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Daily Rules, Proposed Rules, and Notices of the Federal Government

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 11-42, 03-109, 12-23 and CC Docket No. 96-45; FCC 12-11]

Lifeline and Link Up Reform and Modernization, Advancing Broadband Availability Through Digital Literacy Training

AGENCY: Federal Communications Commission.
ACTION: Final rule.
SUMMARY: In this document, the Federal Communications Commission comprehensively reforms and begins to modernize the Universal Service Fund's Lifeline program. The reforms adopted in this document substantially strengthen protections against waste, fraud, and abuse; improve program administration and accountability; improve enrollment and consumer disclosures; initiate modernization of the program for broadband; and constrain the growth of the program in order to reduce the burden on all who contribute to the Universal Service Fund.
DATES: Effective April 2, 2012, except for the amendments to SSSS 54.202(a), 54.401(c), 54.403, 54.407, 54.410, 54.416, 54.417, 54.420, 54.222 which contain information collection requirements that are not effective until approved by the Office of Management and Budget. The Federal Communications Commission will publish a document in theFederal Registerannouncing the effective date for those sections, and except for the amendments contained herein to 47 CFR 54.411, 54.412, 54.413 and 54.414 which shall become effective April 1, 2012; and 47 CFR 54.409 which shall become effective June 1, 2012.
FOR FURTHER INFORMATION CONTACT: Kimberly Scardino, Wireline Competition Bureau, (202) 418-7400 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Report and Order (R&O) in WC Docket Nos. 11-42, 03-109, 12-23 and CC Docket No. 96-45; FCC 12-11, adopted on January 31, 2012 and released on February 6, 2012. There was also a companion document released with this item. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW., Washington, DC 20554. Or at the following Internet address:http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0207/FCC-12-11A1.doc.

I. Introduction

1. In this Order, the Commission comprehensively reforms and begins to modernize the Universal Service Fund's Lifeline program (Lifeline or the program). Building on recommendations from the Federal-State Joint Board on Universal Service (Joint Board), proposals in the National Broadband Plan, input from the Government Accountability Office (GAO), and comments received in response to the Commission's March Notice of Proposed Rulemaking, the reforms adopted in this Order substantially strengthen protections against waste, fraud, and abuse; improve program administration and accountability; improve enrollment and consumer disclosures; initiate modernization of the program for broadband; and constrain the growth of the program in order to reduce the burden on all who contribute to the Universal Service Fund (USF or the Fund). We take these significant actions, while ensuring that eligible low-income consumers who do not have the means to pay for telephone service can maintain their current voice service through the Lifeline program and those who are not currently connected to the networks will have the opportunity to benefit from this program and the numerous opportunities and security that telephone service affords.

2. This Order is another step in the Commission's ongoing efforts to overhaul all USF programs to promote the availability of modern networks and the capability of all American consumers to access and use those networks. Consistent with previous efforts, we act here to eliminate waste and inefficiency, increase accountability, and transition the Fund from supporting standalone telephone service to broadband. In June 2011, the Commission adopted theDuplicative Program Payments Order,76 FR 38040, June 29, 2011, which made clear that an eligible consumer may only receive one Lifeline-supported service, established procedures to detect and de-enroll subscribers receiving duplicative Lifeline-supported services, and directed the Universal Service Administrative Company (USAC) to implement a process to detect and eliminate duplicative Lifeline support—a process now completed in 12 states and expanding to other states in the near future. Building on those efforts, the unprecedented reforms adopted in today's Order could save the Fund up to an estimated $2 billion over the next three years, keeping money in the pockets of American consumers that otherwise would have been wasted on duplicative benefits, subsidies for ineligible consumers, or fraudulent misuse of Lifeline funds.

3. These savings will reduce growth in the Fund, while providing telephone service to consumers who remain disconnected from the voice networks of the twentieth century. Moreover, by using a fraction of the savings from eliminating waste and abuse in the program to create a broadband pilot program, we explore how Lifeline can best be used to help low-income consumers access the networks of the twenty-first century by closing the broadband adoption gap. This complements the recentUSF/ICC Transformation Order,76 FR 76623, December 8, 2011, which reoriented intercarrier compensation and the high-cost fund toward increasing the availability of broadband networks, as well as the recently launched “Connect to Compete” private-sector initiative to increase access to affordable broadband service for low-income consumers.

4. To make the program more accountable, the Order establishes clear goals and measures and establishes national eligibility criteria to allow low-income consumers to qualify for Lifeline based on either income or participation in certain government benefit programs. The Order adopts rules for Lifeline enrollment, including enhanced initial and annual certification requirements, and confirms the program's one-per-household requirement. The Order simplifies Lifeline reimbursement and makes it more transparent. The Commission adopts a number of reforms to eliminate waste, fraud and abuse in the program, including creating a National Lifeline Accountability Database to prevent multiple carriers from receiving support for the same subscribers; phasing out toll limitation service support; eliminating Link Up support except for recipients on Tribal lands that are served by eligible telecommunications carriers (ETCs) that participate in both Lifeline and the high-cost program; reducing the number of ineligible subscribers in the program; and imposing independent audit requirements on carriers receiving more than $5 million in annual support. These reforms are estimated to save the Fund up to $2 billion over the next three years. As part of these reforms we establish a savings target of $200 million in 2012 versus the program's status quo path in the absence of reform, create a mechanism for ensuring that target is met, and put the Commission in a position to determine the appropriate budget for Lifeline in early 2013 aftermonitoring the impact of today's fundamental overhaul of the program and addressing key issues in the Further Notice of Proposed Rulemaking (FNPRM), including the appropriate monthly support amount for the program. Using savings from the reforms, the Order establishes a Broadband Adoption Pilot Program to test and determine how Lifeline can best be used to increase broadband adoption among Lifeline-eligible consumers. We also establish an interim base of uniform support amount of $9.25 per month for non-Tribal subscribers to simplify program administration.

