[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Rules and Regulations]
[Pages 70881-70888]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28341]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 10-90; DA 13-2115]


Connect America Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
specifies service obligations of price cap carriers that accept Connect 
America Phase II model-based support through the state-level commitment 
process, and addressed how to determine what areas are considered as 
served by an unsubsidized competitor. Specifically, the Commission sets 
out how a price cap carrier satisfies the latency, usage allowance, and 
pricing requirements for Connect America Phase II. This document also 
addresses how these metrics will apply in determining what areas will 
be considered as served by an unsubsidized competitor.

DATES: Effective December 27, 2013, except for Sec.  54.313(a)(11), 
which contain new or modified information collection requirements that 
will not be effective until approved by the Office of Management and 
Budget. The Federal Communications Commission will publish a document 
in the Federal Register announcing the effective date for that section.

FOR FURTHER INFORMATION CONTACT: Ryan Yates, Wireline Competition 
Bureau, (202) 418-0886 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's Report and Order in WC Docket No. 10-90, and DA 
13-2115, released on October 31, 2013. 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. These documents 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. Or at the following Internet address: http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db1031/DA-13-2115A1.pdf.

I. Introduction

    1. In the USF/ICC Transformation Order, 78 FR 38227, June 26, 2013, 
the Federal Communications Commission (Commission) comprehensively 
reformed and modernized the universal service and intercarrier 
compensation systems to maintain voice service and extend broadband-
capable infrastructure to millions of Americans. As part of the reform, 
the Commission adopted a framework for providing support to areas 
served by price cap carriers, known as the Connect America Fund, 
through ``a combination of competitive bidding and a new forward-
looking model of the cost of constructing modern multi-purpose 
networks.'' In particular, the Commission will offer each price cap 
carrier monthly model-based support for a period of five years in 
exchange for a state-level commitment to serve specified areas within 
the state that are not served by an unsubsidized competitor, and if 
that offer is not accepted, will determine support through a 
competitive process.
    2. In this Report and Order (Order), the Wireline Competition 
Bureau (Bureau) takes further action to implement the Commission's 
direction that price cap carriers may elect to receive model-based 
support in certain areas in exchange for making a state-level 
commitment to meet the Commission's service obligations. The Bureau 
specifies the service obligations of price cap carriers that accept 
Phase II model-based support through the state-level commitment 
process. Specifically, the Bureau provides two options for a price cap 
carrier accepting model-based support to meet the Commission's 
requirements for reasonably comparable pricing of voice and broadband 
services. In addition, the Bureau specifies a 100 gigabyte (GB) minimum 
usage allowance that will initially apply to a price cap carrier 
accepting model-based support for Phase II-funded locations, to the 
extent the carrier chooses to set usage allowances in such areas. The 
Bureau also specifies latency requirements--specifically, that price 
cap carriers must have a provider round trip latency of 100 
milliseconds (ms) or less, and provide two options for how they may 
test and report compliance with this requirement. Finally, the Bureau 
addresses how we will apply these metrics to determine what areas we 
will consider as served by an unsubsidized competitor.

II. Discussion

A. Price Cap Carrier Obligations

    3. In this section, the Bureau discusses the specific metrics that 
will be used to determine compliance of recipients of model-based Phase 
II support with the Commission's service obligations. By setting these 
standards, the Bureau provides clarity to price cap carriers 
contemplating accepting Phase II support through the state-level 
commitment process. The Bureau details how compliance with the 
Commission's requirements will be evaluated, while creating a 
straightforward framework for oversight and accountability in Phase II. 
Price cap carriers should use the standards in this Order when making 
their annual certifications. The Commission will review these annual 
reports to ensure the standards set forth in this Order are being met 
and to evaluate price cap carriers' continuing eligibility for Phase II 
support.
    4. Price. The USF/ICC Transformation Order calls for rates for both 
voice and broadband between urban and rural areas to be reasonably 
comparable. The Bureau has adopted a survey instrument to conduct a 
rate survey, and the Bureau is working to conduct this survey in the 
near future. The Bureau anticipates that the rate survey data will be 
available, and the benchmarks set, prior to the deadline for Phase II 
state-level

[[Page 70882]]

