November 9, Marlene H. Dortch Secretary Federal Communications Commission th St., S.W. Washington, D.C

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1 Federal Regulatory Affairs 2300 N St. NW, Suite 710 Washington DC November 9, 2012 Marlene H. Dortch Secretary Federal Communications Commission th St., S.W. Washington, D.C Re: A National Broadband Plan for Our Future, GN Docket No ; Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No ; Developing a Unified Intercarrier Compensation Regime, CC Docket No ; Connect America Fund, WC Docket No ; High Cost Universal Service Support, WC Docket No ; Federal-State Joint Board on Universal Service, CC Docket No Dear Ms. Dortch: On November 8, 2012, Commissioner Ryan Palmer of the West Virginia Public Service Commission, and Billy Jack Gregg and the undersigned representing Frontier Communications, spoke on the phone with Christine Kurth, Policy Director and Wireline Counsel for Commissioner McDowell. In this meeting the parties discussed the unique negative effects that the rate floor and rate comparability benchmark established in the FCC s USF/ICC Transformation Order 1 and modified by the Commission s Third Order on Reconsideration, 2 will have upon West Virginia Universal Service funding. The discussion in this meeting was entirely consistent with the comments filed by Frontier, 3 the West Virginia Public Service Commission, 4 and the Consumer Advocate Division of West Virginia 5 in this proceeding. Frontier offers West Virginia customers a variety of calling plans with varying measured service options ranging from all measured service to a local unlimited calling plan leaving the customer to choose the plan that best fits their individual needs. Each plan contains its own unique pricing structure, and the average monthly revenue per line in West Virginia is approximately $25, well above the $14 rate floor for 2013 and well above the national average urban rate. Unfortunately, due to the rate floor calculation methodology described in the Third Order on Reconsideration, each individual plan would have to be measured against the rate floor, instead of accounting for the average revenue per line produced by all calling plans. This 1 In re: Connect America Fund, WC Dkt. No et al., 26 FCC Rcd. FCC 17663, FCC (rel. Nov. 18, 2011). 2 In re: Connect America Fund, WC Dkt. No et al., 27 FCC Rcd. FCC 5662, FCC at 22 (rel. May 14, 2012). 3 Comments of Frontier Communications, WC Dkt. No (filed Sep. 28, 2012). 4 Motion to File Comments and Comments of the West Virginia Public Service Commission, WC Dkt. No (filed Oct. 25, 2012). 5 Comments of Consumer Advocate Division of West Virginia, WC Dkt. No (filed Oct. 10, 2012).

2 methodology leaves Frontier and the West Virginia PSC the choice of either raising the base rate of the plan most-favored by Lifeline customers or losing out on Universal Service high-cost support. Frontier explained the need to be able to average the revenue per line of all of its plans when calculating both the rate floor, and also in the future when it certifies that its highest calling plan is within two standard deviations of the national average urban rate (the rate comparability benchmark). Frontier used maps to demonstrate the calling areas of each of its four calling plans available in West Virginia. Frontier also provided a proposed edit to the Commission s rules that would allow for the requested relief. Pursuant to Section (b) of the Commission s rules, 47 C.F.R (b), this letter is being filed electronically with your office today. Please feel free to contact me with any further questions. Sincerely, Michael D. Saperstein, Jr. Director of Federal Regulatory Affairs Frontier Communications (202) cc: Christine Kurth

3 FRONTIER WEST VIRGINIA ILLUSTRATION OF WEST VIRGINIA LOCAL CALLING PLANS Calling Areas for the Hurricane Exchange Red = flat-rated Blue = measured

4 FRONTIER WEST VIRGINIA ILLUSTRATION OF WEST VIRGINIA LOCAL CALLING PLANS Calling Areas for the Grafton Exchange Plan 1 Thrifty Caller $7 All calls measured Plan 2 Community Caller $15.50 All calls to home exchange flat-rated, all others measured Plan 3 Community Plus $22 All calls to home and surrounding exchanges flat, remainder measured Plan 4 Frequent Caller $29 All calls flat-rated Red = flat-rated Blue = measured

