represent a significant compliance burden for A-CAM 
carriers relative to their overall revenues. The NPRM proposes to 
transition these carriers to a form of incentive regulation that will 
enable these LECs to significantly reduce these compliance costs. The 
NPRM also proposes a new regulatory framework for A-CAM carriers' BDS 
that would in many cases eliminate ex ante pricing regulation and 
tariffing requirements for carriers electing incentive regulation.

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

    98. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance and reporting requirements under the rules for such small 
entities; (3) the use of performance rather than design standards; and 
(4) an exemption from coverage of the rule, or any part thereof, for 
such small entities.
    99. The rule changes proposed by the NPRM would reduce the economic 
impact of the Commission's rules on A-CAM carriers that elect incentive 
regulation in the following ways. Electing A-CAM carriers would no 
longer be required to prepare annual cost studies to justify their BDS 
rates. Such carriers would also be freed of ex ante pricing regulation 
for many of their BDS offerings, including packet-based BDS, circuit-
based BDS above a DS3

[[Page 22937]]

bandwidth (about 45 Mbps) such as OCn services, and circuit-based end 
user channel terminations (e.g. DS1 and DS3) in geographic areas deemed 
to be competitive by a competitive market test. These proposed rule 
changes represent alternatives to the Commission's current rules that 
would significantly minimize the economic impact of those rules on 
electing A-CAM LECs. Finally, we seek comment as to any additional 
economic burden incurred by small entities that may result from the 
rule changes proposed in the NPRM.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    100. None.

XI. Ordering Clauses

    101. Accordingly, it is ordered, pursuant to sections 1, 4(i), 10, 
and 201(b) of the Communication Act of 1934, as amended, 47 U.S.C. 151, 
154(i), 160, and 201(b) that the Petition for Rulemaking filed by ITTA 
and USTelecom in this proceeding is granted to the extent described 
herein.
    102. It is further ordered, pursuant to sections 1, 4(i), 10, and 
201(b) of the Communication Act of 1934, as amended, 47 U.S.C. 151, 
154(i), 160, and 201(b) that this Notice of Proposed Rulemaking is 
adopted.
    103. It is further ordered, Pursuant to Section 220(i) of the 
Communications Act, 47 U.S.C. 220(i), that notice be given to each 
state commission of the above rulemaking proceeding, and that the 
Secretary shall serve a copy of this NPRM on each state commission.
    104. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects

47 CFR Part 1

    Communications common carriers, Equal employment opportunity, 
Reporting and recordkeeping requirements, Telecommunications, 
Television.

47 CFR Part 32

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

47 CFR Part 51

    Communications common carriers, Telecommunications.

47 CFR Parts 61 and 69

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR parts 1, 32, 51, 61 
and 69 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 is revised to read as follows:

    Authority:  47 U.S.C. 151, 154(i), 154(j), 155, 157, 225, 227, 
303(r), 309, 1403, 1404, 1451, and 1452.
0
2. Section 1.1409 is amended by revising paragraph (g) to read as 
follows:


Sec.  1.1409  Commission consideration of the complaint.

* * * * *
    (g) A price cap company, or a rate-of-return carrier electing to 
provide service pursuant to Sec.  61.50 of this chapter, opts-out of 
Part 32 may calculate attachment rates for its poles, ducts, conduits, 
and rights of way using either Part 32 accounting data or GAAP 
accounting data. A company using GAAP accounting data to compute rates 
to attach to its poles, ducts, conduits, and rights of way in any of 
the first twelve years after opting-out must adjust (increase or 
decrease) its annually computed GAAP-based rates by an Implementation 
Rate Difference for each of the remaining years in the period. The 
Implementation Rate Difference means the difference between attachment 
rates calculated by the carrier under Part 32 and under GAAP as of the 
last full year preceding the carrier's initial opting-out of Part 32 
USOA accounting requirements.

PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS 
COMPANIES

0
3. The authority citation for part 32 continues to read as follows:

    Authority:  47 U.S.C. 219, 220 as amended, unless otherwise 
noted.

0
4. Section 32.1 is revised to read as follows:


Sec.  32.1  Background

    The revised Uniform System of Accounts (USOA) is a historical 
financial accounting system which reports the results of operational 
and financial events in a manner which enables both management and 
regulators to assess these results within a specified accounting 
period. The USOA also provides the financial community and others with 
financial performance results. In order for an accounting system to 
fulfill these purposes, it must exhibit consistency and stability in 
financial reporting (including the results published for regulatory 
purposes). Accordingly, the USOA has been designed to reflect stable, 
recurring financial data based to the extent regulatory considerations 
permit upon the consistency of the well-established body of accounting 
theories and principles commonly referred to as generally accepted 
accounting principles (GAAP). The rules of this part, and any other 
rules or orders that are derivative of or dependent on these Part 32 
rules, do not apply to price cap companies, and rate-of-return 
telephone companies offering business data services pursuant to Sec.  
61.50 of this chapter, that have opted-out of USOA requirements 
pursuant to the conditions specified by the Commission in section 
32.11(g).
0
5. Section 32.11 is amended by revising paragraph (g) to read as 
follows:


Sec.  32.11  Companies Subject to this part.

* * * * *
    (g) Notwithstanding subsection (a), a price cap company, or a rate-
of-return telephone company offering business data services pursuant to 
Sec.  61.50 of this chapter, that elects to calculate its pole 
attachment rates pursuant to section 1.1409(g) of this chapter will not 
be subject to this Uniform System of Accounts.

PART 51--INTERCONNECTION

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

    Authority:  47 U.S.C. 151-55, 201-05, 207-09, 218, 220, 225-27, 
251-54, 256, 271, 303(r), 332, 1302.

0
7. Section 51.903 is amended by revising paragraph (g) to read:


Sec.  51.903  Definitions.

* * * * *
    (g) Rate-of-Return Carrier is any incumbent local exchange carrier 
not subject to price cap regulation as that term is defined in Sec.  
61.3(bb) of this chapter, but only with respect to the

[[Page 22938]]

territory in which it operates as an incumbent local exchange carrier.
* * * * *

PART 61--TARIFFS

0
8. The authority citation for part 61 continues to read as follows:

    Authority:  Secs. 1, 4(i), 4(j), 201-05 and 403 of the 
Communications Act of 1934, as amended; 47 U.S.C. 151, 154(i), 
154(j), 201-05 and 403, unless otherwise noted.

0
9. Section 61.41 is amended by revising paragraph (d) and adding 
paragraph (f) to read as follows:


Sec.  61.41  Price cap requirements generally.

* * * * *
    (d) Except as provided in paragraph (e) of this section, local 
exchange carriers that become subject to price cap regulation as that 
term is defined in Sec.  61.3(ff) shall not be eligible to withdraw 
from such regulation.
* * * * *
    (f) Notwithstanding the requirements of paragraphs (c) and (d) of 
this section, a telephone company subject to rate-of-return regulation 
that is affiliated with a price cap local exchange carrier may provide 
business data services pursuant to Sec.  61.50 without converting other 
services to price cap regulation.
0
10. Section 61.50 is added to read as follows:


Sec.  61.50  Incentive regulation of rate-of-return carrier provision 
of business data services.

    (a) A rate-of-return carrier, as defined in Sec.  51.903(g), has 
the option to offer business data services to customers pursuant to 
this section if the carrier
    (1) Receives universal service payments pursuant to the 
Alternative-Connect America Cost Model pursuant to Sec.  54.311;
    (2) Is an affiliate of a price cap local exchange carrier operating 
pursuant to a waiver of Sec.  61.41; or
    (3) Receives universal service payments pursuant to Sec.  54.306.
    (b) A rate-of-return carrier may not elect to offer business data 
services to customers pursuant to this section unless it notifies the 
Chief of the Wireline Competition Bureau at least 120 days before the 
effective date of the election. Carriers may only elect this option to 
be effective on July 1, [year].
    (c) A rate-of-return carrier may elect to offer business data 
services pursuant to this section only if all affiliated rate-of-return 
carriers make the election.
    (d) A rate-of-return carrier electing to offer business data 
services under this section may continue to participate in the NECA 
Traffic Sensitive Pool for access services other than business data 
services.
    (e) A rate-of-return carrier electing to offer business data 
services pursuant to this section shall employ the procedures outlined 
in Sec. Sec.  61.41 through .49 to adjust its indexes to the extent 
those sections are applicable to business data services, except that:
    (1) For the special access basket specified in Sec.  61.42(d)(5), 
the value of X for local exchange carriers offering service under this 
section shall be 2.0% effective July 1, [year]; and
    (2) Exogenous costs shall be allocated to business data services 
based on relative revenues, including any universal service support 
amounts.
    (f) Tariffs offering business data services pursuant to this 
section may offer those business data services at different rates in 
different study areas.
    (g) A rate-of-return carrier offering business data services 
pursuant to this section may make a low-end adjustment pursuant to 
Sec.  61.45(d)(1)(vii) of this subpart unless it:
    (1) Exercises the regulatory relief pursuant to paragraph (j) of 
this section in any part of its service region; or
    (2) Exercises the option to use Generally Accepted Accounting 
Principles rather than the Part 32 Uniform System of Accounts pursuant 
to Sec.  32.11(g).
    (h) Rate-of-return carriers electing to offer business data 
services pursuant to this section may offer transport and end user 
channel terminations that include:
    (1) Volume and term discounts;
    (2) Contract-based tariffs, provided that:
    (i) Contract-based tariff services are made generally available to 
all similarly situated customers;
    (ii) The rate-of-return carrier excludes all contract-based tariff 
offerings from incentive regulation pursuant to Sec.  61.42(f) of this 
subpart;
    (3) Ability to file tariff revisions on at least one day's notice, 
notwithstanding the notice requirements for tariff filings specified in 
Sec.  61.58 of this chapter.
    (j) A rate-of-return carrier electing to offer business data 
services pursuant to this section shall comply with the requirements of 
section 69.805 of this Chapter.
    (k) The regulation of other services offered by a rate-of-return 
carrier that offers business data services pursuant to this section 
shall not be modified as a result of the requirements of this section.
0
11. Section 61.55 is amended by revising paragraph (a) to read as 
follows:


Sec.  61.55  Contract-based tariffs.

    (a) This section shall apply to price cap local exchange carriers 
permitted to offer contract-based tariffs under Sec.  1.776 or Sec.  
69.805 of this chapter, as well as to the offering of business data 
services by rate-of-return carriers pursuant to Sec.  61.50 of this 
part.
* * * * *

PART 69--ACCESS CHARGES

0
12. The authority citation for part 69 continues to read as follows:

    Authority:  47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 
403.

0
13. Section 69.114 is amended by revising paragraph (a) to read as 
follows:


Sec.  69.114  Special Access.

    (a) Appropriate subelements shall be established for the use of 
equipment or facilities that are assigned to the Special Access element 
for purposes of apportioning net investment, or that are equivalent to 
such equipment or facilities for companies subject to price cap 
regulation as that term is defined in Sec.  61.3(ff) of this chapter.
* * * * *
0
14. Section 69.805 is amended by revising paragraph (a) to read as 
follows:


Sec.  69.805  Prohibition on certain non-disclosure agreement 
conditions.

    (a) In markets deemed non-competitive, buyers and sellers of 
business data services shall not enter into a tariff, contract-based 
tariff, or commercial agreement, including but not limited to master 
service agreement, that contains a non-disclosure agreement as defined 
in Sec.  69.801(h), that restricts or prohibits disclosure of 
information to the Commission, or requires a prior request or legal 
compulsion by the Commission to effect such disclosure.
* * * * *
[FR Doc. 2018-10338 Filed 5-16-18; 8:45 am]
 BILLING CODE 6712-01-P



                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                           22923

                                               I. Executive Order 13211: Actions That                  FEDERAL COMMUNICATIONS                                see the SUPPLEMENTARY INFORMATION
                                               Significantly Affect Energy Supply,                     COMMISSION                                            section of this document.
                                               Distribution, or Use                                                                                          FOR FURTHER INFORMATION CONTACT:
                                                                                                       47 CFR Parts 1, 32, 51, 61, and 69                    Justin Faulb, Wireline Competition
                                                 This action is not subject to Executive                                                                     Bureau, Pricing Policy Division at 202–
                                                                                                       [WC Docket No. 17–144; FCC 18–46]
                                               Order 13211, because it is not a                                                                              418–1589 or via email at Justin.Faulb@
                                               significant regulatory action under                     Regulation of Business Data Services                  fcc.gov.
                                               Executive Order 12866.                                  for Rate-of-Return Local Exchange                        For additional information concerning
                                                                                                       Carriers                                              any potential information collection
                                               J. National Technology Transfer and
                                                                                                                                                             requirements contained in this
                                               Advancement Act (NTTAA)                                 AGENCY:  Federal Communications                       document, send an email to PRA@
                                                                                                       Commission.                                           fcc.gov or contact Nicole Ongele at
                                                 This rulemaking does not involve
                                                                                                       ACTION: Proposed rule.                                Nicole.Ongele@fcc.gov.
                                               technical standards.
                                                                                                                                                             SUPPLEMENTARY INFORMATION: This is a
                                               K. Executive Order 12898: Federal                       SUMMARY:    In this document, the                     summary of the Commission’s Notice of
                                               Actions To Address Environmental                        Commission proposes to allow rate-of-                 Proposed Rulemaking (NPRM), WC
                                               Justice in Minority Populations and                     return carriers receiving universal                   Docket No. 17–144; FCC 18–46, adopted
                                               Low-Income Populations                                  service support under the Alternative                 on April 17, 2018 and released on April
                                                                                                       Connect America Cost Model (A–CAM)                    18, 2018. The full-text of this document
                                                 The EPA believes the human health or                  to voluntarily migrate their lower speed              may be found at the following internet
                                               environmental risk addressed by this                    circuit-based business data service                   address: https://apps.fcc.gov/edocs_
                                               action will not have potential                          (BDS) offerings to incentive regulation.              public/attachmatch/FCC-18-46A1.doc.
                                               disproportionately high and adverse                     It also seeks comment on whether to                      Pursuant to §§ 1.415 and 1.419 of the
                                               human health or environmental effects                   remove ex ante pricing regulation from                Commission’s rules, 47 CFR 1.415,
                                               on minority, low-income or indigenous                   these carriers’ higher speed BDS                      1.419, interested parties may file
                                               populations because it does not affect                  offerings and on whether further                      comments and reply comments on or
                                               the level of protection provided to                     regulatory relief is warranted for these              before the dates indicated on the first
                                               human health or the environment. As                     carriers’ lower-speed circuit-based BDS               page of this document in Dockets WC
                                               discussed in Section I.C. of the                        in areas deemed competitive by a                      17–144. Comments may be filed using
                                                                                                       potential competitive market test.                    the Commission’s Electronic Comment
                                               preamble to this action, the NPL is a list
                                                                                                       Additionally, the document proposes to                Filing System (ECFS).
                                               of national priorities. The NPL is
                                                                                                       allow other rate-of-return carriers                      • Electronic Filers: Comments may be
                                               intended primarily to guide the EPA in                  receiving fixed support to opt into the               filed electronically using the internet by
                                               determining which sites warrant further                 same incentive regulation proposed for                accessing the ECFS: http://apps.fcc.gov/
                                               investigation to assess the nature and                  A–CAM carriers. Finally, the                          ecfs/.
                                               extent of public health and                             Commission seeks comment on                              • Paper Filers: Parties who choose to
                                               environmental risks associated with a                   proposed rule changes that would                      file by paper must file an original and
                                               release of hazardous substances,                        implement the proposals made in this                  one copy of each filing. If more than one
                                               pollutants or contaminants. The NPL is                  document, including corrections to                    docket or rulemaking number appears in
                                               of only limited significance as it does                 inaccuracies contained in its current                 the caption of this proceeding, filers
                                               not assign liability to any party. Also,                rules.                                                must submit two additional copies for
                                               placing a site on the NPL does not mean                                                                       each additional docket or rulemaking
                                                                                                       DATES:  Comments are due on or before
                                               that any remedial or removal action                                                                           number.
                                                                                                       June 18, 2018; reply comments are due                    Filings can be sent by hand or
                                               necessarily need be taken.                              on or before July 2, 2018. Parties that               messenger delivery, by commercial
                                               List of Subjects in 40 CFR Part 300                     believe this document may contain new                 overnight courier, or by first-class or
                                                                                                       or modified information collection                    overnight U.S. Postal Service mail. All
                                                 Environmental protection, Air                         requirements may submit written                       filings must be addressed to the
                                               pollution control, Chemicals, Hazardous                 Paperwork Reduction Act (PRA)                         Commission’s Secretary: Office of the
                                               substances, Hazardous waste,                            comments to the Office of Management                  Secretary, Federal Communications
                                               Intergovernmental relations, Natural                    and Budget (OMB), and other interested                Commission.
                                               resources, Oil pollution, Penalties,                    parties on or before July 16, 2018.                      • All hand-delivered or messenger-
                                               Reporting and recordkeeping                             ADDRESSES: You may submit comments,                   delivered paper filings for the
                                               requirements, Superfund, Water                          identified by WC Docket No. 17–144, by                Commission’s Secretary must be
                                               pollution control, Water supply.                        any of the following methods:                         delivered to FCC Headquarters at 445
                                                                                                         • Federal Communications                            12th St. SW, Room TW–A325,
                                                 Authority: 33 U.S.C. 1321(d); 42 U.S.C.
                                                                                                       Commission’s Website: http://                         Washington, DC 20554. The filing hours
                                               9601–9657; E.O. 13626, 77 FR 56749, 3CFR,
                                                                                                       apps.fcc.gov/ecfs//. Follow the                       are 8:00 a.m. to 7:00 p.m. All hand
                                               2013 Comp., p. 306; E.O. 12777, 56 FR 54757,
                                                                                                       instructions for submitting comments.                 deliveries must be held together with
                                               3 CFR, 1991 Comp., p.351; E.O. 12580, 52 FR
                                                                                                         • People with Disabilities: Contact the             rubber bands or fasteners. Any
                                               2923, 3 CFR, 1987 Comp., p.193.
                                                                                                       FCC to request reasonable                             envelopes and boxes must be disposed
amozie on DSK3GDR082PROD with PROPOSALS




