Telecom Carrier Area

These terms and examples are designed to assist health care providers in completing Blocks 6 and 7 of Form 466 and telecommunications carriers in completing Blocks 5 and 6 of Form 468 for Funding Year 3. During "focus group" testing of Year 3 forms, applicants requested simplifications which resulted in elimination of the Form 468 worksheet As a result, there is no direct indication on either Form 466 or 468 to show health care providers what level of support they may expect. Therefore, these examples also show how the Rural Health Care Division (RHCD) of Universal Service will use the information on Forms 466 and 468 to calculate support. If you have additional questions after reviewing these examples, please call the Customer Service Support Center at 800-229-5476.

28-day Posting Period: Competitive bidding period when Form 465 is posted on the RHCD web site, for telecommunications carriers to contact HCPs to discuss telecommunications needs and to submit proposals for those needs. However, HCPs may not sign a contract or enter into an agreement for services before the end of the 28-day posting period -- they must wait until day 29. HCPs that enter into an agreement before completion of the 28-day posting requirement are in violation of the FCC’s competitive bidding rules for this program, and may not receive support.

Billed Entity: The entity that pays the bills from the telecommunications carrier for the HCP. The Billed Entity may be the HCP receiving the service or it may be a third party.

Billed Miles: The distance for which the telecommunications carrier requires payment of mileage charges. This was called circuit distance in Funding Years 1 and 2. Typically it consists of interoffice channel (IOC) mileage, and in some cases local channel (loop) mileage. If a telecommunications carrier does not charge for mileage, then billed miles equal zero.

Billing Account Number: The account number used by the telecommunications carrier to bill for the services provided to the HCP. This is often referred to as the Billing Telephone Number (BTN), although it may be an alpha-numeric rather than an actual phone number. The Billing Account Number is recorded on Form 466.

Closest Large City: The city closest to the HCP with a population of 50,000 or more in the same state as the HCP. The closest large city for each HCP is added by RHCD to Form 465 at the bottom of Block 5 when the form is posted on the RHCD web site. (See Telecom Carrier Area - Search Postings to review posted Form 465s.) The closest large city is used to determine the "urban rate" and MAD (see definition below) for a given service.

Evidence for Rural Rate: The telecommunications carrier or the HCP must provide supporting evidence for the rural rate (see definition below). Evidence may include telephone bills, invoices, tariff pages, or contracts, which show services and charges for the rural rate. Include summary pages where possible and textual explanations as necessary for RHCD to substantiate the claimed rural rate.

Evidence for Urban Rate: The telecommunications carrier or the HCP must provide supporting evidence for the urban rate (see definition below). Evidence may include (but is not limited to) telephone bills, invoices, tariff pages, a letter from the urban telecommunications carrier, or rate pricing information provided on the urban carrier's web site which show services and charges for the urban rate. Include summary pages where possible and textual explanations as necessary for RHCD to verify the claimed urban rate.

Funding Year 3: The third funding year for the program administered by RHCD, which runs from July 1, 2000 to June 30, 2001.

HCP: A health care provider. Generally HCP will mean a rural health care provider eligible for support under this program, unless HCP is qualified, such as "urban" HCP.

Maximum Allowable Distance (MAD): The distance from the HCP, in whole miles, to the far side of the closest large city for the HCP. The MAD is the maximum distance for which RHCD will support a telecommunications service. The MAD is listed in Block 5 on the HCP's Form 465 posted on the RHCD web site. (See Telecom Carrier Area - Search Postings to review posted Form 465s.)

Mileage-Based Charges (Also called distance-sensitive charges or monthly mileage charges): Charges for a telecommunications service that are based on the circuit distance, such as $300 per month for a 30 mile circuit for which the carrier charges $10 per mile. Mileage-based charges typically exist for interoffice channels, and in some cases for local channels. If there are no mileage-based charges (such as for ISDN), this number is zero. Mileage-based charges should include any taxes that are applied as a percentage of the per mile charge, but should not include taxes, surcharges, non-recurring (set-up) charges, or other fixed charges such as channel terminations, that are not mileage sensitive. If carriers use banded mileage rates (where the rate varies by circuit length, for example $50 for the first half mile and $20 for subsequent miles), the entire mileage based charge should be recorded in Form 468 Block 5, and divided by the circuit mileage, to yield the average per mile rate.

Multiple-Bill Circuit: If more than one telecommunications carrier is required to complete an HCP’s circuit, and each bills separately for their share of the circuit, it is a multiple bill circuit. In this case, multiple Forms 468 must be completed for each Form 466, which can accommodate up to 3 carriers. Because a multi-bill circuit may have non-mileage based charges that exceed the urban rate when all carriers are totaled, it is important that all carriers in a multi-bill circuit complete Form 468 Block 6 (as well as Block 5 if there are mileage based charges), so the HCP can make a rate case (if appropriate). (See Example 5 below.)

