[Federal Register Volume 77, Number 110 (Thursday, June 7, 2012)]
[Proposed Rules]
[Pages 33895-33944]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13611]



[[Page 33895]]

Vol. 77

Thursday,

No. 110

June 7, 2012

Part IV





Federal Communications Commission





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47 CFR Part 54





Universal Service Contribution Methodology; a National Broadband Plan 
for Our Future; Proposed Rule

Federal Register / Vol. 77, No. 110 / Thursday, June 7, 2012 / 
Proposed Rules

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 06-122; GN Docket No. 09-51; FCC 12-46]


Universal Service Contribution Methodology; a National Broadband 
Plan for Our Future

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) seeks public comment on approaches to reform and modernize 
how Universal Service Fund (USF or Fund) contributions are assessed and 
recovered. The Commission seeks comment on ways to reform the USF 
contribution system in an effort to promote efficiency, fairness, and 
sustainability. The Commission seeks comment on proposals in four key 
areas regarding the contributions system: Who should contribute to the 
Fund; how contributions should be assessed; how the administration of 
the contribution system can be improved; and recovery of universal 
service contributions from consumers.

DATES: Comments are due on or before July 9, 2012 and reply comments 
are due on or before August 6, 2012. If you anticipate that you will be 
submitting comments, but find it difficult to do so within the period 
of time allowed by this notice, you should advise the contact listed 
below as soon as possible.

ADDRESSES: You may submit comments, identified by WC Docket Nos. 06-
122; GN Docket No. 09-51, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: http://fjallfoss.fcc.gov/ecfs2/. 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: FCC504@fcc.gov or phone: (202) 418-
0530 or TTY: (202) 418-0432.

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: Vickie Robinson, Wireline Competition 
Bureau, (202) 418-2732 or Ernesto Beckford, Wireline Competition 
Bureau, (202) 418-1523 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Further Notice of Proposed Rulemaking (NPRM) in WC Docket No. 06-122, 
and GN Docket No. 09-51, FCC 12-46, adopted April 27, 2012, and 
released April 30, 2012. The complete text of this document is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street SW., 
Room CY-A257, Washington, DC 20554. The document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc. (BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via the Internet at http://www.bcpiweb.com. It is also available on 
the Commission's Web site at http://www.fcc.gov.
    Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's rules, 
interested parties may file comments and reply comments on or before 
the dates indicated on the first page of this document. Comments may be 
filed using: (1) The Commission's Electronic Comment Filing System 
(ECFS); (2) the Federal Government's eRulemaking Portal; or (3) by 
filing paper copies. See Electronic Filing of Documents in Rulemaking 
Proceedings, 63 FR 24121, May 1, 1998.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the Web site for submitting 
comments.
    [cir] For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet email. To get filing instructions, 
filers should send an email to ecfs@fcc.gov, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    [cir] Paper Filers: Parties who choose to file by paper must file 
an original and four copies of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, 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 (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    [cir] The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8:00 a.m. to 7:00 p.m. All hand deliveries 
must be held together with rubber bands or fasteners. Any envelopes 
must be disposed of before entering the building.
    [cir] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    [cir] U.S. Postal Service first-class, Express, and Priority mail 
should be addressed to 445 12th Street SW., Washington, DC 20554.
    In addition, one copy of each pleading must be sent to the 
Commission's duplicating contractor, Best Copy and Printing, Inc, 445 
12th Street SW., Room CY-B402, Washington, DC 20554; Web site: 
www.bcpiweb.com; phone: 1-800-378-3160. Furthermore, three copies of 
each pleading must be sent to Charles Tyler, Telecommunications Access 
Policy Division, Wireline Competition Bureau, 445 12th Street SW., Room 
5-A452, Washington, DC 20554; email: Charles.Tyler@fcc.gov.
    Filings and comments are also available for public inspection and 
copying during regular business hours at the FCC Reference Information 
Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 
20554. Copies may also be purchased from the Commission's duplicating 
contractor, BCPI, 445 12th Street SW., Room CY-B402, Washington, DC 
20554. Customers may contact BCPI through its Web site: 
www.bcpiweb.com, by email at fcc@bcpiweb.com, by telephone at (202) 
488-5300 or (800) 378-3160 (voice), (202) 488-5562 (tty), or by 
facsimile at (202) 488-5563.
    To request materials in accessible formats for people with 
disabilities (Braille, large print, electronic files, audio format), 
send an email to fcc504@fcc.gov or call the Consumer & Governmental 
Affairs Bureau at (202) 418-0530 (voice) or (202) 418-0432 (TTY). 
Contact the FCC to request

[[Page 33897]]

reasonable accommodations for filing comments (accessible format 
documents, sign language interpreters, CART, etc.) by email: 
FCC504@fcc.gov; phone: (202) 418-0530 or TTY: (202) 418-0432.
    For further information regarding this proceeding, contact Vickie 
Robinson, Deputy Chief, Telecommunications Access Policy Division, 
Wireline Competition Bureau at (202) 418-2732, vickie.robinson@fcc.gov, 
or Ernesto Beckford, Attorney Advisor, Wireline Competition Bureau at 
(202) 418-1523, ernesto.beckford@fcc.gov.

I. Summary

A. Who should contribute to Universal Service

1. Statutory Authority To Require Contributions
    1. Under section 254(d) of the Act, the Commission has mandatory 
authority to require contributions to the Fund, ``[E]very 
telecommunications carrier that provides interstate telecommunications 
services.'' In addition, the Commission has ``permissive'' authority 
that extends to ``any * * * provider of interstate telecommunications * 
* * if the public interest so requires.'' Over time, the Commission has 
periodically exercised its permissive authority to extend contribution 
obligations to particular classes of providers on a service-specific 
basis. We seek comment on the scope of our permissive authority, 
including how we should interpret the statutory terms that define that 
authority.
a. ``Provider of Interstate Telecommunications''
    2. We seek comment on how we should interpret the terms 
``providing'' and ``telecommunications'' and whether it is appropriate 
to revisit any previous Commission interpretations based on the 
evolution of the industry and significant marketplace changes over the 
last decade.
    3. In exercising our permissive authority, we must determine 
whether an entity is a ``provider'' of interstate telecommunications as 
specified in section 254(d). Although Congress has not defined the 
terms ``provide,'' ``provider,'' or ``provision,'' the Commission has 
addressed these terms in several orders. First, the Commission has 
concluded that ``provide'' is a different term from ``offer.'' The 
Commission has drawn a distinction between what is ``offered'' from a 
demand perspective (i.e., what the customer perceives to be the 
integrated product), and what is ``provided'' from a supply perspective 
i.e., what the provider is furnishing or supplying to the end user, 
including not only the integrated product but also the discrete 
components of the product). Second, the Commission has previously held 
that ``provide'' is broader than ``offer.'' Under this view, an entity 
may both ``provide'' and ``offer'' telecommunications, but an entity 
may also provide telecommunications without offering 
telecommunications. Many participants in today's marketplace do not 
separately offer telecommunications to end users, but instead offer 
integrated services that include both telecommunications (i.e., 
transmission) and non-telecommunications components. For such 
integrated services, however, the service provider still ``provides'' 
telecommunications as part of the ``offering.'' The D.C. Circuit has 
upheld the Commission's interpretation. In light of the marketplace 
changes over the last decade, should the Commission revisit its 
interpretation of what it means to ``provide'' or to be a ``provider 
of'' telecommunications?
    4. Telecommunications. The Act defines the term 
``telecommunications'' as ``the transmission, between or among points 
specified by the user, of information of the user's choosing, without 
change in the form or content of the information as sent and 
received.'' Here and in Section IV.C below, we seek comment on how we 
should interpret each component of this definition for purposes of 
potentially exercising our permissive authority.
b. ``If the Public Interest So Requires''
    5. We seek comment on what factors we should consider in deciding 
whether the public interest warrants exercising our permissive 
authority. We seek comment generally on whether the public interest 
would be served, and to what extent exercising our permissive authority 
would achieve any or all of the goals set forth above--efficiency, 
fairness, and sustainability. For example, is it in the public interest 
to exercise permissive authority over a provider of telecommunications 
if the telecommunications is part of a service that competes with or is 
used by consumers or businesses in lieu of telecommunications services 
that are subject to assessment? In the past, the Commission has stated 
that the principle of competitive neutrality dictates that it should 
assess contributions from entities that are not mandatory contributors, 
but benefit from access to the PSTN. Is that consideration relevant in 
today's marketplace? Should we assess providers of services that are 
capturing a growing portion of overall communications spending as a 
means of achieving sustainability? Should we consider whether those 
services are being used in ways that may replace, partially or wholly, 
services that are subject to mandatory assessment? Does the public 
interest analysis differ depending on whether we are considering 
consumer services or business/enterprise services? What other factors 
should we take into account?
2. Determining Contribution Obligations on a Case-by-Case Basis With 
Respect to Providers of Specific Services
    6. We seek comment on whether and if so, to what extent, the 
Commission should exercise its permissive authority contained in 
section 254(d) of the Act to clarify or modify contribution 
requirements for providers of several specific services, or if we 
should otherwise modify or clarify the contribution obligations of such 
services. As discussed above, the Commission has exercised its 
permissive authority on several occasions to expand or clarify 
contribution obligations on a service-specific basis. In the Universal 
Service First Report and Order, 62 FR 32862, June 17, 1997, it required 
private line service providers and payphone aggregators to contribute 
to the Fund, reasoning that the services offered by these entities rely 
on access to the PSTN and compete with services offered by mandatory 
contributors to the Fund (i.e., common carriers). In 2006, the 
Commission assessed interconnected VoIP services without reaching the 
statutory classification of such services. The Commission concluded 
that deciding the statutory classification was unnecessary, because 
even if interconnected VoIP services did not fall under the mandatory 
contribution provision of section 254(d), it was appropriate to assess 
such services as an exercise of permissive authority. The Commission 
determined that an immediate extension of contribution obligations to 
interconnected VoIP service was warranted due to the growth in demand 
for the Fund, the decline in the contribution base overall, and the 
``robust growth in subscribership'' to interconnected VoIP services, 
from 150,000 subscribers in 2003 to 4.2 million subscribers in 2005.
    7. We seek comment on continuing this general approach of 
addressing the contribution obligations of specific services on a 
service-by-service basis. First, we seek comment on exercising 
permissive authority with respect to certain services for which 
contribution

[[Page 33898]]

obligations are currently subject to dispute. To the extent commenters 
believe that any such services should be non-assessable, we also seek 
comment on alternative approaches to clarifying contributions, 
including forbearing from any applicable contribution obligations to 
the extent these services are telecommunications services, and we seek 
comment on the effect of such approaches on the contribution base and 
the sustainability of the Fund. Second, we seek comment on exercising 
permissive authority with respect to other services that are clearly 
not currently assessable, but which various commenters have proposed 
should be assessed.
    8. In particular, we seek comment on exercising our permissive 
authority to require contributions from providers of enterprise 
communications services that include interstate telecommunications; 
text messaging; one-way VoIP; and broadband Internet access services. 
Each of these services has found a significant niche in today's 
communications marketplace. The question of whether certain enterprise 
communications services are currently assessable as telecommunications 
services or non-assessable as information services has led to 
significant disputes, uncertainty, and incentives for providers to 
attempt to characterize their services in a particular way in order to 
avoid contribution requirements, resulting in a pending request for 
guidance from USAC regarding the treatment of certain services. 
Likewise, the question of whether text messaging is currently 
assessable has been disputed, and there is a pending request for 
guidance from USAC regarding text messaging. In contrast, one-way VoIP 
services and broadband Internet access services are clearly not in the 
contribution base today, although various parties have argued they 
should be assessed. We seek comment on these arguments.
    9. We seek comment on addressing the contribution obligations of 
such services, regardless of their statutory classification as 
information services or telecommunications services, in order to 
provide clarity for contributors and greater stability for the Fund. We 
also seek comment on whether exercising our permissive authority would 
ensure that competitive services are not unfairly disadvantaged by 
disparate contribution obligations, while further simplifying the 
requirements imposed on contributors.
    10. We seek comment on adopting the following rule, in whole or in 
part: Providers of the following are subject to contributions: * * * 
Enterprise communications services that include a provision of 
telecommunications; Text messaging service; One-way VoIP service; and 
Broadband Internet access services.
    11. Enterprise Communications Services Providers. We seek comment 
on clarifying the contribution obligations of various enterprise 
communications services that include the provision of 
telecommunications, without classifying those services as 
telecommunication services or information services, to advance our 
proposed goals for contributions reform, namely, creating greater 
efficiency, fairness, and sustainability of the Fund.
    12. We note that, as stated above, the Act defines 
telecommunications as ``the transmission, between or among points 
specified by the user, of information of the user's choosing, without 
change in the form or content of the information as sent and 
received.'' The Commission has found that transmission is the heart of 
telecommunications, and has classified data transmission services that 
have ``traditionally'' and ``typically'' been used for basic 
transmission purposes, such as ``stand-alone ATM service, frame relay, 
gigabit Ethernet service, and other high-capacity special access 
services,'' as telecommunications services.
    13. We have not formally addressed enterprise communications 
services such as Dedicated IP, VPNs, WANs, and other network services 
that are implemented with various protocols such as Frame Relay/ATM, 
MPLS and PBB for purposes of determining USF contribution obligations. 
To the extent that such enterprise communications services would not 
fall within the definition of telecommunications services, should we 
exercise our permissive authority with respect to providers of those 
services? Are such enterprise communications services substitutes for 
other enterprise communications services that are subject to mandatory 
contributions, and would such an exercise of permissive authority 
increase clarity and fairness? If we were to exercise our permissive 
authority over enterprise communications services that may be 
information services, should we enumerate the specific services that 
would be subject to a contribution obligation, or should we attempt to 
craft a more general definition that would capture future generations 
of such services that deliver similar functionality, regardless of 
technology used, in order to promote the sustainability of the Fund? 
What would be the appropriate transition period for such changes?
    14. If we choose to exercise our permissive authority in this 
fashion, how would that affect the size of the contribution base? To 
what extent would assessing enterprise communications services bring 
additional contributors into the system that do not otherwise 
contribute today directly or indirectly? How would an assessment of 
additional enterprise communications services affect the distribution 
of contribution obligations among various industry segments? How would 
such assessment affect the relative distribution of contribution 
obligations between services provided to enterprise and residential 
customers? How would such assessment affect the average contributions 
of different categories of residential end users, such as low-volume 
versus high-volume users, or vulnerable populations such as low-income 
consumers?
    15. To the extent we conclude that Dedicated IP, VPNs, WANs, or 
other communications services for which contribution obligations have 
been in dispute should not be subject to contribution obligations, 
should we exercise our forbearance authority under section 10 of the 
Act to exempt these services from mandatory contribution insofar as 
they may be viewed as telecommunications services? How would that 
impact the current contribution base, and the relative distribution of 
contribution obligations between enterprise and residential consumers? 
Do these services differ from other explicitly assessed enterprise 
communications services in a way that makes their exemption from 
contribution appropriate, and would the section 10 criteria otherwise 
be met?
    16. We note that the Commission has expressly declined to exercise 
permissive authority over systems integrators for whom 
telecommunications represents a small fraction (less than five percent) 
of total revenues derived from systems integration services. To the 
extent that we explicitly exercise our permissive authority to assess 
enterprise communications services, should we also eliminate the system 
integrators exemption, so that systems integrators would contribute 
even if their telecommunications revenues were under the current 
threshold? In the alternative, if we determine that we should clarify 
that certain enterprise communications services are not subject to 
contributions, should we modify the systems integrators exemption, and 
if so how? How would our decision to clarify the contribution 
obligations for any category of these services affect current 
contributions?

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    17. We seek comment on the size of the enterprise communications 
services marketplace, including comment on the Telecommunications 
Industry Association estimates, and whether this marketplace is likely 
to grow or shrink in the future. If commenters believe the estimates 
are too high or too low, they should provide specific data to more 
accurately size this segment of the communications marketplace. We also 
seek comment and data submissions on how assessing these services would 
affect the contribution base under the different methodologies proposed 
in the Notice. We seek comment and data on the extent to which service 
providers are currently treating these services as assessable. We seek 
comment on how revenues from such services should be apportioned into 
assessable and non-assessable segments if the Commission continues with 
a revenues-based methodology. We encourage commenters to provide 
comments and data regarding the structure of typical enterprise 
communications services contracts. In particular, we seek comment on 
whether such contracts typically break out costs for different parts of 
the services provided and, if so, how they generally do so.
    18. Text Messaging Providers. We seek comment on whether text 
messaging services should be assessed in light of our proposed goals 
for contribution reform. To what extent is there a lack of clarity 
within the industry over whether such services are subject to universal 
service contributions? Would adopting a clear rule establishing that 
text messaging is in the contribution base further the Commission's 
efforts to promote fairness and competitive neutrality? If providers of 
text messaging services were required to contribute, would that create 
competitive distortions between text messaging service providers and 
providers that offer applications that allow users to send messages 
using a wireless customer's general data plan--applications that 
consumers may increasingly view as a substitute to text messaging? 
Given the rapid growth in the text messaging marketplace, a number of 
stakeholders have suggested in recent years that text messaging 
revenues should be added to the contribution base to enhance the 
sustainability of the Fund. To what extent would including these 
services in the contribution base add to the stability of the Fund? If 
we modified our rules to explicitly assess text messaging, what would 
be an appropriate transition period?
    19. If we conclude text messaging services should be assessed, 
should we exercise the Commission's permissive authority under section 
254(d) of the Act to assess providers of these services, without 
determining whether such services are telecommunications services or 
information services? Alternatively, if we conclude that text messaging 
services should not be assessed, should the Commission conclude that 
even if such services are telecommunications services, we should 
exercise our forbearance authority under section 10 of the Act to 
exempt text messaging from contribution obligations?
    20. We seek comment on the extent to which consumers are 
substituting text messaging for traditional voice services and other 
services that are subject to universal service contributions. Are there 
any reasons to treat short message service (SMS) or multimedia 
messaging service (MMS) differently for this analysis? Commenters 
should provide data to support their assertions.
    21. We also seek comment on whether wireless providers include 
revenues generated through the use of common short codes in their text 
messaging revenues. If common short code revenues are not reported as 
part of the text messaging revenues, are there any reasons to treat 
such revenues differently in calculating the universal service 
contributions?
    22. We seek comment on the size of the text messaging marketplace, 
including the industry revenue figures referenced above, and whether 
this marketplace is likely to grow or shrink in the future. Commenters 
who disagree with the estimates above should submit specific revenue 
data to support their assertions.
    23. To the extent commenters advocate a position on whether text 
messaging providers should be assessed, we view it as highly relevant 
whether those commenters earn text message revenues themselves and, if 
so, whether they have reported it as assessable in recent years. We 
thus ask commenters to include in their comments their estimated recent 
text messaging revenues, and the extent to which they reported those 
revenues as assessable. If we explicitly assess text messaging 
providers, how would that affect the size of the contribution base? How 
would such assessment affect the distribution of contribution 
obligations between services for enterprise and residential customers? 
How would it affect the total average impact of contributions on 
residential end users? How would it affect the distribution of 
obligations between low-volume and high-volume users? How would an 
assessment of text messaging providers affect the distribution of 
contribution obligations among various industry segments?
    24. We also seek comment and data submissions on how assessing 
these providers of these services would affect the contribution base 
under the different methodologies proposed in Section V below. We note 
that to the extent that providers of text messaging also are providers 
of assessable voice services, explicitly assessing text messaging would 
not necessarily broaden the base; to the extent we were to adopt a non-
revenues-based contribution methodology. We also seek comment and data 
on the extent to which service providers are currently treating these 
services as assessable.
    25. One-way VoIP Service Providers. We seek comment on whether the 
Commission should exercise its permissive authority under section 
254(d) to include in the contribution base providers of ``one-way'' 
VoIP with respect to such service offerings, regardless of the 
statutory classification of such services. Such offerings would include 
all services that provide users with the capability to originate calls 
to the PSTN or terminate calls from the PSTN, but in all other respects 
meet the definition of ``interconnected VoIP.'' We seek comment below 
on a potential definition of such services for the purpose of USF 
contributions: One-way VoIP service. A service that (1) enables real-
time, two-way voice communications; (2) requires a broadband connection 
from the user's location; (3) requires Internet protocol-compatible 
customer premises equipment; and (4) permits users generally to receive 
calls that originate on the public switched telephone network or 
terminate calls to the public switched telephone network.
    26. To what extent does this rationale apply today to one-way VoIP 
services? We note that one-way VoIP enables consumers to originate or 
terminate calls on the PSTN. Would the public interest be served by 
exercising permissive authority over one-way VoIP to further our 
proposed goals of efficiency, fairness and sustainability?
    27. In particular, we seek comment on whether competitive 
neutrality concerns now support the inclusion of one-way VoIP services 
within the contribution base. Some parties argue that the one-way VoIP 
exemption is ``an enormous loophole'' that creates competitive 
disparities. We seek comment on the extent of competition between one-
way VoIP and other services that are subject to assessment, and how 
that should affect our analysis. Commenters are encouraged to provide 
data to support

[[Page 33900]]

their analysis. If one-way VoIP providers are brought into the 
contribution base, what would be the appropriate transition period?
    28. We seek comment on the size of the one-way VoIP marketplace in 
the United States, and whether this marketplace is likely to grow or 
shrink in the future. How many providers of one-way VoIP are there, and 
who are other major providers of such services? What are the overall 
U.S. revenues for this group of providers, and how many customers do 
they have? Commenters are encouraged to provide specific data to 
support their assertions. We also seek comment and data submissions on 
how assessing these services would affect the contribution base under 
the different methodologies proposed in section V below.
    29. If we assess one-way VoIP, how would that affect the size of 
the contribution base? How would such assessment affect the 
distribution of contribution obligations between services for 
enterprise and residential customers? How would it affect the total 
average impact of contributions on residential end users? How would it 
affect the distribution of obligations between low-volume and high-
volume users, and how would it impact low-income consumers? How would 
an assessment of one-way VoIP affect the distribution of contribution 
obligations among various industry segments? We seek comment on the 
relevance of precedent to the question of whether one-way providers 
should contribute to universal service.
    30. Broadband Internet Access Service Providers. The State Members 
of the Federal-State Universal Service Joint Board (State Members of 
the Joint Board) have proposed that the Commission include ``broadband 
and services closely associated with the delivery of broadband'' in the 
base, including Digital Subscriber Line (DSL), cable, and wireless 
broadband Internet access. Other commenters also support extending 
assessments to broadband Internet access.
    31. In 2002, the Commission sought comment on whether and how 
broadband Internet access service providers should contribute to 
universal service. In the Wireline Broadband Internet Service Access 
Order, 70 FR 60222, October 17, 2005, the Commission classified 
wireline broadband Internet access as an information service. The 
Commission also recognized, however, that wireline broadband Internet 
access service includes a provision of telecommunications. In the 
Wireline Broadband Internet Access Order, the Commission stated that it 
intended to address contribution obligations for providers of broadband 
Internet access in a comprehensive fashion in the future, either in 
that docket or in this docket.
    32. Some commenters have suggested that the Commission should 
exercise its permissive authority to assess providers of broadband 
Internet access services. Several parties, however, have expressed 
concern that assessing broadband Internet access could discourage 
broadband adoption. We seek comment on those concerns and invite 
commenters to submit empirical data into the record of this proceeding 
regarding the potential impact of assessing broadband Internet access 
services on consumer adoption or usage of services. Would assessing 
broadband Internet access service in the near term undermine the goals 
of universal service? Could the Commission address such concerns by 
phasing in contributions for mass market broadband Internet access 
services over time?
    33. In the USF/ICC Transformation Order, 76 FR 76623, December 8, 
2011, we adopted new rules to ensure that robust and affordable voice 
and broadband, both fixed and mobile, are available to Americans 
throughout the nation. In this proceeding, we are looking to update and 
modernize the method by which funds are collected to support universal 
service. Some have expressed concern that assessing broadband Internet 
access may indirectly raise the price of broadband Internet access for 
some consumers. To what extent, if any, would assessing broadband 
services discourage consumers from subscribing? To what extent, if any, 
would that in turn slow down deployment of broadband infrastructure? We 
seek comments and economic analyses that address the overall effect on 
broadband deployment of assessing or not assessing broadband.
    34. The State Members of the Joint Board recommend that both 
telecommunications services and information services (such as broadband 
Internet access services) should be assessed and suggest that if most 
of the revenues currently reported on FCC Form 499 Line 418 were 
assessed, that would reduce the contribution factor to approximately 
two percent. They also suggest this would simplify billing ``since the 
new federal USF surcharge rate would generally apply to an end user's 
total bill.'' We seek comment on this recommendation of the State 
Members of the Joint Board. Would such an approach make 
telecommunications more affordable for consumers with lower overall 
telecommunications expenditures? What is the relationship between 
household income and the percentage of a household's telecommunications 
bill subject to assessment under the current system, and what would it 
be under the State Members' proposed approach? Would such an approach 
affect consumer adoption of telecommunications services that are not 
currently assessed? We ask commenters to provide any analysis and data 
regarding their estimated reduction in the contribution factor, if we 
were to require contributions based on the total bill. If we were to 
assess broadband Internet access, to what extent would that reduce the 
contribution factor if we maintain a revenue-based methodology?
    35. If the Commission does assess broadband Internet access 
service, now or at some point in the future, should the Commission 
assess all forms of broadband Internet access, including wired 
(including over cable, telephone, and power-line networks), satellite, 
and fixed and mobile wireless? Should it assess mass market broadband 
Internet access as well as enterprise broadband Internet access? As a 
practical matter, how would the Commission differentiate between mass 
market broadband Internet access, and other forms of broadband Internet 
access, and would such a distinction create any distortions in the 
marketplace?
    36. We note that TIA estimates the wired broadband Internet access 
marketplace to be $38.3 billion in 2011 and $40.3 billion in 2012, and 
the marketplace for wireless data services to be $73.6 billion in 2011 
and $89.8 billion in 2012. TIA also projects wireless data services to 
be over $140 billion, or double that for wireless voice, by 2015. It is 
not clear; however, from how TIA presents the data whether its 
estimates include both enterprise as well as mass market broadband 
Internet access. To what extent are any of these revenues in the 
contribution base today? What proportion of those revenues should be 
considered mass market broadband Internet access, if we were to retain 
a revenues-based system but adopt an approach that would exempt mass 
market broadband Internet access services from contribution 
obligations? Under such an approach, how should we define ``mass 
market''?
    37. We also seek comment on whether exercising our permissive 
authority with respect to broadband Internet access services would be 
consistent with the Act and our potential goals for contributions 
reform, namely, creating greater efficiency, fairness, sustainability, 
and other goals that

[[Page 33901]]

commenters identify. If we assess broadband Internet access services, 
how would that affect the size of the contribution base? How would such 
assessment affect the distribution of contribution obligations between 
enterprise and mass market customers if we assess only enterprise 
broadband Internet access services, only mass market broadband Internet 
access services, or all broadband Internet access services? How would 
these different approaches to assessing broadband Internet access 
services affect the total average contribution impact for mass market 
end users? How would they affect the distribution of contribution 
obligations between services offered to low-volume and high-volume 
users, or between low-income and higher-income users? How would an 
assessment of broadband Internet access services affect the 
distribution of contributions among various industry segments? Would 
assessing retail broadband Internet access service eliminate the 
current competitive disparity that exists today between providers that 
contribute on their broadband transmission (small rate of return 
companies) and their competitors, who do not?
    38. Listing of Services Subject to Universal Service Contribution 
Assessment. Section 54.706 of our rules sets forth a non-exhaustive 
list of services that are currently included in the contribution base. 
Should we continue to specify in our codified regulations specific 
services that are subject to assessment? Should that list be updated to 
reflect marketplace changes over the last decade? Does it advance our 
potential goals for reform of providing predictability and simplifying 
compliance and administration to maintain a non-exhaustive list of 
services that are subject to contributions, which by definition does 
not provide clarity as to whether services not on the list are subject 
to contribution obligations? Could we adopt a simpler approach that is 
flexible enough to be applied to services that exist today and ones 
that will emerge in the future, without a need to continually update 
our codified rules? Should the Commission periodically set forth a list 
of assessable services, similar to the eligible services list used for 
the schools and libraries universal service support mechanism?
3. Determining Contribution Obligations Through a Broader Definitional 
Approach
    39. In the previous section, we inquired about using our section 
254(d) permissive authority or other tools to modify or clarify the 
contribution obligations of providers of specific services. In this 
section, we seek comment on an alternative approach: exercising our 
permissive authority to craft a general rule that would specify which 
``providers of interstate telecommunications'' must contribute, without 
enumerating the specific services subject to assessment. Like the 
approach discussed above, such a rule would not require us to resolve 
the statutory classification of specific services as information 
services or telecommunications services in order to conclude that 
contributions should be assessed. Such a rule could potentially produce 
a more sustainable contribution system by avoiding the need to 
continually update a list of specific services subject to assessment. 
At the same time, such an approach leaves open the possibility of 
carving out or excluding a specifically defined list of providers or 
services, if inclusion of those providers or services is not in the 
public interest.
    40. For example, we seek comment on exercising our permissive 
authority to adopt a rule such as the following: Any interstate 
information service or interstate telecommunications is assessable if 
the provider also provides the transmission (wired or wireless), 
directly or indirectly through an affiliate, to end users.
    41. This rule is intended to encompass only entities that provide 
transmission to their users, whether using their own facilities or by 
utilizing transmission service purchased from other entities. As 
discussed above, the provision of ``telecommunications'' means, in 
part, the provision of transmission capability. Under the approach 
historically taken by the Commission, some, but not all, providers of 
information services ``provide'' telecommunications. By statutory 
definition, an information service provider offers the ``capability for 
generating, acquiring, storing, transforming, processing, retrieving, 
utilizing, or making available information via telecommunications.'' In 
the past, the Commission has found that the telecommunications 
component may be provided by the information services provider or the 
customer. In other words, some information service providers 
``provide'' the telecommunications required to utilize the information 
service, but others require their customers to ``bring their own 
telecommunications'' (in other words, to ``bring their own transmission 
capability''). The rule set forth above is intended to include entities 
that provide transmission capability to their users, whether through 
their own facilities or through incorporation of services purchased 
from others, but not to include entities that require their users to 
``bring their own'' transmission capability in order to use a service. 
This is consistent with Commission precedent where the Commission has 
exercised its permissive authority to extend USF contribution 
requirements to providers of telecommunications that are competing 
directly with common carriers. We seek comment on whether the rule 
would achieve this intended result. To the extent the rule above would 
not achieve this intended result; we seek comment on how the rule could 
be altered to achieve this result.
    42. We seek comment on whether a rule such as the one above would 
further our proposed goals of contributions reform by improving 
efficiency, fairness, and the sustainability of the Fund. Would 
adopting such a rule provide sufficient guidance to potential 
contributors regarding their contribution obligation? Would such a rule 
be simple to administer, monitor, and enforce? Would it create market 
distortions or impede innovation?
    43. The National Broadband Plan recommended that however the 
Commission chooses to reform contribution methodology, it should take 
steps to minimize opportunities for arbitrage as new products and 
services are developed, so that there is no need to continuously update 
regulations to catch up with changes in the market. Would a rule like 
the one discussed above achieve these goals, minimizing opportunities 
for arbitrage and eliminating the need to continuously update 
regulations? Or, alternatively, would it result in new definitional 
disputes and potential uncertainty?
    44. Could the above rule be read to make content fees assessable 
when content is provided by the provider of the interstate 
telecommunications? For example, could an IP-based video-on-demand 
service be assessable? We note that cable services are regulated under 
Title VI of the Act, and that video service providers are currently 
only required to contribute to the extent they provide interstate 
telecommunications services or other assessable telecommunications. We 
also note that many video-on-demand services are being provided through 
Internet web sites, and thus are services that require the viewer to 
bring their own ``telecommunications'' (i.e., Internet access). Could 
the above definition lead to the assessment of any other services that 
compete largely or primarily against services that remain non-
assessable? If

