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                                Before the
               Federal Communications Commission
                    Washington, D.C.  20554


In the Matter of                     )
                                     )
Federal-State Joint Board on         )
Universal Service:                   )    CC Docket No.  96-45
Promoting Deployment and             )    
Subscribership in Unserved           )  
and Underserved Areas, Including        )    
Tribal and Insular Areas             )    
                                          
                                     
              FURTHER NOTICE OF PROPOSED RULEMAKING
                                
                                
      Adopted: August 5, 1999Released:  September 3, 1999


Comments Due:       60 days after publication in the Federal Register
Reply Comments Due: 90 days after publication in the Federal Register


By the Commission:  Commissioner Furchtgott-Roth approving in part, dissenting in part, and
issuing a statement; Commissioner Tristani issuing a statement.


                       TABLE OF CONTENTS
                                

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II.                                                             Current Levels of Deployment and Subscribership. . . . . . .8
 A.  Penetration Rates. . . . . . . . . . . . . . . . . . . . . . . . . .8
 B.  Availability and Cost of Telecommunications Services . . . . . . . .9
 C.  Impediments to Increased Penetration . . . . . . . . . . . . . . . 12
III.                                                            Tribal Lands . . . . . .16
 A.  Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
 B.  Defining "Tribal Lands". . . . . . . . . . . . . . . . . . . . . . 23
 C.  High-cost Support Mechanisms . . . . . . . . . . . . . . . . . . . 25
 D.  Revisions to Lifeline. . . . . . . . . . . . . . . . . . . . . . . 30
IV.                                                             DESIGNATING Eligible Telecommunications Carriers Pursuant to Section 214(e)(6) . . . . . 33
V. Unserved Areas -- Implementation of Section 214(e)(3) . . . . . . . .38
 A.  Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
 B.  Defining "Unserved Area" . . . . . . . . . . . . . . . . . . . . . 39
 C.  Determining When a Community is Unserved . . . . . . . . . . . . . 40
 D.  Determining When No Common Carrier Will Provide Service. . . . . . 40
 E.  Identifying Carrier or Carriers Best Able to Serve Unserved Areas. . . . . . .40
 F.  Ordering Carriers to Provide Service . . . . . . . . . . . . . . . 48
VI.                                                             Underserved Areas. . . . . . 49
 A.  Defining "Underserved Area". . . . . . . . . . . . . . . . . . . . 49
 B.  Expanding LinkUp to Include Facilities-Based Charges . . . . . . . 49
 C.  Support for Intrastate Toll Calling. . . . . . . . . . . . . . . . 51
 D.  Expanded Availability of Toll Limitation Devices . . . . . . . . . 51
 E.  Publicizing Availability of Low-Income Support . . . . . . . . . . 52
 F.  Support for Rural Health Care Infrastructure . . . . . . . . . . . 53
VII. Insular Areas . . . . . . . . . . . . . . . . . . . . . . . . . . .56
 A.  Defining "Insular Area". . . . . . . . . . . . . . . . . . . . . . 56
 B.  Rural Health Care Support. . . . . . . . . . . . . . . . . . . . . 58
 C.  Access to Toll-Free Services in Insular Areas. . . . . . . . . . . 60
VIII.                                                           Procedural Matters . . . . . 62
 A.  Ex Parte Procedures. . . . . . . . . . . . . . . . . . . . . . . . 62
 B.  Comment Filing Procedures. . . . . . . . . . . . . . . . . . . . . 62
 C.  Initial Regulatory Flexibility Act Analysis. . . . . . . . . . . . 63
IX.                                                             Ordering clauses . . . . . . 63
APPENDIX A:                                                     COMMISSION MEETINGS ON INDIAN TELECOMMUNICATIONS ISSUES   LIST OF
ATTENDEES 65
APPENDIX B:                                                     OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS -COMMISSION HEARINGS. . . . . . . . . . . . . . . . . . . .67
APPENDIX C:                                                     OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO INDIANS ON
RESERVATIONS   PARTIES FILING COMMENTS . . . . . . . . . . . . . . . . .69
APPENDIX D:                                                     COMPETITIVE BIDDING PROPOSALS AND EXAMPLES . . . . . .71
APPENDIX E:                                                     ARIZONA PROPOSAL CONCERNING UNIVERSAL SERVICE SUPPORT FOR
INITIAL CONNECTION CHARGES . . . . . . . . . . . . . . . . . . . . . . .83
APPENDIX F:                                                     INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS. . . . . .84

                         I.INTRODUCTION
1.     An important goal of the Telecommunications Act of 1996 is to preserve and advance
universal service in a competitive telecommunications environment.  The 1996 Act mandates that
"consumers in all regions of the Nation, including low-income consumers and those in rural,
insular, and high[-] cost areas, should have access to telecommunications and information services
. . . ."  Congress also directed that the support mechanisms employed by the Commission for this
task should be "specific, predictable and sufficient."  Through decisions adopted over the past
two years, the Commission has been striving to ensure that federal universal service support
mechanisms for high-cost areas, low-income consumers, schools and libraries, and rural health
care providers, enable consumers to obtain telecommunications services that would otherwise be
prohibitively expensive.  
2.     The absence of telecommunications service in a home puts its occupants at a
tremendous disadvantage in today's society.  Parents cannot be reached when urgent situations
arise at school.  Job seekers cannot offer prospective employers a quick and convenient means of
communication.  People in immediate need of emergency services cannot contact police
departments, fire departments, or medical providers.  In short, telephone service provides a vital
link between individuals and society as a whole.  Given the importance of telephone service in
modern society, it is imperative that the Commission take swift and decisive action to promote the
deployment of facilities to unserved and underserved areas and to provide the support necessary
to increase subscribership in these areas.
3.     The Commission took additional steps in the Thirteenth Order on Reconsideration
toward realizing Congress's goal of bringing telecommunications services to all regions of the
nation.  Specifically, in consultation with the Federal-State Joint Board on Universal Service
(Joint Board), we adopted the framework for a new, forward-looking high-cost support
mechanism for non-rural carriers.  This new high-cost support mechanism is intended to ensure
that high-cost areas receive support that is specific, predictable, and sufficient, even as local
competition develops.  Moreover, we believe that the forward-looking methodology, as opposed
to a methodology based on book costs, will encourage efficient entry and investment in high-cost
areas because forward-looking costs drive market decisions.  
4.     In addition to adopting the methodology for the new high-cost support mechanism for
non-rural carriers, the Thirteenth Order on Reconsideration also sought comment on certain
issues regarding the implementation of the new mechanism.  The Commission intends to resolve
these implementation issues in the fall of 1999, so that the new high-cost support mechanism will
begin providing support to non-rural carriers beginning on January 1, 2000.  In addition, the
Commission reaffirmed its intention that rural carriers will receive support based on the forward-
looking costs of providing supported services, but not before January 1, 2001, and only after
further review by the Commission, the Joint Board, and a Rural Task Force appointed by the Joint
Board.  In the meantime, rural carriers will continue to receive high-cost support based on the
existing mechanism until the Commission adopts an appropriate forward-looking mechanism for
determining rural support.   
5.     The Commission has also recognized that, despite the steps it had taken to achieve the
universal service goals of the 1996 Act, some areas of the nation remain unserved or inadequately
served.  In the First Report and Order, the Commission stated that it would revisit certain issues
pertaining to the availability of service in unserved areas and universal service support in insular
areas.  In its Second Recommended Decision, the Joint Board recommended that the special
needs of unserved areas be investigated and subjected to a more comprehensive evaluation in a
separate proceeding. Telephone penetration rates among low-income consumers, and in insular,
high-cost, and tribal lands lag behind the penetration rates in the rest of the country.  Indeed,
while approximately 94.2 percent of all households in the United States have telephone service
today, subscribership levels for very low income households (78.3 percent), insular areas,
certain high-cost areas, and tribal lands (46.6 percent), are significantly lower than the national
average.  The Commission has stated that these low penetration rates are largely the result of
"income disparity, compounded by the unique challenges these areas face by virtue of their
location." 
6.     The Commission has been particularly concerned that Indians on reservations, in
comparison to other Americans, have less access even to basic telecommunications services.  In
1998, the Commission began formally examining its relationship with Indian tribes and the unique
issues involved in providing access to telephone service for Indians on reservations.  As a first
step, Commissioners and staff met with many tribal leaders and other Indian representatives to
obtain their input.  In meetings on April 30, 1998, and July 7, 1998, Commissioners and staff
heard from a variety of tribal leaders, tribal telephone company representatives, academics,
government personnel, and others with experience and expertise in the deployment of
telecommunications services on reservations.   Experts discussed problems ranging from
geographic isolation to lack of information to economic barriers.  These meetings provided an
unprecedented opportunity for the Commission to hear about the variety of interrelated obstacles
that have resulted in the lowest penetration rates in the country.  Following these meetings,
several of the experts returned in the fall of 1998, to provide a tutorial on Indian law for
Commission staff.
7.     Based on this informal dialogue with experts, the Commission determined that it
would conduct public hearings to explore further the reasons for the lack of telephone service and
to determine what specific actions the Commission could take that would improve access to
telephone service on Indian reservations.  The hearings, entitled "Overcoming Obstacles to
Telephone Service for Indians on Reservations," BO Docket No. 99-11, provided an opportunity
to obtain formal testimony and comments on the range of problems the Commission had begun to
identify.  The first field hearing was held on January 29, 1999 at the Indian Pueblo Cultural Center
in Albuquerque, New Mexico.  The second field hearing was held on March 23, 1999 at the Gila
River Indian Community in Chandler, Arizona.  Each hearing consisted of three panels
representing tribal authorities and tribal telephone companies, industry, and government and
consumer groups.   The Commission heard extensive testimony on issues including the costs of
delivering services to remote areas having very low population densities; the impact of the size
and extent of local calling areas on affordability of service; the quality of telephone service on
reservations; the complexities of governmental jurisdiction and sovereignty issues; and the effects
on telephone service of low incomes and high unemployment on reservations.  Transcripts of the
hearings and comments filed by interested parties are available on the Commission's website. 
Comments filed in BO Docket Number 99-11 will be incorporated, where relevant, into the
record of this proceeding.
8.     Further, in connection with each of the field hearings, Commissioners and staff made
site visits to Indian reservations and tribally-owned telephone companies.  These included visits to
the Rosebud Reservation, the Santa Domingo, Jemez, and Picuris Pueblos, and to Saddleback
Communications, the Gila River Telephone Company, the Salt River Pima-Maricopa Reservation,
the Navajo Nation, the Hopi Reservation, and the Havasupai Reservation.  These site visits
provided an opportunity for Commissioners and staff to observe firsthand the state of telephone
service in these reservations and pueblos and to hear directly from tribal members about their
experiences.  For example, Commissioners and staff visited the home of an elderly couple who
could not afford the cost of installing a telephone in their home.  The husband of the couple
explained that he was suffering from a chronic illness, but was unable to reach the hospital or his
doctor by telephone to schedule medical appointments and discuss his treatment.  During another
site visit, a tribal member stated that a relative had died during a medical emergency when his
family was unable to call an ambulance in time when critical medical attention was needed.  In
addition, the trips to Saddleback Communications and the Gila River Telephone Company
enabled Commission staff to view the successful operations of some tribally-owned telephone
companies.
9.     In this Further Notice of Proposed Rulemaking (Further Notice), the Commission
addresses the unique issues that may limit telecommunications deployment and subscribership in
the unserved or underserved regions of our Nation, including on tribal lands and in insular areas.
In particular, the Commission seeks comment on current levels of deployment and subscribership
in unserved, tribal and insular areas, including penetration rates, availability of telecommunications
services, and possible impediments to increased deployment and penetration. With respect to
tribal areas, the Commission seeks comment on issues that may be affecting the availability of
universal service in tribal areas, including the assignment of jurisdiction, designation of eligible
telecommunications carriers, and possible modifications to federal high-cost and low-income
support mechanisms that may be necessary to promote deployment and subscribership in these
areas.  In particular, the Commission seeks comment on the possibility of allowing carriers to
establish separate tribal study areas, raising the cap on the high-cost fund to allow for growth
based on separate tribal study areas, and revisions to its Lifeline rules.  In a companion Notice of
Proposed Rulemaking we are adopting today, we seek comment on the potential of wireless
technology to provide basic telephone service to tribal lands.
10.    With respect to unserved areas, the Commission seeks further comment regarding the
implementation of section 214(e)(3) of the Act, which permits the Commission or state
commissions to order a carrier to provide service to an unserved community, including the
possibility of adopting a competitive bidding mechanism to identify the carrier or carriers best able
to serve an unserved area.  The Commission also seeks comment on possible modifications to the
federal low-income and rural health care support mechanisms in underserved areas, including
tribal and insular areas, including the possibility of expanding LinkUp to include facilities based
charges, and providing support for intrastate toll-calling and rural health care infrastructure.  The
Commission seeks comment on rule changes designed to enhance the availability of support for
rural health care providers in insular areas, including determining the urban rate and the nearest
large city.  Through these efforts, we seek to ensure that unserved and underserved areas have
access to telecommunications services.  With respect to tribal lands, we also seek to ensure that
our efforts are consistent with principles of tribal sovereignty, the federal trust relationship, and
support for tribal self-determination.
       XI.Current Levels of Deployment and Subscribership
12.    In this section, we seek to gain a better understanding of the characteristics of
unserved and underserved areas, including insular and tribal lands, which by their very nature are
difficult to assess.  We also seek comment on specific factors preventing deployment of
telecommunications services in unserved areas and causing unusually low subscribership rates in
underserved areas.  We seek to determine which of these factors are common among rural,
insular, high-cost, and tribal lands, and which are unique to specific types of areas.  We ask
commenters to support their comments with empirical evidence, in addition to anecdotal evidence,
to the extent possible.
     A.   Penetration Rates
13.    The Industry Analysis Division of the Common Carrier Bureau publishes a
Subscribership Report three times per year.  The data in this report is based on the Current
Population Survey (CPS), conducted monthly by the Census Bureau to keep track of the
unemployment rate and other socio-economic conditions.  The survey, however, is based on
information from only 50,000 households nationwide and does not identify geographic areas with
fewer than 100,000 people.  Because many unserved, tribal and insular areas fall below this
population threshold, the CPS cannot be used to estimate penetration rates for these areas.  In
addition, this data does not include areas of the United States that are not states, including Puerto
Rico and the Virgin Islands.  The long form of the decennial census, which is delivered to millions
of households, contains a question about telephone subscribership.  As a result, the census data
can be used to estimate telephone penetration for smaller geographic areas.  This data, however,
is collected only every ten years and it takes the Census Bureau one year to compile results.  
14.    We seek detailed information, to the extent that it is available, on penetration rates in
high-cost areas, insular areas, tribal lands, and any other areas considered to be underserved.  By
the term penetration rate, we mean the percentage of households within a specified area that have
telephone service in the housing unit.  We seek this information on a national level, on a state-
by-state or territory-by-territory level, and on an area-by-area level.  To the extent possible, we
encourage commenters to provide the following additional information in each of the areas, and
on each of the levels, where they measure penetration rates:  (1) total population; (2) population
density; (3) average annual income; and (4) average unemployment rate.  We also ask that
commenters briefly explain the methods by which they gather their data (e.g., census data,
statistical sampling, etc.).  We also seek comment on the difficulty of getting such information,
such as the difficulty of mapping a telephone service territory onto the census territories (such as
census block groups) because the boundaries may not always coincide, and questions concerning
the definitions of the terms "household" and "telephone service."
     A.   Availability and Cost of Telecommunications Services
15.    In each of the areas, and on each of the levels described above in section II.A above,
we seek to determine the nature of the telecommunications services available and the costs of
such services.  In particular, we seek comment on the extent to which these areas receive the
following service, if any: basic telephone service, services included within the definition of
universal service, and/or advanced telecommunications services.  We also seek comment on
whether any carrier is providing the following services and the approximate number of households
served by each service: wireline, wireless, Basic Exchange Telecommunications Radio Systems
(BETRS), or other telecommunications services; cable television; direct broadcast satellite
service; other satellite services that provide voice and data, such as those provided through VSAT
networks; Internet service; and electric service.  In addition, we seek comment on the monthly
rate for each of these services.  With specific regard to basic telephone service, we seek comment
on the average monthly bill for local service, local toll service, and long-distance service.
16.    To the extent that underserved, high-cost, insular, and/or tribal lands have basic
telephone service, we seek comment on whether the local calling area includes the nearest
metropolitan area or other area where the nearest medical, government, cultural or entertainment
facilities exist, i.e., the "community of interest."  For unserved areas, and in particular tribal lands,
we also seek comment to determine whether these areas fall within the designated service area of
existing carriers, regardless of whether such carriers are providing service to the area.
17.     We seek comment on the extent to which existing facilities currently used to provide
other services (e.g., radio broadcast towers, cable television plant, electrical poles and satellite
infrastructure) could be adapted to provide the services included within the definition of universal
service.  We also seek comment on whether specific services included within the definition of
universal service could not be provided via these facilities.  We seek comment on the extent to
which facilities used to provide telecommunications service to customers outside the unserved or
underserved areas exist adjacent to or nearby the unserved or underserved areas.  In particular,
we seek comment on whether railroad tracks, or towers used for the placement of antennas, are
found in these adjacent areas.  We seek comment on what role the Commission might play in
encouraging the use of these other facilities to provide service in underserved areas.  For example,
we seek comment on whether the Commission, or some other entity, should develop a database to
maintain information about facilities that could be used to provide service in currently unserved or
underserved areas, including tribal lands and insular areas.
18.    We also seek comment on the possible shared use of existing federal
telecommunications infrastructure, facilities or other resources, including government rights-of-
way,  to provide service in unserved or underserved areas, including tribal and insular areas.  We
seek comment on whether federal telecommunications resources could be made available in the
short term to serve as connecting backbone infrastructure for health and safety
telecommunications in unserved areas.  We encourage federal entities with government owned
telecommunications resources, particularly the Bureau of Indian Affairs, to comment on this issue. 

