[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Proposed Rules]
[Pages 76791-76795]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30144]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90; DA 13-2304]


Availability of Version 4.0 of the Connect America Fund Phase II 
Cost Model; Adopting Current Default Inputs in Final Version of Model

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Wireline Competition Bureau announces 
that version four of the Connect America Cost Model (CAM v4.0) will be 
available shortly. The Bureau seeks comment on whether the Bureau 
should adopt this version of CAM and the default inputs for purposes of 
calculating cost in price cap areas for implementing Connect America 
Phase II.

DATES: Comments are due on or before January 7, 2014.

ADDRESSES: Interested parties may file comments on or before January 7, 
2014. All pleadings are to reference WC Docket No. 10-90. Comments may 
be filed using the Commission's Electronic Comment Filing System (ECFS) 
or by filing paper copies, by any of the following methods:
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing.
     People with Disabilities: 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), (202) 418-0432 (tty).

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: Katie King, Wireline Competition 
Bureau at (202) 418-7491 or TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's document in WC Docket No. 10-90; DA 13-2304, 
released December 2, 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. The document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via Internet at http://www.bcpiweb.com.
    1. The Wireline Competition Bureau (Bureau) announces that version 
four of the Connect America Cost Model (CAM v4.0), which incorporates a 
number of modifications, including additional adjustments to address 
the unique circumstances and operating conditions in the non-contiguous 
areas of the United States, will be available shortly. The Bureau seeks 
comment on whether they should adopt this version of CAM and the 
default inputs for purposes of calculating costs in price cap areas for 
implementing Connect America Phase II.
    2. Overview of Changes in CAM v4.0. As described in more detail 
below, CAM v4.0 includes a number of modifications to address the 
unique circumstances and operating conditions in the non-contiguous 
areas of the United States. In particular, CAM v4.0 calculates the cost 
of submarine cables used for middle mile connections between intra-
state points in non-contiguous areas. It also updates the plant mix 
values for the non-contiguous carriers, and assumes that buried plant 
is placed in conduit in non-contiguous areas to provide additional 
protection from harsh weather. This version modifies the prior 
methodology used for determining input values for terrain in non-
contiguous areas, and it treats Alaska Communications Systems (ACS) as 
a small carrier for purposes of calculating its operating expenses. It 
also uses state-specific values for certain capital expense inputs for 
Virgin Islands Telephone Corporation d/b/a Innovative Telephone 
(Vitelco). CAM v4.0 incorporates several modifications to 
CostQuestLandLine (CQLL) and CostQuestMiddleMile (CQMM), the 
proprietary applications that CAM relies on to develop the network 
topology for the CAM. In CQLL, the national demand location data and 
the terrain data were updated, and the clustering code was modified. 
CQMM was modified to route middle-mile connections along roads, 
consistent with the treatment of last mile plant in prior versions. CAM 
v4.0 includes inputs for submarine cable and other costs specific to 
non-contiguous areas, and it also adjusts the default input for the 
cost of money to 8.5 percent. CAM v4.0 also incorporates updated 
broadband coverage data.
    3. Middle Mile Submarine Routes in Non-Contiguous Areas. CAM v4.0 
includes the capability to model the cost of submarine cable used for 
middle mile connections in non-contiguous areas. Previous versions of 
the model did not distinguish between terrestrial routes and the 
submarine portions of middle mile routes in determining middle mile 
investment in the non-contiguous areas of the United States. The model 
was modified to identify middle mile routes requiring an undersea 
connection, including those connecting the islands in Hawaii, Puerto 
Rico, the U.S. Virgin Islands, and the Northern Mariana Islands, and to 
connect Anchorage to Juneau and the Kenai Peninsula. The Capital 
Expenditures (Capex) workbook was modified to include submarine cable 
costs and the cost for two beach manholes on each intrastate middle 
mile submarine route. This submarine cable is part of the middle-mile 
network in each area; it connects central offices just like wholly 
land-based middle-mile cable does. Each beach manhole is connected to a 
nearby central office that provides multiplexing, routing and co-
location. The Bureau assumes that there is no need for duplicative 
facilities to provide multiplexing, routing or co-location between 
central offices and therefore do not assume a full landing station at 
each submarine landing site. To the extent that parties disagree with 
that assumption, they should provide a detailed analysis in support of 
their position.
    4. The table below shows middle mile route distances for 
terrestrial and submarine routes in non-contiguous areas.

