This News Release: Text | Acrobat
Statements: Powell | Copps | Martin
MAG Item: Summary
FCC 01-304: Text | Acrobat

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Federal Communications Commission
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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 11, 2001
Michael Balmoris 202-418-0253


Action Aims for More Efficient Competition and More Choice in Rural Areas

Washington, D.C. - Today, the Federal Communications Commission (FCC) modified its interstate access charge rules and universal service support system for rate-of-return incumbent local exchange carriers (LECs). Today's action, based upon pending Commission proposals and consideration of the Multi-Association Group (MAG) petition, is designed to bring all Americans, including those in rural and high-cost areas, the benefits of competition and choice. MAG is a coalition of associations representing rural carriers, including the National Rural Telecom Association (NRTA), the National Telephone Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), and the United States Telecom Association (USTA).

Rate-of-return carriers, as opposed to price cap carriers, are typically small, rural telephone companies concentrated in one area, but they range in size from a few hundred lines to approximately one million. They generally have higher operating and equipment costs than price cap carriers due to lower subscriber density, smaller exchanges, and limited economies of scale. Rate-of-return carriers also rely more heavily on revenues from interstate access charges and universal service support. They number roughly 1,300 carriers and serve approximately eight percent of the nation's phone lines.

The Order adopted today is designed to carry out the universal service policies embodied in the Telecommunications Act of 1996, and seeks to accomplish the following three goals (specific measures adopted are attached):

1. Align the interstate access rate structure more closely with the manner in which costs are incurred by driving per-minute access charges towards lower, more cost-based levels.

2. Remove implicit support for universal service with explicit support that is portable to all eligible telecommunications carriers on a competitively neutral basis. This will provide a more equal footing for competitors in the local and long distance markets.

3. Provide certainty and stability for the small and mid-sized local telephone companies serving rural and high-cost areas by permitting these carriers to continue to set rates based on a rate-of-return of 11.25%, thereby encouraging investment in rural America.

The Commission also adopted a Further Notice of Proposed Rulemaking to seek additional common on the MAG incentive regulation plan and other means of providing opportunities for rate-of-return carriers to increase their efficiency and competitiveness.

Today's action largely completes the interstate access charge and universal service support reforms the FCC initiated following the passage of the Telecommunications Act. Specifically, the Commission has reformed 1) intrastate high-cost support for non-rural carriers in October 1999, 2) interstate access charge and universal service support system for price cap carriers in May 2000, and 3) intrastate high-cost support for rural carriers in May 2001.


Docket Nos.: CC 00-256, 96-45, 98-77, 98-166

Action by the Commission October 11, 2001, by Second Report and Order and Further Notice of Proposed Rulemaking (FCC 01-304). Chairman Powell, and Commissioners Abernathy and Martin, with Commissioner Copps dissenting, and Powell, Copps and Martin issuing statements.

Common Carrier Bureau Staff Contact: Bill Scher at 202-418-7400.

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October 11, 2001



Further Notice of Proposed Rulemaking