commitment elections. Once these benchmarks are adopted, a price cap 
carrier accepting model-based support can certify that its rates 
conform to the reasonable comparability benchmark.
    5. Consistent with the Commission's approach when it adopted rules 
for the second round of Connect America Phase I incremental support, 
the Commission also adopted an alternative means for showing reasonable 
rate comparability: A carrier's rate for both voice and broadband will 
be presumed reasonably comparable if the carrier certifies that it is 
offering fixed services meeting our voice and broadband requirements 
for the same or lower prices in rural areas as urban areas. To qualify 
for this presumption, the qualifying service plan must have 
substantially similar terms and conditions in both urban and rural 
areas. This approach recognizes that if rates in rural areas are the 
same as urban areas, that by definition complies with the reasonable 
comparability principles set forth in section 254(b). In order to 
certify that rates are reasonably comparable under this presumption, 
the rates in Phase II-funded areas must be the same or lower than rates 
for fixed wireline services in urban areas. The Bureau does not require 
the carrier to offer a particular rate nationwide; rather, it is 
sufficient if the carrier offers the same rate in an urban area in the 
state where it accepts Phase II funding.
    6. The Bureau recognizes that, in comparing urban and rural 
offerings, carriers may not offer service plans that exactly match the 
minimum service obligations for Connect America. Therefore, in 
certifying that rural rates are at or below urban rates, the basis for 
comparison should be the lowest cost non-promotional rate for an urban 
service offering that meets or exceeds each dimension of the service 
obligations set in this Order.
    7. In adopting this presumption, the Bureau concludes that the 
relevant comparison for a price cap carrier accepting model-based 
support is to rates and usage allowances for fixed wireline services in 
urban areas. Some carriers eligible for Phase II funding offer a fixed 
wireless product in urban areas that may meet all of the service 
obligations described herein, but such offerings are typically offered 
at a higher price for a given amount of data usage than typical 
wireline offerings. Given the Commission's reference in its discussion 
of capacity to the typical data allowances of wireline broadband 
offerings, the Bureau does not believe it would be consistent with the 
Commission's framework for a price cap carrier accepting model-based 
support to meet its reasonable comparability obligations by relying on 
uniform pricing for fixed wireless offerings. Rather, a price cap 
carrier making a reasonable comparability certification for model-based 
support must look to the prices and usage allowances of its fixed 
wireline offerings in urban areas.
    8. This presumption may be overcome in extreme circumstances where 
other evidence strongly suggests that the price cap carrier is relying 
on the existence of a rate plan in urban areas to which few consumers 
subscribe. For example, it would not be reasonable for a price cap 
carrier to rely on the offering of the same service at the same rate in 
urban and rural areas when only a de minimus number of customers 
subscribe to the service offering in the urban area. Similarly, the 
presumption may be overcome if a carrier is only offering the service 
plan in a very small portion of the urban area.
    9. As proposed in the Phase II Service Obligations Public Notice, 
78 FR 16456, March 15, 2013, an urban area is defined as any ``urban 
area'' or ``urban cluster'' that sits within a Metropolitan Statistical 
Area, as defined by the Census Bureau. A carrier need only make the 
offering in part of the ``urban area'' or ``urban cluster'' to qualify. 
The presumption of reasonable comparability under this alternative 
provides carriers needed certainty in making their elections and is 
supported by parties in the record.
    10. The rate survey benchmarks, once adopted, will serve as a safe 
harbor. To the extent the rates in question for funded locations are at 
or below the benchmarks established through the rate survey, that will 
be sufficient to meet the Commission's reasonable comparability 
requirements.
    11. Usage Allowance. Under the USF/ICC Transformation Order, Phase 
II recipients must provide broadband with usage allowances reasonably 
comparable to those available through comparable offerings in urban 
areas. The Commission set some guide posts as to what would be deemed 
reasonably comparable, noting that a 250 GB per month usage allowance 
would likely be reasonably comparable, while a 10 GB per month usage 
allowance would not. The Commission delegated to the Bureau the task of 
setting a specific minimum usage allowance and specified that minimum 
should be adjusted over time.
    12. In the Service Obligations Public Notice, the Bureau sought 
comment on two methods of setting the minimum usage allowance: The 
first method was based on what activities could be undertaken with a 
particular data allowance, and the second method was based on current 
consumer data usage patterns. The Bureau also inquired as to whether 
the minimum usage allowance should be a fixed standard, or whether it 
should grow during the term of Phase II.
    13. The Commission envisioned that price cap carriers accepting 
model-based support would build ``robust, scalable networks.'' As such, 
the Bureau does not expect those carriers accepting model-based support 
would impose the kind of usage allowances that typically exist today 
for many wireless and satellite offerings. Indeed, such usage 
allowances would be incompatible with the fiber-based forward looking 
cost model approach that the Bureau has adopted. To provide clarity in 
the event a price cap carrier sets any usage allowance for the service 
offering that it relies upon to meet its universal service obligations 
for acceptance of model-based support, however, we specify an initial 
minimum allowed usage limit of 100 GB per month, with the opportunity 
to obtain additional data usage at a reasonable price to the extent the 
price cap carrier chooses to offer a plan providing the minimum 
specified amount. The Bureau concludes that 100 GB is a reasonable 
initial usage allowance for price cap carriers making a state-level 
commitment. According to the Commission's most recent data, 80 percent 
of cable/fiber users--most of which are likely to be in urban areas--
currently use less than 100 GB per month. As discussed in the Phase II 
Service Obligations Public Notice and shown in the chart below, this 
would provide for a mid-level basket of video related activities, 
including viewing over 20 hours of video per week and the ability to 
load hundreds of Web sites each day. And, the Bureau emphasizes that 
the 100 GB per month is the minimum usage--price cap carriers are free 
to offer plans with additional usage and indeed the Bureau encourages 
price cap carriers to offer a variety of plans in rural areas as they 
do in urban areas.