                                                 Dated: May 9, 2018.                                   accommodations (accessible format                     of before entering the building.
                                               Barry N. Breen,                                         documents, sign language interpreters,                   • Commercial overnight mail (other
                                               Acting Assistant Administrator, Office of               CART, etc.) by email: FCC504@fcc.gov                  than U.S. Postal Service Express Mail
                                               Land and Emergency Management.                          or phone: 202–418–0530 or TTY: 888–                   and Priority Mail) must be sent to 9050
                                               [FR Doc. 2018–10466 Filed 5–16–18; 8:45 am]             835–5322.                                             Junction Drive, Annapolis Junction, MD
                                                                                                         For detailed instructions for                       20701.
                                               BILLING CODE 6560–50–P
                                                                                                       submitting comments and additional                       • U.S. Postal Service first-class,
                                                                                                       information on the rulemaking process,                Express, and Priority mail must be


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                                               22924                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               addressed to 445 12th Street SW,                        to be efficient by granting them at least             return carriers that receive model-based
                                               Washington, DC 20554.                                   a share of profits obtained from cost                 support to opt into the regulatory
                                                 People with Disabilities: To request                  reductions and allowing them to more                  framework for BDS that the Commission
                                               materials in accessible formats for                     aggressively serve consumers (including               recently adopted for price cap carriers.
                                               people with disabilities (braille, large                by reducing prices) in the face of                    The Petition explains that for such
                                               print, electronic files, audio format),                 competitive pressures. By contrast, rate-             carriers, ‘‘continued compliance with
                                               send an email to fcc504@fcc.gov or call                 of-return regulation provides incentives              rate-o[f]-return-based rate regulation
                                               the Consumer & Governmental Affairs                     for firms to ‘‘pad’’ their rate base and to           . . . entails significant costs.’’ It further
                                               Bureau at 202–418–0530 (voice), 202–                    make inefficiently high use of capital                explains that because carriers that
                                               418–0432 (TTY).                                         inputs. Additionally, rate-of-return                  receive universal service support based
                                                                                                       regulation requires carriers to account               on a cost model no longer have cost-
                                               Synopsis                                                for the costs they incur in providing                 based switched access charges, ‘‘the
                                               I. Introduction                                         service to justify their rates and                    need to perform annual cost studies
                                                  1. The Commission has long                           universal service support and thus                    now applies only with respect to BDS.’’
                                               recognized that, because it promotes                    unavoidably involves substantial                      It also claims that rate-of-return
                                                                                                       regulatory burdens.                                   regulation deters investment in
                                               efficiency and reduces regulatory
                                                                                                          3. In 1990, the Commission began the               networks and harms competition. The
                                               burdens, incentive regulation is
                                                                                                       process of shifting away from cost-based              Wireline Competition Bureau (Bureau)
                                               preferable to rate-of-return regulation.                regulation by adopting price cap rules
                                               Therefore, in a series of steps over the                                                                      sought and received comment on the
                                                                                                       that govern how the largest incumbent                 Petition. A number of commenters
                                               last three decades, the Commission                      LECs establish their interstate access
                                               provided incentives to encourage                                                                              support the Petition, arguing that cost
                                                                                                       charges. Price cap regulation was                     savings and lighter touch pricing
                                               incumbent local exchange carriers                       intended to avoid the counterproductive
                                               (LECs) to move from rate-of-return                                                                            regulation of model-based carriers’ BDS
                                                                                                       incentives of rate-of-return regulation in            would spur competition, incentivize
                                               regulation to incentive regulation. In                  part by divorcing the annual rate
                                               this NPRM, we take more steps along                                                                           investment, benefit consumers, and
                                                                                                       adjustments from the actual costs of                  eliminate unnecessary administrative
                                               that path by proposing to allow rate-of-                each individual LEC, and in part by
                                               return carriers that receive universal                                                                        burdens. Other commenters expressed
                                                                                                       adjusting the cap based on actual                     concerns, including whether sufficient
                                               service support under the Alternative                   industry productivity experience. In
                                               Connect America Cost Model (A–CAM)                                                                            competition exists in A–CAM study
                                                                                                       more recent years, a number of midsize                areas to justify reduced regulation.
                                               to voluntarily migrate their lower speed                carriers have voluntarily converted from
                                               business data services (BDS) offerings to               rate-of-return to price cap regulation.                  6. In addition to facilitating rate-of-
                                               incentive regulation. Because A–CAM                        4. In 2011, as part of comprehensive               return carriers’ move to incentive
                                               carriers that elect to move away from                   reform and modernization of the                       regulation, the Commission has taken
                                               rate-of-return regulation for their BDS                 universal service and intercarrier                    major steps to reduce regulation for
                                               offerings (electing A–CAM carriers) will                compensation systems, the Commission                  carriers that face competition. Given the
                                               no longer need to provide cost-based                    adopted rate caps for switched access                 inherent inefficiencies of regulation, the
                                               justification for their rates, we propose               services for rate-of-return carriers,                 Commission relies on competition to the
                                               to relieve them of burdensome cost-                     thereby removing switched access                      extent possible to ensure carriers’ rates
                                               based pricing regulation, including the                 services from rate-of-return regulation.              and practices are just and reasonable. In
                                               obligation to conduct cost studies for                  In 2016, the Commission gave rate-of-                 1999, the Commission granted pricing
                                               purposes of ratemaking. At the same                     return carriers the option of receiving               flexibility to price cap carriers that
                                               time, because we recognize that ex ante                 forward looking model-based support                   provided service in areas where carriers
                                               pricing regulation is of limited use—and                from the high-cost universal service                  could demonstrate threshold levels of
                                               often harmful—in a dynamic and                          support program, the A–CAM, designed                  deployment by competitive providers.
                                               increasingly competitive market, we                     to estimate the cost of operating and                 The Pricing Flexibility Order adopted
                                               seek comment on identifying areas                       maintaining an efficient modern                       competitive triggers designed to
                                               served by electing A–CAM carriers that                  network. More than 200 carriers opted                 measure the extent to which
                                               are sufficiently competitive that their                 to receive A–CAM support which                        competitors had made irreversible, sunk
                                               lower speed BDS offerings should be                     eliminated the need for those carriers to             investment in collocation and transport
                                               relieved of ex ante pricing regulation,                 conduct cost studies to quantify the                  facilities. The Commission gave price
                                               and we seek comment on whether to                       amount of high-cost support they                      cap carriers that satisfied those triggers
                                               relieve electing A–CAM carriers’ higher                 receive. The Commission observed that                 the flexibility to offer BDS at
                                               speed BDS offerings from ex ante                        ‘‘the election of model-based support                 unregulated rates through generally
                                               pricing regulation. And, because there                  places those carriers in a different                  available and individually negotiated
                                               are other rate-of-return carriers that                  regulatory paradigm’’ and that                        tariffs. In addition, starting in 2007,
                                               receive model-based or fixed support,                   ‘‘[e]ffectively, the carriers that choose to          upon finding that competitive providers
                                               and would benefit from less                             take the voluntary path to the model are              for BDS services existed in the relevant
                                               burdensome regulation, we propose to                    electing incentive regulation for                     price cap areas, the Commission granted
                                               provide the same relief to those carriers               common line offerings.’’ As a result,                 a number of price cap incumbent LECs
                                               as we propose to provide to A–CAM                       rate-of-return carriers that elected the              forbearance from dominant carrier
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                                               carriers. Taken together we expect these                A–CAM support option are currently                    regulation, including tariffing and price
                                               actions will spur entry, innovation, and                subject to rate-of-return regulation and              cap regulation, for their newer packet-
                                               competition in the affected BDS                         the attendant requirement to conduct                  based broadband services. These
                                               markets.                                                cost studies only for their BDS offerings.            forbearance orders concluded that a
                                                                                                          5. In 2017, ITTA and USTelecom                     number of competing providers exist for
                                               II. Background                                          (together, Petitioners) filed a joint                 broadband BDS. They also concluded
                                                 2. We start from the premise that                     petition requesting that the Commission               that forbearance from burdensome
                                               incentive regulation encourages carriers                allow A–CAM carriers and other rate-of-               regulations when competition exists


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                           22925

                                               increases the amount of competition in                  propose for A–CAM carriers, we also                   make this election mandatory for all A–
                                               the marketplace, ensuring that rates and                seek comment on providing a path                      CAM carriers.
                                               practices for services are just,                        forward for regulating such carriers’
                                                                                                                                                             1. Relieving Electing A–CAM Carriers of
                                               reasonable, and not unreasonably                        BDS offerings. As commenters respond
                                                                                                                                                             Rate-of-Return Regulation for Their
                                               discriminatory.                                         to the requests for comment below, we
                                                  7. The BDS Order the Commission                                                                            Lower Speed TDM BDS Offerings
                                                                                                       encourage discussion of how such a
                                               adopted last year took another step                     path forward could work for other such                   11. We propose to relieve electing A–
                                               toward reducing regulation in response                  rate-of-return carriers.                              CAM carriers of a variety of regulatory
                                               to the growth of competition. In that                                                                         obligations that pertain to rate-of-return
                                               order, the Commission found that                        A. Incentive Regulation for Lower                     regulation, including the obligation to
                                               reducing government intervention and                    Capacity TDM Transport and End User                   perform cost studies. Rate-of-return
                                               allowing market forces to continue                      Channel Termination Services                          carriers are required by our rules to
                                               working would further spur entry,                          9. We propose to allow electing A–                 perform relatively burdensome cost
                                               innovation, and competition in BDS                      CAM carriers to convert their lower                   studies to support their rate
                                               markets served by price cap carriers.                   capacity TDM BDS offerings to an                      development. Petitioners and other
                                               The Commission applied ex ante rate                     incentive regulatory approach modelled                commenters identify elimination of cost
                                               regulation ‘‘only where competition is                  on the rules the Commission adopted                   studies as a primary benefit of allowing
                                               expected to materially fail to ensure just              for price cap carriers’ lower speed BDS               A–CAM carriers to elect incentive
                                               and reasonable rates’’ and stated its                   in noncompetitive areas, while still                  regulation. We invite parties to quantify
                                               preference to rely ‘‘on competition                     allowing such carriers to be subject to               the burdens of preparing cost studies
                                               rather than regulation, wherever                        the switched access rate transition and               (including costs and/or hours of labor)
                                               purchasers can realistically turn to a                  the Eligible Recovery rules applicable to             and comment on whether cost studies
                                               supplier beyond the incumbent LEC.’’                    rate-of-return carriers. We propose to                impose any special burdens on smaller
                                               Based on the record before it, the                      allow conversion to incentive regulation              carriers. We also seek comment on
                                               Commission found that, on balance,                      for TDM transport and end user channel                whether data from A–CAM carriers’ cost
                                               competition was sufficient to ensure just               termination services offered at speeds at             studies are necessary in the performance
                                               and reasonable rates for packet-based                   or below a DS3, as well as other                      of any Commission regulatory function.
                                               business data services, TDM transport                   generally lower speed non-packet-based                If so, will the benefits of the data
                                               services, and higher bandwidth (i.e.                    services that are commonly considered                 collected from electing A–CAM carriers’
                                               above DS3) TDM services (including                      special access services. Are there other              cost studies outweigh the burden of
                                               OCn services) in areas served by price                  special access offerings by rate-of-return            requiring them to continue to provide
                                               cap carriers. It also adopted a                         carriers that we should include in the                that data when they are no longer
                                               competitive market test for TDM end                     incentive regulation option for A–CAM                 offering cost-based services? Are there
                                               user channel terminations in price cap                  carriers? For example, are there any                  other, less burdensome ways of
                                               areas and refrained from ex ante pricing                telecommunications service                            collecting the relevant data from
                                               regulation of those services in areas                   components associated with either                     electing A–CAM carriers that we should
                                               deemed competitive by that test.                        residential digital subscriber line                   explore? Are there other issues we need
                                                                                                       services or dedicated internet access                 to address before relieving A–CAM
                                               III. Path Forward For Lower Speed                       services that would qualify as special                carriers of the burden of cost studies? If
                                               Services                                                access services that we should also                   so, how shall we address them?
                                                  8. We seek comment on a regulatory                   allow to migrate to incentive regulation?                12. We also propose to allow electing
                                               framework that would provide electing                   We anticipate that this approach will                 A–CAM carriers pricing flexibility for
                                               A–CAM carriers a path to allow a move                   encourage competition for BDS in areas                their lower capacity TDM services
                                               from rate-of-return regulation to a more                served by electing A–CAM carriers and                 similar to that granted by the
                                               efficient system of incentive regulation                reduce unnecessary regulatory burdens                 Commission in the BDS Order to price
                                               for their TDM transport and end user                    on electing A–CAM carriers. We seek                   cap carriers in their provision of lower
                                               channel terminations at speeds at or                    comments on this proposal, including                  capacity TDM services in counties
                                               below a DS3. In so doing, we propose                    on the benefits and costs of this                     deemed noncompetitive by the
                                               to require that each A–CAM carrier’s                    approach.                                             competitive market test we adopted for
                                               decision about whether to move their                       10. The Commission has consistently                price cap carriers. We propose to allow
                                               BDS offerings out of rate-of-return                     acknowledged that incentive regulation                electing A–CAM carriers to offer term
                                               regulation be made on an all-or-nothing                 can foster appropriate incentives for                 and volume discounts and contract-
                                               basis for all of an A–CAM carrier’s study               carriers to be efficient and to innovate.             based services for their TDM transport
                                               areas that receive A–CAM support. We                    Under price cap regulation, as opposed                and end user channel termination
                                               also invite comment on what would be                    to cost-based regulation, carriers have               services offered at speeds at or below a
                                               an appropriate market analysis for these                the incentive to become more efficient,               DS3. Electing A–CAM carriers would be
                                               lower speed services and on a                           to reduce costs, and to innovate as a                 required to maintain generally available
                                               competitive market test that would                      means of increasing their profits.                    tariffed rates subject to incentive
                                               allow us to distinguish between markets                 Moreover, an appropriate X-factor and                 regulation for these lower speed TDM
                                               that are sufficiently competitive so as                 periodic review by the Commission can                 transport and end user channel
                                               not to warrant the burdens of ex ante                   ensure that carriers share some or all of             terminations, and other special access
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                                               pricing regulation from those that are                  these efficiencies with their customers.              services included in their tariffs. We
                                               not. Although the sections below focus                  We invite parties to identify with                    seek comment on these proposals.
                                               on A–CAM carriers, because we are                       specificity any short-comings in the                     13. We also propose to allow electing
                                               proposing to allow other rate-of-return                 proposal and to suggest alternatives that             A–CAM carriers to remain in the NECA
                                               carriers that receive model-based or                    could achieve the objectives more                     traffic-sensitive tariff for switched
                                               other types of fixed support the                        efficiently. Given the well-recognized                access services, and to continue to be
                                               opportunity to elect the same or similar                benefits of incentive regulation, we also             subject to the switched access rate cap
                                               lighter-touch BDS regulation that we                    seek comment on whether we should                     provisions of section 51.909 and the