[[Page 76792]]



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                                                              Cabling                        Total MM         Land MM      Submarine MM
                                                             distance     Beach manholes     distance        distance        distance       % Submarine
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AK......................................................      63,620,956              74      63,620,956      54,717,162       8,903,794            14.0
HI......................................................       4,657,509              10       4,657,509       3,622,974       1,034,536            22.2
MP......................................................         591,597               4         591,597         186,097         405,500            68.5
PR......................................................       3,299,014               4       3,299,014       3,134,003         165,010             5.0
VI......................................................         442,389               4         442,389         172,750         269,639            61.0
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    5. Plant Mix. CAM v4.0 includes state-specific plant mix values for 
the price cap carriers serving the non-contiguous United States: ACS, 
Puerto Rico Telephone Company (PRTC), Hawaiian Telcom, Inc. (HTI), 
Vitelco, and the Micronesian Telecommunications Corporation d/b/a IT&E 
(MTC). The plant mix values for price cap carriers serving the 
contiguous United States were largely based on values that reflect an 
inventory of existing plant mix. Several of the non-contiguous carriers 
have suggested that the model should use ``forward-looking'' plant mix 
values for their areas that are significantly different than their 
current plant mix values and the national average plant mix values in 
CAM v3.2.
    6. Rather than use current values or the proposed forward-looking 
values submitted by these carriers, CAM v4.0 incorporates a hybrid 
approach that recognizes that there may be good reasons in non-
contiguous areas to reduce the amount of aerial plant in the future, 
but that an efficient carrier would likely replace aerial plant with a 
mixture of buried and underground plant. CAM v4.0 recognizes that 
buried and underground plant both provide the benefits of below-ground 
plant, and that an efficient carrier would choose to bury plant rather 
than build underground plant where technically and legally permitted, 
as underground plant is typically three to five times more costly than 
buried plant. CAM v4.0 therefore assumes the amount of underground 
plant would not exceed a carrier's current amount of underground plant; 
to the extent the carrier-submitted proposed values for underground 
plant are higher than current values, the excess is moved into buried 
plant. The table below illustrates a hypothetical example of this 
approach.

----------------------------------------------------------------------------------------------------------------
                                                                      Aerial          Buried        Underground
----------------------------------------------------------------------------------------------------------------
Current values..................................................              60              10              30
Forward-looking values..........................................              10              30              60
Hybrid..........................................................              10              60              30
----------------------------------------------------------------------------------------------------------------

