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May 27, 1999


Re: Seventh Report & Order and Thirteenth Order on Reconsideration in CC Docket No. 96-45, Fourth Report & Order in CC Docket No. 96-262, CC Docket Nos. 96- 45, 96-262


I am writing separately to raise just a couple of points in my current thinking on high cost universal service and access reform that I believe deserve emphasis.

First, as this Order indicates, the Commission has concluded, in consultation with the Federal-State Joint Board, that phone rates are generally affordable and that federal high cost support for the intrastate jurisdiction should not grow significantly at this time. I believe these goals are two of the most important we should pursue as we push forward to finalize the high cost support mechanism. I also would favor targeting high cost support in a way that better promotes competitive entry.

Second, I am intrigued by the idea, suggested by our Chief Economist and perhaps others, that there may be ways to direct additional support to high cost areas as a by- product of reforming access charges. In particular, I am open to the idea that the cost model our staff is developing could be effective in geographically de-averaging the support in access that we might convert from implicit to explicit. I think this approach may have some important merits. For example, it could potentially facilitate competition by making access support de-averaged and portable so that CLECs can win the support associated with particular customers when they convince those customers to switch to the CLEC from the ILEC. In addition, this approach might discourage inefficient entry in denser, low cost areas by lessening the degree to which access subsidies are exaggerated in those areas, thereby also making high cost consumers relatively more attractive to CLECs. (Note, however, that in declaring my openness to this sort of approach, I do not wish to prejudge the important issue of whether and the extent to which access charges overall should be cut.)

I must stress that my interest in pursuing this approach is tentative but serious. As such, I encourage parties to comment on whether such an approach is workable and whether it would provide for moderate increases in federal high cost funding and better promote competition without abandoning the Joint Board's goal of not increasing such funding substantially.

In closing, I would like to thank our diligent and exceptional Common Carrier Bureau staff for their efforts on this Order and on high cost universal service and access reform generally. These issues are almost frightfully complex, and we could never reach our collective goal of reforming access charges and universal service without the staff's talent and dedication. I hope the Commission can marry the staff's dedication with the courage we will need to resolve these complex and politically-charged issues in a rational way. I look forward to working hard toward that goal with the staff and my colleagues over the next few months.