II. Performance Goals & Measures

5. The Order adopts three performance goals for the program: (1) Ensure the availability of voice service for low-income Americans; (2) ensure the availability of broadband service for low-income Americans; and (3) minimize the contribution burden on consumers and businesses. The Order adopts measurements for each of the goals, while delegating to the Bureau authority to resolve implementation aspects of such measurements (for example, determining how to define “low-income” and “next higher” for the purpose of the measurement).

III. Voice Services Eligible for Discount

6. Consistent with the actions taken in the CAF Order and Sua Sponte Order on Reconsideration, the Order amends the definition of “Lifeline” to provide support for “voice telephony service.” The Order amends the rules to eliminate the “basic local service qualifier” that is currently part of the definition of Lifeline service, but explains that the Commission continues to expect Lifeline providers to provide service that enables consumers to communicate with others that live nearby, while acknowledging that service plans increasingly allow all distance communication. The Order declines to specify minimum service standards for Lifeline service, but states the Commission will monitor service levels to see if it should adopt standards in the future.

IV. Support Amounts for Voice Services

7. Today, ETCs are reimbursed for Lifeline based on a rather complicated tiers structure that is, among other things tied to the ILEC Subscriber Line Charge. To simplify administration of the program and revise the rules to reflect the current marketplace in which more than half of the support is provided to wireless providers that do not charge a SLC, the Order adopts an interim rate of $9.25 to replace the current Tiers 1, 2, and 3, effective April 1, 2012. The interim support amount represents the nationwide average rate of reimbursement as of September 2011. Tier 4, which provides enhanced Lifeline support to residents of Tribal lands, remains unchanged. We seek further comment on setting appropriate permanent support amounts in a Further Notice of Proposed Rulemaking.

V. Consumer Eligibility and Enrollment A. Uniform Eligibility Criteria

8. The Order establishes a uniform floor of eligibility for Lifeline based on the current federal rules, while allowing states to include more permissive eligibility criteria. Additionally, the Order keeps the current federal income standard of 135% or below of the federal poverty guidelines. This uniformity will simplify program administration for USAC and for ETCs as well as provide a baseline level of program accessibility nationwide.

B. One-per-Household

9. The order adopts a one-per-household requirement. “Household” is defined consistent with the Low-Income Home Energy Assistance Program as “any individual or group of individuals who are living together at the same address as one economic unit,” with an “economic unit” defined as “all adult individuals contributing to and sharing in the income and expenses of a household.” The Order permits Lifeline support to individuals living in group living facilities. The Order adopts procedures to enable Lifeline applicants to demonstrate when initially enrolling in the program that any other Lifeline recipients residing at their residential address are part of a separate household and directs USAC, within 30 days of the effective date of the Order, to develop a worksheet that will allow low-income households sharing an address to indicate they are part of a separate household. The Order also directs USAC, within 30 days of the effective date of the Order, to develop print and web materials to be posted on USAC's Web site that both USAC and ETCs can use to educate consumers about the one-per-household rule (i.e.,how to determine what persons comprise a household).

C. Determining Consumer Eligibility (At Enrollment and Annually Thereafter)

10. The Order requires all Lifeline subscribers to provide certain certifications when enrolling in Lifeline and annually thereafter. These requirements are as follows:

1. Initial Certification Requirements

11. The Order requires ETCs (or the state administrator, where applicable) to check the program-based eligibility of new Lifeline subscribers at enrollment by accessing available state or federal eligibility databases. Where underlying program eligibility data cannot be accessed, the Order requires new Lifeline subscribers to provide documentation of program-based eligibility, which the entity enrolling the subscriber should review (but not retain). Similarly, the Order extends the current requirement in federal default states that new Lifeline subscribers must present documentation to qualify for Lifeline based on income level to all states. The Order adopts additional certification requirements to protect the program from waste, fraud, and abuse, including requiring consumers to certify upon enrollment and annually thereafter that they are receiving support for only one line per household (as described above), and requires consumers to sign a certification form prior to enrolling in the Lifeline program.

2. Annual Re-Certification Requirements

12. The Order replaces the existing annual verification process with a rule that requires each Lifeline subscriber (both existing subscribers and new subscribers) to provide annual self-certifications attesting to their continued eligibility for the program. The Order requires all ETCs, to re-certify by the end of 2012, all of their subscribers claimed on their June FCC Form 497 and report the results of this annual re-certification process to the Commission, USAC and the relevant state commission (where the state has jurisdiction over the ETC) annually by January 31, 2013. Beginning in 2013, where ETCs cannot re-certify their subscriber by accessing a database, they must re-certify them on an annual basis or elect to have USAC re-certify them. The results of the re-certification process must be filed by January 31st each year. Where ETCs can access underlying state or federal program data to confirm a consumer's ongoing eligibility for Lifeline, the Order allows them to do so in place of the annual re-certification process. The Order adopts a rule that consumers that do not respond to annual re-certifications must be de-enrolled from the program. The Order also adopts a rule requiring consumers to notify their ETC within 30 days if the consumer no longer qualifies for Lifeline.