[[Page 70883]]



          Broadband Applications Possible With 100 GB of Usage
------------------------------------------------------------------------
 
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Video Applications (Education (including    95 Hours.
 digital learning), Healthcare, Business,
 Community Engagement and Other Activities
 Such As Video Conferencing with Family).
plus E-mails Sent/Received for Personal     5,000 E-mails.
 and Professional Correspondence.
plus Websites Loaded (Activities Such As    14,500 Websites.
 Job Searching, Education, Banking,
 Health, and Government Services).
------------------------------------------------------------------------

    14. Other parties have called for a lower minimum usage limit, with 
some advocating for limits at or below 20 GB per month and others 
suggesting 60 GB. However, a 20 GB limit would fall well short of 
existing fixed broadband usage levels--over two-thirds of cable and 
fiber subscribers currently consume in excess of 20 GB of data per 
month. Nor is the Bureau convinced we should establish a minimum usage 
allowance of 60 GB for price cap carriers accepting model-based 
support. Over 30 percent of current fiber and cable subscribers 
consumed in excess of 60 GB of data per month, and consumers are likely 
to consume more, not less, over time. The Bureau is guided by the 
Commission's statement that ``Americans should have access to broadband 
that is capable of enabling the kinds of key applications that drive 
our efforts to achieve universal broadband, including education (e.g., 
distance/online learning), health care (e.g., remote health 
monitoring), and person-to-person communications (e.g., VoIP or online 
video chat with loved ones serving overseas).'' While the Commission 
recognized that service obligations may need to be relaxed in some 
fashion for extremely high cost areas, the Bureau concludes that a 
usage limit of 20 GB, or 60 GB, for price cap carriers accepting model-
based support is not consistent with the robust, scalable networks that 
the Commission expects such providers to deploy.
    15. The Bureau requires price cap carriers accepting model-based 
Phase II support to offer a minimum usage allowance over the course of 
Phase II's five-year term that remains consistent with trends in usage 
for 80 percent of consumers using cable or fiber-based fixed broadband 
services. As an alternative to any national data set (such as Measuring 
Broadband America) that demonstrates trends in usage over time, the 
Bureau will deem a price cap carrier to be in compliance with this 
usage allowance requirement in future years if its minimum usage 
allowance for Connect America funded locations is at least 100 GB and 
is at or above the usage level for 80 percent of all of its broadband 
subscribers, including those subscribers that live outside of Phase II 
funded areas. Given the size and scale of most price cap carriers, it 
is reasonable to presume that their individual data would be consistent 
with national data, and this alternative will enable price cap carriers 
to anticipate how their usage allowances may change in the future.
    16. Latency. In the USF/ICC Transformation Order, the Commission 
required Phase II recipients to provide latency sufficient for real-
time applications, such as VoIP. In this section, the Bureau describes 
how they will implement this requirement for price cap carriers that 
accept Phase II model-based support.
    17. The Bureau agrees with WISPA that because latency can be 
defined and measured in many ways, ``a clear, workable, measureable 
definition of `latency''' is necessary. The Bureau also agrees with 
commenters that argue the Commission should base its performance 
metrics on ``empirical data.'' After consideration of the record, the 
Bureau therefore bases our standard on the International 
Telecommunication Union (ITU) G.114 design objectives. ITU Standard 
G.114 provides that consumers are ``very satisfied'' with the quality 
of VoIP calls up to a mouth-to-ear latency of approximately 200 ms. The 
ITU has determined that consumers become less satisfied with the 
quality of VoIP calls when total mouth-to-ear latency is above 200 ms. 
Therefore, the Bureau concludes that a reasonable approach is a 
framework that should result in mouth-to-ear latency of 200 ms or less.
    18. The Bureau recognizes that price cap carriers accepting model-
based support may not presently have a way to measure end-to-end 
latency, and therefore adopt an approach that allows them to certify 
they are meeting the Commission's requirements based on a provider 
round-trip latency measure. The ITU latency calculations are ``mouth-
to-ear'' one-way path measurements which include: The signal conversion 
at the input (the conversion of the speaker's voice to digital 
packets); the broadband provider's network path from the input device 
to the Internet core; the path through the Internet core; the broadband 
provider's network path from the Internet core over the provider's 
network to the output device; and the signal conversion at the output 
device (the conversion of the digital packets back to voice for the 
listener). ITU Standard Y.1541 calculates input and output terminal 
conversion delays together to be between 50 and 80 ms. Based on these 
ITU calculations and other research, we use 75 ms for purposes of 
calculating conversion delays. An assumed conversion delay of 75 ms 
means that the total latency for the network path to the Internet core, 
the Internet core, and the network path from the Internet core to the 
output device would need to be no greater than 125 ms if 200 ms mouth-
to-ear latency limit is to be maintained.

