[Federal Register Volume 79, Number 139 (Monday, July 21, 2014)]
[Proposed Rules]
[Pages 42276-42283]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17117]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90; DA 14-944]


Wireline Competition Bureau Announces Posting of Broadband Data 
From Urban Rate Survey and Seeks Comment on Calculation of Reasonable 
Comparability Benchmark for Broadband Services

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Wireline Competition Bureau (Bureau) 
announces the posting of the fixed broadband services data collected in 
the 2013 urban rate survey, and explanatory notes regarding the data, 
on the Commission's Web site. The Bureau also proposes a specific 
methodology for calculating the reasonable comparability benchmark for 
fixed broadband services which would result in a broadband benchmark 
that ranges from $68.48 to $71.84 for services meeting the current 
broadband performance standard of 4 Mbps downstream/1 Mbps upstream, 
with the specific benchmark depending on the associated usage 
allowance.

DATES: Comments are due on or before August 20, 2014.

ADDRESSES: Interested parties may file comments on or before August 20, 
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: Suzanne Yelen, Wireline Competition 
Bureau at (202) 418-0626 or TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's Public Notice (Notice) in WC Docket No. 10-90; DA 
14-944, released June 30, 2014. 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 the posting 
of the fixed broadband services data collected in the 2013 urban rate 
survey, and explanatory notes regarding the data, on the Commission's 
Web site at http://www.fcc.gov/encyclopedia/urban-rate-survey-data. The 
Bureau (Bureau) also proposes a specific methodology for calculating 
the reasonable comparability benchmark for fixed broadband services. In 
the USF/ICC Transformation Order, the Commission required that as a 
condition of receiving Connect America Fund support, recipients must 
offer voice and broadband services in supported areas at rates that are 
reasonably comparable to rates for similar services in urban areas. The 
methodology proposed here would result in a broadband benchmark that 
ranges from $68.48 to $71.84 for services meeting the current broadband 
performance standard of 4 Mbps downstream/1 Mbps upstream, with the 
specific benchmark depending on the associated usage allowance.
    2. Consistent with longstanding Commission precedent for the voice 
comparability benchmark, we will

[[Page 42277]]

compute the broadband comparability benchmark based upon a national 
average. Indeed, the Commission made clear that it expected the Bureau 
to use a national urban average.
    3. The Bureau Staff Report included herein discusses three 
potential methods for determining the average urban rate using the data 
collected in the Survey: Simple rate statistics for specified 
subsamples; an average rate for offerings meeting a minimum level of 
service; and regression analysis. The Staff Report also presents the 
average plus two standard deviations for each approach, thus showing a 
potential reasonable comparability benchmark for broadband service 
under each approach. For illustrative purposes, the Staff Report also 
presents the relevant calculations if the minimum performance 
obligations were modified as proposed recently by the Commission.
    4. The first approach calculates the average using a subsample of 
observations based solely on download speed, without regard to usage or 
upstream speeds. The second approach calculates the average by 
identifying the subset of observations that meet or exceed a minimum 
service level, and then for each provider that is captured in that sub-
sample, computing the average based on the lowest rate offered by that 
provider that meets or exceeds the specified service level. The third 
approach uses a simple weighted linear regression model that takes into 
account the impact of three dimensions of service on rates: upload 
speed, download speed, and usage allowance, if any. We summarize below 
the results under the three approaches.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Average + 2
              Method                          Speed            Usage  allowance       Average        standard
                                                                                                    deviations
----------------------------------------------------------------------------------------------------------------
Service Offerings Meeting 3 to <5   3 to <5 Mbps/any upload   Any...............          $47.48          $73.22
 Mbps Downstream.                    speed.
Service Offerings Meeting or        4 Mbps/1 Mbps...........  100 GB............           54.54           82.00
 Exceeding a Minimum Service Level
 (Upstream, Downstream, Usage).
Linear Regression.................  4 Mbps/1 Mbps...........  100 GB............           44.74           68.48
                                    4 Mbps/1 Mbps...........  250 GB............           46.76           70.50
Analysis..........................  4 Mbps/1 Mbps...........  unlimited.........           48.10           71.84
----------------------------------------------------------------------------------------------------------------