3. ETC Certifications

13. The Order requires ETCs to make certain certifications annually and when submitting for reimbursement from the program.

D. Tribal Lifeline Eligibility

14. The Order clarifies that residents of Tribal lands are eligible for Lifeline (and Link Up support if served by a high cost recipient) based on (1) Income level; (2) participation in any Tribal-specific federal assistance program identified in the Commission's rules; or (3) participation in any other program identified in the Commission's rules. The Order adopts the NPRM proposal to add the Food Distribution Program on Indian Reservations (FDPIR) to the list of programs that confer eligibility. The Order establishes a waiver and designation process for those Tribal communities that are located outside of reservations, but can show ties to defined Tribal communities, and removes the term “near reservation” from the Commission's definition of Tribal lands. The Order requires residents on Tribal lands to follow the same requirements for documentation of income and program based eligibility as other Lifeline recipients, but clarifies that we will continue to allow self-certification of residence on Tribal lands.

E. Electronic Signature

15. The Order allows ETCs and state agencies to capture a subscriber's signature electronically at sign-up, including through the use of interactive voice response systems in compliance with the requirements of the E-Sign Act and the Government Paperwork Elimination Act. The E-Sign Act allows the use of electronic records to satisfy Commission regulations requiring that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.

F. Automatic and Coordinated Enrollment

16. The Order encourages states to facilitate coordinated enrollment, but makes clear that automatic enrollment whereby consumers receiving eligible benefits are automatically enrolled in a particular carrier's Lifeline program without their express consent is not permitted because it may increase the incidence of duplicative support.

VI. Reforms To Eliminate Waste, Fraud and Abuse A. National Lifeline Accountability Database

17. The Order adopts a national duplicates database to detect and eliminate duplicative Lifeline and Link Up support. The Order directs WCB to work with USAC and OMD to establish and implement the database and associated processes. ETCs will be required to query the database to determine whether a prospective subscriber is already receiving Lifeline support from another ETC. The order directs ETCs to (1) populate the database with the necessary information to implement these processes and (2) query the database for each new subscriber prior to receiving reimbursement from the fund for that subscriber. We seek further comment in an FNRPM on how to implement a database to check for eligibility.

B. TLS

18. The Order clarifies that it does not consider a subscriber who has a Lifeline calling plan that includes a set number of calling minutes available for either local or domestic long distance calls to have voluntarily elected to receive TLS. Therefore, TLS support will not be provided to ETCs providing such plans effective April 1, 2012. To the extent an ETC offers service plans that still charge a fee for toll calls that is in addition to the per month or per billing cycle price for the Lifeline service plan, it must provide at no additional cost to the consumer the ability to limit or block calls that would result in additional charge, but the program will no longer provide additional support for this functionality. Support for TLS will be eliminated over two years to mitigate the impact of this change. The Order establishes a limit on TLS support of $3.00 per month per subscriber that will be implemented with April 2012 support payments through the remainder of 2012, beginning with April 2012 disbursements. TLS support will be reduced to $2.00 per month per subscriber in 2013, and eliminated at the beginning of 2014.

C. Link Up

19. The Order eliminates Link Up support to all ETCs on non-Tribal lands, effective April 1, 2012, and limits Link Up on Tribal lands to high cost recipients deploying infrastructure. Marketplace trends indicate that Lifeline consumers increasingly have service options from ETCs that neither draw on Link Up support nor charge the consumer a service initiation fee. In balancing a number of universal service goals with finite resources, we conclude that dollars currently spent for Link Up can be more effectively spent to improve and modernize the Lifeline program.

D. Subscriber Usage of Customer Supported Service

20. The Order establishes a rule that pre-paid ETCs offering service to subscribers for free may not seek reimbursement for subscribers until the subscriber initiates service in the first instance. Moreover, subscribers who fail to “use” the service (as that term is defined in the Order/Rules) within 60 consecutive days must be de-enrolled by the carrier and the duplicates database must be updated within one business day. Furthermore, pre-paid ETCs must inform their subscribers that Lifeline services are not transferable, that there is a usage requirement to retain the benefit, and that subscribers will be automatically de-enrolled for non-use.

E. Minimum Consumer Charge

21. The Order does not adopt a minimum consumer charge in light of other W/F/A protections that will be implemented to ensure that consumers do not abuse the program, but notes that this issue could be revisited if the measures adopted fail to address the issues that currently exist. Further, the Order eliminates the current rule that imposes a $1 minimum local charge on Tribal subscribers.