[[Page 70884]]

[GRAPHIC] [TIFF OMITTED] TR27NO13.021

    19. Based on ITU calculations and reported core latencies in the 
contiguous United States, the Bureau assumes 50 ms as the roundtrip (25 
ms one way) core Internet latency in our calculations. The assumed 75 
ms for conversion delay and assumed 50 ms (25 ms one way) for the 
Internet core path means that the provider network path from the input 
device to the Internet core and from the Internet core to the output 
device must be no more than 100 ms (50 for each provider segment) in 
order to maintain an overall mouth-to-ear latency limit of 200 ms. 
Because existing network management systems, ping tests, or other 
commonly available network measurement tools typically calculate 
latency as a round-trip measurement, we adopt a 100 ms provider latency 
round-trip limit, which is consistent with the 50 ms one-way latency 
assumption for the path from the input device to the Internet core.
[GRAPHIC] [TIFF OMITTED] TR27NO13.022

    20. To show that it is meeting this standard, a price cap carrier 
accepting model-based support will need to certify that 95 percent or 
more of all peak period measurements (also referred to as observations) 
of network round trip latency are at or below 100 ms. As suggested in 
the Phase II Service Obligations Public Notice, measurements should be 
taken during peak period (defined as weeknights between 7:00 p.m. to 
11:00 p.m. local time) between the customer premises and the closest 
designated Internet core peering interconnection point (often referred 
to as an Internet Exchange Point--IXP). The measurements should be 
conducted over a minimum of two consecutive weeks during peak hours for 
at least 50 randomly-selected customer locations within the census 
blocks of each state for which the provider is receiving model-based 
support using existing network management systems, ping tests, or other 
commonly available network measurement tools.
    21. The Bureau acknowledges that measuring latency is a complex 
task that requires detailed testing protocols. To minimize the cost of 
testing and ensure that it can be done relatively quickly, the Bureau 
will allow providers to rely on existing network management systems, 
ping tests, or other commonly available network measurement tools. 
Although the Bureau recognizes that these types of tests have 
drawbacks, such as a possible low priority handling/response times at 
target servers, low quality of service (QoS) handling/packet drops in 
intermediate nodes, and generally small packet sizes, the Bureau 
concludes that this approach strikes the appropriate balance of 
implementing Phase II quickly, with some assurance that Phase II funded 
locations will have the service that the Commission expects, without 
requiring carriers accepting model-based support to make a significant 
investment in testing infrastructure.
    22. As an alternative to conducting ping-like tests, carriers 
participating in the MBA program may use the results from that testing 
to support certification that they meet the latency requirement. To use 
MBA results, carriers will need to deploy at least 50 white boxes to 
customers within the Phase II-funded areas within each state, i.e. at 
least 50 white boxes per state distributed throughout the Phase II-
funded areas within that state. The white box costs and any associated 
administrative costs imposed by the MBA program would be the carrier's 
responsibility. Because white boxes take measurements on a continuous 
basis, a carrier would prove

[[Page 70885]]

