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MossAdams,LLP

SummaryofProposedFCCRules(SignificantModificationsOnly)

USFandIntercarrierCompensationReformProceeding

Part32UniformSystemofAccounts

32.6540 Access Expense: Modified to include Middle Mile expense and a definition of Middle Mile

(facilitiesandbandwidthcapacityassociatedwithconnectingtheBroadbandAccessServiceConnection

PointtotheInternetbackbone.

Part36 Separations

36.126CircuitEquipmentCategory4:

Added36.126(b)(4)MiddleMileCircuitEquipmentCategory4.4.

Added36.126(g)ApportionmentofMiddleMileCircuitEquipmentAmongtheOperations,whichdefines

MiddleMile

(see

above)

and

identifies

that

the

investment

shall

be

directly

assigned

to

Interstate

privateline.

36.154 ExchangeLineCableandWireFacilitiesCategory1ApportionmentProcedures:

Extendedtheapplicationofthe25%SubscriberPlantFactor(SPF)toCategory1.3ExchangeCableand

WireFacilitiesin36.154(g)throughJune30,2012.

Added36.154(h)AdditionalInterstateAssignmentBeginningJuly1,2012theinterstateapportionment

of Category 1.3 Exchange Cable and Wire Facilities will be based on the Broadband Take Rate

(broadbandlinesdividedbybroadbandlinespluscommonlines). TheAdditionalInterstateAssignment

is theBroadbandTakeRateabove thecurrent25%SPF.To theextent that theBroadbandTakeRate

Exceeds50%,

only

of

the

amount

above

50%

will

be

used

in

the

Additional

Interstate

Assignment

(i.e.

total Interstate allocation will not exceed 75% and the Additional Interstate Assignment will not

exceed50%).

Added36.154(i)TheAdditionalInterstateAssignmentwillbephasedinequallyover12years.

36.158 MiddleMileCableandWireFacilitiesCategory5ApportionmentProcedures(Added):

Added36.158(a)todefineMiddleMileCableandWireFacilities(seeabove)and36.158(a)(1)identifies

thattheinvestmentshallbedirectlyassignedtoInterstateprivateline.

36.354 AccessExpenseAccount6540:

Added36.354(1) to identify thatMiddleMileexpenses shallbedirectlyassigned to Interstateprivate

line.

36.392 GeneralandAdministrativeAccount6720:

Added 36.392(2)(i) which applies the current HCLS limitation on corporate operations expense to

Interstatecostrecovery.

Added36.392(2)(ii)whichdirectlyassignsanycorporateoperationsexpenseabovethelimitationtothe

Intrastatejurisdiction.

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Part36UniversalServiceFund

36.606 LimitationsonLoopPlantCapitalExpendituresEligibleforSupport: Thisisanentirelynew,and

verycomplexsection, thatdefines theamountofannual investment in loopplant that is recoverable

throughUSF. Ingeneral,annualloopinvestmentislimitedto15%ofthedepreciatedloopplantplus5%

for routineupgrades toexistingplant. Thereareexceptions forareaswithnoexisting loop facilities,

where grant funds are used, areas covered by a loan in place prior to January 1, 2012, and projectswhereacontractwasawardedtoavendorpriortoJanuary1,2012. Amountsabovethelimitationand

excludedfromsupportinthecurrentyearcanbecarriedforwardtofutureyears.

36.611SubmissionofInformationtotheNationalExchangeCarrierAssociation(NECA):

Added36.611(i)toidentifytheinformationthatruralcarriersmustsupplytoNECAonanannualbasisto

calculate the actual Intrastate rate of return, which cannot exceed the authorized Interstate rate of

return,orsupportwillbe reduced. The requested items include (perParts32,36,and65): Intrastate

RateBase,IntrastateOperatingRevenues,IntastateOperatingExpenses,IntrastateOperatingTaxesand

Other Income, Intrastate Income Taxes, Combined Effective Tax Rate, and the Additional End User

CommonLineChargerevenuesbilledorimputedasaresultofICCandUSFreform.

36.612 UpdatingInformationSubmittedtotheNationalExchangeCarrierAssociation:

Added36.612(b)whicheliminatestheabilitytofilequarterlyHCLSupdateseffectiveJuly1,2012.

Part36SubpartHAccessRestructureMechanismExpenseAdjustment(New)

Added 36.801 General, defines the Access Restructure Mechanism Expense Adjustment to be the

Intrastate access revenue requirement assigned to the Interstatejurisdiction via Access Restructure

Support,definedin54.1002.