19.    Individuals from Indian communities, state agencies and the telecommunications
industry have commented that satellite and terrestrial wireless systems may represent practical and
cost-effective alternatives for providing service in unserved areas, including tribal lands.  In the
pending 2 GHz proceeding, which proposes policies and rules for licensing and operation of the 2
GHz mobile satellite service (MSS) systems in the United States, the Commission sought
comment on incentives and policies to encourage provision of satellite services to unserved, rural,
insular or economically isolated areas.  The commenters generally support the Commission's
tentative conclusion that satellites represent an excellent technology for providing basic and
advanced telecommunications services to unserved areas, including tribal lands.  Several
commenters stated that the Commission should take positive steps to encourage access to
Universal Service Funds by satellite operators or service providers.  Several commenters also
requested that the Commission should identify express and implicit regulatory provisions that may
prevent satellite providers from seeking universal support subsidies and reform those provisions,
or forbear from imposing these provision, so that MSS providers can fully participate in the
Universal Service Support initiative.
20.    Satellite networks, used either on a stand alone basis or in combination with a
terrestrial wireless network, may offer a cost advantage over wireline or other alternatives in
remote areas where a limited population may not provide the economies of scale to support the
deployment of wireline or other networks for each community.  Because satellites have large
coverage areas, and in many cases, can reach an entire nation, satellite providers may achieve
greater economies of scale in serving isolated areas since the costs of deployment could be spread
across a number of communities.  The basic build-out required to obtain satellite service is for
earth stations to transmit and receive satellite signals.  We seek comment on why satellite or
terrestrial wireless systems have not been used more extensively to serve these areas. 
Specifically, we seek comments regarding the particular characteristics of satellite or terrestrial
wireless systems that render these technologies suited for serving unserved areas, the costs
associated with deployment, the availability of federal universal service support, and any other
impediments to deployment.  To the extent that costs deter satellite and terrestrial wireless
deployment, we seek comment on what actions the Commission should take to support the
establishment and maintenance of satellite and terrestrial wireless services.  We ask parties to
comment on whether specific aspect of our universal service rules may deter both current and
future satellite services providers from providing service to rural, insular, and other unserved
communities, and what specific steps the Commission can undertake to encourage the use of
universal service support by satellite service providers.  We also seek comment on any other
actions the Commission should take to encourage the deployment of the most cost-effective,
practical solution in these geographically extreme areas.
     A.   Impediments to Increased Penetration
21.    An important step in increasing low penetration in unserved or underserved high-cost,
insular, and tribal lands is understanding the impediments to higher penetration rates. 
Accordingly, in this section, we seek comment on the nature of such impediments.  To facilitate
discussion, we have divided this issue into the categories described below.  These categories are
not intended to be exhaustive, however, and we encourage commenters to discuss any additional
impediments to increased penetration that they are able to identify.  
22.    In addition to identifying impediments to increased penetration rates, we also ask
commenters to discuss potential solutions for overcoming those impediments.  We do not reach
tentative conclusions on any of the proposals discussed below.  Instead, we seek comment on the
need for the Commission to address the specific concerns set forth below and the costs and
benefits of the proposals discussed.  We seek comment on how the Commission should measure
its success in satisfying the mandate in the 1996 Act that consumers in all regions of the nation
have access to telecommunications services.  We seek comment on what measure we could use,
other than penetration rates, to evaluate our success in achieving this goal.
          1.   Demographic Factors
23.    In section II.A above, we ask commenters to supply data for high-cost, insular,  and
tribal lands regarding: (1) total population; (2) population density; (3) average annual income; and
(4) average unemployment rate.  Bureau of Census data indicates that income and education
levels greatly affect telephone penetration rates and that geographic location can also make a
difference.  In this section, we seek specific comments on how these demographic factors affect
penetration rates.  For example, do income levels have a greater effect on penetration rates than
population density?  Do the combined effects of low income and low population density have an
exponential effect on penetration rates?  We seek comment on whether other demographic factors
significantly affect penetration rates in high-cost, insular, and tribal lands, e.g., education levels.
          1.   Geographic Factors
24.    One of the more obvious explanations for low penetration rates in high-cost, insular,
and tribal lands is that these areas are unusually expensive to serve.  Distance appears to be one
reason line extension charges are so high.  During the New Mexico and Arizona Field Hearings,
several tribes testified about the remoteness of their locations and the challenges that remote
locations presented in terms of telecommunications services.  For example, in 1997, the Navajo
Communications Company issued 72 line extension charge estimates that averaged more than
$40,000, including eight over $100,000 and one over $157,000.  The cost for installation of a
line on the Salt River Pima-Maricopa Indian Community (located in the heart of metropolitan
Phoenix) is $5,000.  We seek comment on the general terrain, including the existence of
mountains, plains, swamps, water, plateaus, canyons, etc., that create challenges in providing
telecommunications services.  We also seek comment on the extent to which the absence of
necessary infrastructure, for example roads or electrical capacity, constitutes a barrier to
deployment in rural, insular, high-cost, and tribal lands.  
          1.   Financial Factors 
25.    We seek comment on whether difficulties in obtaining access to financing limits the
ability of carriers to provide service in unserved or underserved rural, insular, high-cost, and tribal
lands.  We seek comment on any specific provisions in loan agreements that serve to deter
deployment in these areas.  We also seek comment on any measures the Commission could take
that would diminish the risks faced by investors and would enhance the ability of carriers to
attract financing necessary to provide service in unserved or underserved rural, insular, high-cost,
and tribal lands.  We also seek comment on the availability and utility of existing programs that
may provide funding and assistance to carriers seeking to provide telecommunications service in
unserved areas and underserved areas, including tribal and insular areas,  including whether the
availability of existing sources of funding and assistance is adequately publicized.   
          1.   Cultural Factors
26.    We seek comment on the extent to which cultural values or lifestyle preferences deter
consumer interest in subscribing to telecommunications services in unserved or underserved
areas.  For example, we seek comment on whether concerns about cultural preservation,
religion, identity, and values may affect the willingness of tribal authorities to allow or promote
the availability of telecommunications services in their communities.  Similarly, we seek
comment on whether there are a significant number of individuals that simply do not want
telecommunications services because of personal lifestyle choices.  We also seek comment on the
extent to which carriers justify the lack of deployment in unserved or underserved rural, insular,
high-cost, and tribal lands based on  concerns for cultural preservation and whether these
concerns are legitimate.  In addition, we seek comment on whether the Commission's efforts to
promote deployment and subscribership in unserved and underserved areas should be constrained
by the cultural choices expressed by tribal authorities or other local leadership.
          1.   Regulatory Factors
27.    In this section, we seek comment on impediments imposed by various laws,
regulations or practices that may deter carriers from providing service to unserved or underserved
areas, including federal, state, tribal or insular authorities.
28.    Federal Regulatory Impediments.  We seek comment on the current process for
obtaining access to rights-of-way on tribal lands and to what extent this process deters carriers
from providing service on tribal lands.  Under the Right-of-Way Act of 1948, there are three
critical components for obtaining rights-of-way over tribal land: (1) the Secretary of the Interior
through the Bureau of Indian Affairs must grant the easement for the right-of-way; (2)
compensation of not less than fair market value, as determined by the Secretary, plus severance
damages must be paid to the property owner; and (3) tribal consent must be obtained.  The
first of these requires a service provider to undergo environmental assessments and secure cultural
and archaeological clearances from the Bureau of Indian Affairs.  The second component
requires the service provider to obtain the standard appraisal it would for any easement but under
standards set by Bureau of Indian Affairs.  Finally, the service provider must also meet any
conditions imposed by the particular tribe because the tribe has the ultimate authority to accept or
reject the right-of-way.  Carriers have indicated that this process is a significant barrier to entry. 
Tribal authorities have expressed concern about the ability of carriers to use existing rights-of-way
to establish new terrestrial networks without obtaining the consent of the tribal authority.  In
addition, carriers and tribal authorities appear to have concerns concerning appropriate
compensation for use of rights-of-way in tribal lands.  To the extent rights-of-way management
issues pose a barrier to entry on tribal lands, we seek comment on what role, if any, the
Commission could play in addressing these issues.  
29.    We also seek comment on whether any aspect of our universal service rules deters
carriers from providing service to unserved and underserved areas.  For example, does the
definition of supported services deter terrestrial wireless or satellite service providers from
providing services in these areas?  In our ongoing proceeding to reform the high-cost universal
service support mechanism for non-rural carriers, several parties representing rural carriers have
filed comments asking that we adjust or eliminate the cap on the high-cost loop fund to coincide
with the anticipated transition of non-rural carriers to a new forward-looking support mechanism
on January 1, 2000.  We observe that the cap on the existing high-cost fund properly allows for
growth based on the rate of growth in the total number of working loops nationwide.  We also
observe that carriers do invest in facilities in an amount greater than that which is supported
through federal universal service support mechanisms.  We seek comment regarding the extent
to which the interim cap on the high-cost fund is a factor contributing to the lack of deployment in
unserved areas, including tribal and insular areas. 
30.    We comment on whether existing LATA boundaries prevent calls from unserved or
underserved areas, including tribal lands, to the nearest metropolitan area or community of
interest from being included in local service.  We seek comment on any other federal rules or
Commission regulations which may deter carriers from providing service to unserved or
underserved areas.  We also observe that issues specific to wireless providers will be addressed in
a separate proceeding.
31.    State Regulations.  We also seek comment on regulations or actions at the state level
that may impact deployment and subscribership in unserved and underserved areas.  We seek
comment on the extent to which statewide rate-averaging requirements or limited local calling
areas may make the costs of telecommunications service unaffordable to low-income consumers
living in unserved or underserved areas.  We also seek comment on existing state programs
designed to ensure that rates in remote and tribal lands are affordable.
32.    Tribal / Insular Regulatory Impediments.  We seek comment on any regulations or
requirements imposed by tribal or insular authorities that may deter entry in tribal lands or in
insular areas.  For example, we seek comment on whether local governments own or operate the
local exchange carrier in their areas and what impact this may have on competitive entry from
other cost-effective wireline, terrestrial wireless, or satellite service providers.  We seek comment
on whether government ownership or operation affects the provision of services supported by
universal service mechanisms in these areas.  We seek comment on any ownership or employment
requirements imposed by tribal authorities that may impair the ability of carriers to provide service
and/or compete with tribally-owned carriers.  For example, we seek comment on the extent to
which tribes require an ownership interest in a carrier as a prerequisite to allowing the carrier to
provide service on tribal lands.  We seek comment on the impact such requirements may have on
the deployment of telecommunications facilities and services on tribal lands.
                     XXXIII.  Tribal Lands
34.    For our universal service support mechanisms to be effective on tribal lands, we seek
to promote active involvement and collaboration between the Commission and tribal authorities. 
As a general matter, we seek comment on how we can increase Indian participation in the
Commission's decision-making process.  At a more specific level, we seek comment throughout
this section on issues unique to tribal lands that may affect the goals and incentives of federal
universal service support mechanisms and consider additional, targeted assistance the Commission
may want to provide to promote deployment and subscribership on tribal lands.  As  described
below, the trust relationship between the federal government and Indians as well as principles of
tribal sovereignty suggest that the federal government may have the authority to implement
particularized measures to address the factors causing the unusually low subscribership on tribal
lands.  We emphasize that these proposals are not meant to imply that the states have not, or will
not, do their share in promoting the availability of universal service on tribal lands.  In fact, many
states have made significant efforts in this area.  We commend them for doing so and we
encourage them to continue.  In this proceeding, however, we consider measures the Commission
may take to fulfill its obligation to address telecommunications needs on tribal lands.
     A.   Jurisdiction
          1.   Background
35.    As noted above, one of our goals in this proceeding is to identify and address the
unique issues that may limit telecommunications deployment and subscribership in unserved or
underserved regions of our Nation, including insular areas and tribal lands and to consider what
changes in our universal service rules would best address these issues.  Our jurisdiction to make
these changes springs from our obligation under section 254 of the Act to develop policies and
rules for the preservation and advancement of universal service.  With respect to tribal lands, our
exercise of this section 254 authority must be informed by our exploration of the jurisdiction of
states and Indian tribes to regulate and provide telecommunications.  Our jurisdiction to alter our
universal service rules in ways targeted to benefit unserved tribal lands must also be informed by
the principles of Indian law that stem from the unique relationship of the federal government with
Indian tribes.
36.    This relationship is set forth in the Constitution of the United States, treaties, statutes,
Executive Orders and court decisions. Historically, the United States has recognized the special
trust relationship between the federal government and tribal authorities, the unique sovereign
status of Indian tribes, and the federal obligation to guarantee the right of Indian tribes to self-
government.  
37.    Trust Relationship.  Federal courts have long recognized a "distinctive obligation of
trust incumbent upon the Government in its dealings with these dependent and sometimes
exploited people."  The formation of a trust relationship evolved out of a recognition of the
unequal bargaining power of Indian tribes in the formation of the treaties governing their rights
and obligations.  Over 150 years ago, Chief Justice Marshall acknowledged the special status of
Indian tribes in the seminal case of Cherokee Nation v. State of Georgia, describing them as
"domestic dependent nations."  Since that time, the courts have routinely observed the federal
government's unique relationship with Indian tribes, and as recently as June 14, 1999, the
Supreme Court again recognized the "special federal interest in protecting the welfare of Native
Americans."  The Supreme Court has stated that, through this special trust relationship, the
federal government "has charged itself with moral obligations of the highest responsibility and
trust.  Its conduct, as disclosed in the acts of those who represent it in dealings with the Indians,
should therefore be judged by the most exacting fiduciary standards."  
38.    Tribal Sovereignty.  The Constitution of the United States recognizes the sovereign
status of Indian tribes by classing Indian treaties as among the "Supreme Law of the land" and
establishes Indian affairs as a unique area of federal concern.  Indian tribes retain important
sovereign powers over "their members  and their territory" subject to the plenary power vested in
Congress by the Constitution of the United States. Under the tribal sovereignty doctrine, "Indian
tribes are unique aggregations possessing attributes of sovereignty over both their members and
their territory."  Under this doctrine, tribes have retained "a semi-independent position . . . not as
States, not as nations, . . . but as a separate people with the power of regulating their internal and
social relations . . .."  The foundation of Indian sovereignty over the reservation and tribal
members was first recognized by Chief Justice John Marshall, who described the Indian tribes as
"distinct political communities, having territorial boundaries within which their authority is
exclusive, and having a right to all lands within those boundaries, which is not only acknowledged
but guaranteed by the United States." The tradition of tribal sovereignty has persisted since
Chief Justice Marshall's early decisions construing the status of Indian tribes.  As the Supreme
Court has acknowledged "traditional notions of Indian self-government are so deeply ingrained in
our jurisprudence that they have provided an important 'backdrop' against which vague or
ambiguous federal enactment must always be measured." Congress recently declared that the
trust relationship "includes the protection of the sovereignty of each tribal government."
39.    Tribal Self-determination.  Through the enactment of various statutes, Congress has
demonstrated an "overriding goal of encouraging tribal self-sufficiency and economic
development."  For example, the Indian Financing Act of 1974 provides in pertinent part that:
"[i]t is hereby declared to be the policy of Congress . . . to help develop and utilize Indian
resources, both physical and human, to a point where the Indians will fully exercise responsibility
for the utilization and management of their own resources and where they will enjoy a standard of
living from their own productive efforts comparable to that enjoyed by non-Indians in neighboring
communities."  
          1.   Issues for Comment
40.    We recognize that principles of Indian law, including the trust relationship between the
federal government and Indian tribes, tribal sovereignty, and tribal self-determination, must apply
with equal force in the area of telecommunications.  With respect to telecommunications
services provided by tribal carriers on or off the reservation or by non-tribal carriers within tribal
lands (all of which are referred to jointly as "tribal telecommunications") the parameters of
federal, state and tribal authority, however, are not always clear. The Supreme Court, itself, has
acknowledged that "generalizations on this subject have become treacherous."  Nonetheless,
some of the proposals presented in this Further Notice necessitate an effort to evaluate these
jurisdictional relationships.  In this Further Notice, we seek comment to determine how best to
give effect to principles of Indian law in the context of rule changes intended to benefit unserved
and underserved tribal lands.
41.    State Jurisdiction.  Three of the proposals detailed later in this Further Notice deal
with provisions of sections 254 and 214 of the Act, and of our existing rules that are triggered
when the state lacks jurisdiction over a carrier providing telephone exchange or access service in a
particular area.  First, as described in section IV, the determination of whether a state has
jurisdiction over a common carrier providing telephone exchange service and exchange access is
key in determining whether the Commission is required to designate telecommunications carriers
as eligible to receive federal universal service support in high-cost areas.  Second, as detailed in
section V, in unserved areas where the state lacks jurisdiction the Commission, pursuant to
section 214(e)(3) shall determine which common carrier or carriers are best able to provide
service.  Third, in section III.D.1, we propose that revisions to our Lifeline rules to address the
situation faced by carriers not subject to state jurisdiction.
42.    The issue of the extent to which tribal authorities or state governments have authority
to regulate activities occurring on tribal lands, whether by tribal members or not, has a long and
complex legal history, involving considerations of whether state regulation is preempted by
federal regulation, whether state regulation is consistent with tribal sovereignty and self-
determination, and whether tribes have consented to state jurisdiction, either in treaties or
pursuant to the Indian Civil Rights Act of 1968.  In addition, Indian law jurisprudence finds 
state law generally inapplicable when states attempt to regulate the conduct of Indians directly
within reservation boundaries.  
43.    We recognize  that some state commissions have asserted jurisdiction over carriers
seeking to provide service on tribal lands and regulate certain aspects of the provision of
telecommunications service on tribal lands.  We seek comment, in particular from state
commissions as well as any other interested parties, concerning the extent of state and tribal
regulation of telecommunications provided on tribal lands and by tribally-owned or operated
carriers.  In particular, we seek comment on the appropriate jurisdictional authority in the
following situations: (1) tribally-owned or operated carriers providing service within the
reservation (a) to tribal members, (b) to non-tribal members, and (c) to non-tribal members living
on non-native fee lands (within the reservation); (2) non-tribally owned or operated carriers
offering service both inside and outside of the reservation; and (3) tribally-owned or operated
carriers offering service outside of the reservation.  We refer parties commenting on these issues
to the various ways in which tribal lands could be defined, as discussed below, and seek comment
on how these definitions inform the jurisdictional analysis requested in this section.
44.    In addition, we seek comment on the jurisdictional treatment of the following
geographic entities, as classified by the Bureau of the Census:  (1) American Indian
Reservations, which are areas with boundaries established by treaty, statute and /or executive or
court order; (2) Trust Lands, which are real property held in trust by the federal government that
is associated with a specific American Indian reservation or tribe and which may be located within
or outside the reservation;  (3) Tribal Jurisdiction Statistical Areas, which are delineated by those
Federally-recognized tribes in Oklahoma that no longer have a reservation; (3) Tribal Designated
Statistical Areas, which encompasses federally and state-recognized tribes without reservation or
trust lands; (4) Alaska Native Regional Corporations, which are corporate entities established
under the Alaska Native Claims Settlement Act of 1972 (ANCSA) to conduct the commercial and
nonprofit business of Alaska Natives; and (5) Alaska Village Statistical Areas, which are tribes,
bands, clans, groups, villages, communities, or associations in Alaska that are recognized pursuant
to the ANCSA.  
45.    We seek comment on whether there are any other kinds of tribal relationships that
would inform our jurisdictional analysis.  We seek comment on whether the state commission has
jurisdiction over telecommunications in the situations described above, the legal authority for such
jurisdiction (e.g. the state constitution, state statute, Indian treaty, etc.); and the extent to which
the particular state commission exercises that jurisdiction. We also seek comment on the existence
of any concurrent jurisdiction.
46.    In addition, we observe that wireline telephone calls between Indian tribal lands and
the state in which tribal land is located are currently treated as intrastate calls, subject to state
jurisdiction.  We seek comment on whether this treatment is consistent with principles of tribal
sovereignty and the Indian law jurisprudence regarding the limits of state authority, referenced
above.  We also seek comment on whether the treatment of these calls as intrastate is consistent
with the division of jurisdiction between the Commission and the states under section 2 of the
Act.  We seek comment as well on the need, impact, and Commission's authority to reclassify
these calls as interstate for the purpose of giving effect to principles of tribal sovereignty.
47.    We observe further that state jurisdiction may be preempted by the operation of
federal law "if it interferes with or is incompatible with federal and tribal interests reflected in
federal law, unless the state interests at stake are sufficient to justify the assertion of state
authority."  An express Congressional statement of preemption is not required.  Instead, a
preemption analysis "requires a particularized examination of the relevant state, federal and tribal
interests."  We seek comment on state interests in regulating telecommunications on tribal lands,
including the ability to ensure reasonable rates, quality service, and the continued viability of local
exchange carriers (LECs).  We also seek comment from each tribal government, and any other
interested parties, on the extent to which the state's exercise of jurisdiction over
telecommunications on tribal lands and over tribal carriers that serve areas both inside and outside
Indian sovereign territory is warranted.
48.    Tribal Regulation.  We seek comment from each tribal government, and any other
interested parties, on the extent of tribal authority over regulation of telecommunications on tribal
lands.  As a threshold matter, we note that the Commission has previously spoken to some
aspects of this issue in the A.B. Fillins Order, in which the Commission considered the extent of
tribal regulatory authority over the provision of cellular service within a tribal reservation.   In
that order, the Commission held that under well-settled case law, the Communications Act applies
with equal force to tribal reservations as to other areas, and that the Commission has sole
authority under Title III of the Act with respect to management and licensing of radio spectrum in
tribal areas.  The Commission also concluded, however, that the Communications Act does not
preempt tribal authority over access by telecommunications carriers to tribal lands, because the
provisions of the Act that preempt state and local impediments to entry do not apply to tribal
authorities.     
49.    In light of this statutory framework, we seek comment on the current extent to which
tribal authorities have engaged in telecommunications regulation and on any future plans of tribal
authorities to regulate telecommunications in tribal areas.  We seek comment on the extent to
which tribal authorities consider regulation of tribal telecommunications important to the right to
self-government and self-determination. We also seek comment on whether tribal authorities
should be considered as comparable to state authorities for purposes of regulating
telecommunications services, and the degree to which the federal-tribal relationship on
communications matters is similar or dissimilar to the federal-state relationship.  Finally, while we
have determined in the A.B. Fillins Order that tribal authorities are not subject to preemption
under provisions of the Act applicable to state and local governments, we seek comment on what
authority, if any, the Commission has to preempt tribal regulations that may be inconsistent with
our federal regulatory scheme. 
50.    Tribal Self-determination and Universal Service Goals.  We seek comment to
determine how principles of Indian law and federal support for tribal self-determination affect the
Commission's statutory mandate to ensure that consumers in all regions of the nation have access
to the services supported by federal universal service support mechanisms.  Pursuant to the Act,
the Commission is bound by its statutory mandate to promote the availability of the services
supported by federal universal service support mechanisms in all regions of the Nation.  We
seek comment on whether this statutory obligation is affected or constrained by any contrary
interests, for cultural or other reasons, of certain tribal authorities.   We seek comment, in
particular from tribal authorities, to ascertain whether tribal authorities share the goals established
by the 1996 Act, which the Commission is bound to implement.  We seek comment on the extent
to which tribal authorities seek to promote the availability of telecommunications services and
competition among telecommunications providers.
51.    We also seek comment on whether the services supported by federal universal service
support mechanisms are consistent with the interests of tribal authorities in promoting service in
tribal lands.  We recognize that some tribal authorities may prefer a different mix of services to
be supported.  For example, some tribes may prefer support for terrestrial wireless or satellite
services, rather than wireline services.  Other tribes may want to prioritize the ability for each
member to receive basic telecommunications service, rather than the entire package of services
included in the definition of universal service.  We seek comment on whether the Commission has
the authority to and whether it should develop a procedure by which the Commission, the Joint
Board and the sovereign Indian tribes could identify a single alternative definition of the services
supported by federal universal service support mechanisms in tribal lands.  We seek comment on
additional administrative burdens that would be associated with implementing this procedure.  
     A.   Defining "Tribal Lands"
52.    The definition we adopt of "tribal lands" will be used to identify those areas in which,
for reasons based on principles of Indian sovereignty, the Commission seeks comment to
determine whether possible modifications to our federal universal service policies and rules may
be warranted.  In defining tribal lands, we seek to ensure that we limit the reach of these proposals
to those areas in which principles of tribal sovereignty and tribal self-determination apply.  We
also seek to balance the reasonable exercise of federal jurisdiction with appropriate deference to
state sovereignty and jurisdiction.  
53.    We seek comment on defining tribal lands as all land within the limits of any Indian
reservation under the jurisdiction of the United States Government, notwithstanding the issuance
of any patent, and, including rights-of-way running through the reservation.  Alternatively, we
seek comment on defining tribal lands to have the same meaning as the term "Indian country," as
that term is defined by the Bureau of Indian Affairs.  "Indian country" means (a) all land within
the limits of any Indian reservation under the jurisdiction of the United States Government,
notwithstanding the issuance of any patent, and, including rights-of-way running through the
reservation, (b) all dependent Indian communities within the borders of the United States whether
within the original or subsequently acquired territory thereof, and whether within or without the
limits of a state, and (c) all Indian allotments, the Indian titles to which have not been
extinguished, including rights-of-way running through the same.  
54.    In addition, we seek comment on whether the geographic entities, as classified by the
Bureau of the Census, should be included in the definition of tribal lands: (1) American Indian
Reservations, which are areas with boundaries established by treaty, statute and / or executive or
court order; (2) Trust Lands, which are real property held in trust by the federal government that
is associated with a specific American Indian reservation or tribe and which may be located within
or outside the reservation;  (3) Tribal Jurisdiction Statistical Areas, which are delineated by those
Federally-recognized tribes in Oklahoma that no longer have a reservation; (3) Tribal Designated
Statistical Areas, which encompasses federally and state-recognized tribes without reservation or
trust lands; (4) Alaska Native Regional Corporations, which are corporate entities established
under the ANCSA to conduct the commercial and nonprofit business of Alaksa Natives; and
(5) Alaska Village Statistical Areas, which are tribes, bands, clans, groups, villages, communities,
or associations in Alaska that are recognized pursuant to the ANCSA.  
55.    We observe that, with the exception of the first category, American Indian
Reservations, the above listed classifications used by the Bureau of the Census would not be
encompassed in a definition of tribal lands that is limited to "all land within the limits of any Indian
reservation under the jurisdiction of the United States Government," as set forth above. We
recognize that tribes encompassed by these classifications may face obstacles in obtaining
telecommunications services that are similar to those faced by tribes in living in American Indian
Reservations.  Commenters supporting the inclusion of any of these categories should explain the
source of the Commission's authority to implement the additional measures proposed in this item
with respect to these areas, including noting any jurisdictional arguments provided in response to
questions raised in section III.A.2.  
     A.   High-Cost Support Mechanisms
          1.   Background
56.    In 1984, the Commission established high-cost support mechanisms to promote the
nationwide availability of telephone service at reasonable rates.  The high-cost loop fund
provides support by allowing incumbent LECs with higher than average local loop costs to
allocate an additional portion of those costs to the interstate jurisdiction to be recovered from
interstate revenues.  This enables the state jurisdictions to establish lower local exchange rates
in study areas receiving such assistance.  In general, a study area corresponds to an incumbent
LEC's entire service territory within a state.  Typically for incumbent LECs operating in more
than one state, each state represents a study area.  
57.    Pursuant to existing support mechanisms, high-cost loop support for most incumbent
LECs is calculated using data provided by incumbent LECs pursuant to the Commission's cost
accounting and jurisdictional separations rules.  Non-rural carriers are scheduled to make the
transition on January 1, 2000 to a new support mechanism based on forward-looking costs, while
rural carriers will continue to receive support based on the existing mechanisms until at least
January 1, 2001.  Under the existing mechanisms, the amount of an incumbent LEC's high-cost
loop support is based on the relationship of its historical loop cost for a particular study area to
the national average loop cost.  In order to determine this relationship, approximately half of all
incumbent LECs submit their historical loop cost data to NECA each year pursuant to sections
36.611 and 36.612 of the Commission's rules.  Because the cost data is not submitted by
carriers until seven months after the end of a calendar year, and because NECA requires time to
analyze the data and make the necessary nationwide calculations of support, carriers generally do
not receive high-cost support based on these data until the beginning of the second calendar year
after costs are incurred.  The impact of this rule is mitigated, however, by section 36.612 of the
rules, which allows carriers to update on a quarterly basis the calendar year data that they submit
to NECA on July 31 of each year.
58.    The remainder of incumbent LECs, known as "average schedule companies," are not
required to perform jurisdictionally-separated cost studies.  Average schedule treatment
historically has been available to companies that are presumed, because of their small size, to lack
the resources to justify a requirement that they perform separations and access charge cost studies
to determine their compensation from interstate services.  NECA develops a schedule based on
generalized industry data to reflect the costs of a typical small incumbent LEC.  Subject to
Commission approval, NECA's average schedule formula is used to provide support to average
schedule companies.
59.    Study Area Freeze.   The Commission froze all study area boundaries effective
November 15, 1984 to curtail the ability of incumbent LECs to place high-cost exchanges within
their existing service territories in separate study areas to maximize the payments from the
universal service support mechanisms.  As a result, an incumbent LEC must apply to the
Commission for a waiver of the study area boundary if it wishes to sell or purchase an
exchange.
60.    Interim Cap on High-Cost Fund.   In 1993, the Commission became concerned about
the rapid and erratic pattern of growth in the size of the high-cost loop fund and initiated an
inquiry to reevaluate its universal service support mechanism and to consider permanent changes
in the manner in which high-cost support would be provided.  At that time, the Commission
established an interim cap to the universal service fund.  The cap was designed to moderate the
growth of the fund while the Commission conducted a rulemaking proceeding and to allow for an
orderly transition to the new universal service support mechanisms that would be adopted.
Under the cap, the total fund for a given year may increase by no more than a percentage equal to
the percentage growth nationwide in the number of loops for that year.
61.    May 8, 1997 First Report and Order.   In 1997, the Commission adopted broad
revisions to its universal service support mechanisms consistent with the directive of the 1996 Act
to ensure that universal service support mechanisms be explicit, sufficient, and sustainable as local
competition develops.  The Commission established a plan for providing high-cost support
through the explicit federal universal service support mechanism rather than the interstate access
charge rate structure and a methodology for determining high-cost support based on the
forward-looking economic cost of providing the supported services to a particular service area. 
62.    Currently, all carriers receive high-cost support based upon the high-cost support
mechanisms which pre-date the 1996 Act.  As discussed above, non-rural carriers will begin
receiving high-cost support based on forward-looking costs on January 1, 2000.  The
Commission intends that rural carriers also will receive support based on forward-looking costs,
but only after further review by the Commission, the Joint Board, and the Rural Task Force
appointed by the Joint Board, and in no event before January 1, 2001.
63.    Until a carrier receives high-cost support based upon forward-looking costs, that
carrier's support will be determined on the basis of whether the carrier is an incumbent LEC or
a competitive eligible telecommunications carrier. A competitive eligible telecommunications
carrier  is defined in our rules as an eligible telecommunications carrier  that does not meet the
definition of incumbent LEC.  A competitive eligible telecommunications carrier  receives the
same amount of support per customer that the incumbent LEC previously serving that customer
received.
          1.   Federal Share of High-Cost Support
64.    As discussed above, because the trust relationship creates a unique relationship
between the federal government and Indian tribes, the federal government may have authority to
undertake additional measures to promote deployment and subscribership on tribal lands and to
provide universal service support necessary to offset the particular challenges facing these areas. 
With respect to high-cost support on tribal lands, we seek comment on the extent to which states
currently support the costs of universal service in tribal lands and whether the Commission should
provide an additional portion of the universal service support calculated by the federal support
methodology in high-cost, tribal lands.  For instance, with regard to the forward-looking high-cost
support mechanism for non-rural carriers, we seek comment on whether, rather than providing
support for costs that exceed both a national cost benchmark and the individual state's resources
to support those costs, the mechanism should provide support for all costs in unserved tribal lands
that exceed the national benchmark.
          1.   Separate Study Areas Option for Tribal Lands
65.    In order to provide additional high-cost support to tribal lands, we seek comment on
modifications to our study area rules.  Our study area rules provide a mechanism through which
the Commission has controlled the growth of the high-cost universal service support mechanism.
Universal service support for high-cost areas is determined on the basis of average loop costs
throughout a study area.  Averaging costs on a study-area wide basis spreads the burden of
serving high-cost areas among all of the telecommunications subscribers in that study area.  As a
result, however, carriers with relatively low average loop costs in a particular study area receive
no support for serving additional customers in a high-cost portion of that study area if the loop
costs in the high-cost portion do not raise the overall average loop costs for the study area above
a specific national benchmark, currently 115% of the national average cost per loop.  By
freezing study area boundaries, the Commission sought to eliminate incentives for carriers to
place high-cost exchanges in separate study areas in order to receive additional support for
providing service to those study areas.  As a result of these two policies, however, certain carriers
may experience strong financial disincentives to serving unprofitable high-cost customers in their
study areas and other carriers may lack incentives to purchase those unserved exchanges.
66.    In order to promote the deployment of universal services on tribal lands, we seek
comment on modifying our rules to permit carriers to treat tribal lands as a distinct study
area.  We seek comment on whether, by providing an exception to our study area rules, we can
eliminate regulatory requirements that may deter carriers from serving high-cost, tribal lands.  For
example, one option may be that the tribal study area for a carrier will consist of all of the tribal
lands served by the carrier within the borders of a single state.  This means that carriers may have
a tribal study area in each state in which it provides service on tribal lands.  We seek comment on
whether the tribal study area should include all of the tribal lands in a state (rather than, for
example, a single nationwide tribal study area) because states use study areas for purposes of
determining intrastate revenue requirements. 
67.    We emphasize that the proposal to allow tribal study areas is not related to the issue of
the area over which costs are averaged to determine support using the new high-cost mechanisms,
which is pending in the high-cost proceeding.  We seek comment on how allowing a separate
tribal study area could affect whether the carrier serving that area falls within the statutory
definition of a rural carrier for providing service to that area.  If a carrier designates the tribal
lands within a state as a separate study area, the number of access lines or inhabitants in that
newly created study area may qualify the carrier as a rural carrier with respect to that study
area.  We seek comment on whether this may result in some carriers, currently designated as
non-rural, being considered rural for purposes of receiving universal service support in certain
tribal study areas. 
          1.   Interim Cap on the High-Cost Fund
68.    In the First Report and Order, the Commission concluded that it would maintain the
cap on the existing high-cost loop support mechanism until all carriers receive support based on
the new high-cost funding mechanism.  The cap on the high-cost loop fund was initially
intended as an interim measure.  Commission rules require that if total support, based on each
carrier's actual costs, is above the total allowed capped amount, each recipient of high-cost loop
support will receive a reduced amount of support to keep the total fund at the capped amount. 
The cap has served its purpose in controlling excessive growth in the size of the fund during the
past six years as the Commission has reformed its universal service support mechanisms.  We
have stated that the rural carriers will receive support based on the new high-cost funding
mechanism no earlier than January 1, 2001.  The Commission has not established a timetable for
moving rural carriers to a forward-looking high-cost support mechanism.  Rather, this
undertaking is on hold pending the Rural Task Force making its recommendation to the Joint
Board; the Joint Board may recommend that the Commission conduct further proceedings on
certain issues.  
69.    Allowing carriers to designate separate tribal study areas, as proposed above, could
mean that additional carriers may be entitled to a portion of the high-cost support fund.  We seek
comment on the need for the Commission to provide additional high-cost support under the
existing mechanisms to tribal lands.  In order to do so, the Commission may either lift the cap on
the high-cost fund to allow for growth in the size of the fund attributable to the separate study
area proposal or reallocate the existing funds among the expanded category of recipients.  We
seek comment on these options.  We also seek comment on any other options that may assist the
Commission in achieving the goal of targeting additional federal high-cost support to tribal lands.
     A.   Revisions to Lifeline
70.    The Commission's Lifeline support program for low-income consumers is designed to
reduce the monthly billed cost of basic service for low-income consumers, which we anticipate
will increase telephone penetration.  Lifeline provides carriers with three elements of universal
service support.  The support must be passed through to each qualifying low-income consumer
by an equivalent reduction in his or her monthly bill for telephone service.  All carriers receive a
baseline amount of $3.50 per month per Lifeline customer in the form of a waiver of the federal
subscriber line charge (SLC).  An additional $1.75 per month is available per Lifeline customer
if "the state commission approves an additional reduction of $1.75 in the amount paid by
consumers. . . ."  Finally, carriers can receive federal matching funds of fifty percent of the
amount of state Lifeline support, up to a maximum of an additional $1.75 per month, as long as
the entire amount is passed on to subscribers.  Federal Lifeline support per qualifying low-
income consumer is capped at $7.00 per month.  
          1.   State Commission Approval
71.    The Commission has received petitions for waiver of our Lifeline rules to allow
carriers not subject to the jurisdiction of a state commission to receive the second tier of federal
support where no regulations issued by local authorities (including state commissions and tribal
authorities) exist that would prevent an equivalent reduction in the monthly telephone bills of
qualifying low-income consumers.  In drafting our rule, we did not consider the situation faced
by carriers not subject to the jurisdiction of a state commission.  Based on these waiver petitions,
it appears that our rule has given rise to certain situations that we did not anticipate.  The
requirement of state consent prior to making available the second tier of federal Lifeline support
was intended to reflect deference to the states in such areas of traditional state expertise and
authority.  We did not intend to require carriers not subject to state commission jurisdiction to
seek either state commission action or a Commission waiver in order to receive the additional
$1.75 available under federal support mechanisms, where that additional support would be passed
through to consumers.  For these reasons, we propose to modify our rule to state that an
additional $1.75 per qualifying low-income consumer will be provided to the carrier where the
additional support will result in an equivalent reduction in the monthly bill of each qualifying low-
income consumer.  This proposed revision maintains deference to the state commission because
the additional support will not be provided where a state commission with jurisdiction to do so
has not permitted an equivalent reduction in the consumer's bill.  The proposed revision is
intended to eliminate the need for carriers not subject to the jurisdiction of a state commission to
seek state commission action or a Commission waiver.  We seek comment on the proposed
revision. 
          1.   Federal Support on Tribal Lands
72.    In addition, in keeping with principles of tribal sovereignty, we seek comment on
modifying our rule to provide that the third tier of federal support, a maximum of $1.75 per
month per low-income consumer, is available to customers on tribal lands.  As described above,
the federal government has a special trust relationship with Indian tribes, and this entails special
responsibilities, particularly where tribal reservations appear to be particularly disadvantaged by a
lack of important resources, like telecommunications.  With respect to tribal lands, we seek
comment on the extent to which states currently provide the support necessary to qualify for
matching funds for the third tier of Lifeline support.  We also seek comment on whether the
federal government, in light of its trust relationship with Indian tribes, should provide carriers
serving tribal lands the third tier of Lifeline support, $1.75 per qualifying Lifeline customer, as
long as all such Lifeline customers receive an equivalent reduction in their bills.  Unlike in other
areas, this federal support amount would not be contingent upon the state in which the tribal lands
are located providing support. 
          1.   Amendments to Consumer Qualification Criteria
73.    We seek comment on whether the Commission should expand the consumer
qualifications for Lifeline assistance to ensure that low income consumers on tribal lands are able
to participate fully in the Lifeline assistance program.  Under our current rules, in states that
provide intrastate matching funds, a consumer must meet the criteria established by the state
commission to receive federal Lifeline support.  In most states, a consumer can meet the criteria
by demonstrating or certifying that he or she participates in one of several narrowly targeted low
income assistance programs.  We are concerned that some state commissions have established
Lifeline criteria that may inadvertently exclude low income consumers on tribal lands because the
criteria do not include low income assistance programs that are specifically targeted toward
Indians living on tribal lands.  Similarly, in those states that do not provide intrastate matching
funds (and thus do not establish the consumer qualifications for Lifeline participation), a consumer
seeking Lifeline support must certify his or her participation in one of the following Commission-
designated low income assistance programs: Medicaid; food stamps; Supplemental Security
Income; federal public housing assistance; or Low-Income Home Energy Assistance Program.
74.    We seek comment on how the Commission might expand the consumer qualifications
for Lifeline support to enable low income consumers on tribal lands to participate in the Lifeline
assistance program.  In particular, we seek comment about whether we should amend our rules to
allow low income consumers on tribal lands to qualify for Lifeline support by certifying their
participation in additional means tested assistance programs, such as the programs administered
by the Bureau of Indian Affairs or Indian Health Services. We encourage commenters to
indicate whether there might be other suitable criteria -- based solely on income or factors related
to income -- that should be used to determine qualification for low income members of tribal
lands.  We ask commenters to indicate whether providing Indians living on tribal lands with
greater access to Lifeline assistance might increase incentives for eligible telecommunications
carriers to serve these tribal lands.  Finally, we seek comment on whether the Commission could
apply any new criteria specifically targeted to low income Indians living on tribal lands both to
states that do not provide matching funds and states that do provide such funds.
LXXV.DESIGNATING Eligible Telecommunications Carriers Pursuant to
                       Section 214(e)(6)
76.    Pursuant to section 254(e) of the 1996 Act, not all telecommunications providers are
eligible for federal universal service support.  For purposes of the universal service support
mechanisms for high-cost areas and low income consumers "only an eligible telecommunications
carrier designated under section 214(e) shall be eligible" to receive federal universal service
support.  To be designated as an eligible telecommunications carrier, a carrier must: 
          