    5. We propose to use the weighted linear regression model to 
calculate the average urban rate. Although the regression analysis is 
more complex than the other methods identified in the Staff Report, 
regression analysis is well suited to take into account the differences 
in speed and usage allowance among the service offerings in the sample 
(and thus reducing the likelihood of having the rates for dramatically 
higher-speed services increase the benchmark for lower-speed services). 
Further, we propose to use a subsample of data points to develop the 
regression, specifically, those data points with download speeds less 
than or equal to 15 Mbps. We propose to adopt a separate benchmark for 
services with differing usage levels. Thus, the reasonable 
comparability benchmark for a high-cost recipient offering a 4 Mbps/1 
Mbps/100 GB offering would be $68.48; if that high-cost recipient chose 
to meet the Commission's broadband performance obligations with a 4 
Mbps/1 Mbps/unlimited usage offering, its reasonable comparability 
benchmark would be $71.84. We seek comment on these proposals.
    6. To the extent parties believe one of the other approaches to 
determining an average of the data collected in the Survey is 
preferable, they should explain with specificity the benefits of 
adopting an alternative approach. Is there some other method of 
calculating the average urban rate that would better account for the 
differences in speed and usage allowance among the service offerings?

Procedural Matters

A. Paperwork Reduction Act

    7. 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, see 44 U.S.C. 3506(c)(4).

B. Filing Requirements

    8. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated on the first page of 
this document. Comments are to reference WC Docket No. 10-90 and DA 14-
944, 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.s
    [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.
    9. In addition, we request that one copy of each pleading be sent 
to each of the following:
    (1) Jay Schwarz, Industry Analysis and Technology Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 6-A134, 
Washington, DC 20554; email: Jay.Schwarz@fcc.gov;
    (2) Alexander Minard, Telecommunications Access Policy Division, 
Wireline Competition Bureau, 445 12th Street SW., Room 5-A334, 
Washington, DC 20554; email: Alexander.Minard@fcc.gov.
    10. 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

[[Page 42278]]

or call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (tty).
    11. 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.

Federal Communications Commission.
Rodger Woock,
Chief, Industry Analysis and Technology Division Wireline Competition 
Bureau.

Wireline Competition Bureau Staff Report

Possible Methodologies for Establishing Reasonably Comparable Broadband 
Rates for Fixed Services