compliance with the latency limit by certifying that 95 percent or more 
of the measurements taken during peak periods for a period of two weeks 
were at or below 100 ms.
    23. The Bureau is not persuaded by AT&T's argument that the 
Commission should not set a specific numerical latency standard and 
should instead ``assume that wireline networks capable of delivering 
speeds of 4/1 and greater will meet the latency requirements for real-
time applications such as VoIP.'' Although results from the most recent 
MBA testing show that providers using fiber, cable, or DSL technology 
are generally able to meet or exceed 100 ms provider-round trip latency 
95 percent limit, MBA testing is currently limited to only large 
providers. Not all of the price cap carriers eligible for Phase II 
support are participating in this program and, in any event, we have no 
assurance that the measurements taken in MBA are taken at Phase II-
funded locations. Moreover, MBA testing results show that there can be 
a great disparity in latency among different locations served by a 
single provider. The Bureau concludes it is necessary for carriers to 
test latency in the census blocks where they will be receiving Phase II 
funding, and not rely on MBA data that may be derived from other 
locations.
    24. The Bureau also disagrees with ViaSat's argument that ``network 
latency need not impact the end-user experience'' and that adoption of 
a numerical latency standard could ``violate the Commission's policy of 
technological neutrality.'' To the contrary, the ITU's extensive VoIP 
calculations show that consumer satisfaction is improved by lower 
latency. Further, adoption of a numerical standard designed to meet 
reasonable regulatory objectives does not violate technological 
neutrality simply because some technologies or service providers cannot 
meet that standard. Failing to specify how the Commission's 
requirements will be enforced in practical terms that can be 
incorporated into business planning would be a disservice both to price 
cap carriers accepting Phase II support and to consumers that stand to 
benefit from Phase II deployments. Quantifiable metrics provide 
certainty to these price cap carriers at the time they accept funding: 
they are aware of the specific performance standards they must meet in 
order to satisfy their obligations. These metrics also give federal and 
state regulators a bright line standard against which to hold these 
Phase II recipients accountable, ensuring that they perform in line 
with expectations. Failing to provide such clarity would result in 
obligations that are difficult to anticipate, difficult to measure, and 
difficult to enforce.
    25. The Bureau notes that they are adopting a more lenient approach 
than the 60 ms average latency standard they originally proposed in the 
Public Notice. The Bureau does so after consideration of the ITU 
conclusion that consumers are ``very satisfied'' with the quality of 
VoIP calls up to an ear-to-mouth latency of approximately 200 ms and 
the record received in this proceeding. The Bureau agrees that the ITU 
data for a VoIP call are an appropriate basis for determining latency 
sufficient for this aspect of Phase II, and we believe the 100 ms limit 
adopted herein is consistent with ITU data.
    26. The Bureau disagrees with ACS that ``[i]t is particularly 
important to develop testing solutions not dependent on customer usage, 
as there is an expected increase in latency over Internet Protocol 
networks as customer usage nears the peak capacity of the service.'' 
Although the Bureau agrees that latency is affected by customer usage, 
this does not lead to a conclusion that testing should be done at times 
of low customer usage. Latency sufficient for real-time applications 
such as VoIP must be available to consumers during the time they use 
the Internet. A network with low latency does not benefit most 
consumers if the low latency is only available when few customers are 
using the Internet. Therefore, the Bureau has adopted testing 
specifications that require testing to be conducted during the peak 
hours, weeknights between 7:00 p.m. to 11:00 p.m. local time. The 
Bureau believes that measurements conducted during the peak period will 
demonstrate the latency experienced by the majority of customers.
    27. The Bureau does not believe that the testing methodology they 
have adopted will impose an undue burden on providers, as there are 
readily available hardware and software solutions for conducting such 
testing. The latency testing requires only 50 Phase II-funded locations 
in a state to be measured over a two-week period per quarter using 
existing or readily acquired network management or performance 
management systems. Many providers already perform network management 
tests to monitor network performance. Network devices commonly support 
ICMP and SNMP, as well as other vendor-specific tests such as Cisco's 
IP service level agreement (SLA) command line. In addition, for those 
carriers that either currently participate in or join the MBA program, 
the Bureau will allow the use of MBA test results from Phase II-funded 
locations as an alternative basis for certifying compliance with our 
requirements. Therefore, even if a provider does not already have a 
testing mechanism in use for its network, the means to conduct such 
testing are readily available.
    28. The Bureau is not persuaded by USTelecom's claims that testing 
should be ``between the customer premises to the provider's transit or 
peering interconnection point, at least in cases where there is a 
transit or peering interconnection point located in the same state as 
the customer premises being measured.'' The Commission determined that 
latency should be sufficient to allow consumers to make use of real-
time applications such as VoIP. Testing latency on only a portion of 
the network connecting a consumer to the Internet core will not show 
whether that customer is able to enjoy high-quality real-time 
applications because it is network performance from the customer's 
location to the destination that determines the quality of the service 
from the customer's perspective.
    29. Further, while a price cap carrier accepting Phase II model-
based support may not have direct control over any middle-mile or 
transit providers with which it connects, it does have influence over 
its transit providers. For example, a last-mile provider can compare 
the quality of service offered by transit providers and select one with 
a higher quality of service. In addition, the last-mile provider can 
improve its latency by purchasing additional capacity from the transit 
provider or by negotiating a SLA. Last-mile providers can also 
implement dual homing to more than one transit provider to ensure a 
higher quality of service. Measuring latency from the customer location 
to designated Internet exchange points will show if customers are being 
provided with service that allows use of real-time applications by 
giving price cap carriers accepting Phase II model-based support strong 
incentives to maintain a high-quality network and to use sufficient, 
high-quality transit providers.
    30. The Bureau concludes that the metrics adopted today provide 
sufficient flexibility that price cap carriers serving markets with 
unique conditions, such as Alaska, will be able to make the necessary 
certifications. ACS argues that when measuring broadband latency in 
Alaska, the Commission must take into account the long transmission 
facilities in Alaska, which often include point-to-point microwave, 
satellite transport, and

[[Page 70886]]