       (A) offer the services that are supported by Federal universal service support
     mechanisms under section 254(c), either using its own facilities or a combination
     of its own facilities and resale of another carrier's services (including the services
     offered by another eligible telecommunications carrier); and
     (B) advertise the availability of such services and the charges therefor using media
     of general distribution.
77.    Under section 214(e), the primary responsibility for designating a prospective carrier
as an eligible telecommunications carrier lies with the state commission.  In a situation where
there is no common carrier willing to provide supported services to an unserved community that
requests such services, section 214(e)(3) states that:

          [T]he Commission, with respect to interstate services . . . or a State
          commission, with respect to intrastate services, shall determine
          which common carrier or carriers are best able to provide such
          service to the requesting unserved community or portion thereof
          and shall order such carrier or carriers to provide such service for
          that unserved community or portion thereof.
     
In the event that a common carrier is not subject to the jurisdiction of a state commission, section
214(e)(6) authorizes the Commission, upon request, to designate the carrier as an eligible
telecommunications carrier, for a service area designated by the Commission, if the carrier meets
the qualifications for eligible telecommunications carrier status. 
78.    Section 214(e) of the Act states that only an "eligible telecommunications carrier"
designated under section 214(e) shall be eligible to receive federal universal service support. 
Pursuant to section 214(e)(2) and (e)(5) of the Act, state commissions are generally responsible
for designating eligible telecommunications carriers and for designating service areas for such
carriers.  Initially, section 214(e) did not include a provision for designating carriers not subject
to the jurisdiction of a state commission.   The Act was amended in 1997 to address this
"oversight." Section 214(e)(6) authorizes the Commission to designate as an eligible
telecommunications carrier "a common carrier providing telephone exchange service and
exchange access that is not subject to the jurisdiction of a State Commission."  We tentatively
conclude that, by adding section 214(e)(6), Congress sought to ensure that carriers serving all
regions of the United States have access to a mechanism that will allow them to be designated as
eligible telecommunications carriers, if they meet the statutory requirements.  Recognizing that
the designation of eligible telecommunications carriers is primarily a state commission function,
Congress granted this Commission the authority for this task in the event that a carrier is not
subject to the jurisdiction of a state commission. 
79.    Although some of the legislative history of section 214(e)(6) focuses on the ability of
tribally-owned carriers to be designated as eligible telecommunications carriers,  the statutory
language and other legislative history is not so limited.  The other legislative history states that
"the intent of this bill is to cover such situations where a State commission lacks jurisdiction over
a carrier, in which case the FCC determines who is eligible to receive federal universal service
support."  The legislative history also makes clear that "nothing in this bill is intended to impact
litigation regarding jurisdiction between State and federally recognized tribal entities" or to
"expand or restrict the existing jurisdiction of State commissions over any common carrier or
provider in any particular situation."  In the following paragraphs, we seek comment on how
section 214(e)(6) should be interpreted and implemented with respect to carriers (whether tribally
owned or otherwise) that provide telecommunications services to tribal areas. 
80.    First, however, we seek comment identifying other situations in which carriers
providing telephone exchange and exchange access services to areas other than tribal lands are not
subject to state commission jurisdiction and thus must seek designation as eligible
telecommunications carriers from the Commission.  In this context, we seek comment on whether
the Commission, rather than state commissions, has the jurisdiction to designate terrestrial
wireless or satellite carriers as eligible telecommunications carriers.  If such carriers submit
applications for designation pursuant to section 214(e)(6) during the pendency of this proceeding,
we will consider them on a case by case basis in light of the statutory language and the showings
made by the affected parties.  We also note that our analysis of the scope of the designation
provision of section 214(e)(6) is not intended to affect any other decision with respect to the
authority of state commissions or tribal authorities to regulate telecommunications on tribal lands
or over terrestrial wireless or satellite carriers.
81.    The statutory language of section 214(e)(6) is ambiguous with respect to when the
Commission's authority to designate eligible telecommunications carriers is triggered.  It is not
clear whether the Commission's authority is triggered when a carrier is not subject to the
jurisdiction of a state commission or when the service or access the carrier provides is not subject
to the jurisdiction of a state commission.  Thus, the initial question in interpreting section
214(e)(6) with respect to the provision of telecommunications service in tribal lands is under what
circumstances the Commission may designate carriers as eligible telecommunications carriers. 
The title of section 214(e)(6), "Common Carriers not Subject to State Commission Jurisdiction,"
suggests that the triggering inquiry is whether the carrier is subject to state commission
jurisdiction.  We tentatively conclude, however, that the better interpretation of section 214(e)(6)
is that the determination of whether a carrier is subject to the jurisdiction of a state commission
depends in turn on the nature of the service provided (e.g. telephone exchange or access service
provided by wire, satellite or terrestrial wireless)  or the geographic area in which the service is
being provided (e.g. tribal lands).  This interpretation is supported by the legislative history of
section 214(e)(6).  Representative Tauzin stated that "S.1354 makes a technical correction to the
Act that will make it possible for telephone companies serving areas not subject to the jurisdiction
of a State Commission, to be eligible to receive federal Universal Service support."  Our
tentative conclusion that the nature of the service or the geographic area in which the carrier
provides it should be the basis for distinguishing between the designation authority of the
Commission and state commission under section 214(e)(6), is consistent with other provisions of
the Act.  Section 2 of the Act similarly distinguishes between federal and state jurisdiction over
telecommunications services based on the geographic area in which the service is provided. 
Section 332(3) of the Act limits state authority on the basis of the service provided (i.e.
commercial and private mobile service).  We seek comment on this analysis and on any other
factors which may be relevant to this determination.
82.    Our next question then is under what circumstances are telecommunications carriers
providing telecommunications services on tribal lands subject to state commission authority?  In
section III.A.2, above, we seek comment on the extent to which a state commission has
jurisdiction over tribally-owned carriers seeking to provide telecommunications service on tribal
lands and over non-tribally-owned carriers seeking to provide such service on tribal lands.  The
answer to these questions will determine whether the Commission may designate carriers seeking
to provide service on tribal lands as eligible telecommunications carriers.  With respect to tribally-
owned carriers seeking to provide telecommunications service on tribal lands, we note that state
law is generally inapplicable when states attempt to regulate the conduct of tribal members
directly within reservation boundaries, except in "exceptional circumstances."    We seek
comment on whether, for the purpose of eligible telecommunications carrier designation, tribally-
owned carriers providing telecommunications services within tribal reservations would be subject
to state regulatory authority. 
83.    We further recognize that when states seek to regulate non-tribal members and their
activities conducted within a reservation, the appropriateness of the state's assertion of regulatory
authority is determined by a "particularized inquiry" into the nature of the state, federal, and tribal
interests at stake.  Specifically, the analysis turns "on whether state authority is pre-empted by the
operation of federal law; and '[s]tate jurisdiction is pre-empted . . . if it interferes or is
incompatible with federal and tribal interests reflected in federal law, unless the state interests at
stake are sufficient to justify the assertion of state authority.'  The inquiry is to proceed in light of
traditional notions of Indian sovereignty and the congressional goal of Indian self-government,
including its 'overriding goal' of encouraging tribal self-sufficiency and economic development." 
We recognize that this inquiry is a particularized one, and thus specific to each state and the facts
and circumstances surrounding the provision of telecommunications services by non-tribal
members within those tribal lands.  However, we seek comment on whether there are any general
federal, state and tribal interests at stake which might inform the inquiry and help provide general
guidance on the proper boundaries of state authority in this case.  Specifically, we seek comment
on the federal government's interest in assuming authority over the designation of eligible
telecommunications services, and the extent to which state authority would be preempted by the
operation of federal law -- namely section 214 or other relevant provisions or other federal or
tribal interests reflected in federal law.  
84.    We also seek comment on the states' interests in designating eligible
telecommunications carriers, as well as the implications of state designation on Indian sovereignty,
self-government and "tribal self-sufficiency and economic development."   We recognize,
however, that some state commissions have asserted jurisdiction over carriers seeking to provide
service on tribal lands, and that these commissions regulate certain aspects of a carrier's
provisions of service on tribal lands.   
85.    In implementing section 214(e)(6), we are concerned that the fact intensiveness and
the legal complexity of determining whether a state has jurisdiction over carriers seeking
designation as an eligible telecommunications carrier may lead to confusion, duplication of efforts
and needless controversy among carriers, tribal authorities, state commissions and this
Commission, which could undermine efforts to achieve our universal service goals.   For these
reasons, we propose the following process to treat applications for the Commission's designation
of eligible telecommunications companies eligible to receive universal service support for serving
tribal land.  Carriers seeking designation as an eligible telecommunications carrier from this
Commission, whether to serve tribal lands or on the basis of other jurisdictional arguments,
should consult with the relevant tribal authority, where appropriate, and the state commission on
the issue of whether the state commission has jurisdiction to designate the carrier.  In situations
where the tribal authority and the state commission agree that the state has jurisdiction, we
anticipate that the state would conduct the designation proceeding.  In instances where the tribal
authority challenges the state's exercise of jurisdiction, we encourage the carriers, with the
support of the tribal authority, to apply to this Commission for designation.  In the public
comment period subsequent to a carrier's application for designation as an eligible
telecommunications carrier, the carriers and tribal authorities would be expected to demonstrate
why Commission designation is appropriate.  Interested parties, including the state commission,
that disagree with the Commission's exercise of jurisdiction would also be expected to raise their
challenges in that proceeding. We seek comment on this proposal and suggestions for other ways
in which the determination of whether the designation must be performed by the Commission or a
state commission could be simplified or streamlined.
  LXXXVI.Unserved Areas -- Implementation of Section 214(e)(3)
     A.   Overview
87.    The federal universal service support mechanisms are designed to provide appropriate
incentives for the deployment of facilities capable of providing the supported services and the
promotion of increased subscribership.  This system depends upon the complex interrelationship
between federal mechanisms and state actions.  For these reasons, we rely on the input of the
Joint Board in making our decisions.  In general, we are confident that the new forward-looking
high-cost support mechanism described in the Thirteenth Order on Reconsideration will provide
appropriate incentives for carriers to provide supported services to all Americans who need them. 
Nonetheless, we are concerned that certain areas of the nation remain unserved because of
extraordinarily high-costs, low-incomes, or any other factors identified above in section II.C
above, that would inhibit service.  In this section, we discuss a specific statutory provision, section
214(e)(3) of the Act, that may allow the Commission to accelerate the deployment of facilities and
the provision of service in unserved areas by ordering carriers to serve those areas. 
88.    Section 214(e)(3) of the Act establishes that, in certain instances, the Commission or
state commissions may order a common carrier to provide the services supported by universal
service in unserved areas.  Due to the lack of information in the record, and at the Joint Board's
recommendation, the Commission decided in the May 8, 1997 First Report and Order not to
adopt particular rules to implement this provision at that time.  As part of our current efforts to
promote the deployment of service in unserved areas, insular and tribal lands, we conclude that it
is time to establish a framework for conducting proceedings pursuant to section 214(e)(3). 
Accordingly, we seek comment, as described below, regarding the implementation of this
provision.  
89.    Section 214(e)(3) provides that:
          
          if no common carrier will provide the services that are supported by
          Federal universal service support mechanisms under section 254(c)
          to an unserved community or any portion thereof that requests such
          service, the Commission, with respect to interstate services or an
          area served by a common carrier to which paragraph (6) applies,
          or a State commission, with respect to intrastate services, shall
          determine which common carrier or carriers are best able to provide
          such service for that unserved community or portion thereof.  Any
          carrier or carriers ordered to provide such service shall meet the
          requirements of  paragraph (1) and shall be designated as an eligible
          telecommunications carrier for that community or portion thereof.
          