    7. By utilizing a greater amount of buried plant than current 
buried plant, the hybrid approach reflects the fact that there may be 
some locations where it is more efficient to decrease the amount of 
aerial plant in favor of buried plant. The Bureau does recognize, 
however, that there may be some instances when deploying underground 
plant may be technically or legally required. To the extent any party 
contends that the approach to plant mix taken in CAM v4.0 does not 
adequately reflect a forward-looking network, they should supply data 
that demonstrates what percentage of plant in the state must 
specifically be placed underground, as opposed to buried, due to local 
ordinances or for technical reasons.
    8. Buried Plant in Conduit. In response to comments submitted by 
some carriers serving non-contiguous areas, CAM v4.0 also was modified 
to allow buried plant to be placed in conduit systems. Traditionally, 
underground plant is placed within conduit for added support and 
protection and with access points via manholes, while buried plant is 
placed directly into the ground, without any conduit. Some non-
contiguous carriers have suggested that the model should include an 
additional approach to plant deployment that would combine aspects of 
both traditional underground and buried plant. Such an approach 
combines buried plant techniques with conduit for added protection. The 
logic modification contained in CAM 4.0 allows for these ``buried in 
conduit'' systems and is used for buried plant in the non-contiguous 
United States.
    9. Terrain. The methodology for determining whether a census block 
group is identified as having hard rock was modified for the non-
contiguous areas of the United States. Several carriers serving the 
non-contiguous areas, ACS, PRTC, and HTI, requested that the model 
treat 100 percent of their terrain as ``hard rock,'' the most expensive 
terrain in which to place plant. This approach would significantly 
over-estimate the actual amount of hard rock in these areas.
    10. CAM v4.0 modifies the approach for determining whether a census 
block group is considered to consist of hard rock in non-contiguous 
areas. Terrain factors for the entire country were developed for each 
census block group using data from the Natural Resources Conservations 
Service (NRCS) STATSGO data, where available. The rock hardness used in 
the contiguous United States for a given census block group is 
whichever type of rock is listed most frequently for the list of 
STATSGO map units in the census block group, regardless of the 
geographic area of those map units. The revised methodology now 
considers the entire census block group in non-contiguous areas, where 
terrain data are available, to be hard rock if at least fifty percent 
of the area is identified as hard rock.
    11. ACS Treated as Small Carrier. CAM v4.0 shifts ACS from the 
``medium'' carrier category, which encompasses carriers that serve 
between 100,000 and 1 million access lines, to the ``small'' carrier 
category, for carriers that serve fewer than 100,000 access lines. 
Given the other changes made in CAM v4.0, we tentatively believe that 
it would be reasonable to treat ACS as a ``small'' carrier rather than 
a ``medium'' carrier category for the purposes of calculating its 
operating expense (opex) in the CAM v4.0.
    12. Vitelco Capex Inputs. CAM v4.0 also includes state-specific 
values for certain inputs in the Capex workbook for the Virgin Islands. 
Vitelco submitted several proposed modifications to the Capex workbook. 
CAM v4.0 includes the modifications to the material costs, but not to 
the labor costs. The Bureau tentatively believes it would be reasonable 
to assume that certain materials would be more expensive in the Virgin 
Islands, but they are not convinced that labor costs should be adjusted 
upward as proposed by Vitelco.

[[Page 76793]]