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                                               22926                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               Eligible Recovery rules in section 51.917               including those of affiliates and carriers            access tariff filing. Using July 1st will
                                               of the Commission’s rules. We propose                   it purchases or merges with, to be                    simplify the tariffing process for
                                               to require electing A–CAM carriers to                   subject to price cap regulation. We                   implementing any change and is
                                               remove their special access services                    propose to amend § 61.41 to create an                 consistent with the price cap rules’ use
                                               from the NECA traffic-sensitive tariff.                 exception for the alternative regulatory              of the prior calendar-year demand data
                                               We seek comment on these proposals.                     structure we propose in this NPRM, and                for their price cap calculations. We
                                                  14. We recognize that our proposed                   we seek comment on this proposal. Are                 invite parties to comment on this
                                               approach for electing A–CAM carriers                    there any other rules we should                       proposal, and to suggest other timing
                                               treats TDM transport differently than                   consider waiving or amending in the                   options that may work, identifying the
                                               the BDS Order does for price cap                        context of this proceeding?                           benefits and drawbacks of such
                                               carriers. While the Commission found                                                                          proposals. The proposals should
                                               TDM transport to be competitive in                      2. Implementing Optional Incentive
                                                                                                                                                             address the periods for determining cost
                                               price cap areas generally, here we                      Regulation for Lower Capacity TDM
                                                                                                                                                             and demand for electing A–CAM
                                               propose to allow electing A–CAM                         Services
                                                                                                                                                             carriers. We also invite parties to
                                               carriers to convert lower speed TDM                        16. In this section, we make specific              comment on whether we should allow
                                               transport services to incentive                         proposals regarding the terms of the                  a one-time opportunity to elect, or
                                               regulation but not to immediately                       incentive regulation we propose to                    whether additional election
                                               eliminate ex ante pricing regulation for                adopt for electing A–CAM carriers and                 opportunities should be allowed. If
                                               them. We propose this different                         seek comment on these proposals.                      more than one opportunity to elect is
                                               approach given that competition for                     a. Election                                           offered, what should the timing be for
                                               such services may not be as robust in                                                                         any additional election opportunities?
                                               the less dense, more rural areas that A–                   17. We propose to require carriers that              19. We have recently proposed
                                               CAM carriers typically serve. We seek                   elect to move off rate-of-return                      making a second A–CAM offer. In the
                                               comment on this aspect of our proposal,                 regulation for their BDS services to                  event that additional rate-of-return
                                               and on what data exist to confirm or                    move to incentive regulation at the                   carriers become A–CAM carriers, we
                                               invalidate our assumption. The                          holding company level for study areas                 propose that they may elect to adopt
                                               Commission observed in the BDS Order                    in all states that elected to receive A–              incentive regulation at the next annual
                                               that competitive transport services are                 CAM support rather than electing on an                tariff filing date that follows their
                                               typically deployed at locations where                   individual carrier or study area basis, as            election. We also propose to allow the
                                               sufficient demand is aggregated to                      proposed by Petitioners. Requiring                    new electing A–CAM carriers to adopt
                                               enable a competitor to justify                          election at the holding company level                 the other lighter touch regulatory
                                               investment. To what extent is there                     will ensure cost savings from the                     options that are available to electing A–
                                               sufficient aggregated demand in A–CAM                   elimination of annual cost studies to be              CAM carriers at that time. We invite
                                               areas to justify the deployment of                      realized by all affiliated carriers electing          parties to comment on these proposals.
                                               competitive transport? Are there                        A–CAM support. Carriers have already
                                                                                                       had the opportunity to elect between A–               b. Initial Rate Levels
                                               instances where demand for TDM
                                               transport services may be increasing,                   CAM and cost-based support at a state-                   20. We propose to allow electing A–
                                               creating the precondition for                           wide level. Allowing A–CAM carriers to                CAM carriers that currently file their
                                               competitive entry in the future?                        elect regulatory treatment at a more                  own tariffed rates for BDS offerings to
                                               Alternatively, has the overall decline in               disaggregated level would appear to be                use their existing rates to set their initial
                                               demand for TDM services also affected                   inconsistent with the underlying                      BDS rates under incentive regulation.
                                               the demand for lower speed TDM                          premise of price caps, which assumed a                The Commission used this method
                                               transport services in A–CAM areas?                      broad representation of carrier                       when allowing rate-of-return carriers
                                               Finally, we seek comment on allowing                    operations to provide a basis for                     filing their own rates to convert to price
                                               additional regulatory relief for A–CAM                  establishing an industry-wide                         cap regulation. The demand to be used
                                               carriers’ TDM transport offered at                      productivity factor. Currently, there are             for the incentive regulation calculations
                                               speeds at or below a DS3 in areas                       262 A–CAM companies when                              would be that of the previous calendar
                                               deemed competitive by a competitive                     calculated at the state level and 207                 year. The carrier would then apply the
                                               market test we seek comment on below.                   when calculated at the holding                        prescribed X-factor and the inflation
                                                  15. We do not propose to transition                  company level. We invite parties to                   factor, two variables in the
                                               electing A–CAM carriers to incentive                    comment on the proposed level of                      Commission’s existing formula for the
                                               regulation for switched access services.                election. Parties believing the proposed              price cap index (PCI), which would
                                               The transition provisions for switched                  holding company level is too high                     result in the proposed rates in the first
                                               access rates and Eligible Recovery rules                should explain why a more                             year of incentive regulation, and each
                                               for rate-of-return carriers adopted by the              disaggregated level would be in the                   year thereafter. We invite parties to
                                               USF/ICC Transformation Order are well                   public interest. Any explanation should               comment on this proposal. We ask that
                                               established, have been upheld on                        include concrete examples of why the                  any party disagreeing with this
                                               appeal, and have been partially                         proposed level would preclude a                       approach submit a detailed proposal for
                                               implemented; disrupting these                           significant number of A–CAM carriers                  setting initial rates, including an
                                               transitions would likely impose                         from electing incentive regulation.                   explanation of why its preferred
                                               additional costs and increase                           Parties should address whether other                  approach would be equal to or better
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                                               uncertainty, deterring investment and                   aspects of the proposal could be                      than the approach we propose.
                                               deployment. We also seek comment on                     modified to make the proposed level of                   21. Establishing initial BDS rates for
                                               the benefits and costs of our proposed                  election more acceptable.                             electing A–CAM carriers participating
                                               approach. The Petition sought an                           18. We propose to make incentive                   in the NECA traffic-sensitive pool is
                                               ‘‘exception’’ to § 61.41 of the                         regulation for electing A–CAM carriers                more complicated because they are
                                               Commission’s rules (the so-called ‘‘all or              effective on the July 1st following                   charging a pooled rate, which does not
                                               nothing’’ rule), which requires all of a                adoption of an order in this proceeding,              reflect the actual costs of the pooling
                                               price cap carrier’s study areas and rates,              which is the deadline for the annual                  carrier. The NECA pool BDS rates are


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                         22927

                                               therefore not the proper rates to use as                carriers contained in sections 61.45–48               warrant that the Commission increase or
                                               initial BDS rates. We therefore propose                 of our rules, as appropriate, to reflect              decrease the X-Factor? Should the level
                                               that each electing A–CAM carrier in the                 the prescribed productivity factor, the               of the X-Factor be affected by whether
                                               pool establish its initial BDS rates by                 inflation factor, and any required                    the carrier election is for all A–CAM
                                               multiplying the NECA pool rate the                      exogenous cost adjustment in the PCI, to              study areas, or made on a more
                                               carrier has been charging by a net                      ensure that the Actual Price Index (API)              disaggregated level?
                                               contribution/recipient factor. Thus, an                 does not exceed the PCI, and that the
                                                                                                                                        e. Exogenous Costs
                                               A–CAM carrier with more BDS revenues                    SBIs for each category or subcategory do
                                               than the BDS settlements it receives                    not exceed their upper limits. The  27. We seek comment on the
                                               from the pool would have its pool rate                                                   treatment that should be accorded
                                                                                                       category and sub-category requirements
                                               reduced commensurately. The opposite                                                     exogenous costs if we allow A–CAM
                                                                                                       are designed to limit the degree to
                                               would occur for an electing A–CAM                                                        carriers to elect to move to incentive
                                                                                                       which a carrier can raise rates in any
                                               carrier that received more BDS                                                           regulation. Exogenous costs are those
                                                                                                       given year in an effort to avoid anti-
                                               settlements than the BDS revenues it                                                     costs that are beyond the control of the
                                                                                                       competitive pricing. We invite parties to
                                               produced. The carrier would then apply                                                   carrier, as determined by the
                                                                                                       comment on this proposal. Are there
                                               the prescribed X-factor and the inflation                                                Commission. Section 61.45(d) of our
                                                                                                       other approaches we should take? Are
                                               factor, which would result in the                                                        rules provides for an exogenous cost
                                                                                                       there other categories or sub-categories
                                               proposed rates in the first year of                                                      adjustment for price cap carriers to be
                                                                                                       needed for A–CAM carriers that were
                                               incentive regulation, and each year                                                      apportioned on a cost-causative basis
                                                                                                       not necessary for price cap carriers? We
                                               thereafter. This approach avoids the                                                     between price cap services as a group,
                                                                                                       request that parties recommending that
                                               necessity of doing new cost studies for                 we modify the categories or sub- and excluded services as a group.
                                               each study area of the electing A–CAM                                                    Exogenous cost changes attributed to
                                                                                                       categories explain why such a change
                                               carriers. We invite parties to comment                                                   price cap services are recovered from
                                                                                                       would improve the functioning of the
                                               on this approach. Alternatively,                                                         services other than those used to
                                                                                                       incentive regulation plan and/or the
                                               commenters may suggest other                                                             calculate the average traffic-sensitive
                                                                                                       BDS market and produce benefits for
                                               approaches, such as doing cost studies                  consumers.                       charge. A–CAM carriers have been
                                               for the preceding calendar year, or other                                                removed from rate-of-return regulation
                                                                                             d. Productivity Factor and Measure of      for universal service purposes and for
                                               twelve-month period. Parties making
                                                                                             Inflation                                  interstate access services other than
                                               such alternative proposals should
                                               address the manner in which the                  24. Consistent with the BDS Order, we BDS. We invite parties to address how
                                               alternative time period data would be         also propose to adopt an X-factor of two the principle of cost causation should be
                                               incorporated into the incentive               percent to reflect the productivity        applied in determining the amount of
                                               regulation calculations.                      growth that electing A–CAM carriers are any exogenous costs to be assigned to
                                                  22. Are there other approaches we          likely to experience in the provision of   the BDS basket for electing A–CAM
                                               should take in determining how electing       these services relative to productivity    carriers. We propose that exogenous
                                               A–CAM carriers should establish initial       growth in the overall economy in the       costs be allocated based on a ratio of
                                               BDS rates? Are there other adjustments        foreseeable future and to use Gross        BDS revenues to total revenues from all
                                               that we should make to our proposed           Domestic Product-Price Index (GDP–PI) regulated services and A–CAM
                                               initial rate setting process? For example,    as the measure of inflation that electing  universal service support payments. We
                                               should the initial rates be lower than        A–CAM carriers will use in their PCI       invite parties to address whether some
                                               current rates because of the cost savings     calculations. We do not propose to         other basis would be preferable,
                                               electing carriers will realize by moving      incorporate a consumer productivity        including the rationale for the
                                               to incentive regulation? If so, how much      dividend (CPD) adjustment into this X-     alternative approach.
                                               should be shared with consumers and           factor. Based on the industry-wide
                                                                                                                                        f. Low-End Adjustment
                                               how should such amount be                     analysis provided in the BDS Order and
                                               determined? In a 2012 waiver petition         Petitioners’ proposal that we use a two       28. Consistent with the BDS Order, we
                                               seeking to move from rate-of-return to        percent X-Factor, we believe an X-factor propose to adopt a low-end adjustment
                                               price cap status, FairPoint                   of two percent will ensure just and        mechanism to provide an appropriate
                                               Communications, Inc., proposed                reasonable rates for BDS offered by        backstop to ensure that electing A–CAM
                                               reducing its special access rates by a        electing A–CAM carriers, and that use of carriers are not subject to protracted
                                               percentage of the anticipated cost            the GDP–PI is appropriate. We seek         periods of low earnings. Failure to
                                               savings. We invite parties to comment         comment on this proposal.                  include any adjustment for such
                                               on these issues and to suggest how such          25. Are there reasons we should use     circumstances could harm customers as
                                               amounts should be determined,                 a different productivity factor for        well as shareholders of such a carrier as
                                               especially if another cost study is to be     electing A–CAM providers than we use       a below-normal rate-of-return over a
                                               avoided.                                      for price cap carriers? We request that    prolonged period could threaten the
                                                                                             any party proposing a different            carrier’s ability to raise the capital
                                               c. Special Access Basket, Categories and productivity factor or measure of               necessary to provide modern, efficient
                                               Subcategories                                 inflation factor describe with specificity services to customers. The low-end
                                                  23. Consistent with the BDS Order, we how their proposed X-Factor is derived          adjustment mechanism would permit a
                                               propose to retain the special access          and why it would be a better forecast of   one-time adjustment to a single year’s
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                                               basket, categories and subcategories,         the expected pattern of growth than        BDS rates to avoid back-to-back annual
                                               and the attendant rules governing the         what we propose herein.                    earnings below a set benchmark. If an
                                               allowed annual adjustments. We                   26. We also seek comment on the         electing A–CAM carrier’s BDS earnings
                                               propose to require each electing A–CAM extent to which the voluntary nature of           fall below the low-end adjustment mark
                                               carrier to initialize its PCI for the special the election interacts with the            in a base year period, it would be
                                               access basket and associated service          appropriate level of the X-Factor. For     entitled to adjust its rates upward to
                                               band indices (SBIs) at 100 and to use the example, are there relationships               target earnings to the benchmark. We
                                               rate adjustment rules for price cap           between different factors that could       propose that, consistent with past