Part36Glossary

AddsdefinitionsofBroadbandAccessServiceConnectionPoint,BroadbandLine,andMiddleMile.

Part51Interconnection

Added 51.301(c)(9) to identify that refusing to assist in performing traffic studies or providing traffic

dataexchangedbetweennetworksviolatesthedutytonegotiateingoodfaith.

Added51.301(d)toclarifythatanincumbentLECmayrequestinterconnectionfromanothercarrierand

invokethenegotiationandarbitrationproceduresinthe1996Act. Oncearequestismade,theinterim

transportandterminationratesin51.715apply.

Added51.510

Rural

Transport

requires

rural

carriers

to

terminate

traffic

to

another

carrier

at

that

carriersPOP if it resides in the rural carriers servicearea,otherwise traffic will be handedoffat the

meetpoint.

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Part51ReciprocalCompensation

Added 51.716 Adjustments to Reciprocal Compensation Rates. If reciprocal compensation rates are

higherthanterminatinginterstateaccessrates,thereciprocalcompensationrateswillbeadjusteddown

totheterminatinginterstateaccessratesovertwoyears.

Part54UniversalService

SubpartL:AccessRestructureSupport(New)

Added54.1001Definitionstoinclude:

InterstateSwitchedAccessRevenueShortfall:differencebetweentheswitchedaccessrevenuesbilledandtheinterstaterevenuerequirementforthesameservices,reducedbyLocalSwitching

Support.

Intrastate Terminating SwitchedAccess Revenue Shortfall: difference between the intrastateterminating

switched

access

revenues

billed

plus

net

reciprocal

compensation

and

the

revenues

forthesameservicesbilledin201X(tobedefined),adjustedeachyearbythepercentchangein

thecarriersinterstaterevenuerequirement.

AdditionalEndUserCommonLineRevenues:revenuesassociatedwiththeAdditionalCommonLineChargespursuantto69.104(s)

Added54.1002(a) CalculationofAccessRestructureSupport:supportshallequalthesumofthecarriers

annual Interstate Switched Access Revenue Shortfall and the Intrastate Terminating Switched Access

RevenueShortfall,lesstheAdditionalEndUserCommonLineRevenues.

Added

54.1002(a)(1)

Application

of

Additional

End

User

Common

Line

Revenues:

additional

revenues

will first be applied to the Intrastate Terminating Switched Access Revenue Shortfall and then to the

InterstateSwitchedAccessRevenueShortfall.

Added54.1002(a)(2)IntrastateRegulatedEarningsTest:IntrastateRestructureSupportwillbereduced

untilIntrastateearningsdonotexceedtheauthorizedInterstaterateofreturn.

Added 54.1002(b) stating that for companies participating in the NECA pool, this calculation will be

performedattheaggregatepoollevel.

SubpartM:ConnectAmericaFundforRuralRateofReturnCarriers(New)

Added54.1100

Terms

and

Definitions

to

include

(see

rules

for

exact

definitions):

BroadbandAccessServiceConnectionPoint:aggregationpointforbroadbandtraffic.BroadbandLine: looptransportingvoiceanddata,ordataonly,withaminimumdownstreamspeedof256Kbps.

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Broadband Take Rate: broadband lines divided by total working access lines, includingbroadband.

MiddleMile:broadbandaccessserviceconnectionpointtotheInternetbackbone.SecondMile:broadbandtransmissionbetweentheendofficeandthebroadbandaccessserviceconnectionpoint.

RuralBroadbandBenchmark:abenchmarkrateforbroadbandservicethat includesafixedperlineamount(sameforallstudyareas)plusavariableperlineamount(studyareaspecific).

RuralBroadbandNetworkTransmissionCosts: costs associated with broadband lines, secondmileandmiddlemile.

Added54.1101ConnectAmericaFundSupportforRuralRateofReturnCarriers:ConnectAmericaFund

(CAF)supportforruralrateofreturncarriersismadeupofNetworkTransmissionSupport(seebelow)

andadjustmentstoHCLS,ICLSandLSS.

Added54.1102RuralBroadbandNetworkTransmissionSupportComponent

Added54.1102(a):RuralBroadbandNetworkTransmissionSupport=RuralBroadbandNetwork

Transmission Costs Rural Broadband Benchmark * year end working Broadband Lines * 12

months.