June 30, 2014

    Introduction. In the USF/ICC Transformation Order, the Commission 
required that as a condition of receiving Connect America Fund support, 
recipients must offer voice and broadband services in supported areas 
at rates that are reasonably comparable to rates for similar services 
in urban areas. The Commission concluded that rural rates for broadband 
service would be deemed ``reasonably comparable'' to urban rates if 
those rates ``fall within a reasonable range of the national average 
urban rate for broadband service.'' It delegated authority to the 
Wireline Competition and Wireless Telecommunications Bureaus to conduct 
an annual survey of urban broadband rates in order to derive a national 
range of rates for broadband service. In the USF/ICC Transformation 
FNPRM, the Commission sought comment on whether using two standard 
deviations would be the appropriate methodology for determining 
reasonable comparability, or should another methodology be used.
    The Wireline Competition Bureau (Bureau) is working to develop an 
approach for determining an upper range of rates that could be 
reasonably comparable to urban broadband prices for a broadband service 
with characteristics similar to a specified minimum download speed, 
upload speed and usage allowance. Our objective is to develop an 
approach that is flexible enough to take account any changes the 
Commission may make in the future regarding broadband performance 
obligations for recipients of Connect America funding.
    Developing a methodology for setting a reasonably comparable 
broadband benchmark involves (1) defining terms and scope based on the 
USF/ICC Transformation Order, (2) creating a sampling plan, (3) 
processing the collected data, and (4) analyzing the data. We explain 
below each step in this process, specifying the decisions that the 
Bureaus have already made regarding the execution of the urban rate 
survey and identifying the options for analyzing the data that has been 
collected.
    Implementation of the Survey--Definitions. In 2013, the Bureaus 
adopted the form and content of the urban rate survey. We decided to 
compute the ``national average urban rate for broadband service'' based 
on the mean of residential, non-promotional, advertised rates offered 
to potential new customers by firms in urban areas, i.e. list prices. 
Given this, we designed a survey and methodology to estimate this 
parameter. The specific statistical interpretation used for development 
of the survey and estimation from the data collected is given in the 
Appendix.
    The Bureaus made the decision not to create a national average 
urban rate that blends rates derived from fixed and mobile data. 
Satellite broadband also was excluded from the sampling frame. The 
Bureaus made the decision not to include existing contracts, but 
instead to collect rates only for new offered service. The Bureaus made 
the decision to collect rates on all standalone service plans offered 
to residential customers. As a result, in our sample, for each plan 
offered, the provider reported the advertised download bandwidth, the 
advertised upload bandwidth, the usage allowance (if any), and the 
monthly rate.
    The Bureaus made a decision to define urban rates based on whether 
the rate was offered in an urban census tract. A census tract was 
defined as urban if it contained any census-defined Urban Areas or 
Urban Clusters. Census tracts served as the geographic unit for which 
providers were asked to report residential broadband rates.
    Survey Sample Selection. A sample of 500 survey units was randomly 
selected with replacement. These survey units were chosen by the 
Bureau's Industry Analysis and Technology Division (IATD) in a two-step 
process. First, 500 census tracts were randomly selected from all urban 
census tracts (as defined above). Second, for each of these selected 
census tracts a provider was chosen, using FCC Form 477 data. This 
census tract-provider pair constitutes a sampling unit for which a 
survey was sent. Each of these sampling steps is explained below.
    The frame for the selection of urban census tracts was provided by 
the Excel file ``urbantracts--list--all.xls'' which listed 58,331 urban 
census tracts encompassing the 50 states, the District of Columbia, and 
Puerto Rico. The first phase in the sample selection process was to 
randomly select, using household weights, 500 census tracts with 
replacement from this list of urban census tracts. The selection was 
weighted proportionately by the number of households in the census 
tracts which was also provided in the file. The

[[Page 42279]]