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                                               22928                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               practice, the low-end adjustment                        regulated costs and prices, a carrier is              h. GAAP Accounting
                                               benchmark should be set 100 basis                       not able automatically to recoup                         34. We propose to allow electing A–
                                               points below the authorized rate of                     misallocated non-regulated costs by                   CAM carriers to use GAAP for keeping
                                               return for rate-of-return carriers. We                  raising basic service rates,’ thus                    their accounts, should they choose to do
                                               propose that electing A–CAM carriers                    reducing incentives to shift non-                     so. The Commission recently revised the
                                               that exercise downward pricing                          regulated costs to regulated services.’’              Part 32 rules to allow price cap LECs to
                                               flexibility (for example, by entering into              Does the same reasoning for forbearance               elect to use GAAP in recording and
                                               a contract tariff with a customer), or                  apply to A–CAM carriers electing                      reporting their financial data, subject to
                                               elect the option to use generally                       incentive regulation? Will the operation              two targeted accounting requirements.
                                               accepted accounting practices (GAAP)                    of the incentive regulation rules we                  Electing carriers may either (a) calculate
                                               rather than the Part 32 Uniform System                  propose make enforcement of the cost                  an Implementation Rate Difference
                                               of Accounts as set forth in our recent                  assignment and separations rules                      between the attachment rates calculated
                                               Part 32 Accounting Order, will be                                                                             by the price cap carrier under the
                                                                                                       unnecessary to ensure just, reasonable
                                               ineligible for a low-end adjustment.
                                                                                                       and not unjustly or unreasonably                      Uniform System of Accounts (USOA)
                                                  29. We invite interested parties to
                                                                                                       discriminatory charges, practices,                    and under GAAP as of the last full year
                                               comment on the proposal to adopt a
                                               low-end adjustment mechanism. We ask                    classifications, and regulations, or make             preceding the carrier’s initial opting-out
                                               parties to comment on whether this                      enforcement of those rules unnecessary                of Part 32 USOA accounting
                                               measure will ensure that electing A–                    to protect consumers from unjust,                     requirements; or (b) comply with GAAP
                                               CAM carriers have the opportunity to                    unreasonable, and unjustly or                         accounting for all purposes other than
                                               attract sufficient capital. We note that an             unreasonably discriminatory rates,                    those associated with setting pole
                                               A–CAM carrier would have to present                     practices, classifications, and                       attachment rates while continuing to
                                               cost data to support a claim for a low-                 regulations? Is enforcement of such                   use the Part 32 accounts and procedures
                                               end adjustment. Because eliminating the                 regulations unnecessary to protect                    necessary to establish and evaluate pole
                                               need for cost studies is one of the                     consumers? Would forbearance be                       attachment rates. Electing carriers must
                                               driving objectives behind Petitioners’                  consistent with the public interest and               adjust their annually computed GAAP-
                                               proposal, we ask parties to comment on                  would the reduction of regulatory                     based rates by the Implementation Rate
                                               whether there are alternative ways to                   burdens improve market                                Difference for a period of 12 years after
                                               make the required determinations short                                                                        the election. This frees price cap carriers
                                                                                                       competitiveness?
                                               of performing a full cost study. Parties                                                                      from having to maintain two sets of
                                                                                                          32. We further propose to condition                books: One for financial reporting
                                               offering suggestions should explain the
                                                                                                       any grant of forbearance from                         purposes consistent with GAAP and one
                                               proposed mechanism in sufficient detail
                                               that a comparison to the results of a cost              application of the cost assignment and                for regulatory reporting purposes
                                               study can be made. We also seek                         jurisdictional separations rules for an               consistent with the accounting
                                               comment on the appropriateness of                       electing A–CAM carrier that froze their               requirements of Part 32. For the same
                                               setting the benchmark for the low-end                   separations category relationships on its             reasons, we propose to allow electing
                                               adjustment at 100 basis points below the                conducting a cost study for the                       A–CAM carriers to have the option to
                                               authorized rate of return for rate-of-                  preceding calendar year. The A–CAM                    use GAAP. We propose to require
                                               return carriers. We note that this                      carrier would then adjust the initialized             electing A–CAM carriers that choose to
                                               proposal would allow the benchmark to                   BDS rates determined pursuant to the                  use GAAP accounting to be subject to
                                               track the gradual reduction in the                      procedures described above by the                     the same data provisioning
                                               authorized rate-of-return as it transitions             results of the cost study. We invite                  requirements as price cap carriers,
                                               down.                                                   parties to comment on this proposal and               including the requirements relating to
                                                                                                       to identify any constraints that should               the calculation of pole attachment rates.
                                               g. Cost Assignment and Jurisdictional                   be placed on application of the cost                  As a result, such carriers will have to
                                               Separations Rules                                                                                             determine an Implementation Rate
                                                                                                       study results to the development of
                                                  30. Pursuant to section 10 of the Act,               revised access charges, including BDS                 Difference to apply in calculating their
                                               and to implement our new incentive                      rates. For example, should a carrier be               pole attachment rates. We seek
                                               regulation for those A–CAM carriers                     limited in the extent it may adjust the               comment on this proposal. Are there
                                               that elect incentive regulation, we                     relative price relationships between                  other issues with allowing electing A–
                                               propose to forbear from application of                  business data services that may be                    CAM carriers to use GAAP accounting
                                               our cost assignment rules, including                    established?                                          that we should consider?
                                               jurisdictional separations requirements.
                                                                                                          33. Above, we propose procedures for               B. Providing a Path To Relieve Electing
                                               Consistent with our previous
                                                                                                       electing A–CAM carriers to use in                     A–CAM Carriers of Ex Ante Pricing
                                               forbearance orders for price cap carriers,
                                                                                                       establishing initial BDS rates under                  Regulation for Lower Speed End User
                                               we propose to define cost assignment
                                                                                                       incentive regulation that assume other                Channel Terminations and TDM
                                               rules to include the rules governing the
                                                                                                       factors remained unchanged. Forbearing                Transport in Competitive Areas
                                               assignment of costs and revenues by
                                               carriers. We seek comment on our                        from cost allocation and jurisdictional                  35. We seek comment on whether we
                                               proposed definition.                                    separations requirements for A–CAM                    should adopt a competitive market test
                                                  31. In providing similar forbearance to              carriers electing incentive regulation,               (CMT) to assess the availability of actual
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                                               price cap carriers, the Commission                      however, would change one of the                      and likely competitive options in the
                                               observed that such rules ‘‘were                         controlled factors. We invite comment                 provision of transport and last-mile
                                               developed when the ILECs’ interstate                    on what adjustments, if any, we should                services in areas served by electing A–
                                               rates and many of their intrastate rates                allow an A–CAM carrier that elects to                 CAM carriers and to remove from ex
                                               were set under rate-based, cost-of-                     freeze its category relationships to make             ante pricing regulation DS1 and DS3
                                               service regulation. The Commission has                  to its rates to ensure that its BDS rates             end user channel terminations, TDM
                                               explained that ‘because price cap                       are just and reasonable pursuant to                   transport at speeds at or below a DS3,
                                               regulation severs the direct link between               section 201 of the Act.                               and other generally lower speed BDS


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                          22929

                                               provided (or some subset of these                       already serve. Because we would not be                c. Apply a Modified Two-Prong CMT to
                                               services) by electing A–CAM carriers in                 using the first prong of the existing                 Areas Served by Electing A-CAM
                                               areas that the CMT finds competitive. If                CMT, there would be no need to                        Carriers
                                               so, what should be the elements of such                 conduct a BDS data collection for A–                    40. Another option would be to adopt
                                               a test and what are the costs and                       CAM carriers akin to the 2015                         a CMT for electing A–CAM carriers
                                               benefits of adopting such a test? We also               Collection. For a variety of reasons, we              using prongs similar to those of the
                                               seek comment on whether we should                       are not inclined to adopt an approach                 existing CMT, but using data specific to
                                               use different metrics and/or different                  that would require another such large-                areas served by electing A–CAM
                                               tests to measure the competitiveness of                 scale data collection. The burdens                    carriers. We seek comment on this
                                               lower speed end user channel                            associated with such a data collection
                                                                                                                                                             approach. We recognize that for
                                               terminations as compared to lower                       would be substantial for A–CAM
                                                                                                                                                             purposes of the first prong of the new
                                               speed TDM transport services.                           carriers and other providers of data, and
                                                                                                                                                             CMT, this approach would require a
                                                  36. If we adopt a CMT for electing A–                could significantly delay Commission
                                                                                                                                                             data collection sufficient to allow us to
                                               CAM carriers, should we use the CMT                     action without corresponding benefits.
                                                                                                                                                             identify for each county served by an
                                               the Commission adopted in the BDS                       However, we invite comment on this
                                                                                                                                                             electing A–CAM carrier whether 50
                                               Order for price cap carriers (the existing              issue. Because of the lack of cable
                                                                                                                                                             percent of the locations with BDS
                                               CMT) as a starting point? The existing                  service in many rate-of-return study
                                                                                                                                                             demand in that part of the county are
                                               CMT features two prongs, based on data                  areas, we recognize that this test will
                                                                                                                                                             within a half-mile of a location that was
                                               from price cap study areas. The first                   likely result in very few A–CAM
                                                                                                       counties being deemed competitive.                    served by a competitive provider. Such
                                               measures whether 50 percent of the                                                                            a collection could be limited to electing
                                               locations with BDS demand in a county                   Does that suggest this test is accurate in
                                                                                                       identifying competition in A–CAM                      A–CAM carriers and their competitors.
                                               are within a half-mile of a location that                                                                     Nonetheless, we have reservations about
                                               was served by a competitive provider,                   areas? Are there other costs and benefits
                                                                                                       to this approach that we should                       the relative costs and benefits of
                                               based on the 2015 Collection. The                                                                             conducting such a data collection. And,
                                               second uses Form 477 data to measure                    consider?
                                                                                                                                                             the current record is split on whether
                                               whether a cable operator offers a                       b. Use the Results of the Existing CMT                we should consider a new data
                                               minimum of 10/1 Mbps broadband                                                                                collection. We seek comment on how to
                                               service in 75 percent of the census                        38. Petitioners propose that we apply
                                                                                                       the existing CMT to electing A–CAM                    most efficiently collect relevant data
                                               blocks in the county. If either prong is                                                                      and on whether the burdens of such a
                                               satisfied, that county is deemed                        carriers’ BDS offerings. Under this
                                                                                                       proposal, an electing A–CAM carrier’s                 data collection outweigh the benefits.
                                               competitive for price cap carriers’ BDS.                                                                      We also seek comment on other benefits
                                               Below, we seek comment on several                       lower speed TDM BDS offerings would
                                                                                                       be relieved of ex ante pricing regulation             and drawbacks to this option.
                                               options for a CMT for electing A–CAM
                                                                                                       in those counties that have already been              d. Adopt a CMT Based on a Market
                                               carriers, some of which include the use
                                                                                                       deemed competitive by the existing                    Analysis Specific to Areas Served by A–
                                               of the existing CMT. Beside the options
                                                                                                       CMT. Petitioners recognize that there                 CAM Carriers
                                               we offer below, are there other options
                                                                                                       are 78 purely rate-of-return counties that
                                               we should consider if we choose to                                                                               41. A fourth option is to create a
                                                                                                       were not analyzed by the existing CMT.
                                               adopt a CMT? What are the costs and                                                                           whole new CMT based on a competitive
                                                                                                       They propose to use the second prong
                                               benefits of each?                                                                                             market analysis specific to BDS services
                                                                                                       of the existing CMT to determine
                                               1. CMT Options                                          whether those counties should be                      in areas served by electing A–CAM
                                                                                                       considered competitive. Petitioners                   carriers. Petitioners argue that the BDS
                                               a. Rerun the Second Prong of the                                                                              market analysis conducted in the BDS
                                               Existing CMT Using 477 Data for A–                      argue that this approach would involve
                                                                                                       minimal administrative and compliance                 Order with respect to price cap areas
                                               CAM Areas                                                                                                     applies equally to rate-of-return areas
                                                                                                       burdens and would avoid the need for
                                                  37. First, we seek comment on                        revising and re-running the CMT for                   served by A–CAM carriers. We seek
                                               adopting a CMT that uses only a version                 electing A–CAM carriers or analyzing                  comment on Petitioners’ argument.
                                               of the second prong of the existing CMT                 any additional data.                                     42. In the BDS Order, the Commission
                                               using data from areas served by A–CAM                      39. We seek comment on Petitioners’                conducted a broad, data-driven, multi-
                                               carriers. Under this approach, we would                 proposed approach. The existing CMT                   faceted market analysis based on a
                                               rerun the second prong of the existing                  was developed for price cap carriers’                 comprehensive data collection to
                                               CMT using FCC Form 477 data only                        service areas and involved analysis of                evaluate the extent of competition for
                                               from electing A–CAM carriers’ study                     competition only in price cap areas. The              BDS in price cap areas. The
                                               areas. We would then deem                               Commission did not consider                           Commission’s market analysis was
                                               competitive, for purposes of relieving                  competition in A–CAM markets. Is an                   informed by, but not limited to,
                                               electing A–CAM carriers’ lower speed                    analysis of existing or potential                     traditional antitrust principles, such as
                                               TDM BDS services from ex ante pricing                   competition in price cap areas of a                   the market power analysis performed by
                                               regulation, any county where a cable                    county an appropriate way to determine                U.S. antitrust agencies. The Commission
                                               operator or other competitive provider                  whether competition or potential                      analyzed the product market,
                                               offers a minimum of 10/1 Mbps                           competition exists in areas of that                   geographic market, barriers to entry, and
                                               broadband service in 75 percent of the                  county served by an electing A–CAM                    other characteristics of price cap BDS
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                                               census blocks in the portion of the                     carrier? Is it likely to result in                    markets.
                                               county served by an electing A–CAM                      deregulating lower speed TDM-based                       43. If we conduct a new market
                                               carrier. This approach has the benefit of               BDS services offered by electing A–                   analysis, should it be similar to the
                                               simplicity. It would allow us to use FCC                CAM carriers in counties where such                   market analysis conducted by the
                                               Form 477 data that we regularly collect                 carriers will not face competitive                    Commission in the BDS Order as a
                                               and would identify areas served by                      pressure in pricing those services? Are               precondition to determining whether
                                               electing A–CAM carriers that                            there other benefits or drawbacks to this             competition is sufficient to warrant
                                               competitors or potential competitors                    approach that we should consider?                     lighter touch regulation in certain BDS