F. Outreach and Marketing

22. Within six months from the Order's effective date, ETCs must include in plain, easy-to-understand language in all of their Lifeline marketing materials (including print, internet, audio and video), that the offering is a Lifeline-supported service; Lifeline is a government assistance program; only eligible consumers may enroll in the program; what documentation is necessary for enrollment; the program is limited to one benefit per household, consisting of either wireline or wireless service; and consumers who willfully make false statements in order to obtain program benefits can be punished with a fine or imprisonment or barred from the program. Additionally, the Order requires ETCs to disclose the company name under which it does business and the details of its Lifeline service offerings in its Lifeline-related marketing and advertising. The Order does not adopt mandatory outreach requirements but directs the Wireline Competition and Consumer and Governmental Affairs Bureau to conductan outreach campaign regarding the new program rules.

G. Audits and Enforcement

23. The order requires USAC to revise its existing oversight program (the Beneficiary Compliance Audit and Payment Quality Assurance programs) in light of the new rules. It also adopts a new first-year audit requirement for newly designated ETCs whereby they would be audited by USAC within their first year of providing service. The order also adopts a rule that ETCs drawing more than $5 million, at the holding company level, from the low-income program must conduct biennial independent audits and submit the audit reports to the Commission, USAC, and appropriate state commission. The Order requires ETCs to report to USAC their ownership information, including affiliates and holding companies, which is necessary to implement this new audit requirement. ETCs are put on notice that findings concerning improper payment of funds may result in recapture of those payments under the Improper Payments Elimination and Recovery Act (IPERA) and related Office of Management and Budget implementation guidelines and/or revocation of ETC designation.

VII. Payment of Low-Income Support

24. The order adopts a three-month transition for low-income support to be disbursed based on actual support in place of the current administrative process of paying low-income support based on projected service. The Order accelerates USAC's payment of low-income support for carriers filing the FCC Form 497 electronically by a monthly deadline. The window by which carriers must file revisions or original FCC Form 497s is reduced from fifteen months from the end of a calendar year, to a rolling twelve-month window.

VIII. Modernizing the Program A. Bundled Services

25. The Order adopts a rule permitting ETCs in all states to allow qualifying low-income consumers to apply Lifeline discounts to all residential service plans that provide voice telephony service, including bundled service packages combining voice and broadband, or packages containing optional calling features. ETCs will be required to apply partial subscriber payments to the cost of the Lifeline voice component of a package before paying down any additional services, and must notify Lifeline consumers of this rule in writing. In a Further Notice, described below, we seek further comment on whether to adopt a rule mandating that ETCs offer Lifeline discounts on all bundled service packages and packages with optional calling features.

B. Broadband Pilot

26. The Order establishes a broadband pilot program aimed at generating statistically significant data that will allow the Commission, ETCs, and the public to analyze the effectiveness of different approaches to using Lifeline funds to making broadband more affordable for low-income Americans while providing support that is sufficient but not excessive. The broadband pilot program will be funded with some of the savings from the duplicate resolution process.

C. Managing the Size of the Low Income Fund

27. The Order sets a savings target of $200 million for 2012. The Bureau shall provide to each Commissioner an interim report no later than six months from the adoption of the Order analyzing the reforms' progress in meeting the savings target. Not later than one year after the adoption of the Order, the Bureau shall provide to each Commissioner a report as to whether the reforms have succeeded in meeting the savings target; and, if they have not, analyzing the causes, providing options for realizing those savings, and making specific recommendations for corrective action to realize those savings. Both reports shall be made available for public input on the Commission's Web site.

IX. Eligible Telecommunications Carrier Requirements A. Facilities-Based Requirements for Lifeline-Only ETCs

28. The Commission forbears from applying the Act's facilities requirement of section 214(e)(1)(A) to all telecommunications carriers that seek limited ETC designation to participate in the Lifeline program, subject to certain conditions. Specifically, each carrier must (i) comply with certain 911 requirements; and (ii) file, subject to Bureau approval, a compliance plan providing specific information regarding the carrier's service offerings and outlining the measures the carrier will take to implement the obligations contained in this Order. To avoid disruption to subscribers served by existing Lifeline-only ETCs that previously received forbearance in those states where they were designated prior to December 29, 2011, those ETCs can continue to receive reimbursement in those states pending approval of their compliance plan, provided they submit their plan to the Bureau by July 1, 2012. Non-facilities-based carriers designated after December 29, 2011 will not receive reimbursement from the Fund until the Bureau approves their compliance plans.

B. Impact of New Rules on Prior Forbearance Conditions

29. To the extent that any of the conditions in the prior forbearance orders and compliance plans are inconsistent with the rules adopted in the Order, the newly adopted rules shall prevail. However, any carrier whose grant of forbearance was conditioned on more stringent compliance plans must comply with those additional obligations as well as the rules adopted in the Order.

C. Additional Rule Amendments

30. The Order makes several changes to the rules regarding Lifeline providers to eliminate waste and inefficiency, and to increase accountability in the program. The Order amends section 54.202 to clarify that Lifeline-only ETCs are not required to submit a five-year improvement plan as part of its application for designation. Carriers seeking to be designated as a Lifeline-only ETC must demonstrate their technical and financial capacity to provide the supported services. All ETCs receiving Lifeline must annually report the names and identifiers used by the ETC, its holding company, operating companies and affiliates. Additonally, the Order requires every ETC receiving low-income support to annually provide to the Commission and USAC general information regarding their Lifeline plans for voice telephony service offered specifically for low-income consumers.