selection was performed using the ``RandomChoice'' function in 
Mathematica. The selection process produced an Excel file ``urban 
tracts sample broadband.xls'' of 498 unique census tracts; two census 
tracts were each selected twice.
    An Excel file (``broadband--v2'') listing Fixed Broadband service 
providers reporting subscribers in the 498 unique census tracts in the 
sample was prepared based on Form 477 December 2012 filings. The file 
also gave the number of residential connections each provider had in 
each census tract in the sample.
    For each of the 500 census tracts in the sample, a service provider 
was randomly selected from the providers of Fixed Broadband service for 
that census tract as listed in ``broadband--v2'' using the 
``RandomChoice'' function in Mathematica. Because different providers 
in the same census tract may offer service to substantially different 
numbers of households, the selection was weighted based on the number 
of residential subscribers for each provider in the census tract as now 
described.
    A service provider was given weight = 1 if the provider had more 
than 7% of the total residential subscribers in the census tract. 
Otherwise, the provider was given the weight = 1/(N+1) where N is the 
number of providers with 7% or less of the total residential 
subscribers in the census tract. So, if the census tract had only one 
service provider with 7% or less of the total residential subscribers 
in the census tract, that service provider had weight 1/2 while all 
others had weight 1. If the census tract had two service providers each 
with 7% or less of the total residential subscribers in the census 
tract, those two service providers each had weight 1/3 while all others 
had weight 1.
    Survey Data Collection. The Bureau contacted each provider that had 
been selected in the sampling stage. Each provider was asked to report 
rates for all standalone broadband plans in one or more census tracts. 
These providers were asked to report these rates via a specially-
designed online system for which each provider was given login access. 
If a provider did not currently offer residential service in the census 
tract, the provider would indicate this and otherwise report nothing. 
Providers reported rates beginning December 17, 2013, continuing for 
several weeks thereafter.
    Analysis of the Collected Data--Data Preparation. The Bureau 
received responses for 498 census tracts from 81 service providers. A 
total of 2211 rows of data were recorded. A total of 63 rows did not 
provide monthly rate data, for the following reasons:
     The row gave no indication that the census tract was 
served by the provider (54).
     The row was an erroneous entry (4).
     The row indicated service at a specified level was 
provided but no rates were given (3).
     The row indicated that service would be provided at a 
higher level in the future (1).
     The row was a duplicate entry (1).
    In two separate cases identical rates were provided for the same 
service for the same provider in the same census tract; in each of 
these two cases, the two duplicate rows were merged into a single row. 
In addition, some service providers offered the same service in a 
census tract using digital subscriber line (DSL) and fiber to the home 
(FTTH) technologies reporting rates for each technology on separate 
rows. There were 41 such cases where the two rows were merged by 
averaging the rates for DSL and FTTH technologies. As a result, a total 
of 2105 monthly rates for broadband service were provided by 71 
providers for 444 census tracts.
    Values for reported download speeds ranged from 0.5 to 20480 and 
values for reported upload speeds ranged from 0.125 to 1024. All values 
were expected to be entered in Mbps, but some respondents evidently 
entered the relevant data as Kbps. For consistency, speed values 
entered in the survey were converted as shown in the table below:

------------------------------------------------------------------------
                        Speed entered                            Speed
------------------------------------------------------------------------
0.256 or 256.................................................      0.25
0.384 or 384.................................................      0.375
0.512 or 512.................................................      0.5
0.768 or 768.................................................      0.75
1.024 or 1024................................................      1
20.48 or 20480...............................................     20
------------------------------------------------------------------------

    The rates presented below represent the sum of the Monthly Charge, 
Surcharge, and Other Mandatory Charge (if any) reported by the 
respondents. In cases where a maximum and minimum charge was provided 
by the respondent, the average of the maximum and minimum was used.
    Two service offering rates from Nitelog Inc were excluded from the 
analysis as apparent outliers. The rates were $1,250 and $1,999 for 25/
25/Unlimited and 50/50/Unlimited using Fixed Wireless technology. The 
next highest reported monthly rate was $399.95 for 505/100/250 service.
    One service offering from Digis LLC for 5/5/Unlimited service using 
Fixed Wireless technology at a monthly rate of $271.45 was also 
excluded from the analysis as an apparent outlier. The next highest 
reported monthly rate for 5/x/Unlimited service was $87.45 for 0.75 
Mbps upload speed. The third highest reported monthly rate for 5/x/
Unlimited service was $61.45 for 2 Mbps upload speed which was also 
offered by Digis LLC.
    Potential Options. The goal is to develop an approach for 
determining an upper range of rates that could be reasonably comparable 
to the national average urban rate for similar broadband services. For 
purposes of the following discussion, the Bureau defined ``similar 
services'' as those with a download speed, upload speed, and usage 
allowance close to the minimum performance specifications of a download 
speed of 4 Mbps, an upload speed 1 Mbps, and a usage allowance of 100 
GB per month. We note, however, that the options presented could be 
adapted for use with services offering differing speeds and/or usage 
allowances and thus would be flexible enough to take account any 
changes the Commission may make in the future regarding broadband 
performance obligations.
    The following analysis explicitly does not select a specific 
methodology or benchmark. Rather, we present several potential 
methodologies for determining an upper range that could be adopted by 
the Bureau at a future date as a benchmark and discuss the benefits and 
challenges of each. The selection of a method and a value to select 
with that method are decisions that will be made after further public 
comment.
    The first method is to calculate relatively simple rate statistics 
for specified subsamples; for example, all rates for observations with 
the specified download speed, or all rates for observations from 
providers that offer a service that meets or exceeds a minimum service 
level. Both of these approaches have the disadvantage of including and/
or excluding observations that are close, but not identical to the 
specified broadband service requirement. A variant of these approaches 
would be to develop an average rate for a selection of similar 
services, while testing how sensitive the resulting range is to any 
given choice of similar services. A third approach uses regression 
analysis to account for the multiple dimensions of broadband service 
(i.e. download bandwidth, upload bandwidth, and usage allowance).
    As a general note, in each methodology, we only present in the main 
body of the text the point estimates. However, it is important to 
remember that each point estimate has a statistical error and therefore 
has a