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                                               22930                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               markets? If we do conduct a new market                  outweigh the benefits of conducting an                   49. We seek comment on the number,
                                               analysis, we propose to consider                        A–CAM specific market analysis?                       type, size, concentration, and market
                                               product and geographic markets,                            46. Product Market. If we conduct a                share of nearby BDS competitors (i.e.,
                                               competitive entry, and other market                     new market analysis, should we use the                within a half-mile) that operate in A–
                                               attributes to ascertain the extent to                   same analysis to define the product                   CAM study areas, in the form of
                                               which nearby potential BDS competitors                  market for lower speed TDM end user                   facilities-based wired communications
                                               are likely to temper price, resulting in                channel terminations and transport in                 network providers, that temper prices to
                                               reasonably competitive prices over the                  A–CAM areas as we used to define the                  reasonably competitive levels in the
                                               short- to medium-term (i.e., up to three                product market for BDS in price cap                   short- to medium-term.
                                               to five years). Would this be the right                 areas in the BDS Order? We anticipate                    50. Consistent with the BDS Order,
                                               approach to assessing the level of                      that the product market for BDS in A–                 should we consider as part of our
                                               competition for BDS in A–CAM areas?                     CAM areas will closely resemble the                   market analysis the extent to which
                                               What other approaches should we                         BDS product market delineated in the                  providers and potential providers face
                                               consider taking? How should we                          BDS Order for price cap areas and seek                barriers to enter the BDS marketplace in
                                               analyze transport under our market                      comment on this belief and on potential               A–CAM areas? We seek comment on the
                                               analysis? Would a competitive market                    differences that may exist between the                timeliness, likelihood, and sufficiency
                                               analysis give us sufficient basis to go                 two types of markets. Despite these                   of a competitor’s entry into the BDS
                                               beyond the incremental deregulation of                  similarities, we recognize that there may             market in A–CAM areas. We seek
                                               lower speed transport that we propose                   be differences between price cap areas                comment on the barriers facing carriers
                                               above? We ask commenters to support                     and A–CAM areas that may affect the                   for both lower speed TDM end user
                                               their positions with data that would                    BDS product markets in these areas. Are               channel terminations and transport.
                                               help us determine whether markets are                   there products that were marketed or                  How are the markets different? For
                                               sufficiently competitive to warrant                     supplied to BDS customers in price cap                example, in the BDS Order, the
                                               deregulatory treatment.                                 areas that are not in demand, marketed,               Commission found lower entry barriers
                                                  44. Data for a Market Analysis. If we                or otherwise supplied in A–CAM areas                  for deploying TDM transport services
                                               conduct a market analysis, what                         as a BDS substitute, and to what extent               than for end user channel termination
                                               relevant data are available and what are                do products that are not in the same                  services. Is this accurate for A–CAM
                                               the potential utility and limitations of                BDS product market nonetheless exert                  carrier study areas as well? Would
                                               the available data? Should we review                    competitive pressure on prices for BDS                buildout and entry by an entrant be
                                               FCC Form 477 data on mass market                        in A–CAM areas?                                       rapid enough to render incumbent LECs’
                                               broadband service to determine the                                                                            attempts to set prices above competitive
                                                                                                          47. Geographic Market. In the BDS
                                               extent to which they serve as evidence                                                                        levels unprofitable? Would such entry
                                                                                                       Order, the Commission defined the
                                               of the presence of network facilities                                                                         occur over a longer timeframe, such as
                                                                                                       geographic market in terms of ‘‘the area
                                               capable of delivering reasonably                                                                              three to five years, and, if so, would that
                                                                                                       to which consumers can ‘practically                   justify taking the same light touch
                                               competitive BDS over the short- to
                                               medium-term (three to five years) in A–                 turn for alternative sources,’ and within             regulatory approach here as taken in the
                                               CAM areas? We seek comment on the                       which providers can reasonably                        BDS Order? To what extent is market
                                               data, methodologies, and modeling used                  compete.’’ Consistent with the BDS                    entry profitable (and thus likely) based
                                               to develop the A–CAM study area                         Order, should we define the geographic                on projected expenditures and revenues
                                               boundaries, including state-level                       market as an area where customers have                from customers and potential
                                               location density data, the A–CAM                        medium-term competitive choices for                   customers? Is the presence of a second
                                               model, and geocoded location data                       BDS based on customer locations within                provider in the relevant geographic
                                               submitted to USAC and the extent they                   a half mile of a location served over the             market, whether a non-incumbent LEC
                                               can assist us in analyzing the BDS                      facilities of at least one non-incumbent              or a cable operator, sufficient to
                                               market in A–CAM areas.                                  competitive provider? We encourage                    constrain prices to competitive levels?
                                                  45. To the extent the Commission’s                   commenters to provide data and                        To what extent does the half-mile test
                                               existing data sources are insufficient, we              analysis to support their positions.                  that was derived from the market
                                               seek data from commenters on facilities-                   48. Competitive Entry. As part of our              analysis of price cap areas relate to
                                               based BDS providers serving A–CAM                       analysis, and consistent with the BDS                 demand densities in those areas that
                                               areas that would help us to ascertain                   Order, should we consider how varying                 may not be present in A–CAM areas?
                                               markets with reasonably competitive                     market characteristics impact entry by                Finally, we seek comment on the extent
                                               conditions to justify lighter touch                     non-incumbent competing BDS                           incumbents and non-incumbent
                                               regulatory treatment. Are there existing                providers in A–CAM areas, along with                  entrants, particularly cable companies,
                                               data similar to data collected as part of               evidence of entry barriers being                      are upgrading or building out their
                                               the 2015 Collection that would help us                  overcome by traditional and non-                      networks to sources of BDS demand in
                                               better understand or estimate the                       traditional competing providers? We                   A–CAM study areas.
                                               location of BDS demand in A–CAM                         seek comment on identifiable market
                                               areas, including consumers and                          features in A–CAM areas, including                    2. Updating CMT Results for A–CAM
                                               business locations served (or readily                   carrier market share, number and size                 Carriers
                                               served) by BDS, as well as data on                      distribution of competing firms, the                     51. The BDS Order directed the
                                               market structure, demand, pricing, and                  nature of competitors’ barriers to entry,             Bureau to review the existing price cap
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                                               competitive pressures in those areas?                   the availability of reasonably                        CMT every three years using the second
                                               Does similar data exist that could                      substitutable services, the level of                  prong of the test based on Form 477
                                               identify BDS demand for transport in                    demand elasticity, and whether a firm                 data. If we adopt a CMT for electing A–
                                               A–CAM areas? If we have to collect new                  controls bottleneck facilities to help us             CAM carriers, we seek comment on
                                               data, what data should we collect and                   identify where competition is sufficient              whether we should conduct similar
                                               what is the most efficient way to collect               to make imposing the burdens of ex ante               periodic reviews of any CMT we adopt
                                               it? Does the cost of conducting and                     pricing regulation unnecessary and                    for such carriers. For administrative
                                               analyzing such a data collection                        counterproductive.                                    ease, should we target the timing of our


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                           22931

                                               initial review of the results of a CMT for              bandwidth of a DS3) and packet-based                  bandwidth in excess of a DS3 offered by
                                               electing A–CAM carriers to coincide                     services likely to be sufficiently                    electing A–CAM carriers?
                                               with our initial review of price cap                    competitive in A–CAM areas over the                      57. We seek comment on granting
                                               served areas? Under the BDS Order,                      next three to five years such that the                forbearance from section 203 tariffing
                                               counties that were determined to be                     harms of price regulation in these                    requirements for A–CAM carriers’
                                               competitive were no longer subject to                   markets, most notably in terms of                     provision of certain BDS after they elect
                                               review of their status in subsequent                    discouraging the extension of                         incentive regulation. In the BDS Order,
                                               updates of the CMT. Should we treat A–                  competition, are likely to be greater than            the Commission granted forbearance
                                               CAM areas similarly? If not, we seek                    any harms that may occur were we not                  from the application of section 203 to
                                               comment on alternatives to                              to regulate? Are these markets                        each price cap LEC in its provision of
                                               grandfathering those A–CAM areas.                       sufficiently competitive to outweigh any              any packet-based BDS and of circuit-
                                               3. Regulation in Areas Deemed                           benefits of ex ante pricing regulation?               based BDS above the DS3 bandwidth
                                               Competitive by the CMT                                  Parties are encouraged to provide                     level. The Commission also granted
                                                                                                       evidence to support their arguments. We               forbearance from the application of
                                                  52. If we adopt a CMT for areas served               seek comment on the extent to which
                                               by electing A–CAM carriers, consistent                                                                        section 203 to price cap incumbent
                                                                                                       Commission or other data could
                                               with the BDS Order, we propose to                                                                             LECs in their provision of BDS that
                                                                                                       facilitate our evaluation of competition
                                               refrain from ex ante pricing regulation                                                                       comprise transport pursuant to section
                                                                                                       in these areas, including Form 477 mass
                                               for lower speed transport and TDM end-                                                                        69.709(a)(4) of the Commission’s rules,
                                                                                                       market broadband data, A–CAM study
                                               user channel terminations in areas                                                                            and to DS1 and DS3 end user channel
                                                                                                       area boundary data, A–CAM modeling
                                               deemed competitive. We also seek                                                                              termination services and any other
                                                                                                       data, and geocoded location data
                                               comment on whether forbearing from                                                                            special access services currently tariffed
                                                                                                       submitted to USAC. We invite
                                               section 203 tariffing requirements for                                                                        in competitive counties or in non-
                                                                                                       commenters to identify specific data
                                               these services in these areas would meet                                                                      competitive counties previously subject
                                                                                                       sources that could be useful to our
                                               the statutory criteria of section 10 of the                                                                   to Phase II pricing flexibility. The
                                                                                                       inquiry and to explain their utility.
                                               Act. As we did in the BDS Order, we                                                                           Commission concluded that ‘‘[w]here a
                                                                                                          55. The Commission also found that
                                               recognize the continuing applicability                                                                        price cap LEC provides these services in
                                                                                                       sales of TDM-based BDS by price cap
                                               and importance of sections 201, 202,                                                                          competitive markets, application of
                                                                                                       carriers were declining due to product
                                               and 208 of the Act to ensure that                                                                             section 203, including its tariffing
                                               consumers will remain protected from                    substitution, including customer loss to
                                                                                                                                                             requirement, is not necessary to ensure
                                               unjust and unreasonable rates in areas                  cable operators and other competitive
                                                                                                                                                             that the LEC’s charges, practices,
                                               deemed competitive. We seek comment                     providers. To what extent are
                                                                                                                                                             classifications, or regulations are just,
                                               on this proposal.                                       purchasers substituting packet-based
                                                                                                                                                             reasonable, and not unjustly or
                                                                                                       services for TDM-based services in A–
                                               IV. Removing Ex Ante Pricing                                                                                  unreasonably discriminatory. Nor is
                                                                                                       CAM areas? Are TDM-based services
                                               Regulation From Packet-Based BDS and                                                                          application of section 203 necessary to
                                                                                                       declining in A–CAM areas at a rate
                                               TDM-Based BDS Providing Bandwidth                                                                             protect consumers.’’
                                                                                                       similar to the decline in price cap areas?
                                               in Excess of a DS3                                      The Commission found declining prices                    58. While the Petition does not
                                                  53. We also seek comment on whether                  for packet-based BDS across all                       expressly request forbearance from
                                               we should eliminate ex ante pricing                     bandwidths in price cap areas to be                   tariffing requirements, we seek
                                               regulation of packet-based and TDM-                     evidence of competitive conditions.                   comment on whether to de-tariff certain
                                               based business data services providing                  Have prices for packet-based BDS in A–                electing A–CAM BDS offerings by
                                               bandwidth in excess of a DS3 offered by                 CAM areas also declined across all                    granting forbearance from section 203
                                               those carriers that elect to move their                 bandwidths? Are lower bandwidth                       tariffing obligations. We seek comment
                                               lower speed BDS offerings from rate-of-                 packet-based services (at or below the                on whether we should remove ex ante
                                               return regulation to incentive                          level of a DS3) experiencing price                    pricing regulation of packet-based BDS
                                               regulation. If so, should we provide 36                 changes in A–CAM areas as in price cap                and higher capacity TDM-based services
                                               months for such a transition? If we                     areas?                                                providing bandwidth in excess of a DS3
                                               transition these high-speed services,                      56. We recognize that price cap                    for A–CAM carriers that elect incentive
                                               consistent with the BDS Order, we                       carriers’ provision of these services was             regulation. Would forbearing from the
                                               would continue to recognize the                         generally relieved of ex ante pricing                 tariffing requirement for these services
                                               applicability and importance of sections                regulation prior to the BDS Order in a                meet the statutory criteria set by section
                                               201, 202, and 208 of the Act in                         series of forbearance decisions. In                   10 of the Act? Would de-tariffing these
                                               protecting consumers from unjust and                    contrast, A–CAM carriers provide these                services promote competitive market
                                               unreasonable practices.                                 services subject to rate-of-return                    conditions? Would de-tariffing reduce
                                                  54. With respect to price cap areas,                 regulation. Would removing ex ante                    compliance costs, increase regulatory
                                               the Commission’s market analysis did                    pricing regulation for these services for             flexibility, increase incentives to invest
                                               ‘‘not show compelling evidence of                       electing A–CAM carriers encourage                     in innovative products and services and
                                               market power’’ in incumbent LECs’                       competitive entry and network                         thereby facilitate the technology
                                               provision of packet-based services and                  investment and provide an incentive for               transitions, or otherwise be in the public
                                               higher capacity TDM-based business                      the transition to packet-based                        interest as the Petition asserts? If the
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                                               data services (in excess of the                         technologies as we found to be the case               Commission decides to forbear from
                                               bandwidth of a DS3), particularly for                   for price cap carriers? In the foregoing,             section 203, should it mandate or
                                               higher bandwidth services. We seek                      we seek comment on the parameters of                  simply allow de-tariffing? Would
                                               comment on whether these observations                   this potential transition. Are there other            mandatory de-tariffing further promote
                                               offer any insights on the nature and                    issues we should consider as we                       competition and drive down prices by
                                               extent of competition in A–CAM areas.                   evaluate whether to remove ex ante                    requiring electing carriers to negotiate
                                               Are markets for higher capacity TDM-                    pricing regulation for all packet-based               agreements to provide the de-tariffed
                                               based BDS offerings (above the                          and TDM-based services providing                      services that they offer?