X. APCC Petition

31. The Order denies a petition for rulemaking and a petition for interim relief by the American Public Communications Council to subsidize the payphone industry through Lifeline.

XI. Procedural Matters A. Paperwork Reduction Act Analysis

32. This Report and Order contains new information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. The new requirements will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the new or modifiedinformation collection requirements contained in this proceeding. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198,see44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. We describe the impacts that might affect small businesses, which include most businesses with fewer than 25 employees, in the Final Rregulatory Flexibility Analysis below.

B. Congressional Review Act

33. The Commission will send a copy of thisReport and Orderto Congress and the Government Accountability Office pursuant to the Congressional Review Act,see5 U.S.C. 801(a)(1)(A).

C. Final Regulatory Flexibility Analysis

34. The Regulatory Flexibility Act (RFA) requires that an agency prepare a regulatory flexibility analysis for notice and comment rulemakings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” Accordingly, we have prepared a Final Regulatory Flexibility Analysis concerning the possible impact of the rule changes contained in thisReport and Orderon small entities.

35. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Lifeline and Link Up Reform and Modernization Notice of Proposed Rulemaking (Lifeline and Link Up NPRM), 76 FR 16482, March 23, 2011. The Commission sought written public comments on the proposals in theLifeline and Link Up NPRM,including comment on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

D. Need for, and Objectives of, the Order

36. The Commission is required by section 254 of the Act to promulgate rules to implement the universal service provisions of section 254. On May 8, 1997, the Commission adopted rules that reformed its system of universal service support mechanisms so that universal service is preserved and advanced as markets move toward competition. Among other programs, the Commission adopted a program to provide discounts that make basic, local telephone service affordable for low-income consumers.

37. In this Order, we comprehensively reform and begin to modernize the Universal Service Fund's Lifeline program (Lifeline or the program). Building on recommendations from the Federal-State Joint Board on Universal Service (“Joint Board”), proposals in the National Broadband Plan, input from the Government Accountability Office (GAO), and comments received in response to the Commission's March Notice of Proposed Rulemaking the reforms adopted in this Order substantially strengthen protections against waste, fraud, and abuse; improve program administration and accountability; improve enrollment and consumer disclosures; initiate modernization of the program for broadband; and constrain the growth of the program in order to reduce the burden on all who contribute to the Universal Service Fund (USF or the Fund). We take these significant actions, while ensuring that eligible low-income consumers who do not have the means to pay for telephone service can maintain their current voice service through the Lifeline program and those who are not currently connected to the networks will have the opportunity to benefit from this program and the numerous opportunities and security that telephone service affords.

38. This Order is another step in the Commission's ongoing efforts to overhaul all Universal Service Fund programs to fulfill the goals Congress gave us to promote the availability of modern networks and the capability of all American consumers to access and use those networks. Consistent with previous efforts, we act here to eliminate waste and inefficiency, increase accountability, and transition the Fund from supporting standalone telephone service to broadband. In June 2011, the Commission adopted theDuplicative Program Payments Order,which made clear that an eligible consumer may only receive one Lifeline-supported service, established procedures to detect and de-enroll subscribers receiving duplicative Lifeline-supported services, and directed USAC to implement a process to detect and eliminate duplicative Lifeline support—a process now completed in 12 states and expanding to other states in the near future. Building on those efforts, we estimate that the unprecedented reforms adopted in today's Order could save the Fund up to an estimated $2 billion over the next three years, keeping money in the pockets of American consumers that otherwise would have been wasted on duplicative benefits, subsidies for ineligible consumers, or fraudulent misuse of Lifeline funds.

39. These savings will reduce growth in the Fund but at the same time provide telephone service to consumers who remain disconnected from the voice networks of the Twentieth Century. Moreover, by using a fraction of the savings from eliminating waste and abuse in the program to create a broadband pilot program, we explore how Lifeline can best be used to help low-income consumers access the networks of the Twenty-First Century by closing the broadband adoption gap. This complements the recentUSF/ICC Transformation Order and FNPRM,which reoriented intercarrier compensation and the high-cost fund toward increasing the availability of broadband networks, as well as the recently launched “Connect to Compete” private-sector initiative to increase access to affordable broadband service for low-income consumers.

40. To make the program more accountable, the Order establishes clear goals and measures and establishes national eligibility criteria to allow low-income consumers to qualify for Lifeline based on either income or participation in certain government benefit programs. The Order adopts rules for Lifeline enrollment, including enhanced initial and annual certification requirements, and confirms the program's one-per-household requirement. The Order simplifies Lifeline reimbursement and makes it more transparent. The Commission adopts a number of reforms to eliminate waste, fraud and abuse in the program, including creating a National Lifeline Accountability Database to prevent multiple carriers from receiving support for the same subscribers; phasing out toll limitation service support; eliminating Link Up support except for recipients on Tribal lands that are served by eligible telecommunications carriers (“ETCs”) that participate in both Lifeline and the high-cost program; reducing the number of ineligible subscribers in the program; and imposing independent audit requirements on carriers receiving more than $5 million in annual support. These reforms are expected to save the Fund approximately $2 billion over the next three years. Using savings from the reforms, the Order establishes a Broadband Adoption Pilot Program to test and determine how Lifeline can best be used to increase broadband adoption among Lifeline-eligible consumers. We also establish an interim base of uniform support amount of $9.25 per month for non-Tribal subscribers to simplify program administration.