[[Page 42280]]

confidence interval around it. Thus, if the statistical error is known, 
we could say with 95% confidence that the population value lay within a 
specific interval of its estimate from the sample.
    Rate Estimates for Services with the Specified Download Speed. The 
first approach we consider is the estimation of candidate benchmark 
values directly from rates from those observations for the specified 
download speed. Under this approach, we would specify the relevant 
download speed, say, 4 Mbps, and the relevant cutoff, say, the sample 
average plus two standard deviations. If rates were normally 
distributed, this upper bound would represent an unbiased estimate of 
the rate that was higher than 97.5% of all rates with the download 
speed of interest. For the reasons discussed below, we would not 
recommend this approach. However, it has expositional value because it 
illustrates both the nature of our sample and the problems in trying to 
define an upper range of rates.
    Table 2 below provides estimates of monthly broadband rate 
statistics for different download speeds or download speed groups. 
``Responses'' is the number of responses out of the 498 received used 
in the estimate. ``Number of Providers'' is the number of different 
providers represented in the observations. All of the remaining seven 
columns starting with ``Median Rate ($)'' contain weighted estimates; 
for each observation, the weight used was the sum of the weights 
described earlier for service providers in the census tract of the 
observation. These weights were used in all methodologies described in 
this document. ``% with Unlimited Usage Allowance'' is the weighted 
estimated percentage of offers for services at the specified speed that 
have an unlimited usage allowance. In Table 2 we present statistics 
combining all observations for services with download bandwidths 
between 3 and 4 Mbps. For the combined 3 through 4 Mbps grouping, the 
mean plus two standard deviations value is $73.22.

                                                   Table 2--Rate Estimates Within Download Speed Bands
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                % With
                                               Number of                Median      Average     Std dev     Ave+2SD       95%        97.5%     unlimited
            Downloan speed (mbps)              providers   Responses   rates ($)   rates ($)   rates ($)   rates ($)   Quantile    Quantile      usage
                                                                                                                          ($)         ($)      allowance
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-2.........................................          28         236       39.78       40.59       10.92       62.43       53.99       69.99          38
3-4.........................................          45         242       44.99       47.48       12.87       73.22       64.99       64.99          50
5...........................................          12          67       45.99       46.32        7.27       60.85       59.95       61.45          23
6...........................................          14         125       49.95       48.78        7.60       63.98       50.94       58.97          23
7...........................................           5          33       45.99       48.37        4.94       58.24       54.95       69.49          20
8...........................................           4          17       50.94       57.38       19.27       95.93       95.00       95.00          29
9...........................................           2           2       62.99       63.82        1.44       66.71       66.32       66.32         100
10..........................................          18          47       52.00       58.84       17.44       93.72       99.00      121.45          76
11-15.......................................          34         154       55.99       60.56       15.67       91.90       74.99       74.99          78
16-25.......................................          26         309       64.95       61.19       14.95       91.10       75.94       96.00          29
26-50.......................................          43         292       76.95       86.03       21.17      128.37      115.99      149.00          54
51-100......................................          27         104       94.99      102.45       33.63      169.70      123.00      200.29          87
101-150.....................................          18         162      114.95      123.76       16.79      157.34      144.99      144.99          40
151-1000....................................          13          75      304.99      281.91       69.52      420.95      399.95      399.95          82
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The key drawback of this approach is that it only takes into 
consideration one dimension of the service (i.e. download bandwidth) 
even though a priori we would expect upload bandwidth and usage 
allowances also to be reflected in the price (for example, this 
approach would average together a 4/0.4/10 service with a 4/4/1,000 
service, if both of those existed). The benefit of this approach, if 
not its practical usefulness, is that it is straightforward and easily 
understandable.
    Rate Estimates for Service Offerings Meeting or Exceeding a Minimum 
Service Level. Another approach that focuses on urban rates that meet 
or exceed a specified minimum service level (MSL) would be to compute 
the average of the minimal monthly rate for each service provider that 
meets or exceeds the MSL. To illustrate this approach, a subset of the 
sample was created consisting of all rates for offerings that met or 
exceeded the MSL. Then, from this subset, the lowest monthly rate was 
found for each service provider. For each provider, each census tract 
with service offered at the provider's lowest rate was included in the 
estimate. The following table presents estimates of several statistics 
for monthly service rates based on the observations selected as 
described above with MSL=4/1/100 and for MSL=10/1/100.

