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PUBLIC NOTICE

     Federal Communications Commission
     1919 M St., N.W.
     Washington, D.C. 20554




                  PROCEDURES FOR STATES TO ELECT TO FILE
               STATE-CONDUCTED FORWARD-LOOKING COST STUDIES
           FOR UNIVERSAL SERVICE SUPPORT FOR NON-RURAL CARRIERS

                      CC Docket Nos. 96-45 and 97-160
                                DA 97-1677
                         Released:  August 7, 1997

     On May 8, 1997, the Commission released a Report and Order on Universal Service
(Order).  In the Order, the Commission established, consistent with recommendations of
the Federal-State Joint Board on Universal Service, a methodology to calculate the
forward-looking economic cost of providing universal service in rural, insular, and high
cost areas.  The Commission specified that state commissions may elect to conduct forward-
looking economic cost studies and may submit such cost studies to the Commission for use
as the basis for calculating federal universal service support for non-rural local exchange
carriers (LECs) in their states.  In order for a state cost study to be used as the basis for
calculating federal universal service support for non-rural LECs, it must meet the criteria
specified in the Order and reiterated in the Public Notice released on July 29, 1997.  

  In the Order, the Commission encouraged states to submit cost studies because of
the states' familiarity with local conditions and because the states have been reviewing cost
studies for several years, most recently in connection with local interconnection,
unbundling, and resale.  The Commission also affirmed that state-conducted cost studies
present the advantage of allowing states to coordinate universal service cost studies with
unbundled network element pricing, reducing the potential for marketplace distortions
such as arbitrage opportunities.  If a state elects not to conduct its own forward-looking
economic cost study, or if the state-conducted study fails to meet the criteria specified, the
Commission will determine the forward-looking economic cost of providing universal
service in that state according to the Commission's forward-looking mechanism.  States
that notify the Commission that they intend to conduct a cost study may subsequently
choose to rely on the Commission's forward-looking mechanism.

  State commissions that choose to submit state-conducted forward-looking economic
cost studies must make such an election by August 15, 1997, by sending a letter referencing
CC Dockets 96-45 and 97-160 to the Office of the Secretary, Federal Communications
Commission, 1919 M Street, N.W., Room 222, Washington, DC  20554.  The letter must be
received by the Office of the Secretary by the deadline.  States should also send an
additional copy of the letter to Sheryl Todd, Federal Communications Commission,
Accounting & Audits Division, Universal Service Branch, 2100 M Street, N.W., Room 8611,
Washington, DC 20554.  For additional information, please contact Natalie Wales at (202)
418-7389 or nwales@fcc.gov.  

                             - FCC -