E. Summary of Significant Issues Raised by Public Comments in Response to the IRFA

41. No comments were filed in response to the IRFA attached to theLifeline and Link Up NPRM.Notwithstanding the foregoing, general comments discussing the impact of the proposed rules on small business were submitted in response to theLifeline and Link Up NPRM.With respect to the proposal to provide household identifying information as a measure to prevent duplicate enrollment, one commenter expressed concern that the imposition of a data transmission requirement would result in new training, programming, and administrative expenses which would be burdensome on small entities. One commenter opposed any limitations placed on Link Up support arguing that such limitations would inhibit small ETCs' ability to participate in the low income program. Commenters expressed concern that the proposed audit requirements in the NPRM would be expensive and difficult for small companies to comply with. One commenter opposed the proposed verification proposals in the NPRM asserting that such new requirements would be unnecessarily expensive and disproportionately burden small businesses. Commenters opposed the proposed sampling methodology to confirm eligibility as it would have the result of requiring small entities to sample most if not all of their Lifeline subscribers. Commenters asserted that outreach efforts may be unreasonably burdensome for small ETCs. In making the determinations reflected in the Order, we have considered the impact of our actions on small entities.

F. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply

42. 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). Nationwide, there are a total of approximately 29.6 million small businesses, according to the 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 2002, there were approximately 1.6 million small organizations. The term “small governmental jurisdiction” is defined generally as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” Census Bureau data for 2002 indicate that there were 87,525 local governmental jurisdictions in the United States. We estimate that, of this total, 84,377 entities were “small governmental jurisdictions.” Thus, we estimate that most governmental jurisdictions are small.

1. Wireline Providers

43.Incumbent Local Exchange Carriers (Incumbent LECs).Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer and 44 firms had had employment of 1000 or more. According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers. Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees. Consequently, the Commission estimates that most providers of local exchange service are small entities that may be affected by the rules and policies proposed in the Notice. Thus under this category and the associated small business size standard, the majority of these incumbent local exchange service providers can be considered small providers.

44.Competitive Local Exchange Carriers (Competitive LECs), Competitive Access Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers.Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these Competitive LECs, CAPs, Shared-Tenant Service Providers, and Other Local Service Providers can be considered small entities. According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services. Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer employees and 186 have more than 1,500 employees. In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees. In addition, 72 carriers have reported that they are Other Local Service Providers. Seventy of which have 1,500 or fewer employees and two have more than 1,500 employees. Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, Shared-Tenant Service Providers, and Other Local Service Providers are small entities that may be affected by rules adopted pursuant to the Notice.

45.Interexchange Carriers.Neither the Commission nor the SBA has developed a small business size standard specifically for providers of interexchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these Interexchange carriers can be considered small entities. According to Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services. Of these 359 companies, an estimated 317 have 1,500 or fewer employees and 42 have morethan 1,500 employees. Consequently, the Commission estimates that the majority of interexchange service providers are small entities that may be affected by rules adopted pursuant to the Notice.

46.Operator Service Providers (OSPs).Neither the Commission nor the SBA has developed a small business size standard specifically for operator service providers. The appropriate size standard under SBA rules is the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede 2002 Census data, show that there were 3,188 firms in this category that operated for the entire year. Of the total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these interexchange carriers can be considered small entities. According to Commission data, 33 carriers have reported that they are engaged in the provision of operator services. Of these, an estimated 31 have 1,500 or fewer employees and 2 have more than 1,500 employees. Consequently, the Commission estimates that the majority of OSPs are small entities that may be affected by our proposed action.

47.Local Resellers.The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000. Thus under this category and the associated small business size standard, the majority of these local resellers can be considered small entities. According to Commission data, 213 carriers have reported that they are engaged in the provision of local resale services. Of these, an estimated 211 have 1,500 or fewer employees and two have more than 1,500 employees. Consequently, the Commission estimates that the majority of local resellers are small entities that may be affected by rules adopted pursuant to the Notice.

48.Toll Resellers.The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000. Thus under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data, 881 carriers have reported that they are engaged in the provision of toll resale services. Of these, an estimated 857 have 1,500 or fewer employees and 24 have more than 1,500 employees. Consequently, the Commission estimates that the majority of toll resellers are small entities that may be affected by our action.

49.Pre-paid Calling Card Providers.Neither the Commission nor the SBA has developed a small business size standard specifically for pre-paid calling card providers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000. Thus under this category and the associated small business size standard, the majority of these pre-paid calling card providers can be considered small entities. According to Commission data, 193 carriers have reported that they are engaged in the provision of pre-paid calling cards. Of these, an estimated all 193 have 1,500 or fewer employees and none have more than 1,500 employees. Consequently, the Commission estimates that the majority of pre-paid calling card providers are small entities that may be affected by rules adopted pursuant to the Notice.