[[Page 33902]]

so, would this lead to competitive distortions? How could the 
definition be altered to avoid this result?
    45. As noted above, the Commission has determined that ``over-the-
top'' interconnected VoIP providers provide transmission to or from the 
PSTN to end users, and has subjected these services to contribution 
obligations. Even where a user obtains Internet access from an 
independent third party to use an interconnected VoIP service, an over-
the-top interconnected VoIP provider must still supply termination to 
the PSTN for outgoing calls (which is not covered by the Internet 
access service), and origination from the PSTN for incoming calls 
(which again is not covered by the Internet access service). Over-the-
top VoIP providers generally purchase this access to the PSTN from a 
telecommunications carrier who accepts outgoing traffic from and 
delivers incoming traffic to the interconnected VoIP provider's media 
gateway. The Commission held that origination or termination of a 
communication via the PSTN is ``telecommunications,'' and over-the-top 
interconnected VoIP providers, like other resellers, are providing 
telecommunications when they provide their users with the ability to 
originate or terminate a communication via the PSTN, regardless of 
whether they do so via their own facilities or obtain transmission from 
third parties. Are there legal or policy considerations that would 
warrant revisiting those rationales, if we were to exercise our 
permissive authority as set forth above? Are there reasons to extend or 
not extend the rationale above to other services that provide 
origination or termination of a communication via the PSTN? Would 
interconnected VoIP providers fall under the definition of an 
assessable service set forth in this section? If the objective is to 
include only entities that provide a physical connection (wired or 
wireless), should we consider entities that provide PSTN origination or 
termination to be included within that group? If not, should we alter 
the proposed definition, or should we add some additional provisions 
specifically including additional services, like interconnected VoIP or 
other services that are substitutable for assessable services, for 
assessment?
    46. The State Members of the Joint Board have proposed an 
alternative broad definition, recommending that the Commission exercise 
its permissive authority to broaden the contributions base to include 
``all services that touch the public communications network.'' The 
State Members conclude, however, that contributions should not be 
required for ``pure content delivered by non-telecommunications over 
broadband facilities.'' They acknowledge that their proposed rule could 
result in difficult line drawing problems when the same company sells 
both broadband services and content. We seek comment on the State 
Members' proposal.
    47. Potential Exclusions. If we were to adopt a rule such as the 
one above, we seek comment on whether we should adopt any additional 
limitations.
    48. Non-Facilities-Based Providers: The rule discussed above would 
assess providers of interstate telecommunications whether or not they 
own the physical facility, or hold license to the spectrum, that is 
used to provide interstate telecommunications. In the alternative, 
should we limit contribution obligations to facilities-based providers, 
and if so, how should we define ``facilities-based''? For example, 
would a provider be considered ``facilities-based'' for contributions 
purposes if it provides service only partially over its own facilities? 
Should we define ``facilities-based'' services for contributions 
purposes as those provided over unbundled network elements, special 
access lines, and other leased lines and wireless channels that the 
provider obtains from another communications services provider? For 
example, EarthLink has suggested that non-facilities-based providers of 
Internet access service do not provide the ``transmission service.'' We 
seek comment on this viewpoint. The Commission's contribution 
methodology has never exempted non-facilities-based telecommunications 
providers from their obligation to contribute, and the Act does not 
itself distinguish between facilities-based and non-facilities-based 
telecommunications providers for purposes of contribution obligations. 
We note that the Commission has previously found resellers to be 
telecommunications carriers supplying telecommunications services to 
their customers even though they do not own or operate the transmission 
facilities. Carriers that incorporate transmission obtained from other 
providers into their own telecommunications services are currently 
subject to contribution requirements under the mandatory contribution 
requirement in section 254(d). Likewise, firms contribute today when 
they resell private line service provided by other carriers. Are there 
policy or administrative reasons not to exercise permissive authority 
over entities that incorporate telecommunications purchased from others 
into their own service offerings?
    49. Broadband Internet Access: If we were to adopt a rule such as 
the one above, should we exclude broadband Internet access service? 
Several parties have expressed concern that assessing broadband 
Internet access could discourage broadband adoption. As described 
above, we seek comment on those concerns and invite commenters to 
submit empirical data into the record of this proceeding regarding the 
impact of assessing broadband Internet access services on consumer or 
business adoption or usage of services. To what extent would assessment 
of universal service contribution obligations potentially deter 
adoption of such services? Is there less likelihood that assessment of 
USF contributions would deter adoption of business broadband Internet 
access services?
    50. To the extent commenters believe that assessing mass market 
broadband Internet access service in particular could discourage 
broadband adoption or harm other Commission goals, we seek comment on a 
specific exemption for mass market broadband Internet access services 
(both fixed and mobile). If we were to take such an approach, how 
should we define enterprise versus mass market services, and from an 
administrative standpoint, how would carriers and USAC be able to 
distinguish between the two? To what extent would such an exemption 
potentially distort how business and residential broadband Internet 
access is provided, as carriers may seek to characterize their 
offerings as ``mass market'' to avoid contribution obligations?
    51. Free or Advertising-Supported Services: If we were to adopt a 
rule such as the one above, should we do so only with respect to 
providers that offer service for a subscription fee? Given the broad 
meaning of ``fee'' in other contexts, how would we frame an exclusion 
for free or advertising-supported services? Would such an exclusion 
potentially cause marketplace distortions vis-[agrave]-vis firms that 
have business models that derive revenues from other sources, such as 
advertising revenues? Would imposing contribution obligations on free 
or advertising-supported services from contribution obligations 
discourage innovative offerings? Commenters should provide specific 
examples and supporting data regarding the business models of relevant 
services.
    52. Machine-to-Machine Connections: If we were to adopt a rule such 
as the one above, should we exclude machine-to-machine services? 
Machine-to-machine connections have grown

[[Page 33903]]

rapidly in recent years. Would it be consistent with our statutory 
authority to exercise permissive authority over machine-to-machine 
communications, such as smart meter/smart grids, remote health 
monitoring, or remote home security systems? Should machine-to-machine 
connections be treated the same as connections between or among people? 
As discussed above, the Act defines the term ``telecommunications'' as 
``the transmission, between or among points specified by the user, of 
information of the user's choosing, without change in the form or 
content of the information as sent and received.'' In the case of 
machine-to-machine communications, who is the ``user'' that is 
specifying where the information should go? Is there any precedent 
outside the contribution methodology context that should inform our 
interpretation of the statutory term here? Should we conclude that all 
machine-to-machine connections that transmit information over the 
Internet include interstate telecommunications? How would assessing 
machine-to-machine communications impact marketplace innovation in this 
arena?
    53. Statutory Interpretation. Above, we asked whether a general 
rule like that described in this section would provide sufficient 
guidance to potential contributors regarding their contribution 
obligation. The rule described in this section would not require us to 
resolve the statutory classification of specific services as 
information services or telecommunications services in order to 
conclude that contributions should be assessed. The Commission would, 
however, still be required to determine whether services involved the 
provision of interstate ``telecommunications.'' We seek comment on 
additional issues that may arise in interpreting the definition of 
``telecommunications'' for contributions purposes as the communications 
marketplace evolves. We also ask how resolution of these questions in 
the context of USF contributions would impact other regulatory 
obligations, such as regulatory fees or other assessments that utilize 
the Telecommunications Reporting Worksheets.
    54. First, we seek comment on how to interpret the statutory 
requirement that a telecommunications transmission must be ``between or 
among points specified by the user.'' In particular, we seek comment on 
whether we should interpret ``the user'' to be a subscriber to the 
service in question. For example, suppose that Bookseller A sells an 
electronic reading device to Ms. Smith. The price of the device 
includes a 3G wireless connection that allows Ms. Smith to connect to 
Bookseller A's servers at any time and purchase e-books. Bookseller A, 
in turn, purchases the wireless bandwidth for the connection from 
Carrier B. In this instance, should we consider Ms. Smith to be the 
``user'' of the service provided by Bookseller A? Alternatively, is 
Bookseller A the ``user'' of the service provided by Carrier B? Under 
the former view, would Bookseller A be viewed as ``providing 
telecommunications'' to Ms. Smith, and therefore a contributor on that 
service? Or should Carrier B be viewed as the entity that is providing 
telecommunications to Bookseller A, and therefore the contributor? What 
would be the potential effects in other regulatory contexts if the 
Commission were to interpret the term ``user'' in a new way here?
    55. We seek comment on what it means for the user to ``specify'' 
the ``points'' of transmission. Many communications services today 
allow the user to specify the points of transmission--for example, 
telephone and text messaging services generally allow a user to reach 
any other user on the PSTN, and broadband Internet access services 
generally allow users to access any location on the Internet. Certain 
services, however, arguably do not allow the ``user'' to specify the 
endpoints of the communication. To return to the e-books example above, 
suppose that the free wireless connectivity on the reading device can 
only be used to communicate between the device and Bookseller A's 
server, and not to reach any other destination on the PSTN or the 
Internet. In that case, is Ms. Smith, Bookseller A's customer, 
``specifying'' the ``points'' of the transmission, or is Bookseller A?
    56. We also seek comment on how to interpret the statutory 
requirement in the definition of ``telecommunications'' that the 
information transmitted must also be ``of the user's choosing.'' How 
should we interpret this phrase? For example, suppose a doctor provides 
a remote monitoring device to a patient that can send information back 
to the doctor's office. The monitoring device is pre-programmed to 
transmit only certain types of relevant medical data. Assuming that the 
other statutory components of ``telecommunications'' are present, is 
this an instance where the patient should be deemed the ``user'' that 
is transmitting information ``of his or her choosing,'' or would the 
fact that only information specified by the doctor or manufacturer that 
provides the device to the patient is transmitted mean that this 
communication does not meet the statutory definition of 
``telecommunications''?
    57. We also seek comment on whether, under a rule such as the one 
described in this section, the Commission would have to interpret the 
statutory requirement that the transmission must be ``without change in 
the form or content of the information as sent and received.'' Although 
information services often include a component that ``processes'' 
information in some way, the Commission has in the past recognized that 
an information service can also include a separate 
``telecommunications'' component. Furthermore, the Commission has 
previously found that while all information services require the 
transmission of information between customers and ``computers or other 
processors,'' the form or content of the information is not altered 
during these transmissions, and such transmissions constitute 
``telecommunications.'' Would we be required to revisit any aspect of 
these interpretations in light of changing technology and marketplace 
developments?
    58. Impact on the Contribution Base. We seek comment on the number 
of additional contributors and impact on the contribution base if we 
were to adopt the general definitional approach discussed in this 
section, and whether those figures are likely to grow or shrink in the 
future. How would the answer to this question differ if we were to 
assess based on revenues, connections, numbers or some other 
alternative? For each contribution methodology scenario, what services 
and providers would contribute under such a rule that do not contribute 
today? To what extent are they contributing today? What other services, 
not already discussed above, might be included if we were to adopt the 
general definitional approach discussed in this section? How would the 
answer to these questions differ under the definitional approach 
discussed in this section, as opposed to the service-by-service 
approach discussed in the preceding section?
    59. Finally, to the extent not already covered by the questions 
above, we request clear and specific comments on the Commission's legal 
authority and the type and magnitude of likely benefits and costs of 
each of these variants of the suggested rule, and request that parties 
claiming significant costs or benefits provide supporting analysis and 
facts, including an explanation of how they were calculated and an 
identification of all underlying assumptions.

[[Page 33904]]

B. How Contributions Should Be Assessed

    60. We seek comment on how to simplify our contributions system, 
consistent with the Act and our proposed goals for reform. Over the 
last decade, the Commission has sought comment on a number of proposals 
for alternative methodologies to the current revenues-based system, 
including methodologies based on connections, numbers, and various 
hybrid solutions. The record is mixed on whether we should make 
modifications to our existing revenues-based system, or move to an 
alternative system such as connections or numbers. Here, we seek 
comment on reforming the current revenues-based system as well as ask 
parties to update the record on these alternative methodologies. We 
seek comment on how each option would further our proposed goals and 
ask about potential implementation issues that are associated with 
specific methodologies. We ask commenters to provide data to quantify 
how potential rule changes would impact the Fund and reduce compliance 
costs and burdens.
    61. We request specific comments on the type and magnitude of 
likely benefits and costs of each of the possible rules discussed in 
this section, and request that parties claiming significant costs or 
benefits provide supporting analysis and facts, including an 
explanation of how any data were calculated and an identification of 
all underlying assumptions.
1. Reforming the Current Revenues-Based System
    62. We seek comment on whether we should retain the existing 
revenues-based system, and if so, how we can reform the current system 
to provide greater clarity to contributors, thereby promoting 
efficiency, fairness, and sustainability. Specifically, we seek comment 
on the pros and cons of retaining a revenues-based system. We ask 
parties claiming significant costs or benefits of a revenues-based 
system to provide supporting analysis and facts for such assertions, 
including an explanation of how they were calculated and all underlying 
assumptions.
    63. What are the benefits or disadvantages of retaining a revenues-
based system for a transitional or indefinite period? Are there market 
distortions caused by the existing revenues-based system? We solicit 
comment on whether the modifications discussed below would sufficiently 
address problems with the current revenues system. If we adopt any of 
the potential reforms discussed in this section to modify the revenues 
system, would such a system better serve our proposed reform goals than 
a connections-based, numbers-based, or other alternative contribution 
system? Would any of the potential reforms suggested in this section 
also make sense for a connections-based, numbers-based, or other 
alternative contribution system?
    64. To the extent that we retain the current system, we seek 
comment on rules to simplify how revenues are apportioned for 
assessment, including the allocation of telecommunications service 
revenues between the intrastate and interstate jurisdictions, and the 
reporting of assessable revenues when a customer purchases a bundle of 
services only some of which are assessable. We also seek comment on how 
to assess revenues from information services and services that have not 
been classified as information or telecommunications services. Such 
adjustments could address some shortcomings in the current system that 
stakeholders have raised and could reduce administrative burdens on 
providers and USAC. We also seek comment on alternative approaches to 
provide greater clarity regarding the respective obligations of 
wholesalers and their customers, which has been subject to much 
dispute. We seek comment on adopting a value-added revenues system that 
would require contributions from each provider in the value chain, or, 
in the alternative, substantially revising the reseller certification 
process. Adopting a value-added revenues system or revising the 
certification process could eliminate the complications and loopholes 
associated with the current carrier's carrier reporting requirements. 
In addition, we seek comment on measures to clarify our prepaid calling 
card reporting requirements to ensure that competitors are contributing 
in a consistent manner. Finally, we seek comment on eliminating the 
international-only and the limited international revenues exemptions 
and on modifying the de minimis exemption to reduce compliance burdens.
a. Apportioning Revenues From Bundled Services
    65. We seek comment on modifying our bundled offering apportionment 
rules to adopt more specific standards for determining what 
apportionment methods are deemed reasonable for allocating revenues 
from bundled offerings, or to eliminate carrier discretion in 
determining how to apportion revenues from bundled offerings. We ask 
whether doing so will further our proposed goals of making the 
contributions system more efficient and fair, minimizing compliance 
burdens, and reducing competitive distortions in the marketplace.
    66. We are concerned that the lack of bright-line rules may 
encourage providers to minimize their allocation of revenues in a 
bundle to assessable services to reduce their contribution obligations 
in order to gain a competitive edge. A number of commenters have 
suggested, for instance, that this is a concern in the enterprise 
market, where there is fierce competition to win contracts from large 
corporate clients. We seek data from commenters regarding what are 
common industry practices regarding the allocation of revenues from 
bundled offerings. To what extent do contributors rely on market 
studies of stand-alone services offered by other providers? To what 
extent do contributors allocate revenues based on the allocated cost of 
the underlying individual services? To what extent do contributors 
allocate revenues based on revenue reporting requirements imposed by 
other regulatory jurisdictions, such as cable franchising authorities 
or state sales tax authorities?
    67. We seek comment on adopting a revised apportionment rule that 
would codify a modified version of the two safe harbors provided under 
the CPE Bundling Order, 66 FR 19398, April 16, 2001, for apportioning 
revenues from bundled service offerings and eliminate providers' 
discretion on how to apportion revenues derived from bundled services. 
Specifically, we seek comment on the following rule for USF 
contributions purposes: If an entity bundles non-assessable services or 
products (such as customer-premises equipment) with one or more 
assessable services, it must either treat all revenues for that bundled 
offering as assessable telecommunications revenues or allocate revenues 
associated with the bundle consistent with the price it charges for 
stand-alone offerings of equivalent services or products (with any 
discounts from bundling assumed to be discounts in non-assessable 
revenues).
    68. We seek comment on whether this rule would simplify the process 
of apportioning bundled revenues in a way that is transparent, 
enforceable, and easily administrable. How would such a rule be 
enforceable if the provider does not offer stand-alone equivalent 
services? Would we need a separate rule to address such circumstances? 
If so, how should that rule be structured? Would the benefits of 
limiting the method by which providers determine

[[Page 33905]]

assessable revenues for bundled services outweigh any potential 
benefits of allowing providers to present individualized showing, as 
permitted under the current rule? We seek comment and examples of 
instances where some providers of bundled services may be allocating 
assessable revenues differently than their competitors, creating a 
competitive disadvantage. Would eliminating the open-ended 
apportionment option in favor of the rule above minimize competitive 
disparities? Would the rule change incentives to offer (or not offer) 
assessable services on an unbundled basis?
    69. We seek comment on the technical aspects of such a rule. For 
example, if we were to adopt such a rule, how much discretion should 
carriers have in determining what constitutes a ``stand-alone offering 
of equivalent service''? How could we prevent contributors from gaming 
a stand-alone option to minimize their assessable revenues? Should 
there be a requirement, for instance, that such a stand-alone offering 
be generally available and actually subscribed to by a minimum number 
of end users? If so, how and how many end users? Are there any 
alternative ways to ensure that contributors are not creating a sham 
stand-alone offering to minimize contribution obligations?
    70. We also seek comment on whether such a rule would create 
competitive disparities between providers that offer stand-alone 
offerings of assessable services, and those that only sell bundled 
services in the marketplace. Should we require carriers that do not 
offer a stand-alone service themselves to rely on a market analysis of 
services offered by other carriers in the marketplace or a tariffed 
rate of another provider? If so, should we require such carriers to 
submit any such market analyses used for imputation purposes or third 
party tariffed rate to the Commission and to USAC? Should we require 
that the stand-alone offering price be objectively verifiable by the 
Commission or USAC, such as by reference to a public Web site or 
tariffed offering? What measures would need to be in place for USAC to 
be able to verify stand-alone pricing for business services, which are 
often individually negotiated for individual customers? Is there any 
reason to implement such a rule only for certain types of bundled 
offerings and not others, or certain classes of customers and not 
others? What is the least burdensome mechanism to ensure allocations 
are objectively verifiable?
    71. We seek comment on how the rule would impact the overall 
contributions base, as well as the individual burden on consumers. What 
would be the impact of the rule on providers serving consumers with 
lower telecommunications expenditures (such as a voice only subscriber 
with limited long distance calling) compared to providers serving 
consumers with higher expenditures (such as a triple-play subscriber)? 
How would such a rule affect consumers with lower telecommunications 
expenditures compared to consumers with higher expenditures? What would 
be the impact of such a rule on mobile providers, who increasingly are 
deriving revenues from bundled voice-data packages, and their 
consumers?
    72. We also seek comment on alternative rule language as well as 
alternative means of determining contribution obligations for bundled 
service offerings. Parties that submit alternative proposals should 
explain how such proposals further our proposed goals of reform and are 
consistent with our legal authority. We ask commenters to quantify, 
where possible, how their proposed rule would impact the contribution 
base and total assessable revenues.
    73. For each of these alternatives, we seek comment on how the 
approach would impact the overall contribution base, as well as the 
individual burden on contributors and consumers. We also seek comment 
on what steps would need to be taken to implement the proposals above 
or alternative proposals for apportioning revenues from bundled service 
offerings for USF contribution purposes. How much time would parties 
need to transition to a new method of apportioning revenues from 
bundled offerings?
    74. As discussed above, the Commission has the authority to assess 
all providers of interstate telecommunications, if the public interest 
warrants. Would a contribution methodology that assesses the full 
retail revenues of bundled services that contain 
``telecommunications,'' as that term is defined in the Act, without 
safe harbors or the ability to present individualized showings, conform 
to the statutory requirements? Given the growth in bundled service 
offerings over the last decade, would adopting such a bright-line rule 
make the contribution base more stable and thereby serve the public 
interest? Would it further the principle of ``equitable and non-
discriminatory'' contributions by reducing potential competitive 
distortions among providers and service offerings that apportion 
revenues using different methodologies? Would a simplified approach 
that assesses the total bill for bundled services promote 
administrative efficiency and reduce compliance and enforcement 
expenditures? Would it be appropriate to adopt such an approach even if 
the Commission chose not to make every component of a bundled service 
individually assessable, or would that create market distortions and 
discourage bundled offerings?
b. Contributions for Services With an Interstate Telecommunications 
Component
    75. We seek comment on what revenues should be assessed to the 
extent we choose to exercise our permissive authority over services 
that provide interstate telecommunications. For example, to the extent 
enterprise communications services that are implemented with MPLS 
protocols are information services that provide interstate 
telecommunications, we seek comment on whether we could and should 
assess the full retail revenues of such enterprise communications 
services, or instead should adopt a bright-line that would assess only 
a fraction or percentage of the retail revenues.
    76. Would it be consistent with our statutory authority under 
section 254(d) to require contributions on the full retail revenues of 
an information service that provides interstate telecommunications? Is 
there a potential for competitive disparity, to the extent a non-
facilities-based provider of such services is assessed on its retail 
revenues, and also may bear indirectly the cost of a universal service 
contribution on underlying transmission that it purchases from a 
wholesale provider? To what extent should the retail revenues derived 
from information services have some nexus with the underlying 
transmission component, in order for the full retail revenues to be 
assessed? What are the advantages and disadvantages of assessing retail 
information service revenues, if we were to exercise our permissive 
authority?
    77. Alternatively, should we assess only the telecommunications 
(i.e., the transmission) component, and if so, how would we determine 
what portion of the integrated service revenues should be associated 
with the transmission component? For example, the MPLS Industry Group 
proposes that revenues associated with the access transmission 
components of all MPLS-enabled services be imputed on a uniform basis 
and made subject to USF contributions obligations through Commission-
established ``MPLS

[[Page 33906]]

Assessable Revenue Component'' proxies. In other cases, the underlying 
transmission is separately offered on a Title II basis, which could 
provide a basis for assessing only the revenues associated with the 
transmission component. We seek comment on the MPLS Industry Group 
proposal. Is such a proposal workable for other similar services?
    78. We seek comment on the following rule: If an entity offers an 
assessable information service with an interstate telecommunications 
component, it must treat all revenues for that information service as 
assessable revenues, unless it offers the transmission underlying the 
information service separately on a stand-alone basis. If it offers the 
transmission on a stand-alone basis, it may treat as assessable 
revenues an amount consistent with the price it charges for stand-alone 
offerings of equivalent transmission.
    79. We seek comment on whether this rule would simplify the process 
of determining assessable revenues for information services in a way 
that is transparent, enforceable, and easily administrable. How would 
such a rule be enforceable if the provider did not offer the underlying 
transmission on a stand-alone basis? In such circumstances, should we 
craft a rule that looks at the general retail price of such 
transmission services when offered on a stand-alone basis by other 
providers? Would the proposed rule change incentives to offer (or not 
offer) telecommunications transmission on an unbundled basis? Would 
such a rule create competitive disparities between providers that 
choose to offer transmission on a stand-alone basis (such as small 
rate-of-return carriers that offer broadband Internet access) and 
providers that do not offer transmission separately (such as cable 
operators in the same geographic area as those rate-of-return 
carriers)?
    80. In the alternative, should we craft a rule, or a safe harbor, 
that provides for assessment of a certain percentage of the retail 
revenues of information services with a telecommunications 
(transmission) component? Would it be legally permissible for the 
Commission to assess a set percentage of the retail revenues, even when 
such percentage might exceed the allocated revenues associated with the 
underlying transmission in that information service? Would a set 
percentage be easier to administer, reduce compliance costs, and 
otherwise be in the public interest? Would it create competitive 
distortions? Should the percentage vary depending on the type of 
information service at issue? Is some other formula for determining the 
assessable percentage of retail revenues of an information service 
appropriate?
    81. For each of these alternatives, we seek comment on how the 
approach would impact the overall contributions base, as well as the 
individual burden on contributors and consumers. We also seek comment 
on what steps would need to be taken to implement the proposals above 
or alternative proposals for apportioning revenues from information 
services for USF contribution purposes. How much time would parties 
need to transition to a new method of apportioning revenues from 
information services with an interstate telecommunications component?
c. Allocating Revenues Between Inter- and Intrastate Jurisdiction
    82. We seek comment on modifying or eliminating the requirement 
that carriers are assessed based on interstate and international 
revenues. While that requirement may have made sense when the 
Commission initially implemented the Act, the marketplace has changed 
dramatically since 1996 and will evolve with the continued deployment 
of IP-based networks.
    83. As a general matter, we seek comment on whether the Act compels 
us to only assess a portion of revenues associated with services that 
operate interstate, intrastate, and internationally. We also seek 
comment on whether as a policy matter we should require that revenues 
be allocated based on the jurisdiction that regulates the associated 
service. Does this construct make sense in an environment where many 
contributors are not rate regulated, and many of the services they 
offer are only lightly regulated?
    84. One approach would be to adopt a rule that requires all 
providers that are subject to contributions to report and contribute on 
all of the revenues derived from assessable services rather than 
require providers to allocate revenues between the interstate and 
intrastate jurisdictions. Since many services offered today are not 
priced and sold separately as intrastate or interstate service, any 
designated allocation between jurisdictions may be arbitrary to some 
extent. In the TOPUC decision, the court found that the Commission did 
not have jurisdiction to assess federal universal service contribution 
on intrastate revenues. Given the changes in the marketplace, would the 
TOPUC decision prohibit assessing a federal universal service fee on 
the entire service?
    85. The State Members of the Joint Board argue that the regulatory 
jurisdiction over a service should not determine whether that service 
contributes to universal service. They note that the states may 
constitutionally impose sales taxes on both interstate and intrastate 
telecommunications, and they suggest that the U.S. Constitution does 
not prohibit there being both a federal universal service surcharge and 
a state universal service surcharge on all services delivered over the 
public communications network. They acknowledge that the 1999 TOPUC 
decision limited the Commission from imposing universal service 
surcharges on intrastate services, but they contend that TOPUC was 
wrongly decided. We seek comment on the State Members' analysis and ask 
commenters to address whether it would be consistent with section 
254(d) for the Commission to require contributions on all revenues 
derived from services delivered over a public network.
    86. Would a rule that assesses all revenues from services that 
operate interstate, intrastate, and internationally without allocation 
for intrastate operations advance our proposed goals for reform? How 
would such a rule impact the contribution base, today and in the 
future? We note that the sum of interstate, international, and 
intrastate revenues for all filers was $210 billion in 2010, while the 
contribution base (the total of reported assessable revenues) for 2010 
was $67 billion. If such a rule had been in place in 2010, i.e., a rule 
that assesses all interstate, intrastate, and international revenues, 
the contribution factor would have been roughly four percent, instead 
of 14 percent on an annualized basis. Would such a system be 
significantly simpler to administer, reducing the costs of complying 
with our contribution rules? How would such a system affect states? How 
would such an approach affect the allocation of the contribution 
burden, especially between residential consumers and enterprise 
consumers? For example, would residential consumers end up paying (in 
USF pass through charges) a substantially higher portion of the USF 
burden than they do today, compared to enterprise customers? If so, are 
there ways to offset or limit this effect? Commenters are encouraged to 
provide additional data and analysis regarding the impact of such a 
rule change.
    87. Another alternative would be to adopt bright-line rules for how 
companies should allocate revenues between jurisdictions for broad 
categories of services. If we were to adopt such rules, how narrowly or 
broadly should we define the relevant

[[Page 33907]]

services? As shown in Chart 5 below, the percentage of end user 
revenues that are reported as interstate/international have remained 
relatively stable for the major subcategories of revenue that have been 
reported on FCC Form 499 between 2004 and 2011. Should we adopt a 
separate allocator for each major category of service presently 
reported on Form 499 (fixed local services, mobile services, toll 
services), or should we follow a simpler approach, for instance, with 
just two allocation rules: one for voice and one for data services? For 
instance, we could adopt a standard allocator for all voice revenues, 
regardless of technology (fixed or mobile, traditional telephony or 
interconnected VoIP). Under such an approach, we could specify that 
voice revenues should be allocated according to a specified ratio, such 
as 20 percent interstate and 80 percent intrastate. Should the 
interstate allocation be higher or lower? Is there any policy 
justification for setting a different percentage for voice based on the 
type of carrier or technology used?
    88. In other contexts, the Commission has recognized that Internet 
access services are jurisdictionally interstate because end users 
access Web sites across state lines. We seek comment whether a similar 
finding should be made for USF contribution purposes. Specifically, if 
we use our permissive authority to expand or clarify USF contribution 
requirements to include enterprise communications services, text 
messaging services, and broadband Internet access services (both fixed 
and mobile), should we find that for USF contribution purposes, 
revenues from such services should be reported as 100 percent 
interstate? Alternatively, should we use an allocator lower than 100 
percent interstate for contribution purposes, to preserve a revenue 
base that could be assessed for state universal service funds?
    89. What data should be considered when developing that fixed 
percentage of interstate and intrastate revenues for services? Appendix 
C presents in more detail the percentage of end user revenues that are 
reported as interstate/international for each individual subcategory of 
end user revenue reported on FCC Form 499 for the periods of 2004 
through 2011. For 2011, filers reported $73.5B in total revenues for 
fixed local revenues, with 30 percent allocated to the interstate 
category and 0.6 percent allocated to the international category. For 
mobile services, filers reported $106.6 billion in total revenues in 
2011, with 22.8 percent allocated to the interstate category and 0.4 
percent allocated to the international category. For toll services in 
2011, filers reported $34.3 billion in total revenues, with 50.3 
percent allocated to the interstate category, and 21.4 percent 
allocated to the international category. We note that there is 
significant variation in some of the individual subcategories of 
revenues as currently reported on FCC Form 499. How should our decision 
be informed by the interstate percentages reported for individual 
subcategories of service as reported on the current Form 499, such as 
fixed local exchange (line 404) and mobile services monthly and 
activation charges (line 409)?
    90. To what extent should we take into account ratios reported by 
wireless carriers and interconnected VoIP providers in their traffic 
studies? If we were to adopt a ratio applicable to the broad category 
of ``mobile services,'' for instance, should we base the percentage for 
mobile services, on the average (23 percent) or median (19 percent) 
ratio that carriers have reported in their most recent traffic studies? 
Commenters that support a different percentage should explain why 
adoption of that alternative is preferable.
    91. If we were to adopt such a rule specifying that a set 
percentage of revenues should be reported as interstate for a category 
of service, should carriers still be permitted to make a particularized 
showing that a higher percentage of their traffic is intrastate? Should 
the Commission adopt a mechanism to periodically update the percentage 
and, if so, what would be the basis for updating the fixed percentage 
factor? How would such a rule impact the contribution base, today and 
in the future? Commenters are encouraged to provide additional data and 
analysis regarding the impact of such a rule change.
    92. Would adopting a fixed allocation method for categories of 
services, or an across the board fixed allocation method, further our 
proposed goals for contribution reform? Using a single allocation 
factor for contribution purposes could potentially minimize competitive 
distortions among providers offering similar services. Would a single 
allocation factor help stabilize the contribution base by eliminating 
incentives for providers to underreport their interstate 
telecommunications revenues? Would a single allocation factor lessen 
providers' compliance burdens by eliminating the need to perform 
traffic studies or to maintain and update the methodology used to 
establish their good-faith estimates? Would using a single allocation 
factor potentially provide greater predictability?
    93. We seek comment on whether, if we were to adopt a rule imposing 
a fixed interstate allocator, we would be legally required to adopt a 
procedure by which a provider could ``opt-out'' of using the single 
allocation factor and instead make an individualized showing. We seek 
comment on whether allowing any telecommunications provider to opt-out 
would negate the administrative simplicity of adopting a single 
allocator for purposes of universal service contributions. To the 
extent that any commenter believes there should be a mechanism to 
``opt-out'' of the fixed allocation factor, it should explain what 
showing should be required to opt out, and what steps the Commission 
should take to minimize competitive distortions that may arise if 
alternative allocations are used for certain types of providers or for 
certain types of traffic. For example, should a provider that opts out 
of the fixed allocation factor be required to allocate revenues on a 
customer-by-customer basis, given that each customer actually uses the 
purchased telecommunications differently?
    94. We also seek to develop a factual record on the regulatory 
compliance costs stemming from the current requirement to allocate 
revenue between the intrastate and interstate jurisdictions. We seek 
comment and data submissions regarding the costs imposed on companies 
today to separate their revenues in this fashion, and the costs 
associated with performing a traffic study on an annual basis. We 
encourage companies to provide estimates not only of the costs 
associated with their legal and regulatory personnel, but also to 
include any other costs that compliance with such requirements may pose 
on other personnel, including accounting, billing, sales, network, IT, 
and marketing staff, and any costs associated with hiring outside 
resources, such as attorneys or consultants, to assist in implementing 
such requirements or responding to any audits or investigations 
relating to this aspect of our contribution rules.
    95. To the extent commenters have concerns about any of these 
proposals; they should present alternative methods for simplifying the 
allocation of revenues between the interstate and intrastate 
jurisdictions and explain how their proposals would meet the proposed 
contribution reform goals set forth in this Notice. If we do not adopt 
a fixed factor or factors to allocate telecommunications revenues, what 
modifications should we consider making to the current rules?