The legislative history for this provision states that section 214(e)(3) "makes explicit the implicit
authority of the Commission" to order a common carrier to provide services supported by the
universal service support mechanisms. 
     A.   Defining "Unserved Area"
90.    In order to determine whether an allegedly unserved community is eligible for relief
pursuant to section 214(e)(3), we must first decide whether the area at issue is unserved.  Only
after making this initial determination can we proceed with the rest of the analysis required by
section 214(e)(3).  We propose defining an unserved area as "any area in which facilities would
need to be deployed in order for its residents to receive each of the services designated for
support by the universal service support mechanisms."  In the First Report and Order, we
identified the services that would be supported by universal service support mechanisms as: 
single-party service; voice grade access to the public switched network; DTMF signaling or its
functional equivalent; access to emergency services; access to operator services; access to
interexchange service; access to directory assistance; and toll limitation services for qualifying
low-income consumers.  These services were identified based on the statutory directive
embodied in section 254(c)(1)(A)-(D), requiring the Joint Board and the Commission to 
"consider the extent to which ... telecommunications services" included in the definition of
universal service: (1)  are essential to education, public health, or public safety;   (2) have, through
the operation of market choices by customers, been subscribed to by a substantial majority of
residential customers;  (3) are being deployed in public telecommunications networks by
telecommunications carriers;  and (4) are consistent with the public interest, convenience and
necessity.
91.    The proposed definition is based on whether facilities would need to be deployed to
provide the supported services to distinguish unserved areas from areas in which a large
percentage of the population does not subscribe to available services.  This definition is intended
to help further our statutory mandate to promote the availability of services supported by federal
universal service support mechanisms.  We recognize that this definition may result in certain
areas being deemed unserved, even though those areas are receiving some level of service that
includes less than all of the services designated for support by the universal service support
mechanisms.  We also recognize that this definition may result in the existence of relatively small
unserved areas within larger areas that are currently receiving service.  We seek comment on
whether this definition will enable us to appropriately target our efforts to those areas that do not
receive all of the services supported by federal universal service support mechanisms. 
92.    We emphasize, however, that determining whether a particular area meets the
definition of unserved area is only the beginning of the analysis under section 214(e)(3).  To
obtain relief pursuant to section 214(e)(3), each of the steps discussed below must be followed. 
We seek comment on this analysis and we invite commenters to propose alternative definitions.  
     A.   Determining When a Community is Unserved
93.    The language "or any portion thereof" in section 214(e)(3) suggests that we are not
meant to impose minimum size requirements on the number of potential subscribers needed to
invoke the authority of section 214(e)(3).  We seek comment on whether the language should be
interpreted differently or suggests a particular definition.  
     A.   Determining When No Common Carrier Will Provide Service
94.    By its terms, the relief afforded in section 214(e)(3) is not triggered until a
determination is made that "no common carrier will provide" the services supported by the federal
universal service support mechanisms.  Therefore, we seek comment on the meaning of the phrase
"no common carrier will provide" the supported services.
95.    As an initial matter, section 214(e)(3) does not specify whether the request for service
must be received from members of the unserved community or whether state, local, or tribal
authorities must make an official request for service from the carrier on behalf of the unserved
members of the community.  We tentatively conclude that limitations on who may issue the
request are not warranted by the terms of the statute or the goals it seeks to achieve.  We seek
comment on this tentative conclusion.
96.    We tentatively conclude that the language "no common carrier will provide" the
services supported by the federal universal service support mechanisms means something more
than no common carrier is actually providing the supported services.  We seek comment on how
we can determine that no common carrier is willing to provide the supported services.  We seek
comment on which common carriers must be asked in order to reach the conclusion that no
common carrier will provide the service.  We seek comment on how a satellite services provider
should be treated for this issue, given that they can potentially provide service to these unserved
areas.  We also seek comment on whether the reasons for the common carrier's refusal to provide
service are relevant to a determination that the area is unserved.  For example, what if the refusal
to provide service is based on the poor credit histories of the individuals requesting service or an
existing overdue debt?  Given the extremely low annual incomes, on average, on tribal lands, it
seems possible that inadequate credit histories of the potential customers may cause a carrier to be
unwilling to provide service.
     A.   Identifying Carrier or Carriers Best Able to Serve Unserved Areas
97.    Section 214(e)(3) authorizes the Commission, with respect to interstate service or an
areas served by a carrier to which section 214(e)(6) applies, and state commissions, with respect
to intrastate service, to determine which carrier or carriers are best able to provide service to the
requesting, unserved community and order that carrier or carriers to provide service.  We seek
comment on the relative roles that the Commission and the states should play in determining
which carriers are best able to provide the supported services in unserved areas, including any
coordination that should occur in making this determination.
98.    We seek comment on whether the Commission is authorized to and whether it should
establish national guidelines by which states may or must make this determination, when they have
jurisdiction to do so.  We recognize that the selection of the carrier to serve some unserved areas
pursuant to section (e)(3) of the Act is to be made by state commissions.  We seek comment on
whether a consistent, national approach is necessary to further the universal service goals of the
Act or to provide certainty to carriers regarding the possible application of this important
provision.  We seek comment on whether, in situations where the state has jurisdiction to
designate eligible telecommunications carriers, all aspects of this decision should be left to the
states because states have more familiarity with the areas in question.  We also seek comment on
the role of tribal authorities with respect to the Commission's determination of the carrier or
carriers best able to serve unserved, tribal lands.  We also seek comment to determine whether the
Commission's obligation to identify and order a carrier to provide service in tribal lands should be
affected by the interests of the tribal authorities.
99.    One approach for making a determination pursuant to section 214(e)(3) would be to
conduct a fact-intensive inquiry, polling common carriers serving nearby or surrounding areas to
determine where existing facilities are deployed, to estimate the costs for each carrier to provide
the supported services, and to consider other possible factors that may be relevant to the
conclusion that a carrier is "best able."  We tentatively conclude, however, that our preferred
approach would be to adopt a competitive bidding mechanism for identifying the carrier or
carriers best able to provide service in unserved areas for which the Commission has authority to
order carriers to provide service.  We seek comment on the use of a competitive bidding
mechanism in section V.E.2, below.  We seek comment on whether it is within our authority to
require states to adopt a competitive bidding mechanism to determine which carrier or carriers
will be ordered to provide intrastate service in unserved areas to which section 214(e)(6) does not
apply.  
100.   If the competitive bidding mechanism does not give rise to a carrier willing and
able to provide the supported services in the unserved area at a reasonable cost, we seek comment
on whether the Commission should then initiate an inquiry to determine the carrier or carriers
best-able to provide service to the area.  We seek comment on whether the following factors
would be relevant in making that determination:  (1) whether the area falls within the designated
service area of an existing carrier;  (2) the extent to which a carrier has deployed facilities capable
of providing supported services in the surrounding area; (3) the cost for that carrier to build
facilities capable of providing the supported services; (4) the quality of services that would be
provided; (5) the financial strength of the carrier; (6) the proportionate impact serving the area
would have on the number of lines and the geographic area served by the carrier; (7) the amount
of time required for the carrier to deploy facilities; and (8) a carrier's status as either an incumbent
LEC or a competitive eligible telecommunications carrier.  We seek comment on any other factors
that may be relevant.  We also seek comment on whether our inquiry must be limited to
incumbent LECs and competitive eligible telecommunications carriers or whether we may also
include other competitive LECs, interexchange carriers, terrestrial wireless or satellite service
providers, or providers of cable or electric services that would be capable of providing the
supported services to the unserved area. We seek comment on whether to exclude certain carriers
from consideration, for example, carriers that are considered small entities for purposes of the
Regulatory Flexibility Act.   Finally, we seek comment on whether the preferences of the
unserved community for a particular carrier or technology should be considered in making a
determination of which carrier is best able to provide service to the area.
          1.   Background on Competitive Bidding
101.   In the Notice of Proposed Rulemaking issued to implement the universal service
provisions of the 1996 Act, the Commission sought comment on how to provide universal
service support to rural, insular, and high-cost areas, generally, and asked whether competitive
bidding could be used to set the level of support.  The Commission sought comment on the use
of a competitive bidding system in which eligible carriers offering all of the services supported by
universal service mechanisms would bid on the level of assistance per line that they would need to
provide such services at affordable rates, consistent with the Act.  The Commission explained that
such an approach would attempt to harness competitive forces to minimize the cost of universal
service.  In a July 1996 Public Notice, the Common Carrier Bureau sought further comment on a
competitive bidding system.  In addition, Commission staff conducted ex parte meetings
relating to competitive bidding, including a March 19, 1997 forum on universal service
auctions.
102.   The Joint Board focused its recommendations regarding support for rural, insular,
and high-cost areas on a mechanism for estimating the forward-looking economic cost of service
for such areas.  The Joint Board concluded that:
          [w]hile the record in this proceeding persuades us that a properly
          structured competitive bidding system could have significant
          advantages over other mechanisms used to determine the level of
          universal service support for high cost areas, we find that the
          information contained in the record does not support adoption of
          any particular competitive bidding proposal at this time.
103.   The Joint Board cited the potential advantages of competitive bidding including
the use of marketplace dynamics to establish the level of universal service support for any given
area.  The Joint Board noted that "[a] properly designed competitive bidding system would
reduce the role of regulators in determining the costs of providing universal service once an area
becomes subject to bidding."  The Joint Board also recognized that a properly structured
competitive bidding system could reduce the amount of support needed for universal service by
reflecting the lower costs of more efficient carriers and new technologies that would be used to
set the level of universal service support for the entire area.
104.   The Joint Board found that sections 254 and 214(e) of the Act and the record
developed in this proceeding provide some guidance as to how a competitive bidding system
should be structured.  The Joint Board recommended that any carrier that meets the eligibility
criteria for universal service support should be permitted to participate in the auction and that any
competitive bidding system should be competitively neutral, favoring neither incumbents nor new
entrants.  It also recommended that the system adopted should minimize the ability of bidders to
collude, and suggested that the system should either prescribe a minimum number of bidders or
be designed to be effective for any number of bidders.  Finally, the Joint Board recommended
that, in determining the geographic area that carriers would bid to serve, any final proposed
bidding plan use areas sized to promote competition and target universal service support
efficiently.
105.   On May 8, 1997, the Commission released its First Report and Order.  In the First
Report and Order, the Commission adopted most of the recommendations of the Joint Board
including "a specific timetable for implementation of federal universal service support to rural,
insular, and high cost areas."  In the First Report and Order, the Commission found that "a
compelling reason to use competitive bidding is its potential as a market-based approach to
determining universal service support. . . ."  The Commission also found that "a properly
structured competitive bidding system would . . . reduce the amount of support needed for
universal service."  By reducing the amount of support provided for universal service, the
Commission found that competitive bidding may advance the goal of affordable rates  because
carriers would be able to pass-through any reductions to their subscribers.  The Commission
concluded, however, that further proceedings were needed to examine issues related to the use of
competitive bidding to set universal service support levels for rural, insular, and high-cost areas. 
Specifically, the Commission found that the record did not contain adequate discussion or analysis
to enable us either to define a competitive bidding mechanism that would be consistent with the
requirements of sections 214(e) and 254, or to adopt specific procedures for implementing a
lawful competitive bidding system. 
          1.   Competitive Bidding Proposal
106.   We tentatively conclude that we should adopt a competitive bidding mechanism to
identify the carrier or carriers best able to provide the supported services in unserved tribal lands
and to set the level of support provided for serving the area.  We are hopeful that we may be able
to design a competitive bidding mechanism that will generate public awareness of the needs of a
particular area for service and elicit proposals from one or more carriers that could be compared
before determining which carrier or carriers should be designated as an eligible
telecommunications carrier for the area.  We seek comment on this proposal.  
107.   We seek comment on whether the possibility that a carrier will be ordered to
provide service pursuant to section 214(e)(3) will provide incentives for carriers to participate in
the competitive bidding mechanism in order to be able to set the terms on which they will provide
service.  We seek comment on whether the competitive bidding mechanism could bring unserved
areas to the attention of carriers previously unaware of the need for telecommunications services
in those areas and thus identify carriers that would be willing to provide service to the area for a
support amount equal to or lower than the amount that would be provided under existing federal
universal service support mechanisms.  In addition, we seek comment on possible negative
incentives and distortions that may be created by using a competitive bidding mechanism.  For
example, we seek comment on whether a competitive bidding approach will likely lead carriers to
provide the lowest-cost, lowest-quality service that meets the definition of supported services,
unfairly depriving residents of higher quality or advanced services.
108.   We also seek comment on whether the Commission should conduct a trial to
determine whether a competitive bidding mechanism is the most efficient means of identifying the
carrier or carriers best able to provide the supported services in unserved areas.  We seek
comment on how large a service area would be appropriate for such a trial.  We seek comment on
whether the Commission should solicit volunteers from Indian tribes that currently have large
unserved areas.  
               (a)  Participants
109.   We seek comment on the possible participants in a competitive bidding
proceeding.  Section 214(e)(3) states that any carrier ordered to provide service pursuant to this
section shall meet the requirements necessary and be designated an eligible telecommunications
carrier for the unserved area.  We seek comment on whether a carrier must first be designated
an eligible telecommunications carrier for the area prior to participating in the competitive bidding
mechanism.  We seek comment on whether any carrier that can demonstrate that it can meet the
requirements of section 214(e)(1) may participate in the competitive bidding mechanism.  We
seek comment on what kind of showing is necessary to demonstrate that a carrier can meet the
requirements of section 214(e)(1).  We seek comment on whether terrestrial wireless or satellite
providers will be able to participate in the competitive bidding mechanism.  We also seek
comment on the number of bidders we should anticipate for auctions in the universal service
context, and the extent to which we should consider that number in deciding the type of auction
that should be used, as discussed below.
               (a)  Number of Winners
110.   We seek comment on whether the characteristics of the unserved tribal lands may
be such that it is not economically practical to support more than one provider to serve unserved,
tribal lands. To the extent that supporting a single provider is more economical, permitting
multiple providers to receive federal universal service support may not be in the public interest.  In
addition, if all carriers were entitled to receive support at the level determined in the competitive
bidding auctions, bidders would have no incentive to bid below the opening level; that is,
competitive bidding would not reveal the minimum amount of support necessary to provide
service to the area.  For these reasons, we propose that qualified eligible telecommunications
carriers bid to secure an exclusive right to receive universal service support for serving the
unserved tribal area.  That is, the winning bidder would be the only carrier designated as an
eligible telecommunications carrier for providing the supported services to the unserved, tribal
lands subject to competitive bidding.
111.   We seek comment on whether the Commission has the authority to and whether
we should try to attract carriers by agreeing to designate only one carrier to serve the unserved,
tribal land or permitting only one carrier to receive federal universal service support for serving
the area.  We seek comment on whether a decision to limit support to a single carrier is consistent
with the universal service provisions and pro-competitive goals of the Act.  We observe that, in
the case of an area served by a rural carrier, the Commission "may" designate more than one
eligible telecommunications carrier but must make a specific showing that an additional eligible
telecommunications carrier would serve the public interest.  With respect to all other carriers,
the Commission "shall" designate more than one common carrier as an eligible
telecommunications carrier.  We seek comment on whether these provisions apply with respect to
an unserved area.  We seek comment on whether the statutory language that the Commission
"shall determine which carrier or carriers are best able to provide such service" indicates that the
Commission may determine that a single carrier shall be designated.  Finally, we seek comment
concerning the ability of bidders to accurately estimate the possible future challenges from other
carriers for the more profitable customers in the previously unserved, tribal lands.
112.   As an alternative to a single winner, we consider the possibility of supporting two
or more winning bidders.  We generally believe that customers benefit most when multiple
providers are available, because competition leads to lower prices and provides an alternative
where service quality is unsatisfactory.  Supporting two winning bidders means that a second
carrier would be able to compete vigorously with the lowest bidder.  We seek comment on
whether to use the competitive bidding mechanism to identify a level of support which would be
provided for serving the area and to allow any carrier with a bid within a specific range of the
winning bidder, who also satisfies the requirements of section 214(e)(1) of the Act, to receive
that level of support for providing service to the area.  We seek comment on whether the
possibility of having multiple carriers receive support for these previously unserved areas would
substantially diminish or even eliminate any incentives carrier might have to participate in
competitive bidding.  We seek comment on whether providing support sufficient to allow
competing carriers to build the necessary infrastructure would generate customer benefits over the
long-term that would offset the additional cost associated with supporting two carriers.  In
making this determination, we must consider the duration of the service term and the rate of
change in network technology.  For example, if technological change were so rapid that both the
new entrant and incumbent carrier would need to install and recover the cost of new facilities for
each contract term, the benefits of creating competing carriers would be significantly reduced. 
We seek comment on these issues.  
               (a)  Term of Exclusivity Period
113.   If the Commission determines that a bidder should win the exclusive right to
federal universal service support, we would seek to establish an exclusivity period that is of an
adequate length to provide incentives for carriers to deploy facilities yet does not result in
unnecessary support being provided.  We seek comment on the appropriate duration of any
exclusivity period.  After the exclusivity period has ended, we could choose to re-auction the
service obligation and consider multiple providers if the costs of providing service decreased or
market conditions improved so that multiple providers became practical.  We anticipate that that
the length of the exclusivity period will affect the bids for monthly support levels.  In addition, the
length of the exclusivity period will affect the average administrative and transaction costs for
conducting the auction. Granting exclusivity periods that are too short could be harmful because
the winning carrier is likely to need time to establish its network, and to amortize its investments. 
In addition, more frequent auctions entail increased administrative costs.  Granting periods that
are too long, however, also could be harmful.  Technological advances over time can create more
efficient means of providing communications, which would enable firms to offer service at a lower
cost.  To the extent that the winning bidder is shielded from competition during the exclusivity
period, the benefits of adopting a more efficient technology will accrue to the carrier, rather than
the customer.  In addition, with longer contract terms, the carriers' prediction of their costs at
later stages in the contract becomes more speculative, which could translate into higher bids in the
auction.  We seek comment on this analysis and the appropriate length of the exclusivity period. 
We suggest that commenters review the competitive bidding proposals and mechanisms
summarized in Appendix D for examples that may assist in determining the length of the
exclusivity requirement.
               (a)  Bidding Process
114.   We seek comment on whether to use a single-round, sealed bid process or a
descending, multi-round auction.   Each bidder would submit an amount of support necessary
per line given our universal service technical specifications.  We observe that the Commission has
successfully implemented multi-round auctions in other contexts.  We seek comment on
whether a descending multi-round bidding system would be preferable to a single-round sealed bid
auction.
115.   We also seek comment on how to establish the reservation price   the highest bid
that would qualify for support    for the competitive bidding mechanism.  One option would be to
use the new high-cost mechanism to estimate the amount of support that would be available for
providing the supported services in the unserved, tribal area and set that as the reservation price. 
We seek comment on what incentives carriers would have, if any, to bid an amount lower than the
reservation price determined by the model.  Alternatively, we seek comment on whether we
should set a reservation price that is some percentage above the support amount determined under
the new high-cost mechanisms.  We seek comment on whether a rational percentage can be
identified.  We also seek comment on whether to conduct an auction without establishing a
particular reservation price or specifically identifying the amount that would be provided under
the new high-cost mechanism in an effort to determine the amount of support each carrier believes
is necessary.  We seek comment on whether, if we were to proceed in this manner, the
Commission should reserve the right to conclude that the competitive bidding mechanism was not
successful and to proceed to the fact-based inquiry, described in paragraph 96 above.
               (a)  Support Amount
116.   A well-designed auction should provide incentives for carriers to disclose the
minimum amount of support they require, even though this information may be competitively
sensitive. We seek comment on how to provide incentives for carriers to reveal the minimum
amount of support necessary to provide service to the unserved area.  We seek comment on
whether we should employ a "Second Price" or "Vickrey" auction, in which the successful bidder
gets support at the level of the lowest bid made by a non-successful bidder.  In theory, this style of
auction appears to induce bidders to reveal their actual costs and would thereby generate the same
total support requirements as a first price, sealed bid auction.  Another factor relevant in setting
the support level is whether the federal support provided constitutes the entire amount of subsidy
available to the carrier.  We tentatively conclude that we would need to establish that the
competitive bidding mechanism for unserved areas would be used to determine the entire amount
of support to be divided and the relevant share of support would be allocated to the federal and
state authorities, in whatever proportion is established for the high-cost support mechanism in
general.  We seek comment on this analysis.
               (a)  Obligations Assumed by Winning Bidder
117.   We tentatively conclude that, pursuant to section 214(e), a successful bidder must
provide the services supported by the universal service support mechanisms to all customers
requesting service in the designated area and advertise the availability of such service throughout
the service area.  We seek comment on this tentative conclusion.
          1.   Other Proposals and Examples of Competitive Bidding
118.   A number of parties submitted competitive bidding proposals in the universal
service docket, the most detailed of which were submitted by GTE, consultants to Ameritech,
and Frank Kelly and Richard Steinberg of Cambridge University, Great Britain.  These
proposals were designed to determine the carrier or carriers entitled to receive universal service
support and the level of support to be provided.  In addition, other government agencies have
used competitive bidding systems that may have features relevant to the market at issue here.  We
seek comment on these other competitive bidding proposals, summarized in Appendix D, because
aspects of these proposals may be preferable to the competitive bidding approach proposed
above. 
     A.   Ordering Carriers to Provide Service
119.    We seek comment on the ramifications of ordering a carrier to provide service in
an unserved area.  We tentatively conclude that this requirement entails an obligation to deploy
the facilities necessary to provide the services supported by federal universal service support
mechanisms, to offer the services to all customers requesting service in the designated area, and to
advertise the availability of such service throughout the service area.  These requirements are
consistent with the language in section 214(e)(3) of the Act, stating that the carrier ordered to
provide service shall meet the requirements of section 214(e)(1) of the Act.  We seek comment
on this tentative conclusion.
120.   We also seek comment whether additional measures may be necessary to ensure
that the carrier ordered to provide service is able to earn an appropriate return on its investment. 
For example, a carrier may deploy facilities, advertise the availability of services and offer service
to all customers and yet an inadequate number of customers may subscribe to the service,
rendering the operation unprofitable.  This result may occur due to faulty estimations by the
carrier, but it may also be the result of unpredictable demand.  Similarly, it is possible that carriers
may provide services to all requesting customers, yet the customers might default on their bills.  If
the carrier is ordered to provide service, to what extent must it retain customers who cannot pay
overdue debts or with poor credit  records?  How will the carrier recover its investment on the
facilities deployed to provide service to subscribers who do not pay their bills?  We seek comment
on these issues, including the appropriate role for the Commission and state commissions to play
in addressing these issues.
                     CXXI.Underserved Areas
122.   In this section of the Further Notice, the Commission considers whether additional
support for low-income consumers is necessary to promote subscribership in unserved and
underserved areas, including tribal and insular areas.  
     A.   Defining "Underserved Area"
123.   In the Thirteenth Order on Reconsideration, the Commission observed that there
may be inadequately served areas that are characterized by extremely low penetration, low
population density, and high costs.  We seek comment on the need for the Commission to
establish a definition of "underserved area" that would be used in targeting supplemental universal
service support to those areas.  For example, a community may be considered underserved if the
penetration rate of the community is significantly below the national average.  In addition to the
number of supported services available, and the percentage of the population receiving those
supported services, there may be  other identifying characteristics that describe an underserved
area.  We seek comment on an appropriate definition for underserved area.  For example, we
could define underserved area as a geographic area that meets certain statistical benchmarks, i.e.,
a penetration rate below a certain percentage, a population density below a certain level, costs of
providing supported services above a certain level, etc.  We also seek comment on whether there
is sufficient, readily available statistical data to make such a definitional approach viable. 
     A.   Expanding LinkUp to Include Facilities-Based Charges
124.   We seek comment on whether increasing federal support to offset initial
connection charges may be necessary to increase the success of our universal service support
mechanisms in underserved areas, including insular and tribal lands.  In the proceeding leading up
to the Second Recommended Decision, the Arizona Corporation Commission (Arizona
Commission) submitted a proposal to use a portion of federal support to address the problem of
unserved areas and the inability of low-income residents to obtain telecommunications service
because they cannot afford to pay the required line extension or construction costs.  The
Arizona Commission's proposal was not intended to be a comprehensive alternative to the high-
cost fund distribution model, but rather to address a discrete concern related to low-income
residents in remote areas.  We seek comment on the Arizona Commission's proposal and the
extent to which the problem identified by the Arizona Commission is widespread.  In particular,
we seek further data on the cost of line extensions in rural areas and regarding the number of
residents that are deprived of telecommunications services because of high line extension or
construction costs and areas in which this problem is acute. 
125.   The Joint Board recognized that investments in line extensions historically have
been an issue addressed by the states through intrastate proceedings that establish reasonable rates
for line extension agreements and encourage carriers to minimize unserved regions of the states. 
The Joint Board suggested that these issues should continue to be dealt with by states, to the
extent that the states are able to do so.  We note that regulators generally require carriers to use
rate averaging to reduce the rates for their highest-cost customers in rural and insular areas, but
those regulators often still permit carriers to charge particularly isolated customers a
supplementary "initial connection" charge for installing a new line.  Moreover, while regulators
also generally require carriers to amortize the cost of installing new lines, if there is a reasonable
chance that those lines will not be used over their full life-span, regulators often permit carriers to
charge most, if not all, of the initial connection charge up front.  These charges can be
prohibitive.  We seek comment on whether states have the ability to address this problem, or, in
the alternative, whether federal assistance, in some instances, may be necessary.
126.   We seek comment on what role the Commission might play in trying to alleviate
this problem.  We seek comment on whether we might provide additional support through the
LinkUp America program -- which provides federal support to reduce the price of initial
connection charges -- at least for locations with significantly lower than average
telecommunications penetration rates, e.g., below 75 percent.  Commenters supporting such an
approach should also explain whether support would be provided as a one-time payment or over a
number of years.  We also seek comment on what we might do to encourage carriers to offer
installment loans for such extensions over a practical time frame.  We seek comment on these and
any other alternatives that might be more effective ways of addressing this problem. For example,
we seek comment on whether the provision of telecommunication service to remote areas using
terrestrial wireless or satellite technologies might allow service at lower cost compared to the cost
of line extension or construction of wireline facilities.  Commenters offering proposals should also
explain how their proposals would avoid encouraging uneconomic investments in relatively high-
cost technologies.  
     A.   Support for Intrastate Toll Calling
127.   In paragraph 30 above, we seek comment on the extent to which limited local
calling areas impose a barrier to increased penetration in certain underserved areas.  For example,
the local calling area for the Jemez Pueblo in New Mexico includes only about half a dozen other
towns.  It does not include any other Pueblos or hospitals nor the cities of Albuquerque or Santa
Fe, where most residents work.  Similarly, the calling area for the Picuris Pueblo does not even
include 911 calls.  To the extent that limited local calling areas impose a barrier to increased
penetration, we seek comment on how to remove this barrier.  For example, expanding the local
calling area to include the unserved or underserved area and the nearest metropolitan area or
community of interest may entice more consumers to request service.  Expanding local calling
areas, however, would likely cause upward pressure on local rates.  We seek comment on how
expanded local calling areas would impact local rates, including rates for consumers living in
communities outside of tribal lands.  We seek comment on what role, if any, the Commission is
authorized to and should play in seeking to address impediments caused by limited local calling
areas.  
128.   We seek comment on whether federal universal service support mechanisms should
provide additional support for low-income consumers living in remote areas or low-income
consumers living on tribal lands.  For example, the Commission could provide support for calls
outside of the local calling area that fall within specified federally-designated support areas.
Similarly, federal universal service support could be provided to pay for a foreign exchange (FX)
line service from the remote or tribal area to the nearest metropolitan area or community of
interest.  We seek comment on whether such proposals would eliminate incentives for states to
ensure affordable local rates.  We also seek comment on whether the provision of service by
terrestrial wireless or satellite providers would alleviate any problems associated with limited local
calling areas.
     A.   Expanded Availability of Toll Limitation Devices
129.   Many households may forgo telecommunications service because of past or
anticipated future problems with high telephone bills.  The general prevalence of this bill
management problem was documented in a GTE-Pacific Bell commissioned survey done in 1993
by the Field Research Corp.  for the California PUC.  The Commission sought to address the
problem, however, by requiring carriers offering low-income subscribers "Lifeline" service, to
permit those subscribers to secure a "toll limitation" service -- either toll blocking or toll
control.  We believe that our actions in this regard should alleviate this bill management
problem.  We  seek comment on whether expanded options for toll-control or toll-blocking
would make telecommunications service more desirable in unserved and underserved areas,
including tribal lands.  We ask that commenters identify any specific toll-control or toll-blocking
features that would be useful, including, for example, the ability to require the use of a Personal
Identification Number (PIN) in order to restrict access to toll calls.  We  also recognize that the
benefits of these options are minimal if consumers are not aware of them.  We seek comment on
what additional measures, if any, the Commission should undertake to ensure consumers are
educated about the availability of toll-limitation devices.
     A.   Publicizing Availability of Low-Income Support
130.   We observe that customers may fail to subscribe to telecommunications service
because they are unaware of the Commission's Lifeline and LinkUp programs, which are intended
to make service more affordable, and the availability of toll-control and toll-blocking, which are
intended to help low-income consumers control the amount of their monthly bills.  Although the
Commission's Lifeline and LinkUp programs have been providing universal service support to
eligible customers for more than a decade, we are concerned that carriers may have failed to
publicize the programs in some areas, particularly on Indian reservations. Unfortunately, it
appears that in markets where carriers find it unprofitable to provide service, they have no
particular incentive to publicize the availability of Lifeline and LinkUp.  Thus, the Commission
found that none of the representatives of the pueblos testifying in the January, 1999 Albuquerque
field hearings were aware of the Lifeline and LinkUp programs.  Furthermore, despite the 60-
percent unemployment rate in the Cheyenne River Sioux Telephone Authority area, only about
10-percent of the subscribers there receive Lifeline service.
131.   We seek comment on whether the Commission should play a role in ensuring the
spread of information on tribal lands, or in other low-income, underserved areas, about the
availability of low-income support that may make telecommunications service affordable.  We
recognize that carriers already have an incentive to convince potential customers of the value of
their service -- assuming the customers will be profitable to serve.  We are concerned about those
consumers whom carriers may consider unprofitable to serve. We tentatively conclude that a lack
of information may contribute to the significantly low penetration rates on tribal lands.
132.   We seek comment on what options the Commission may have to promote
awareness of low-income support mechanisms on tribal lands.  Section 214(e)(1)(B) of the Act
requires an eligible telecommunications carrier to "advertise the availability of" the services
supported by federal universal service support mechanisms "and the charges therefor using media
of general distribution."  We seek comment on the possibility of amending our current universal
service rules to require carriers to publicize the availability of Lifeline and LinkUp and toll-
limitation options.  For example, we could revise section 54.405 of our rules by adding the
following italicized language:

