Federal-State Joint Board on Universal Service

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Common Carrier Bureau (Bureau) updates line count input values for the new high-cost universal service support mechanism for non-rural carriers for purposes of calculating and targeting support amounts for the year 2001. Specifically, the Bureau shall use updated line count data in the universal service cost model to estimate non-rural carriers' forward-looking economic costs of providing the services supported by the federal high-cost mechanism. In addition, the Bureau clarifies that non-rural support amounts will continue to be adjusted each quarter to account for line growth based on the wire center line count data reported quarterly by non-rural carriers.

DATES:

Effective December 27, 2000.

FOR FURTHER INFORMATION CONTACT:

Katie King, Attorney, Common Carrier Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION:

This is a summary of a Common Carrier Bureau's Order in CC Docket No. 96-45 released on December 8, 2000. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, SW., Washington, DC, 20554.

I. Introduction

1. In this Order, we update line count input values for the new high-cost universal service support mechanism for non-rural carriers for purposes of calculating and targeting support amounts for the year 2001. Specifically, we shall use updated line count data in the universal service cost model to estimate non-rural carriers' forward-looking economic costs of providing the services supported by the federal high-cost mechanism. In addition, we clarify that non-rural support amounts will continue to be adjusted each quarter to account for line growth based on the wire center line count data reported quarterly by non-rural carriers.

II. Discussion

2. Consistent with the framework adopted in the Twentieth Reconsideration Order, 65 FR 26513, May 8, 2000, we conclude that the cost model should use the year-end 1999 line counts filed July 31, 2000, as input values for purposes of estimating average forward-looking costs and determining support for the year 2001. We also conclude that line counts should be allocated to the classes of service used in the model based on the line count data filed pursuant to the 1999 Data Request. We conclude further that special access line counts should be allocated on the basis of the 1999 Data Request data and trued-up to 1999 43-08 ARMIS special access line counts. In addition, we conclude that the Bureau and USAC should use available information to match reported wire centers to wire centers used in the model. Line counts in wire centers that cannot be matched will not be used to estimate average costs, but will be incorporated in the calculation of support amounts, along with the quarterly line counts reported by carriers. Finally, most carriers sought confidential treatment of the 1999 Data Request data. Such data will be made available pursuant to the Interim Protective Order in this proceeding.

3. 1999 Line Counts. We find that line count input values should be updated so that the model will take into account changes in costs that result from changes in line counts. If line count input values remained static, the model's cost estimates would fail to reflect the economies of scale generated by serving an increasing number of lines. Absent an update of line count input values, the use of reported lines in the support methodology would cause non-rural support to increase indefinitely as reported lines increase. Such a result would be inconsistent with the criteria adopted in the Universal Service First Report and Order, 62 FR 32862, June 17, 1997, requiring that the cost model reflect the economies of scale of serving all lines within a geographic area. By updating line count input values, the cost estimates will reflect the economies of scale resulting from the growth in the number of lines served by non-rural carriers.

4. We also find that the lines reported by carriers on July 31, 2000 (year-end 1999 line counts) are the appropriate data to use for updating the cost model's input values at this time. We are not persuaded by AT&T's argument that we should use as input values projected line counts for the year in which support is provided. Because support currently is provided on the basis of the lines reported by carriers, rather than line count projections, AT&T's proposed solution would not resolve the purported “mismatch” between model lines and reported lines identified by AT&T.

5. For purposes of calculating support in 2001, we will use year-end 1999 line counts in the model and adjust support amounts every quarter to reflect the lines reported by carriers, according to the methodology set forth in the Twentieth Reconsideration Order. We defer to a future proceeding the issue of how often line counts and other input values should be updated.

6. We are not persuaded by Qwest's argument that we should not use updated line count data in the cost model unless we also use updated customer location data. Qwest claims that updating only line counts would “artificially depress the cost per line, since the numerator would remain stagnant while the denominator grows.” This statement fails to acknowledge how the model estimates forward-looking costs. Qwest concedes that increased line counts reflect one of two situations: (1) additional lines at existing locations; and (2) lines at new locations. When additional lines are added at existing locations the model takes into account additional costs involved, such as larger cable sizes and increased capacity digital loop carriers. Contrary to Qwest's claim, the numerator (estimated forward-looking cost) would not remain stagnant if the model uses updated line count input values. Moreover, we estimate that approximately 65 percent of the increase in residential lines is due to additional lines at existing locations rather than to lines at new locations. Until the Commission adopts new customer location data, all new lines should be treated as additional lines at existing locations in the model, with their additional costs included in the model's cost estimates.