Standard Urban Distance (SUD): The average diameter, in whole miles, of all large cities (of at least 50,000 population) in a state. There is a single SUD for each state. RHCD supports mileage charges beyond the SUD up to the maximum allowable distance (MAD). The SUD for each state is listed on the RHCD web site under "Applicant Area -Standard Urban Distance".

Rate Case: When an HCP seeks support for the actual cost difference between the rural and urban rates for a telecommunications service. Generally this would be used for a non-mileage sensitive service such as Frame Relay or ISDN, if the rural rate for the service exceeds the comparable urban rate. A rate case usually would not be made for a mileage sensitive service such as T1, because except for mileage, the urban and rural rates would likely be the same. However, if an HCP is seeking support for a service such as Frame Relay or ISDN, where the urban rate is not mileage sensitive, but a rural HCP must pay for a mileage sensitive interoffice channel (link extension) to complete the connection, then a rate case may be made. A rate case may also yield more support for a multiple bill mileage sensitive circuit, such as T1, if each carrier has fixed charges and an urban HCP would only pay such charges once, rather than multiple times. (See Example 4 below.) Note that an HCP making a rate case must provide evidence of urban and rural rates (see definitions above under evidence for rural and urban rates), or RHCD will be unable to process a rate case request.

Rural Rate: The rate charged by a telecommunications carrier for all non-mileage sensitive (fixed rate) charges, in the rural area where the HCP is located. Carriers must provide supporting evidence for the rural rate as described under "evidence for rural rate". For a rural rate that includes a link extension (see definition above), the supporting evidence must clearly distinguish between the charge for the requested service (e.g. Frame Relay) and the link extension.

Urban Rate: The rate charged by a telecommunications carrier for the same or similar service, for non-mileage sensitive (fixed rate) charges, in the closest large city in the same state as the HCP. The urban rate includes non-recurring (set-up) and monthly recurring charges. The urban rate may be from a different carrier than the rural rate, as long as both are from carriers authorized to provide service in the respective areas. The urban and rural rates should have the same or similar terms (tariff type and duration). An urban rate should not include mileage-sensitive charges. Carriers must provide supporting evidence for the urban rate as described above under "evidence for urban rate".

In the examples which follow, carriers only need supply the information shown under "Form 468 is completed as follows:" The calculations shown under "RHCD will calculate support as:" are for informational purposes, to show how RHCD will use the information to calculate support. Unlike in past years, there is no Form 468 worksheet and carriers do not consider the MAD or subtract the SUD in reporting Billed Miles (line 24). Rather, they report all mileage for which they bill. RHCD will apply the MAD and the SUD as appropriate to calculate support.

Example 1: Support for Mileage Based Charges Only (Block 5 on Form 468)

The HCP is seeking support for a T1 (1.544 Mbps dedicated circuit). The monthly mileage based charge for an interoffice channel of 130 miles is $1300. The MAD is 120 miles, the SUD is 10 miles, and the tax rate is 2%. The circuit was installed prior to the start of the funding year, so the HCP is not eligible to seek support for installation charges

Block 5: Mileage-based Charge Discount Request

Block 6 is left blank since the HCP is only seeking support for mileage-based charges.

Monthly Support = (Billed Miles up to MAD - SUD) x Cost per Mile per Month

= (120 - 10) x $10.20 = $1122 per month

(Since billed miles (130) exceeds the MAD (120), the MAD is used to determine support instead of billed miles.)

Example 2: Support for Rate Case Only (Block 6 on Form 468)

The HCP is seeking support for ISDN - BRI - 128 Kbps. The closest large city is Boston, MA. There are no mileage sensitive charges. The service is turned on after the HCP applies for universal service support and the HCP is charged $205 for installation and $164 per month for the service. The carrier determines (and documents) that the urban rate for the same service with the same terms and conditions in Boston (one year rate, MA state tariff) is $100 for installation and $75 per month. The tax rate is 0%

Block 5: Mileage-based Charge Discount Request (Left blank since there are no mileage-based charges.)

Block 6: Comprehensive Rate Comparison Request

After completing Form 468, the rural carrier provides evidence for the rural and urban rates so the HCP can make their rate case request (see evidence for rural or urban rate definitions above).

Non-recurring support = Non-recurring rural rate – Non-recurring urban rate

= $205 - $100 = $105

Monthly recurring support = monthly rural rate - monthly urban rate

= $164 - $75 = $89 per month

Example 3: Support for Mileage-Sensitive Charges and Rate Case (Blocks 5 & 6 on Form 468)

The HCP is seeking support for T1 – 1.544 Mbps (dedicated circuit). The closest large city is Boston, MA. The monthly mileage sensitive charge for a 130 mile interoffice channel is $1300. Fixed rate charges are $200 for installation and $150 per month for channel terminations. The MAD is 120 miles, the SUD is 10 miles, and the tax rate is 2%. The carrier determines (and documents) that the urban rate for the same service with the same terms and conditions in Boston (one year rate, MA state tariff) is $10 per mile plus $100 for installation and $100 per month for channel terminations.

