This News Release: Text | Word97
Summary of High Cost Universal Service Orders
Statements: Ness | Furchtgott-Roth | Powell | Tristani
FCC 99-304: Text | WordPerfect | Zip
FCC 99-306: Text | WordPerfect

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Federal Communications Commission
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Washington, D.C. 20554
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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

October 21, 1999

Mike Balmoris at (202) 418- 0253



Orders Are Part of Larger FCC Effort to Keep Telephone Rates Affordable and Reasonably Comparable Throughout the Nation

Washington, D.C. The Federal Communications Commission (FCC) today adopted a new universal service support mechanism for the Nation's largest local telephone companies to ensure that customers throughout the Nation, and particularly in high-cost and rural areas, will receive telephone service at affordable and reasonably comparable rates.

The FCC's actions are consistent with the mandate established by Congress in the Telecommunications Act of 1996 to provide universal service support to states where the costs of providing telephone service are significantly higher than in other areas of the country. The FCC's universal service reforms will allow efficient competition in high-cost areas served by large, non-rural carriers.

The FCC's actions today are based on recommendations made by the Federal- State Joint Board on Universal Service (Joint Board). The FCC agreed with the Joint Board that the individual states and the FCC share the responsibility for ensuring that telecommunications services are available to consumers in high-cost areas at affordable and reasonably comparable rates. With the new high-cost support mechanism, the FCC will ensure that rates are reasonably comparable, on average, among states, while the states will continue their historical role of ensuring that rates are reasonably comparable within their borders.

Specifically, the FCC adopted two companion Orders that, taken together, significantly reform the high-cost support mechanism for the largest local telephone companies -- those that do not meet the Communications Act's definition of a rural telephone company. First, the FCC completed development of the cost model that will be used to estimate the large telephone companies' forward-looking cost of providing service. The cost model developed in this proceeding represents the most sophisticated tool available for estimating non-rural carriers' forward-looking cost of providing supported services, which is the basis for prices in competitive markets. The FCC made clear that the federal cost model was developed for the purpose of determining federal universal service support, and that it may not be appropriate to use nationwide values for other purposes, such as determining prices for unbundled network elements.

In the second Order, the FCC adopted a methodology that uses the costs generated by the cost model to calculate the appropriate level of support for non-rural carriers serving high-cost areas. The new forward-looking mechanism uses a single national cost benchmark of 135 percent against which carriers' forward-looking costs of providing supported services are compared to determine their need for support. Thus, if a carrier's forward-looking cost of providing service exceeds 135 percent of the national average cost per line, the new high-cost support mechanism would provide federal support for all intrastate costs that exceed this benchmark.

Under the new mechanism, universal service support is targeted to the highest-cost wire centers within the state. The targeting approach is pro-competitive because it ensures that support provided to both incumbent local telephone companies and competitors is commensurate with the relative costs of providing supported service in particular wire centers. In addition, under the new mechanism, universal service support is "portable" among all eligible telecommunications carriers. Thus, when a local telephone company loses a customer to a competitor, the competitor receives the support for that customer's line.

The FCC also adopted a transitional "hold-harmless" measure to prevent potential rate-shocks and disruptions in state rate designs when the new high-cost mechanism takes effect. During the transition period, no large telephone company will receive less support under the new high-cost mechanism than it receives under the existing mechanism. This interim hold-harmless provision is a transitional measure and eventually will be phased out.

Under the new mechanism, seven states will receive high-cost support of approximately $255 million. These seven states are: Alabama ($67.5 million), Kentucky ($18 million), Maine ($6 million), Mississippi ($113.5 million), Vermont ($12 million), West Virginia ($34.5 million), and Wyoming ($3 million). For the year 2000, the total fund for the non-rural carriers, which includes both support from the new mechanism and the transitional hold-harmless support, will be approximately $437 million.

The two high-cost universal service Orders, which were adopted today, are summarized in more detail in the attached summary.

Action by the Commission on October 21, 1999, by Report and Order in CC Docket Nos. 96-45 and 97-160 (FCC 99-304). Chairman Kennard and Commissioners Ness, Powell, and Tristani; Commissioner Tristani issuing a statement; Commissioner Furchtgott-Roth dissenting and issuing a statement.

Common Carrier Bureau Contacts for CC Docket No. 97-160: Katie King or Richard Smith at (202) 418-7400

Action by the FCC on October 21, 1999, by Ninth Report and Order and Seventeenth Order on Reconsideration in CC Docket No. 96-45 (FCC 99-306); Chairman Kennard and Commissioners Ness and Tristani; Commissioners Ness and Tristani issuing separate statements; Commissioner Powell concurring in part and issuing a statement; and Commissioner Furchtgott-Roth dissenting and issuing a statement.

Common Carrier Bureau Contacts for CC Docket No. 96-45: Chuck Keller or Jack Zinman at (202) 418-7400

Report No. CC 99-49


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Input Values for the Forward-Looking Cost Model (CC Docket Nos. 96-45, 97-160)

New Mechanism for Federal Universal Service High-Cost Support Provided to Non-Rural Carriers (CC Docket No. 96-45)