Added 54.1102(b): Rural Broadband Network Transmission Costs = Interstate Common Line

Revenue Requirement + Additional Interstate Assignment + Middle Mile Costs + Second Mile

Costs

Added

54.1102(c):

defines

the

Rural

Broadband

Benchmark

as

54.1102(c)(1)FixedComponent: startsat$19.25 from July1,2012 throughDecember

31,2012andthenincreasesby$0.75peryearforthenext11years.

54.1102(c)(2)VariableComponent:$6.50forstudyareashavingaBroadbandTakeRate

of 25% or less. For study areas having a Broadband Take Rate >25% but =50%,thecalculation is

the sameexcept that the BroadbandTakeRate is limited to of the differenceover

50%.

Added54.1103

Adjustments

to

Other

Universal

Service

Support

Mechanisms

54.1103(a) High Cost Loop Support: If existing HCLS, including Safety Net and Safety Valve,

exceeds the Additional InterstateAssignmentof loopscosts in36.154(h), the studyarea shall

receivethisdifferenceinadditiontoCAFsupport.

54.1103(b) Transitional Interstate Common Line Support = (ICLS + EUCL revenue) * (1

BroadbandTakeRate).

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Added54.1105DataReportingandTrueUpProcedures:EachcarriershallsubmitdatatocalculateCAF

supporttoUSACbyMarch31stofeachyearandfundingyearwillbeJuly1stthroughJune30th.Trueup

dataisduetoUSAConDecember31stfortheprioryear.

Part61Tariffs

ModificationstoaddressCLECaccessrates,including:

ACLECmaynotbedeemedrural if itterminatesmorethan1,500 interstateminutesper loop

permonth.

The benchmark rate for CLECs shall be the rate charged by the competing ILEC. Eliminates

specificratespreviouslyidentified.

Part64MiscellaneousRulesRelatingtoCommonCarriers

Added64.1601(a)(1):CallingPartyNumbersshallnotbereplacedorsuperseded.

Added64.1601(a)(2):DefinesCIC.

Added 64.1601(a)(3): Intermediate carriers required to transmit all signaling information without

alteration.

Added 64.1601(a)(4): Terminatingcarriers may charge highest terminating access rates to any carrier

thatdeliverscallsforterminationwithoutcalldetail.

Added 64.1605 Phantom Traffic: Defined as the intentional misrouting of traffic to disguise financial

responsibility. Terminatingcarriersmayusetelephonenumbersassociatedwiththecalltodetermine

call

jurisdiction

for

billing.

Part69AccessCharges

Added 69.3(k): Intrastate access tariffs must be modified to reflect access reform. Intrastate Carrier

CommonLineratestobecombinedwithIntrastateLocalSwitching.

Added 69.104(s) Additional End User Common Line Charge: Carriers with local residential telephone

exchangeservicerates(R1+interstateEUCL+intrastateEUCL+mandatoryEAS+stateUSF)islessthan

$25permonth(LocalResidentialServiceBenchmark)mayapplyanAdditionalEndUserCommonLine

Charge. Thischarge is$0.75beginningJuly1,2012throughJune30,2013andincreasingby$0.75per

yeareachyearthereafterfor5yearsuptoatotalof$4.50. AdditionalEndUserCommonLineCharge

doesnot

apply

once

the

local

residential

telephone

exchange

service

rate

reaches

the

Local

Residential

ServiceBenchmark.

Added 69.114(a)(ii): establishes subelements for Middle Mile and Second Mile broadband access

services.

Added69.132PhaseDownofIntrastateandInterstateAccessRates

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69.132(1):InterstateoriginatingandterminatingswitchedaccessratescappedatJune30,2012

levels.

69.132(2):Effective July1,2012 intrastate terminating switchedaccess rates reducedbyof

thedifferencebetweeninterstateandintrastaterates.

69.132(3):EffectiveJuly1,2013intrastateterminatingswitchedaccessratesequaltointerstaterates.

69.132(4): From July 1,2014 until July1,2017 interstateand intrastate terminating switched

accessratesreducedinequalannualincrementsto$0.005atJuly1,2017.

69.132(5): From July 1,2017 until July1,2020 interstateand intrastate terminating switched

accessratesreducedinequalannualincrementsto$0.0007atJuly1,2020.

69.132(6):RatereductionsidentifiedaboveshallonlybetakentotheextentthatthereisAccess

RestructureSupportavailabletofundthereductionsinaccessrevenues.