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                                               22932                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               V. Transition Mechanisms                                regulation proposal and, if so, based on              consisted in whole or in part of the
                                                                                                       what rationale?                                       presentation of data or arguments
                                                  59. We seek comment on how to                                                                              already reflected in the presenter’s
                                               transition electing A–CAM carriers and                  VII. ITTA/USTelecom Petition
                                                                                                                                                             written comments, memoranda or other
                                               the areas they serve if the Commission                    62. Throughout this NPRM, we seek                   filings in the proceeding, the presenter
                                               adopts a new lighter touch regulatory                   comment on various aspects of the                     may provide citations to such data or
                                               framework for their provision of BDS.                   Petition for rulemaking filed by ITTA                 arguments in his or her prior comments,
                                               The BDS Order provided certain                          and USTelecom. However, the Petition                  memoranda, or other filings (specifying
                                               mechanisms to facilitate the transition                 differs in some ways from what we                     the relevant page and/or paragraph
                                               to the new regulatory framework that it                 propose in this NPRM. Most                            numbers where such data or arguments
                                               established for price cap carriers. These               fundamentally, it proposes that subject               can be found) in lieu of summarizing
                                               mechanisms included a thirty-six month                  to certain conditions we simply allow                 them in the memorandum. Documents
                                               transition period in which de-tariffing is              model-based carriers to elect the same                shown or given to Commission staff
                                               permitted but not mandated, a six                       regulatory framework that the BDS                     during ex parte meetings are deemed to
                                               month freeze of tariffed rates for end-                 Order provided for price cap carriers. It             be written ex parte presentations and
                                               user channel terminations in newly                      also proposes providing electing A–                   must be filed consistent with rule
                                               deregulated counties, and a                             CAM carriers an opportunity for a one-                1.1206(b). In proceedings governed by
                                               grandfathering of existing contractual or               time unfreezing of category                           Rule 1.49(f) or for which the
                                               other long-term BDS arrangements. We                    relationships for purposes of                         Commission has made available a
                                               seek comment on the appropriateness of                  jurisdictional separations. To the extent             method of electronic filing, written ex
                                               these and other mechanisms to aid in                    we have not already done so, we invite                parte presentations and memoranda
                                               the transition of electing A–CAM areas                  comment on the Petition and each of the               summarizing oral ex parte
                                               to any new regulatory framework we                      proposals made therein.                               presentations, and all attachments
                                               establish for them. Are there other                     VIII. Proposed Rule Changes                           thereto, must be filed through the
                                               transition issues and mechanisms that                                                                         electronic comment filing system
                                               may be unique to A–CAM carriers and                       63. We seek comment on the                          available for that proceeding, and must
                                               the areas they serve that would help                    proposed rule changes that can be found               be filed in their native format (e.g., .doc,
                                               ensure an orderly transition? For                       in Appendix A. Those rule changes                     .xml, .ppt, searchable .pdf). Participants
                                               example, should the Commission                          largely track the proposals made in this              in this proceeding should familiarize
                                               consider any additional mechanisms                      NPRM. They also include some                          themselves with the Commission’s ex
                                               that would facilitate transitions for                   corrections to what appear to be                      parte rules.
                                               electing A–CAM carriers that participate                inaccuracies in our current rules. These
                                                                                                       proposed changes include changing (1)                 A. Initial Regulatory Flexibility Analysis
                                               in NECA pooling arrangements?
                                                                                                       the cross reference to § 61.3(aa) in                    65. Pursuant to the Regulatory
                                               VI. Other Carriers                                      § 51.903(g) to § 61.3(bb), (2) the cross              Flexibility Act (RFA), the Commission
                                                                                                       reference to § 61.3(ee) in § 61.41(d) to              has prepared an Initial Regulatory
                                                 60. We propose to offer the
                                                                                                       § 61.3(ff), (3) the cross reference to                Flexibility Analysis (IRFA) of the
                                               opportunity to elect the same type of
                                                                                                       § 61.3(x) in § 69.114 to § 61.3(ff), and (4)          possible significant economic impact on
                                               regulatory relief that we propose to
                                                                                                       the cross reference to § 69.801(g) in                 small entities of the policies and actions
                                               provide to electing A–CAM carriers to
                                                                                                       § 69.805(a) to § 69.801(h). These cross               considered in this Notice of Proposed
                                               other rate-of-return carriers that
                                                                                                       references have been rendered                         Rulemaking. The text of the IRFA is set
                                               currently receive fixed universal service
                                                                                                       inaccurate because of changes in the                  forth in Appendix B. Written public
                                               support, rather than receiving support
                                                                                                       definitions contained in § 61.3 that                  comments are requested on this IRFA.
                                               based on their costs. Such carriers
                                                                                                       occurred in other rulemaking                          Comments must be identified as
                                               include traditional rate-of-return
                                                                                                       proceedings or because they were                      responses to the IRFA and must be filed
                                               carriers that are affiliated with price cap
                                                                                                       incorrectly stated when added to our                  by the deadlines for comment on the
                                               carriers and are therefore receiving
                                                                                                       rules.                                                Notice of Proposed Rulemaking. The
                                               support based on the Connect America
                                                                                                                                                             Commission’s Consumer and
                                               Cost Model (CACM); rate-of-return                       IX. Procedural Matters
                                                                                                                                                             Governmental Affairs Bureau, Reference
                                               carriers participating in the                              64. This proceeding shall be treated as            Information Center, will send a copy of
                                               Commission’s ‘‘Alaska Plan’’; and                       a ‘‘permit-but-disclose’’ proceeding in               this Notice of Proposed Rulemaking,
                                               carriers that accept further offers of A–               accordance with the Commission’s ex                   including the IRFA, to the Chief
                                               CAM support.                                            parte rules. Persons making ex parte                  Counsel for Advocacy of the Small
                                                 61. Like A–CAM carriers, the                          presentations must file a copy of any                 Business Administration (SBA).
                                               members of each of these three groups                   written presentation or a memorandum
                                               of rate-of-return carriers all receive non-             summarizing any oral presentation                     B. Paperwork Reduction Act
                                               cost-based universal service support and                within two business days after the                       66. This document may contain
                                               therefore are routinely required to                     presentation (unless a different deadline             proposed new or modified information
                                               prepare cost studies only for their BDS.                applicable to the Sunshine period                     collection requirements. The
                                               What are the costs and benefits of                      applies). Persons making oral ex parte                Commission, as part of its continuing
                                               relieving them of existing pricing                      presentations are reminded that                       effort to reduce paperwork burdens,
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                                               regulations and allowing them to elect                  memoranda summarizing the                             invites the general public and the Office
                                               the type of incentive pricing regulation                presentation must (1) list all persons                of Management and Budget (OMB) to
                                               we propose? Should we modify our                        attending or otherwise participating in               comment on the information collection
                                               proposed incentive regulation in any                    the meeting at which the ex parte                     requirements contained in this
                                               way to reflect differences in any of these              presentation was made, and (2)                        document, as required by the Paperwork
                                               types of carriers’ circumstances? Are                   summarize all data presented and                      Reduction Act of 1995, Public Law 104–
                                               there any other types of carriers that                  arguments made during the                             13. In addition, pursuant to the Small
                                               should be eligible for our incentive                    presentation. If the presentation                     Business Paperwork Relief Act of 2002,


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                           22933

                                               Public Law 107–198, we seek specific                    C. Description and Estimate of the                    governments (county, municipal and
                                               comment on how we might further                         Number of Small Entities to Which the                 town or township) with populations of
                                               reduce the information collection                       Proposed Rules Will Apply                             less than 50,000 and 12,184 special
                                               burden for small business concerns with                    70. The RFA directs agencies to                    purpose governments (independent
                                               fewer than 25 employees.                                provide a description of, and where                   school districts and special districts)
                                                                                                       feasible, an estimate of the number of                with populations of less than 50,000.
                                               X. Initial Regulatory Flexibility                                                                             The 2012 U.S. Census Bureau data for
                                               Analysis                                                small entities that may be affected by
                                                                                                       the proposed rules and by the rule                    most types of governments in the local
                                                                                                                                                             government category shows that the
                                                  67. As required by the Regulatory                    revisions on which the NPRM seeks
                                                                                                                                                             majority of these governments have
                                               Flexibility Act of 1980, as amended                     comment, if adopted. The RFA generally
                                                                                                                                                             populations of less than 50,000. Based
                                               (RFA), the Commission has prepared                      defines the term ‘‘small entity’’ as
                                                                                                                                                             on these data we estimate that at least
                                               this Initial Regulatory Flexibility                     having the same meaning as the terms
                                                                                                                                                             49,316 local government jurisdictions
                                               Analysis (IRFA) of the possible                         ‘‘small business,’’ ‘‘small organization,’’
                                                                                                                                                             fall in the category of ‘‘small
                                               significant economic impact on small                    and ‘‘small governmental jurisdiction.’’
                                                                                                                                                             governmental jurisdictions.’’
                                               entities by the policies and rules                      In addition, the term ‘‘small business’’
                                               proposed in this Notice of Proposed                     has the same meaning as the term                      2. Broadband Internet Access Service
                                                                                                       ‘‘small-business concern’’ under the                  Providers
                                               Rulemaking (NPRM). The Commission
                                                                                                       Small Business Act. A ‘‘small-business                   74. Internet Service Providers
                                               requests written public comments on
                                                                                                       concern’’ is one which: (1) Is                        (Broadband). Broadband internet
                                               this IRFA. Comments must be identified
                                                                                                       independently owned and operated; (2)                 service providers include wired (e.g.,
                                               as responses to the IRFA and must be                    is not dominant in its field of operation;
                                               filed by the deadlines for comments                                                                           cable, DSL) and VoIP service providers
                                                                                                       and (3) satisfies any additional criteria             using their own operated wired
                                               provided on the first page of the NPRM.                 established by the SBA.                               telecommunications infrastructure fall
                                               The Commission will send a copy of the
                                                                                                       1. Total Small Entities                               in the category of Wired
                                               NPRM, including this IRFA, to the Chief
                                                                                                                                                             Telecommunication Carriers. Wired
                                               Counsel for Advocacy of the Small             71. Small Businesses, Small                                     Telecommunications Carriers are
                                               Business Administration (SBA). In          Organizations, Small Governmental                                  comprised of establishments primarily
                                               addition, the NPRM and IRFA (or            Jurisdictions. Our actions, over time,                             engaged in operating and/or providing
                                               summaries thereof) will be published in    may affect small entities that are not                             access to transmission facilities and
                                               the Federal Register.                      easily categorized at present. We                                  infrastructure that they own and/or
                                                                                          therefore describe here, at the outset,                            lease for the transmission of voice, data,
                                               A. Need for, and Objectives of, the        three broad groups of small entities that
                                               Proposed Rules                                                                                                text, sound, and video using wired
                                                                                          could be directly affected herein. First,                          telecommunications networks.
                                                  68. In this NPRM, we propose changes while there are industry specific size                                Transmission facilities may be based on
                                               to, and seek comment on, our rate-of-      standards for small businesses that are                            a single technology or a combination of
                                                                                          used in the regulatory flexibility                                 technologies. The SBA size standard for
                                               return and business data services rules
                                                                                          analysis, according to data from the                               this category classifies a business as
                                               as they are applied to rate-of-return
                                                                                          SBA’s Office of Advocacy, in general a                             small if it has 1,500 or fewer employees.
                                               carriers that receive universal service    small business is an independent
                                               support based on the Alternative-                                                                             U.S. Census data for 2012 show that
                                                                                          business having fewer than 500                                     there were 3,117 firms that operated that
                                               Connect America Cost Model (A–CAM), employees. These types of small
                                                                                                                                                             year. Of this total, 3,083 operated with
                                               or under the Commission’s universal        businesses represent 99.9% of all                                  fewer than 1,000 employees.
                                               service support mechanism for Alaska-      businesses in the United States which                              Consequently, under this size standard
                                               based carriers (Alaska Plan), or is an     translates to 28.8 million businesses.                             the majority of firms in this industry can
                                               affiliate of a price cap local exchange       72. Next, the type of small entity                              be considered small.
                                               carrier operating pursuant to a waiver of described as a ‘‘small organization’’ is
                                               § 61.41 of our rules. In the NPRM, the     generally ‘‘any not-for-profit enterprise                          3. Wireline Providers
                                               Commission proposes to adopt a form of which is independently owned and                                          75. Wired Telecommunications
                                               incentive regulation for A–CAM             operated and is not dominant in its                                Carriers. The U.S. Census Bureau
                                               carriers’ provision of business data       field.’’ Nationwide, as of August 2016,                            defines this industry as ‘‘establishments
                                               services (BDS), conduct a market           there were approximately 356,494 small                             primarily engaged in operating and/or
                                               analysis to evaluate the characteristics   organizations based on registration and                            providing access to transmission
                                               of BDS markets served by A–CAM             tax data filed by nonprofits with the                              facilities and infrastructure that they
                                               carriers, and adopt a new lighter touch    Internal Revenue Service (IRS).                                    own and/or lease for the transmission of
                                               regulatory framework for A–CAM                73. Finally, the small entity described                         voice, data, text, sound, and video using
                                               carriers’ BDS that in most respects        as a ‘‘small governmental jurisdiction’’                           wired communications networks.
                                               parallels the framework recently           is defined generally as ‘‘governments of                           Transmission facilities may be based on
                                               adopted for price cap carriers in the BDS cities, towns, townships, villages,                                 a single technology or a combination of
                                               Order.                                     school districts, or special districts, with                       technologies. Establishments in this
                                                                                          a population of less than fifty                                    industry use the wired
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                                               B. Legal Basis                             thousand.’’ U.S. Census Bureau data                                telecommunications network facilities
                                                                                          from the 2012 Census of Governments                                that they operate to provide a variety of
                                                  69. The legal basis for any action that indicates that there were 90,056 local                             services, such as wired telephony
                                               may be taken pursuant to this NPRM is      governmental jurisdictions consisting of                           services, including VoIP services, wired
                                               contained in sections 1, 4(i), 10, and     general purpose governments and                                    (cable) audio and video programming
                                               201(b) of the Communications Act of        special purpose governments in the                                 distribution, and wired broadband
                                               1934, as amended, 47 U.S.C. 151, 154(i), United States. Of this number there                                  internet services. By exception,
                                               160, and 201(b).                           were 37,132 general purpose                                        establishments providing satellite


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                                               22934                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               television distribution services using                  carriers have reported that they are                  operate transmission facilities and
                                               facilities and infrastructure that they                 Other Local Service Providers. Of this                infrastructure. Mobile virtual network
                                               operate are included in this industry.’’                total, 70 have 1,500 or fewer employees.              operators (MVNOs) are included in this
                                               The SBA has developed a small                           Consequently, based on internally                     industry. Under that size standard, such
                                               business size standard for Wired                        researched FCC data, the Commission                   a business is small if it has 1,500 or
                                               Telecommunications Carriers, which                      estimates that most providers of                      fewer employees. Census data for 2012
                                               consists of all such companies having                   competitive local exchange service,                   show that 1,341 firms provided resale
                                               1,500 or fewer employees. Census data                   competitive access providers, Shared-                 services during that year. Of that
                                               for 2012 show that there were 3,117                     Tenant Service Providers, and Other                   number, all operated with fewer than
                                               firms that operated that year. Of this                  Local Service Providers are small                     1,000 employees. Thus, under this
                                               total, 3,083 operated with fewer than                   entities.                                             category and the associated small
                                               1,000 employees. Thus, under this size                     78. We have included small                         business size standard, the majority of
                                               standard, the majority of firms in this                 incumbent LECs in this present RFA                    these prepaid calling card providers can
                                               industry can be considered small.                       analysis. As noted above, a ‘‘small                   be considered small entities.
                                                  76. Incumbent Local Exchange                         business’’ under the RFA is one that,                    81. Toll Resellers. The Commission
                                               Carriers (Incumbent LECs). Neither the                  inter alia, meets the pertinent small                 has not developed a definition for Toll
                                               Commission nor the SBA has developed                    business size standard (e.g., a telephone             Resellers. The closest NAICS Code
                                               a small business size standard                          communications business having 1,500                  Category is Telecommunications
                                               specifically for incumbent LEC services.                or fewer employees), and ‘‘is not                     Resellers. The Telecommunications
                                               The closest applicable size standard                    dominant in its field of operation.’’ The             Resellers industry comprises
                                               under SBA rules is for the category                     SBA’s Office of Advocacy contends that,               establishments engaged in purchasing
                                               Wired Telecommunications Carriers as                    for RFA purposes, small incumbent                     access and network capacity from
                                               defined above. Under that size standard,                LECs are not dominant in their field of               owners and operators of
                                               such a business is small if it has 1,500                operation because any such dominance                  telecommunications networks and
                                               or fewer employees. According to                        is not ‘‘national’’ in scope. We have                 reselling wired and wireless
                                               Commission data, 3,117 firms operated                   therefore included small incumbent                    telecommunications services (except
                                               in that year. Of this total, 3,083 operated             LECs in this RFA analysis, although we                satellite) to businesses and households.
                                               with fewer than 1,000 employees.                        emphasize that this RFA action has no                 Establishments in this industry resell
                                               Consequently, the Commission                            effect on Commission analyses and                     telecommunications; they do not
                                               estimates that most providers of                        determinations in other, non-RFA                      operate transmission facilities and
                                               incumbent local exchange service are                    contexts.                                             infrastructure. Mobile virtual network
                                               small businesses that may be affected by                   79. Interexchange Carriers (IXCs).                 operators (MVNOs) are included in this
                                               the rules and policies adopted. A total                 Neither the Commission nor the SBA                    industry. The SBA has developed a
                                               of 1,307 firms reported that they were                  has developed a definition for                        small business size standard for the
                                               incumbent local exchange service                        Interexchange Carriers. The closest                   category of Telecommunications
                                               providers. Of this total, an estimated                  NAICS Code category is Wired                          Resellers. Under that size standard, such
                                               1,006 have 1,500 or fewer employees.                    Telecommunications Carriers as defined                a business is small if it has 1,500 or
                                                  77. Competitive Local Exchange                       above. The applicable size standard                   fewer employees. Census data for 2012
                                               Carriers (Competitive LECs),                            under SBA rules is that such a business               show that 1,341 firms provided resale
                                               Competitive Access Providers (CAPs),                    is small if it has 1,500 or fewer                     services during that year. Of that
                                               Shared-Tenant Service Providers, and                    employees. U.S. Census data for 2012                  number, 1,341 operated with fewer than
                                               Other Local Service Providers. Neither                  indicates that 3,117 firms operated                   1,000 employees. Thus, under this
                                               the Commission nor the SBA has                          during that year. Of that number, 3,083               category and the associated small
                                               developed a small business size                         operated with fewer than 1,000                        business size standard, the majority of
                                               standard specifically for these service                 employees. According to internally                    these resellers can be considered small
                                               providers. The appropriate NAICS Code                   developed Commission data, 359                        entities. According to Commission data,
                                               category is Wired Telecommunications                    companies reported that their primary                 881 carriers have reported that they are
                                               Carriers, as defined above. Under that                  telecommunications service activity was               engaged in the provision of toll resale
                                               size standard, such a business is small                 the provision of interexchange services.              services. Of this total, an estimated 857
                                               if it has 1,500 or fewer employees. U.S.                Of this total, an estimated 317 have                  have 1,500 or fewer employees.
                                               Census data for 2012 indicate that 3,117                1,500 or fewer employees.                             Consequently, the Commission
                                               firms operated during that year. Of that                Consequently, the Commission                          estimates that the majority of toll
                                               number, 3,083 operated with fewer than                  estimates that the majority of IXCs are               resellers are small entities.
                                               1,000 employees. Based on this data, the                small entities that may be affected by                   82. Other Toll Carriers. Neither the
                                               Commission concludes that the majority                  our proposed rules.                                   Commission nor the SBA has developed
                                               of Competitive LECS, CAPs, Shared-                         80. Local Resellers. The SBA has                   a definition for small businesses
                                               Tenant Service Providers, and Other                     developed a small business size                       specifically applicable to Other Toll
                                               Local Service Providers, are small                      standard for the category of                          Carriers. This category includes toll
                                               entities. According to Commission data,                 Telecommunications Resellers. The                     carriers that do not fall within the
                                               1,442 carriers reported that they were                  Telecommunications Resellers industry                 categories of interexchange carriers,
                                               engaged in the provision of either                      comprises establishments engaged in                   operator service providers, prepaid
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                                               competitive local exchange services or                  purchasing access and network capacity                calling card providers, satellite service
                                               competitive access provider services. Of                from owners and operators of                          carriers, or toll resellers. The closest
                                               these 1,442 carriers, an estimated 1,256                telecommunications networks and                       applicable NAICS Code category is for
                                               have 1,500 or fewer employees. In                       reselling wired and wireless                          Wired Telecommunications Carriers as
                                               addition, 17 carriers have reported that                telecommunications services (except                   defined above. Under the applicable
                                               they are Shared-Tenant Service                          satellite) to businesses and households.              SBA size standard, such a business is
                                               Providers, and all 17 are estimated to                  Establishments in this industry resell                small if it has 1,500 or fewer employees.
                                               have 1,500 or fewer employees. Also, 72                 telecommunications; they do not                       Census data for 2012 show that there