[[Page 33908]]

    96. If we continue to allow use of traffic studies to estimate the 
allocation of interstate revenues, should we codify specific 
requirements or provide greater detail in the Form 499 instructions for 
how traffic is categorized in traffic studies to ensure that reporting 
entities are conducting the studies in a competitively neutral manner? 
We seek comment on current practices for classifying traffic for 
traffic studies. We have some concerns that contributors may be using 
different methodologies in conducting traffic studies, given the broad 
variation in reported ratios. It is surprising, for instance, that nine 
wireless providers report no interstate or international revenues at 
all. Similarly, the fact that 47 VoIP filers report no interstate/
international revenues, while some others report ratios relatively 
close (but slightly under) the current 64.9 percent safe harbor, also 
suggests that VoIP providers may be classifying their traffic in 
significantly different ways, and there may be a need to provide more 
standardized guidance regarding how to perform a traffic study. We seek 
comment on this analysis.
    97. We seek comment on what steps would need to be taken to 
implement the approaches above or alternative approaches to simplify 
the allocation of interstate and intrastate revenues for federal USF 
contribution purposes. We also seek comment on how much time, if any, 
parties would need to transition to any new allocation method.
d. Contribution Obligations of Wholesalers and Their Customers
    98. Value-Added Approach to Assessing Contributions. We seek 
comment on whether we should modify the existing universal service 
contribution methodology to assess ``value-added'' revenues rather than 
``end-user'' revenues. Under this value-added approach, each 
telecommunications provider in a service value chain (including both 
wholesalers and resellers) would contribute based on the value the 
provider adds to the service. Thus, in a revenue-based system, a 
wholesaler would contribute on its wholesale revenues, and a reseller 
of those services would contribute based on its retail mark-up.
    99. Under this value-added revenues approach each provider in a 
distribution or value chain would contribute based on the provider's 
total interstate and international revenues, less a credit for any 
telecommunications services or telecommunications purchased from other 
contributors in the distribution or value chain. Contributors would 
not, therefore, need to distinguish between revenues from end users and 
revenues from other telecommunications providers.
    100. We seek comment on the following potential rule change, which 
could implement a value-added revenues system: A contributor must 
contribute based on its projected assessable revenue less a credit for 
telecommunications services or telecommunications purchased from other 
contributors. Contributors shall report such revenues on the FCC Form 
499-A and 499-Q Telecommunications Reporting Worksheets or such other 
forms or filings as the Commission may prescribe from time to time. 
Projected revenue information shall be subject to an annual true up, as 
prescribed from time to time by the Commission in its 
Telecommunications Reporting Worksheet instructions.
    101. We ask whether the proposed value-added revenues approach 
would meet the proposed goals of improving administrative efficiency, 
while ensuring sustainability of the Fund. For example, how would a 
value-added system further our proposed goals of simplifying 
administration and oversight of the contribution system? Would a value-
added system reduce incentives to structure transactions to avoid 
contribution obligations? Would adoption of a value-added system have 
unintended consequences that undermine our proposed goals in reforming 
the system? What records should contributors be required to retain to 
demonstrate compliance with a value-added system? For example, if we 
adopted the rule proposed above, should contributors be required to 
retain (and/or report) back-up for the ``credit for telecommunications 
services or telecommunications purchased from other contributors''?
    102. As an alternative to reporting on the revenues earned minus 
any amounts paid for telecommunications service inputs, should we 
implement a value-added methodology in which carriers instead subtract 
from their final contribution liability any pass-through charges paid 
to other contributors? If so, should we require or permit 
telecommunications providers to pass through an explicit universal 
service line-item charge to customers that are also telecommunications 
providers? Would a pass-through charge in these limited circumstances 
enable telecommunications providers and USAC to verify the universal 
service charges paid by one contributor to another for purposes of 
calculating the credit the contributor should receive against its own 
contribution obligation? Would mandated pass-through charges benefit 
competition by eliminating the ability of wholesale providers to 
distinguish service offerings based on whether or how they pass through 
universal service charges to their reseller customers? Would allowing 
providers to retain discretion over whether to recover their 
contributions implicitly or via an explicit line-item charge further 
our proposed goals of ensuring competitive neutrality and simplicity in 
the USF contribution system? Under a value-added assessment system, how 
should we treat transactions between wholesale providers and non-
carriers (e.g., retailers or distributors of prepaid calling cards), or 
transactions between wholesale providers and entities that are 
currently exempt from directly contributing to the Fund (e.g., non-
profit schools, non-profit libraries, non-profit colleges, non-profit 
universities, and non-profit health care providers)?
    103. If we adopt a value-added system based on credits for pass 
through charges paid to other providers, we seek comment on whether we 
should scale or otherwise limit the credit a telecommunications 
provider receives to account for the fact that this system may exclude 
some telecommunications revenues from assessment. We also seek comment 
on the implementation of a value-added system. What would be an 
appropriate time frame for implementing such a rule? For example, to 
what extent would the existence of long-term contracts warrant delaying 
implementation of a value-added revenues system? If we delay 
implementation, what would be a reasonable period of time to transition 
to this system?
    104. We request clear and specific comments on the type and 
magnitude of likely benefits and costs of the suggested rule, and 
request that parties claiming significant costs or benefits provide 
supporting analysis and facts, including an explanation of how data 
were calculated and identification all underlying assumptions.
    105. Value-Added Approach for Alternative Contribution 
Methodologies. The value-added revenues system discussed above assumes 
retaining a revenues-based contribution system. We seek comment below 
on moving from a revenues-based contribution system to a system based 
on assessing connections or numbers. Commenters should indicate whether 
a value-added system could and should be developed for a connections-
based or numbers-based contribution system. If value-added is needed or 
advisable for such other contribution systems, commenters

[[Page 33909]]

should explain the basis for such analysis, and should indicate how a 
value-added system would work in such instances.
    106. We note that one of the considerations in crafting the current 
revenue-based system focused on end users was to avoid ``double 
counting'' revenue. We ask commenters whether a connections or numbers-
based system may also raise concerns of double counting, and if so, how 
a value-added proposal could be crafted to address this issue. More 
generally, we seek comment on whether avoiding double counting remains 
a significant policy concern, and if it should inform the structure of 
a contributions methodology system.
    107. In particular, we seek comment here on whether a value-added 
system similar in concept to the value-added revenues proposal set 
forth above for a revenues-based system may be desirable for 
connections, and if so, how such a system would operate. If we were to 
adopt a service-based definition of connections, there could be 
situations in which a wholesaler sells a ``connection'' to a reseller 
who adds value by separately selling more than one service over that 
connection. For instance, to the extent Carrier A sells a connection to 
Carrier B, and then Carrier B sells two connections to the retail 
customer, would it simplify administration of a connections-based 
system if both Carrier A and B are assessed based on the connections 
provided to their respective customers, with Carrier B receiving a 
credit for the number of connections it has purchased from a wholesale 
provider so that, in this example, Carrier A and B would each be 
assessed for one connection?
    108. We also seek comment on how one might adopt a value-added 
approach for a numbers-based methodology. Would a value-added approach 
work in which each provider of interstate telecommunications in a 
service value chain (including both wholesalers providers and their 
customers) that provides a number to a customer would contribute on 
that number, with a credit provided to the extent a carrier obtains 
lines with numbers from another provider? Alternatively, would it make 
sense to adopt a system in which a wholesaler could contribute on its 
wholesale numbers at a lesser adjusted rate, and its customer could 
contribute based on a higher per-unit rate for numbers associated with 
services provided to retail customers, with an adjustment made for any 
pass-through charges paid to the wholesale provider?
    109. Reasonable Expectation Standard. We seek comment on potential 
bright line rules that we could adopt that would provide greater 
clarity to contributors as to what steps they must take to properly 
report their assessable revenues and lessen the need to engage in such 
fact-intensive inquiries, if we maintain a revenue-based contribution 
methodology.
    110. We seek comment and data submissions regarding the costs 
imposed on companies today to separate their wholesale from their 
retail revenues, and the costs associated with complying with the 
requirement that they demonstrate a reasonable expectation that their 
customers are contributing to USF. We encourage companies to provide 
estimates not only of the costs associated with their legal and 
regulatory personnel, but also to include any other costs that 
compliance with such requirements may pose on other personnel, 
including accounting, billing, sales, IT, and marketing staff, and any 
costs associated with hiring outside resources, such as attorneys or 
consultants, to assist in implementing such requirements or responding 
to any audits or investigations relating to this aspect of our 
contribution rules.
    111. We seek comment on whether we should adopt a rule mandating 
greater specificity in contributor certifications regarding the 
services on which the certifying entity is contributing, so that 
wholesalers are in a better position to determine which of their 
revenues should be classified as carrier's carrier revenues. Many 
contributors may obtain such certifications from their customers only 
on an entity-wide basis, rather than on a service-specific basis, 
because the model certification language provided in the instructions 
beginning in 2007 does not specify service-specific certifications.
    112. We seek comment on adopting a rule that would establish the 
following language for customer certifications:

    I certify under penalty of perjury that the company is 
purchasing service which is incorporated into the company's 
offerings. I also certify under penalty of perjury that either my 
company contributes directly to the federal universal support 
mechanisms for those offerings that incorporate this wholesale 
service, or that each entity to which the company, in turn, sells 
those offerings has provided the company with a certificate in the 
form specified by Commission rules.
    OR I certify under penalty of perjury that the company is 
purchasing service for which is incorporated into the company's 
offerings. I also certify under penalty of perjury that:

(check one)

    The company contributes directly to the federal universal 
service support mechanisms for those service offerings that 
incorporate the wholesale service, or if the company resells the 
service to another contributor, that the company has received a 
certification from each customer in a form specified by Commission 
rules that the customer will contribute directly based on revenues 
from each such service.
    The company contributes on [number] percent of the revenues for 
services that incorporate the wholesale service, or has received a 
certification from its customer stating that the customer will 
contribute directly based on revenues from the service. On the 
remaining [number] percent of the revenues of the service that 
incorporates the wholesale service, the company does not directly 
contribute, and it does not sell that service to another 
contributor.
    I also certify under penalty of perjury that the company will 
notify [name of wholesale provider] within [30 or 60 days] if the 
information provided in this certification changes.

    113. Specificity as to Incorporation of Wholesale Services into a 
Finished Service. It appears that under our current requirements, 
certain revenues may be escaping assessment altogether, in situations 
where a wholesaler does not contribute on revenues derived from 
customers that it believes to be contributing when in fact the customer 
is not contributing on those revenues. We seek comment on the magnitude 
and prevalence of this problem. In these and other analogous 
situations, should there be an affirmative obligation on the part of 
the entity that purchases the wholesale telecommunications to specify 
in its certification the extent to which the wholesale input is 
incorporated into assessable services versus non-assessable services? 
For instance, should we adopt the following rule: To the extent a 
company purchases services that are incorporated into its own 
offerings, with some of the offerings subject to universal service 
contributions and some of the offerings not subject to universal 
service contributions, the purchaser has an affirmative obligation to 
provide information to its wholesale provider sufficient for the 
wholesaler to allocate the revenues associated with its service as 
carrier's carrier revenue or end-user revenue.
    114. What burdens would such a rule impose on entities that 
purchase wholesale telecommunications to incorporate into their 
finished offerings, and what measures could be implemented to minimize 
such burdens? If we were to adopt such a rule, what metric should the 
purchasing entity use in developing the relevant allocations? For 
instance, should it base the percentage on the number of circuits, the 
revenues associated with individual circuits (to the extent that can be 
determined), the average usage of a circuit, or something else?

[[Page 33910]]

    115. We seek comment on whether to adopt a rule imposing an 
affirmative obligation on entities purchasing wholesale 
telecommunications that sign certifications to notify their wholesale 
carrier within a specified period of time, such as 30 or 60 days, if 
their contribution status changes over the course of the year. For 
instance, we seek comment on the following rule: Providers who provide 
contributor certifications to their wholesale carriers must notify 
their wholesale carrier within [30 or 60] days if the contribution 
status provided in the certifications changes.
    116. Today, there may be situations where an entity certifies in 
good faith at the beginning of the year that it is a contributor with 
respect to the services provided to its retail customers, but 
subsequently it ceases to be a contributor. This could occur, for 
instance, if the entity purchases a special access circuit from a 
wholesaler, and initially expects to provide special access to a retail 
customer, but ultimately uses that circuit to provide broadband 
Internet access service, which is not assessable under our current 
rules. Or an entity purchasing wholesale telecommunications may expect 
to contribute, but ultimately it turns out to be a de minimis 
contributor due to lower than expected revenues. In both situations, 
the wholesaler would not contribute on the services (because it has a 
contributor certificate from its customer), but its customer ultimately 
does not contribute, resulting in revenues not being subject to 
contributions at any point in the value chain. Commenters should 
address the time frame in which such notification should occur, and 
what specific procedures should be followed. To the extent that parties 
support elimination of certifications in favor of an alternative system 
or a bright line, we ask them to provide specific details on how any 
such alternatives would be implemented, administered, and enforced.
    117. Another alternative on which we seek comment is whether we 
should assess wholesalers at their point of sale, but not their 
customers, so long as the wholesaler certifies that the contribution 
has been or will be paid. Would such an approach be easier to 
administer? Are there disadvantages to such an approach? Commenters 
should indicate, to the extent possible, the reduction to the 
contribution base if we were to adopt such an approach and how such an 
approach would impact contribution burdens.
    118. Improved Certification Requirements Compared to Value Added 
Revenues System. Commenters are encouraged to compare and comment on 
both the improved certification system and the value-added system 
discussed immediately above in this Notice. Is there a particular 
advantage over one approach over the other? Do aspects of both 
approaches need to be adopted? If we adopt a value-added revenues 
system, should we adopt modifications to our contributor certification 
rules on an interim or transitional basis while we implement the value-
added approach?
    119. Improved Certification Requirements for Alternative 
Contribution Methodologies. We also seek comment on moving from a 
revenues-based contribution system to a system based on assessing 
connections or numbers. Commenters should indicate whether similar 
contributor certification requirements as discussed above should be 
developed for a connections-based or numbers-based contribution system. 
If improved certification requirements are needed or advisable for such 
other contribution systems, commenters should explain the basis for 
such analysis, and should indicate how the contributor certifications 
would work in such instances.
    120. We ask commenters whether a connections or numbers-based 
system may also raise concerns of double counting, and if so, how a 
contributor certification could be crafted to address this issue. More 
generally, we seek comment on whether avoiding double counting remains 
a significant policy concern, and if it should inform the structure of 
a contributions methodology system.
    In particular, we seek comment here on whether improved contributor 
certifications similar in concept to the proposals discussed above 
might be desirable for connections, and if so, how such a system would 
operate. If we were to adopt a service-based definition of connections, 
there could be situations in which a wholesaler sells a ``connection'' 
to a customer who adds value by separately selling more than one 
service over that connection. We also seek comment on how one might 
adopt contributor certifications for a numbers-based system.
e. Contribution Obligations of Wholesalers and Their Customers
    121. Reporting Prepaid Calling Card Revenues. Our rules require 
prepaid calling card providers to contribute to the Fund based on their 
end-user revenues. We seek comment on modifying existing rules to 
provide clarity to the industry in response to requests from USAC and 
record evidence suggesting different prepaid calling card providers may 
be interpreting our rules in different ways, which may result in an 
unlevel playing field for competitors of these services. We seek 
comment on adopting a rule to require prepaid calling card providers to 
report and contribute on all end-user revenues, and who should be 
deemed the end user for purposes of such a rule. We ask whether prepaid 
calling card providers should only report amounts paid by the entity to 
which the provider directly sells the prepaid service. Alternatively, 
we seek comment on adopting a rule to require prepaid calling card 
providers to contribute based on the amounts paid by end users for 
prepaid cards, whether the prepaid calling card is purchased by the end 
user directly from the prepaid calling card provider or from a 
marketing agent, distributor, or retailer. We also ask about the 
application of the value-added contribution paradigm, discussed above, 
to assessment of prepaid calling card service. In addition, we seek 
comment on measures to standardize how providers report prepaid calling 
card revenues, eliminating incentives or opportunities for providers to 
avoid their USF contribution obligations. We also solicit comment on 
whether adopting these reforms would further our proposed goals for 
reform and the potential impact on the Fund if we were to adopt the 
measures described below.
    122. Defined Terms. We first seek comment on modifying the 
definition of prepaid calling cards as explained below. The terms 
``prepaid calling cards,'' and ``prepaid calling card providers'' are 
defined in Sec.  64.5000 of our rules, as adopted by the Commission in 
the Prepaid Calling Card Services Order, 71 FR 43667, August 2, 2006. 
The definition of a prepaid calling card is fairly expansive, 
encompassing not just physical cards that require the input of a 
personal identification number (PIN) but also any ``device'' that 
provides end users with the same or similar functionality. Although we 
propose retaining these definitions, we seek comment on whether we 
should add the phrase ``or service'' to the definition to make clear 
that our prepaid calling card rules will encompass new ways to market 
prepaid telecommunications services that do not involve using a PIN or 
a device. Such a modification could read as follows (new language 
underlined): (a) Prepaid calling card. The term ``prepaid calling 
card'' means a card or similar device or service that allows users to 
pay in advance for a specified amount of

[[Page 33911]]

calling, without regard to additional features, functions, or 
capabilities available in conjunction with the calling service; (b) 
Prepaid calling card provider. The term ``prepaid calling card 
provider'' means any entity that provides telecommunications service to 
consumers through the use of a prepaid calling card.
    123. We also seek comment on whether we should define, for purposes 
of prepaid calling cards, the term ``prepaid calling card distributor'' 
as we use it in the context of reporting prepaid calling card revenues. 
The use of such term would acknowledge that prepaid calling cards are 
often sold by means of marketing agents, distributors or retailers. We 
seek comment on the following proposed definition: Prepaid calling card 
distributor. A marketing agent, distributor, retailer, or other third 
party that sells or resells prepaid calling cards on behalf of a 
prepaid calling card provider.
f. Reporting Prepaid Calling Card Revenues
    124. We also seek comment on alternative methods prepaid calling 
card providers should use to report revenues from prepaid calling card 
services. Today, prepaid calling card providers are required to report 
and contribute on the end-user revenues from the sale of prepaid 
calling card services. The current version of the Telecommunications 
Reporting Worksheet instructions calls for reporting of such revenues 
by the prepaid calling card provider, whether the end user purchases 
the card from the prepaid calling card service provider or a marketing 
agent, distributor, or retailer. Some stakeholders contend that this 
method, which requires providers to report the ``face value'' of a card 
as assessable revenue--not the amount actually paid by the provider's 
end-user customer--is unrealistic considering that many cards do not 
have a face value, and contributing providers often do not know and 
have no control over the ultimate retail price of a calling card.
    125. We first seek comment on limiting the contribution and 
reporting requirements of prepaid calling card providers to report 
amounts paid only by the person or firm to whom the provider directly 
sells the prepaid card. Prepaid calling card providers that sell 
directly to an end-user customer would, as now, easily identify and 
report the assessable revenue amount. However, in situations where the 
provider sells the card to an intermediate distributor or retailer, 
rather than an end-user customer, under this paradigm we would require 
the provider to report revenue actually received from the intermediate 
distributor. This concept presumably would make it simpler for prepaid 
providers to report accurate revenues because they would recognize 
actual assessable revenue amounts from the sale to the end-user 
customer or the intermediate distributor and would not be required to 
estimate the amount paid by an end-user customer with whom the provider 
has no retail relationship. This approach could benefit providers and 
the Fund by permitting providers to report the revenue realized in a 
more timely fashion. We seek comment on this alternative and ask 
whether including an intermediate distributor or retailer in the 
definition of an end user for the purpose of reporting prepaid calling 
card revenue would create any competitive distortions or create 
disparities among different types of contributors.
    126. In the alternative, we seek comment on codifying in greater 
detail the approach reflected in the existing Form 499 instructions. We 
first specifically inquire how prepaid calling card providers should 
report revenues from sales of prepaid calling card services to 
marketing agents, distributors, or retailers. The Form 499 instructions 
state that the revenue to be included in a provider's contribution 
calculation is the amount actually paid by the end-user customer, not 
the price paid to the prepaid calling card provider by intermediate 
marketing agents, distributors, or retailers, even when the distributor 
pays a different amount than the end user.
    127. Should there be symmetry in the way that prepaid calling card 
service transactions and other transactions are treated for USF 
contribution purposes? For example, the Form 499 instructions also 
state that payphone providers should not deduct from reported revenues 
commission payments to owners of premises where payphones are located. 
Should we also adopt a rule that payphone providers may deduct from 
reported revenues discounts provided to intermediate distributors? We 
seek comment on potential bright lines that would simplify 
administration of contributions reporting for prepaid calling 
providers.
    128. Adopting a bright-line standard for reporting end-user 
revenues could reduce or eliminate competitive disparities among 
providers of similar services. We seek comment generally on adopting a 
bright-line standard that contributors must use to report prepaid 
calling card revenues. Would a bright-line standard create an incentive 
for prepaid calling card providers to establish a process with their 
marketing agents, distributors, and retailers to specifically identify 
and report the actual prices paid by end users? Should we also consider 
implementing a safe harbor for providers to estimate end-user revenues 
when the price paid by the end-user customer cannot readily be 
determined by the prepaid calling card provider?
    129. If we adopt a bright-line standard, we seek comment on what 
mark-up would be appropriate for prepaid calling card providers to use 
in determining end-user revenues. Given this wide range of estimated 
mark-ups, we seek comment on whether a standard mark-up of 50 percent 
would be a reasonable mid-point between the various estimates that have 
previously been suggested by commenters. We also seek comment on 
whether a higher or lower standard mark-up would be more representative 
of industry practice or would better serve in creating an incentive for 
providers to work with their marketing agents, distributors and 
retailers to identify the actual price paid by end-users. Adopting a 
standard mark-up that falls at the higher end of the scale, for 
example, may provide a greater incentive for prepaid calling card 
providers to determine and report the actual prices paid by end users. 
Parties should provide specific data to support their arguments.
    130. To further ensure that all reporting entities are reporting 
prepaid calling card revenues in a consistent manner under the current 
system, we seek comment on requiring prepaid calling card providers to 
report revenues derived from the sale of prepaid calling cards not 
later than 60 days after the date the cards are sold by the prepaid 
calling card provider to a prepaid calling card distributor. Adopting a 
rule that creates an appropriate time limit for recognizing revenue 
derived from the sale of prepaid calling cards could serve to further 
reduce competitive distortions that arise from disparate 
interpretations and application of our rules. We seek comment on this 
analysis. We also seek comment on whether it is reasonable to expect 
that most cards are sold within sixty days of the date the provider 
bills the prepaid calling card distributor for the cards, taking into 
account a 30-day billing cycle and an additional 30 days for the end 
user to purchase the card.
    131. We seek comment on whether these alternative ideas further our 
proposed goal of ensuring that contribution assessments are fair. Would 
such a rule be simple to administer? Are there policy reasons prepaid 
calling card providers should be allowed to reduce or adjust reported

[[Page 33912]]

revenues based on discounts provided to prepaid calling card 
distributors?
    132. We also ask about the relationship between assessment of 
prepaid calling card providers and the ``value-added'' approach to 
assessing revenues discussed above. Under this approach, each 
telecommunications provider in a service value chain (including 
wholesalers, distributors, and reselling retailers) would contribute 
based on the value the provider adds to the service. As applied to the 
prepaid calling card marketplace, any firm that derives revenue from 
the sale of prepaid calling card services would report and contribute 
based on that revenue and would be permitted to take a credit based on 
contributions made by other contributors in the chain. We seek comment 
generally on this approach and inquire about the potential impact on 
firms that are not already reporting revenue or contributing to the 
Fund, such as retailers and other non-contributors. Should we consider 
an exemption from any reporting and contribution obligations for 
certain categories of retailers or distributors? If so, what would be 
the basis for such an exemption? What would be the impact on other 
contributors in the prepaid card chain, such as the service provider? 
Should we also consider a more limited exemption such that we require 
these companies only to report revenue derived from the card in order 
to ensure the Fund is fully compensated? Finally, we seek comment on 
what steps would need to be taken to implement any of the ideas 
discussed above or any alternative proposals to modify the contribution 
reporting requirements for prepaid calling card revenues. We also seek 
comment on how much time parties would need to transition to any such 
new rules.
g. International Telecommunications Providers
    133. We seek comment on whether we should eliminate the limited 
exemption for providers whose revenues are exclusively or predominantly 
international. We seek comment on modifications to our current rules 
regarding the contribution obligations of international providers.
    134. Eliminating the ``International Only'' and the ``Limited 
International Revenues'' Exemptions. We seek comment on whether the 
Commission should eliminate the exemption for international-only 
providers and Limited International Revenues Exemption (LIRE)-
qualifying providers, and our legal authority for doing so. In 1997, 
the Commission interpreted section 254 of the Act, and specifically our 
authority to assess all ``providers of interstate telecommunications,'' 
as drawing a three-way distinction between intrastate, interstate, and 
international telecommunications. We seek comment on whether, in light 
of the changes in the industry and telecommunications marketplace, 
section 254's reference to interstate telecommunications in the context 
of universal service contributions is better viewed as drawing a 
jurisdictional line between the authority of the states (which have 
authority over providers of intrastate telecommunications under section 
254(f)) and the authority of the Commission (which has authority over 
providers of interstate telecommunications under section 254(d)). Such 
a reading of section 254 would parallel the Commission's reading of 
other sections of that Act that divide responsibility between the state 
and federal jurisdictions and include international services within the 
Commission's jurisdiction. Alternatively, we seek comment on whether we 
could rely on section 254(b)(4)'s principle of ``equitable and 
nondiscriminatory contributions'' to require international-only and 
LIRE-qualifying providers to contribute because these providers also 
benefit from being able to originate or terminate traffic in the United 
States. We note that the Act distinguishes ``foreign communication'' 
from both interstate and intrastate. Does that distinction affect the 
Commission's authority to treat interstate and foreign 
telecommunications in the same manner?
    135. We also seek comment on whether the TOPUC decision limits our 
ability to re-examine the international-only and LIRE exemptions today. 
The Fifth Circuit in TOPUC held that the Commission's previous rule, 
which had required providers with limited interstate telecommunications 
revenues to contribute based on both their interstate and international 
revenues but exempted providers without interstate telecommunications 
revenues, was not ``equitable and nondiscriminatory.'' The court held 
that the previous rule ``damage[d] some international carriers [i.e., 
limited-interstate-revenue providers] more than it harm[ed] others 
[i.e., no-interstate-revenue providers].'' The court also found the 
rule inequitable because it required limited-interstate-revenue 
providers ``to incur a loss to participate in interstate service.'' The 
court did not, however, make any findings or opine about the 
Commission's jurisdiction to assess international revenues. Thus the 
Commission should have significant discretion to revise its rules 
regarding contributions on international revenues, consistent with the 
Fifth Circuit decisions, so long as the new rule is equitable and 
nondiscriminatory. We seek comment on this analysis and our ability to 
eliminate the LIRE and to assess one hundred percent of a contributor's 
interstate and international revenues, without a LIRE exemption.
    136. Commenters that oppose the elimination of the ``international 
only'' and the ``limited international revenues'' exemptions should 
provide specific alternative rules and explain how their proposals will 
support the proposed goals set forth in this Notice. We ask commenters 
to provide data to quantify how our proposals or alternatives will 
impact the Fund and reduce compliance costs and burdens.
    137. Modifying the Limited International Revenues Exemption. If we 
were to assess all international telecommunications revenues, as 
suggested above, should we also eliminate the LIRE? In the alternative, 
if we maintain an exemption for international-only providers, we seek 
comment on whether modifying the LIRE and the contribution obligations 
of LIRE-qualifying contributors may be appropriate.
    138. Specifically, if we do not require LIRE-qualifying providers 
to contribute on all of their end-user international telecommunications 
revenues, we propose to require LIRE-qualifying providers to contribute 
on at least a portion of those revenues. Moreover, the LIRE-qualifying 
factor codified in our current rules (12 percent) may no longer provide 
the ``adequate margin of safety'' it once did for providers that 
primarily offer international services, given that the contribution 
factor has remained above 12 percent over the past two years. We 
therefore seek comment on ways to modify the LIRE-qualifying factor.
    139. If we retain the LIRE, we seek comment on whether we should 
modify the LIRE as follows: If the ratio of an entity's collected 
interstate end-user telecommunications revenues to its combined 
collected interstate and international end-user telecommunications 
revenues is less than that year's LIRE-qualifying factor, that entity's 
assessable revenues shall be its collected interstate end-user 
telecommunications revenues plus an equal amount of its collected 
international end-user telecommunications revenues, net of 
contributions. (1) The LIRE-qualifying factor for a given year shall be 
equal to the highest contribution factor

[[Page 33913]]

established for any quarter of the previous year plus three percent. 
(2) For purposes of this subsection, an ``entity'' shall refer to the 
entity that is subject to the universal service reporting requirements 
and shall include all of that entity's affiliated providers of 
interstate and international telecommunications and telecommunications 
services.
    140. We seek comment and (if appropriate) examples of how the LIRE 
results in a competitive advantage for some providers. Providers that 
qualify for the LIRE compete against non-qualifying providers that must 
include all of their international revenues in calculating their 
contribution base. LIRE-qualifying providers benefit from being able to 
originate and terminate both interstate and international calls in the 
United States. Further, we seek comment on whether the proposed 
modification of the LIRE would advance the goal of fairness by treating 
competitive providers in a like manner. Would it advance other of our 
proposed goals for contribution reform, such as ensuring a stable 
contribution base? Would requiring LIRE-qualifying providers to 
contribute based on an amount of their international revenues equal to 
their interstate revenues be a more equitable approach in today's 
marketplace? Would the modification proposed above reduce the potential 
regulatory advantage that LIRE-qualifying providers have over their 
competitors? What impact would such a modification have on the Fund?
    141. We also seek comment on whether we should set the LIRE-
qualifying factor based upon a formula rather than fixed percentage. A 
fixed percentage assumes that the Commission can easily forecast 
changes in the contribution base as well as changes in the demand for 
universal service support. Neither of these assumptions has been valid 
in recent years. The Commission has already had to increase the LIRE-
qualifying factor once to respond to the rising contribution factor. 
Using a formula to establish the LIRE-qualifying factor should 
eliminate the need for us to periodically rewrite our rules. Moreover, 
a formula tied to the current contribution factor would also respond to 
changes in the contribution factor. If, for example, future events 
bring the contribution factor down, the LIRE-qualifying factor would 
automatically decrease in future years, which should increase the 
contribution base. Should we set the LIRE-qualifying factor one year at 
a time to provide regulatory certainty for contributors? A three 
percent increase tied to the current or anticipated contribution factor 
is generally in line with previous increases to the LIRE. Would a three 
percent increase, for example, over the previous year's highest 
contribution factor, be sufficient to address unexpected events in the 
future?
    142. We seek comment on what steps would need to be taken to 
implement the potential modifications outlined above or alternative 
proposals to modify the contribution requirements for international-
only and predominantly international providers. We also seek comment on 
how much time parties would need to transition to any modified or new 
reporting requirements.
h. Reforming the De Minimis Exemption
    143. We seek comment on streamlining the de minimis exemption to 
ease administrative burdens. In particular, we seek comment on whether 
we should modify the de minimis exemption to base the threshold on a 
provider's assessable revenues rather than on the amount of its 
contributions. We also seek comment on how we could potentially reform 
our rules to minimize the filing requirements for companies that may be 
subject to the exemption.
    144. We seek comment on whether we should modify the Commission's 
de minimis rules in an effort to reduce administrative burdens. 
Specifically, we seek comment on revising the rule as follows to base 
the de minimis threshold on a provider's assessable revenues rather 
than on the amount of its contributions: If a potential contributor's 
annual assessable revenues in any given year is $50,000 or less, that 
contributor will not be required to submit a contribution or 
Telecommunications Reporting Worksheet for that year unless it is 
required to do so by our rules governing TRS, numbering administration, 
or shared costs of local number portability. * * *A potential 
contributor may--but need not--file the quarterly Telecommunications 
Reporting Worksheet for the year after it qualifies as a de minimis 
telecommunications provider.
    145. Such a rule would set the de minimis threshold based on a 
telecommunications provider's assessable revenues rather than what it 
would have contributed. A potentially qualifying telecommunications 
provider (and its underlying providers) should know with increased 
certainty whether it will actually qualify as a de minimis 
telecommunications provider as the exemption will no longer depend on 
each year's quarterly contribution factors. We seek comment on this 
analysis.
    146. If we adopt this approach, is $50,000 the right cutoff for 
assessable revenues to qualify for the de minimis exemption, or should 
we adopt some other cutoff? We use $50,000 as a potential cut off 
because today the de minimis exemption applies when the contribution 
would be less than $10,000. If a contributor (under the existing de 
minimis rule) has $50,000 in annual assessable revenues, and we assume 
an average contribution factor for the year of 17 percent, that 
contributor would qualify for the de minimis exception. We believe that 
adopting a $50,000 revenues threshold would not change the number of 
contributors that would qualify for the de minimis exemption, but would 
simplify the application of the de minimis rule. Modifying the de 
minimis exemption in this manner could be more equitable, could have a 
smaller marginal impact, and may better align our requirements for 
reporting and contributing without affecting those whose 
``telecommunications activities are limited to such an extent that the 
level of such carrier's contribution to the preservation and 
advancement of universal service would be de minimis.'' We seek comment 
on this analysis.
    147. We also seek comment on whether such a rule would also reduce 
the reporting obligations and regulatory uncertainty for de minimis 
telecommunications providers with growing revenues. If so, we ask 
commenters to quantify the savings. Should we make it optional for 
contributors to file quarterly Telecommunications Reporting Worksheets 
for a year after which a contributor qualified as de minimis? We seek 
comment on whether we should adopt a rule that allows 
telecommunications providers in that position to avoid filing quarterly 
Telecommunications Reporting Worksheet in the first year for which they 
are no longer a de minimis filer. Such a rule could strike a reasonable 
balance between providing certainty to small (and growing) businesses 
in the telecommunications marketplace and the need for all 
telecommunications providers with a substantial presence to contribute 
to universal service in an equitable manner. We note that such a rule 
would not alter the obligation of telecommunications providers to file 
the annual Telecommunications Reporting Worksheet.
    148. We also seek comment on other reforms the Commission could 
make to all of its de minimis rules--in the context of funding 
universal service,