50.800 and 800-Like Service Subscribers.Neither the Commission nor the SBA has developed a small business size standard specifically for 800 and 800-like service (“toll free”) subscribers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1,000 employees and one operated with more than 1,000. Thus under this category and the associated small business size standard, the majority of resellers in this classification can be considered small entities. To focus specifically on the number of subscribers than on those firms which make subscription service available, the most reliable source of information regarding the number of these service subscribers appears to be data the Commission collects on the 800, 888, 877, and 866 numbers in use. According to our data, as of September 2009, the number of 800 numbers assigned was 7,860,000; the number of 888 numbers assigned was 5,888,687; the number of 877 numbers assigned was 4,721,866; and the number of 866 numbers assigned was 7,867,736. The Commission does not have data specifying the number of these subscribers that are not independently owned and operated or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of toll free subscribers that would qualify as small businesses under the SBA size standard. Consequently, the Commission estimates that there are 7,860,000 or fewer small entity 800 subscribers; 5,888,687 or fewer small entity 888 subscribers; 4,721,866 or fewer small entity 877 subscribers; and 7,867,736 or fewer small entity 866 subscribers. We do not believe 800 and 800-Like Service Subscribers will be effected by our proposed rules, however we choose to include this category and seek comment on whether there will be an effect on small entities within this category.

2. Wireless Carriers and Service Providers

51. Below, for those services subject to auctions, the Commission notes that, as a general matter, the number of winning bidders that qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service. Also, the Commission does not generally track subsequent business size unless, in the context of assignments or transfers, unjust enrichment issues are implicated.

52.Wireless Telecommunications Carriers (except Satellite).Since 2007, the Census Bureau has placed wireless firms within this new, broad, economic census category. Prior to that time, such firms were within the now-superseded categories of “Paging” and “Cellular and Other Wireless Telecommunications.” Under the present and prior categories, the SBA has deemed a wireless business to be small if it has 1,500 or fewer employees. For the category of Wireless Telecommunications Carriers (except Satellite), Census data for 2007, which supersede data contained in the 2002 Census, show that there were 1,383 firms that operated that year. Of those1,383, 1,368 had fewer than 100 employees, and 15 firms had more than 100 employees. Thus under this category and the associated small business size standard, the majority of firms can be considered small. Similarly, according to Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service (PCS), and Specialized Mobile Radio (SMR) Telephony services. Of these, an estimated 261 have 1,500 or fewer employees and 152 have more than 1,500 employees. Consequently, the Commission estimates that approximately half or more of these firms can be considered small. Thus, using available data, we estimate that the majority of wireless firms can be considered small.

53.Wireless Communications Services.This service can be used for fixed, mobile, radiolocation, 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 SBA has approved these definitions. The Commission auctioned geographic area licenses in the WCS service. In the auction, which commenced on April 15, 1997 and closed on April 25, 1997, seven bidders won 31 licenses that qualified as very small business entities, and one bidder won one license that qualified as a small business entity.

54.Satellite Telecommunications Providers.Two economic census categories address the satellite industry. The first category has a small business size standard of $15 million or less in average annual receipts, under SBA rules. The second has a size standard of $25 million or less in annual receipts.

55. The category of Satellite Telecommunications “comprises establishments primarily engaged in providing telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications.” Census Bureau data for 2007 show that 512 Satellite Telecommunications firms that operated for that entire year. Of this total, 464 firms had annual receipts of under $10 million, and 18 firms had receipts of $10 million to $24,999,999. Consequently, the Commission estimates that the majority of Satellite Telecommunications firms are small entities that might be affected by our action.

56. The second category, i.e. “All Other Telecommunications” comprises “establishments primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing Internet services or voice over Internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry.” For this category, Census Bureau data for 2007 show that there were a total of 2,383 firms that operated for the entire year. Of this total, 2,347 firms had annual receipts of under $25 million and 12 firms had annual receipts of $25 million to $49,999,999. Consequently, the Commission estimates that the majority of All Other Telecommunications firms are small entities that might be affected by our action.

57.Common Carrier Paging.The SBA considers paging to be a wireless telecommunications service and classifies it under the industry classification Wireless Telecommunications Carriers (except satellite). Under that classification, the applicable size standard is that a business is small if it has 1,500 or fewer employees. For the general category of Wireless Telecommunications Carriers (except Satellite), Census data for 2007, which supersede data contained in the 2002 Census, show that there were 1,383 firms that operated that year. Of those 1,383, 1,368 had fewer than 100 employees, and 15 firms had more than 100 employees. Thus under this category and the associated small business size standard, the majority of firms can be considered small. The 2007 census also contains data for the specific category of “Paging” “that is classified under the seven-number North American Industry Classification System (NAICS) code 5172101. According to Commission data, 291 carriers have reported that they are engaged in Paging or Messaging Service. Of these, an estimated 289 have 1,500 or fewer employees, and 2 have more than 1,500 employees. Consequently, the Commission estimates that the majority of paging providers are small entities that may be affected by our action. In addition, in the Paging Third Report and Order, the Commission developed a small business size standard for “small businesses” and “very small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments. A “small business” is 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 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. The SBA has approved these small business size standards. An auction of Metropolitan Economic Area licenses commenced on February 24, 2000, and closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold. Fifty-seven companies claiming small business status won.