undersea cable, as well as the remote location of Internet exchange 
points. The Bureau does not believe that that the use of point-to-point 
microwave links will adversely affect the latency of broadband services 
in most cases. ITU planning values for delays of different technologies 
indicate that coaxial fiber has a higher delay time at 5 microseconds 
per kilometer whereas microwave transmissions (radio-relay) are at 4 
microseconds per kilometer. Indeed, there has recently been renewed 
interest in microwave technology to support low-latency applications.
    31. Conversely, the use of geostationary satellite technologies 
would substantially affect a price cap carrier's ability to meet the 
200 ms end-to-end latency standard we adopt herein. Although satellite 
transmissions travel at rates faster than copper, cable, or fiber 
transmissions, the satellite's distance from Earth makes achievement of 
the 200 ms end-to-end transmission (100 ms limit for the round-trip 
carrier portion) impossible. Therefore, the Bureau presumes that ACS 
would not include customers served by satellite technologies in the 50 
measurement locations required for latency testing. ACS has not alleged 
that a majority, or even a substantial number, of its customers are 
served by satellite technologies, so elimination of satellite customers 
from testing calculations should resolve this concern.
    32. ACS also alleges that the use of undersea cable in its network 
and the distance between customers and Internet exchange points could 
affect ACS's ability to meet the latency standard. It is possible that 
the use of undersea cable, depending upon the type and length of cable, 
could affect latency determinations for providers serving Alaska. 
Therefore, providers in noncontiguous areas of the United States should 
conduct their latency network testing from the customer location to a 
point at which traffic is consolidated for transport to an Internet 
exchange point in the continental United States. For example, 
speedtest.net has five servers located in Anchorage, Alaska, and one in 
Fairbanks, Alaska, that could be used for network testing. Although the 
Bureau allows providers in noncontiguous areas of the United States to 
conduct their latency network testing from the customer location to a 
point at which traffic is consolidated for undersea cable transport to 
an IXP in the continental United States, the Bureau may not extend this 
exception to other circumstances without additional evidence that such 
an exception is warranted. The Bureau notes that MBA 2013 data results 
show that the 25 Time Warner Cable-based customer locations in Hawaii 
were able to meet the 100 ms limit 95 percent or more of the time. 
Hawaii, at approximately 2,500 miles from the continental United 
States, is over double the undersea cable distance from a continental 
United States-based IXP as Anchorage, Alaska.
    33. ACS notes that with peering points ``over a thousand miles away 
in Oregon and Washington,'' its ability to conduct testing and improve 
results is limited. The Bureau's decision that testing for 
noncontiguous parts of the United States should be conducted between 
the customer location and the point at which traffic is aggregated for 
transport to the continental United States via undersea cable should 
resolve this issue. Moreover, for remote points within Alaska, MBA 
testing data shows that although there is a correlation between 
distance and latency, the 200 ms end-to-end standard (100 ms roundtrip 
limit 95 percent or more of the time for the carrier portion) is 
reasonable for distances of 700 or more miles, as data from Measuring 
Broadband America testing in Hawaii shows. The MBA February 2013 Report 
shows that the mean latency for measurements 700 miles from the test 
server was 44.7 ms roundtrip. Thus, even for customer locations in 
Alaska located a substantial distance from a point used for aggregating 
traffic for transport to the continental United States, an Alaska 
provider should be able to meet the 200 ms end-to-end standard (100 ms 
roundtrip limit for the carrier portion).
    34. Buildout Measurement. In order to satisfy their state-level 
commitment, Phase II recipients must deploy voice and broadband-capable 
networks and offer services meeting the above performance metrics to a 
specified number of locations. The Bureau expects to release a Public 
Notice specifying the number of locations that recipients of model-
based support will be required to serve, based on the Connect America 
Cost Model, state by state, so that carriers are aware at the time of 
acceptance the required number of locations. Three years after making a 
state-level commitment, a carrier must have deployed voice and 
broadband-capable networks to 85 percent of the specified number of 
locations in the given state. Five years after making a state-level 
commitment, a carrier must have deployed voice and broadband-capable 
networks to the total number of locations as specified by the Bureau.
    35. Generally, all deployment must occur in census blocks funded 
under the Connect America Cost Model. However, the USF/ICC 
Transformation Order states that ``[i]n meeting its obligation to serve 
a particular number of locations in a state, an incumbent that has 
accepted the state-level commitment may choose to serve some census 
blocks with costs above the highest cost threshold instead of eligible 
census blocks (i.e., census blocks with lower costs), provided that it 
meets the public interest obligations in those census blocks, and 
provided that the total number of unserved locations and the total 
number of locations covered is greater than or equal to the number of 
locations in the eligible census blocks.'' Thus, a carrier could build 
to one of these higher-cost locations in lieu of building to a location 
in one of its eligible census blocks as originally planned.

B. Unsubsidized Competitors

    36. In adopting the USF/ICC Transformation Order, the Commission 
directed that Phase II support should not go to any ``areas where an 
unsubsidized competitor offers broadband service that meets the 
broadband performance requirements'' of Phase II. An unsubsidized 
competitor is defined as a facilities-based provider of residential 
terrestrial fixed voice and broadband service that does not receive 
high-cost support. The Commission delegated to the Bureau the task of 
implementing the specific requirements of the unsubsidized competitor 
rule and determining what areas should be considered as served by an 
unsubsidized competitor. In the Phase II Challenge Process Order, 78 FR 
32991, June 3, 2013, the Bureau determined that an area would be 
presumed as served by an unsubsidized competitor if the area was shown 
on the National Broadband Map as served by a provider with speeds of 3 
Mbps/768 kbps, and that provider was shown on Form 477 data as 
providing voice service in that state. Thus, a potential unsubsidized 
provider need only make a showing regarding the metrics discussed in 
this Order in two circumstances: first, if it challenges an area 
initially designated as unserved, claiming that the area should instead 
be treated as served; or second, if it is responding to a challenger's 
claim that one of the census blocks shown as served by the provider is 
in fact unserved.
    37. Consistent with the Commission's direction in the USF/ICC 
Transformation Order, the Bureau concludes that unsubsidized 
competitors should meet the same standards we require of Phase II price 
cap carrier recipients. To exclude an area from Phase II support, an 
unsubsidized competitor must be