                               Table 3--Rate Estimates for Service Offerings Meeting or Exceeding a Minimum Service Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     MSL                          Providers       Observations         Median            Average           Ave+2SD       97.5% Quantile
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/1/100.....................................                64               353            $49.95            $54.54            $82.00            $89.00
10/1/100....................................                59               255             54.99             58.05             84.15             79.95
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The benefit of this approach is its simplicity and that it includes 
all providers offering service meeting or exceeding the MSL. The 
negatives of this approach are that:
     It incorporates observations into the benchmark for urban 
services with characteristics that are far above the MSL, which are not 
``similar'' services; and
     it may exclude services that are very close to, but do not 
quite meet the MSL.
    A More General Approach to Selecting Sub-samples. Both of the 
approaches just examined involve the selection of sub-samples for 
analysis (all those rates for services that deliver the minimum 
download speed, and the minimum rate for each provider that has

[[Page 42281]]

at least one service that meets or exceeds the MSL). However, in both 
cases observations below the MSL (or its proxy) are excluded. A 
variation on these approaches is to include observations for offerings 
with differing characteristics within a certain range or ranges below 
the chosen MSL as well as above the MSL. The challenge of doing so, 
however, is deciding what is the appropriate range that should be 
deemed ``similar'' to the specified performance standard.
    Rate Estimates from a Weighted Linear Regression Model. The third 
approach is based on a weighted linear regression model. This has an 
important advantage over the use of simple averages in that it provides 
a formalized means of estimating the various degrees to which the 
different service characteristics (download speed, upload speed, and 
usage allowance) influence rates. However, it also requires similar 
decisions to those made above. Because inclusion of observations from 
services dramatically different from a MSL plan might influence the 
ultimate benchmark, it may be appropriate to use a subsample, that is, 
to fit a model using data only in the region of interest for the MSL. 
In particular, we found that standard deviations of rates with less 
than 15 Mbps download speed tend to be smaller than those at higher 
download speeds. Consequently, using a model fitting all the data as 
opposed to one fitting data using observations in the lower range of 
speeds could result in overestimation of the standard deviation 
appropriate to the MSL and consequently also the benchmark rate.
    To illustrate this approach, we applied a multidimensional weighted 
linear regression technique to all services with download bandwidths of 
15 Mbps or less. This sub-sample of the data encompassed 995 rates from 
65 different providers. The rates in this sub-sample ranged from $11.46 
to $151.45 with a weighted standard deviation of $14.22. We undertook a 
weighted linear regression fit based on the following model:

Average Monthly Rate ($) = K0 + KD D + 
KU U - KA A
for download speed in Mbps (D), upload speed in Mbps (U), and usage 
allowance in GB (A = 1/UsageAllowance or 0 if unlimited usage) was 
used. We estimated the parameters as:

Average Monthly Rate ($) = 41.247 + 1.02463 D + 2.75597 U - 335.676 A.