       All telecommunications carriers shall (a) make available Lifeline service, as defined in 
     54.401, to qualifying low-income consumers, and (b) publicize the availability of Lifeline
     service in a manner reasonably designed to reach those likely to qualify for the services.
133.   We seek comment on the costs and benefits of requiring carriers to publicize the
availability of Lifeline, LinkUp and toll-control devices.  Alternatively, the Commission could
encourage and participate in other marketing and information dissemination efforts, such as
preparing consumer information fact-sheets that would be distributed in local communities.  We
seek comment on whether there is, or should be, some entity that would collect and verify the
accuracy of data on Lifeline rates for each reservation, the eligibility standards for Lifeline in the
relevant state, and how individuals who desired Lifeline service could confirm their eligibility and
how they could sign up for service.  We also seek comment on the best ways to disseminate this
information to the relevant audience of potential Lifeline subscribers.  We seek comment on any
research or other data that indicates the most effective way of marketing to this population,
whether via broadcast, print, wireline, or other media; whether separately or in combination with
the marketing efforts of other social programs seeking to reach this audience; and whether on a
federal, state or tribal level.  Commenters aware of a particularly effective program are requested
to provide us with sufficient information to enable us to contact that program administrator.
     A.   Support for Rural Health Care Infrastructure
134.   In the 1996 Act, Congress ordered the Commission to provide universal service
support for "any public or nonprofit healthcare provider that serves persons who reside in rural
areas."  It also directed the agency "to enhance, to the extent technically feasible and
economically reasonable, access to advanced telecommunications and information services for all
public and nonprofit . . . health care providers."  In the First Report and Order, the
Commission implemented these instructions by adopting rules to provide public or nonprofit Rural
Health Care Providers (RHCPs) with discounts on one 1.544 bandwidth link or the equivalent
over the distance generally necessary to reach the nearest urban hospital.  That discount
generally enables an RHCP to pay no more than it would pay if it were located in the nearest
urban area.  In addition eligible public and non-profit health care providers without local access
to Internet service providers may also receive support for toll-free access to an Internet service
provider.
135.   Both the Joint Board and the Commission considered whether improvements to
the public switched telephone network should be supported if such improvements are necessary to
provide telemedicine and telehealth services in rural areas.  In the First Report and Order, the
Commission discussed the need to improve telecommunications infrastructure in Alaska,
particularly so that rural health care providers can use telemedicine and telehealth services.  The
State of Alaska asserted that "the major obstacle to providing telemedicine services in Alaska is
that the public switched network is not currently capable of providing services in rural locations
where there is significant need."  The Alaska Public Utilities Commission (PUC) asserted that
Alaska is "heavily dependent on satellite communications to provide links between the majority of
remote, rural health care providers and the few regional hospitals" and that affordable satellite
connectivity is often limited to bandwidth of 9.6 kbps.  Because satellite signals must be
"hopped" through multiple earth stations, including antiquated analog earth stations, residents of
Alaska are often prevented from using fax machines or computer modems.
136.   Although the Commission's Advisory Committee on Telecommunications and
Health Care recommended that universal service support be available to build, improve, or
extend telecommunications infrastructure in such areas, the Commission concluded that "the
existing record contains insufficient information to determine the level of need for such
infrastructure development or to estimate reliably the costs to support such development."  In
addition, the Commission concluded that it had insufficient information about existing federal and
state programs already supporting infrastructure development and their success in meeting
existing needs.  The Commission found that it has authority, under section 254(h)(2)(A), to
implement a program of universal service support for infrastructure development as a method of
enhancing access to advanced telecommunications and information services as long as such a
program is competitively neutral, technically feasible, and economically reasonable. 
137.   We seek comment on the technical limitations of the telecommunications services
available to rural health care providers throughout the United States, including Alaska and insular
areas.  We ask commenters to provide as much detail as possible regarding the extensions or
improvements needed in areas lacking adequate infrastructure.  We ask that commenters identify
the most urgent needs, such as those that would address threats to the health and safety of
residents.  We particularly encourage providers of fixed satellite services, geo-stationary satellites,
and emerging technologies, to describe the capability of these technologies to serve Alaska and
insular areas, and ask these providers to estimate the costs, provide a timetable for deploying
particular technologies, and provide information regarding the capability of different technologies
to support telehealth and telemedicine applications.  We ask providers of other technologies, such
as fixed wireless technology, to describe whether these technologies could effectively supplement
the apparently inadequate infrastructure in the rural areas of Alaska, insular areas, and the
mainland United States.
138.   We seek comment on whether and to what extent improvements to the
telecommunications network required to meet the telecommunications needs of rural health care
providers should be supported by federal universal service mechanisms and whether other
mechanisms exist that would provide support for improving infrastructure.  We ask parties to
submit detailed descriptions of any programs supporting infrastructure development that would
assist rural health care providers.  We specifically ask the sponsors of programs cited in the State
Health Care Report and other commenters familiar with these programs to detail their scope, 
identify any needs that are unmet by existing programs, and explain why.
139.   We invite commenters to submit specific proposals that they have already prepared
for expanding the federal universal service support for rural health care providers to include
infrastructure improvement costs of telecommunications carriers.  Any commenter submitting a
proposal should analyze the extent to which the proposal is competitively neutral, technically
feasible, and economically reasonable, as required pursuant to section 254(h)(2).  Commenters
should also file detailed cost information for any proposal submitted.  We recognize that some
improvements to the telecommunications network made to provide service to rural health care
providers may also be used to provide commercial services.  We seek comment on whether and to
what extent we should take account of such additional revenue sources in the event that support
is provided to extend or improve telecommunications networks. 
                       CXL.Insular Areas
141.   In the First Report and Order, the Commission stated it would seek further
comment in a subsequent proceeding on universal service issues affecting insular areas.  The
Commission recognized that, while insular areas will benefit from the federal universal service
support mechanisms, insular areas may face unique problems that could limit their ability to
participate in and benefit from all of the universal service programs.  In particular, the
Commission expressed concern about the low subscribership levels in insular areas, including
Puerto Rico, and the potential need to tailor universal service support for both rural health care
providers and telecommunications carriers in insular areas.  The Commission also concluded
that it would consider in a later proceeding whether and how to support infrastructure
development needed to enhance public and not-for-profit health care providers' access to
advanced telecommunications and information services, for both insular and non-insular rural
areas.  We initiate that discussion in this section of the Further Notice.  
     A.   Defining "Insular Area"
142.   In articulating the principle that consumers in all regions of the nation should have
access to telecommunications services, Congress explicitly included insular areas within this
mandate.  As the Joint Board noted in the Recommended Decision, however, the Act does not
define the phrase insular areas.  We tentatively conclude that we should adopt a definition of
insular areas to provide clarity regarding the availability of universal service support in those
areas.  
143.   We observe that, in other statutes, the term insular area generally refers to the
island portions of the United States that are not states or portions of states.  In addition, we
observe that in common usage, the term insular area means "of, or having the form of an
island."  Accordingly, we propose the following definition of insular areas:  "islands that are
territories or commonwealths of the United States."  By including the phrase "territories or
commonwealths," we intend to restrict the definition to areas that are populated islands that have
a local government.  We also observe that the proposed definition comports with publications
of the Department of Interior's Office of Insular Affairs (OIA) and various provisions of the
United States Code.  We seek comment on this proposal.
144.   We seek comment on whether the definition of insular areas should include only
those areas that are subject to the laws of the United States, and for which carriers serving those
areas would be required to contribute to our universal service support mechanisms, and, if so,
we seek comment on whether the proposed definition satisfies this goal.  We seek comment on
whether the definition of insular areas should exclude sovereign states that are not subject to the
laws of the United States nor eligible to receive universal service support under the Act,
unpopulated islands, and insular areas subject to the jurisdiction of, and receiving
telecommunications service from, the United States military.  We tentatively conclude that
Puerto Rico, American Samoa, CNMI, Guam, and the U.S. Virgin Islands are properly included
in the definition of insular areas and seek comment on this tentative conclusion.
145.   We seek comment on whether the Freely Associated States (FAS), including the
Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau,
should be included in the definition of insular areas.  These islands are associated with the
United States through the terms of a Compact of Free Association, which gives the Commission
authority and jurisdiction over various telecommunications services in the FAS, but carriers are
not subject to universal service contribution requirements for the services they provide on these
islands.  We also observe that Midway Atoll is being transferred from the jurisdiction of the
United States Navy to the U.S.  Fish & Wildlife Service of the Department of Interior and has a
population of 450 persons.  We seek comment on whether Midway Atoll should be included in
the definition of insular areas.  We invite commenters to provide alternative definitions of
"insular areas" and to describe which areas would and would not be included with any alternative
definition.
146.   We seek comment on whether similarities between the historical experience of 
Indians and persons living in insular areas warrant the extension of federal trust-type principles,
including supplemental measures to promote the availability of universal service, to insular
areas.
     A.   Rural Health Care Support
147.   Parties have already submitted information to us demonstrating that insular areas
may have few hospitals and substantial undeveloped terrain and that travel between insular areas
and more developed states or countries nearest to them may be very expensive.  For these
reasons, we anticipate that telehealth and telemedicine initiatives may be particularly important in
insular areas.  We encourage interested parties to highlight previous comments they have made
on this issue or present any relevant new information to us.  We are particularly interested in the
differences between the needs and opportunities of rural health care providers in insular areas and
those located in the remainder of the United States.
148.   Urban Rates.  In the First Report and Order, the Commission adopted rules
requiring carriers to provide rural health care providers with access to telecommunications
services permitting speeds up to 1 Mbps at rates comparable to those offered in urban areas.
Consistent with the statute, the Commission's rules for rural health care providers calculate
support amounts on the basis of the difference between the "urban rate" and the "rural rate" for
the supported service.  The urban rate is determined with reference to the rates charged other
commercial customers of a similar service in the nearest large city in the state.  The nearest
large city is defined as having a population of at least 50,000 people.  
149.   In the First Report and Order, the Commission found that the mechanism of using
urban rates as a benchmark for reasonable rates may be ill-suited to certain insular areas that are
relatively rural all over.  The Commission concluded that it required additional information
about whether telecommunications rates differ in urban and non-urban areas or insular areas,
including areas of the Pacific Islands  and the U.S.  Virgin Islands.  Accordingly, we seek
comment on whether the rules concerning calculation of rural health care support need
modifications to address the geographic or demographic situation in insular areas.  We invite
commenters to propose specific revisions in this regard.  
150.   Nearest Large City.  Consistent with the statute, the Commission's rules for
providing universal service support to rural health care providers limit the length of the supported
service to the distance between the health care provider and the point farthest from that provider
on the jurisdictional boundary of the nearest large city in the state.  The Governor of Guam
proposed that we modify this rule to provide support for telecommunications services between an
insular area's medical facilities and a supporting medical center in an urban area outside the insular
area, such as in Hawaii or on the west coast of the continental United States.  We seek
comment on this proposal.  We encourage commenters supporting this proposal to present
detailed estimates of the cost of such a proposal and steps that must be taken to implement it. 
Commenters favoring this proposal should also provide legal analysis explaining whether it would
be consistent with section 254 to treat insular areas differently from the remainder of the United
States, where support is only provided based on intrastate distances, as section 254(h)(1)(A)
appears to require. 
151.   Finally, we seek comment on whether health care providers and
telecommunications carriers that serve insular areas face unique challenges that have not been
documented previously in the record of this proceeding, and, if so, how we should tailor
additional support mechanisms to address those problems, consistent with the statute.  We
encourage commenters to present proposals for additional support mechanisms through which
rural health care providers located in insular areas could have access to the telecommunications
services available in urban areas of the nation at affordable rates.
     A.   Access to Toll-Free Services in Insular Areas
152.   Because of their traditional treatment as international destinations, the Pacific
Island areas have faced high rates for interexchange service and have had limited ability to obtain
access to toll-free and advanced services.  Calls between these insular areas and the remainder
of the United States also required callers to use the "011" international access code.  Recent
changes have begun to address these problems.  Specifically, the 1996 Act requires that insular
areas become subject to rate integration and averaging, which means that interexchange carriers
are required to offer domestic interstate service using a uniform rate structure throughout the
United States.    In addition, many insular areas have been integrated into the North American
Numbering Plan (NANP).   In the First Report and Order, the Commission permitted residents
of CNMI and Guam to access toll-free (e.g., 800) services by using 880 and 881 codes and paying
the cost of reaching Hawaii where the calls could be connected thereafter toll-free to the called
party until July 1, 1998, and that date was subsequently extended indefinitely.  
153.   In the First Report and Order, the Commission determined that "these changes
will have a significant impact on how residents of the[se] islands place interexchange calls and the
rates that they, and toll-free access customers, will pay for the calls they place."  Based upon
the recommendation of the Joint Board, the Commission concluded that it should delay, until after
July 1, 1998, consideration of whether the Commission should provide additional support for toll-
free access and access to advanced and information services for insular areas so that the impact of
rate integration and averaging and incorporation into the NANP could be evaluated.  We seek
comment on whether rate integration, rate-averaging, and incorporating insular areas into the 
NANP are leading toll-free customers to include insular areas in their toll-free calling areas.  We
seek comment on whether additional universal service support is needed to support toll-free
calling from insular areas.  We ask commenters to present any evidence that the marketplace will
not fully solve this problem.   
                    CLIV.Procedural Matters
     A.   Ex Parte Procedures
155.   The Further Notice is a non-restricted notice and comment rulemaking proceeding. 
Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they
are disclosed as provided in the Commission's rules.
     A.   Comment Filing Procedures
156.   Pursuant to sections 1.415 and 1.419 of the Commission's rules, interested
parties may file comments as follows:  comments are due 60 days after publication of the Further
Notice in the Federal Register and reply comments are due 90 days after publication of the
Further Notice in the Federal Register.  Comments may filed using the Commission's Electronic
Comment Filing System (ECFS) or by filing paper copies.  
157.   Comments filed through the ECFS can be sent as an electronic file via the Internet
to http://www.fcc.gov/e-file/ecfs.html.  Generally, only one copy of an electronic submission must be
filed.  If multiple docket or rulemaking numbers appear in the caption of this proceeding,
however, commenters must transmit one electronic copy of the comments to each docket or
rulemaking number referenced in the caption.  In completing the transmittal screen, commenters
should include their full name, Postal Service mailing address, and the applicable docket or
rulemaking number.  Parties may also submit an electronic copy by Internet e-mail.  To get filing
instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should
include the following words in the body of the message: "get form <your email address>."  A
sample form and directions will be sent in reply.
158.   Parties who choose to file by paper must file an original and four copies of each
filing.  If more than one docket or rulemaking number appears in the caption of this proceeding,
commenters must submit two additional copies for each additional docket or rulemaking number. 
All paper filings must be sent to the Commission's Secretary, Magalie Roman Salas, Office of the
Secretary, Federal Communications Commission, 445 Twelfth Street S.W., Room TW-A325,
Washington, DC 20554.  
159.   Parties who choose to file by paper should also submit their comments on diskette
to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, Federal Communications
Commission, 445 Twelfth Street SW, Room 5-A523, Washington, DC 20554.  Such a submission
should be on a 3.5 inch diskette formatted in an IBM-compatible format using WordPerfect 5.1
for Windows or a compatible software.  The diskette should be accompanied by a cover letter and
should be submitted in "read-only" mode.  The diskette should be clearly labeled with the
commenter's name, proceeding, including the lead docket number in the proceeding (CC Docket
No. 96-45), type of pleading (comment or reply comment), date of submission, and the name of
the electronic file on the diskette.  The label should also include the following phrase (Disk Copy
  Not an Original.")  Each diskette should contain only one party's pleadings, preferably in a
single electronic file.  In addition, commenters should sent diskette copies to the Commission's
copy contractor, International Transcription Service, Inc., 1231 20th St. NW, Washington DC
20037.
     A.   Initial Regulatory Flexibility Act Analysis
160.   The Regulatory Flexibility Act (RFA) requires a Regulatory Flexibility Act analysis
whenever an agency publishes a notice of proposed rulemaking or promulgates a final rule, unless
the agency certifies that the proposed or final rule will not have "a significant economic impact on
a substantial number of small entities," and includes the factual basis for such certification. 
Pursuant to section 603 of the RFA, the Commission has prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the possible significant economic impact on small entities by the policies and
actions considered in this Further Notice.  The text of the IRFA is set forth in Appendix F. 
Written public comments are requested on this IRFA.  Comments must be identified as responses
to the IRFA and must be filed by the deadlines for comments on the Further Notice provided
above in paragraph 149.  The Commission will send a copy of the Further Notice, including the
IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.  In addition,
summaries of the Further Notice and IRFA will be published in the Federal Register.
                     CLXI.Ordering clauses
162.   Accordingly, IT IS ORDERED that, pursuant to the authority contained in
sections 1-4, 201-205, 214(e), and 254 of the Communications Act of 1934, as amended, 47
U.S.C.  151-154, 201-205, 214(e), and 254, this FURTHER NOTICE OF PROPOSED
RULEMAKING IS HEREBY ADOPTED and COMMENTS ARE REQUESTED as described
above.
163.   IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
Reference Operations Division, SHALL SEND a copy of this FURTHER NOTICE OF
PROPOSED RULEMAKING, including the Initial Regulatory Flexibility Act Analysis, to the
Chief Counsel for Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION
                                                               