[[Page 33914]]

Telecommunications Relay Services (Interstate TRS), North American 
Numbering Plan, Local Number Portability, and regulatory fees 
administration programs--to relieve de minimis companies of the burden 
of filing the annual Telecommunications Reporting Worksheet. We seek 
comment on whether we should reform our rules for filing the annual 
Telecommunications Reporting Worksheet and set the de minimis threshold 
based on a metric that does not require completing the entire 
worksheet. For example, should we establish an abbreviated form for 
telecommunications providers with less than some cutoff value in gross 
revenues? What metric should the Commission use for determining de 
minimis status? We ask commenters to discuss whether and how 
alternative metrics would be consistent with the language of section 
254(d). What threshold should the Commission establish to permit filing 
of the abbreviated form? How could we ensure that any revisions to 
these de minimis rules will not undermine the stability of funding for 
various federal regulatory programs or allow telecommunications 
providers to evade contribution obligations? Commenters that oppose 
such suggested rules should provide specific alternative rules and 
explain how their proposals will support the goals of universal 
service. We also seek comment on what changes, if any, may be needed in 
our de minimis rules if we were to assess the international 
telecommunications revenues of all telecommunications providers.
    149. We seek comment on what steps would need to be taken to 
implement any of the potential modifications detailed above or 
alternative proposals to improve the contribution reporting 
requirements for de minimis providers. We also seek comment on how much 
time, if any, parties would need to transition to any new rules.
2. Assessing Contributions Based on Connections
    150. We seek comment on moving from a revenues-based contribution 
assessment system to a system based on connections. Nothing in the Act 
requires contributions to be based on revenues, and the Commission has 
explored a connections-based methodology in the past. We ask whether a 
connections-based approach would better meet our proposed goals of 
promoting efficiency, fairness, and sustainability in the Fund, as well 
as other goals identified by commenters.
    151. Under a connections-based system, providers would be assessed 
based on the number of connections to a communications network provided 
to customers. Providers would contribute a set amount per connection, 
regardless of the revenues derived from that connection. Under various 
proposals, there would be one standard monthly assessment for certain 
kinds of connections, typically provided to individuals, and a higher 
standard monthly assessment for higher speed or capacity connections, 
typically provided to enterprise customers. There might be several 
tiers for assessment based on speed or capacity. The standard 
assessment and higher assessment levels for higher speed or capacity 
connections would be calculated by applying a formula based on the USF 
demand requirement and the number of connections, however that term is 
defined. This contribution factor would apply equally for all 
connections that fall into the same category, such that assessments 
would no longer be based on revenues.
    152. In 2001, the Commission first sought comment on replacing the 
existing revenues-based methodology with one that assesses 
contributions on the basis of a flat fee ``per unit'' charge. In early 
2002, the Commission proposed an assessment mechanism based on the 
number or speed of connections a contributor provides to a public 
network. The Commission subsequently sought comment on various 
iterations of a connections-based system, including hybrid systems that 
would include a connections and revenues component.
    153. Proponents of connections-based methodologies have argued that 
a connections-based system may provide a more stable contribution base 
than a revenue-based system because the number of connections has 
historically been more stable than end-user interstate 
telecommunications revenues. In addition, proponents have suggested 
that connections-based assessments may mitigate the need to 
differentiate between revenues from interstate and intrastate 
jurisdictions and from telecommunications and non-telecommunications 
services. Others have raised concerns that a connections-based system 
would impose new costs on both industry and USAC in the form of new 
data collection and reporting requirements, necessitating changes to 
billing and reporting systems. Some have argued that a connections-
based system may be at least as complex to implement and administer as 
a revenue-based system, with many operational details that would need 
to be resolved. Despite several rounds of comment, the industry as a 
whole has not reached consensus about whether connections-based 
assessments are the best way to reform the contribution system: Some 
providers have strongly opposed a connections system, others have been 
agnostic about whether a connections-based system is the optimal 
reform, and still others who once supported a move to a system that 
includes a connections-based component appear to be re-evaluating their 
position on this issue. In light of the varied connections-based 
proposals, the evolution of the communications ecosystem, and the 
comments received over the past decade, we now seek to refresh the 
record on the operation of a connections-based system, as well as the 
costs and benefits of such a system, as discussed below. We ask parties 
claiming significant costs or benefits of a connections-based system to 
provide supporting analysis and facts for such assertions, including an 
explanation of how data were calculated and all underlying assumptions.
a. Legal Authority
    154. Section 254(d) of the Act requires that ``[e]very 
telecommunications carrier that provides interstate telecommunications 
services shall contribute, on an equitable and nondiscriminatory basis, 
to the specific, predictable, and sufficient mechanisms established by 
the Commission to preserve and advance universal service.'' It also 
gives the Commission broad permissive authority to require 
contributions from a variety of providers. We seek to refresh the 
record on whether a connections-based assessment would satisfy the 
requirements of section 254(d). In responding to the specific questions 
below, we invite commenters to address how a connections-based system 
should be structured to fulfill the statutory requirement that 
telecommunications service providers contribute on an equitable and 
nondiscriminatory basis. If we were to adopt a connections-based 
contribution methodology, should we also explicitly exercise our 
permissive authority over specified providers to make clear that 
connections provided by those providers would be assessed? How would we 
ensure that all entities that contribute under a connections-based 
system are providers of interstate telecommunications?
    155. In 2002, the Commission proposed a hybrid revenues/
connections-based system that would require a mandatory minimum 
contribution based on interstate telecommunications revenues for all 
providers of interstate telecommunications. Under this proposal, all 
non-de minimis

[[Page 33915]]

telecommunications carriers would contribute a mandatory minimum, 
either based on a percentage of total interstate revenue, or based on 
increasing percentages of telecommunications revenues or increasing 
flat-fee amounts tied to their telecommunications revenues. Providers 
with end-user customers would also be assessed on a flat fee basis for 
residential, single line business, and mobile connections, and on a 
tiered basis based on speed or capacity for multi-line businesses. 
Providers with end-user assessments could offset their connections-
based assessment against their minimum contribution. In crafting this 
proposal, the Commission was specifically addressing concerns that a 
connections-based proposal would be inconsistent with section 254(d)'s 
requirement that every provider of interstate telecommunications 
service contribute. We seek to refresh the record on this proposal and 
seek comment on whether, in fact, a mandatory contribution from every 
interstate telecommunications carrier is required to satisfy the 
requirements of section 254(d) that contributions be equitable and 
nondiscriminatory.
    156. We also seek specific comment on whether a connections-based 
methodology is consistent with the Fifth Circuit's TOPUC decision, 
which held that section 2(b) of the Act prohibits the Commission from 
assessing revenues associated with intrastate telecommunications 
service. The Fifth Circuit also interpreted the Act as limiting the 
Commission's authority to assess international revenues, finding that 
the Commission's contribution system may not inequitably and 
discriminatorily assess providers more in universal service 
contributions than the provider generates in interstate revenues. We 
seek comment on the Commission's authority under a connections-based 
system to assess international connections that either originate or 
terminate in the United States and whether TOPUC would apply under such 
a system. We also seek comment on whether, if we were to adopt a 
connections-based system, we should adopt an exemption similar to the 
LIRE under the current revenues-based system for connections that are 
primarily international in nature, and if so, how to craft such an 
exemption.
b. Defining ``Connections''
    157. We seek comment on the definition of an assessable connection 
that best meets our proposed goals of promoting efficiency, fairness, 
and the sustainability of the Fund, as well as other goals identified 
by commenters. As described below, the question of the appropriate 
definition of an assessable connection is related to, but may be 
distinct from, the questions raised in this Notice regarding what 
providers and services should contribute to universal service.
    158. Facilities-Based Definition. A facilities-based definition 
focuses on the physical facility--either wired line or wireless 
channel--that is provided by the contributor. Under a facilities-based 
definition, the connection itself, and not the services that are 
provided over the connection, would be assessed. For example, a 
physical line to a residential home would be assessed as one 
``assessable connection'' even if it provided multiple assessable 
services to the customer. A multi-line business connection would 
likewise be assessed based on speed or capacity of the facility and not 
the services provided over the facility. A facilities-based approach 
raises complexities, however, to the extent that the assessment varies 
based on the speed of the facility, in circumstances where the physical 
connection provides variable speed on demand.
    159. If we were to adopt a facilities-based definition, would it be 
appropriate to build on the definition that was suggested in late 2002: 
a facility that provides end users with ``access to an interstate 
public or private network, regardless of whether the connection is 
circuit-switched, packet-switched, wireline or wireless, or leased 
line''? For example, we seek comment on the following potential 
definition of connection: Connection. A facility that provides end 
users with access to any assessable service, whether circuit-switched, 
packet-switched, wireline or wireless, leased line or provisioned 
wireless channel. Alternatively, we seek comment on the following 
potential definition of connection, building on the FCC Form 477: 
Connection. A wired line or wireless channel used to provide end users 
with access to any assessable service. Are there any significant 
differences in what would qualify as ``connections'' under these 
definitions?
    160. We believe either definition could be used with either of the 
two general approaches to defining assessable services described in 
Section IV of this Notice. That is, either definition could be used 
either if, as described in Section IV.B, we were to continue defining 
assessable services as telecommunications services plus certain 
enumerated other services, or if, as described in Section IV.C, we were 
to adopt a more general definition of assessable services. We seek 
comment on this analysis.
    161. We also seek comment on the impact of adopting a facilities-
based definition of connection. How would adopting such a definition 
affect the distribution of contribution obligations among different 
industry sectors, or the relative contribution burden borne by mass 
market versus enterprise customers? Would such a definition provide 
predictability for contributors, while retaining sufficient flexibility 
to accommodate the evolution of the telecommunications marketplace? Are 
there variations on the definitions, or alternate definitions, that 
would better meet our proposed goals for contribution reform?
    162. Service-Based Definition. Under a service-based definition, 
the definition of the connection ``unit'' would focus on the service or 
services that are delivered over the facility. Under such a definition, 
each interstate telecommunications service using the connection would 
be assessed as one ``unit,'' as could any service that had an 
interstate telecommunications component. For example, in contrast to 
the facilities-based definition, if a customer purchases two services 
that we have determined are assessable and that are delivered over the 
same facility, the provider would be assessed for two connections. 
Multi-line business services could likewise be assessed based on the 
services that are provided over the connection. For example, we seek 
comment on the following potential service-based definition of 
connection: Connection. An assessable service provided to an end user.
    163. As above, we seek comment on the impact of adopting this 
definition of connection. How many total connections would there be 
under this definition, given the different approaches to defining 
assessable services in this Notice? Would this definition raise 
questions regarding whether particular offerings were one ``service'' 
or multiple bundled services? For example, under such a definition, 
should a subscriber purchasing both text messaging service and voice 
service be counted as two connections or one? How would family plans or 
other multi-user or multi-device scenarios be treated?
    164. How would adopting this definition affect the distribution of 
contribution obligations among different industry sectors, or the 
relative contribution burden borne by mass market versus enterprise 
customers? Would this definition provide predictability for 
contributors, while retaining sufficient flexibility to accommodate the 
evolution of the telecommunications marketplace? Are

[[Page 33916]]

there variations on this definition, or alternate definitions, which 
would better meet our proposed goals for contribution reform?
    165. We also seek comment on alternative service-based definition 
that would focus on usage (i.e., how much throughput actually traverses 
the connection in a given period).
    166. Defining ``End User.'' We also seek comment on whether a 
definition of connection should be limited to connections provided to 
``end users.'' In prior years, the Commission sought comment on whether 
to apply the same definition of end user that is used under the current 
revenue-based system. As discussed above, under the existing system, 
``end users'' include purchasers of retail interstate 
telecommunications or telecommunications services that do not 
contribute on their finished offerings. End users do not include 
entities that purchase wholesale inputs and contribute on the services 
they provide to other customers. Would including the use of the term 
``end user'' in the definition of a connection perpetuate some of the 
challenges we see under the current revenue-based system discussed 
above, such as, for example, the difficulty of determining whether a 
customer is an end user or reseller of specific services for purposes 
of USF contribution obligations? How should we define end user if we 
adopt a connections-based approach? Should we, for instance, define an 
end user as a residential, business, institutional, or governmental 
entity who uses the services provided for its own purposes, and does 
not sell the service to other entities, or incorporate the service into 
another service sold to other entities?
    167. Would a system that requires each provider to ``pay its own 
way''--that is, each provider would contribute based on the connection 
it provides to another entity--be simpler from a compliance and 
administrative perspective? In 2002, the Commission sought comment on a 
proposal that would split connections-based contribution obligations 
between switched access and interstate transport providers. Under such 
an approach, a provider of both local and interexchange services to the 
end user would be assessed two units per connection (one for access and 
one for transport), while a provider that provided only local service 
would be assessed one unit and the interexchange carrier would be 
assessed one unit. We invite comment on whether a more general system 
of this type that requires each provider of connections to contribute 
would be simpler from a compliance and administration perspective than 
a system that requires only the provider with the relationship to the 
end user customer to contribute. For instance, as discussed above, if 
we were to adopt a service definition of connection, and Carrier A 
sells a private line to Carrier B, and Carrier B in turn uses that 
circuit to provide both an enterprise communications service and VoIP 
to its retail customer, should Carrier A be assessed one unit for that 
high-speed line, while Carrier B is assessed one unit for the 
communications service and a second unit for the VoIP service?
    168. Connections Provided to Lifeline Subscribers. Today there are 
approximately 14.8 million Lifeline subscribers. We seek comment on 
whether the Commission has statutory authority to exclude from 
assessment connections provided to Lifeline subscribers. Would it be 
consistent with section 10 to forbear from imposing contribution 
obligations on such connections? How would the exclusion of such 
connections impact a connections-based regime? What would be the policy 
justifications for excluding these connections from contribution 
obligations? Alternatively, should such connections associated with 
Lifeline services be assessed at a pro-rated or reduced rate, and if 
so, what would be an appropriate amount?
c. Trends in Connections
    169. We seek comment regarding trends in connections over time. We 
seek data to project the number of connections that exist today under 
the facilities-based definitions discussed above. If we were to adopt a 
service-based definition, the number of connections would largely 
depend on how narrowly or broadly we were to define the relevant 
assessable services. We invite commenters to present data and their 
underlying assumptions regarding the number of connections under the 
alternative connection definitions discussed above.
    170. The FCC Form 477 data collection provides some information 
that may be useful in projecting the number of connections. As 
discussed above, FCC Form 477 counts broadband connections separately 
from connections that are used for local telephone service, which 
provides some basis for estimating the number of connections if we were 
to exercise our permissive authority over broadband Internet access 
services and also adopted a definition of connections that counted 
broadband separately from voice. Notably, because the form is designed 
mainly to track residential connections, it does not capture many 
connections provided to businesses, governmental entities, and other 
large institutions.
    171. There were 616 million connections reported under the FCC Form 
477 connection categories in 2010: 117 million local landlines 
(switched access lines), 32 million interconnected VoIP subscriptions, 
285 million mobile telephone subscriptions, and 182 million broadband 
connections. If one assumes continued growth in mobile subscriptions, 
interconnected VoIP and broadband connections, the total number of 
connections could grow to approximately 800 million connections under 
the FCC Form 477 connection categories by 2015.
    172. We seek comment on our analysis of the 477 data and invite 
commenters to present their own analysis and underlying assumptions. In 
particular, how many enterprise connections are there under different 
definitions of connections and of assessable enterprise services? And 
if we were to adopt a facilities-based definition of connections, 
rather than the service-based approach used in Form 477, how many 
connections are there, and what is the likely trend in the number of 
connections over time? To what extent are the landlines or mobile 
subscriptions reported in FCC Form 477 also providing broadband?
d. Assessment and Use of Speed or Capacity Tiers
    173. Another key question is whether a connections-based assessment 
should be based on speed or capacity tiers and how to define any such 
tiers. In the past, the Commission's proposals have assumed a 
connections-based methodology would classify connections into various 
tiers, and each connection within a tier would be assessed the same 
flat fee. We seek comment on how assessment based on speed or capacity 
tiers would operate under a service or facilities-based definition of 
``connection,'' and whether such an assessment structure would further 
our proposed reform goals of promoting efficiency, fairness, and 
sustainability of the Fund.
    174. Determining the Per-Unit Assessment. In the past, the 
Commission has sought comment on grouping residential, single-line 
business, and mobile wireless connections together in a separate 
category from multi-line business connections, and assessing each based 
on a flat fee. Under such a system, the initial proposed amount for the 
residential, single-line business, and mobile wireless connections has 
been in the range of $1 per month. The residual USF demand would then 
be met

[[Page 33917]]

through assessments on multi-line business connections based on the 
number and capacity of the connections. We seek comment to refresh the 
record on such an approach. How would the contribution amount for a 
typical consumer vary under such an approach compared to the revenues-
based approach in place today?
    175. If we were to adopt a connections-based approach, should 
certain providers be eligible for special consideration or exemption? 
We seek comment on whether a connections-based system that provides 
special treatment for a myriad of services would meet our proposed 
goals of ensuring sustainability of the Fund, while simplifying 
compliance and administration. As noted above, a recent development is 
the growth in machine-to-machine connections, enabling such innovations 
as smart meter/smart grids, remote health monitoring, or supply chain 
tracking. To the extent we were to exercise permissive authority over 
some or all machine-to-machine connections, should they be assessed at 
the same level, or flat rate, as other connections? If not, how should 
they be assessed?
    176. Another question that would need to be resolved under a 
connections-based approach with tiers is whether and how to update the 
tiers and/or assessment amounts as business and residential users move 
to higher bandwidth services and new technologies and services develop. 
In previous Notices, the Commission recognized that, to ensure an 
appropriate amount of funds for universal service, it would need to 
revisit and adjust the assessment amount periodically. Recently, the 
Commission has taken significant strides to minimize future growth of 
the Fund by adopting a budget in the recent USF Transformation Order 
and a savings target in the Lifeline and Link-Up Reform and 
Modernization Order. These measures to instill fiscal responsibility in 
these programs are in addition to the caps on other universal service 
support mechanisms (i.e., the schools and libraries and rural health 
care mechanisms). We seek comment on how often we should revisit any 
per-unit amount, if we were to adopt a connections-based proposal, in 
light of these reforms. Would a semi-annual or annual review be 
sufficient to meet the needs of the Fund? We also seek comment on 
whether any re-evaluation of the assessment should happen on a set 
schedule or an ad hoc basis, either on our own motion or at the request 
of industry participants or USAC. What factors should we consider in 
determining whether to adjust the assessment? When periodically 
readjusting the unit amounts, should we aim to maintain the relative 
proportion of contribution burdens between residential and business 
consumers? How could that proportion be accurately determined?
    177. Tiers. In 2002, the Commission proposed that contributions 
from providers of multi-line business connections be a residual amount 
calculated to meet the remaining universal service funding needs not 
met by contributions for residential, single-line business, and mobile 
connections. The Commission reasoned that this proposal would make 
contribution obligations more predictable and understandable for 
residential, single-line business, and mobile customers, and that 
multi-line businesses may be better equipped to understand the 
fluctuations in assessments from quarter to quarter. We seek comment on 
whether this reasoning remains valid in today's marketplace.
    178. In the past, the Commission sought comment on defining a 
connection as either a residential/single-line business or a multi-line 
business connection based on whether the residential/single-line 
business or multi-line business subscriber line charge (SLC) is 
assigned to the connection. We seek to update the record on whether 
this delineation is an effective way to identify residential and 
single-line business connections in today's market, particularly given 
the growth in wireless and VoIP connections--which typically do not 
charge SLCs or their equivalent. Not only is such a method for 
distinguishing residential connections from business connections 
possibly outdated today, but we are concerned it will become 
increasingly more so as users move to alternative providers that do not 
charge SLCs. We seek comment on whether, if we adopt a connections-
based approach, we should distinguish between residential/mass market 
connections and business/enterprise connections. And, if so, we seek 
comment on other objective measures aside from the SLC that we could 
use to distinguish between these two categories of connections.
    179. We understand anecdotally that many companies are moving away 
from purchasing mobile service directly for employees in favor of 
providing employees with reimbursements for their personal mobile 
monthly plans. To the extent we were to make a distinction between 
residential and business connections, how should such connections be 
classified as residential or multi-line business connections? How would 
contributors distinguish such connections absent a corporate identifier 
on the account? We seek comment on these issues and whether such a 
distinction serves our proposed policy goals of administrative 
efficiency, fairness, and sustainability.
    180. Tier Structures. Over the years, the Commission and the 
industry have proposed various tiers to calculate assessments for 
multi-line business connections, with no one approach emerging as the 
preferred alternative. In 2002, the Commission proposed a structure of 
three tiers of up to 1.544 Mbps, 1.544 to 45 Mbps, and 45 Mbps or 
higher for multi-line business connections. Later in 2002, the 
Commission updated the proposed tiers to four tiers of up to 725 kbps, 
726 kbps to 5 Mbps, 5.01 Mbps to 90 Mbps, and greater than 90 Mbps for 
multi-line business connections. At that time, the Commission sought to 
set the speed ranges so that then-common service offerings would fall 
well within each tier in order to minimize market distortion. 
Subsequently in 2008, the Commission proposed just two tiers of up to 
64 kbps and over 64 kbps for business services. Commenters have also 
proposed different sets of tiers. AT&T, for example, proposed three 
tiers of up to 25 Mbps, over 25 Mbps up to and including 100 Mbps, and 
over 100 Mbps for dedicated business connections.
    181. In today's ever evolving marketplace, there is increased 
demand for multi-line business connections to have more bandwidth. One 
of the proposed goals of our reformed contribution system is to 
simplify administration and reporting. Is there a way to structure the 
speed tiers in a future-proof manner? Or, would a system based on 
available speed tiers inevitably become outdated as the communications 
industry continues to evolve? Is there a reasonable way to have tiers 
automatically adjusted, for example by setting tiers based on 
percentile, such that the slowest quartile of connections would fall 
into one tier, the next quartile in another tier, etc.?
    182. We seek comment on whether any of the previously proposed tier 
structures would be appropriate in today's marketplace, and whether any 
such tiers should be limited to business customers or whether they 
should extend to residential or mass market connections as well. We 
seek to refresh the record in light of recent actions taken in the USF-
ICC Transformation Order and FNPRM and other pending proceedings. For 
instance, in establishing tiers, to what extent, if at all, should we 
take into account the Commission's decision to establish 4

[[Page 33918]]

Mbps down/1 Mbps up as the minimum speed for fixed broadband 
connections under the Connect America Fund? Should speed tiers for 
universal service contribution purposes be based on actual speeds or 
advertised speeds? Is one approach preferable to another for purposes 
of auditing and enforcing compliance with our contributions rules?
    183. To the extent commenters believe one of the previously 
proposed tier structures is appropriate for today's market, we seek 
detailed comments to support such a position. Additionally, we 
encourage commenters to propose a tier structure that accounts for the 
qualities of connections in the marketplace today. In the past, the 
Commission sought comment on a tier structure based on speed. Should 
tiers also be set based upon capacity, or the total volume of data that 
can be sent and/or received over the connection by the end user over a 
period of time? Commenters should explain why they propose tiers at the 
particular capacity range and propose the appropriate assessment amount 
for each tier. Commenters should also discuss how we can structure the 
tiers so that they will accommodate future evolution. We seek to 
minimize the potential for market distortion based on the tier 
structure; commenters should address how their proposal addresses this 
concern in their responses. Commenters proposing new tier structures 
should also provide an analysis of the impact on the Fund and the 
relevant burdens to residential and business consumers.
    184. Would the current FCC Form 477 tier structure work in the 
context of a USF connections-based assessment? For example, FCC Form 
477 tracks facility-based broadband connections in ten different 
technology categories (e.g., asymmetrical and symmetrical xDSL, cable 
modem, fiber-to-the-home, mobile wireless) based on transfer rates 
ranging from 200 kbps to greater than 100 mbps. We seek comment on 
whether this categorization and tier structure as well as the other 
data collection requirements in the FCC Form 477 could work for 
universal service contribution purposes, or whether they could be 
easily modified to satisfy the requirements of both the FCC Form 477 
and any established USF contribution rules and requirements. If we were 
to modify our FCC Form 477 data collection, should we also make 
corresponding modifications to the tiers for purposes of USF 
contributions?
    185. While multi-line business connections may provide a specific 
maximum level of speed or capacity, other connections provide 
customers, through contractual agreements, with the option of utilizing 
additional speed or capacity on a short-term basis. One of the 
challenges of a tiered connections-based approach is how it would 
address connections that provide varying speed at different points in 
time. For example, should we consider how ``burstable'' bandwidth would 
be assessed under a connections-based system? Burstable bandwidth 
allows a connection to exceed its stated speed, usually up to a pre-
chosen maximum capacity for a period of time, such as during periods of 
heavy network activity or peak network usage. We seek comment on what 
rules should be adopted to address such situations, if we were to adopt 
a connections-based system.
    186. Some commenters argue that there is little correlation between 
connection speed and telecommunications usage. These commenters ask 
whether it is more appropriate to base the tiers on usage rather than 
speed. Under prior connections-based proposals, contributors would be 
assessed for multi-line business connections based on the maximum 
amount of bandwidth they allocate to the connection, not the actual 
amount of bandwidth used. Because customers often purchase excess 
bandwidth for backup or future growth, some commenters argue that 
assessing a connection at the maximum available speed taxes spare 
bandwidth and could lead to poor network management practices. We seek 
comment on this position. We also seek comment on how a provider would 
measure the actual usage of a customer's connection and the burdens 
associated with such reporting. Finally, we seek comment on how we 
would audit actual usage.
e. Policy Arguments Related to Connections-Based Assessment
    187. In 2002, the Commission outlined a number of potential 
benefits of a connections-based assessment methodology: the number of 
connections has been more stable than interstate revenues and therefore 
connections-based assessment may provide a more predictable and 
sufficient funding source for universal service; under a connections-
based approach, providers would not have to allocate revenues between 
interstate and intrastate jurisdictions or between telecommunications 
and non-telecommunications services; and under a connections-based end-
user approach, only one entity--the one with the direct relationship 
with the end user--would be responsible for contributing, thereby 
potentially reducing the complexities associated with collecting and 
reporting USF fees. We seek comment to refresh the record on these 
issues given the changes that have occurred in the telecommunications 
marketplace since 2002 and the potential rule changes discussed in this 
Notice. Is a connections-based contribution methodology consistent with 
the proposed goals of having a contribution methodology that is 
efficient, fair, and sustainable?
    188. Distinguishing Telecommunications from Non-Telecommunications. 
In 2002, the Commission and commenters suggested as a potential benefit 
that a connections-based methodology might not require carriers to 
distinguish between telecommunications and non-telecommunications 
services, distinctions that may be increasingly difficult as the 
marketplace evolves. We seek comment above on approaches to provide 
clarity to contributors with respect to specific services, without the 
need to classify those services as either information services or 
telecommunications services. We also seek comment on assessing revenues 
associated with information services. In light of those potential 
approaches, is this potential advantage of a connections-based 
methodology still relevant? If we were to adopt a facilities-based 
connections approach, should we make an affirmative finding that each 
connection within the scope of our definition ``provides interstate 
telecommunications'' in order to subject that connection to assessment?
    189. Jurisdictional Considerations. The Commission and industry 
participants have suggested in the past that a connections-based system 
might mitigate the need to differentiate between interstate and 
intrastate jurisdictions. We seek comment on whether this remains a 
relevant consideration.
    190. In the connections-based methodology proposed in 2002, the 
Commission stated that international-only and intrastate-only 
connections would be exempt because they do not have an interstate 
component. We seek comment on how specifically we would determine 
whether a particular connection should be deemed to be intrastate-only 
for contribution purposes, if we were to adopt a connections-based 
methodology, and how such a rule could be applied. We note that today, 
private lines with less than ten percent interstate traffic are deemed 
to be jurisdictionally intrastate. For contribution purposes, the Form 
499 instructions specify that if over ten percent of the traffic is 
interstate, all of

[[Page 33919]]

the revenues for that line are classified as interstate. We seek 
comment above in this Notice on a revenues-based approach that would be 
simpler to administer, which would allocate revenues to the different 
jurisdictions according to a set percentage. If we were to adopt a 
connections-based approach, should we adopt a rule that any connection 
that provides the capability to originate or terminate communications 
that may cross state lines is subject to assessment, regardless of the 
physical end points of the facility or the actual traffic carried on a 
particular circuit?
    191. To the extent we exercise our permissive authority to assess 
broadband Internet access connections, we seek comment on whether such 
connections should be presumed interstate for purposes of universal 
service contributions. Should we conclude that any connection that 
connects to an Internet point of presence should be deemed interstate 
for federal USF contribution purposes? Would such a rule allow states 
to assess connections (or revenues associated with connections) to 
support state universal service funds? Would a connections-based system 
increase compliance burdens if states continue to employ a revenues-
based assessment for state-based funds? What is a simple way to 
determine jurisdiction for connections in a manner that is fair and 
competitively neutral, and could such an approach reduce compliance 
burdens on contributors?
    192. Consumer Impact. In the past, certain contributors have argued 
that a connections- or numbers-based contribution methodology would 
disproportionately impact vulnerable populations, such as low-income 
consumers and the elderly. How would moving to a connections-based 
approach change the relative distribution of the contribution burden 
between enterprise users and consumers, as well as among different 
types of enterprise users and consumers? Is moving to a connections-
based approach where connections are assessed a flat rate (or a flat 
rate within a tier) fair to low-income consumers and other users on 
low-cost service plans? Are there modifications that could be made to a 
connections-based methodology to make the level of assessment fairer to 
consumers on low-cost service plans? If we were to adopt a connections-
based approach, would low-income households be likely to see a 
contribution pass-through charge for a larger percentage of their 
monthly telecommunications bill than higher-income households? Would 
low-volume customers bear an assessment that constitutes a larger 
percentage of their bill than high-volume users?
f. Implementation
    193. Implementing a connections-based system would presumably 
require new data collection and reporting requirements and, at least in 
the near term, impose additional costs on both filers and USAC to 
implement new reporting systems. A connections-based system could also 
present complexities related to compliance and auditing, particularly 
because connections are not generally reported for other governmental 
purposes. Further, a move to a connections-based system may affect 
other programs that currently report on the FCC Form 499, including 
Interstate TRS, North American Numbering Plan, Local Number 
Portability, and regulatory fees administration. Finally, a new system 
would require some period of transition. We seek comment on all these 
issues below.
    194. Reporting. We seek comment on how to implement reporting 
requirements under a connections-based contributions system. Under the 
existing revenue-based contribution methodology, contributors report to 
USAC their historical gross-billed, projected gross-billed, and 
projected collected end-user interstate and international revenues 
quarterly on the FCC Form 499-Q and their gross-billed and actual 
collected end-user interstate and international revenues annually on 
the FCC Form 499-A. USAC then bills contributors for their universal 
service contribution obligations on a monthly basis based on the 
contributors' quarterly projected collected revenue. Contributors 
report actual revenues on the FCC Form 499-A, which USAC uses to 
perform true-ups to the quarterly projected revenue data.
    195. How should a connections-based system be implemented? In 
particular, we seek comment on the specific changes necessary to enable 
USAC to administer the Fund under a connections-based system. How would 
contributors report the number and speed or capacity of their 
connections under a connections-based assessment methodology? For a 
service-based connections methodology, how should providers report the 
service type? Should we continue to use a FCC Form 499 or use a 
different system, and why? What would be the administrative impact of a 
new reporting system on providers and on USAC as the administrator of 
the Fund? Could we modify the FCC Form 477 to capture the data 
necessary for a connections-based system, thus eliminating the need to 
file separately for contribution purposes? What measures should we take 
to ensure that providers would not be able to avoid their contribution 
obligation? To what extent do connections fluctuate due to churn or 
other factors, and, as a result, how often should providers report 
their data to ensure the stability and sufficiency of the Fund? Should 
we limit reporting requirements to twice a year, to coincide with the 
requirement to report connections data on the FCC Form 477? We seek 
comment on whether reporting only twice a year would satisfy our 
proposed goal of a more simplified contribution system. We also seek 
comment on the potential impact of a six-month reporting interval on 
periodic adjustments to the per-connection assessment. Would such a 
reporting schedule provide USAC and the Commission with the data 
necessary to effectively administer the universal service programs? We 
specifically seek comment and data on whether it is necessary to 
monitor individual provider fluctuations through frequent reporting or 
whether less frequent reporting would suffice.
    196. Alternatively, we seek comment on the costs and benefits of 
reporting at monthly or quarterly intervals. Since a more frequent 
interval would likely provide a larger number of ``snapshots'' of a 
contributor's connection counts over a year, would a more frequent 
interval provide more accurate data and lead to more stability in the 
Fund than would a six-month interval? Would a more frequent reporting 
period make adjustments to the contributions requirements more 
incremental? Would longer or shorter reporting intervals advantage or 
disadvantage some types of providers more than others? In 2002, the 
Commission sought comment on a monthly reporting system under which the 
contributor would report the number and speed or capacity of their 
connections at the end of each month on a new FCC Form 499-M. Under 
that approach the new form would also serve as a contributor's monthly 
bill. We seek comment on the costs and benefits of such an approach.
    197. Costs Associated with Implementing a Connections System. We 
seek comment on contributors' out-of-pocket costs for implementing a 
new connections-based contribution methodology. Would contributors be 
able to use their current billing and operating systems to report 
connections for universal service contributions? If not, what would be 
the incremental costs associated with modifying billing systems and 
internal controls and processes to collect and track