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                          22935

                                               were 3,117 firms that operated that year.               is small if it has 1,500 or fewer                     5. Satellite Service Providers
                                               Of this total, 3,083 operated with fewer                employees. For this industry, U.S.                       89. Satellite Telecommunications
                                               than 1,000 employees. Thus, under this                  Census data for 2012 show that there                  Providers. This category comprises firms
                                               category and the associated small                       were 967 firms that operated for the                  ‘‘primarily engaged in providing
                                               business size standard, the majority of                 entire year. Of this total, 955 firms had             telecommunications services to other
                                               Other Toll Carriers can be considered                   employment of 999 or fewer employees                  establishments in the
                                               small. According to internally                          and 12 had employment of 1000                         telecommunications and broadcasting
                                               developed Commission data, 284                          employees or more. Thus under this                    industries by forwarding and receiving
                                               companies reported that their primary                   category and the associated size                      communications signals via a system of
                                               telecommunications service activity was                 standard, the Commission estimates that               satellites or reselling satellite
                                               the provision of other toll carriage. Of                the majority of wireless                              telecommunications.’’ Satellite
                                               these, an estimated 279 have 1,500 or                   telecommunications carriers (except                   telecommunications service providers
                                               fewer employees. Consequently, the                      satellite) are small entities.                        include satellite and earth station
                                               Commission estimates that most Other                       86. The Commission’s own data—                     operators. The category has a small
                                               Toll Carriers are small entities that may               available in its Universal Licensing                  business size standard of $32.5 million
                                               be affected by rules adopted pursuant to                System—indicate that, as of October 25,               or less in average annual receipts, under
                                               the Second Further Notice of Proposed                   2016, there are 280 Cellular licensees                SBA rules. For this category, U.S.
                                               Rulemaking.                                             that will be affected by our actions
                                                  83. Operator Service Providers (OSPs).                                                                     Census Bureau data for 2012 show that
                                                                                                       today. The Commission does not know                   there were a total of 333 firms that
                                               Neither the Commission nor the SBA                      how many of these licensees are small,
                                               has developed a small business size                                                                           operated for the entire year. Of this
                                                                                                       as the Commission does not collect that               total, 299 firms had annual receipts of
                                               standard specifically for operator                      information for these types of entities.
                                               service providers. The appropriate size                                                                       less than $25 million. Consequently, we
                                                                                                       Similarly, according to internally                    estimate that the majority of satellite
                                               standard under SBA rules is for the                     developed Commission data, 413
                                               category Wired Telecommunications                                                                             telecommunications providers are small
                                                                                                       carriers reported that they were engaged              entities.
                                               Carriers. Under that size standard, such                in the provision of wireless telephony,
                                               a business is small if it has 1,500 or                  including cellular service, Personal                  6. Cable Service Providers
                                               fewer employees. According to                           Communications Service, and
                                               Commission data, 33 carriers have                                                                                90. Because section 706 requires us to
                                                                                                       Specialized Mobile Radio Telephony                    monitor the deployment of broadband
                                               reported that they are engaged in the                   services. Of this total, an estimated 261
                                               provision of operator services. Of these,                                                                     using any technology, we anticipate that
                                                                                                       have 1,500 or fewer employees, and 152                some broadband service providers may
                                               an estimated 31 have 1,500 or fewer                     have more than 1,500 employees. Thus,
                                               employees and two have more than                                                                              not provide telephone service.
                                                                                                       using available data, we estimate that                Accordingly, we describe below other
                                               1,500 employees. Consequently, the
                                                                                                       the majority of wireless firms can be                 types of firms that may provide
                                               Commission estimates that the majority
                                                                                                       considered small.                                     broadband services, including cable
                                               of OSPs are small entities.
                                                  84. Prepaid Calling Card Providers.                     87. Wireless Communications                        companies, MDS providers, and
                                               The SBA has developed a definition for                  Services. This service can be used for                utilities, among others.
                                               small businesses within the category of                 fixed, mobile, radiolocation, and digital                91. Cable and Other Subscription
                                               Telecommunications Resellers. Under                     audio broadcasting satellite uses. The                Programming. This industry comprises
                                               that SBA definition, such a business is                 Commission defined ‘‘small business’’                 establishments primarily engaged in
                                               small if it has 1,500 or fewer employees.               for the wireless communications                       operating studios and facilities for the
                                               According to the Commission’s Form                      services (WCS) auction as an entity with              broadcasting of programs on a
                                               499 Filer Database, 500 companies                       average gross revenues of $40 million                 subscription or fee basis. The broadcast
                                               reported that they were engaged in the                  for each of the three preceding years,                programming is typically narrowcast in
                                               provision of prepaid calling cards. The                 and a ‘‘very small business’’ as an entity            nature (e.g. limited format, such as
                                               Commission does not have data                           with average gross revenues of $15                    news, sports, education, or youth-
                                               regarding how many of these 500                         million for each of the three preceding               oriented). These establishments produce
                                               companies have 1,500 or fewer                           years. The SBA has approved these                     programming in their own facilities or
                                               employees. Consequently, the                            definitions.                                          acquire programming from external
                                               Commission estimates that there are 500                    88. Wireless Telephony. Wireless                   sources. The programming material is
                                               or fewer prepaid calling card providers                 telephony includes cellular, personal                 usually delivered to a third party, such
                                               that may be affected by the rules.                      communications services, and                          as cable systems or direct-to-home
                                                                                                       specialized mobile radio telephony                    satellite systems, for transmission to
                                               4. Wireless Providers—Fixed and                         carriers. As noted, the SBA has                       viewers. The SBA has established a size
                                               Mobile                                                  developed a small business size                       standard for this industry stating that a
                                                  85. Wireless Telecommunications                      standard for Wireless                                 business in this industry is small if it
                                               Carriers (except Satellite). This industry              Telecommunications Carriers (except                   has 1,500 or fewer employees. The 2012
                                               comprises establishments engaged in                     Satellite). Under the SBA small business              Economic Census indicates that 367
                                               operating and maintaining switching                     size standard, a business is small if it              firms were operational for that entire
                                               and transmission facilities to provide                  has 1,500 or fewer employees.                         year. Of this total, 357 operated with
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                                               communications via the airwaves.                        According to Commission data, 413                     less than 1,000 employees. Accordingly
                                               Establishments in this industry have                    carriers reported that they were engaged              we conclude that a substantial majority
                                               spectrum licenses and provide services                  in wireless telephony. Of these, an                   of firms in this industry are small under
                                               using that spectrum, such as cellular                   estimated 261 have 1,500 or fewer                     the applicable SBA size standard.
                                               services, paging services, wireless                     employees and 152 have more than                         92. Cable Companies and Systems
                                               internet access, and wireless video                     1,500 employees. Therefore, a little less             (Rate Regulation). The Commission has
                                               services. The appropriate size standard                 than one third of these entities can be               developed its own small business size
                                               under SBA rules is that such a business                 considered small.                                     standards for the purpose of cable rate


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                                               22936                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               regulation. Under the Commission’s                      connected with one or more terrestrial                Commission’s rate-of-return and
                                               rules, a ‘‘small cable company’’ is one                 systems and capable of transmitting                   business data services rules. The
                                               serving 400,000 or fewer subscribers                    telecommunications to, and receiving                  objective of the proposed modifications
                                               nationwide. Industry data indicate that                 telecommunications from, satellite                    is to reduce the unnecessary regulatory
                                               there are currently 4,600 active cable                  systems. Establishments providing                     burdens and inflexibility of rate-of-
                                               systems in the United States. Of this                   internet services or voice over internet              return regulation for BDS services for
                                               total, all but eleven cable operators                   protocol (VoIP) services via client-                  A–CAM carriers, which are for the most
                                               nationwide are small under the 400,000-                 supplied telecommunications                           part small businesses. These rule
                                               subscriber size standard. In addition,                  connections are also included in this                 modifications would provide additional
                                               under the Commission’s rate regulation                  industry. The SBA has developed a                     incentives for competitive entry,
                                               rules, a ‘‘small system’’ is a cable system             small business size standard for ‘‘All                network investment and the migration
                                               serving 15,000 or fewer subscribers.                    Other Telecommunications,’’ which                     to IP-based network technologies and
                                               Current Commission records show 4,600                   consists of all such firms with gross                 services. The NPRM seeks comment on
                                               cable systems nationwide. Of this total,                annual receipts of $32.5 million or less.             proposed rules that would generally
                                               3,900 cable systems have fewer than                     For this category, census data for 2012               reduce compliance requirements for A–
                                               15,000 subscribers, and 700 systems                     show that there were 1,442 firms that                 CAM carriers that choose to opt into the
                                               have 15,000 or more subscribers, based                  operated for the entire year. Of these                new incentive regulation and regulatory
                                               on the same records. Thus, under this                   firms, a total of 1,400 had gross annual              framework for the provision of BDS.
                                               standard as well, we estimate that most                 receipts of less than $25 million.                       97. Under the Commission’s rate-of-
                                               cable systems are small entities.                       Consequently, we estimate that the                    return rules, rates for business data
                                                  93. Cable System Operators (Telecom                  majority of All Other                                 services are based on costs derived from
                                               Act Standard). The Communications                       Telecommunications firms are small                    carrier-specific cost studies which
                                               Act also contains a size standard for                   entities that might be affected by our                represent a significant compliance
                                               small cable system operators, which is                  action.                                               burden for A–CAM carriers relative to
                                               ‘‘a cable operator that, directly or                                                                          their overall revenues. The NPRM
                                               through an affiliate, serves in the                     7. Electric Power Generators,                         proposes to transition these carriers to a
                                               aggregate fewer than 1 percent of all                   Transmitters, and Distributors                        form of incentive regulation that will
                                               subscribers in the United States and is                    95. Electric Power Generators,                     enable these LECs to significantly
                                               not affiliated with any entity or entities              Transmitters, and Distributors. This                  reduce these compliance costs. The
                                               whose gross annual revenues in the                      U.S. industry is comprised of                         NPRM also proposes a new regulatory
                                               aggregate exceed $250,000,000.’’ There                  establishments that are primarily                     framework for A–CAM carriers’ BDS
                                               are approximately 52,403,705 cable                      engaged in providing specialized                      that would in many cases eliminate ex
                                               video subscribers in the United States                  telecommunications services, such as                  ante pricing regulation and tariffing
                                               today. Accordingly, an operator serving                 satellite tracking, communications                    requirements for carriers electing
                                               fewer than 524,037 subscribers shall be                 telemetry, and radar station operation.               incentive regulation.
                                               deemed a small operator if its annual                   This industry also includes
                                                                                                       establishments primarily engaged in                   E. Steps Taken To Minimize the
                                               revenues, when combined with the total
                                                                                                       providing satellite terminal stations and             Significant Economic Impact on Small
                                               annual revenues of all its affiliates, do
                                                                                                       associated facilities connected with one              Entities, and Significant Alternatives
                                               not exceed $250 million in the
                                                                                                       or more terrestrial systems and capable               Considered
                                               aggregate. Based on available data, we
                                               find that all but nine incumbent cable                  of transmitting telecommunications to,                   98. The RFA requires an agency to
                                               operators are small entities under this                 and receiving telecommunications from,                describe any significant alternatives that
                                               size standard. The Commission neither                   satellite systems. Establishments                     it has considered in reaching its
                                               requests nor collects information on                    providing internet services or voice over             proposed approach, which may include
                                               whether cable system operators are                      internet protocol (VoIP) services via                 the following four alternatives (among
                                               affiliated with entities whose gross                    client-supplied telecommunications                    others): (1) The establishment of
                                               annual revenues exceed $250 million.                    connections are also included in this                 differing compliance or reporting
                                               Although it seems certain that some of                  industry. The closest applicable SBA                  requirements or timetables that take into
                                               these cable system operators are                        category is ‘‘All Other                               account the resources available to small
                                               affiliated with entities whose gross                    Telecommunications’’. The SBA’s small                 entities; (2) the clarification,
                                               annual revenues exceed $250 million,                    business size standard for ‘‘All Other                consolidation, or simplification of
                                               we are unable at this time to estimate                  Telecommunications,’’ consists of all                 compliance and reporting requirements
                                               with greater precision the number of                    such firms with gross annual receipts of              under the rules for such small entities;
                                               cable system operators that would                       $32.5 million or less. For this category,             (3) the use of performance rather than
                                               qualify as small cable operators under                  U.S. Census data for 2012 show that                   design standards; and (4) an exemption
                                               the definition in the Communications                    there were 1,442 firms that operated for              from coverage of the rule, or any part
                                               Act.                                                    the entire year. Of these firms, a total of           thereof, for such small entities.
                                                  94. All Other Telecommunications.                    1,400 had gross annual receipts of less                  99. The rule changes proposed by the
                                               ‘‘All Other Telecommunications’’ is                     than $25 million. Consequently, we                    NPRM would reduce the economic
                                               defined as follows: This U.S. industry is               estimate that under this category and                 impact of the Commission’s rules on A–
                                               comprised of establishments that are                    the associated size standard the majority             CAM carriers that elect incentive
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                                               primarily engaged in providing                          of these firms can be considered small                regulation in the following ways.
                                               specialized telecommunications                          entities.                                             Electing A–CAM carriers would no
                                               services, such as satellite tracking,                                                                         longer be required to prepare annual
                                               communications telemetry, and radar                     D. Description of Projected Reporting,                cost studies to justify their BDS rates.
                                               station operation. This industry also                   Recordkeeping, and Other Compliance                   Such carriers would also be freed of ex
                                               includes establishments primarily                       Requirements for Small Entities                       ante pricing regulation for many of their
                                               engaged in providing satellite terminal                   96. This NPRM proposes changes to,                  BDS offerings, including packet-based
                                               stations and associated facilities                      and seeks comment on, the                             BDS, circuit-based BDS above a DS3