                                                               
                              Magalie Roman Salas
                              Secretary

               APPENDIX A: COMMISSION MEETINGS ON INDIAN TELECOMMUNICATIONS
               ISSUES   LIST OF ATTENDEES

April 30, 1998

Outside Parties:
Charles Blackwell, Ambassador from the Chickasaw Nation
Jack Brown, Golden West, SD
James Casey, Morrison & Forester
Audrey Choi, Office of Vice President Gore
Darrell Gerlaugh, Gila River Telephone Inc., AZ
Steve Gigamough, Salt River Pima, AZ
Robert Gough, Intertribal Council on Utility Policy, Rosebud SD
L. Marie Guillory, NTCA
Larry Irving, NTIA
Alex Lookingelk, Standing Rock Sioux Tribe, ND
Chris McLean, Rural Utilities Service
Bill Quinn, Salt River Pima-Maricopa Indian Community
Pat Spears, Intertribal Council on Utility Policy, SD
Tony Thompson, Oneida Nation
Alice Walker, Cheyenne River Sioux Tribal Telephone Authority, CO
JD Williams, Cheyenne River Sioux, SD

Commission Participants:
Chairman William E. Kennard 
Commissioner Susan Ness
Commissioner Gloria Tristani
John Nakahata, Chief of Staff
Ruth Milkman, Deputy Chief, Common Carrier Bureau
Catherine Sandoval, Director, Office of Communications Business Opportunities
Staff from the Common Carrier Bureau, Wireless Telecommunications Bureau, International
Bureau, Office of Legislative and Intergovermental Affairs, Office of Communications Business
Opportunities and the Office of General Counsel

July 7, 1998

Outside Parties:
Charles Blackwell, Ambassador from the Chickasaw Nation
James Casey, Morrison and Forester
Prof. Arturo Gandara, University of California Davis Law School
Robert Gough, Intertribal Council on Utility Policy, Rosebud SD
Dr. James May, Cal. St. Univ. at Monterey Bay, CA
Roanne Robinson, NTIA
Randy Ross, SD
Pat Spears, Intertribal Council on Utility Policy, SD

Commission Participants
Chairman William E. Kennard
Commissioner Gloria Tristani
Rick Chessen, Senior Legal Advisor, Office of Commissioner Tristani
Paul Gallant, Legal Advisor, Office of Commissioner Tristani
Michele Ellison, Deputy General Counsel, Office of General Counsel
Catherine Sandoval, Director, Office of  Communications Business Opportunities
Staff from the Common Carrier Bureau, Wireless Telecommunications Bureau, Mass Media
Bureau, Cable Services Bureau, Office of Communications Business Opportunities, the Office of
Workplace Diversity, and the Office of General Counsel

               APPENDIX B:    OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO
               INDIANS ON RESERVATIONS -COMMISSION HEARINGS

Albuquerque Hearing

Chairman William E. Kennard, Federal Communications Commission
Commissioner Gloria Tristani, Federal Communications Commission
The Honorable Tom Udall, United States House of Representatives
The Honorable Heather Wilson, United States House of Representatives
The Honorable Leonard Tsosie, State of New Mexico House of Representatives
The Honorable Lynda Lovejoy, Chairwoman, State of New Mexico Public Regulation
Commission
The Honorable Eagle Rael, Governor, Picuris Pueblo
The Honorable Steve Beffort, Secretary, New Mexico General Services Department
The Honorable Anthony O. Lucio, Councilman, Zuni Pueblo
The Honorable Raymond Gachupin, Governor, Jemez Pueblo
The Honorable Jerome Block, State of New Mexico Public Regulation Commission
The Honorable  Herb Hughes, State of New Mexico Public Regulation Commission
The Honorable Bill Pope, State of New Mexico Public Regulation Commission
The Honorable Arnold Cassador, President, Jicarilla Apache Tribe
Jean Whitehorse, Native American Library Project, Crownpoint, NM
The Honorable Tony Anaya, former Governor of New Mexico
Arthur Martinez, Western New Mexico Telephone Company, Inc.
Edward Lopez, New Mexico Vice President, U S West 
Francis Mike, Navajo Communications Company, Inc.
Gene DeJordy, Esq., Executive Director   Regulatory Affairs, Western Wireless Corporation
George Arthur, Council Delegate, Navajo Nation
Godfrey Enjady, General Manager, Mescalero Apache Telephone and Utilities Company
Karen Buller, President, National Indian Telecommunications Institute
Peter Carson, Vice-President, Business Development, ArrayComm, Inc.
Richard Weiner, Esq., State of New Mexico Office of the Attorney General
Stanley Pino, Chairman, All Indian Pueblo Council
Mr. Scholten
Henry Dodge, Ramah Navajo Chapter, NM
Mary Alice Tsosie, Native American Librarian and Special Interest Group, NM


Arizona Hearing

Chairman William E. Kennard, Federal Communications Commission
Commissioner Susan Ness, Federal Communications Commission
Commissioner Harold Furchtgott-Roth, Federal Communications Commission
Jim Irvin, Commissioner Chairman, Arizona Corporation Commission
The Honorable Charles Blackwell, Ambassador for the Chickasaw Nation
James Casey, Morrison and Forester
David Motycka, Utilities Division, Arizona Corporation Commission
Mark DiNunzia, Utilities Division, Arizona Corporation Commission
Maureen Scott, Arizona Corporation Commission
Patrick Black, Chief of Staff, Arizona Corporation Commission
David Redick, CA
Ed Groenhout, Northern Arizona University, AZ
Laura Lo Bianco, Iridium North America 
Herman Laffoon, Jr., Colorado Indian Tribes, Parker, AZ
Alison Hughes, Associate Director, Arizona Telemedicine Program, Rural Health Office,
University of Arizona, College of Medicine
Aloa Stevens, Director, External Affairs   West, Citizens Communications
Carl Artman, Oneida Nation, Airadigm Communications, Inc.
Charles W. Wiese, General Manager, Tohono O'odham Utility Authority
Christopher McLean, Deputy Administrator, Rural Utility Service, U. S. Department of
Agriculture
David Siddall, Esq., Verner, Liipfert, Bernhard, McPherson and Hand, Chartered
Ivan Makil, President, Salt River Pima-Maricopa Indian Community
J. D. Williams, General Manager, Cheyenne River Telephone Authority
Jeff Olson, Director, Regulatory Planning and Policy for Issues Integration/Planning and Strategy,
GTE Service Corporation
Madonna Peltier Yawakie, President, NATec, Inc.
Nora Helton, Chairperson, Fort Mojave Indian Tribe
Rhonda McKenzie, President and Chief Executive Officer, Aircom Consultants, LLC d/b/a
InAirNet
Richard Watkins, General Manager, Smith Bagley, Inc. operating as Cellular One of Northeast
Arizona
The Honorable Mary Thomas, Governor, Gila River Indian Community
Vernon James, President, San Carlos Apache Telecommunications Utility, Inc.
Walter Purnell, President and Chief Executive Officer, American Mobile Satellite Corporation

               
               

               APPENDIX C: OVERCOMING OBSTACLES TO TELEPHONE SERVICE TO
               INDIANS ON RESERVATIONS   PARTIES FILING COMMENTS  

COMMENTS
AMSC Subsidiary Corporation
Bell Atlantic Mobile
Cellular Telecommunications Industry Association
Gila River Telecommunications, Inc.
ICO Global Communications (Holding) Limited
Motorola, Inc.
National Telephone Cooperative Association
National Tribal Telecommunications Alliance
Nemont Telephone Cooperative, Inc.
North Dakota Public Service Commission
Salt River Pima-Maricopa Indian Community
SkyBridge, LLC
Southwestco Wireless, L.P.
TCA, Inc. - Telcom Consulting Associates
The Hopi Tribe
US West Communications, Inc.
Western Wireless Corporation

LETTERS
Colorado River Indian Tribes
Daryl Towenk, Concerned People, Lewiston, NY
Eastern Nebraska Telephone Company
Ernest and Carol E. Patterson, Concerned People, Lewiston, NY
Frank L. Williams, Tuscarora Indian Reservation, NY
Mark F. Williams, Sr., Tuscarora Indian Reservation, NY
Stefan J. Levine, Red Bank, NJ
United Native American Telecommunications, Inc. 
William Martin, Tuscarora Indian Reservation, NY

TESTIMONY
Alison Hughes, Arizona Telemedicine Program
Aloa J. Stevens, Citizens Communications and Navajo Communications Company
Arthur Martinez, Western New Mexico Telephone Company, Inc.
Carl Artman, Airadigm Communications, Inc.
Charles W. Wiese, Tohono O'odham Utility Authority
     Christopher A. McLean, Deputy Administrator, Rural Utilities Service, United States Department
     of Agriculture
Commissioner Chairman James Irvin, Arizona Corporation Commission
Councilman Anthony Lucio, Zuni Pueblo
David R. Siddall, Esq.
Edward J. Lopez, Jr., US West 
Francis Mike, New Mexico Telephone Association and Navajo Communications Company, Inc.
George Arthur, Navajo Nation 
Godfrey Enjady, Mescalero Apache Telephone and Utilities Company
Governor Eagle Rael, Picuris Pueblo
Governor Mary Thomas, Gila River Indian Community
Governor Raymond Gachupin, Pueblo of Jemez
Ivan Makil, Salt River Pima-Maricopa Indian Community
J.D. Williams, Cheyenne River Sioux Telephone Authority
Jeff Olson, GTE Service Corporation
Karen Buller, National Indian Telecommunications Institute
Madonna Peltier Yawakie, NAtec, Inc.
Nora Helton, Fort Mojave Telecommunications, Inc.
Peter Carson, ArrayComm, Inc.
President Arnold Cassador, Jicarilla Apache Tribe
Rhonda G. McKenzie, MTG, Inc. and Aircom Consultants, LLC
Richard Watkins, Smith Bagley, Inc. (operating as Cellular One)
Stanley Pino, All Indian Pueblo Council
Steven R. Beffort, State of New Mexico, General Services Department
Walter Purnell, American Mobile Satellite Company

               
               APPENDIX D: COMPETITIVE BIDDING PROPOSALS AND EXAMPLES
          1.   GTE Proposal 
164.   GTE proposes that there be bidding for support in geographic areas called Census
Block Groups (CBGs).  Every six months, carriers desiring to serve a CBG could notify the
state commission with jurisdiction over that CBG, that they wanted to initiate an auction for the
rights and duties of carrier of last resort (COLR) in that CBG.  Assuming there were enough
qualified bidders, the state would employ a single round, sealed-bid auction to set the per-
customer support in that CBG.  Bids could be no higher than the "reservation" price for each
CBG.  That reservation price would be based on the current level of support an incumbent LEC
was receiving for that CBG, although each incumbent LEC would be permitted to make a one-
time set of adjustments to the support levels for the CBGs they served as long as the total support
received by the incumbent LEC from all the CBGs it served remained the same.  The adjusted
support levels, increased by a prescribed percentage, would then become the reservation prices
for each CBG.
165.   Under the GTE proposal, after submitting bids, every bidder that was within 15%
of the low bid would be a successful bidder in the auction.  If there were no other bidders within
15% of the low bid, the low bidder and next lowest bidder within 25% of the low bid would be a
successful bidder.  If no other bid was within 25% of the low bid, only the low bidder would be a
successful bidder.  Each successful bidder would then assume COLR obligations and receive per-
customer support equal to the highest level of support sought by a carrier with a successful bid.  If
there were only one winner, the new support would be set at the reservation price, i.e., the
current support increased by the prescribed percentage.  Starting with the lowest bidder, GTE
would also allow bidders to withdraw from the auction after an initial set of the successful bidders
was determined.  If a bidder withdrew, there would be a new selection of successful bidders,
treating the withdrawn bid as if it had never been made.  If the auction resulted in a new COLR
for the area, either in addition to the incumbent or in place of the incumbent, the support levels
and obligations for that area would be frozen for three years.  No new entrants could receive
universal service support during this time, although they could enter and provide service without
such support.  After the three-year period, carriers could bid on the area again.
166.   GTE's proposal would allow a COLR to transfer or sell its rights and obligations
to any qualified carrier, as long as the number of COLRs in the CBG would not decrease.  The
GTE proposal also requires penalties for any carrier that defaults on its COLR obligations.  GTE
also proposes that, when the incumbent LEC desires to exit the market at the current level of
support and no other carrier volunteers to serve the market with a bid at or below the reservation
price for the service area, the level of support would be raised by some designated percentage. 
GTE also recognizes that contingent bids may be appropriate if there are substantial economies of
density and proposes that this could be addressed by requiring each bidder to submit a two-part
bid.  The first element would reveal the amount of support it would require if it were the only
bidder to receive support for serving the market.  The second element would reveal what the
bidder would require if it were one of multiple carriers receiving support for serving the market.
          1.   Proposal of Ameritech Consultants
167.   Jeremy Bulow and Barry Nalebuff, consultants for Ameritech, propose that
carriers be asked to compete for a portion of a lump-sum of support in return for assuming
COLR obligations over a subset of customers in a particular area.  Under their proposal, all
carriers, both COLR and non-COLR, in a particular area would assign customers that they did not
find profitable to serve to a COLR pool.  After the bidding (for support and associated COLR
obligation), the "unprofitable" customers (those no carrier found it profitable to serve) would be
randomly assigned to the successful bidders.  Bulow and Nalebuff advocate a sealed-bid auction,
in which a carrier's bid is the amount it would require to take 100 percent of the COLR pool in a
particular area.  The lowest bid wins and the carrier making that bid is awarded a pre-designated
substantial fraction of the COLR pool, e.g., 70%, along with an equal fraction of the total
support.  The second lowest bidder may choose to accept the remaining, smaller fraction of the
COLR pool, along with a share of the total support equal to that smaller fraction.  If the second
lowest bidder declines, the third lowest bidder would be offered the same choice.  If all other
bidders decline the opportunity, the lowest bidder would be assigned 100 percent of the COLR
pool and 100 percent of the successful bid (i.e., support).  Under this proposal, the total support
amount would equal the amount of the lowest bid.  Bulow and Nalebuff would allow a COLR to
trade its COLR-pool customers to other carriers for cash or other service obligations.  
168.   Bulow and Nalebuff contend that if there is only one LEC in a region, then support
should be set on a per-subscriber basis to provide an incentive for that carrier to serve the entire
market.  If, however, non-COLRs without subsidies compete for individual customers against a
COLR with a per-subscriber subsidy, the COLR will have an unfair advantage. Because of the
per-subscriber subsidy the COLR will be able to win certain customers that an unsubsidized firm
could serve at lower cost.  Bulow and Nalebuff contend that fixed-fee support avoids this
distortion. As discussed above, a fixed-fee subsidy could be applied to multiple COLRs by
splitting the total award among the winning bidders in proportion to their COLR obligations.
They also argue that, in the presence of economies of density, competitive bidding could lead to
unnecessarily high support, because the most efficient bidder would tend to bid higher than
necessary to protect against the possibility that it would be forced to share the COLR customers
rather than bidding lower based on the assumption that it would serve 100 percent of the COLR
pool.  Bulow and Nalebuff thus suggest that the lowest bidder should be awarded a large fraction
-- perhaps 70-75 percent -- of the COLR pool.
169.   Bulow and Nalebuff argue, as well, that their suggested approach removes the
problem that a competitor to the incumbent LEC will try to "cherry pick" the most profitable
customers, which could occur under the GTE competitive bidding proposal.  For the GTE
proposal, the "cherry picking" problem prompts the suggestion that competitive bidding be
conducted for areas that are small enough to have homogeneous costs of service (e.g., Census
Block Groups).  Bulow and Nalebuff argue that their approach would allow competitive bidding
over larger and more diverse areas than the GTE proposal would allow, which may be
administratively simpler or less costly.  They also argue that competitive bidding over larger areas
would be preferable if there are cost synergies among small markets.
          1.   The Kelly & Steinberg Auction Proposal
170.   Frank Kelly and Richard Steinberg propose that per-subscriber support be given to
carriers serving "blocks" of customers.  Under their proposal, a two-stage auction would set the
amount of support over all blocks at the same time.  They would base the initial support level for
each block on either the historical cost of serving residential customers in the block or on a
forward-looking economic cost mechanism's prediction of such service costs, whichever is lower.
171.   In the first stage of the auction, bidders would submit a sealed set of "contingent"
bids on any blocks in which they were interested.  The contingent bids would ask for different
levels of support depending upon the number of carriers that were chosen to serve the block.  For
example, they might ask for $10 in support if they were the sole provider, $6 if they were to share
the block with one other carrier, and $4.50 if they were to share the block with two bidders.  Each
bid would equal the lump-sum payment that the carrier sought for serving its share of customers
in that block.  The auctioneer would then determine the lowest total support payout for each
possible number of successful bidders, e.g., the lowest bid to be sole provider, the sum of the two
lowest of those bids contingent on sharing the block with one other carrier, the sum of the three
lowest of those bids contingent on sharing the block with two other carriers, eligible
telecommunications carrier.  The auctioneer would then adjust these levels of support by a
preferential weighting factor that attempted to quantify the societal benefit of increasing the
number of firms competing in a market.  The auctioneer would then select the lowest adjusted
support level and the associated successful bidder or bidders.  The bidders with the lowest bids for
the contingency of that number of successful bidders would be the first stage winners.  For
example, if the lowest payout was for two carriers then support would be available to the carriers
with lowest bids for sharing support with one other carrier.  If there were multiple winners in a
block, each successful bidder would be assigned a proportional share of the block, i.e., a "sub-
block."
172.   The second stage of the auction would consist of multiple rounds of open
combinatorial bidding in which bidders offered to serve some combination of blocks and sub-
blocks for less support than the successful bidders from the first or any previous round.  A valid
combinatorial bid would consist of a list of requested support amounts, one support amount for
each sub-block in the combination.  The total value of the combinatorial bid would be the sum of
these support amounts.  A valid combinatorial bid would need to seek less total support (i.e., have
a lower total value of the bid) than previous bids by an exact amount, i.e., "bid increment." 
Initially it would need to improve on the combined bids of the first stage successful bidders.  The
rounds of the second stage would start by considering combinations across two blocks, and then
progressively consider larger combinations.  Bidders would not be allowed to make combinatorial
bids over sub-blocks within a block.  
173.   To be eligible to bid, bidders would need to remain "active" in the auction, by
either holding the low bid in the previous round or submitting an acceptable bid in the present
round.  How active a bidder was in the present round would determine how many bids it could
place in the next round.  The level of activity needed to be allowed to make bids in the next
round would also change as the auction continued.
174.   When second-stage bidding activity stopped, the auction would end and final
successful bidders would be declared.  The successful bidders would receive per-customer
support base on their bid, for serving customers up to their designated proportion of a block,
(e.g., one-third of the customers in a block if there had been three successful bidders of the block
at the end of the first stage).  Multiple successful bidders within the block would then compete for
customers within a block.  Unserved customers would be assigned to a successful bidder not
serving its full share of customer is the block.  A successful bidder would be free to attract the
business of all the customer in a block, but would only receive support for its share, e.g., one-
third, of the marked that it was assigned in the auction.  Throughout the auction process, no bid
waivers or bid withdrawals would be allowed.
          1.   Other Competitive Bidding Proposals
175.   Time Warner notes that the Act appears to preclude the grant to any single carrier
of exclusive rights to receive universal service support for serving a high-cost area.  Therefore,
Time Warner proposes that to encourage low bids, we reward the successful bidder by granting it
100% of the high-cost support that it bids while all other bidders would receive a smaller
percentage.  Time Warner also asserts that a competitive system cannot work unless all
participants have equal access to relevant information about the market including costs and
revenues.  Time Warner thus proposes to require incumbent LECs to disclose fully information
about the market, including cost and revenues.  Finally, Time Warner recommends periodic
rebidding of areas to ensure that support levels reflect current costs and competitive conditions. 