58.Wireless Telephony.Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As noted, the SBA has developed a small business size standard for Wireless Telecommunications Carriers (except Satellite). Under the SBA small business size standard, a business is small if it has 1,500 or fewer employees. According to the2008 Trends Report,434 carriers reported that they were engaged in wireless telephony. Of these, an estimated 222 have 1,500 or fewer employees and 212 have more than 1,500 employees. We have estimated that 222 of these are small under the SBA small business size standard.

3. Internet Service Providers

59. The 2007 Economic Census places these firms, whose services might include voice over Internet protocol (VoIP), in either of two categories, depending on whether the service is provided over the provider's own telecommunications facilities (e.g.,cable and DSL ISPs), or over client-supplied telecommunications connections (e.g.,dial-up ISPs). The former are within the category of Wired Telecommunications Carriers, which has an SBA small business size standard of 1,500 or fewer employees. The latter are within the category of All Other Telecommunications, which has a size standard of annual receipts of $25 million or less. The most current Census Bureau data for all such firms, however, are the 2002 data for the previous census category called Internet Service Providers. That category had a smallbusiness size standard of $21 million or less in annual receipts, which was revised in late 2005 to $23 million. The 2002 data show that there were 2,529 such firms that operated for the entire year. Of those, 2,437 firms had annual receipts of under $10 million, and an additional 47 firms had receipts of between $10 million and $24,999,999. Consequently, we estimate that the majority of ISP firms are small entities.

60. The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): “(1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.”

G. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

61.Support Amounts for Voice Service.In the Order, we adopt an interim rate of reimbursement for Lifeline in lieu of the prior tiered system. The tiered system was tied to the subscriber line charge (SLC), which we find to be an imprecise basis for Lifeline support given the myriad changes in the telecommunications marketplace. This interim monthly rate is set at $9.25 per subscriber. This interim support amount was determined by calculating the average level of support from the most recent disbursement data available. Because the interim support amount is an average, some ETCs will receive more monthly support while others receive less—regardless of size. While there may be a slightly negative economic impact on some small entities, such an impact will be felt by all entities currently receiving more than $9.25 per month per subscriber in Lifeline support, not just small entities. However, as with our adoption of uniform consumer eligibility rules, this uniform interim support amount will simplify program administration by ETCs operating across different SLCs.

62.Uniform Eligibility Criteria.As part of the Commission's effort to streamline the program, the Commission adopts a uniform set of consumer eligibility requirements throughout the nation. This rule alleviates some of the administrative burdens on ETCs operating in multiple states caused by varying consumer eligibility requirements. We anticipate that this new rule will significantly simplify program administration by ETCs, resulting in greater program efficiencies. Given that we permit states to adopt more permissive Lifeline eligibility criteria on top of the base of federal Lifeline eligibility criteria, no ETCs will face a smaller Lifeline subscriber base because of the change in eligibility criteria. We expect no economic impact on entities through the adoption of the federal eligibility criteria across all states.

63.One-per-Household.First, the Order adopts a one-per-household requirement. “Household” is defined consistent with the Low-Income Home Energy Assistance Program as “any individual or group of individuals who are living together at the same address as one economic unit,” with an “economic unit” defined as “all individuals contributing to and sharing in the income and expenses of a household” (which would include persons with no income who benefit from another person's financial support). Second, the Order adopts procedures to enable Lifeline applicants to demonstrate when initially enrolling in the program that any other Lifeline recipients residing at their residential address are part of a separate household and directs USAC, within 30 days of the effective date of the Order, to develop a form that will allow low-income households sharing an address to indicate they are part of a separate household. Third, the Order also directs USAC, within 30 days of the effective date of the Order, to develop print and web materials to be posted on USAC's Web site that both USAC and ETCs can use to educate consumers about the one-per-household rule (i.e.,how to determine what persons comprise a household). USAC will prepare materials that the ETCs can rely on to educate their subscribers about the one-per-household requirement.

64. We estimate that these rules will have a minimal economic impact. While the rules will require eligible telecommunications carriers to obtain information from a limited number of consumers about their household arrangements, it will only impact those low-income consumers who reside in group living facilities or at addresses shared by multiple households. This information will be collected using a worksheet to be designed and provided to the ETCs by USAC. This information is necessary to assist qualifying consumers relying on addresses shared by multiple households to obtain Lifeline service and to document their compliance with the one-per-household rule. Additionally, USAC will develop print and web materials that ETCs can use to educate consumers about the one-per-household rule. We do not expect these requirements to have a disproportionate impact on carriers, including those that are small entities.

65.Certification of Consumer Eligibility.First, the Order amends § 54.410 of the Commission's rules to require all Lifeline subscribers to provide certain certifications pertaining to their eligibility for Lifeline upon initial program enrollment and annually thereafter. Depending on the state, certifications should be collected from consumers by carriers or the state Lifeline administrator or a state agency.

66. Carriers and states (where applicable) may need to update their existing certification forms to comply with the requirements of § 54.410, as amended. Carriers already collect several similar certifications from Lifeline subscribers at enrollment; thus, we expect that the costs of compliance with the amended rule will be marginally larger. Therefore, we anticipate that the effect of this rule will have minimal economic impact. Carriers and states (where applicable) may choose to use their existing certification forms so long as those forms are updated to comply with the new certification rules. We also provide in the Order that the new certification rules will not go into effect until June 1, 2012, which will give carriers (both large and small) time to make any needed s