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                                                                        Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules                                              22937

                                               bandwidth (about 45 Mbps) such as                       47 CFR Part 51                                        § 32.1    Background
                                               OCn services, and circuit-based end                                                                              The revised Uniform System of
                                               user channel terminations (e.g. DS1 and                   Communications common carriers,
                                                                                                       Telecommunications.                                   Accounts (USOA) is a historical
                                               DS3) in geographic areas deemed to be                                                                         financial accounting system which
                                               competitive by a competitive market                     47 CFR Parts 61 and 69                                reports the results of operational and
                                               test. These proposed rule changes                                                                             financial events in a manner which
                                               represent alternatives to the                             Communications common carriers,
                                                                                                                                                             enables both management and
                                               Commission’s current rules that would                   Reporting and recordkeeping
                                                                                                                                                             regulators to assess these results within
                                               significantly minimize the economic                     requirements, Telephone.
                                                                                                                                                             a specified accounting period. The
                                               impact of those rules on electing A–                    Federal Communications Commission.                    USOA also provides the financial
                                               CAM LECs. Finally, we seek comment                      Marlene Dortch,                                       community and others with financial
                                               as to any additional economic burden                    Secretary.                                            performance results. In order for an
                                               incurred by small entities that may                                                                           accounting system to fulfill these
                                               result from the rule changes proposed in                Proposed Rules
                                                                                                                                                             purposes, it must exhibit consistency
                                               the NPRM.                                                                                                     and stability in financial reporting
                                                                                                         For the reasons discussed in the
                                               F. Federal Rules That May Duplicate,                    preamble, the Federal Communications                  (including the results published for
                                               Overlap, or Conflict With the Proposed                  Commission proposes to amend 47 CFR                   regulatory purposes). Accordingly, the
                                               Rules                                                   parts 1, 32, 51, 61 and 69 as follows:                USOA has been designed to reflect
                                                                                                                                                             stable, recurring financial data based to
                                                  100. None.                                           PART 1—PRACTICE AND                                   the extent regulatory considerations
                                               XI. Ordering Clauses                                    PROCEDURE                                             permit upon the consistency of the well-
                                                                                                                                                             established body of accounting theories
                                                 101. Accordingly, it is ordered,                      ■ 1. The authority citation for part 1 is             and principles commonly referred to as
                                               pursuant to sections 1, 4(i), 10, and                   revised to read as follows:                           generally accepted accounting
                                               201(b) of the Communication Act of                        Authority: 47 U.S.C. 151, 154(i), 154(j),           principles (GAAP). The rules of this
                                               1934, as amended, 47 U.S.C. 151, 154(i),                155, 157, 225, 227, 303(r), 309, 1403, 1404,          part, and any other rules or orders that
                                               160, and 201(b) that the Petition for                   1451, and 1452.                                       are derivative of or dependent on these
                                               Rulemaking filed by ITTA and                            ■ 2. Section 1.1409 is amended by                     Part 32 rules, do not apply to price cap
                                               USTelecom in this proceeding is                         revising paragraph (g) to read as follows:            companies, and rate-of-return telephone
                                               granted to the extent described herein.                                                                       companies offering business data
                                                 102. It is further ordered, pursuant to               § 1.1409 Commission consideration of the              services pursuant to § 61.50 of this
                                                                                                       complaint.                                            chapter, that have opted-out of USOA
                                               sections 1, 4(i), 10, and 201(b) of the
                                               Communication Act of 1934, as                           *      *     *     *     *                            requirements pursuant to the conditions
                                               amended, 47 U.S.C. 151, 154(i), 160,                       (g) A price cap company, or a rate-of-             specified by the Commission in section
                                               and 201(b) that this Notice of Proposed                 return carrier electing to provide service            32.11(g).
                                               Rulemaking is adopted.                                  pursuant to § 61.50 of this chapter, opts-            ■ 5. Section 32.11 is amended by
                                                 103. It is further ordered, Pursuant to               out of Part 32 may calculate attachment               revising paragraph (g) to read as follows:
                                               Section 220(i) of the Communications                    rates for its poles, ducts, conduits, and
                                                                                                                                                             § 32.11    Companies Subject to this part.
                                               Act, 47 U.S.C. 220(i), that notice be                   rights of way using either Part 32
                                                                                                       accounting data or GAAP accounting                    *      *    *     *     *
                                               given to each state commission of the
                                               above rulemaking proceeding, and that                   data. A company using GAAP                               (g) Notwithstanding subsection (a), a
                                               the Secretary shall serve a copy of this                accounting data to compute rates to                   price cap company, or a rate-of-return
                                               NPRM on each state commission.                          attach to its poles, ducts, conduits, and             telephone company offering business
                                                                                                       rights of way in any of the first twelve              data services pursuant to § 61.50 of this
                                                 104. It is further ordered that the                   years after opting-out must adjust                    chapter, that elects to calculate its pole
                                               Commission’s Consumer and                               (increase or decrease) its annually                   attachment rates pursuant to section
                                               Governmental Affairs Bureau, Reference                  computed GAAP-based rates by an                       1.1409(g) of this chapter will not be
                                               Information Center, shall send a copy of                Implementation Rate Difference for each               subject to this Uniform System of
                                               this Notice of Proposed Rulemaking,                     of the remaining years in the period.                 Accounts.
                                               including the Initial Regulatory                        The Implementation Rate Difference
                                               Flexibility Analysis, to the Chief                      means the difference between                          PART 51—INTERCONNECTION
                                               Counsel for Advocacy of the Small                       attachment rates calculated by the
                                               Business Administration.                                carrier under Part 32 and under GAAP                  ■ 6. The authority citation for part 51
                                               List of Subjects                                        as of the last full year preceding the                continues to read as follows:
                                                                                                       carrier’s initial opting-out of Part 32                 Authority: 47 U.S.C. 151–55, 201–05, 207–
                                               47 CFR Part 1                                           USOA accounting requirements.                         09, 218, 220, 225–27, 251–54, 256, 271,
                                                                                                                                                             303(r), 332, 1302.
                                                 Communications common carriers,
                                                                                                       PART 32—UNIFORM SYSTEM OF
                                               Equal employment opportunity,                                                                                 ■ 7. Section 51.903 is amended by
                                                                                                       ACCOUNTS FOR
                                               Reporting and recordkeeping                                                                                   revising paragraph (g) to read:
                                                                                                       TELECOMMUNICATIONS COMPANIES
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                                               requirements, Telecommunications,
                                               Television.                                                                                                   § 51.903    Definitions.
                                                                                                       ■ 3. The authority citation for part 32
                                                                                                       continues to read as follows:                         *     *     *     *    *
                                               47 CFR Part 32
                                                                                                         Authority: 47 U.S.C. 219, 220 as amended,
                                                                                                                                                               (g) Rate-of-Return Carrier is any
                                                 Communications common carriers,                       unless otherwise noted.                               incumbent local exchange carrier not
                                               Reporting and recordkeeping                                                                                   subject to price cap regulation as that
                                               requirements, Telephone, Uniform                        ■ 4. Section 32.1 is revised to read as               term is defined in § 61.3(bb) of this
                                               System of Accounts.                                     follows:                                              chapter, but only with respect to the


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                                               22938                    Federal Register / Vol. 83, No. 96 / Thursday, May 17, 2018 / Proposed Rules

                                               territory in which it operates as an                       (e) A rate-of-return carrier electing to           or § 69.805 of this chapter, as well as to
                                               incumbent local exchange carrier.                       offer business data services pursuant to              the offering of business data services by
                                               *     *     *    *     *                                this section shall employ the procedures              rate-of-return carriers pursuant to
                                                                                                       outlined in §§ 61.41 through .49 to                   § 61.50 of this part.
                                               PART 61—TARIFFS                                         adjust its indexes to the extent those                *     *     *     *     *
                                                                                                       sections are applicable to business data
                                               ■ 8. The authority citation for part 61
                                                                                                       services, except that:                                PART 69—ACCESS CHARGES
                                               continues to read as follows:
                                                                                                          (1) For the special access basket
                                                 Authority: Secs. 1, 4(i), 4(j), 201–05 and            specified in § 61.42(d)(5), the value of X            ■ 12. The authority citation for part 69
                                               403 of the Communications Act of 1934, as               for local exchange carriers offering                  continues to read as follows:
                                               amended; 47 U.S.C. 151, 154(i), 154(j), 201–
                                               05 and 403, unless otherwise noted.
                                                                                                       service under this section shall be 2.0%                Authority: 47 U.S.C. 154, 201, 202, 203,
                                                                                                       effective July 1, [year]; and                         205, 218, 220, 254, 403.
                                               ■ 9. Section 61.41 is amended by                           (2) Exogenous costs shall be allocated             ■ 13. Section 69.114 is amended by
                                               revising paragraph (d) and adding                       to business data services based on                    revising paragraph (a) to read as follows:
                                               paragraph (f) to read as follows:                       relative revenues, including any
                                                                                                       universal service support amounts.                    § 69.114   Special Access.
                                               § 61.41   Price cap requirements generally.
                                                                                                          (f) Tariffs offering business data                   (a) Appropriate subelements shall be
                                               *      *     *     *     *                              services pursuant to this section may
                                                  (d) Except as provided in paragraph                                                                        established for the use of equipment or
                                                                                                       offer those business data services at                 facilities that are assigned to the Special
                                               (e) of this section, local exchange
                                                                                                       different rates in different study areas.             Access element for purposes of
                                               carriers that become subject to price cap
                                                                                                          (g) A rate-of-return carrier offering              apportioning net investment, or that are
                                               regulation as that term is defined in
                                                                                                       business data services pursuant to this               equivalent to such equipment or
                                               § 61.3(ff) shall not be eligible to
                                                                                                       section may make a low-end adjustment                 facilities for companies subject to price
                                               withdraw from such regulation.
                                                                                                       pursuant to § 61.45(d)(1)(vii) of this                cap regulation as that term is defined in
                                               *      *     *     *     *                              subpart unless it:
                                                  (f) Notwithstanding the requirements                                                                       § 61.3(ff) of this chapter.
                                                                                                          (1) Exercises the regulatory relief                *      *     *     *     *
                                               of paragraphs (c) and (d) of this section,              pursuant to paragraph (j) of this section
                                               a telephone company subject to rate-of-                                                                       ■ 14. Section 69.805 is amended by
                                                                                                       in any part of its service region; or                 revising paragraph (a) to read as follows:
                                               return regulation that is affiliated with                  (2) Exercises the option to use
                                               a price cap local exchange carrier may                  Generally Accepted Accounting                         § 69.805 Prohibition on certain non-
                                               provide business data services pursuant                 Principles rather than the Part 32                    disclosure agreement conditions.
                                               to § 61.50 without converting other                     Uniform System of Accounts pursuant
                                               services to price cap regulation.                                                                               (a) In markets deemed non-
                                                                                                       to § 32.11(g).                                        competitive, buyers and sellers of
                                               ■ 10. Section 61.50 is added to read as
                                                                                                          (h) Rate-of-return carriers electing to            business data services shall not enter
                                               follows:
                                                                                                       offer business data services pursuant to              into a tariff, contract-based tariff, or
                                               § 61.50 Incentive regulation of rate-of-                this section may offer transport and end              commercial agreement, including but
                                               return carrier provision of business data               user channel terminations that include:               not limited to master service agreement,
                                               services.                                                  (1) Volume and term discounts;                     that contains a non-disclosure
                                                 (a) A rate-of-return carrier, as defined                 (2) Contract-based tariffs, provided               agreement as defined in § 69.801(h), that
                                               in § 51.903(g), has the option to offer                 that:                                                 restricts or prohibits disclosure of
                                               business data services to customers                        (i) Contract-based tariff services are             information to the Commission, or
                                               pursuant to this section if the carrier                 made generally available to all similarly             requires a prior request or legal
                                                 (1) Receives universal service                        situated customers;                                   compulsion by the Commission to effect
                                               payments pursuant to the Alternative-                      (ii) The rate-of-return carrier excludes           such disclosure.
                                               Connect America Cost Model pursuant                     all contract-based tariff offerings from
                                                                                                                                                             *     *      *     *     *
                                               to § 54.311;                                            incentive regulation pursuant to                      [FR Doc. 2018–10338 Filed 5–16–18; 8:45 am]
                                                 (2) Is an affiliate of a price cap local              § 61.42(f) of this subpart;
                                                                                                                                                             BILLING CODE 6712–01–P
                                               exchange carrier operating pursuant to a                   (3) Ability to file tariff revisions on at
                                               waiver of § 61.41; or                                   least one day’s notice, notwithstanding
                                                 (3) Receives universal service                        the notice requirements for tariff filings
                                               payments pursuant to § 54.306.                          specified in § 61.58 of this chapter.                 DEPARTMENT OF COMMERCE
                                                 (b) A rate-of-return carrier may not                     (j) A rate-of-return carrier electing to
                                               elect to offer business data services to                offer business data services pursuant to              National Oceanic and Atmospheric
                                               customers pursuant to this section                      this section shall comply with the                    Administration
                                               unless it notifies the Chief of the                     requirements of section 69.805 of this
                                               Wireline Competition Bureau at least                    Chapter.                                              50 CFR Part 622
                                               120 days before the effective date of the                  (k) The regulation of other services
                                               election. Carriers may only elect this                                                                        [Docket No. 171031999–8428–01]
                                                                                                       offered by a rate-of-return carrier that
                                               option to be effective on July 1, [year].               offers business data services pursuant to             RIN 0648–BH39
                                                 (c) A rate-of-return carrier may elect                this section shall not be modified as a
                                               to offer business data services pursuant                result of the requirements of this                    Fisheries of the Caribbean, Gulf of
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                                               to this section only if all affiliated rate-            section.                                              Mexico, and South Atlantic; Snapper-
                                               of-return carriers make the election.                   ■ 11. Section 61.55 is amended by                     Grouper Fishery of the South Atlantic
                                                 (d) A rate-of-return carrier electing to              revising paragraph (a) to read as follows:            Region; Amendment 43
                                               offer business data services under this
                                               section may continue to participate in                  § 61.55   Contract-based tariffs.                     AGENCY:  National Marine Fisheries
                                               the NECA Traffic Sensitive Pool for                       (a) This section shall apply to price               Service (NMFS), National Oceanic and
                                               access services other than business data                cap local exchange carriers permitted to              Atmospheric Administration (NOAA),
                                               services.                                               offer contract-based tariffs under § 1.776            Commerce.


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Document Created: 2018-05-17 00:50:22
Document Modified: 2018-05-17 00:50:22
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionProposed rule.
DatesComments are due on or before June 18, 2018; reply comments are due on or before July 2, 2018. Parties that believe this document may contain new or modified information collection requirements may submit written Paperwork Reduction Act (PRA) comments to the Office of Management and Budget (OMB), and other interested parties on or before July 16, 2018.
ContactJustin Faulb, Wireline Competition Bureau, Pricing Policy Division at 202-418-1589 or via email at [email protected]
FR Citation83 FR 22923 
CFR Citation47 CFR 1
47 CFR 32
47 CFR 51
47 CFR 61
47 CFR 69
CFR AssociatedCommunications Common Carriers; Equal Employment Opportunity; Reporting and Recordkeeping Requirements; Telecommunications; Television; Telephone and Uniform System of Accounts

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