176.   MCI proposes a bidding system only for those few areas that are not served or
areas where a carrier becomes unwilling to serve at the established universal service support
level.  MCI suggests that the Commission should join with the state to conduct the auction that
will determine the level of support available in the area.  The state would certify the carriers
eligible to participate in the auction, and the eligible carriers would bid the amount of support they
require to serve the area.  Any carrier willing to provide service in that area would then be
eligible to receive support at the level submitted by the lowest bidder.  If the incumbent was not a
successful bidder, it would have to make its network available for resale at net book value to the
successful bidder.

177.   Citizens for a Sound Economy Foundation (CSE Foundation) suggests an open,
multiple-round auction that would allow bidders to gain information about the costs of providing
service to different areas as they learn what other carriers have bid on those areas.  It suggests
that higher bidders obtain reduced universal service support.  Finally, because the need to
finance an investment over many years is particularly important when large-scale, capital-intensive
projects are involved,  CSE Foundation contends that it is important that the universal service
support be guaranteed over some period of time, perhaps five years.  It expresses concern,
however, over GTE's proposal to exclude from support any new provider during the period of
time the support level is guaranteed.  As a solution, CSE Foundation tentatively suggests that the
right to receive support for a particular market be made transferable.  
          1.   Hawaii Competitive Bidding Mechanism
178.   In 1995, the Hawaii legislature enacted a statute authorizing its PUC to select, via
a competitive bidding process, single carriers of last resort to receive universal service funds for
serving designated local exchange service areas.  Under the statute, once the PUC determines
the level of support that is appropriate for each local exchange area, it must invite
telecommunications providers to bid on these areas for providing service.  The successful
bidder becomes the COLR for the local exchange service area for "a period of time and upon
conditions set by the commission."  In choosing the successful bidder, the PUC is required to
take into account "the level of service to be provided, the investment commitment, and the length
of the agreement, in addition to the other qualifications of the bidder."  The PUC requires that
bidders' proposals contain projected rates for the initial ten-year period and expected subsidies
and loans that will lower the rates for consumers, but selection of the new provider need not be
made entirely on the basis of who submits the lowest bid; rather it may reflect a weighing of
multiple factors, i.e., "internal and external strengths."
179.   The first rural area in which the PUC authorized carriers to compete with the
incumbent LEC, GTE Hawaiian Tel, was the Ka'u area on the island of Hawaii.  In April 1996,
the PUC issued a Request for Proposal (RFP), specifying the technical, engineering, financial, and
other requirements for bidders.  The RFP also articulated specific "internal strengths," "external
strengths," and "miscellaneous indicia of fitness and ability" on which bidders would be
evaluated. 
180.   The PUC selected TelHawaii, Inc. to be the COLR for the Ka'u area, but
TelHawaii and GTE Hawaiian Tel thus far have been unable to conclude an agreement for the
transfer or lease of GTE Hawaiian Tel's assets to TelHawaii for serving this area.  GTE Hawaiian
Tel sought reconsideration of the decision selecting TelHawaii as COLR, but the PUC
subsequently held that it was necessary and in the public interest to condemn GTE Hawaiian Tel's
assets and to allow TelHawaii to use these condemned assets in its operations as a public utility. 
GTE Hawaiian Tel's appeal of this decision is now pending in the Hawaii Supreme Court.
          1.   Examples From Foreign Countries: Chile & Peru
181.   In 1994, Chile's legislature passed a telecommunications law that established the
Rural Telecommunications Development (RTD) Fund.  Since 1995, Subsecretaria de
Telecommunicaciones (SUBTEL), Chile's regulatory body, has allocated RTD funds to
companies through an annual competitive bidding process.  The competitive bidding process is
initiated when SUBTEL, after consulting with local and regional governmental entities, issues an
annual prioritized list of RTD projects.  SUBTEL assigns an "RTD maximum subsidy" for each
project and issues a public notice calling for technically qualified companies to submit bids for one
or more RTD projects.  RTD funds can be used by the selected companies to subsidize between
1/4 and 1/3 of the initial investment costs of rural projects.  Bids are submitted in a single-round
format and opened during a public meeting, and the bid that has the lowest RTD support wins.  If
two or more of the competing companies submit the same low bid, the RTD project and support
are assigned by lottery.  Companies that receive RTD funds are not given any exclusive market
rights to profitable customers in the areas they serve.
182.   In Peru, in 1994, the Organismo Supervisor de la Inversion Privada de
Telecommunicaciones (OSIPTEL), the Peruvian regulator that administers the Fund for
Investment in Telecommunications (FITEL), stated that it would allocate FITEL funds through a
competitive bidding process similar to Chile's.  Also that year, OSIPTEL was designing the
selection parameters for the projects.    
          1.   Spectrum Auctions
183.   In the Omnibus Budget Reconciliation Act of 1993, Congress amended the
Communications Act of 1934 by adding Section 309(j), which granted the Commission authority,
under certain circumstances, to employ competitive bidding to assign licenses to use portions of
the electromagnetic spectrum.  After adopting rules to govern this process, the Commission
began its spectrum auctions in 1994.
184.   The first set of licenses to be auctioned authorized licensees to provide
narrowband Personal Communications Services (PCS).  Because of the likelihood that the values
of these licenses were interdependent (i.e., the value placed by a bidder on one license depends
upon whether it also holds another license), the Commission chose to employ simultaneous,
multiple-round auctions to assign these licenses.  The Commission began by auctioning a
relatively small number of licenses, 10 nationwide narrowband PCS licenses, in July 1994.  As the
Commission gained experience, it gradually expanded the number of licenses included in each
auction.  Thus far, the Commission has held twenty-three spectrum auctions, employing both
simultaneous and sequential auction designs, and both oral outcry and electronic methods for
bidding.  Licenses for terrestrial-based mobile and fixed services (including the narrowband and
broadband PCS services, the Specialized Mobile Radio Services, and the Wireless
Communications Service), as well as for satellite broadcasting services (including the Direct
Broadcast Satellite service and the Digital Audio Radio Service), have been assigned using
competitive bidding.  
185.   To fulfill the requirements of Section 309(j), we have adopted general rules and
procedures governing the types of auction designs that may be employed for spectrum auctions. 
We have set eligibility rules, requiring that prospective bidders make pre-auction upfront
payments, and allowed alteration of competitive bidding mechanism details for each auction,
including minimum levels of required bidding activity, minimum bid increments and stopping rules
for ending the auction.  These rules are intended to ensure that in simultaneous multiple round
auctions only sincere bidders participate and that auctions proceed at a reasonable pace and can
be brought to a close in a rational manner.
186.   We also have adopted rules that require payments in the event of bid withdrawal or
default, so that bidders understand that they will be held to the amounts of their bids.  In
general, a bidder who withdraws a high bid during the course of an auction will be subject to a
payment calculated as the difference between the amount of the withdrawn bid and the amount of
the successful bid the next time the license is offered by the Commission.  Thus, no payment is
required if the subsequent successful bid exceeds the withdrawn bid.  If a successful bidder
defaults or is disqualified after the close of an auction, that bidder must pay the amount already
described and an additional three percent of the lesser of the defaulted bid amount and the
subsequent successful bid.  This additional payment is intended to encourage a bidder who has
any doubt about its ability to make payment on a license to withdraw its bid before the auction
closes, thereby giving others an opportunity to bid on that license.
187.   Our rules concerning spectrum auctions also include anti-collusion provisions that
were designed to work in conjunction with existing antitrust laws and to ensure that each bidder
in a spectrum auction has access to the same information about all joint arrangements into which
other bidders may have entered.  These rules prohibit bidders from cooperating, collaborating,
discussing, or disclosing the substance of their bids or bidding strategies with other bidders unless
they are members of a bidding consortium or joint bidding arrangement that has been identified on
the pre-auction application.  In addition, consistent with objectives for competitive bidding
detailed in Section 309(j), there are rules to enable small businesses and businesses owned by
members of minority groups and women, to overcome historical difficulties in gaining access to
capital, thereby promoting opportunities for these groups to participate in the provision of
spectrum-based services.  These provisions included limiting eligibility to bid on licenses in
"Entrepreneurs' Blocks" to companies below a certain size and making available bidding credits
on certain licenses and installment payment plans that allow a successful bidder to spread out
payment for a license over the license term.
188.   The Commission recently initiated a proceeding in which we will comprehensively
examine our general competitive bidding rules for all auctionable services to identify how they can
be changed to make our licensing processes more efficient.
          1.   FTS2000
189.   The contract for providing telecommunications services to the United States
government -- called FTS2000 -- was awarded by the General Services Administration (GSA) in
1988 to two different firms: 60% to AT&T and 40% to US Sprint.  The decision to divide the
contract between the two lowest bidders and to divide it 60%-40% was suggested by
Congressman Jack Brooks and GSA agreed to do so.  GSA then asked Coleman Research
Corporation (CRC), an engineering firm, to quantify and suggest how to minimize the deleterious
effects of splitting the contract.  CRC estimated that the employment of a second carrier would
raise actual costs by about eight percent, but that varying the allocation percentages would not
have any significant effect on total costs.  CRC was unable to estimate the likely benefits.  The
RFP was released in January 1988.
190.   Although the contract was for ten years, there were two points in time where the
two successful firms (AT&T and Sprint) had an opportunity to rebid to secure a larger share of
the total contract.  Under this price redetermination/service reallocation (PR/SR) provision, 40%
of the market shares of the two firms, i.e., 24% from AT&T and 16% from Sprint, were made
subject to the rebidding with three possible results.  If the two firms made similar bids then each
firm would retain its current market share, but if one firm bid significantly less than the other, than
that firm would capture the 40% of the contract that was now available.  AT&T and Sprint both
originally bid $.18 per minute.  After the first rebidding both lowered their bids to $.14 per
minute.  After the second rebidding AT&T lowered its bid to $.07 per minute.  Thus, when
AT&T significantly underbid Sprint for the final three year period, AT&T captured 40% of the
40% Sprint market share leaving AT&T with 76% of the revenues and Sprint with only 24% of
the revenues.
191.   GSA's analysis of the contract found that splitting the contract was not as costly as
they had expected because the size of the contract was large enough to permit multiple firms to
operate at their minimum efficient scale.  Furthermore, GSA found that one of the most significant
reasons that AT&T had for bidding aggressively was to avoid the danger that it would be
underbid in subsequent rounds and that the news of such a significant loss would be heavily
publicized by the successful bidder, suggesting that the federal government no longer regarded
AT&T as the best choice.
192.   GSA is now considering how to implement the successor to FTS2000, so called
FTS2001.  GSA is considering whether it might permit as many as three firms to gain shares of
federal revenues but, the number of successful bidders will depend on the differences between
their bids.
          1.   Cable Franchise Bidding
193.   Local cable television franchising authorities in the United States have generally
awarded cable television franchises by issuing RFPs which solicit competitive bids.  A
municipality establishes a cable franchise once it grants a company permission to string wires
above or below the public streets within a set area for a set time-period.  The RFP generally
contains the area's minimum requirements for the municipality's desired cable service.  It is
published in a local newspaper and at least one national trade publication, after which companies
have at least three months to prepare and submit their applications.  An average of four to five
companies initially submit bids.  Once the bidding period is over, local policymakers select the
most promising few bids and then conduct hearings on them.  Remaining bidders are given the
opportunity to amend their proposals.  The competition among remaining bidders ensures that the
quality of service is high.  A single successful bidder is usually awarded an exclusive, renewable
contract, usually 15 years in duration.  
194.   Once the contract is awarded, the successful bidders and the municipality
commence negotiations for the unresolved issues in the contract.  Many view this franchising
relationship as akin to direct regulation.  Critics of the cable franchising system argue that the
selection process is political and subjective.  
195.   To guarantee a cable franchisee's obligations to the municipality under a franchise
agreement, the municipality generally collects a form of collateral.  It may require performance
bonds or security deposits, partially in the form of cash or municipal bonds, the remainder in a
letter of credit.  The collateral acts as a security for damages, losses, or expenditures that the
municipality incurs as a result of the successful bidder's failure to comply with the contract, or pay
all the funds due to the municipality. 
          1.          Essential Airline Service
196.   To ensure that smaller communities always remain linked to the national
transportation system after the passage of the Airline Deregulation Act of 1978, Congress
established the Essential Air Service Program, which is administered by the Department of
Transportation (Department).  Under the Program, if an airline wishes to terminate, suspend, or
reduce its service to a particular area, the airline must file a 90-day notice with the appropriate
state aviation agency, officials in the affected community, and the Department.  Before the 90-day
notice period ends, other carriers have the opportunity to propose to replace without support the
incumbent carrier.  If no carrier expresses interest in serving the area without support before the
90-day notice period ends, the Department must solicit proposals for subsidized service.
197.   Carriers submitting proposals must carefully detail the calculations of their support
need.  The Department reviews all proposals, meets with each applicant to finalize their proposals,
and then solicits the opinions of the affected community's members.  The Department selects a
new carrier after weighing factors that include the following:  the community preferences; the
amount of support required; the quality of proposed service; the applicant's financial stability; the
applicant's reputation for reliability; and the applicant's marketing relationships with major
carriers.  The Department usually chooses a carrier that is then eligible to provide supported
service for a two-year period.  As the end of the two-year period approaches, the Department will
either renegotiate the support rate with the incumbent and publish this tentative rate in an order to
show cause, or solicit new proposals in the same manner used for replacing an incumbent as
previously described.
               