[[Page 33920]]

connections for purposes of reporting and contributing to the Fund? 
Would contributors have to implement entirely new systems to track the 
type of data needed to report connections? Does the answer to this 
question depend on whether the Commission adopts the FCC Form 477 
connection categories as opposed to other categories of providers or 
services whose connections are assessable? Are there cost savings that 
could be realized by moving away from the current system, which 
requires contributors to report revenues quarterly (projected) and 
annually (actual) for USF purposes? Would those costs vary depending on 
the definition of connections we adopt? We also seek comment on whether 
the cost of updating billing and internal systems for this regulatory 
purpose would outweigh any benefit achieved. What would be the 
implications for reporting for other regulatory programs such as 
regulatory fees, Interstate TRS, and the North American Numbering Plan? 
Would increased operational costs negatively impact certain carriers 
more as compared to other carriers (for example, smaller rate of return 
companies that recover some of these costs from high-cost loop support, 
which is capped)?
    198. We specifically seek comment on any implementation costs 
associated with other programs that rely on the data reported on the 
FCC Form 499-A. For example, if we were to move to a connections-based 
system for contributions, would there be additional costs associated 
with reporting for the Interstate TRS Fund, North American Numbering 
Plan, Local Number Portability, and regulatory fees administration 
programs which currently rely on the FCC Form 499-A data? Would a 
change in the contribution system to a connections-based approach only 
be feasible and cost-effective if these other programs also changed to 
a connections-based approach? We also ask whether adopting a 
connections-based system would increase compliance burdens if states 
continue to employ a revenues-based assessment.
    199. We also seek to refresh the record on whether there are other 
costs associated with a connections system, and in particular ask 
providers if there are any new costs that were not foreseen when we 
last asked for comments on this methodology. Would the cost of a new 
assessment methodology increase for certain classes of customers or 
certain industry segments? To what extent would this analysis change 
depending on how a connection is defined and assessed? Do the 
additional costs associated with implementation and reporting 
requirements outlined below outweigh the benefits of moving to a 
connections-based methodology?
    200. Auditing. Audits are an essential tool for the Commission and 
USAC to ensure program integrity and to detect and deter waste, fraud, 
and abuse. Any new connections methodology must be auditable in order 
to ensure that contributors are reporting accurately, and that the 
system operates in an equitable and nondiscriminatory manner, maintains 
stability in the contribution base, and minimizes market distortions 
and gamesmanship. Auditing a connections-based system could be 
difficult, however, if the manner in which providers track their 
connections for business reasons does not overlap with the Commission's 
definitions of ``connections'' and ``tiers.'' As previously noted, 
unlike revenues, connections are not universally tracked, and thus 
there are no standards or regular means of auditing a ``connection.'' 
In addition, unlike revenues, ``connections'' are not reported to other 
federal agencies, such as the SEC, nor are connections routinely 
tracked on a company's books. Because companies would be tracking 
connections solely or primarily for the Commission, we seek comment on 
how to structure a connections-based system to be auditable and 
enforceable. How, in fact, would companies track their connections for 
USF contribution reporting purposes? Would companies need to create 
internal records solely for this purpose? How would an auditor verify 
the accuracy of the internal records, especially in light of customer 
churn and customer change orders? Because revenue is reported for other 
governmental purposes there are, to some extent, inherent checks and 
balances built into a revenues-based system. We seek comment on whether 
any potential lack of checks and balances under a connections system is 
a fatal flaw, or if it could be remediated. Proponents of a 
connections-based system should provide specific details about how 
contributors would report their data and how auditors could verify the 
accuracy of connections data reported. In addition to audits, what 
other steps should be taken under a connections-based system to detect 
and deter waste, fraud, and abuse?
    201. We seek comment on how, under a connections-based system, we 
could create the proper incentives for providers to accurately report 
connections data. What types of procedures are necessary to verify the 
accuracy of the number of connections reported by a provider? How would 
USAC measure the accuracy of the data, especially given customer churn 
that may occur between reporting periods?
    202. Effect on Other Programs. As in previous comment cycles, we 
ask parties to provide comment on the impact of moving to a 
connections-based approach on the Interstate TRS, North American 
Numbering Plan, Local Number Portability, and regulatory fees 
administration programs. The revenue information currently reported on 
an annual basis in FCC Form 499-A is also used to calculate assessments 
for these programs. We ask parties to provide comment on the best 
approach for ensuring proper funding of these programs were we to move 
to a connections-based methodology. Should contributors continue 
reporting gross billed end-user revenues for purposes of these 
programs, and if so, should they continue to report on an annual basis? 
Could we dramatically simplify the FCC Form 499 for purposes of revenue 
reporting in that instance, such as by eliminating the multi-line 
breakout of reported revenues into sub-categories? We specifically seek 
comment on whether to maintain revenue-based reporting for the 
regulatory fee program if we move to a connections-based approach for 
USF contributions and/or the other programs.
    203. If we were to adopt a connections-based approach for the USF, 
should we also move to a connections-based approach for Interstate TRS, 
North American Numbering Plan, Local Number Portability, and regulatory 
fees administration programs? If so, would a connections-based approach 
for these programs vary, if at all, from a connections-based approach 
for the USF? We specifically seek comment on how a connections-based 
system could be implemented to satisfy the requirements of section 715 
of the Act. This section requires that each interconnected VoIP service 
provider and each provider of non-interconnected VoIP service shall 
participate in and contribute to the Interstate Telecommunications 
Relay Services Fund in a manner ``consistent with and comparable to the 
obligations of other contributors to such Fund.'' Finally, are there 
alternative ways to calculate contributions for the Interstate TRS, 
North American Numbering Plan, Local Number Portability, and regulatory 
fees programs?
    204. Transition. A connections-based methodology would constitute a 
substantial change from the current revenue-based system and would 
likely require a transition period, especially if reporting entities 
need to implement

[[Page 33921]]

new billing and accounting systems and a process for recording 
connection counts in a manner that is auditable. We seek comment on 
what steps would need to be taken to transition between the current 
revenues-based system and a connections-based system and how much time 
would be needed to ensure that the new process is applied in an 
equitable manner.
    205. If we were to adopt a connections-based methodology, the 
Commission and USAC would likely need to go through multiple reporting 
cycles to determine whether information is being reported consistently 
and to determine whether contributors understand what information they 
are being asked to report. In addition, contributors and USAC would 
need time to update their billing and tracking systems to accommodate 
the new methodology. Is a one-year transition period sufficient to 
ensure that all affected parties would have adequate time to address 
any implementation issues that arise? How much time would be necessary 
for contributors, including new contributors, to adjust their record-
keeping and reporting systems in order to comply with new reporting 
procedures? Are there new considerations that would favor a longer or 
shorter transition period? Would there be a benefit in adopting 
different transition periods for residential and business markets?
    206. We also seek comment on the value of requiring dual reporting 
during all or some of the transition time--where reporting entities 
would continue to report and pay under the current revenues-based 
system, while they also begin reporting under the new system. Would 
having providers report under both systems for a specified amount of 
time during the transition provide the opportunity for both providers 
and USAC to address unforeseen implementation issues that are likely to 
arise under the new reporting system? Should new filers begin reporting 
sooner since USAC does not have any historical data on their revenues 
and services?
3. Assessing Contributions Based on Numbers
    207. We seek comment on moving away from the current revenues-based 
contribution system and adopting a numbers-based contribution 
methodology. The Commission has explored a numbers-based methodology in 
the past, including as recently as 2008, when it sought comment on 
using telephone numbers as the basis for a new contributions system. We 
seek to refresh the record given developments in technology and 
communications.
    208. Under a numbers-based system, in its simplest form, providers 
would be assessed based on their count of North American Numbering Plan 
(NANP) phone numbers. There would be a standard monthly assessment per 
phone number, such as $1 per month, with potentially higher and lower 
tiers for certain categories of numbers based on how these numbers are 
assigned or used. The monthly assessment per number would be calculated 
by applying a formula based on the USF demand requirement and the 
relevant count of numbers, however that term is defined. This 
contribution factor would no longer be based on revenues.
    209. In 2002, the Commission first sought comment on replacing the 
existing revenues-based methodology with a system that would assess 
providers on the basis of telephone numbers assigned to end users 
(assigned numbers), while assessing special access and private lines 
that do not have assigned numbers based on their speed. The Commission 
also sought comment on how to treat multi-line switched business 
services, such as Centrex and private branch exchange, and other types 
of services, such as electronic fax services under a telephone-number 
based approach. Thereafter, in the 2008 Comprehensive Reform FNPRM, 73 
FR 66821, December 12, 2008, the Commission sought comment on a series 
of proposals to adopt a new contribution methodology based on assessing 
telephone numbers. The FNPRM contained three proposals, each with a 
numbers-based assessment component. Two of the proposals (2008 Appendix 
A Proposal and 2008 Appendix C Proposal) would have assessed USF 
contributions based on telephone numbers used for residential services, 
at a flat $1.00 per month charge for each number, and would have 
assessed business services based on connections. The third proposal 
(2008 Appendix B Proposal) would have assessed USF contributions based 
on telephone numbers used for consumer and business services, at a flat 
$.85 per month charge for each number.
    210. We seek comment on whether a numbers-based methodology would 
further our proposed reform goals of greater administrative efficiency, 
fairness, and sustainability of the Fund. We also seek comment on the 
costs and benefits of a numbers-based contribution methodology. We ask 
parties claiming significant costs or benefits of a numbers-based 
system to provide supporting analysis and facts for such assertions, 
including an explanation of how data were calculated and all underlying 
assumptions.
a. Legal Authority
    211. We seek comment on our legal authority to adopt a numbers-
based contributions methodology. Section 254(d) of the Act requires 
that ``[e]very telecommunications carrier that provides interstate 
telecommunications services shall contribute on an equitable and 
nondiscriminatory basis, to the specific, predictable, and sufficient 
mechanisms established by the Commission to preserve and advance 
universal service.'' Section 254(d) also provides the Commission with 
permissive authority to require ``providers of interstate 
telecommunications'' to contribute to the Fund. Title I of the Act 
gives the Commission ancillary jurisdiction over matters reasonably 
related to ``the effective performance of [its] various 
responsibilities'' where the Commission has subject matter jurisdiction 
over the service.
    212. The Commission previously has sought comment on whether the 
Commission's ``plenary authority'' over numbering in section 251(e) 
provides additional authority to adopt a numbers-based methodology. The 
Commission has ``exclusive jurisdiction over those portions of the NANP 
that pertain to the United States.'' In the VoIP 911 Order, the 
Commission relied on its section 251(e) authority to require 
interconnected VoIP providers to provide E911 services. In so doing, 
the Commission noted that it exercised its authority under section 
251(e) because, among other reasons, ``interconnected VoIP providers 
use NANP numbers to provide their services.''
    213. We seek to refresh the record on the Commission's authority 
pursuant to sections 254(d), 251(e), and Title I of the Act to 
establish a numbers-based contributions methodology. Under a numbers-
based approach, some providers could be required to contribute directly 
to the Fund that historically may have contributed indirectly or not at 
all. We seek comment on whether the public interest would be served if 
the Commission were to exercise its permissive authority to require 
these providers to contribute to the Fund. What is the extent of the 
Commission's ancillary authority under Title I of the Act? Does the 
provision of a service that relies on the assignment of an assessable 
number to an end user bring such a service offering under the 
Commission's broad subject matter jurisdiction because it involves, in 
some manner, ``interstate * * * communication by wire or radio? '' Does

[[Page 33922]]

the Commission's plenary authority over numbering under section 251 of 
the Act support use of a numbers-based contribution methodology?
    214. We invite commenters to address how a numbers-based system 
should be structured to fulfill the statutory requirement that 
telecommunications service providers contribute on an equitable and 
nondiscriminatory basis. If we were to adopt a numbers-based 
contribution methodology, should we also explicitly exercise our 
permissive authority over providers of telecommunications or specified 
services to make clear that providers of those services would be 
assessed? How would we ensure that all entities that contribute under a 
numbers-based system are providers of interstate telecommunications?
b. Defining Assessable Numbers for Contribution Purposes
    215. We seek comment on which numbers should be assessed under a 
numbers-based contribution methodology. We also seek comment on whether 
defining assessable numbers or alternatives that commenters may suggest 
would best further our proposed goals for contribution reform. We 
specifically ask commenters to estimate the per-number assessment under 
their preferred definition of assessable numbers and the scope of any 
exemptions that they propose. We also ask parties to address the impact 
of differing definitions of assessable numbers on who would contribute 
in the future, compared to today.
    216. Definition of Assessable Numbers. We seek comment on how the 
Commission should define an ``assessable'' number for purposes of a 
numbers-based contributions methodology. In other contexts, the 
Commission has defined ``numbers'' for purposes of Commission reporting 
requirements. For example, the Commission requires that each 
telecommunications carrier that receives numbering resources from the 
North American Numbering Plan Administrator (NANPA), the Pooling 
Administrator, or another telecommunications carrier, report its 
numbering resources in each of six defined categories of numbers set 
forth in Sec.  52.15(f) of our rules. In the regulatory fee context, 
the Commission has adopted the category of ``assigned numbers'' as the 
starting point for determining how to assess fees on certain providers, 
but found it necessary to modify that definition to account for 
different regulatory contexts. Specifically, in assessing regulatory 
fees for commercial mobile radio service (CMRS) providers that report 
number utilization to NANPA based on the reported assigned number count 
in their Numbering Resource Utilization and Forecast (NRUF) data, the 
Commission requires these providers to adjust their assigned number 
count to account for number porting. The Commission found that 
adjusting the NRUF data to account for porting was necessary for the 
data to be sufficiently accurate and reliable for purposes of 
regulatory fee assessment. We seek comment on whether we should adopt 
any of these definitions of numbers for purposes of defining an 
``assessable number'' for USF contributions.
    217. Specifically, we seek comment on the following definition of 
assessable numbers: An ``Assessable Number'' is a NANP telephone number 
that is in use by an end user and that enables the end user to receive 
communications from or terminate communications to (1) an interstate 
public telecommunications network or (2) a network that traverses (in 
any manner) an interstate public telecommunications network in the 
United States and its Territories and possessions. Assessable Numbers 
include geographic as well as non-geographic telephone numbers (such as 
toll-free numbers and 500-NXX numbers) as long as they meet the other 
criteria described in this part for Assessable Numbers.
    218. We seek comment on whether this definition furthers our 
overall proposed goals of reform. Is the above definition sufficiently 
broad to capture all types of numbers, including those associated with 
services aimed primarily at international calls that either commence or 
end in the United States and its Territories? Should we include in the 
above definition of numbers toll-free numbers that are also part of the 
North American Numbering Plan, but are governed by Sec. Sec.  52.101 
through 52.111?
    219. We also seek comment on alternatives. For instance, should we 
define assessable numbers consistent with the definition of ``Assigned 
numbers'' in Part 52: ``Assessable numbers are numbers working in the 
Public Switched Telephone Network under an agreement such as a contract 
or tariff at the request of specific end users or customers for their 
use, or numbers not yet working but having a customer service order 
pending. Numbers that are not yet working and have a service order 
pending for more than five days shall not be classified as assessable 
numbers.'' Would such a definition include NANP numbers assigned to 
mobile broadband-only devices, such as 3G tablets or laptop cards? If 
not, should we modify this definition, or would it be appropriate to 
exclude numbers associated with such devices and services associated 
with them? Commenters proposing alternative definitions of ``assessable 
numbers'' should explain how their proposal satisfies our proposed 
goals for contributions reform.
    220. We note that any definition of assessable numbers may exclude 
special access services and possibly other services that are clearly 
assessed today, but that do not include a telephone number. In 
addition, such a definition may exclude some of the services mentioned 
in Section IV.B of this Notice. We seek comment on how such services 
should be treated under a pure numbers-based approach.
    221. Cyclical Numbers. We seek comment below on whether 
contributors should report numbers on a monthly basis. If we were to 
adopt such a rule, should numbers used for intermittent or cyclical 
purposes (and that may not be fully in use at the time of a monthly 
reporting obligation) be excluded or included from the definition of 
Assessable Numbers?
    222. We define numbers used for cyclical purposes as numbers 
designated for use that are typically ``working'' or in use by the end 
user for regular intervals of time. These numbers include, for example, 
an end-user's summer home telephone number that is in service for six 
months out of the year. In the NRO III Order, 67 FR 6431, February 12, 
2002, the Commission clarified that these types of numbers should 
generally be categorized as ``assigned'' numbers if they meet certain 
thresholds and that, if they do not meet these thresholds, they ``must 
be made available for use by other customers'' (i.e., they are 
``available'' numbers). Is there a bright-line way for providers to 
determine, and for the Commission or USAC to verify and audit, which 
numbers are cyclical versus which numbers are not cyclical? If not, 
would excluding such numbers be consistent with our proposed goals for 
contribution reform? What are the implications of excluding such 
numbers in the contribution base? Would excluding these numbers be 
consistent with the requirements of section 254(d)? What would be the 
policy justifications for excluding or including these numbers in the 
contribution base? For example, one policy reason for assessing 
cyclical numbers would be that each cyclical number obtains the full 
benefits of accessing the public network. If cyclical numbers are not 
excluded from the definition of assessable numbers, should such numbers 
be assessed at a pro-rated

[[Page 33923]]

or reduced rate? We ask commenters to provide data as to the count of 
numbers that would fall into the category of cyclical numbers, and 
explain how the Commission and USAC would verify and audit the use of 
such numbers.
    223. Assigned but Not Operational Numbers. Section 52.15 of our 
rules define ``assigned numbers'' as numbers that have been assigned to 
a customer (within a period of five days or less) but have not yet been 
put into service. Since providers generally do not bill for services 
that have yet to be provisioned and therefore are not compensated for 
services during the pendency of the service order, should such numbers 
be excluded from the definition of Assessable Numbers? We seek comment 
on whether our definition of assessable numbers should include numbers 
that are not yet operational to send or receive calls. Would it be 
consistent with the ``equitable and non-discriminatory'' language in 
section 254(d) to exclude these numbers? Would the exclusion of 
assigned but not operational numbers have a material impact on the 
contribution base and associated per month charge for assessable 
numbers? What would be the policy justifications for excluding these 
numbers from contribution obligations? In the alternative, should such 
numbers be assessed at a pro-rated or reduced rate? We ask commenters 
to provide data as to the volume of numbers that would fall into the 
category of ``assigned but not operational numbers.''
    224. Available but Not Assigned Numbers. We seek comment on whether 
the definition of assessable numbers should include or exclude other 
numbers that are held by service providers from the definition of 
Assessable Numbers. In particular, should we exclude from the 
definition of Assessable Numbers those numbers that meet the definition 
of an Available Number, an Administrative Number, an Aging Number, or 
an Intermediate Number as those terms are defined in Sec.  52.15(f) of 
the Commission's rules? Carriers will not have an end user associated 
with a number in any of these categories of numbers. For example, an 
intermediate number is a number that is ``made available for use by 
another telecommunications carrier or non-carrier entity for the 
purpose of providing telecommunications service to an end user or 
customer.'' Should the receiving provider be responsible for including 
the number as an Assessable Number only when it provides the number to 
an end user? We seek comment on whether a numbers-based approach should 
assess Reserved Numbers. Would it be consistent with the ``equitable 
and non-discriminatory'' language in section 254(d) to exclude these 
numbers? Would the exclusion of available but not assigned numbers have 
a material impact on the contribution base and associated per month 
charge for assessable numbers? What would be the policy justifications 
for excluding these numbers from contribution obligations? Should such 
numbers be assessed at a pro-rated or reduced rate? We ask commenters 
to provide data as to the volume of numbers that would fall into the 
category of ``reserved numbers.''
    225. Assigned but Non-Working Numbers. The 2008 proposals sought 
comment on excluding non-working telephone numbers from the definition 
of Assessable Number. Several commenters supported the Commission's 
proposal that assigned but non-working numbers should be excluded from 
contributions. Carriers report as assigned numbers for NRUF purposes 
entire codes or blocks of numbers dedicated to specific end-user 
customers if at least fifty percent of the numbers in the code or block 
are working in the PSTN. Would it be consistent with the definition of 
an Assessable Numbers above for carriers to exclude the non-working 
numbers in these blocks in their Assessable Number counts, because the 
non-working numbers portion of these blocks are not ``in use by an end 
user''? We seek to update the record on whether a numbers-based 
approach, if adopted, should assess non-working numbers. Would it be 
consistent with the ``equitable and non-discriminatory'' language in 
section 254(d) to exclude these numbers? Would the exclusion of non-
working numbers have a material impact on the contribution base and 
associated per month charge for assessable numbers? What would be the 
policy justifications for excluding these numbers from contribution 
obligations? Would this create loopholes and make it difficult for the 
Commission or USAC to audit a provider to determine if non-working 
numbers were properly counted? In the alternative, should such numbers 
be assessed at a pro-rated or reduced rate? We also seek comment on the 
count of non-working numbers, as well as the trend for this category.
    226. Numbers Used for Routing Purposes. We seek to update the 
record on whether a NANP number used solely to route or forward calls 
should be excluded from the definition of Assessable Number in a 
numbers-based approach, if such routing number were provided for free, 
and such number routes calls only to Assessable Numbers. Should these 
numbers be assessed on a different basis, if such routing or forwarding 
were provided for a fee, such as with remote call forward service or 
foreign exchange service? We seek comment on whether such numbers 
should be excluded under a numbers-based contribution system. Would it 
be consistent with the ``equitable and non-discriminatory'' language in 
section 254(d) to exclude these numbers? Would the exclusion of numbers 
used for routing purposes have a material impact on the contribution 
base and associated per month charge for assessable numbers? How would 
the exclusion of routing numbers impact a numbers-based regime? What 
would be the policy justifications for excluding these numbers from 
contribution obligations? Should such numbers be assessed at a pro-
rated or reduced rate? We also seek data on numbers used for routing 
purposes, including trend information for this category of numbers.
    227. Toll-Free Numbers. We seek comment on whether a numbers-based 
methodology should make special accommodations for toll-free numbers. 
We seek comment on whether the proposed definition for assessable 
number should exclude from assessment toll-free numbers. Would it be 
consistent with the ``equitable and discriminatory language'' in 
section 254(d) to exclude these numbers? How would the exclusion of 
toll-free numbers impact a numbers-based regime? What would be the 
policy justifications for excluding these numbers from contribution 
obligations? Should such numbers be assessed at a pro-rated or reduced 
rate? We also seek data on toll-free numbers, including trend 
information for this category of numbers.
    228. All Public or Private Interstate Networks. As more services 
migrate to alternative networks that only partially traverse the PSTN, 
we seek comment on whether there is a danger that a NANP numbers-based 
contributions methodology in time could result in declines in the base, 
and may conflict with our proposed reform goals of ensuring 
sustainability in the Fund and promoting fairness in the USF 
contribution assessment system? Or are NANP numbers being used in 
association with new technologies that do not originate or terminate on 
the PSTN? If so, do commenters expect that growth in these alternative 
usages will outpace other declines? We seek comment generally on 
whether a contribution system based on NANP numbers would be 
sustainable as the marketplace evolves in the future.

[[Page 33924]]

    229. Numbers Provided to End Users. We seek comment on which 
providers should contribute to the Fund under a numbers-based 
contribution methodology. We seek comment on whether the provider with 
the retail relationship with the end user should have the contribution 
obligation under a numbers-based approach. Would such a provider have 
the most accurate and up-to-date information about how many Assessable 
Numbers it currently has assigned to end users and how many are in use? 
If we adopt a different approach for numbers used for consumer versus 
enterprise services, would the provider with the retail relationship be 
in the best position to distinguish consumer users from business users?
    230. We seek comment on how a numbers-based approach should be 
implemented with respect to wholesalers, resellers, and other providers 
incorporating NANP numbers into retail services. Would a system that 
assesses only numbers provided to end-users invite problems similar to 
those that exist today under the current revenues-based system, whereby 
some providers do not contribute for services provided? We note that in 
some instances wholesalers may provide telecommunications services to 
customers with numbers. For example, would a numbers-based system 
create wholesale/reseller/retailer problems of the type discussed 
earlier in this Notice?
c. Trends in Numbers
    231. We seek comment and data on the count of numbers that would be 
assessable under a number-based USF contribution assessment system. 
Neustar, the administrator of the NANP, estimates that there are 
currently 770 million numbers in active use in the United States. As 
shown in Chart 7 below, one projection suggests there could be over 832 
million numbers in active use by 2015. We seek comment on this estimate 
and the underlying assumptions, and invite commenters to present their 
own estimates for the growth or decline in the count of actively-used 
numbers as well as any additional data regarding their own estimates 
and the key drivers for such growth or decline. To what extent is the 
growth in the volume of numbers due to new services and applications, 
and to what extent is it due to greater penetration of phone service, 
such as cell phone family plans and usage by younger children? Do 
commenters believe the volume of numbers will increase in the 
foreseeable future? Is the growth trend sustainable given anticipated 
technology changes? What other factors will impact the continued growth 
in the volume of numbers? What impact would the growth in numbers have 
on future contribution assessments? To the extent commenters predict 
the volume of numbers in use will decline over time rather than grow, 
they should similarly identify the basis for their assumptions and 
describe in detail their projections for the foreseeable future. What 
challenges would a numbers-based contribution system face if the volume 
of numbers were to shrink?
    232. We seek to update the record on what the per-number charge 
would be, given current and projected trends in numbers and overall 
universal service demand. Commenters also should provide revised 
estimates of the impact on different industry contributors, and 
residential and business consumers, in light of current marketplace 
developments. Commenters should indicate which definition of 
``assessable numbers'' (and exclusions from assessable numbers) they 
use in their projections.
d. Differential Treatment of Certain Types of Numbers
    233. We seek comment on whether to provide differential treatment 
or exclude altogether certain types of numbers from the definition of 
Assessable Numbers under a numbers-based contribution methodology, and 
whether doing so would further or undermine our proposed goals for 
contributions reform. To the extent commenters contend certain types of 
numbers should be assessed at a different rate, i.e. a percentage of 
the basic per number assessment per month, we ask commenters to include 
a policy rationale for their proposal. Is there a reason why certain 
types of numbers should be assessed at some fraction, such as 33 or 50 
percent, of other numbers based on usage? Would assessing numbers used 
for certain types of services promote or discourage innovation?
    234. Family Plan Numbers. Parties have argued in the past that 
telephone numbers assigned to the additional handsets in family 
wireless plans should be assessed at a reduced rate, either permanently 
or for a transitional period. These commenters suggested that assessing 
contributions at the full per-number rate would cause family plan 
customers to experience ``rate shock.'' We seek to refresh the record 
on this issue. We seek comment on whether a numbers-based approach 
should count equally all numbers that are used for family plans. If we 
were to adopt a differentiated approach for family plans, how would we 
define a ``family plan'' that would be subject to such differential 
treatment? Would this create incentives for service providers to 
consolidate accounts and take other measures to characterize service 
offerings as ``family plans''? Would such a rule be limited to mass 
market consumers, and if so, how should we distinguish between mass 
market plans and enterprise plans? Would differential treatment of such 
numbers satisfy the statutory requirements that contributions by 
telecommunications service providers be equitable and non-
discriminatory? What would be the policy justifications for assessing 
such numbers at a pro-rated or reduced rate? We ask commenters to 
provide data with underlying assumptions as to the count of numbers 
that would fall into this category, specifically, how many phone 
numbers are associated with a primary phone number in a family plan.
    235. Services-Based Exceptions. Prior commenters have proposed that 
we should exempt from any numbers-based contribution methodology 
services provided by telematics providers, one-way service providers, 
two-way paging services, and alarm companies. We seek to update the 
record on these proposals, noting that since 2008, additional 
marketplace developments have emerged that may similarly not fit neatly 
into the numbers paradigm, including numbers assigned to devices 
reliant on mobile broadband, such as data cards, e-readers, and tablet 
computers. Should these types of numbers be assessed at a different 
rate, e.g., a percentage of the basic per number monthly assessment? 
Should a number assigned to a telematics device, where the customer is 
not paying a monthly fee and the device can only make a ``call'' in an 
emergency situation be assessed differently from a number assigned to a 
consumer cell phone or a business landline? Would exclusion of numbers 
associated with such services be consistent with the statutory 
requirement that all carriers providing interstate telecommunications 
services shall contribute on an equitable and non-discriminatory basis? 
How would the exclusion of such numbers impact a numbers-based regime? 
What would be the policy justifications for excluding these numbers 
altogether from contribution obligations? We ask commenters to provide 
data as to the volume of numbers that would fall into this category.
    236. Numbers Provided to Lifeline Subscribers. We seek comment on 
whether the Commission has statutory authority to exclude numbers 
associated with service offerings provided to Lifeline subscribers, 
given the