    13. Other Changes Proposed by Non-Contiguous Carriers. CAM v4.0 
does not include all the changes submitted into the record by carriers 
serving the non-contiguous United States. In analyzing the impact of 
the requested changes and assessing the reasonableness of the modelled 
costs, we compared the costs calculated in CAM v4.0 with the embedded 
costs reported by the carriers. To the extent parties believe that 
additional modifications should be made to CAM v4.0 prior to adopting 
the cost model, they should provide a detailed analysis in support of 
their position and specify which inputs should be adjusted upwards or 
downwards.
    14. CQLL Demand Locations. CAM v4.0 also incorporates modifications 
designed to ensure that the growth in demand locations for a given 
county are appropriately placed in areas with other residential 
locations. This modification does not alter the demand data sources, 
but modifies the methodology for random placement of housing units to 
prevent anomalous and potentially misleading results. Specifically, 
beginning with CAM v3.0, the overall increase or decrease of 
residential housing units in a specific county in 2011, as compared to 
the 2010 census counts, was randomly dispersed to census blocks based 
on the amount of livable roads in each census block of the county. This 
process may have resulted in residential housing units being assigned 
to census blocks for which 2010 census records showed no residential 
locations. CAM v4.0 uses both 2010 census block information and 2011 
GeoResults geocoded residential data to identify census blocks that 
have no residential locations and removes housing units that previously 
had been placed in these census blocks to reflect 2011 county growth. 
Instead, CAM v4.0 randomly places those housing units into census 
blocks that already contain residential locations. This random 
placement follows the same methods used beginning in v3.0, but improves 
on these methods by removing roads in census blocks without residential 
locations to prevent their use as possible targets for random 
placement. This modification impacts only about 0.1 percent of all 
residential demand locations, but results in a net increase in demand 
of approximately 3,500 Node4 locations, which had been previously 
excluded due to their assignment to census blocks that had no roads or 
fell outside of defined service areas.
    15. CQLL Terrain Data. The CQLL terrain database was modified to 
correct an inversion in some rows impacting the rock hardness and soil 
texture values.
    16. CQLL Clustering Code and Node3 Creator. The CQLL clustering 
code was modified to improve feeder path branching in areas with 
multiple roads. The code for the feeder allocation formulas was updated 
consistent with changes described in CAM v3.2 release notes that 
previously were addressed via an update to CQLL output. The 
calculations for accumulating feeder fibers of Gigabit passive optical 
network (GPON) splitters and special access services were modified. The 
fiber service terminal (i.e., pedestal) cost values used to determine 
the placement of Node3s (i.e., pedestals) was modified to use the 
installed value of a fiber service terminal; the previous value 
understated the cost.
    17. CQMM Updates. CQMM was modified to use road distance in 
calculating terrestrial middle mile route distances, in most instances, 
and includes the capability to model the cost of submarine cable used 
for middle mile connections in non-contiguous areas. CQMM calculates 
connections between nodes using a minimum spanning tree approach. For 
CAM v3.2, and earlier versions of the model, distance was calculated 
using airline distance multiplied by 1.2 (i.e., an estimated conversion 
factor of airline to road distance). For CAM v4.0, distance is 
calculated using either airline distance or road distance. In the non-
contiguous areas of the United States, middle mile distances that 
include submarine routes are calculated using airline distance (x1.2). 
In the contiguous United States and for middle mile distances in non-
contiguous areas of the United States that do not contain submarine 
routes, most distances are calculated using road distance. Where the 
ratio of road distance to airline distance is greater than 3.04, which 
represents the 99th percentile of the road distance to airline distance 
ratios for all routes used in CQMM, the distance is the airline 
distance multiplied by 3.04. Each route with any submarine cable is 
assigned two beach manholes. Submarine investment is not shared with 
other utilities, and is not impacted by the regional cost adjustment.
    18. CQMM also was modified so that a regional tandem will no longer 
be able to serve a central office of a different state when states are 
in the same Local Access and Transport Area (LATA). For example, 
Minnesota and North Dakota share a LATA. With the modification, North 
Dakota central offices are served only by regional tandems in North 
Dakota. In addition, CQMM was modified to remove duplicate key values 
that could lead to an infinite processing loop, to remove three 
duplicative regional tandem locations, and to trigger repeater 
investment based on route distance between nodes rather than total 
route distance.
    19. Cost of Money. In prior versions of the model, the default 
input values reflected a 9 percent cost of money. The previously 
released model outputs for CAM v3.2 used the model's default input 
values, but allowed Commission staff and interested parties to see how 
support amounts varied using both an 8 percent and 9 percent cost of 
money. CAM v4.0 reflects an 8.5 percent cost of money.
    20. CAM Broadband Coverage. CAM v4.0 incorporates updated broadband 
coverage to reflect State Broadband Initiative (SBI) Round 7 data. 
Consistent with the process for updating broadband coverage in prior 
versions of the CAM, the new coverage table removes from the SBI data 
Cable and Fixed Wireless providers receiving subsidies, as well as 
those not providing voice services as reported on FCC Form 477.
    21. CAM Capex. CAM v4.0 includes in the undersea tab of the Capex 
workbook inputs for submarine cable and beach manholes on intrastate 
middle mile submarine cable routes in non-contiguous areas of the 
United States, described above. The cable investment is based on the 
same input used for undersea cabling; each beach manhole investment is 
estimated at $1 million; and submarine costs are calculated using the 
underground fiber Annual Charge Factor.
    22. CAM v4.0 also includes logic to support a ``buried in conduit'' 
method of plant placement, which allows buried plant to be placed in 
conduit systems. The Plant Mix Buried Conduit workbook was added, and 
the percentage of buried in conduit placements is an input in that 
workbook. Buried excavation costs are used. A toggle allows the user to 
exclude manholes (the current default) or to specify access points via 
size one manholes. Another toggle selects the type of conduit used for 
the buried trench; duct without inner-duct is the default.
    23. In addition, CAM v4.0 includes modifications to the buried and 
underground formulas' use of the Structure Sharing table (in the Plant 
Sharing Tables tab) and to the Engineering Rules to allow control over 
sizing for manholes in rural, suburban, and rural areas.
    24. State Specific Capex. A State Specific Capex table and toggle 
were added to provide an input source for situations in which a state-
specific