5 PROPOSED CHANGES TO FCC RULES ON REPORTING OF LOCAL RATES WHEN A LEC OFFERS STATEWIDE OPTIONAL RATES Annual reporting requirements for high-cost recipients. (a) Any recipient of high-cost support shall provide: (10) Beginning July 1, A letter certifying that the pricing of the company s voice services is no more than two standard deviations above the applicable national average urban rate for voice service, as specified in the most recent public notice issued by the Wireline Competition Bureau and Wireless Telecommunications Bureau. (h) Additional voice rate data. (1) All incumbent local exchange carrier recipients of highcost support must report all of their rates for residential local service for all portions of their service area, as well as state fees as defined pursuant to (e) of this subpart, to the extent the sum of those rates and fees are below the rate floor as defined in of this subpart, and the number of lines for each rate specified. Carriers shall report lines and rates in effect as of June 1. (2) In addition to the annual filing, local exchange carriers may file updates of their rates for residential local service, as well as state fees as defined pursuant to (e) of this subpart, on January 2 of each year. If a local exchange carrier reduces its rates and the sum of the reduced rates and state fees are below the rate floor as defined in of this subpart, the local exchange carrier shall file such an update. For the update, carriers shall report lines and rates in effect as of December High-cost support; limitations on high-cost support. (a) Beginning July 1, 2012, each carrier receiving high-cost support in a study area under this subpart will receive the full amount of high-cost support it otherwise would be entitled to receive if its flat rate for residential local service plus state regulated fees as defined in paragraph (e) of this section exceeds a local urban rate floor representing the national average of local urban rates plus state regulated fees under the schedule specified in paragraph (f) of this section.. (b) Carriers whose flat rate for residential local service plus state regulated fees offered for voice service are below the specified local urban rate floor under the schedule below plus state regulated fees shall have high-cost support reduced by an amount equal to the extent to which its flat rate for residential local service plus state regulated fees are below the local urban rate floor, multiplied by the number of lines for which it is receiving support. (c) This rule will apply to rate-of-return carriers as defined in 54.5 and carriers subject to price cap regulation as that term is defined in 61.3 of this chapter. (d) For purposes of this section, high-cost support is defined as the support available pursuant to of this chapter and support provided to carriers that formerly received support pursuant to (e) State regulated fees. (1) Beginning on July 1, 2012, for purposes of calculating limitations on high cost support under this section, state regulated fees shall be limited to state subscriber line charges, state

6 universal service fees and mandatory extended area service charges, which shall be determined as part of a local rate survey, the results of which shall be published annually. (2) Federal subscriber line charges shall not be included in calculating limitations on high-cost support under this section. (f) Schedule. High-cost support will be limited where the flat rate for residential local service plus state regulated fees are below the local urban rate floor representing the national average of local urban rates plus state regulated fees under the schedule specified in this paragraph. To the extent end user rates plus state regulated fees are below local urban rate floors plus state regulated fees, appropriate reductions in high-cost support will be made by the Universal Service Administrative Company. (1) Beginning on July 1, 2012, and ending June 30, 2013, the local urban rate floor shall be $10. (2) Beginning on July 1, 2013, and ending June 30, 2014, the local urban rate floor shall be $14. (3) Beginning July 1, 2014, and thereafter, the local urban rate floor will be announced annually by the Wireline Competition Bureau. *** (h) If, due to changes in local service rates, a local exchange carrier makes an updated rate filing pursuant to section (h)(2) of this subpart, the Universal Service Administrative Company will update the support reduction applied pursuant to paragraphs (b) and (f) of this section. (i) For the purposes of this section and the reporting of rates pursuant to paragraphs 313(a) and (h) of this subpart, rates for residential local service provided pursuant to measured or message rate plans, or as part of a bundle of services, or pursuant to statewide optional calling plans should be calculated as follows: (1) Rates for measured or message service shall be calculated by adding the basic rate for local service plus the additional charges incurred for measured service, using the mean number of minutes or message units for all customers subscribing to that rate plan multiplied by the applicable rate per minute or message unit. The local service rate includes additional charges for measured service only to the extent that the average number of units used by subscribers to that rate plan exceeds the number of units that are included in the plan. Where measured service plans have multiple rates for additional units, such as peak and off-peak rates, the calculation should reflect the average number of units that subscribers to the rate plan pay at each rate. (2) For bundled service, the residential local service rate is the local service rate as tariffed, if applicable, or as itemized on end-user bills. If a carrier neither tariffs nor itemizes the local voice service rate on bills for bundled services, the local service rate is the rate of a similar standalone local voice service that it offers to consumers in that study area. (3) If a carrier offers multiple, uniform local rate plans within a state, and the subscription to any particular rate plan is at the option of the customer, the carrier may report the average monthly local revenue produced by all rate plans. In calculating the average monthly local revenue, qualifying carriers should: (1) determine the sum of all revenue produced by local service monthly recurring charges and local measured service rates over the most recent annual period; (2) divide the result by the average number of residential access lines served by the carrier during the most recent annual period; and (3) divide the result by twelve, the number of months in a year.