[[Page 70887]]

offering broadband and voice service that would meet the Commission's 
requirements for price cap carriers receiving model-based support. 
However, certain adjustments are necessary, not only to make an 
administrable system for determining what areas should be excluded from 
support, but also to account for the diversity of circumstances that 
potential unsubsidized competitors face.
    38. Unsubsidized competitor. The Commission directed the Bureau to 
exclude areas with unsubsidized competitors from Phase II funding. The 
codified rule states that an unsubsidized competitor is one that ``does 
not receive high-cost support.'' The Commission's intent in adopting 
this rule was to preclude support to areas where voice and broadband is 
available without burdening the federal support mechanisms. The Bureau 
will presume that any recipient of high-cost support at the time the 
challenge process is conducted does not meet the literal terms of the 
definition, but will entertain challenges to that presumption from any 
competitive eligible telecommunications carrier that otherwise meets or 
exceeds the performance obligations established herein and whose high-
cost support is scheduled to be eliminated during the five-year term of 
Phase II. This will provide an opportunity for the Commission to 
consider whether to waive application of the ``unsubsidized'' element 
of the unsubsidized competitor definition in situations that would 
result in Phase II support being used to overbuild an existing 
broadband-capable network.
    39. Speed. In the Phase II Service Obligations Public Notice, the 
Bureau sought comment on what proxy we should use for the requirement 
that an unsubsidized competitor provides 4 Mbps/1 Mbps service. 
Providers meeting this proxy would be presumed to meet the speed 
requirement of an unsubsidized competitor. The Bureau concludes that 
the proxy for 4 Mbps/1 Mbps broadband should be set at 3 Mbps/768 kbps, 
as data on 3 Mbps/768 kbps deployment are available on the National 
Broadband Map. This is consistent with the precedent established by the 
Commission in the USF/ICC Transformation Order, as well as its 
conclusions in the Phase I Order, 78 FR 38227, June 26, 2013. 
Commenters note that areas served by an unsubsidized competitor with 
speeds of 3 Mbps/768 kbps are often already served by speeds of 4 Mbps/
1 Mbps. If the Bureau were to use a 6 Mbps/1.5 Mbps proxy, areas served 
by speeds of only 4 Mbps/1 Mbps would be presumed unserved. This would 
have the effect of burdening potential unsubsidized competitors, many 
of which are small businesses, requiring them to come forward in the 
challenge process discussed in the Phase II Challenge Process Order and 
show that they are actually providing 4 Mbps/1 Mbps service.
    40. Pricing. Under the presumptions the Bureau adopted in the Phase 
II Challenge Process Order, a provider would be initially presumed to 
meet the reasonably comparable pricing requirement, so long as it was 
shown on the National Broadband Map as offering 3 Mbps/768 kbps service 
and shown on Form 477 data as offering voice service in the relevant 
state. The Bureau now adopts a conclusive presumption that a potential 
unsubsidized competitor is offering reasonably comparable prices if it 
offers the same or lower rates in rural markets as it does for fixed 
wireline offerings meeting the requisite standards in urban markets. In 
such circumstances, the Commission's policy objective of ensuring 
consumers have access to reasonably comparable services at reasonably 
comparable rates should be achieved.
    41. The Bureau also adopts a conclusive presumption that if a 
potential unsubsidized competitor is competing in a particular census 
block with the incumbent price cap carrier, and both are offering 
services that offer at least 4 Mbps downstream, and at least 1 Mbps 
upstream, and at least 100 GB of data, the pricing of the competitor 
will be deemed reasonable, and not subject to challenge. Given the 
finite $1.8 billion budget for Phase II, the Bureau did not find it 
efficient to target funding to such areas that already have two 
providers offering service meeting the Phase II standards for price cap 
carriers, when there are likely to be other census blocks where the 
average cost exceeds the funding threshold that have no providers at 
all.
    42. The Bureau now turns to situations where the potential 
competitor does not offer fixed wireline service in urban areas, or 
does not serve an area where the incumbent itself offers broadband. 
Once the Bureau adopts the urban rate benchmark, the pricing of such a 
potential competitor will not be subject to challenge if it at or below 
the urban rate benchmark. Stated differently, there will be a 
conclusive presumption that the pricing of any operator with non-
promotional rates below the urban rate benchmark is reasonable. In the 
event the challenge process is underway prior to the publication of the 
urban rate benchmark resulting from the urban rate survey, however, the 
Bureau will need a simple, administratively workable method of 
determining whether the price cap carrier has made a prima facie case 
regarding pricing that shifts the burden to the other provider to 
respond. In the Phase II Service Obligations Public Notice, the Bureau 
sought comment on whether to adopt on an interim basis reasonable 
comparability benchmarks of $37 for voice service and $60 for broadband 
service. The Bureau now adopts such an approach on an interim basis, 
which will enable the Bureau to quickly and efficiently adjudicate 
challenges to the extent that process occurs before the adoption of the 
urban rate benchmark.
    43. In order to make a prima facie case to proceed with a challenge 
in situations where the conclusive presumptions discussed above do not 
apply, a price cap carrier seeking to overturn the classification of a 
particular block as served based on a lack of reasonably comparable 
pricing would need to demonstrate that the provider's advertised non-
promotional price for the lowest cost broadband service offering is 
above $60 and/or the provider's advertised non-promotional price for 
the lowest cost voice service offering is above $37. If the price cap 
carrier successfully makes such a showing, the burden then would shift 
to the other provider to submit evidence that its rates are in fact 
reasonably comparable. The provider can defeat the challenge by 
demonstrating either that: (1) It does in fact offer a qualifying 
broadband offering at a price at or below $60 and a voice offering at 
or below $37; (2) its rates nonetheless should be deemed reasonably 
comparable because it offers a more robust broadband service than the 
minimum requirements established for price cap carriers accepting Phase 
II support; or (3) its rates are the same as those of other providers 
in nearby urban markets where there are two or more providers offering 
fixed services meeting the Commission's standards.
    44. The Bureau now addresses what showing is necessary when a 
provider is challenging the initial designation of a census block as 
unserved, arguing that instead the block should be treated as served by 
the provider. Prior to adoption of the urban rate benchmark, the 
provider may demonstrate that (1) it offers a qualifying broadband 
offering at a price at or below $60 and a voice offering at or below 
$37; (2) its rates nonetheless should be deemed reasonably comparable 
because it offers a more robust broadband service than the minimum 
requirements established for price cap carriers accepting Phase II