7. Although certain costs associated with new locations may not be reflected in the cost model's estimates until the Commission adopts new customer location data, we agree with AT&T and the Florida PSC that we should not wait until then to update line counts. First, as the Florida PSC points out, more current line count data will be used in determining support amounts whether or not the customer location data are updated. If the line counts used in the model are not updated, the time lag between the model inputs and the reported lines used to determine support would continue to grow without any readjustment. Second, because the model currently uses road surrogate customer location data, the additional costs associated with new locations are less significant than implied by Qwest's argument. If the “missing” new locations are anywhere along the road network used to create the surrogate locations, the outside plant structure costs already would be included in the model's cost estimates. Thus, until the model uses updated customer location data, outside structure costs could be underestimated only to the extent that new locations would be along new roads. Moreover, AT&T argues that outside plant costs are not underestimated, but rather are overestimated. AT&T claims that the use of road surrogate data “greatly overestimates the dispersion in customer locations and, therefore, greatly exaggerates outside plant costs, and hence, per-line costs.” We need not find AT&T's claim to be accurate, however, to find that it is reasonable to use updated line counts in the model to determine support for the year 2001. As explained, all of the costs associated with new lines and a substantial portion of the costs associated with “new” locations would be included in the model's cost estimates.

8. Class of Service Allocations. We find that using the wire center line count data filed pursuant to the 1999 Data Request is a reasonable method for allocating line counts to the classes of service used in the model. All commenters addressing this issue support this alternative, although AT&T suggests that it would be preferable to require the local exchange carriers to disaggregate into service classes the USF loops filed on July 31, 2000 (year-end 1999 lines). We do not believe that carriers should be subject to additional reporting requirements at this time, because reasonably accurate class of service allocations can be made easily with the data we already have. We defer to a future proceeding how line count data should be reported by carriers for use in the model in the future.

9. For purposes of 2001 support, line counts shall be allocated to the classes of service used in the model by dividing the year-end 1999 lines reported by non-rural carriers into business lines, residential lines, payphone lines, and single line business lines for each wire center in the same proportion as the lines filed pursuant to the 1999 Data Request (year-end 1998 lines). As Worldcom points out, although this method reflects the overall line growth specific to the particular wire center, it assumes the same growth rate across service categories in that wire center. Nevertheless, Worldcom suggests that we use this method because it is simpler than the proposed alternative, which makes a different assumption, and both alternatives are likely to give similar results in most cases. We find that either method would be a reasonable way to use the 1999 Data Request information to allocate the year-end 1999 lines to the switched lines categories used in the model and agree that we should use the simpler method.

10. We use a somewhat different method to determine the number of special lines in each wire center, because the wire center line counts reported by non-rural carriers (USF loops) include only switched lines. Thus, we cannot simply take USF loops and divide them into the 1999 Data Request line count categories. We conclude that, to determine the relevant number of special lines for each wire center, we shall divide the 1999 ARMIS special access lines among wire centers in the same proportion as the special lines from the 1999 Data Request. We find that this method of determining special access lines is preferable to either of those proposed by AT&T and Worldcom, which would include state private lines as well as interstate special access lines. At this time, we find that only interstate special access lines should be included, as was done in the past. We also find that we should continue to count special lines as voice grade equivalents rather than as physical pairs, as suggested by Qwest. We conclude this represents a reasonable way to calculate 2001 support amounts, pending any future proceedings to refine input values.

11. Matching Wire Centers. We conclude that when updating line counts for purposes of estimating forward-looking costs, the wire centers reported by carriers in their quarterly line count filings should be matched with wire centers found in the 1999 Data Request and in the model's customer location data. The vast majority of the approximately 12,500 reported wire centers have matching records in these other data sets. In calculating support for the year 2001, we shall use information from other data sources to correct typographical errors, match wire centers at identical locations, or otherwise reconcile minor discrepancies in the wire center identifiers. In addition, in the process of calculating support amounts for the year 2000, USAC staff received additional matching information from carriers, which shall be incorporated in the Commission's matching process for calculating support amounts for the year 2001. In a small number of cases no matches could be found. We find that line counts in wire centers reported by carriers in their quarterly filings that cannot be matched will not be used to estimate average costs. Such lines will be used in determining support amounts, however, because these lines are included in the quarterly line counts that are used to calculate statewide support amounts, according to the methodology adopted in the Twentieth Reconsideration Order. We expect that on an ongoing basis we will find opportunities to make additional improvements in matching wire centers.

12. Confidentiality. Most non-rural carriers claim that their wire center line count data are confidential. In April 2000, the Commission denied requests for confidential treatment of quarterly wire center line count data to the limited extent that the number of lines in wire centers receiving support may be determined when the Commission releases per-line and total support amounts. The Commission has not yet determined whether the line count data of wire centers that do not receive support should be afforded confidential treatment and has made such data available to interested parties under the terms of the Interim Protective Order. We do not decide, at this time, whether the data submitted pursuant to the 1999 Data Request should be afforded confidential treatment. The Commission will resolve the separate but related issues raised by these confidentiality requests at a later date. Pending resolution of these issues, the line count data filed pursuant to the 1999 Data Request will be made available only pursuant to the Interim Protective Order previously adopted in this proceeding.

III. Ordering Clauses

13. Pursuant to the authority contained in sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403, and 410 of the Communications Act of 1934, as amended, and § 1.108 of the Commission's rules, this Order is adopted.

List of Subjects

47 CFR Part 36

• Communications common carriers
• Reporting and recordkeeping requirements
• Telephone

47 CFR Part 54

• Reporting and recordkeeping requirements
• Telecommunications
• Telephone