[[Page 76794]]

capex input is required. When the State Specific Capex toggle is set to 
yes, the state-specific capex information will be taken from the State 
Specific Capex workbook. That is, the state specified in the State 
Specific Capex workbook will become the active capex values, for the 
specified state only, in the input collection.
    25. CAM Processing Logic. When running a single state solution set, 
CAM previously identified the service areas to process based on the 
fifth and sixth characters of the service area code, but excluded those 
census blocks served in neighboring states. CAM v4.0 was modified to 
retain all census blocks, including neighboring states, associated with 
service areas in which the fifth and sixth characters of the service 
area code match the state that is processed. This change aligns the 
state definition between single and multi-state solution sets, where 
states are defined as collections of service areas; there is no impact 
on investment calculations.
    26. Access to CAM v4.0. Parties should follow the same procedures 
to access CAM v4.0 as announced for previous versions. In particular, 
parties may access CAM v4.0 at http://www.fcc.gov/encyclopedia/caf-phase-ii-models or https://cacm.usac.org. Additionally, authorized 
users who have signed the relevant attachments to the protective order 
will have access to a system evaluator package that provides a test 
environment populated with a sample database, allowing users to view 
database structures, observe the processing steps of CAM for a subset 
of the country, and see changes in the database. In addition, 
authorized uses will receive a digital rights management protected PDC 
format file (a form of secure PDF) containing the processing source 
code for CQLL and CQMM.
    27. Updated Documentation. In conjunction with the release of CAM 
v4.0, the Bureau will shortly be posting updated methodology 
documentation for CAM v4.0, which provides more detail on the current 
model architecture, processing steps, and data sources. Additionally, 
the Bureau will be making available the input tables used in the CAM. 
The methodology documentation and the input tables will be available at 
http://www.fcc.gov/encyclopedia/price-cap-resources.
    28. Illustrative Results. The Bureau also will shortly be releasing 
a new set of illustrative model outputs for CAM v4.0. The Bureau 
emphasizes, however, that it has not yet finalized the funding 
thresholds, and therefore these illustrative results do not represent 
final support amounts.

I. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

    29. The Non-Contiguous Areas PN, 78 FR 12006, February 21, 2013, 
included an Initial Regulatory Flexibility Analysis (IRFA) pursuant to 
5 U.S.C. 603, exploring the possible significant economic impact on 
small entities of the policies and rules proposed therein. The 
Commission invites parties to file comments on the IRFA in light of 
this additional document.

B. Paperwork Reduction Act

    30. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified information collection burden for small business concerns 
with fewer than 25 employees, pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198.

C. Filing Requirements

    31. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, interested parties may file comments on or before the date 
indicated on the first page of this document. Comments are to reference 
WC Docket No. 10-90 and DA 13-2304, and may be filed by paper or by 
using the Commission's Electronic Comment Filing System (ECFS).
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    [ssquf] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    [ssquf] 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.
    [ssquf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    32. In addition, we request that one copy of each pleading be sent 
to each of the following:
    (1) Katie King, Telecommunications Access Policy Division, Wireline 
Competition Bureau, 445 12th Street SW., Room 5-B544, Washington, DC 
20554; email: Katie.King@fcc.gov;
    (2) Charles Tyler, Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A452, 
Washington, DC 20554; email: Charles.Tyler@fcc.gov.
    33. People with Disabilities: 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), 202-
418-0432 (tty).
    34. 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

[[Page 76795]]

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.

Federal Communications Commission.
Linda Oliver,
Deputy Chief, Telecommunications Access Policy Division, Wireline 
Competition Bureau.
[FR Doc. 2013-30144 Filed 12-18-13; 8:45 am]
BILLING CODE 6712-01-P