[[Page 70888]]

support; (3) it offers service meeting or exceeding the specified 
performance requirements for the same or lower rates in rural areas as 
it does for fixed wireline offerings in urban areas; or (4) both it and 
the price cap carrier are serving that census block and therefore its 
rates should be presumed reasonably comparable. After the adoption of 
the urban rate benchmark, the provider may present evidence that its 
rates are lower than the benchmark. If it successfully makes any of 
these showings, and the price cap carrier fails to offer sufficient 
contrary evidence, the provider will be deemed to be offering 
reasonably comparable rates. In responding to an unserved-to-served 
challenge, price cap carriers may contest the factual assertions made 
by the provider.

III. Procedural Matters

A. Paperwork Reduction Act

    45. This document contains new information collection requirements 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. It will be submitted to the Office of Management and Budget (OMB) 
for review under Section 3507(d) of the PRA. OMB, the general public, 
and other Federal agencies are invited to comment on the new or 
modified information collection requirements contained in this 
proceeding. In addition, the Bureau notes that pursuant to the Small 
Business Paperwork Relief Act of 2002, they previously sought specific 
comment on how the Commission might further reduce the information 
collection burden for small business concerns with fewer than 25 
employees.
    46. In this present document, the Bureau has assessed the effects 
of requiring price cap carriers to report certain information related 
to their Phase II service obligations. As all price cap carriers employ 
more than 25 employees, these changes will have no impact on businesses 
with fewer than 25 employees. Some changes adopted in this Order affect 
how unsubsidized competitors report information related to the 
challenge process. Unsubsidized competitors may be businesses with 
fewer than 25 employees. However, the changes adopted herein fall under 
previous OMB approval for the Phase II challenge process.

B. Final Regulatory Flexibility Certification

    47. The Regulatory Flexibility Act of 1980, as amended (RFA) 
requires that a regulatory flexibility analysis be prepared for 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' The RFA generally defines ``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 Small Business Administration 
(SBA).
    48. The metrics and standards for determining compliance with the 
Commission's service requirements contained in the ``Price Cap Carrier 
Obligations'' section of this Order do not have a significant economic 
impact on a substantial number of small entities. The requirements in 
that section only directly affect price cap carriers that ultimately 
elect to accept Phase II support through the state-level commitment. 
The vast majority of these affected carriers are not small businesses. 
As separate and independent grounds, we also conclude that articulating 
objective quantitative metrics for demonstrating compliance with the 
standards adopted by the Commission creates only a de minimis economic 
impact. The metrics and standards adopted in the ``Unsubsidized 
Competitors'' section of this Order could affect a substantial number 
of small entities, depending on how many such entities participate in 
the challenge process. However, in setting the proxy by which we will 
determine whether an unsubsidized competitor offers 4 Mbps/1 Mbps 
service and stating a how an unsubsidized competitor can make a showing 
that its rates are reasonably comparable, we create only a de minimis 
economic impact. Therefore, we certify that the requirements of this 
Order will not have a significant economic impact on a substantial 
number of small entities. The Commission will send a copy of the order 
including a copy of this final certification, in a report to Congress 
pursuant to the Small Business Regulatory Enforcement Fairness Act of 
1996, see 5 U.S.C. 801(a)(1)(A). In addition, the order and this 
certification will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration, and will be published in the Federal 
Register. See 5 U.S.C. 605(b).

C. Congressional Review Act

    49. The Commission will send a copy of this order to Congress and 
the Government Accountability Office pursuant to the Congressional 
Review Act.

IV. Ordering Clauses

    50. Accordingly, it is ordered that, pursuant to sections 1, 4(i), 
5(c), 201(b), 214, and 254 of the Communications Act of 1934, as 
amended, and section 706 of the Telecommunications Act of 1996, 47 
U.S.C. 151, 154(i), 155(c), 201(b), 214, 254, 1302, sections 0.91 and 
0.291 of the Commission's rules, 47 CFR 0.91, 0.291, and the 
delegations of authority in paragraphs 112, 170, and 171 of the USF/ICC 
Transformation Order, FCC 11-161, this Report and Order is adopted, 
effective thirty (30) days after publication of the text or summary 
thereof in the Federal Register, except for the provisions subject to 
the PRA, which will become effective upon announcement in the Federal 
Register of OMB approval of the subject information collection 
requirements.

Federal Comunications Commission.
Kimberly A. Scardino,
Chief, Telecommunications Access Policy Division, Wireline Competition 
Bureau.
[FR Doc. 2013-28341 Filed 11-26-13; 8:45 am]
BILLING CODE 6712-01-P