DATE:	July 17, 2008
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Compliance (Polk, Casey) Office of the General Counsel (Teitzman)
RE:	Docket No. 010977-TL – State certification of rural telecommunications carriers pursuant to 47 C.F.R. 54.314.
AGENDA:	07/29/2008 – Regular Agenda – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\CMP\WP\010977 July 17-2008.DOC

 

 Case Background

Section 254(e) of the Telecommunications Act of 1996 provides that a carrier that receives universal service support “…shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended.”  In its Fourteenth Report and Order, Twenty-Second Order on Reconsideration, and Further Notice of Proposed Rulemaking in CC Docket No. 00-256 (the Rural Task Force Order; hereafter, the RTF Order), the Federal Communications Commission (FCC) modified its rules pertaining to the provision of high-cost support for rural telephone companies.  The FCC adopted a rule requiring that states who wish for rural carriers within their jurisdiction to receive federal high-cost support must file a certification annually with the FCC and with the Universal Service Administrative Company (USAC).  This certification is to affirm that the federal high-cost funds flowing to rural carriers in the state, or to any competitive eligible telecommunications carriers seeking support for serving customers within a rural carrier’s service area, will be used in a manner that comports with Section 254(e).  47 C.F.R. §54.314 provides the following:

State certification of support for rural carriers.

 

(a)       State certification.  States that desire rural incumbent local exchange carriers and/or eligible telecommunications carriers serving lines in the service area of a rural incumbent local exchange carrier within their jurisdiction to receive support pursuant to §§54.30 (local switching support), 54.305 (sale or transfer of exchanges), and/or 54.307 (support to competitive ETC) of this part and/or part 36, subpart F of this chapter must file an annual certification with the Administrator and the Commission stating that all federal high-cost support provided to such carriers within that State will be used only for the provision, maintenance, and upgrading of facilities and services for which the support is intended...

 

.           .           .

 

(c)       Certification format.  A certification pursuant to this section may be filed in the form of a letter from the appropriate regulatory authority for the State, and shall be filed with both the Office of the Secretary of the Commission clearly referencing CC Docket No. 96-45, and with the Administrator of the high-cost universal service support mechanism, on or before the deadlines set forth below in subsection (d). . . .

 

 

The FCC requires that certifications for the next calendar funding year must be submitted by the preceding October 1; thus, in order for a rural carrier to be eligible for high-cost universal service support for all of calendar year 2009, certification must be submitted by October 1, 2008.

 

            On March 17, 2005, the FCC released Order No. FCC 05-46 establishing new annual certification and reporting requirements to comply with the conditions of Eligible Telecommunication Carrier (ETC) designation and to ensure universal service funds are used for their intended purposes.  In making its decision, the FCC believed that the new reporting requirements were reasonable and consistent with the public interest and the Act, and will further the FCC’s goal of ensuring that ETCs satisfy their obligation under section 214(e) of the Act to provide supported services throughout their designated service areas.  The FCC also believed that the administrative burden placed on carriers would be outweighed by strengthening the requirements and certification guidelines to help ensure that high-cost support is used in the manner that it was intended, and would help prevent carriers from seeking ETC status for purposes unrelated to providing rural and high-cost consumers with the access to affordable telecommunications and information services.

 

            By Order No. PSC-05-0824-FOF-TL, issued August 15, 2005, and Order No. PSC-05-0824A-FOF-TL, issued August 17, 2005, the Commission approved the establishment of the new annual certification and reporting requirements.

Each of the rural carriers which are seeking state certification for 2009 have complied with the Commission’s new reporting requirements.

 

            This recommendation pertains to the Commission’s certification of Florida’s rural LECs for 2009.

 

Discussion of Issues

Issue 1: Should the Florida Public Service Commission (FPSC or Commission) certify to the FCC and to the USAC that for the year 2009 Windstream Florida, Inc., Frontier Communications of the South, LLC, GTC, Inc. d/b/a FairPoint Communications, ITS Telecommunciations Systems, Inc., Northeast Florida Telephone Company d/b/a NEFCOM, Quincy Telephone Company d/b/a TDS Telecom/Quincy Telephone, and Smart City Telecommunications, LLC d/b/a Smart City Telecom will only use the federal high-cost support they receive for the provision, maintenance and upgrading of facilities and services for which the support is intended?