[[Page 33925]]

mandatory contribution obligation for telecommunications service 
providers. To the extent such numbers are provided with 
telecommunications services, would it be consistent with our section 10 
authority to forebear from imposing contribution obligations on such 
numbers?
    237. We seek to update the record on whether it is appropriate to 
not assess numbers for Lifeline subscribers, if we were to adopt a 
numbers-based contribution methodology. We note that today there are 
approximately 14.8 million Lifeline subscribers. How would the 
exclusion of such numbers impact a numbers-based regime? What would be 
the policy justifications for excluding these numbers from contribution 
obligations? Alternatively, should such numbers associated with 
Lifeline services be assessed at a pro-rated or reduced rate, and if 
so, what would be an appropriate amount?
    238. Free Services. We seek to refresh the record on whether 
services offered on a free, or nearly-free basis should be excluded in 
a numbers-based system. Since commercial providers of free or nearly-
free services generate revenue in other ways, such as through 
advertising or through more sophisticated paid service offerings or 
product offerings, should they be exempt from contribution obligations? 
We ask commenters to provide estimates with supporting data regarding 
the number of numbers that would fall into this category.
    239. Community Voice Mail. We seek comment on whether a numbers-
based approach should assess numbers associated with services such as 
community voicemail. Would exclusion of these numbers satisfy the 
statutory requirements for universal service contributions from 
providers of telecommunications services? How would the exclusion of 
such numbers impact a numbers-based regime? What would be the policy 
justifications for excluding these numbers from contribution 
obligations? Should such numbers be assessed at a pro-rated or reduced 
rate? We ask commenters to provide data as to the volume of numbers 
that would fall into this category.
    240. TRS and VRS Numbers. We seek to update the record on whether 
we should exempt Internet-based telecommunications relay services 
(TRS), including video relay services (VRS) and IP Relay services. Such 
services are provided for free to people with hearing and speech 
disabilities, under Congressional mandate. Would inclusion of these 
numbers satisfy the statutory requirements for universal service 
contributions? How would the exclusion of such numbers impact a 
numbers-based regime? What would be the policy justifications for 
excluding these numbers from contribution obligations? Should such 
numbers be assessed at a pro-rated or reduced rate? We ask commenters 
to provide data as to the volume of numbers that would fall into this 
category.
    241. Other Exemptions. Are there other types of numbers or services 
that should be excluded from a numbers-based contribution mechanism, if 
we were to adopt such an approach? For instance, should we adopt 
exemptions for numbers used by non-profit health care providers, 
libraries, colleges and universities, entities that typically 
administer their own numbers? Would inclusion of these numbers satisfy 
the statutory requirements for universal service contributions? How 
would the exclusion of such numbers impact a numbers-based regime? What 
would be the policy justifications for excluding these numbers from 
contribution obligations? Should such numbers be assessed at a pro-
rated or reduced rate? We ask commenters to provide data as to the 
volume of numbers that would fall into each category of proposed 
exemptions.
e. Use of a Hybrid System With a Numbers-Component
    242. We seek specific comment on adopting a hybrid numbers-
connections based methodology. The Commission sought comment in 2008 
proposals on two hybrid approaches in which consumer numbers would be 
assessed on a numbers-based methodology, and business lines would be 
assessed on a connections-based methodology. The Commission has also 
sought comment on a hybrid numbers-connections methodology that would 
assess providers a flat fee for each assessable NANP telephone number 
and assess services not associated with a telephone number as 
connections. A hybrid numbers and connections system may have 
advantages over a numbers-only system insofar as it captures services 
that are provided without numbers. In other respects, however, such a 
system might incorporate all of the potential disadvantages of both 
numbers-based and connections-based systems. Moreover, regardless of 
the particular methodologies used, hybrid systems may be more complex 
and expensive to administer than a single system. Should carriers that 
do not have working numbers or end-user connections continue to 
contribute based on their interstate telecommunications revenues? We 
ask parties to refresh the record and seek comment on this analysis.
    243. To what extent would a hybrid system create competitive 
distortions in the marketplace? Any system that would make distinctions 
between mass market and enterprise users would require an ability for 
contributors in the first instance, and USAC and this Commission, to 
distinguish between the two, in order to ensure that contributions are 
appropriately made. Would such a system advance our proposed reform 
goals of administrative efficiency, fairness and sustainability? Would 
a hybrid system satisfy the statutory requirements that contributions 
be equitable and non-discriminatory? Would using a different 
methodology for contributions for the provision of service to 
businesses dissuade investment in higher speed and robust 
communications facilities? Recognizing that the answer may depend on 
the specific tiers that are adopted, and the assessment levels for each 
tier, would such a system, potentially, unfairly advantage or 
disadvantage purchasers of higher speed connections?
    244. Commenters who support a numbers-connections methodology 
should address the feasibility of the methodology in light of recent 
industry developments and the continuing evolution of 
telecommunications technology. Commenters should also address the 
advantages and disadvantages of such a system. Are there any entities 
that would be contributing for the first time, if we were to adopt a 
hybrid approach? We specifically seek comment on whether a hybrid 
numbers-connections methodology would better meet our goals for reform 
in comparison to the options discussed above, including an improved 
revenues system, a connections-based approach, and a numbers-based 
contribution assessment system. We ask parties claiming significant 
costs or benefits of a hybrid approach to provide supporting analysis 
and facts for such assertions, including an explanation of how data 
were calculated and all underlying assumptions.
f. Policy Arguments Related to Numbers-Based Assessment
    245. We seek to refresh the record on the potential benefits of a 
numbers-based contribution methodology. We also seek comment on whether 
a numbers-based system (compared to a connections-based system or the 
current revenues-based system) would be simpler to understand. Would it 
be competitively neutral? Would a

[[Page 33926]]

numbers methodology be inequitable or discriminatory for low volume 
users? Would a numbers-based system, be easier to audit for compliance? 
Could such a system reduce compliance costs for contributors? Could it 
also reduce marketplace distortions that may be present in either the 
consumer or enterprise markets? We ask parties claiming significant 
costs or benefits of a numbers-based system to provide supporting 
analysis and facts for such assertions, including an explanation of how 
data were calculated and all underlying assumptions.
    246. Are there modifications that could be made to a numbers-based 
methodology to make assessment fairer to consumers on low-cost service 
plans? Would a numbers-based system shift the universal service 
contributions from higher-volume users of communications services to 
lower-volume users? Overall, would low-income households pay a larger 
percentage of communications bills in contribution assessments than 
higher income households compared to today?
    247. Would adoption of a numbers-based contribution approach 
discourage the emergence of innovative new functions and services, such 
as ``follow-me'' services or unified communications applications? If 
the Commission were to adopt a numbers-based contribution methodology, 
how could it structure such a system so as not to inhibit innovation? 
For example, should the Commission exempt numbers associated with 
certain services to be exempt for a defined period of time, analogous 
to the Commission's pioneer's preference rules?
    248. Distinguishing Telecommunications from Non-Telecommunications. 
Would a numbers-based methodology more easily accommodate new services 
and technologies without requiring service providers or the Commission 
to make service classification judgments? We seek comment on approaches 
to provide clarity to contributors with respect to specific services, 
without the need to classify those services as either information 
services or telecommunications services. We also seek comment on 
assessing revenues associated with information services. In light of 
those potential approaches to determining who should contribute, would 
a numbers-based methodology continue to offer advantages as a 
relatively simple basis for assessing those providers' contributions? 
To what extent have numbers become increasingly associated with 
information services? Would a numbers-based assessment mechanism ensure 
that contribution obligations are applied in a fair and predictable 
manner to all interstate telecommunications providers?
    249. Jurisdictional Considerations. The current revenues-based 
system requires contributors to separately report revenues derived from 
interstate, intrastate, and international services. We seek comment on 
whether a numbers-based system might mitigate the need to differentiate 
between interstate and intrastate jurisdiction.
    250. Given that NANP numbers enable users to connect with other 
users across state lines, is it reasonable to conclude that a numbers-
based methodology would be directed at interstate providers and 
therefore consistent with the statutory requirements of section 254? We 
seek specific comment on the implications of the Fifth Circuit's TOPUC 
decision, which held that section 2(b) of the Act prohibits the 
Commission from assessing revenues associated with intrastate 
telecommunications service. Does TOPUC impose any limitations on a 
numbers-based contribution system, particularly in light of the 
Commission's authority over numbering in section 251? We also seek 
comment on whether TOPUC raises any concerns related to assessing 
international services. If so, we seek comment on whether a numbers-
based system should include an exemption similar to the limited 
international revenues exemption under the current revenues-based 
system for providers that are primarily international in nature, and if 
so, how such an exemption should be crafted.
g. Implementation
    251. Implementing a numbers-based system would require revised data 
collection and reporting requirements. In this section, we seek comment 
on how the Commission would transition to a numbers-based system. We 
also ask whether adopting a numbers-based system would increase 
compliance burdens if states that administer their own universal 
service programs continue to employ revenues-based assessments.
    252. Reporting of Numbers. We seek comment on how a numbers-based 
system should be implemented and the transition process, should we 
adopt such a system. In particular, we seek comment on the specific 
changes necessary to enable USAC to collect contributions under a 
numbers-based system. How would contributors report the assessable 
numbers (and potentially speed or capacity under a numbers-connection 
hybrid system) under a numbers-based assessment methodology? Should we 
continue to use a FCC Form 499 (with changes), leverage the existing 
NRUF reporting requirements, or develop a completely new data 
collection? What would be the administrative impact of a new reporting 
system on providers and on USAC as the administrator of the Fund? If 
the Commission were to adopt a numbers-based methodology, should 
contributors be required to report assessable numbers on a monthly 
basis, quarterly basis, or some other period? Should we retain the same 
quarterly and annual true up reporting periods for a numbers-based 
system? Would a monthly reporting requirement create a burden that is 
not outweighed by the simplification posed by a numbers-based system? 
Should the information be reported as actual numbers, forecasted 
numbers, or historical numbers? Would historical reporting 
unnecessarily complicate the numbers reporting system? Is there any 
information that would be particularly difficult to report on a monthly 
basis? Would a more frequent reporting period be less likely to require 
adjustments to the contributions requirements? Would longer or shorter 
reporting intervals advantage or disadvantage some types of providers 
more than others?
    253. Costs Associated With Implementing a Numbers System. We seek 
comment on what out-of-pocket costs contributors would incur to 
implement a new numbers-based contribution methodology, both in the 
short term to transition to a new system and on an annual basis once a 
new system is in place. Commenters should explain the categories of 
costs that would be incurred. To the extent possible, commenters should 
quantify these costs and indicate how they compare to the costs of 
complying with the existing revenues-based system. Would contributors 
be able to use their current billing and operating systems to report 
numbers for universal service contributions? If not, what would be the 
incremental costs associated with modifying billing systems and 
internal controls and processes to collect and track numbers for 
purposes of reporting and contributing to the Fund? Would contributors 
have to implement entirely new systems to track the type of data needed 
to report assessable numbers? Are there cost savings that could be 
realized by moving away from the current revenues-based system, which 
requires contributors to report revenues quarterly (projected) and 
annually (actual) for USF purposes, and potential efficiencies based on 
other existing number reporting requirements for other

[[Page 33927]]

regulatory requirements? Would those costs vary depending on the 
definition of assessable numbers? We also seek comment on whether the 
cost of updating billing and internal systems for this narrow 
regulatory purpose would outweigh any benefit achieved. Would increased 
operational costs of moving to a numbers system negatively impact 
certain carriers as compared to other carriers? Commenters should 
provide data on any such increased costs.
    254. We also seek comment and data on other costs associated with a 
numbers-based system, and in particular ask providers if there are any 
costs that are not discussed above. Would the cost of moving to a new 
numbers system be relatively greater for certain classes of customers 
or certain industry segments? To what extent would this analysis change 
depending on how ``assessable numbers'' is defined and assessed? Do the 
additional costs associated with implementation and the reporting 
requirements outlined below outweigh the benefits of moving to a 
numbers-based methodology?
    255. Auditing. We seek comment on how to define an ``Assessable 
Number'' to make it easier to audit to ensure that contributors are 
reporting accurately, and that the system operates in an equitable and 
nondiscriminatory manner, maintains stability in the contribution base, 
and minimizes market distortions and gamesmanship. We seek comment on 
whether we should allow carriers to self-certify which numbers are 
assessable numbers for contributions purposes. We also seek comment on 
whether we should modify the current recordkeeping requirements to 
further improve the auditing process for both contributors and 
auditors. Should we adopt additional rules or provide further guidance 
regarding the types of records and supporting documentation that should 
be maintained? Proponents of a numbers-based system should provide 
specific details about how contributors would report their data and how 
auditors could verify the accuracy of assessable numbers reported.
    256. Effect on Other Programs. We ask parties to provide comment on 
the impact of moving to a numbers-based approach on the Interstate TRS, 
North American Numbering Plan, Local Number Portability, and regulatory 
fees administration programs. We ask parties to provide comment on the 
best approach for ensuring proper funding of these programs were we to 
move to a numbers-based methodology. Should contributors continue 
reporting gross billed end-user revenues for purposes of these 
programs, and if so, should they continue to report on an annual basis? 
Should we simplify the Form 499 for purposes of revenue reporting in 
that instance? Are there alternative ways to calculate contributions 
for these programs?
    257. Transition. A numbers-based methodology would constitute a 
change from the current revenue-based system and would likely require a 
transition period, especially if reporting entities need to implement 
new billing and accounting systems and a process for recording number 
counts in a manner that is auditable. We seek to refresh the record on 
whether a 12-month period would give contributors sufficient time to 
adjust their record-keeping and reporting systems so that they may 
comply with modified reporting procedures. Could such a transition be 
implemented within a given calendar year, and if so, should it be tied 
in some fashion to the current quarterly filing of Form 499-Q? We seek 
comment on what steps would need to be taken to transition between the 
current revenues-based system and a numbers-based system and how much 
time would be needed to ensure that the new process is applied in an 
equitable manner. Commenters should indicate whether the other changes 
discussed in this Notice would require less or more time to implement.
    258. Is a 12-month transition period sufficient to ensure that all 
affected parties would have adequate time to address any implementation 
issues that arise? How much time would be necessary for contributors, 
including new contributors, to adjust their record-keeping and 
reporting systems in order to comply with new reporting procedures? Are 
there considerations that would favor a longer or shorter transition 
period? Would there be a benefit in adopting different transitional 
periods for residential and business markets?
    259. We also seek comment on requiring dual reporting during all or 
some of the transition time--where reporting entities would continue to 
report and pay under the current revenues-based system, while they also 
begin reporting under the new system. Would having providers report 
under both systems for a specified amount of time during the transition 
provide the opportunity for both providers and USAC to address 
unforeseen implementation issues that are likely to arise under the new 
reporting system? Should new filers begin reporting sooner since USAC 
does not have any historical data on their revenues and services?

C. Improving the Administration of the Contribution System

    260. We seek comment on potential rule changes that could be 
implemented to provide greater transparency and clarity regarding 
contribution obligations, reduce costs associated with administering 
the contribution system, and improve the operation and administration 
of the contributions system. For each issue, we seek comment on whether 
and how the potential rule change could or should be implemented on an 
accelerated timetable, in advance of other reforms under consideration 
in this proceeding, as well as the potential reduction in compliance 
costs associated with adopting each proposal.
    261. We request clear and specific comments on the type and 
magnitude of likely benefits and costs of each of the rules discussed 
in this section, and request that parties claiming significant costs or 
benefits provide supporting analysis and facts, including an 
explanation of how data were calculated and identification all 
underlying assumptions.
1. Updating the Telecommunications Reporting Worksheet
    262. We seek comment on whether we should modify the process by 
which the Telecommunications Reporting Worksheets (FCC Forms 499-A and 
499-Q) are revised by soliciting public comment from interested parties 
prior to adopting revisions to the Telecommunications Reporting 
Worksheet and instructions. We also seek comment on whether to adopt a 
rule specifying that the worksheets and instructions constitute binding 
agency requirements.
    263. We propose to adopt a formalized annual process for the Bureau 
to update and adopt the Telecommunications Reporting Worksheets and 
their accompanying instructions. We propose to amend Sec.  54.711 to 
include the following proposed rule: Telecommunications Reporting 
Worksheet Revisions. The Wireline Competition Bureau shall annually 
issue a Public Notice seeking comment on the Telecommunications 
Reporting Worksheets and accompanying instructions. No later than 60 
days prior to the annual filing deadline, the Wireline Competition 
Bureau shall issue a Public Notice attaching the finalized 
Telecommunications Reporting Worksheet and instructions. Adopting such 
a rule would respond to requests in the record asking that parties be 
given prior notice of any proposed revisions to

[[Page 33928]]

the worksheet instructions, and an opportunity to comment on such 
revisions. If the Bureau were to put instructions out for public 
comment before they are adopted, at what point in the calendar year 
should the Bureau place the proposed form and instructions on public 
notice, and when should it be required to issue the revised form and 
instructions? Would this proposed rule change support our proposed 
reform goals of fairness and simplifying compliance and administration? 
Parties are encouraged to provide information and data addressing how 
such a rule would simplify compliance and administration.
    264. In particular, we seek comment on whether releasing the form 
after the calendar year is over makes it more difficult for 
contributors to track the information that must be reported for the 
prior year in a manner consistent with the prescribed format. If so, 
commenters should provide specific examples of such burden, and 
quantify such examples with data.
    265. Should the Commission specify that contributors are required 
to comply with the Form 499 instructions adopted pursuant to such a 
process? Should the Bureau have delegated authority to make changes to 
the Form and related instructions to the extent that they constitute 
binding requirements, and if so, what should be the scope of its 
authority?
    266. If we do not adopt an annual process for publicizing the 
updated form, should we require the Bureau to set out for comment the 
proposed revisions to the Telecommunications Reporting Worksheets and 
accompanying instructions before implementation of any significant 
changes resulting from the reforms identified in this Notice? What is 
the most efficient way to seek public input on how to implement these 
changes in a straightforward and readable manner so that all reporting 
entities can know their obligations and comply with our rules?
2. Revising the Frequency of Adjustments to the Contribution Factor
    267. If the Commission continues a revenues-based system or 
alternative system that will use a contribution factor, we seek comment 
on modifying the frequency of changes to the contribution factor. 
Presently, the contribution factor is revised on a quarterly basis. We 
seek comment on revising the contribution factor less frequently, such 
as annually. We seek comment on whether we should revise our rules, for 
example, to use reserves, to the extent necessary, to meet any 
quarterly fluctuation in demand. Would such a method better serve our 
proposed reform goals of increasing efficiency, fairness, and 
sustainability of the Fund? If we were to adopt a rule requiring annual 
adjustments to the contribution factor, should we wait to implement 
such a rule until 2013, when the Commission expects to have the 
information needed to be in the position to determine an appropriate 
budget for the Lifeline program?
    268. Would adjusting the contribution factor on an annual basis 
advance our proposed reform goals of increasing administrative 
efficiency, fairness and sustainability? Does the fluctuation in the 
contribution factor create revenue reporting difficulties for 
stakeholders? Does it cause difficulties in marketing services to 
consumers? Does the fluctuation from one quarter to the next in the 
contribution factor make it difficult for contributors to anticipate 
their likely contribution obligations for the year, or for end-user 
customers to forecast the total cost of their communications packages, 
including any universal service pass through charges? To the extent 
there are reasons to adjust the factor more often than annually, would 
it be an improvement to the current system to make such adjustments 
every six months?
    269. Another option to reduce fluctuations in the contribution 
factor caused by prior period adjustments is to extend the period of 
time during which such prior period adjustments are taken into account 
for subsequent adjustments to the contribution factor. For example, we 
could require that prior period adjustments be leveled out over a 
period of two subsequent quarters under a rule that provides as 
follows: If the contributions received by the Administrator in a 
quarter exceed or are inadequate to meet the actual expenses for that 
quarter, the Administrator shall adjust its projected expenses for the 
following two quarters to account for the excess or inadequate payments 
(and any associated costs) unless instructed to do otherwise by the 
Commission. The contribution factor for the following two quarters will 
take into consideration the projected costs of the support mechanism 
for those two quarters, and the excess or insufficient contributions 
carried over from the previous quarter.
    270. We seek comment on whether accounting for prior-period 
adjustments over a longer period, such as two quarters rather than one, 
could reduce the amount and severity of the fluctuation in the 
contribution factor from one period to the next. By providing USAC with 
more than one quarter to account for these adjustments, the increases 
and decreases may help to offset each other, and thereby reduce the 
period to period fluctuations in the contribution factor.
    271. We seek comment on the merits and technical aspects of a rule 
change to address quarter to quarter fluctuations in the contribution 
factor. What would be the benefits of modifying our rules as discussed 
above, and would such a change have any negative or positive impact on 
administration of the Fund? What are the potential unintended 
consequences of extending the period of time during which prior period 
adjustments are taken into account? Would authorizing USAC to make 
prior period adjustments over an even longer period be appropriate, and 
if so, over how many quarters? If we were to move to an alternative to 
the current revenue-based system, should we similarly direct USAC to 
account for any fluctuations in demand over a period of time longer 
than one quarter in order to minimize quarterly variation in the 
contribution obligation associated with the assessable unit of measure?
3. Pay-and-Dispute Policy
    272. We propose to adopt either as Commission policy or a codified 
rule the current USAC practice commonly referred to as the ``pay-and-
dispute'' policy. This policy requires contributors that wish to 
challenge a USAC invoice to keep their accounts current while disputing 
the amounts billed in order to avoid late fees, interest, and 
penalties. We seek comment on whether adopting ``pay-and-dispute'' as a 
policy or rule supports our proposed reform goals, including ensuring 
predictability and sustainability of the Fund, simplifying compliance 
and administration, and fairness.
    273. We propose to amend Sec.  54.713 of our rules to adopt a pay-
and-dispute rule as follows: If a universal service fund contributor 
fails to make full payment of the monthly amount established by the 
contributor's applicable Form 499-A or Form 499-Q, or the monthly 
invoice provided by the Administrator, on or before the date due, the 
payment is delinquent. Late fees, interest charges, and penalties for 
failure to remit any payment by the date due shall apply regardless of 
whether the obligation to pay that amount is appealed or otherwise 
disputed unless the Administrator or the Commission (pursuant to Sec.   
54.719) finds the disputed charges are the result of clear error by the 
Administrator.
    274. Although the Bureau has consistently upheld USAC's

[[Page 33929]]

implementation of the pay-and-dispute requirement, contributors 
continue to challenge USAC's use of the pay-and-dispute requirement in 
specific instances by withholding payment pending resolution of a 
disputed charge. Adopting as a Commission policy or rule or, at a 
minimum, affirming the pay-and-dispute requirement could lessen 
administrative burdens for both USAC and Commission staff, while also 
putting all contributors on notice of the procedures for appealing 
contested invoices. We seek comment on whether adopting the pay-and-
dispute requirement serves our proposed reform goals. We specifically 
seek other proposals that create the proper incentive for contributors 
to pay their invoices in a timely manner. We seek comment on whether 
adopting USAC's pay-and-dispute requirement is consistent with the 
Commission's DCIA rules. We also seek comment on any other changes to 
our rules that would ensure better compliance with our rules and the 
Debt Collection Improvement Act.
4. Oversight and Accountability
    275. We seek comment on various issues relating to oversight and 
accountability for the contributions system. To ensure that data 
actually reported closely approaches our best estimate of industry-wide 
assessable services, should we establish a performance goal of reducing 
the number of contributors that do not satisfy their contributions 
obligations? If so, what information should we rely upon to track that 
goal?
    276. USAC employs several practices to identify entities that 
should register and contribute to the Fund. For example, during 
contributor audits, USAC obtains a list of resellers from the auditee 
and identifies companies that have not registered. USAC contacts these 
companies to determine why they are not registered or contributing to 
the Fund. USAC also contacts companies that it independently identifies 
from industry news sources and whistleblowers. We seek comment on 
additional steps that could be taken to identify those 
telecommunications providers that are not meeting their contribution 
requirements. What measures could the Commission direct USAC to take to 
ensure industry-wide compliance with our contribution rules?
    277. We seek comment on the extent to which potential rule changes 
that could simplify the contribution system discussed in this Notice 
could help ensure that contribution assessments are made and collected 
in accordance with Commission rules and requirements. Further, we seek 
comment on how we could measure the benefits of simplification in the 
contribution system. What information would we need, and what would be 
an appropriate performance goal?
    278. USAC Audits. We seek comment on processes and procedures that 
USAC could implement to make the contributor audit process more 
efficient. We seek public comment on how to most efficiently use our 
administrative resources to ensure that contributions are made in 
accordance with the Commission's rules and requirements, while 
minimizing compliance burden on companies subject to audit. We seek 
comment on whether we should require USAC to produce an updated audit 
plan for OMD and the Bureau for USF contribution purposes. How many 
audits should USAC initiate (at a minimum) each year? How should USAC 
ensure that audits encompass a representative sample of the industry?
    279. Timely and Efficient Reporting. We seek comment on whether we 
should adopt as a performance goal that a specified percentage of 
reporting entities file their Worksheets on time. We seek comment on 
what additional outreach and training USAC may need to do to encourage 
more reporting entities to file their Worksheets on time and 
electronically. We also seek comment on any revisions to our rules that 
would create the proper incentives for timely filing. We seek comment 
on this analysis and the time frame in which we should implement and 
monitor our progress towards meeting such a goal, if adopted.
    280. Prompt Payment and Collection of Contribution Obligations. We 
seek comment on adopting several performance goals related to that 
task. First, we seek comment on adopting a performance goal of 
decreasing the aggregate number and dollar amount of delinquent 
contributions payments. Second, we seek comment on adopting performance 
goals of reducing the percentage of contributors that are delinquent in 
payments, the percentage of contributors delinquent more than 30 days, 
and the percentage of contributors delinquent more than 90 days. We 
seek comment on these performance goals and also on the specific 
targets that USAC and the Commission should strive to reach. We seek 
comment on what additional outreach and training USAC may need to do to 
encourage more contributors to pay their debts on time, and whether any 
revisions to our rules would encourage timely payment. We seek comment 
on what allowances we can and should make in consideration of any 
economic conditions impacting the industry.
    281. We seek comment on whether these measures would assist the 
Commission with monitoring either the costs of compliance for 
contributors or the contributions burden on consumers and businesses, 
especially when coupled with other proposals in this Notice. We seek 
specific comment on whether any particular reforms identified in this 
Notice would help or hinder oversight over the contribution system. We 
also invite parties to suggest additional or alternative goals and 
measures for assessing the performance of the contribution system.
5. Paper-Filing Fees
    282. We propose to adopt a filing fee for contributors that choose 
to submit the Telecommunications Reporting Worksheets by paper rather 
than electronically. In order to increase efficiency in program 
administrative, we propose to amend Sec.  54.711 to require that 
reporting entities file the Telecommunications Reporting Worksheet 
electronically: Electronic Filings. Reporting entities must file the 
Telecommunications Reporting Worksheet electronically. The 
Administrator shall assess a $25 fee on reporting entities for filing 
paper copies of the quarterly Telecommunications Reporting Worksheet. 
The Administrator shall assess a $50 fee on reporting entities for 
filing paper copies of the annual Telecommunications Reporting 
Worksheet. The Administrator shall not assess a paper-filing fee on 
reporting entities that electronically file their Telecommunications 
Reporting Worksheet, but such entities must also submit either a paper 
or electronic certification attesting to the accuracy of the 
information reported therein under penalty of perjury.
    283. Based on information provided by USAC, the proposed paper-
filing fees would be set at a level so as to compensate the Fund for 
the additional costs incurred by USAC to manually process these paper 
filings and encourage more reporting entities to file electronically. 
We seek comment on this analysis.
    284. We seek comment on the merits and technical aspects of a rule 
change assessing a paper filing fee. What is the potential impact on 
contributors and the Fund if we adopt a paper filing fee? We seek 
specific comment on setting the appropriate size of a paper filing fee 
so that reporting entities would have an appropriate incentive to file 
electronically and in a timely manner. We seek comment on any other 
changes

[[Page 33930]]

to our rules that would ensure better compliance with our rules and the 
Debt Collection Improvement Act. The above proposed rule requires 
electronic filers to submit either a paper or electronic certification 
attesting the accuracy of the electronic filing. We seek comment on 
what procedures we should adopt to facilitate the certification to be 
done electronically, per the E-Sign Act. In addition, we seek comment 
on what modifications, if any, USAC should make to its electronic 
filing system to ensure that it is accessible to persons with 
disabilities. In lieu of imposing a filing fee, is there a different 
approach that would incent contributors to file electronically?
6. Filer Registration and Deregistration
    285. We seek comment on tightening our registration requirements so 
that all telecommunications providers with FCC Form 499-A reporting 
obligations (whether they are common carriers or not) have the 
obligation to register within thirty days of commencing service. We 
propose to amend Sec.  54.706 to include the following proposed rule: 
(f) Registration Requirements. Every common carrier subject to the 
Communications Act of 1934, as amended, and every entity required to 
submit a Telecommunications Reporting Worksheet shall register with the 
Commission in accordance with the provisions of 47 CFR 64.1195(a) thru 
(c) and the Instructions to the Telecommunications Reporting Worksheet 
within thirty days of the commencement of provision of service.
    286. Deregistration Requirements. We also propose to require 
registered entities that no longer meet the requirements to register to 
file a deregistration with the Commission. A deregistration requirement 
could ensure that the Commission's Form 499 Filer Database is current 
and complete. Currently, if a contributor has previously filed a Form 
499-A or Form 499-Q, but has not notified USAC that it no longer 
providers telecommunicates services, USAC estimates the provider's 
quarterly revenues and sends an invoice to that provider for its 
estimated contributions. This may create confusion and generate late 
fees for providers that no longer provide service. A formal 
deregistration requirement could streamline USAC's and the Commission's 
processes by eliminating unnecessary invoices and removing entities 
that no longer provide service from the Commission's database. We 
propose to amend Sec.  54.706 to include the following proposed rule: 
(g) Deregistration Requirements. If a registrant stops providing 
interstate and international telecommunications to others, it shall 
deregister with the Commission within thirty days of its last provision 
of telecommunications. To deregister, a registrant must comply with the 
Instructions to the Telecommunications Reporting Worksheet.
    287. Would adoption of such a rule simplify the process of billing 
contributors, and thereby lessen USAC's administrative costs? Would 
adoption of such a rule further other proposed reform goals?
    288. Wholesale-Reseller Confirmation Requirements. We seek comment 
on adopting a value-added revenue system to address recurring USF 
contribution issues that arise in instances where wholesale carriers 
provide services to other carriers. To the extent that we do not adopt 
a value-added system, however, we seek comment on requiring all 
registrants that provide telecommunications to other carriers to check 
the registration status of their customers. We seek comment on whether 
imposing such an obligation could ``deter [registrants] from providing 
service to resellers that have not registered with the Commission, 
which will, in turn, make it more difficult for `bad actor' resellers 
to stay in business.'' We propose to amend Sec.  54.706 to include the 
following proposed rule: Customer Confirmation Requirements. A 
telecommunications carrier or provider providing telecommunications to 
other carriers or providers shall have an affirmative duty to ascertain 
whether a customer that is required to register has in fact registered 
with the Commission prior to offering service to that customer.
    289. Would adoption of each of the above proposed rules increase 
the likelihood that all potential contributors register with the 
Commission and comply with universal service contribution reporting 
obligations? What are the costs and benefits of imposing such an 
obligation on FCC registrants, and how would that vary if the 
Commission adopts other rule changes discussed in this Notice? For 
instance, if the Commission were to require contributions from 
wholesalers, would that lessen the potential policy rationale for 
ensuring the reseller is registered with the Commission?

