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Federal Communications Commission
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Washington, D.C. 20554
News media information 202 / 418-0500
Fax-On-Demand 202 / 418-2830
Internet: http://www.fcc.gov

DA 97-2383
Released November 12, 1997


CC Docket Nos. 96-45 and 97-160

1. May a state submit a state benchmark as part of its state cost study?

No. In the Universal Service Report and Order(1) (the "Order"), the Commission adopted, as recommended by the Joint Board, a nationwide revenue benchmark. The Order allows states to submit state cost studies as a means of determining the forward-looking economic cost of providing the services supported by the federal universal service program in a given state. State cost studies would take the place of the Commission's forward-looking cost mechanism, but not the Commission's benchmark.
2. To what extent may states modify, for purposes of determining state universal service support, the cost studies that they submit to determine federal universal service support?
The Order allows state cost studies to be used in the federal program to determine the forward-looking cost of providing supported services in those states that submit such studies. The Order specifies that if a state cost study is used to determine federal universal service support levels, however, that state cost study "must be the same cost study that is used by the state to determine intrastate universal service support levels." Thus, a state cost study that is submitted to determine federal support levels will not be accepted if a state changes the way that its cost study computes forward-looking cost for its state universal service program. For example, a state could not alter the study's cost calculations to compute intrastate support, such as by changing the area over which support is calculated, and still expect the study to be used to determine federal support levels. As long as the state uses the same cost study as the basis for computing the cost of providing supported services in the state program, and the cost study is otherwise consistent with the criteria for cost studies described in para. 250 of the Order, that state cost study can also be submitted to compute federal support. The Order does not place any restrictions, however, on how states structure their universal service programs. As long as the state programs do not conflict with the federal mechanisms and are consistent with section 253, state regulators have sole jurisdiction over their universal service programs. Thus, for example, states could provide intrastate support for advanced services that are not supported by federal mechanisms or could provide support based on a benchmark that is different from the one used to determine federal support levels.
3. May a state submit separate cost studies for each LEC in the state?
In the Order, the Commission encouraged states, to the extent possible and consistent with the criteria specified in para. 250 of the Order, to use their unbundled network element cost studies as a basis for universal service cost studies. The Order further specifies that state cost studies will only be used to determine federal support levels if they are based on forward-looking economic cost. It has been brought to the Bureau's attention that many states are performing forward-looking cost studies to price unbundled network elements on a company-specific basis. In order to ensure maximum coordination between state cost studies for unbundled network element prices and universal service costs, states may file cost studies that incorporate company-specific assumptions or data. Each cost study must meet the criteria established in para. 250 of the Order.
4. Is state certification as an "eligible telecommunications carrier" under section 214(e) necessary for a carrier that is currently receiving federal universal service support to continue to receive support after January 1, 1998?
Yes, only carriers that are designated as eligible telecommunications carriers by a state commission pursuant to section 214(e) may receive federal universal service support after January 1, 1998 for serving rural, insular, and high cost areas (high cost support) or for providing Lifeline and Link Up services (low income support). There are no exceptions to this requirement for existing carriers, whether rural or non-rural, to continue to receive federal high cost and low income support after January 1, 1998. In order to receive support for providing supported services to eligible health care providers, carriers must also be designated as eligible telecommunications carriers by a state commission, unless support is only sought for providing toll-free access to an Internet service provider, as described in section 54.621(a) of the Commission's rules. Carriers do not have to be designated as eligible telecommunications carriers to receive support for providing supported services to eligible schools and libraries.

For further information, please contact Natalie Wales at (202) 418-7389 or Chuck Keller at (202) 418-7380.

1. Federal State Joint Board on Universal Service, CC Docket No. 96-45, Report & Order, 62 Fed. Reg. 32,862 (1997).

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