    The weighted R Squared was 0.30 and each estimated coefficient was 
significant at the 0.1% confidence level.
    The table below shows the model's average monthly rate estimates 
for various service levels.

     Table 4--Estimates of Average Monthly Rate Based on the Linear
                            Regression Model
------------------------------------------------------------------------
                                                Usage allowance (GB)
           Speed (Mbps)  down/up           -----------------------------
                                               100       250    No limit
------------------------------------------------------------------------
3/.5......................................    $42.34    $44.36    $45.70
3/1.......................................     43.72     45.73     47.08
4/1.......................................     44.74     46.76     48.10
5/.5......................................     44.39     46.41     47.75
5/1.......................................     45.77     47.78     49.13
6/.5......................................     45.42     47.43     48.77
6/1.......................................     46.79     48.81     50.15
10/1......................................     50.89     52.91     54.25
------------------------------------------------------------------------

    The table below shows the standard deviation of error for the 
average monthly rate estimates in Table 4.

  Table 5--Standard Deviation of Error in Estimates of Average Monthly
                             Rate in Table 4
------------------------------------------------------------------------
                                                Usage allowance (GB)
           Speed (Mbps) down/up            -----------------------------
                                               100       250    No limit
------------------------------------------------------------------------
3/.5......................................     $0.71     $0.44     $0.57
3/1.......................................      0.74      0.45      0.57
4/1.......................................      0.73      0.40      0.52
5/.5......................................      0.74      0.43      0.54
5/1.......................................      0.73      0.39      0.49
6/.5......................................      0.78      0.47      0.56
6/1.......................................      0.75      0.40      0.48
10/1......................................      0.96      0.65      0.65
------------------------------------------------------------------------

    A 95% confidence interval for the estimates in Table 4 would be 
roughly +/- twice the values in Table 5.
    Various quantile levels can be estimated using the following table 
with the equation
    Monthly Rate Quantile P = Average Monthly Rate + QP SD
    where SD is the weighted standard deviation about the regression 
fit ($11.87).

         Table 6--Quantiles of the Standard Normal Distribution
------------------------------------------------------------------------
                               P                                   QP
------------------------------------------------------------------------
90%...........................................................     1.282
95%...........................................................     1.645
97.5%.........................................................     1.960
99%...........................................................     2.326
------------------------------------------------------------------------

    Using the equation above, the table below shows the model's average 
monthly rates plus twice the standard deviation for the same set of 
service levels as in Table 4; these values are roughly the 97.5% 
quantiles for the rates.

  Table 7--Estimates of Average Monthly Rate Plus 2 Standard Deviations
                  Based on the Linear Regression Model
------------------------------------------------------------------------
                                                Usage allowance (GB)
           Speed (Mbps) down/up            -----------------------------
                                               100       250    No limit
------------------------------------------------------------------------
3/.5......................................    $66.08    $68.10    $69.44
3/1.......................................     67.46     69.47     70.82
4/1.......................................     68.48     70.50     71.84
5/.5......................................     68.13     70.15     71.49
5/1.......................................     69.51     71.52     72.87
6/.5......................................     69.16     71.17     72.51
6/1.......................................     70.53     72.55     73.89
10/1......................................     74.63     76.65     77.99
------------------------------------------------------------------------