Recommendation:  Yes. (Polk, Casey)

 

Staff Analysis:  Unless the Commission submits certifications to the FCC and to the USAC by October 1, 2008, Florida’s rural carriers will receive no interstate high-cost universal service funds during the first quarter of 2009, and would forego all federal support for that quarter.  Certifications filed after October 1, 2008 would cause rural carriers to be eligible for high-cost funds for only partial quarters of 2009.  For example, certifications filed by January 1, 2009, would allow rural carriers to be eligible for high-cost funds in the second, third, and fourth quarters of 2009.  Certifications filed by April 1, 2009, would only allow rural carriers to be eligible for high-cost funds in the third and fourth quarters of 2009.  Other than Frontier, these rural ETCs are under intrastate price-cap regulation.  However, the FCC anticipated that certain state commissions may have limited economic regulatory authority:

 

In the case of non-rural carriers, we concluded that states nonetheless may certify to the FCC that a non-rural carrier in the state had accounted to the state commission for its receipt of federal support, and that such support will be “used only for the provision, maintenance and upgrading of facilities and services for which the support is intended.”  We determined that, in states in which the state commission has limited jurisdiction over such carriers, the state need not initiate the certification process itself. . . .We conclude that this approach is equally appropriate here with regard to rural carriers and competitive eligible telecommunications carriers serving lines in the service area of a rural local exchange carrier. (RTF Order, ¶188)

 

            Staff notes that on February 27, 2004, the Federal-State Joint Board on Universal Service (Joint Board) recommended that the FCC encourage states to use the annual ETC certification process to ensure that federal universal service support is used to provide the supported services and for associated infrastructure costs.[1] Annual review affords states the opportunity for a periodic review of ETC fund use.[2]  The Joint Board asserted that states should examine compliance with any build-out plans.  Where an ETC fails to comply with the requirements in section 214(e) and any additional requirements proposed by the state commission, the Joint Board noted that the state commission may decline to grant an annual certification or may rescind a certification granted previously.[3]  

            The FCC has noted that it may institute an inquiry on its own motion for companies for which it, rather than state commissions, has granted ETC status.[4]  Such an inquiry could include an examination of the ETC’s records and documentation to ensure that the high-cost support it receives is being used “only for the provision, maintenance, and upgrading of facilities and services.”  The FCC stated that failure to fulfill the requirements of the statute, its rules, and the terms of its designation order could result in the loss of the carrier’s ETC designation. 

            To date, there have been no indications that the rural ETCs are in violation of any of the provisions of Section 214(e). Both the FPSC and the USAC have conducted audits of Florida rural ETCs during the past year to ensure compliance with the universal service funding requirements. 

            As has been done in prior years, each of the seven Florida rural ETCs has provided the Commission with an affidavit (see Attachments A through G) in which they have certified that their use of interstate high-cost universal service support received during 2009 will comport with Section 254(e) of the Act and applicable FCC rules.  Given these ETCs’ certifications, staff again recommends that the Commission certify to the FCC and to the USAC that for the year 2009 Windstream Florida, Inc., Frontier Communications of the South, LLC, GTC, Inc. d/b/a FairPoint Communications, ITS Telecommunciations Systems, Inc., Northeast Florida Telephone Company d/b/a NEFCOM, Quincy Telephone Company d/b/a TDS Telecom/Quincy Telephone, and Smart City Telecommunications, LLC, d/b/a Smart City Telecom will only use the federal high-cost support they receive for the provision, maintenance and upgrading of facilities and services for which the support is intended.

 

 

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes.  This docket should be closed and subsequent annual certifications of rural telephone companies should be addressed in a new docket.  (Teitzman)

Staff Analysis: 

 Under 47 C.F.R. §54.314, state commission certification that its rural LECs will use interstate high-cost universal service support in a manner that comports with Section 254(e) will need to be addressed once a year.  We anticipate that in subsequent years, Florida’s rural LECs that continue to desire to receive interstate high-cost universal service support will again submit affidavits to this Commission; such affidavits would need to be received on a schedule that allows for an order to be issued and forwarded with a letter to the FCC and the USAC prior to October 1.  Accordingly, staff believes it is appropriate for a new docket to be assigned to handle future annual certifications.