D. Recovery of Universal Service Contributions From End Users

    290. We seek comment on issues relating to recovery of universal 
service contributions from customers. We request clear and specific 
comments on the type and magnitude of likely benefits and costs of each 
of the rules discussed in this section, and request that parties 
claiming significant costs or benefits provide supporting analysis and 
facts, including an explanation of how they were calculated and 
identification of all underlying assumptions.
    291. The statutory framework established by Congress in the Act 
governs the recovery of universal service contributions by 
telecommunications service providers. Although a contributor may 
generally recover its universal service contributions from its 
customers, the Commission has placed two restrictions on doing so. 
First, a ``federal universal service line-item charge'' may not 
``exceed the interstate telecommunications portion of that customer's 
bill times the relevant contribution factor.'' Second, eligible 
telecommunications carriers (ETCs) that are incumbent LECs may not pass 
through a federal universal service line-item charge to their Lifeline 
subscribers except to recover ``contribution costs associated with the 
provision of interstate telecommunications services that are not 
supported by the Commission's universal service mechanisms.'' In 
practice, this means that incumbent ETCs historically have not been 
permitted to pass through to Lifeline subscribers the contribution 
costs associated with the subscriber line charge (which is deemed 100 
percent interstate), but they may pass through contribution costs 
associated with other interstate services, such as long distance 
calling. There is no comparable restriction for competitive ETCs that 
serve Lifeline subscribers.
1. Pass-Through of USF Contributions as Separate Line Item Charge
    292. We seek comment on ways to improve transparency relating to 
the amount of universal service contribution charges that are being 
passed through by the carriers to their customers.
    293. Providing Clarity in Customer Bills. Under today's system, the 
contribution factor is typically applied to only a fraction of the 
total end user revenues derived from a customer. Currently, Sec.  
54.712(a) only addresses line items on customer bills and does not 
address situations in which there is no billing relationship. Moreover, 
our rules do not require contributors to indicate how the universal 
service charge on a customer's bill is calculated. In many instances, 
customer bills include a line item for USF, but do not indicate the USF 
contribution factor used to determine such line item, or the portion of 
the bill to which the

[[Page 33931]]

contribution factor was applied. We seek comment on whether we should 
limit the flexibility currently afforded contributors in the recovery 
of universal service obligations or adopt measures to provide greater 
transparency regarding such recovery to enable consumers to make 
informed choices regarding their service. For example, we could adopt a 
rule that contributors must identify on the consumer bill the portion 
of the bill (whether based on revenues or another unit) that is subject 
to assessment. This could enable end users to determine whether they 
are being properly charged a USF pass-through charge. What 
modifications, if any, would we need to make to Sec.  54.712 of the 
existing rules, which prohibits a carrier from charging more than the 
interstate portion of the bill times the relevant contribution factor.
    294. We seek comment on the value of making the burden of the 
universal service contribution plain, and whether this can be obtained 
without distorting the pricing strategies of individual providers. 
Would it be possible to require that the advertised price include the 
universal service contribution, while allowing the continued 
publication of the universal service contribution as a line item in 
end-users' bills? What additional rules should the Commission adopt to 
provide clarity to customers regarding USF pass-through charges? How 
should these rules be enforced? What benefits to consumers and/or cost 
burden to providers would such rules result in?
    295. Advertising USF Charges. Should we also mandate that carriers 
disclose at the time of initial service subscription the amount of the 
quoted rate or other assessable units that would be subject to 
assessment? Are there alternative approaches the Commission should take 
to ensure greater disclosure of such charges to customers in a way that 
advances price comparison and evaluation?
    296. Mass Market Customers vs. Business Customers. If we were to 
adopt either of these rules, should the rule apply broadly to all 
customers, or be limited to mass market customers, who typically have 
less leverage than businesses, institutions and governmental entities 
that purchase communications services? If we were to adopt such a 
distinction, how should we define ``mass market'' for these purposes?
    297. Eliminating Line Items. An alternative approach to the rules 
described above would be to limit carrier flexibility to recover their 
universal service contributions from end users through a line-item or 
``surcharge'' on end-user bills. Under such an approach, while 
contributors would retain the flexibility to include the cost of 
contributing to the universal service fund in determining their overall 
rate structure, they would not be permitted to represent any line item 
on end-user customer bills as a federal universal service charge. For 
instance, Sec.  54.712 of the Commission's rules, which currently 
specifies that line items may not exceed the assessable portion of the 
bill times the contribution factor, could be replaced with the 
following rule: Federal universal service contribution costs may not be 
recovered by contributors as a separate line-item charge on a 
customer's bill.
    298. We seek comment on the relative advantages of any of these 
potential changes over our current rules regarding the recovery of 
universal service contributions. In particular, we invite commenters to 
address whether such rules would benefit consumers by requiring 
contributors to quote prices for their services that are subject to USF 
obligations. What cost/burdens would this impose on service providers, 
and how can such cost/burdens be mitigated? We additionally ask 
commenters to address whether such rules would result in bills that are 
simpler and easier to understand. We particularly seek comment from 
consumer groups on the benefits or disadvantages of such a rule. We 
also seek comment on whether a rule limiting the pass through of USF 
charges would unnecessarily reduce carriers' pricing flexibility, 
resulting in fewer options for consumers.
    299. We seek comment on our authority to impose these constraints 
on contributors' recovery of universal service contributions from their 
customers. We seek comment on whether sections 4(i), 201, 202, and 254 
of the Act, or other statutory provisions, provide sufficient authority 
to adopt these proposals. Could the Commission adopt such requirements 
pursuant to its authority to regulate common carrier billing practices 
under section 201(b) of the Act? Because sections 201 and 202 of the 
Act only apply to ``common carriers'' or ``telecommunications 
carriers,'' could the Commission make these rules applicable to the 
broader category of ``telecommunications providers'' under its 
authority to regulate universal service contribution obligations 
pursuant to section 254(d) of the Act?
    300. We also ask commenters to address whether any of these rules 
would raise First Amendment or other constitutional concerns, and, if 
so, how we should address those concerns. Would such rules be 
consistent with the Commission's other policies and regulations, 
including the Commission's goals of promoting competition, 
deregulation, innovation, and universal service?
2. Segregation of USF Pass-Through Charges
    301. When a telecommunications provider files bankruptcy, the funds 
collected by the provider from end-user customers to recover universal 
service contribution costs are often claimed as part of the bankruptcy 
estate for the benefit of all the carrier's creditors, rather than for 
the benefit of the Fund. From 2001 through 2011, the USF was unable to 
collect, due to provider bankruptcies, $80 million of the $90.7 million 
in funds that such providers had collected as universal service line 
items. The Fund collected the remaining $10.7 million through 
participation in the providers' bankruptcy cases, but only after 
significant delays and the expenditure of attorneys' fees.
    302. We seek comment on whether we should take steps to ensure 
contributions are made by contributors that become insolvent. Should we 
adopt a rule specifying that telecommunications providers that impose 
line items on their customers for federal universal service 
contributions are acting on behalf of the Fund? Would such a codified 
rule strengthen the position of USAC and the Commission in bankruptcy 
proceedings?
    303. One potential solution to this problem would be to amend Sec.  
54.712 of our rules to require contributors that recover their 
contribution obligation from end-users to segregate those end-user 
payments in dedicated trust accounts for the sole benefit of the USF. 
We seek comment on whether the Commission should adopt such a 
requirement, and the particulars of its implementation. Should we, for 
instance, require the account to be interest-bearing? Should we require 
that USAC have access to or be a co-signatory on each account? In the 
event of late payment, should we permit contributors to use the trust 
funds to pay interest, penalties and/or costs assessed against the 
contributor under our rules for late payment? How would such a 
requirement best be enforced? We also seek comment on alternative means 
of ensuring payment of contribution amounts to the Fund in cases of 
insolvency and financial distress, and their advantages and 
disadvantages.

[[Page 33932]]

3. Limiting Pass-Through of USF Charges to Lifeline Subscribers
    304. We seek comment on rule changes to provide a more level 
playing field among incumbent ETCs and competitive ETCs regarding their 
recovery of universal service pass-through charges. In particular, we 
propose to extend the current rules that apply only to incumbent 
carriers by amending Sec.  54.712 to prohibit competitive ETCs from 
recovering USF charges for Lifeline offerings from Lifeline subscribers 
as follows: Lifeline Subscribers. Eligible telecommunications carriers 
covered by Sec.  69.131 and Sec.  69.158 are subject to the limitations 
on universal service end user charges set forth therein. All other 
eligible telecommunications carriers shall not recover federal 
universal service contribution costs from Lifeline services to Lifeline 
subscribers. This limitation does not apply to services to Lifeline 
subscribers that are not supported by Lifeline, such as per-minute or 
other additional charges beyond the service for which the customer 
receives Lifeline support.

Such a rule could offer an easily administrable bright-line rule: ETCs 
would be free to pass along contribution costs through a line-item (or 
prepaid charge in the case of prepaid cards or services) only if the 
Lifeline subscriber chooses to purchase additional services beyond the 
basic Lifeline service. We seek comment on this analysis.
    305. Would it be appropriate to bar competitive ETCs from passing 
through universal service contribution costs associated with their 
basic Lifeline offering, comparable to the restriction that exists 
today for incumbent carriers? Would such a rule result in competitive 
ETCs reducing the number of minutes provided in a Lifeline offering? We 
note that competitive ETCs are not required to allocate their costs and 
tariff their basic local exchange service (as incumbent LECs generally 
must), and there may be no reliable way to determine whether a 
competitive ETC is effectively recovering the contribution costs 
associated with the eligible Lifeline service included in the package. 
How would the Commission treat Lifeline service offerings by 
competitive ETCs?
    306. We seek to develop the record on carrier practices today 
regarding recovery of USF contribution costs for Lifeline offerings 
from Lifeline subscribers. We seek comment and data on the extent to 
which ETCs that offer prepaid services supported by the Lifeline 
program effectively recover from their Lifeline subscribers the cost of 
their universal service contributions associated with that Lifeline 
plan. Do they recover those costs by adjusting the number of minutes 
provided for the established Lifeline rate? Do competitive ETCs 
providers that have monthly billing arrangements with Lifeline 
subscribers pass through USF contribution costs for Lifeline offerings?
    307. We seek comment on the potential impact of a rule prohibiting 
recovery of contribution costs for Lifeline offerings on Lifeline 
service providers and their Lifeline subscribers. Given the 
Commission's steps in the last decade to increase telephone penetration 
on Tribal lands via the low-income program, we are particularly 
interested in comment from Tribal governments and Tribally-owned and 
operated Lifeline service providers on the impact of such a rule on 
Tribal lands and their Lifeline subscribers. Commenters that oppose 
such a rule should provide specific alternative rules and explain how 
their proposals would support the goals of universal service.
    308. We seek comment on whether we need to update our rules 
applicable to both incumbent and competitive ETCs in light of the 
emergence of Lifeline offerings that may permit the Lifeline subscriber 
to make calls across state lines as well as within the state. For 
instance, should we adopt a rule that expressly prohibits all ETCs from 
recovering any contribution costs associated with a Lifeline offering 
that provides all-distance calling from their Lifeline subscriber?
    309. Finally, we also seek comment on the impact on low-income 
subscribers generally, i.e., those subscribers that would be eligible 
for Lifeline, even if they do not participate in the program, of the 
different contribution methodologies discussed in above. What is the 
average amount of USF pass-through charge imposed and collected today 
for low-income consumers?

II. Procedural Matters

A. Ex Parte Presentations

    310. Ex Parte Rules. The proceeding this Notice initiates 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 Sec.  1.1206(b). In proceedings governed 
by rule Sec.  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.

B. Initial Regulatory Flexibility Analysis

    311. 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 a substantial number of small entities by the policies and rules 
proposed in this Notice. Written public comments are requested on this 
IRFA. Comments must be identified as responses to the IRFA and must be 
filed by the deadlines for comments on the Notice. The Commission will 
send a copy of the Notice, including this IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA). In addition, 
the Notice and IRFA (or summaries thereof) will be published in the 
Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    312. In the Notice, we seek public comment on approaches to reform 
and modernize how Universal Service Fund (USF or Fund) contributions 
are assessed and recovered. We seek comment on ways to reform the USF

[[Page 33933]]

contribution system in an effort to promote efficiency, fairness, and 
sustainability. We seek comment in four key areas regarding the 
contributions system: (1) Who should contribute to the Fund; (2) how 
contributions should be assessed; (3) how the administration of the 
contribution system can be improved; and (4) recovery of universal 
service contributions from consumers.
    313. First, we seek comment on who should contribute to the Fund. 
Specifically, we seek comment on how we could exercise our permissive 
authority to define what services or providers should be subject to 
contribution obligations, either by: (1) Clarifying or modifying on a 
service-by-service basis whether particular services or providers are 
required to contribute to the Fund; or (2) adopting a more general rule 
that would specify which interstate telecommunications providers must 
contribute without enumerating the specific services subject to 
assessment.
    314. Second, we seek comment on how contributions should be 
assessed. In particular, what methodology we should use to determine 
the relative contribution obligation among those providers who are 
required to contribute. In particular, we seek to refresh the record 
and update proposals to assess based on revenues, connections, numbers, 
or a hybrid approach. For each alternative, we ask parties to address 
the current and projected impact on the relative contribution burden 
for consumers and businesses in light of marketplace trends.
    315. Third, we seek comment on how to improve the administration of 
the contribution system. We seek comment on potential rule changes that 
could be implemented to provide greater transparency and clarity 
regarding contribution obligations, reduce costs of administering the 
program, and improve the operation and administration of the program. 
Specifically, we seek comment on potential rule changes in six areas 
that should improve administration: (1) Updating the Telecommunications 
Reporting Worksheet and its instructions; (2) revising the frequency of 
adjustments to the contribution factor; (3) codifying the pay-and-
dispute policy; (4) improving oversight and accountability; (5) 
mandating electronic filing of the Telecommunications Reporting 
Worksheet with a fee for paper filer; and (6) implementing a filer 
registration and deregistration requirement for all parties required to 
file the Telecommunications Reporting Worksheet.
    316. Finally, we seek comment on whether the Commission could 
promote fairness and transparency by modifying the methods by which 
providers recover the costs of universal contributions from consumers. 
Specifically, we seek comment on the following questions: (1) whether 
to limit the flexibility of contributors to pass through contribution 
costs as a separately stated line item on customer bills; (2) whether 
to implement measures to ensure contributions are made by contributors 
that become insolvent; and (3) whether to prohibit competitive carriers 
from recovering universal service contributions for Lifeline offerings 
from Lifeline subscribers.
2. Legal Basis
    317. The legal basis for any action that may be taken pursuant to 
the Notice is contained in sections 1, 2, 4(i), 4(j), 201, 202, 218-
220, 254, and 303(r) of the Communications Act of 1934, as amended, and 
section 706 of the Telecommunications Act of 1996, as amended.
3. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    318. 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, 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. 
Nationwide, there are a total of approximately 29.6 million small 
businesses, according to the SBA.
    319. Wired Telecommunications Carriers. 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. 
According to Census Bureau data for 2007, there were a total of 3,188 
firms in this category, that operated for the entire year. Of this 
total, 3144 firms employed 999 or fewer employees, and 44 firms 
employed 1000 employees or more. Thus, under this size standard, the 
majority of firms can be considered small entities that may be affected 
by rules adopted pursuant to the Notice.
    320. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 1,307 carriers reported 
that they were incumbent local exchange service providers. Of these 
carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of local exchange service are small entities that may be 
affected by rules adopted pursuant to the Notice.
    321. Incumbent Local Exchange Carriers (incumbent LECs). Neither 
the Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to incumbent local exchange 
services. The closest applicable size standard under SBA rules is for 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,307 carriers reported that they were incumbent local 
exchange service providers. Of these carriers, an estimated 1,006 have 
1,500 or fewer employees and 301 have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of incumbent 
local exchange service are small entities that may be affected by rules 
adopted pursuant to the Notice.
    322. 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.
    323. 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

[[Page 33934]]

specifically for these service providers. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. 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 
carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have 
more than 1,500 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. In addition, 72 carriers have reported 
that they are Other Local Service Providers. Of these 72 carriers, an 
estimated 70 have 1,500 or fewer employees and two have more than 1,500 
employees. Consequently, 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 that may be affected by rules adopted pursuant to the 
Notice.
    324. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to interexchange services. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 359 companies reported 
that their primary telecommunications service activity was the 
provision of interexchange services. Of these companies, an estimated 
317 have 1,500 or fewer employees and 42 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by rules adopted pursuant to the Notice.
    325. Prepaid Calling Card Providers. Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
prepaid calling card providers. The closest applicable size standard 
under SBA rules is for Telecommunications Resellers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 193 providers have reported that they are 
engaged in the provision of prepaid calling cards. Of these providers, 
an estimated 193, or all such providers, have 1,500 or fewer employees 
and none have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of prepaid calling card providers are small 
entities that may be affected by rules adopted pursuant to the Notice.
    326. Local Resellers. 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. According to Commission data, 213 carriers have reported 
that they are engaged in the provision of local resale services. Of 
these, an estimated 211 have 1,500 or fewer employees and two have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities that may be affected by 
rules adopted pursuant to the Notice.
    327. Toll Resellers. 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. According to Commission data, 881 carriers have reported 
that they are engaged in the provision of toll resale services. Of 
these, an estimated 857 have 1,500 or fewer employees and 24 have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities that may be affected by 
rules adopted pursuant to the Notice.
    328. Payphone Service Providers (PSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
payphone services 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, 535 carriers have reported 
that they are engaged in the provision of payphone services. Of these, 
an estimated 531 have 1,500 or fewer employees and four have more than 
1,500 employees. Consequently, the Commission estimates that the 
majority of payphone service providers are small entities that may be 
affected by rules adopted pursuant to the Notice.
    329. 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 that may be affected by rules adopted pursuant 
to the Notice.
    330. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard 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 size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to 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 and 
five have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of Other Toll Carriers are small entities 
that may be affected by the rules adopted pursuant to the Notice.
    331. 800 and 800-Like Service Subscribers. Neither the Commission 
nor the SBA has developed a small business size standard specifically 
for 800 and 800-like service (toll-free) subscribers. The appropriate 
size standard under SBA rules is for the category Telecommunications 
Resellers. Under that size standard, such a business is small if it has 
1,500 or fewer employees. The most reliable source of information 
regarding the number of these service subscribers appears to be data 
the Commission collects on the 800, 888, 877, and 866 numbers in use. 
According to this data, as of September 2009, the number of 800 numbers 
assigned was 7,860,000; the number of 888 numbers assigned was 
5,588,687; the number of 877 numbers assigned was 4,721,866; and the 
number of 866 numbers assigned was 7,867,736. We do not have data 
specifying the number of these subscribers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
toll-free subscribers that would qualify as small businesses under the 
SBA size standard. Consequently, we estimate that there are 7,860,000 
or fewer small entity 800 subscribers; 5,588,687 or fewer small entity 
888 subscribers;

[[Page 33935]]

4,721,866 or fewer small entity 877 subscribers; and 7,867,736 or fewer 
small entity 866 subscribers.
2. Wireless Telecommunications Service Providers
    332. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the SBA has recognized wireless firms within this new, broad, 
economic census category. Prior to that time, such firms were within 
the now-superseded categories of ``Paging'' and ``Cellular and Other 
Wireless Telecommunications.'' Under the present and prior categories, 
the SBA has deemed a wireless business to be small if it has 1,500 or 
fewer employees. For this category, census data for 2007 show that 
there were 1,383 firms that operated for the entire year. Of this 
total, 1,368 firms employed 999 or fewer employees and 15 employed 1000 
employees or more. Similarly, according to Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service 
(PCS), and Specialized Mobile Radio (SMR) Telephony services. Of these, 
an estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Consequently, the Commission estimates that 
approximately half or more of these firms can be considered small. 
Thus, using available data, we estimate that the majority of wireless 
firms can be considered small entities that may be affected by the 
rules adopted pursuant to the Notice.
    333. Broadband Personal Communications Service. The broadband 
personal communications service (PCS) spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved small business size standards 
bid successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 small and very small business bidders won approximately 40 
percent of the 1,479 licenses for Blocks D, E, and F. In 1999, the 
Commission re-auctioned 347 C, E, and F Block licenses. There were 48 
small business winning bidders. In 2001, the Commission completed the 
auction of 422 C and F Broadband PCS licenses in Auction 35. Of the 35 
winning bidders in this auction, 29 qualified as ``small'' or ``very 
small'' businesses. Subsequent events, concerning Auction 35, including 
judicial and agency determinations, resulted in a total of 163 C and F 
Block licenses being available for grant. In 2005, the Commission 
completed an auction of 188 C block licenses and 21 F block licenses in 
Auction 58. There were 24 winning bidders for 217 licenses. Of the 24 
winning bidders, 16 claimed small business status and won 156 licenses. 
In 2007, the Commission completed an auction of 33 licenses in the A, 
C, and F Blocks in Auction 71. Of the 14 winning bidders, six were 
designated entities. In 2008, the Commission completed an auction of 20 
Broadband PCS licenses in the C, D, E and F block licenses in Auction 
78.
    334. Advanced Wireless Services. In 2008, the Commission conducted 
the auction of Advanced Wireless Services (``AWS'') licenses. This 
auction, which as designated as Auction 78, offered 35 licenses in the 
AWS 1710-1755 MHz and 2110-2155 MHz bands (``AWS-1''). The AWS-1 
licenses were licenses for which there were no winning bids in Auction 
66. That same year, the Commission completed Auction 78. A bidder with 
attributed average annual gross revenues that exceeded $15 million and 
did not exceed $40 million for the preceding three years (``small 
business'') received a 15 percent discount on its winning bid. A bidder 
with attributed average annual gross revenues that did not exceed $15 
million for the preceding three years (``very small business'') 
received a 25 percent discount on its winning bid. A bidder that had 
combined total assets of less than $500 million and combined gross 
revenues of less than $125 million in each of the last two years 
qualified for entrepreneur status. Four winning bidders that identified 
themselves as very small businesses won 17 licenses. Three of the 
winning bidders that identified themselves as a small business won five 
licenses. Additionally, one other winning bidder that qualified for 
entrepreneur status won two licenses.
    335. Narrowband Personal Communications Services. In 1994, the 
Commission conducted an auction for Narrowband PCS licenses. A second 
auction was also conducted later in 1994. For purposes of the first two 
Narrowband PCS auctions, ``small businesses'' were entities with 
average gross revenues for the prior three calendar years of $40 
million or less. Through these auctions, the Commission awarded a total 
of 41 licenses, 11 of which were obtained by four small businesses. To 
ensure meaningful participation by small business entities in future 
auctions, the Commission adopted a two-tiered small business size 
standard in the Narrowband PCS Second Report and Order, 65 FR 35875, 
June 6, 2000. A ``small business'' is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A ``very small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. The SBA has approved these small business 
size standards. A third auction was conducted in 2001. Here, five 
bidders won 317 (Metropolitan Trading Areas and nationwide) licenses. 
Three of these claimed status as a small or very small entity and won 
311 licenses.
    336. Paging (Private and Common Carrier). In the Paging Third 
Report and Order, 64 FR 33762, June 4, 1999, the Commission developed a 
small business size standard for ``small businesses'' and ``very small 
businesses'' for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. A ``small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. Additionally, a ``very small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $3 million for the preceding three years. The SBA has approved 
these small business size standards. According to Commission data, 291 
carriers have reported that they are engaged in Paging or Messaging 
Service. Of these, an estimated 289 have 1,500 or fewer employees, and 
two have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of paging providers are small entities that 
may be affected by rules adopted pursuant to the Notice. An auction of 
Metropolitan Economic Area licenses commenced on February 24, 2000, and 
closed on March 2, 2000. Of the 2,499 licenses auctioned, 985 were 
sold. Fifty-seven companies claiming small business status won 440 
licenses.

[[Page 33936]]

A subsequent auction of MEA and Economic Area (``EA'') licenses was 
held in the year 2001. Of the 15,514 licenses auctioned, 5,323 were 
sold. One hundred thirty-two companies claiming small business status 
purchased 3,724 licenses. A third auction, consisting of 8,874 licenses 
in each of 175 EAs and 1,328 licenses in all but three of the 51 MEAs, 
was held in 2003. Seventy-seven bidders claiming small or very small 
business status won 2,093 licenses. A fourth auction of 9,603 lower and 
upper band paging licenses was held in the year 2010. Twenty-nine 
bidders claiming small or very small business status won 3,016 
licenses.
    337. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
small business size standard for small entities specifically applicable 
to such incumbent 220 MHz Phase I licensees. To estimate the number of 
such licensees that are small businesses, we apply the small business 
size standard under the SBA rules applicable to Wireless 
Telecommunications Carriers (except Satellite). Under this category, 
the SBA deems a wireless business to be small if it has 1,500 or fewer 
employees. The Commission estimates that nearly all such licensees are 
small businesses under the SBA's small business size standard that may 
be affected by rules adopted pursuant to the Notice.
    338. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
subject to spectrum auctions. In the 220 MHz Third Report and Order, we 
adopted a small business size standard for ``small'' and ``very small'' 
businesses for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. This small 
business size standard indicates that a ``small business'' is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $15 million for the preceding 
three years. A ``very small business'' is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that do not exceed $3 million for the preceding three years. The SBA 
has approved these small business size standards. Auctions of Phase II 
licenses commenced on September 15, 1998, and closed on October 22, 
1998. In the first auction, 908 licenses were auctioned in three 
different-sized geographic areas: three nationwide licenses, 30 
Regional Economic Area Group (EAG) Licenses, and 875 Economic Area (EA) 
Licenses. Of the 908 licenses auctioned, 693 were sold. Thirty-nine 
small businesses won licenses in the first 220 MHz auction. The second 
auction included 225 licenses: 216 EA licenses and nine EAG licenses. 
Fourteen companies claiming small business status won 158 licenses.
    339. Specialized Mobile Radio. The Commission awards small business 
bidding credits in auctions for Specialized Mobile Radio (``SMR'') 
geographic area licenses in the 800 MHz and 900 MHz bands to entities 
that had revenues of no more than $15 million in each of the three 
previous calendar years. The Commission awards very small business 
bidding credits to entities that had revenues of no more than $3 
million in each of the three previous calendar years. The SBA has 
approved these small business size standards for the 800 MHz and 900 
MHz SMR Services. The Commission has held auctions for geographic area 
licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction was 
completed in 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels was conducted in 1997. Ten bidders claiming that they 
qualified as small businesses under the $15 million size standard won 
38 geographic area licenses for the upper 200 channels in the 800 MHz 
SMR band. A second auction for the 800 MHz band was conducted in 2002 
and included 23 BEA licenses. One bidder claiming small business status 
won five licenses.
    340. The auction of the 1,053 800 MHz SMR geographic area licenses 
for the General Category channels was conducted in 2000. Eleven bidders 
won 108 geographic area licenses for the General Category channels in 
the 800 MHz SMR band qualified as small businesses under the $15 
million size standard. In an auction completed in 2000, a total of 
2,800 Economic Area licenses in the lower 80 channels of the 800 MHz 
SMR service were awarded. Of the 22 winning bidders, 19 claimed small 
business status and won 129 licenses. Thus, combining all three 
auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR 
band claimed status as small business.
    341. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. In 
addition, we do not know how many of these firms have 1,500 or fewer 
employees. We assume, for purposes of this analysis, that all of the 
remaining existing extended implementation authorizations are held by 
small entities, as that small business size standard is approved by the 
SBA.
    342. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (``MDS'') and Multichannel Multipoint Distribution 
Service (``MMDS'') systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (``BRS'') and Educational Broadband Service (``EBS'') 
(previously referred to as the Instructional Television Fixed Service 
(``ITFS'')). In connection with the 1996 BRS auction, the Commission 
established a small business size standard as an entity that had annual 
average gross revenues of no more than $40 million in the previous 
three calendar years. The BRS auctions resulted in 67 successful 
bidders obtaining licensing opportunities for 493 Basic Trading Areas 
(``BTAs''). Of the 67 auction winners, 61 met the definition of a small 
business. BRS also includes licensees of stations authorized prior to 
the auction. At this time, we estimate that of the 61 small business 
BRS auction winners, 48 remain small business licensees. In addition to 
the 48 small businesses that hold BTA authorizations, there are 
approximately 392 incumbent BRS licensees that are considered small 
entities. After adding the number of small business auction licensees 
to the number of incumbent licensees not already counted, we find that 
there are currently approximately 440 BRS licensees that are defined as 
small businesses under either the SBA or the Commission's rules. The 
Commission has adopted three levels of bidding credits for BRS: (i) A 
bidder with attributed average annual gross revenues that exceed $15 
million and do not exceed $40 million for the preceding three years 
(small business) is eligible to receive a 15 percent discount on its 
winning bid; (ii) a bidder with

[[Page 33937]]

attributed average annual gross revenues that exceed $3 million and do 
not exceed $15 million for the preceding three years (very small 
business) is eligible to receive a 25 percent discount on its winning 
bid; and (iii) a bidder with attributed average annual gross revenues 
that do not exceed $3 million for the preceding three years 
(entrepreneur) is eligible to receive a 35 percent discount on its 
winning bid. In 2009, the Commission conducted Auction 86, which 
offered 78 BRS licenses. Auction 86 concluded with ten bidders winning 
61 licenses. Of the ten, two bidders claimed small business status and 
won four licenses; one bidder claimed very small business status and 
won three licenses; and two bidders claimed entrepreneur status and won 
six licenses.
    343. In addition, the SBA's Cable Television Distribution Services 
small business size standard is applicable to EBS. There are presently 
2,032 EBS licensees. All but 100 of these licenses are held by 
educational institutions. Educational institutions are included in this 
analysis as small entities. Thus, we estimate that at least 1,932 
licensees are small businesses. Since 2007, Cable Television 
Distribution Services have been defined within the broad economic 
census category of Wired Telecommunications Carriers; that category is 
defined as follows: ``This industry comprises 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 defines a small business 
size standard for this category as any such firms having 1,500 or fewer 
employees. The SBA has developed a small business size standard for 
this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 955 firms in this previous category that operated for the entire 
year. Of this total, 939 firms had employment of 999 or fewer 
employees, and 16 firms had employment of 1000 employees or more. Thus, 
under this size standard, the majority of firms can be considered small 
entities that may be affected by rules adopted pursuant to the Notice.
    344. Lower 700 MHz Band Licenses. The Commission previously adopted 
criteria for defining three groups of small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits. The Commission defined a ``small business'' as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues not exceeding $40 million for the preceding three years. 
A ``very small business'' is defined as an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that are not more than $15 million for the preceding three years. 
Additionally, the Lower 700 MHz Band had a third category of small 
business status for Metropolitan/Rural Service Area (``MSA/RSA'') 
licenses, identified as ``entrepreneur'' and defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA approved these small size standards. The 
Commission conducted an auction in 2002 of 740 Lower 700 MHz Band 
licenses (one license in each of the 734 MSAs/RSAs and one license in 
each of the six Economic Area Groupings (EAGs)). Of the 740 licenses 
available for auction, 484 licenses were sold to 102 winning bidders. 
Seventy-two of the winning bidders claimed small business, very small 
business or entrepreneur status and won a total of 329 licenses. The 
Commission conducted a second Lower 700 MHz Band auction in 2003 that 
included 256 licenses: Five EAG licenses and 476 Cellular Market Area 
licenses. Seventeen winning bidders claimed small or very small 
business status and won 60 licenses, and nine winning bidders claimed 
entrepreneur status and won 154 licenses. In 2005, the Commission 
completed an auction of five licenses in the Lower 700 MHz Band, 
designated Auction 60. There were three winning bidders for five 
licenses. All three winning bidders claimed small business status.
    345. In 2007, the Commission reexamined its rules governing the 700 
MHz band in the 700 MHz Second Report and Order. The 700 MHz Second 
Report and Order revised the band plan for the commercial (including 
Guard Band) and public safety spectrum, adopted services rules, 
including stringent build-out requirements, an open platform 
requirement on the C Block, and a requirement on the D Block licensee 
to construct and operate a nationwide, interoperable wireless broadband 
network for public safety users. An auction of A, B and E block 
licenses in the Lower 700 MHz band was held in 2008. Twenty winning 
bidders claimed small business status (those with attributable average 
annual gross revenues that exceed $15 million and do not exceed $40 
million for the preceding three years). Thirty-three winning bidders 
claimed very small business status (those with attributable average 
annual gross revenues that do not exceed $15 million for the preceding 
three years). In 2011, the Commission conducted Auction 92, which 
offered 16 Lower 700 MHz band licenses that had been made available in 
Auction 73 but either remained unsold or were licenses on which a 
winning bidder defaulted. Two of the seven winning bidders in Auction 
92 claimed very small business status, winning a total of four 
licenses.
    346. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and 
Order, the Commission revised its rules regarding Upper 700 MHz band 
licenses. In 2008, the Commission conducted Auction 73 in which C and D 
block licenses in the Upper 700 MHz band were available. Three winning 
bidders claimed very small business status (those with attributable 
average annual gross revenues that do not exceed $15 million for the 
preceding three years).
    347. 700 MHz Guard Band Licenses. In the 700 MHz Guard Band Order , 
we adopted a small business size standard for ``small businesses'' and 
``very small businesses'' for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. A ``small business'' is an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the preceding three years. Additionally, a 
``very small business'' is an entity that, together with its affiliates 
and controlling principals, has average gross revenues that are not 
more than $15 million for the preceding three years. An auction of 52 
Major Economic Area (MEA) licenses commenced on September 6, 2000, and 
closed on September 21, 2000. Of the 104 licenses auctioned, 96 
licenses were sold to nine bidders. Five of these bidders were small 
businesses that won a total of 26 licenses. A second auction of 700 MHz 
Guard Band licenses commenced on February 13, 2001 and closed on 
February 21, 2001. All eight of the licenses auctioned were sold to 
three bidders. One of these bidders was a small business that won a 
total of two licenses.
    348. Cellular Radiotelephone Service. Auction 77 was held to 
resolve one group of mutually exclusive applications for Cellular 
Radiotelephone Service licenses for unserved areas in New Mexico. 
Bidding credits for designated entities were not available in Auction 
77. In 2008, the Commission completed the closed auction of one 
unserved service area in the Cellular

[[Page 33938]]