               APPENDIX E:    ARIZONA PROPOSAL CONCERNING UNIVERSAL SERVICE
               SUPPORT FOR INITIAL CONNECTION CHARGES

               APPENDIX F: INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS
1 Objectives
1.     In the 1996 Act, Congress directed the Commission to take steps to reform our
existing universal service support mechanisms.  Specifically, Congress directed the Commission
to devise methods to ensure that consumers in "all regions of the Nation," including "low-income
consumers and those in rural, insular and high cost areas" have access to "telecommunications and
information services."  Through decisions adopted over the past two years, the Commission has
been striving to ensure that federal universal service support mechanisms for high-cost areas, low-
income consumers, schools and libraries, and rural health care providers, enable consumers to
obtain telecommunications services that would otherwise be prohibitively expensive. 
Notwithstanding these efforts, certain areas of the nation remain unserved or underserved,
particularly insular and Indian tribal lands. Telephone penetration rates and facilities deployment
in certain high-cost areas, including tribal and insular areas, lag behind the penetration rates in the
rest of the country.  In this Further Notice, the Commission seeks comment on proposals designed
to increase deployment of facilities necessary to provide the services supported by federal
universal service support mechanisms in unserved and underserved areas and to increase
subscribership among low-income consumers in certain high-cost areas. 
          1.   Legal Basis
2.     The Commission, in compliance with sections 1, 4, 214, 254, and 403 of the Act,
issues this Further Notice to examine mechanisms to promote deployment and subscribership in
unserved and underserved areas, including tribal and insular areas.  
          1.   Description and Estimate of the Number of Small Entities To Which the
          Proposed Action May Apply
3.     The RFA directs agencies to provide a description of and, where feasible, an estimate
of the number of small entities that may be affected by the proposed rules, if adopted.  The RFA
generally defines the term "small entity" as having the same meaning as the terms "small business,"
"small organization," and "small governmental jurisdiction."  In addition, the term "small
business" has the same meaning as the term "small business concern" under the Small Business
Act.  A small business concern is one that:  (1) is independently owned and operated; (2) is not
dominant in its field of operation; and (3) satisfies any additional criteria established by the Small
Business Administration (SBA).  A small organization is generally "any not-for-profit enterprise
which is independently owned and operated and is not dominant in its field."  Nationwide, as of
1992, there were approximately 275,801 small organizations.  And finally, "Small governmental
jurisdiction" generally means "governments of cities, counties, towns, townships, villages, school
districts, or special districts, with a population of less than 50,000."  As of 1992, there were
approximately 85,006 such jurisdictions in the United States.  This number includes 38,978
counties, cities, and towns; of these, 37,566, or 96 percent, have populations of fewer than
50,000.  The Census Bureau estimates that this ratio is approximately accurate for all
governmental entities.  Thus, of the 85,006 governmental entities, we estimate that 81,600 (91
percent) are small entities. 
4.     As noted, under the Small Business Act, a "small business concern" is one that:  (1) is
independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any
additional criteria established by the Small Business Administration (SBA).  The SBA has
defined a small business for Standard Industrial Classification (SIC) categories 4812
(Radiotelephone Communications) and 4813 (Telephone Communications, Except
Radiotelephone) to be small entities when they have no more than 1,500 employees.  We first
discuss the number of small telephone companies falling within these SIC categories, then attempt
to refine further those estimates to correspond with the categories of telecommunications
companies that are commonly used under our rules.
5.     The most reliable source of information regarding the total numbers of common carrier
and related providers nationwide, including the numbers of commercial wireless entities, appears
to be data the Commission publishes annually in its Carrier Locator report, derived from filings
made in connection with the Telecommunications Relay Service (TRS).  According to data in
the most recent report, there are 3,604 interstate carriers.  These carriers include, inter alia,
local exchange carriers, wireline carriers and service providers, interexchange carriers,
competitive access providers, operator service providers, pay telephone operators, providers of
telephone toll service, providers of telephone exchange service, and resellers.  
6.     We have included small incumbent LECs in this present RFA analysis.  As noted
above, a "small business" under the RFA is one that, inter alia, meets the pertinent small business
size standard (e.g., a telephone communications business having 1,500 or fewer employees), and
"is not dominant in its field of operation." The SBA's Office of Advocacy contends that, for
RFA purposes, small incumbent LECs are not dominant in their field of operation because any
such dominance is not "national" in scope.  We have therefore included small incumbent LECs
in this RFA analysis, although we emphasize that this RFA action has no effect on FCC analyses
and determinations in other, non-RFA contexts.  
7.     Total Number of Telephone Companies Affected.  The United States Bureau of the
Census ("the Census Bureau") reports that, at the end of 1992, there were 3,497 firms engaged in
providing telephone services, as defined therein, for at least one year.  This number contains a
variety of different categories of carriers, including local exchange carriers, interexchange carriers,
competitive access providers, cellular carriers, mobile service carriers, operator service providers,
pay telephone operators, PCS providers, covered SMR providers, and resellers.  It seems certain
that some of those 3,497 telephone service firms may not qualify as small entities or small
incumbent LECs because they are not "independently owned and operated."  For example, a
PCS provider that is affiliated with an interexchange carrier having more than 1,500 employees
would not meet the definition of a small business.  It seems reasonable to conclude, therefore, that
fewer than 3,497 telephone service firms are small entity telephone service firms or small
incumbent LECs that may be affected by the decisions and actions considered in the Further
Notice.
8.     Wireline Carriers and Service Providers.  SBA has developed a definition of small
entities for telephone communications companies other than radiotelephone companies.  The
Census Bureau reports that, there were 2,321 such telephone companies in operation for at least
one year at the end of 1992.  According to SBA's definition, a small business telephone
company other than a radiotelephone company is one employing no more than 1,500 persons. 
All but 26 of the 2,321 non-radiotelephone companies listed by the Census Bureau were reported
to have fewer than 1,000 employees.  Thus, even if all 26 of those companies had more than
1,500 employees, there would still be 2,295 non-radiotelephone companies that might qualify as
small entities or small incumbent LECs.  Although it seems certain that some of these carriers are
not independently owned and operated, we are unable at this time to estimate with greater
precision the number of wireline carriers and service providers that would qualify as small
business concerns under SBA's definition.  Consequently, we estimate that there are fewer than
2,295 small entity telephone communications companies other than radiotelephone companies that
may be affected by the decisions and actions considered in the Further Notice.
9.     Local Exchange Carriers, Interexchange Carriers, Competitive Access Providers,
Operator Service Providers, and Resellers.  Neither the Commission nor SBA has developed a
definition of small local exchange carriers (LECs), interexchange carriers (IXCs), competitive
access providers (CAPs), operator service providers (OSPs), or resellers.  The closest applicable
definition for these carrier-types under SBA rules is for telephone communications companies
other than radiotelephone (wireless) companies.  The most reliable source of information
regarding the number of these carriers nationwide of which we are aware appears to be the data
that we collect annually in connection with the Telecommunications Relay Service (TRS). 
According to our most recent data, there are 1,410 LECs, 151 IXCs, 129 CAPs, 32 OSPs, and
351 resellers.  Although it seems certain that some of these carriers are not independently
owned and operated, or have more than 1,500 employees, we are unable at this time to estimate
with greater precision the number of these carriers that would qualify as small business concerns
under SBA's definition.  Consequently, we estimate that there are fewer than 1,410 small entity
LECs or small incumbent LECs, 151 IXCs, 129 CAPs, 32 OSPs, and 351 resellers that may be
affected by the decisions and actions considered in the Further Notice.
10.    Wireless (Radiotelephone) Carriers.  SBA has developed a definition of small entities
for radiotelephone (wireless) companies.  The Census Bureau reports that there were  1,176 such
companies in operation for at least one year at the end of 1992.  According to SBA's definition,
a small business radiotelephone company is one employing no more than 1,500 persons.  The
Census Bureau also reported that 1,164 of those radiotelephone companies had fewer than 1,000
employees.  Thus, even if all of the remaining 12 companies had more than 1,500 employees,
there would still be 1,164 radiotelephone companies that might qualify as small entities if they are
independently owned are operated.  Although it seems certain that some of these carriers are not
independently owned and operated, we are unable at this time to estimate with greater precision
the number of radiotelephone carriers and service providers that would qualify as small business
concerns under SBA's definition.  Consequently, we estimate that there are fewer than 1,164 small
entity radiotelephone companies that may be affected by the decisions and actions considered in
the Further Notice.
11.    Cellular, PCS, SMR and Other Mobile Service Providers.  In an effort to further
refine our calculation of the number of radiotelephone companies that may be affected by the rules
adopted herein, we consider the data that we collect annually in connection with the TRS for the
subcategories Wireless Telephony (which includes Cellular, PCS, and SMR) and Other Mobile
Service Providers.  Neither the Commission nor the SBA has developed a definition of small
entities specifically applicable to these broad subcategories, so we will utilize the closest
applicable definition under SBA rules -- which, for both categories, is for telephone companies
other than radiotelephone (wireless) companies.  To the extent that the Commission has
adopted definitions for small entities providing PCS and SMR services, we discuss those
definitions below.  According to our most recent TRS data, 732 companies reported that they are
engaged in the provision of Wireless Telephony services and 23 companies reported that they are
engaged in the provision of Other Mobile Services.  Although it seems certain that some of
these carriers are not independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number of Wireless Telephony
Providers and Other Mobile Service Providers, except as described below, that would qualify as
small business concerns under SBA's definition.  Consequently, we estimate that there are fewer
than 732 small entity Wireless Telephony Providers and fewer than 23 small entity Other Mobile
Service Providers that might be affected by the decisions and actions considered in the Further
Notice.
12.    Broadband PCS Licensees.  The broadband PCS spectrum is divided into six
frequency blocks designated A through F, and the Commission has held auctions for each block. 
The Commission defined "small entity" for Blocks C and F as an entity that has average gross
revenues of less than $40 million in the three previous calendar years.  For Block F, an
additional classification for "very small business" was added, and is defined as an entity that,
together with its affiliates, has average gross revenues of not more than $15 million for the
preceding three calendar years.  These regulations defining "small entity" in the context of
broadband PCS auctions have been  approved by SBA.   No small businesses within the SBA-
approved definition bid successfully for licenses in Blocks A and B.  There were 90 winning
bidders that qualified as small entities in the Block C auctions.  A total of 93 small and very small
business bidders won approximately 40% of the 1,479 licenses for Blocks D, E, and F.  However,
licenses for Blocks C through F have not been awarded fully, therefore there are few, if any, small
businesses currently providing PCS services.  Based on this information, we estimate that the
number of small broadband PCS licenses will include the 90 winning C Block bidders and the 93
qualifying bidders in the D, E, and F blocks, for a total of 183 small PCS providers as defined by
SBA and the Commissioner's auction rules.
13.    SMR Licensees.  Pursuant to 47 C.F.R.  90.814(b)(1), the Commission has defined
"small entity" in auctions for geographic area 800 MHz and 900 MHz SMR licenses as a firm that
had average annual gross revenues of less than $15 million in the three previous calendar years. 
The definition of a "small entity" in the context of 800 MHz SMR has been approved by the
SBA, and approval for the 900 MHz SMR definition has been sought.  The proposed rules may
apply to SMR providers in the 800 MHz and 900 MHz bands that either hold geographic area
licenses or have obtained extended implementation authorizations.  We do not know how many
firms provide 800 MHz or 900 MHz geographic area SMR service pursuant to extended
implementation authorizations, nor how many of these providers have annual revenues of less
than $15 million.  Consequently, we estimate, for purposes of this IRFA, that all of the extended
implementation authorizations may be held by small entities, some of which may be affected by
the decisions and actions considered in the Further Notice.
14.    The Commission recently held auctions for geographic area licenses in the 900 MHz
SMR band.  There were 60 winning bidders who qualified as small entities in the 900 MHz
auction.  Based on this information, we estimate that the number of geographic area SMR
licensees that may be affected by the decisions and actions considered in the Notice includes these
60 small entities.  No auctions have been held for 800 MHz geographic area SMR licenses. 
Therefore, no small entities currently hold these licenses.  A total of 525 licenses will be awarded
for the upper 200 channels in the 800 MHz geographic area SMR auction.  The Commission,
however, has not yet determined how many licenses will be awarded for the lower 230 channels in
the 800 MHz geographic area SMR auction.  There is no basis, moreover, on which to estimate
how many small entities will win these licenses.  Given that nearly all radiotelephone companies
have fewer than 1,000 employees and that no reliable estimate of the number of prospective 800
MHz licensees can be made, we estimate, for purposes of this IRFA, that all of the licenses may
be awarded to small entities, some of which may be affected by the decisions and actions
considered in the Further Notice.
15.    220 MHz Radio Service -- Phase I Licensees.  The 220 MHz service has both Phase I
and Phase II licenses.  There are approximately 1,515 such non-nationwide licensees and four
nationwide licensees currently authorized to operate in the 220 MHz band.  The Commission has
not developed a definition of small entities specifically applicable to such incumbent 220 MHZ
Phase I licensees.  To estimate the number of such licensees that are small businesses, we apply
the definition under the SBA rules applicable to Radiotelephone Communications companies. 
According to the Bureau of the Census, only 12 radiotelephone firms out of a total of 1,178 such
firms which operated during 1992 had 1,000 or more employees.  Therefore, if this general
ratio continues to 1999 in the context of Phase I 220 MHz licensees, we estimate that nearly all
such licensees are small businesses under the SBA's definition.
16.    220 MHz Radio Service -- Phase II Licensees.  The Phase II 220 MHz service is a
new service, and is subject to spectrum auctions.  In the 220 MHz Third Report and Order we
adopted criteria for defining small businesses and very small businesses for purposes of
determining their eligibility for special provisions such as bidding credits and installment
payments.  We have defined a small business as an entity that, together with its affiliates and
controlling principals, has average gross revenues not exceeding $15 million for the preceding
three years.  Additionally, a very small business is defined as an entity that, together with its
affiliates and controlling principals, has average gross revenues that are not more than $3 million
for the preceding three years.  An auction of Phase II licenses commenced on September 15,
1998, and closed on October 22, 1998.  908 licenses were auctioned in 3 different-sized
geographic areas:  three nationwide licenses, 30 Regional Economic Area Group Licenses, and
875 Economic Area (EA) Licenses.  Of the 908 licenses auctioned, 693 were sold.  Companies
claiming small business status won: one of the Nationwide licenses, 67% of the Regional licenses,
and 54% of the EA licenses.  As of January 22, 1999, the Commission announced that it was
prepared to grant 654 of the Phase II licenses won at auction.  A reauction of the remaining,
unsold licenses was completed on June 30, 1999, with 16 bidders winning 222 of the Phase II
licenses.  As a result, we estimate that 16 or fewer of these final winning bidders are small or
very small businesses. 
17.    Paging.  On June 7, 1999, the Wireless Telecommunications Bureau announced the
first in a series of auctions of paging licenses, the first to commence on December 7, 1999.  The
Bureau has proposed that the first auction be composed of 2,499 licenses.  The Commission
utilizes a two-tiered definition of small businesses in the context of auctioning licenses in the
Common Carrier Paging and exclusive Private Carrier Paging services.  A small business is
defined as either (1) an entity that, together with its affiliates and controlling principals, has
average gross revenues for the three preceding years of not more than $3 million, or (2) an entity
that, together with affiliates and controlling principals, has average gross revenues for the three
preceding calendar years of not more than $15 million.  The SBA has approved this definition. 
At present, there are approximately 24,000 Private Paging licenses and 74,000 Common Carrier
Paging licenses.  In addition, according to the most recent Carrier Locator data, 137 carriers
reported that they were engaged in the provision of either paging or messaging services, which
are placed together in the data.  Because the auction has yet to occur, we do not have data
specifying the number of winning bidders that will meet the above small business definition.  Also,
we will assume that there currently are 137 or fewer small business paging carriers.
18.    Narrowband PCS.   The Commission has auctioned nationwide and regional licenses
for narrowband PCS.  There are 11 nationwide and 30 regional licensees for narrowband PCS. 
The Commission does not have sufficient information to determine whether any of these licensees
are small businesses within the SBA-approved definition for radiotelephone companies.  At
present, there have been no auctions held for the major trading area (MTA) and basic trading area
(BTA) narrowband PCS licenses.  The Commission anticipates a total of 561 MTA licenses and
2,958 BTA licenses will be awarded by auction.  Such auctions have not yet been scheduled,
however.  Given that nearly all radiotelephone companies have no more than 1,500 employees and
that no reliable estimate of the number of prospective MTA and BTA narrowband licensees can
be made, we assume, for purposes of this IRFA, that all of the licenses will be awarded to small
entities, as that term is defined by the SBA.
19.    Rural Radiotelephone Service.  The Commission has not adopted a definition of small
entity specific to the Rural Radiotelephone Service.  A significant subset of the Rural
Radiotelephone Service is the Basic Exchange Telephone Radio Systems (BETRS).  We will
use the SBA's definition applicable to radiotelephone companies, i.e., an entity employing no
more than 1,500 persons.  There are approximately 1,000 licensees in the Rural Radiotelephone
Service, and we estimate that almost all of them qualify as small entities under the SBA's
definition.
20.    Air-Ground Radiotelephone Service.  The Commission has not adopted a definition of
small entity specific to the Air-Ground Radiotelephone Service.  Accordingly, we will use the
SBA's definition applicable to radiotelephone companies, i.e., an entity employing no more than
1,500 persons.  There are approximately 100 licensees in the Air-Ground Radiotelephone
Service, and we estimate that almost all of them qualify as small entities under the SBA definition.

21.    Private Land Mobile Radio (PLMR).   PLMR systems, also known as Private Mobile
Radio Service (PMRS) systems, serve an essential role in a range of industrial, business, land
transportation, and public safety activities.  These radios are used by companies of all sizes
operating in all U.S. business categories.  The Commission has not developed a definition of small
entity specifically applicable to PLMR licensees due to the vast array of PLMR users.  For the
purpose of determining whether a licensee is a small business as defined by the SBA, each licensee
would need to be evaluated within its own business area.  The Commission is unable at this time
to estimate the number of, if any, small businesses that could be impacted by the proposed rules. 
However, the Commission's 1994 Annual Report on PLMRs indicates that at the end of fiscal
year 1994 there were 1,087,267 licensees operating 12,481,989 transmitters in the PLMR bands
below 512 MHz.  Because any entity engaged in a commercial activity is eligible to hold a PLMR
license, the proposed rules in this context could potentially impact any small U.S. business that
chooses to become licensed in this service.  On July 21, 1999, the Wireless Telecommunications
Bureau requested public comment on whether the licensing of PMRS frequencies in the 800 MHz
band for commercial SMR use would serve the public interest. 
22.    Fixed Microwave Services.  Microwave services include common carrier,
private-operational fixed, and broadcast auxiliary radio services.  At present, there are
approximately 22,015 common carrier fixed licensees in the microwave services.   The
Commission has not yet defined a small business with respect to microwave services.  For
purposes of this IRFA, we will utilize the SBA's definition applicable to radiotelephone companies
-- i.e., an entity with no more than 1,500 persons.  We estimate, for this purpose, that all of the
Fixed Microwave licensees (excluding broadcast auxiliary licensees) would qualify as small
entities under the SBA definition for radiotelephone companies.
23.    Offshore Radiotelephone Service.  This service operates on several UHF TV
broadcast channels that are not used for TV broadcasting in the coastal area of the states
bordering the Gulf of Mexico.  At present, there are approximately 55 licensees in this service. 
We are unable at this time to estimate the number of licensees that would qualify as small entities
under the SBA's definition for radiotelephone communications.
24.    Wireless Communications Services.  This service can be used for fixed, mobile, radio
location and digital audio broadcasting satellite uses.  The Commission defined "small business"
for the wireless communications services (WCS) auction as an entity with average gross revenues
of $40 million for each of the three preceding years, and a "very small business" as an entity with
average gross revenues of $15 million for each of the three preceding years.  The Commission
auctioned geographic area licenses in the WCS service.  In the auction, there were seven winning
bidders that qualified as very small business entities, and one that qualified as a small business
entity.  We conclude that the number of geographic area WCS licensees that may be affected by
the decisions and actions considered in the Further Notice includes these eight entities.
25.    Rural Health Care Providers.  Neither the Commission nor the SBA has developed a
definition of small, rural health care providers.  Section 254(h)(5)(B) defines the term "health care
provider" and sets forth the seven categories of health care providers eligible to receive universal
service support.  We estimate that there are:  (1) 625 "post-secondary educational institutions
offering health care instruction, teaching hospitals, and medical schools," including 403 rural
community colleges, 124 medical schools with rural programs, and 98 rural teaching
hospitals; (2) 1,200 "community health centers or health centers providing health care to
migrants"; (3) 3,093 "local health departments or agencies" including 1,271 local health
departments and 1,822 local boards of health; (4) 2,000 "community mental health
centers"; (5) 2,049 "not-for-profit hospitals"; and (6) 3,329 "rural health clinics."  We do
not have sufficient information to make an estimate of the number of consortia of health care
providers at this time.  The total of these categorical numbers is 12,296. Consequently, we
estimate that there are fewer than 12,296 health care providers potentially affected by the actions
proposed in this Further Notice.  According to the SBA definition, hospitals must have annual
gross receipts of $5 million or less to qualify as a small business concern.  There are
approximately 3,856 hospital firms, of which 294 have gross annual receipts of $5 million or less.
Although some of these small hospital firms may not qualify as rural health care providers, we are
unable at this time to estimate with greater precision the number of small hospital firms which
might be affected by the proposals, if adopted.  Consequently, we estimate that there are fewer
than 294 hospital firms that might ultimately be affected by this Further NPRM.
          1.   Description of Projected Reporting, Record-keeping, and Other Compliance
          Requirements
26.    The measures under consideration in this Further Notice may, if adopted, result in
additional reporting or other compliance requirements for telecommunications carriers, including
small entities, as described below. 
27.    Certain measures under consideration in this Further Notice may, if adopted, result in
increased federal universal service support obligations for telecommunications carriers required to
contribute to federal universal service support mechanisms.  Specifically, in this Further Notice,
the Commission seeks comment on the possibility of allowing carriers to form separate tribal
study areas; lifting the cap on the high-cost fund to allow for growth resulting from the use of
tribal study areas;  amending the consumer qualification criteria for determining eligibility for
Lifeline;  expanding LinkUp to include facilities based line-extension charges or other
construction costs; providing support for intrastate toll-calling;  and providing support for the
deployment of infrastructure necessary to provide rural health care providers with access to
telehealth and telemedicine initiatives.
28.    Certain measures under consideration in this Further Notice may, if adopted, result in
additional obligations for carriers filing petitions pursuant to section 214(e)(6) of the Act or
subject to proceedings conducted pursuant to section 214(e)(6) of the Act.  Section 214(e)(3) of
the Act authorizes the Commission to designate carriers not subject to the jurisdiction of a state
commission as an eligible telecommunications carriers. Specifically, carriers may be required to
provide an analysis of the Commission's jurisdiction in conjunction with filing petitions under this
provision.  Section 214(e)(3) of the Act authorizes the Commission to identify the carrier or
carriers best able to provide the services supported by federal universal service support
mechanisms in unserved areas, and to order that carrier or carriers to provide such service. One
option under consideration is for the Commission to conduct a fact-based inquiry of the common
carriers serving areas near the unserved area to determine where existing facilities are deployed,
to estimate the costs for each carrier to provide the supported services, and to consider other
factors that may be relevant to the determination.  This proposal could result in rules requiring
carrier to submit information to the Commission that is needed in making this determination.
29.    Finally, certain measures raised in this Further Notice could result in additional
compliance requirements for carriers designated as eligible telecommunications carriers. 
Specifically, the Commission seeks comment on the possibility of expanding the provision of toll
limitation offerings and on requiring additional publicity for the availability of low-income
support.
          1.   Significant Alternatives To Proposed Rule Which Minimize Significant
          Economic Impact on Small Entities and Accomplish Stated Objectives
30.    With respect to the possibility of increased universal service contribution requirements,
the primary alternative to the proposals contained in the Further Notice which would minimize the
economic impact on small entities would be to determine not to provide an increased amount of
support. In this proceeding, the Commission will consider whether the alternative   not to provide
the additional support -- would nevertheless accomplish its stated objectives.   We observe that
section 254(d) of the Act requires that all telecommunications carriers contribute to the federal
universal service support mechanisms on "an equitable and nondiscriminatory basis."  As a result,
the Commission may not propose alternatives specifically designed to minimize the economic
impact on small entities.  We note, however, that the Commission has established a de minimis
exception from universal service contribution obligations for carriers whose interstate end-user
telecommunications revenues in a given is less than $10,000.  This exception should lessen the
burden on telecommunications carriers that meet the definition of small entities.
31.    With respect to the information that may  need to be submitted in conjunction with
petitions filed pursuant to section 214(e)(6) and proceedings conducted pursuant to section
214(e)(3), the primary alternative would be for the Commission to determine that the information
is not required or to conclude that it could obtain the information from alternative sources.  In
seeking comment on this issue, the Commission intends to develop a record to determine whether
the information is necessary and the appropriate source for obtaining it.  In addition, with respect
to proceedings conducted pursuant to section 214(e)(6), the Commission seeks comment on the
possibility of providing an exception for carriers that meet the definition of small entities. 
Moreover, the Commission seeks comment on the possibility of using a voluntary competitive
bidding mechanism instead of the more cumbersome, fact-based inquiry.  If the competitive
bidding proposal adopted, the compliance requirements for all carriers, including carriers that
meet the definition of small entities, could be avoided.  
32.    Finally, with respect to the additional compliance requirements for carriers designated
eligible telecommunications carriers, the Commission does not seek comment on whether an
exception for carriers meeting the definition of small entities is appropriate.  In setting the
standard for what services carriers designated as eligible telecommunications carriers must
provide, the Commission has established a uniform, nationwide standard for the services to which
all Americans should have access.  Individual carriers, however, may obtain a waiver of the
Commission's rules if good cause is shown therefor.
          1.   Federal Rules that May Duplicate, Overlap, or Conflict With the Notice
33.    None.

          
                     SEPARATE STATEMENT OF
              COMMISSIONER HAROLD FURCHTGOTT-ROTH
                      DISSENTING IN PART 

      Re: Federal-State Joint Board on Universal Service:  Promoting Deployment and
     Subscribership in Unserved and Underserved Areas, Including Tribal and Insular Areas,
     CC Docket 96-45.

  I support many of the worthwhile goals of today's Order.  Although I write separately to
express limited concerns about this item, I commend my colleagues and the members of the
Commission staff who have worked so diligently on this important action.

  First, I object to the item's apparent invention of a new classification described as
"underserved areas."  This classification does not appear in the Communications Act.  In fact, the
Act specifically refers to a category of "unserved areas" for which Congress directed the
Commission and the States to take specific action. See Section 214(e)(3).  Congress, however,
did not create a category of "underserved areas," and the Commission has no authority to create
one on its own motion.  I believe the Commission can achieve the goals set forth in this item
without inventing new terms and, as a result, placing at risk the goals we seek to serve in this
item.

  Section 214(e)(6) directs the Commission to designate a common carrier as an eligible
telecommunications carrier for purposes of receiving universal service support when, inter alia,
the common carrier is not subject to the jurisdiction of a State commission.  Although the goals of
today's Order are worthwhile, meeting these goals should not result in overbroad results.  I thus
object to the tentative conclusion that this section should be interpreted such that the
determination of whether a carrier is subject to the jurisdiction of a State commission depends on
the geographic area in which the service is being provided (e.g. tribal lands) or the nature of the
service provided (e.g. satellite or terrestrial wireless).  Supra. at par. 78.  I am concerned that
such a conclusion will ultimately lead to the federal government designating satellite and
terrestrial wireless carriers as eligible telecommunications carriers outside of tribal areas.  I dissent
from this tentative conclusion, because I do not believe that this outcome is supported by section
214(e)(6).

  Finally, I question the decision to solicit comment regarding whether the Commission should
establish national guidelines by which states must make the determination of which carriers are
best able to provide services to unserved areas.  Supra. at par. 93.  The Fifth Circuit only last
month reversed a Commission order interpreting a very similar statutory provision in which the
Commission attempted to prohibit States from developing their own requirements when
designating carriers as eligible for federal universal service support pursuant to section
214(e)(2).  When the Commission solicits comment on a topic, it encourages members of the
public to expend resources responding to that solicitation.  I believe it is irresponsible to
encourage such a use of resources when Commission action is unlikely because a federal appeals
court has called into significant doubt the legality of the proposal at issue.  



                                                               
                                                               
                     Separate Statement of
                  Commissioner Gloria Tristani
                                
     Re:  Federal-State Joint Board on Universal Service:  Promoting Deployment and Subscribership
     in Unserved and Underserved Areas, CC Docket No. 96-45; Extending Wireless
     Telecommunications Services, WT Docket No. 99-266.

  I write separately to underscore my support for these items.  Both Notices of Proposed
Rulemaking are intended to address and remedy the dearth of telecommunications in Indian
country and other unserved and underserved areas.  The facts are not in dispute.  While
Americans on average enjoy a telephone subscribership rate of 94%, many communities and areas
throughout the land are not so fortunate.  And Indians living on tribal lands are the least fortunate
of all.  Telephone subscribership rates on tribal lands fall under 50% in many instances and even
under 30%, as in the case of the Navajo reservation.

  These woeful statistics are not new, and this is not the first time that the federal government
and others have taken notice.  What is new, is that the Federal Communications Commission has
not only taken notice, but is now embarked in taking concrete action to change these statistics. 
The items ask thoughtful, appropriate and insightful questions, including questions about the
scope of the problem, the nature of the federal relationship with tribal sovereign governments, and
the extent to which the FCC should act to remedy the problem. 

  But, more importantly, the items posit concrete suggestions   targeting universal service
support, bolstering and/or tailoring the Lifeline and Linkup programs, using alternative
technologies  - on how to provide telecommunication services to Indian country and other
unserved and underserved communities.  These suggestions are good first steps but I hope
commentors will not hesitate to suggest any other appropriate and innovative measures.

  Finally, while I am proud to support these items, I believe it is our statutory and moral
obligation to bring telecommunications to Indian country.  Section 254 of the
Telecommunications Act mandates that we assure that all Americans have access to
telecommunications services.  The federal trust relationship between tribal sovereign governments
and the federal government suggests that we have an obligation to do even more.  But history,
notions of equality, and the principles on which this Nation was founded tell us that is
unconscionable that Indians, the first Americans, remain the last Americans to enjoy the wonders
and benefits of the Information Age.  I trust that the small steps we take today will go a long way
in changing this picture.