After completing Form 468, the rural carrier makes a copy of their contract for rural rate supporting evidence and a copy of the tariff for the service in Boston, MA for the urban rate evidence.

Monthly Support = (Billed Miles up to the MAD – SUD) x Cost per Mile per Month

+ Monthly Rural Rate – Monthly Urban Rate

= (120 – 10) x $10.20 + (153-102) = $1,173 per month

[Since billed miles (130) exceeds the MAD (120), the MAD is used to determine support instead of billed miles.]

Non-recurring support = Non-recurring rural rate minus Non-recurring urban rate:

= $204 - $102 = $102

Example 4: Support for Mileage-Sensitive Charges and Rate Case (Blocks 5 & 6 on Form 468), where the mileage sensitive charges are for a link extension.

The HCP is seeking support for Frame Relay 56 Kbps. Charges for the circuit are $150 per month to connect to the Frame Relay network, plus $500/month for an interoffice channel (link extension) to reach the Frame Relay network. The link extension charge consists of $400 for mileage based charges and $100 for channel termination. Because the HCP is seeking support for a non-mileage sensitive service (Frame Relay), but needs a link extension to reach the Frame Relay "cloud" (service area where Frame Relay is available), the link extension is treated as a rate case, rather than a mileage based service. It is essential that the HCP include a note indicating that the mileage based charges are for a link extension. Otherwise, RHCD will subtract the SUD from the mileage sensitve charges. The tax rate is 0% and the service was installed prior to the funding year, so installation support is not applicable. The carrier determines that the urban rate for Frame Relay with the same terms and conditions in Boston (one year rate, MA state tariff) for fixed rate charges is $120 per month. There is no urban comparison for the link extension, because an urban HCP would not need a link extension.

After completing Form 468, the rural carrier makes a copy of their contract for rural rate supporting evidence and a copy of the tariff for the service in Boston, MA for the urban rate evidence.

Monthly Support = Monthly Mileage Charges + Monthly Rural Rate – Monthly Urban Rate

= $400 +$250 - $120 = $530 per month.

Example 5: Support for Mileage-Sensitive Charges and Rate Case (Blocks 5 & 6 on Form 468), with a multi-bill circuit.

The HCP is seeking support for a T1 – 1.544 Mbps (dedicated circuit) that requires two carriers to complete the circuit. The closest large city is Boston, MA. The circuit is not yet installed, so it will be eligible for installation support. Monthly mileage sensitive charges for carrier A (the carrier whose local loop terminates at the rural health care provider’s site) for a 30 mile circuit are $450. Fixed rate charges for carrier A are $200 for installation and $150 per month for channel terminations. Monthly mileage sensitive charges for carrier B (the carrier whose local loop terminates at the urban site to which the rural health care provider is connecting) for a 100 mile circuit are $1000. Fixed rate charges for carrier B are $225 for installation and $175 per month for channel terminations. The MAD is 120 miles, the SUD is 10 miles, and the tax rate is 0%. Carrier B determines (and documents) that the urban rate for the same service with the same terms and conditions in Boston (one year rate, MA state tariff) is $10 per mile plus $100 for installation and $125 per month for channel terminations. (It would also be acceptable for Carrier A (the carrier whose local loop terminates at the rural HCP’s site) to document the urban rate as long as at least one of the carriers documents the urban rate for the HCP’s Rate Case presentation on Form 466.)

Carrier A.

Carrier B.

After completing Form 468, the rural carrier makes a copy of their contract for rural rate supporting evidence and a copy of the tariff for the service in Boston, MA for the urban rate evidence.

Monthly Support = (Billed Miles up to the MAD – SUD) x Cost per Mile per Month

+ Monthly Rural Rate – Monthly Urban Rate

Carrier A = 30 x $15 + $150 = $600

Carrier B = (90 – 10) x $10 + $175 - $125 = $850

= $1450 per month total support

(Since billed miles (130) exceeds the MAD (120), the MAD is used to determine support instead of billed miles.) The SUD and monthly urban rate were subtracted only from Carrier B, whose local loop terminates at the urban location. If this had resulted in Likewise, the monthly urban rate was subtracted only from Carrier B. If support for Carrier B’s portion of the circuit were rural rate for both carriers was added and the monthly urban rate was subtracted to determine the non-mileage based support amount.

Non-recurring support = Total non-recurring rural rate minus non-recurring urban rate:

Carrier A = $200

Carrier B = $225 - $100 = $125

= $325 total non-recurring support

The non-recurring rural rates for both carriers were added and the non-recurring urban rate was subtracted to determine the non-mileage based support amount.

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