Radiotelephone Service, designated as Auction 77. Auction 77 concluded 
with one provisionally winning bid for the unserved area totaling 
$25,002.
    349. Private Land Mobile Radio (PLMR). PLMR systems serve an 
essential role in a range of industrial, business, land transportation, 
and public safety activities. These radios are used by companies of all 
sizes operating in all U.S. business categories, and are often used in 
support of the licensee's primary (non-telecommunications) business 
operations. For the purpose of determining whether a licensee of a PLMR 
system is a small business as defined by the SBA, we use the broad 
census category, Wireless Telecommunications Carriers (except 
Satellite). This definition provides that a small entity is any such 
entity employing no more than 1,500 persons. The Commission does not 
require PLMR licensees to disclose information about number of 
employees, so the Commission does not have information that could be 
used to determine how many PLMR licensees constitute small entities 
under this definition. We note that PLMR licensees generally use the 
licensed facilities in support of other business activities, and 
therefore, it would also be helpful to assess PLMR licensees under the 
standards applied to the particular industry subsector to which the 
licensee belongs.
    350. As of March 2010, there were 424,162 PLMR licensees operating 
921,909 transmitters in the PLMR bands below 512 MHz. We note that any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, and that any revised rules in this context could therefore 
potentially impact small entities covering a great variety of 
industries.
    351. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio System (``BETRS''). In the present 
context, we will use the SBA's small business size standard applicable 
to Wireless Telecommunications Carriers (except Satellite), i.e., an 
entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and the Commission 
estimates that there are 1,000 or fewer small entity licensees in the 
Rural Radiotelephone Service that may be affected by rules proposed in 
the Notice.
    352. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. We will use SBA's small business size standard 
applicable to Wireless Telecommunications Carriers (except Satellite), 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 100 licensees in the Air-Ground Radiotelephone Service, 
and we estimate that almost all of them qualify as small under the SBA 
small business size standard and may be affected by rules adopted 
pursuant to the Notice.
    353. Aviation and Marine Radio Services. Small businesses in the 
aviation and marine radio services use a very high frequency (VHF) 
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator 
transmitter. The Commission has not developed a small business size 
standard specifically applicable to these small businesses. For 
purposes of this analysis, the Commission uses the SBA small business 
size standard for the category Wireless Telecommunications Carriers 
(except Satellite), which is 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Most applicants for recreational licenses are individuals. 
Approximately 581,000 ship station licensees and 131,000 aircraft 
station licensees operate domestically and are not subject to the radio 
carriage requirements of any statute or treaty. For purposes of our 
evaluations in this analysis, we estimate that there are up to 
approximately 712,000 licensees that are small businesses (or 
individuals) under the SBA standard. In addition, between December 3, 
1998 and December 14, 1998, the Commission held an auction of 42 VHF 
Public Coast licenses in the 157.1875-157.4500 MHz (ship transmit) and 
161.775-162.0125 MHz (coast transmit) bands. For purposes of the 
auction, the Commission defined a ``small'' business as an entity that, 
together with controlling interests and affiliates, has average gross 
revenues for the preceding three years not to exceed $15 million 
dollars. In addition, a ``very small'' business is one that, together 
with controlling interests and affiliates, has average gross revenues 
for the preceding three years not to exceed $3 million dollars. There 
are approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the above special small business size standards and 
may be affected by rules adopted pursuant to the Notice.
    354. Fixed Microwave Services. Fixed microwave services include 
common carrier, private operational-fixed, and broadcast auxiliary 
radio services. At present, there are approximately 22,015 common 
carrier fixed licensees and 61,670 private operational-fixed licensees 
and broadcast auxiliary radio licensees in the microwave services. The 
Commission has not created a size standard for a small business 
specifically with respect to fixed microwave services. For purposes of 
this analysis, the Commission uses the SBA small business size standard 
for Wireless Telecommunications Carriers (except Satellite), which is 
1,500 or fewer employees. The Commission does not have data specifying 
the number of these licensees that have more than 1,500 employees, and 
thus is unable at this time to estimate with greater precision the 
number of fixed microwave service licensees that would qualify as small 
business concerns under the SBA's small business size standard. 
Consequently, the Commission estimates that there are up to 22,015 
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the 
microwave services that may be small and may be affected by rules 
adopted pursuant to the Notice. We note, however, that the common 
carrier microwave fixed licensee category includes some large entities.
    355. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for 
television broadcasting in the coastal areas of states bordering the 
Gulf of Mexico. There are presently approximately 55 licensees in this 
service. We are unable to estimate at this time the number of licensees 
that would qualify as small under the SBA's small business size 
standard for Cellular and Other Wireless Telecommunications Carriers 
(except Satellite). Under that SBA small business size standard, a 
business is small if it has 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Thus under this category and the associated small business size 
standard, the majority of firms can be considered small.
    356. 39 GHz Service. The Commission created a special small 
business size

[[Page 33939]]

standard for 39 GHz licenses--an entity that has average gross revenues 
of $40 million or less in the three previous calendar years. An 
additional size standard for ``very small business'' is: An entity 
that, together with affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards. The auction of the 2,173 
39 GHz licenses began on April 12, 2000 and closed on May 8, 2000. The 
18 bidders who claimed small business status won 849 licenses. 
Consequently, the Commission estimates that 18 or fewer 39 GHz 
licensees are small entities that may be affected by rules adopted 
pursuant to the Notice.
    357. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (``LMDS'') is a fixed broadband point-to-
multipoint microwave service that provides for two-way video 
telecommunications. The auction of the 986 LMDS licenses began and 
closed in 1998. The Commission established a small business size 
standard for LMDS licenses as an entity that has average gross revenues 
of less than $40 million in the three previous calendar years. An 
additional small business size standard for ``very small business'' was 
added as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. The SBA has approved these small business size 
standards in the context of LMDS auctions. There were 93 winning 
bidders that qualified as small entities in the LMDS auctions. A total 
of 93 small and very small business bidders won approximately 277 A 
Block licenses and 387 B Block licenses. In 1999, the Commission re-
auctioned 161 licenses; there were 32 small and very small businesses 
winning that won 119 licenses.
    358. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In the 
218-219 MHz Report and Order and Memorandum Opinion and Order, we 
established a small business size standard for a ``small business'' as 
an entity that, together with its affiliates and persons or entities 
that hold interests in such an entity and their affiliates, has average 
annual gross revenues not to exceed $15 million for the preceding three 
years. A ``very small business'' is defined as an entity that, together 
with its affiliates and persons or entities that hold interests in such 
an entity and its affiliates, has average annual gross revenues not to 
exceed $3 million for the preceding three years. These size standards 
will be used in future auctions of 218-219 MHz spectrum.
    359. 2.3 GHz 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. The Commission auctioned geographic 
area licenses in the WCS service. In the auction, which was conducted 
in 1997, there were seven bidders that won 31 licenses that qualified 
as very small business entities, and one bidder that won one license 
that qualified as a small business entity.
    360. 1670-1675 MHz Band. An auction for one license in the 1670-
1675 MHz band was conducted in 2003. The Commission defined a ``small 
business'' as an entity with attributable average annual gross revenues 
of not more than $40 million for the preceding three years and thus 
would be eligible for a 15 percent discount on its winning bid for the 
1670-1675 MHz band license. Further, the Commission defined a ``very 
small business'' as an entity with attributable average annual gross 
revenues of not more than $15 million for the preceding three years and 
thus would be eligible to receive a 25 percent discount on its winning 
bid for the 1670-1675 MHz band license. One license was awarded. The 
winning bidder was not a small entity.
    361. 3650-3700 MHz band. In March 2005, the Commission released a 
Report and Order and Memorandum Opinion and Order that provides for 
nationwide, non-exclusive licensing of terrestrial operations, 
utilizing contention-based technologies, in the 3650 MHz band (i.e., 
3650-3700 MHz). As of April 2010, more than 1270 licenses have been 
granted and more than 7433 sites have been registered. The Commission 
has not developed a definition of small entities applicable to 3650-
3700 MHz band nationwide, non-exclusive licensees. However, we estimate 
that the majority of these licensees are Internet Access Service 
Providers (ISPs) and that most of those licensees are small businesses.
    362. 24 GHz--Incumbent Licensees. This analysis may affect 
incumbent licensees who were relocated to the 24 GHz band from the 18 
GHz band, and applicants who wish to provide services in the 24 GHz 
band. For this service, the Commission uses the SBA small business size 
standard of ``Cellular and Other Wireless Telecommunications Carriers 
(except satellite),'' which is 1,500 or fewer employees. We believe 
that there are only two licensees in the 24 GHz band that were 
relocated from the 18 GHz band, Teligent and TRW, Inc. It is our 
understanding that Teligent and its related companies have fewer than 
1,500 employees, though this may change in the future. TRW is not a 
small entity. Thus, only one incumbent licensee in the 24 GHz band is a 
small business entity.
    363. 24 GHz--Future Licensees. With respect to new applicants in 
the 24 GHz band, the size standard for ``small business'' is an entity 
that, together with controlling interests and affiliates, has average 
annual gross revenues for the three preceding years not in excess of 
$15 million. ``Very small business'' in the 24 GHz band is an entity 
that, together with controlling interests and affiliates, has average 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved these small business size standards. These size 
standards will apply to a future 24 GHz license auction, if held.
3. International Service Providers
    364. Satellite Telecommunications. Since 2007, the SBA has 
recognized satellite firms within this revised category, with a small 
business size standard of $15 million. The most current Census Bureau 
data are from the economic census of 2007, and we will use those 
figures to gauge the prevalence of small businesses in this category. 
Those size standards are for the two census categories of ``Satellite 
Telecommunications'' and ``Other Telecommunications.'' Under the 
``Satellite Telecommunications'' category, a business is considered 
small if it had $15 million or less in average annual receipts. Under 
the ``Other Telecommunications'' category, a business is considered 
small if it had $25 million or less in average annual receipts.
    365. The first category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing point-to-point 
telecommunications services to other

[[Page 33940]]

establishments in the telecommunications and broadcasting industries by 
forwarding and receiving communications signals via a system of 
satellites or reselling satellite telecommunications.'' For this 
category, Census Bureau data for 2007 show that there were a total of 
512 firms that operated for the entire year. Of this total, 464 firms 
had annual receipts of under $10 million, and 18 firms had receipts of 
$10 million to $24,999,999. Consequently, we estimate that the majority 
of Satellite Telecommunications firms are small entities that might be 
affected by rules adopted pursuant to the Notice.
    366. The second category of Other Telecommunications ``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.'' 
For this category, Census Bureau data for 2007 show that there were a 
total of 2,383 firms that operated for the entire year. Of this total, 
2,346 firms had annual receipts of under $25 million. Consequently, we 
estimate that the majority of Other Telecommunications firms are small 
entities that might be affected by our action.
4. Cable and OVS Operators
    367. Cable and Other Program Distribution. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers; that category is defined as follows: 
``This industry comprises 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 has developed a small business size standard 
for this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 955 firms in this previous category that operated for the entire 
year. Of this total, 939 firms employed 999 or fewer employees, and 16 
firms employed 1000 employees or more. Thus, under this size standard, 
the majority of firms can be considered small and may be affected by 
rules adopted pursuant to the Notice.
    368. Cable Companies and Systems. The Commission has developed its 
own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
indicate that, of 1,076 cable operators nationwide, all but 11 are 
small under this size standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that, of 1,076 cable operators 
nationwide, all but eleven are small under this size standard. In 
addition, under the Commission's rules, a ``small system'' is a cable 
system serving 15,000 or fewer subscribers. Industry data indicate 
that, of 7,208 systems nationwide, 6,139 systems have under 10,000 
subscribers. Thus, under this second size standard, most cable systems 
have 10,000--19,999 subscribers. Thus, under this second size standard, 
most cable systems are small and may be affected by rules adopted 
pursuant to the Notice.
    369. Cable System Operators. The 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.'' The Commission has determined that an 
operator serving fewer than 677,000 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. Industry data indicate that, of 1,076 cable operators 
nationwide, all but ten are small under this size standard. We note 
that the Commission neither requests nor collects information on 
whether cable system operators are affiliated with entities whose gross 
annual revenues exceed $250 million, and therefore we are unable to 
estimate more accurately the number of cable system operators that 
would qualify as small under this size standard.
    370. Open Video Services. The open video system (``OVS'') framework 
was established in 1996, and is one of four statutorily recognized 
options for the provision of video programming services by local 
exchange carriers. The OVS framework provides opportunities for the 
distribution of video programming other than through cable systems. 
Because OVS operators provide subscription services, OVS falls within 
the SBA small business size standard covering cable services, which is 
``Wired Telecommunications Carriers.'' The SBA has developed a small 
business size standard for this category, which is: all such firms 
having 1,500 or fewer employees. According to Census Bureau data for 
2007, there were a total of 955 firms in this previous category that 
operated for the entire year. Of this total, 939 firms employed 999 or 
fewer employees, and 16 firms employed 1000 employees or more. Thus, 
under this second size standard, most cable systems are small and may 
be affected by rules adopted pursuant to the Notice. In addition, we 
note that the Commission has certified some OVS operators, with some 
now providing service. Broadband service providers (``BSPs'') are 
currently the only significant holders of OVS certifications or local 
OVS franchises. The Commission does not have financial or employment 
information regarding the entities authorized to provide OVS, some of 
which may not yet be operational. Thus, again, at least some of the OVS 
operators may qualify as small entities.
5. Internet Service Providers
    371. Internet Service Providers. Since 2007, these services have 
been defined within the broad economic census category of Wired 
Telecommunications Carriers; that category is defined as follows: 
``This industry comprises 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 has developed a small business size standard of 
1,500 or fewer employees. According to Census Bureau data from 2007, 
there were 3,188 firms in this category, total, that operated for the 
entire year. Of this total, 3,144 firms had employment of 999 or fewer 
employees, and 44 firms had employment of 1000 employees or more. 
Consequently, we estimate that the majority of these firms are small 
entities that may be affected by rules adopted pursuant to this Notice.
6. Other Internet-Related Entities
    372. Internet Publishing and Broadcasting and Web Search Portals.

[[Page 33941]]

Our action may pertain to interconnected VoIP services, which could be 
provided by entities that provide other services such as email, online 
gaming, web browsing, video conferencing, instant messaging, and other, 
similar IP-enabled services. The Commission has not adopted a size 
standard for entities that create or provide these types of services or 
applications. However, the Census Bureau has identified firms that 
``primarily engaged in (1) publishing and/or broadcasting content on 
the Internet exclusively or (2) operating Web sites that use a search 
engine to generate and maintain extensive databases of Internet 
addresses and content in an easily searchable format (and known as Web 
search portals).'' The SBA has developed a small business size standard 
for this category, which is: all such firms having 500 or fewer 
employees. According to Census Bureau data for 2007, there were 2,705 
firms in this category that operated for the entire year. Of this 
total, 2,682 firms employed 499 or fewer employees, and 23 firms 
employed 500 employees or more. Consequently, we estimate that the 
majority of these firms are small entities that may be affected by 
rules adopted pursuant to the Notice.
    373. Data Processing, Hosting, and Related Services. Entities in 
this category ``primarily * * * provid[e] infrastructure for hosting or 
data processing services.'' The SBA has developed a small business size 
standard for this category; that size standard is $25 million or less 
in average annual receipts. According to Census Bureau data for 2007, 
there were 8,060 firms in this category that operated for the entire 
year. Of these, 7,744 had annual receipts of under $24,999,999. 
Consequently, we estimate that the majority of these firms are small 
entities that may be affected by rules adopted pursuant to the Notice.
    374. All Other Information Services. The Census Bureau defines this 
industry as including ``establishments primarily engaged in providing 
other information services (except news syndicates, libraries, 
archives, Internet publishing and broadcasting, and Web search 
portals).'' Our action pertains to interconnected VoIP services, which 
could be provided by entities that provide other services such as 
email, online gaming, web browsing, video conferencing, instant 
messaging, and other, similar IP-enabled services. The SBA has 
developed a small business size standard for this category; that size 
standard is $7.0 million or less in average annual receipts. According 
to Census Bureau data for 2007, there were 367 firms in this category 
that operated for the entire year. Of these, 334 had annual receipts of 
under $5.0 million, and an additional 11 firms had receipts of between 
$5 million and $9,999,999. Consequently, we estimate that the majority 
of these firms are small entities that may be affected by rules adopted 
pursuant to the Notice.
7. Other Entities
    375. Responsible Organizations (RespOrgs). Toll-free numbers are 
assigned on a first-come, first-served basis by entities referred to as 
``Responsible Organizations'' or ``RespOrgs.'' These entities, which 
may or may not be telephone companies, have access to the SMS/800 
database, which contains information regarding the status of all toll-
free numbers. RespOrgs are certified by the SMS/800 database 
administrator, which manages toll-free service. Most RespOrgs are 
telephone carriers or companies. Other companies that apply for RespOrg 
status are enhanced voice mail providers, VoIP carriers, call tracking 
and marketing analytics firms, or vanity number firms. Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for RespOrgs. There are 404 RespOrgs certified by SMS/800. 
Consequently, we estimate that there are not more than 404 RespOrgs 
that are small entities.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    376. The transition to a simplified contribution system could 
affect all telecommunications providers, including small entities, and 
may include new administrative processes. The Commission seeks comment 
on various reporting, recordkeeping, and other compliance requirements 
that may apply to all telecommunications providers, including small 
entities. We seek comment on any costs and burdens on small entities 
associated with the proposed rules, including data quantifying the 
extent of such costs or burdens.
    377. Apportioning Revenues from Bundled Services. Under the current 
Fund contribution system, revenues from telecommunications offerings 
are subject to contribution assessment while revenues from information 
services and consumer-premises equipment (CPE) are excluded from the 
contribution base. A telecommunications provider must therefore 
apportion its revenues between telecommunications and non-
telecommunications sources for purposes of contribution assessment. 
Telecommunications providers can currently apportion their bundled 
revenues pursuant to two safe harbor methods established by the 
Commission. In addition to the safe harbors, a telecommunications 
provider could apportion its bundled revenues using any reasonable 
alternative method. In the Notice, we seek comment on ways to simplify 
the apportionment of bundled offerings. We seek comment on a bright-
line rule that codifies a modified version of the two safe harbors. If 
adopted, this change would affect how telecommunications providers 
apportion and report revenues from bundled services.
    378. Contributions for Services with an Interstate 
Telecommunications Component. We seek comment on what revenues should 
be assessed to the extent we choose to exercise our permissive 
authority over services that provide interstate telecommunications. We 
seek comment on whether we could and should require contributions on 
the full retail revenues of an information service that provides 
interstate telecommunications. We also seek comment on whether to 
assess only the telecommunications (i.e., the transmission) component 
and, if so, how we would we determine what portion of the integrated 
service revenues should be associated with the transmission component. 
We also ask whether we should craft a rule, or safe harbor, that 
provides for assessment of a certain percentage of retail revenues of 
information services with a telecommunications (transmission) 
component. If adopted, this change would affect all providers of 
services that contain an interstate telecommunications component.
    379. Allocating Revenues Between Inter- and Intrastate 
Jurisdictions. We also seek comment on whether the Act compels us to 
only assess a portion of revenues associated with services that operate 
interstate, intrastate, or internationally. In the Notice, we seek 
comment on whether to (1) adopt a rule that requires all providers 
subject to contributions to report and contribute on all revenues 
derived from assessable services rather than require providers to 
allocate revenues between the interstate and intrastate jurisdictions; 
(2) adopt a bright line rule for how companies should allocate revenues 
between jurisdictions for broad categories of services; or (3) find 
that for USF contribution purposes, revenues from such services should 
be reported as 100 percent interstate. If adopted, this change would 
affect how telecommunications providers allocate and report mixed 
jurisdiction revenues.

[[Page 33942]]

    380. Contribution Obligations of Wholesalers and Their Customers. 
We seek comment on modifying the existing Fund contribution methodology 
to assess value-added revenues rather than end-user revenues. Under a 
value-added approach, each telecommunications provider in a service 
chain would contribute based on the value it ``adds'' to the service. 
Alternatively, we seek comment on whether we should mandate greater 
specificity in contributor certifications to their wholesalers. If 
adopted, this change would affect how revenues are reported.
    381. Reporting Prepaid Calling Card Revenues. In the Notice, we 
seek comment on adopting a rule to require prepaid calling card 
providers to report and contribute on all end-user revenues, and who 
should be deemed the end user for purposes of such a rule. We seek 
comment on rules standardizing the reporting of prepaid calling card 
revenues. We propose rules requiring all telecommunications providers 
(as well as telecommunications carriers) to register with the 
Commission, and rules requiring entities that provide 
telecommunications to others for resale to check the registration 
status of the their customers. We believe these rules will provide 
reporting entities with enhanced certainty regarding their 
contributions obligations. If adopted, this change would affect 
telecommunications providers that are wholesalers and resellers of 
prepaid calling cards.
    382. International Telecommunications Providers. We seek comment on 
eliminating the exemption for international-only providers and limited 
international revenues exemption (LIRE)-qualifying providers. We also 
seek comment on modifying the LIRE exemption by requiring LIRE-
qualifying providers to contribute on at least a portion of its 
revenues. If adopted, this change would affect international-only 
telecommunications providers and telecommunications providers who may 
have previously relied on the LIRE exemption.
    383. Reforming the De Minimis Exemption. The Commission has 
authority to exempt a carrier or class of carriers from Fund 
contribution requirements if their contributions would be de minimis. 
Currently, de minimis status is determined on a providers' annual 
contribution amount. In the Notice, we seek comment on simplifying the 
exemption by basing it on a provider's annual assessable revenues. This 
should simplify the process by which entities may determine if they 
qualify for the de minimis exception. If adopted, this change would 
affect de minimis telecommunications providers.
    384. Assessing Contributions Based on Connections. In this Notice, 
we seek comment on whether we should adopt a contribution system based 
on connections. Under a connections-based system, providers could be 
assessed based on the number, speed, or capacity of connections to a 
communications network provided to customers. Providers would 
contribute a set amount per connection, regardless of the revenues 
derived from that connection. We seek comment on whether a connections-
based approach would better meet our proposed goals of promoting 
efficiency, fairness, and sustainability in the Fund, as well as other 
goals identified by commenters. If adopted, this change would affect 
all telecommunications providers.
    385. Assessing Contributions Based on Numbers. We also seek comment 
on whether we should adopt a contributions system based on numbers. 
Under a numbers-based system, in its simplest form, providers would be 
assessed based on their count of North American Numbering Plan 
telephone numbers. There would be a standard monthly assessment per 
telephone number, such as $1 per month, with potentially higher and 
lower tiers for certain categories of numbers based on how these 
numbers are assigned or used. The monthly assessment per number would 
be calculated by applying a formula based on the USF demand requirement 
and the relevant count of numbers, however that term is defined. We 
seek comment on whether a numbers-based approach would better meet our 
proposed goals of promoting efficiency, fairness, and sustainability in 
the Fund, as well as other goals identified by commenters. If adopted, 
this change would affect all telecommunications providers.
    386. Assessing Contributions Based on a Hybrid Methodology With a 
Numbers Component. In this Notice, we also seek comment on whether we 
should consider a hybrid approach that combines a telephone numbers 
component with a connections component. Under such an approach, 
providers could be assessed a flat fee for each assessable NANP 
telephone number and assessed a fee based on the connection for 
services not associated with a NANP telephone number. We seek comment 
on whether a hybrid approach would better meet our proposed goals for 
reforming the contributions methodology. If adopted, this change would 
affect all telecommunications providers.
    387. Pass-Through of USF Contributions as a Separate Line Item 
Charge. In this Notice, we seek comment on ways to improve the 
transparency for customers relating to the amount of universal service 
contribution charges that are being passed through by the providers to 
their customers. We seek comment on whether to: (1) Require greater 
clarity on customer bills regarding how the USF charge was calculated; 
(2) require providers to disclose at initiation of service the amount 
of the quoted rate or assessable units would be USF-assessable; and (3) 
if we were to adopt either of these rules, apply them to all customers, 
or limit the rules to mass market customers. We seek comment on whether 
to prohibit contributors from recovering contribution costs as a 
separate line item on the customer bill. We also seek comment on 
whether we should take steps to ensure that contributions are made by 
contributors that become insolvent, specifically by requiring 
contributors that recover their contribution obligation from end-users 
to segregate those end-user payments in dedicated trust accounts for 
the sole benefit of the USF. Finally, we propose to level the playing 
field between incumbent LECs and competitive LECs by adopting a rule 
that would prohibit competitive ETCs from recovering USF contribution 
costs for their Lifeline offerings from Lifeline subscribers. If 
adopted, this change would affect competitive telecommunications 
providers that serve Lifeline customers.
    388. Other Reporting Changes. We propose requiring all 
telecommunications providers (as well as telecommunications carriers) 
to register with the Commission, and propose rules requiring 
registrants that provide telecommunications to others for resale to 
check the registration status of their customers. We also propose that 
telecommunications providers file electronically their quarterly and 
annual Telecommunications Reporting Worksheet, with a fee for those 
that file by paper. We believe these rules will provide reporting 
entities enhanced certainty regarding their contribution obligations.
5. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    389. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) the establishment of

[[Page 33943]]

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.''
    390. As indicated in the Notice, we seek to reform the contribution 
system. We believe our proposed rules will provide reporting entities 
enhanced certainty regarding their contribution obligations, which is 
especially important for small businesses that may not have the 
resources of larger business to comply with complex rules.
    391. We believe that adopting a simplified and clearly defined 
apportionment method will provide greater predictability to all 
telecommunications providers and customers. The Notice seeks comment on 
a modified version of the two safe harbors available for apportioning 
revenues from bundled service offerings. We believe that providing a 
bright line rule for providers reduces the administrative burden for 
small entities.
    392. We seek comment on whether we should modify the contribution 
methodology to assess ``value-added'' revenues rather than ``end user'' 
revenues. Under this approach, each telecommunications provider in a 
service value chain (including both wholesalers and resellers) would 
contribute based on the value in the providers adds to the service. We 
also seek comment on modifying the current reseller certification 
process to provide greater clarity regarding contribution obligations 
when wholesale inputs are incorporated into other services that are not 
telecommunications services. We believe that either of these approaches 
would simplify the reporting process for all parties, and provide 
greater certainty. For each approach, we seek comment on ways to 
streamline the overall reporting requirements for all parties. In 
addition, these potential rule changes would increase the Commission's 
administration and oversight of the contributions system in the 
wholesaler-reseller context.
    393. We believe that our registration and deregistration proposals 
for all parties required to file the Telecommunications Reporting 
Worksheet will help ensure that the Commission's FCC Form 499-A Filer 
Database is current and complete. One of the purposes of registration 
is that it allows the Commission to better monitor registered providers 
for compliance with our rules and regulations. In addition, a filer 
registration requirement provides transparency to the public, making 
available important information including the relevant regulatory 
contact information. We recognize that the proposed registration and 
deregistration process may impose a small one-time burden on parties 
that were not previously required to register, but we believe the 
benefit of having a current and complete database may outweigh the 
burden.
    394. We seek comment on modifying the de minimis exemption to base 
the threshold on assessable revenues rather than the amount of 
contributions. We believe this will simplify the contributions system 
and reduce the administrative burden for small entities. We also seek 
comment on whether this proposal might also reduce the reporting 
obligations and regulatory uncertainty for de minimis 
telecommunications providers that have growing revenues. Specifically, 
we seek comment on whether to make it optional for a telecommunications 
provider to file quarterly Telecommunications Reporting Worksheets for 
a year after which the provider qualifies as de minimis. We believe 
these changes might simplify the reporting obligations of small 
entities and reduces their administrative burden.
    395. We seek comment on updating the Telecommunications Reporting 
Worksheets (FCC Forms 499-A and 499-Q) and its instructions. 
Specifically, we seek comment on whether we should modify the process 
by which these forms are revised by soliciting public comment from 
interested parties prior to adopting revisions to the forms or the 
instructions. We believe these changes would provide greater clarity to 
contributors and simplify compliance and the administration of the 
contributions process.
    396. We note that in past contribution reform proceedings some 
parties have proposed alternative contribution methodologies based on 
numbers, connections, or a combination of numbers and connections. To 
the extent that parties believe that alternative systems would better 
promote our goals for contribution reform, we seek comment on the 
benefits of such systems relative to our proposed improved revenues 
system and ask for specific proposals on how such systems could be 
implemented.
    397. The Notice seeks comment from all interested parties. The 
Commission is aware that some of the proposals or approaches under 
consideration may impact small entities. Small entities are encouraged 
to bring to the Commission's attention any specific concerns they may 
have with the proposals or approaches outlined in the Notice. We invite 
comment on how these proposals or approaches might be made less 
burdensome for small entities but still in keeping with our goals for 
contribution reform. We also invite commenters to discuss the benefits 
of such changes on small entities and to weigh these benefits against 
the burdens for telecommunications providers that might also be small 
entities. The Commission expects to consider the economic impact on 
small entities, as identified in comments filed in response to the 
Notice, in reaching its final conclusions and taking action in this 
proceeding.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    398. None.

C. Paperwork Reduction Act Analysis

    399. This document contains 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, Public Law 
107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment on how we 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.

D. Filing Requirements

    400. Comments and Reply Comments. Pursuant to Sec. Sec.  1.415 and 
1.419 of the Commission's rules, interested parties may file comments 
and reply comments. Comments on the proposed rules are due on or before 
July 9, 2012 and reply comments are due on or before August 6, 2012. 
Written comments on the Paperwork Reduction Act proposed information 
collection requirements must be submitted by the public, Office of 
Management and Budget (OMB), and other interested parties on or before 
August 6, 2012. All filings should refer to CC Docket No 06-122 and GN 
Docket No. 09-51. Comments may be filed using: (1) the Commission's 
Electronic Comment Filing System (ECFS), (2) the Federal Government's 
eRulemaking Portal, or (3) by filing paper copies.

[[Page 33944]]

List of Subjects in 47 CFR Part 54

    Communications Common Carriers, Reporting and Record Keeping 
Requirements, Telecommunications, Telephone.

    Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

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

PART 54--UNIVERSAL SERVICE

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

    Authority:  47 U.S.C. 151, 154 (i), 201, 205, 214, 219, 220, 
254, 303(r), and 1302 unless otherwise noted.

    2. Amend Sec.  54.706 by adding paragraphs (f), (g), and (h) to 
read as follows:


Sec.  54.706  Contributions.

* * * * *
    (f) Registration Requirements. Every common carrier subject to the 
Communications Act of 1934, as amended, and every entity required to 
submit a Telecommunications Reporting Worksheet shall register with the 
Commission in accordance with the provisions of 47 CFR 64.1195(a) 
through (c) and the Instructions to the Telecommunications Reporting 
Worksheet within thirty days of the commencement of provision of 
service.
    (g) Deregistration Requirements. If a registrant stops providing 
interstate and international telecommunications to others, it shall 
deregister with the Commission within thirty days of its last provision 
of telecommunications. To deregister, a registrant must comply with the 
Instructions to the Telecommunications Reporting Worksheet.
    (h) Customer Confirmation Requirements. A telecommunications 
carrier or provider providing telecommunications to other carriers or 
providers shall have an affirmative duty to ascertain whether a 
customer that is required to register has in fact registered with the 
Commission prior to offering service to that customer.
    3. Amend Sec.  54.711 by adding paragraphs (d) and (e) to read as 
follows:


Sec.  54.711  Contributor reporting requirements.

* * * * *
    (d) Telecommunications Reporting Worksheet Revisions. The Wireline 
Competition Bureau shall annually issue a Public Notice seeking comment 
on the Telecommunications Reporting Worksheets and accompanying 
instructions. No later than 60 days prior to the annual filing 
deadline, the Wireline Competition Bureau shall issue a Public Notice 
attaching the finalized Telecommunications Reporting Worksheet and 
instructions.
    (e) Electronic Filings. Reporting entities must file the 
Telecommunications Reporting Worksheet electronically. The 
Administrator shall assess a $25 fee on reporting entities for filing 
paper copies of the quarterly Telecommunications Reporting Worksheet. 
The Administrator shall assess a $50 fee on reporting entities for 
filing paper copies of the annual Telecommunications Reporting 
Worksheet. The Administrator shall not assess a paper-filing fee on 
reporting entities that electronically file their Telecommunications 
Reporting Worksheet, but such entities must also submit either a paper 
or electronic certification attesting to the accuracy of the 
information reported therein under penalty of perjury.
    4. Amend Sec.  54.712 by adding paragraph (b) to read as follows:


Sec.  54.712  Contributor recovery of universal service costs from end 
users.

* * * * *
    (b) Lifeline Subscribers. Eligible telecommunications carriers 
covered by Sec. Sec.  69.131 and 69.158 are subject to the limitations 
on universal service end user charges set forth therein. All other 
eligible telecommunications carriers shall not recover federal 
universal service contribution costs from Lifeline services to Lifeline 
subscribers. This limitation does not apply to services to Lifeline 
subscribers that are not supported by Lifeline, such as per-minute or 
other additional charges beyond the service for which the customer 
receives Lifeline support.
    5. Amend Sec.  54.713 by revising paragraph (b) to read as follows:


Sec.  54.713  Contributor's failure to report or to contribute.

* * * * *
    (b) If a universal service fund contributor fails to make full 
payment of the monthly amount established by the contributor's 
applicable Form 499-A or Form 499-Q, or the monthly invoice provided by 
the Administrator, on or before the date due, the payment is 
delinquent. Late fees, interest charges, and penalties for failure to 
remit any payment by the date due shall apply regardless of whether the 
obligation to pay that amount is appealed or otherwise disputed unless 
the Administrator or the Commission (pursuant to Sec.  54.719) finds 
the disputed charges are the result of clear error by the 
Administrator. All such delinquent amounts shall incur from the date of 
delinquency, and until all charges and costs are paid in full, interest 
at the rate equal to the U.S. prime rate (in effect on the date of the 
delinquency) plus 3.5 percent, as well as administrative charges of 
collection and/or penalties and charges permitted by the applicable law 
(e.g., 31 U.S.C. 3717 and implementing regulations).
* * * * *
[FR Doc. 2012-13611 Filed 6-6-12; 8:45 am]
BILLING CODE 6712-01-P