For example, using the above estimated regression model to set a 
broadband reasonable comparability benchmark for the minimum service 
characteristics based on the average rate plus twice the standard 
deviation:
     If the minimum broadband performance standard is 4/1 Mbps 
with a 100 GB usage allowance, then the reasonable comparability 
benchmark would be $68.48.
     If the minimum broadband performance standard is 10/1 Mbps 
with a 100 GB usage allowance, then the reasonable comparability 
benchmark would be $74.63.
    Not surprisingly, these numbers are lower than the results of the 
second approach which includes observations that exceed the specified 
minimum service standard. These estimates from linear regression take 
into account various service characteristics, while the previous 
approach utilized observations for services with differing service 
characteristics without adjusting for those characteristics. We note, 
however, these are only examples.
    Technical Background. The sample process was designed to estimate 
the mean and standard deviation of the distribution of available 
service rates for broadband service in urban areas. These estimates 
could then be used as input for establishing benchmarks; for example, 
the mean plus twice the standard deviation is a possible upper limit 
based on the approximate 97.5 percentile of a normal distribution.
    At a conceptual level, the ``distribution of available service 
rates in urban areas'' could be captured through the following process:
    1. For each household in an urban area in the United States, list 
all the service providers offering fixed broadband service to that 
household and the service rates they offer for each level of service.
    2. Concatenate all the lists from each household into a single 
list.

[[Page 42282]]

    The resulting list of rates is the distribution of available 
service rates in urban areas for fixed broadband service at various 
levels of service.
    If we were to focus on the rates for a specific level of service, 
the mean and standard deviation of available rates would be
[GRAPHIC] [TIFF OMITTED] TP21JY14.002

    From a practical standpoint, an equivalent result may be obtained 
by surveying service providers offering the relevant service in urban 
areas to obtain data on their rates. In this frame, the equivalent mean 
of the distribution of available rates is obtained as the weighted sum 
of rates offered by service providers in each census tract. Similarly, 
the equivalent standard deviation of the distribution of available 
rates is obtained as the square root of the weighted sum of squared 
differences between the mean rate of the distribution and rates offered 
by service providers in each census tract.

[[Page 42283]]

[GRAPHIC] [TIFF OMITTED] TP21JY14.004

    In order to estimate the mean and the standard deviation, a sample 
of service providers offering fixed broadband service were surveyed for 
rates they offer in a sample of urban census tracts. The sampling 
process was as follows:
     A census tract i was randomly selected with probability 
Hi/H where Hi is the number of households in census tract i and H is 
the sum of the Hi over all census tracts.
     A carrier k was randomly selected from the Ki carriers 
offering service in census tract i with probability Wik/Wi
     This process is repeated n = 500 times to obtain 500 
sampling units. We note that sampling units could appear multiple times 
in the sample.
    The mean of the rate distribution was estimated as the ratio of 
total dollars in rate offers to the total number of rates. We note that 
the total number of available rates is not known, so it must be 
estimated from the sample as well as the estimate of total dollars in 
rate offers. Consequently, an estimate of the mean of available rates 
based on this sample is
[GRAPHIC] [TIFF OMITTED] TP21JY14.005

where

Xj = Wik Yik from the jth sampling unit (census tract i 
and carrier k),
Pj = probability of selecting the jth sampling unit = (Hi/H)(Wik/Wi) 
for the jth sampling unit,
Zj = Wi from the jth sampling unit,
Qj = probability of selecting the jth urban area = Hi/H)

    The estimate of the mean can be simplified to
    [GRAPHIC] [TIFF OMITTED] TP21JY14.006
    
where Yj is the rate Yik and Fj is Wi/Hi for the jth sampling unit.

    The values for the Wi are not known. As described in the main text, 
weights between 0 and 1 were assigned to carriers in each census tract 
of the sample based on their share of residential subscribers in the 
tract. These weights are expressions of Wik/Hi (the fraction of 
households carrier k offers service in census tract i) and therefore Fi 
is the sum of these weights for carriers in census tract i. Similarly, 
the estimate of the standard deviation is
[GRAPHIC] [TIFF OMITTED] TP21JY14.007

[FR Doc. 2014-17117 Filed 7-18-14; 8:45 am]
BILLING CODE 6712-01-P