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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).
| FOR IMMEDIATE RELEASE October 21, 1999 |
NEWS MEDIA CONTACT Bryan Tramont at (202) 418-2000 |
PRESS STATEMENT OF COMMISSIONER FURCHTGOTT-ROTH
REGARDING FCC'S OCTOBER 21 UNIVERSAL SERVICE ORDERS
The Orders Are Inconsistent With Congress's Objective of Preserving Universal Service Support for Rural Carriers. By way of background, four years ago, universal service was a $2 billion per year program targeted mostly at small, rural telephone companies. Today, as a result of the Commission's unwarranted interference in the existing universal service system and the new programs that it has dreamed up, the program costs taxpayers more than $5 billion a year.
I believe that this proceeding illustrates, yet again, that this Commission has its universal service priorities entirely backward. Section 254 of the Telecommunications Act of 1996 was drafted with rural carriers in mind. The primary objective of that provision was to ensure that rural carriers continued to receive sufficient funding to enable them to provide local service at rates comparable to those in urban areas. In light of this objective, the Commission should have turned first to the matter of preserving rural universal service. Instead, the Commission has squandered a tremendous amount of its employees' time and taxpayers' money coming up with an entirely new approach to universal service. And the matter of universal service support for rural carriers has been this Commission's very last priority.
I am relieved to see that the Commission has in these orders taken steps to ensure that funding for rural carriers will not decrease at least in the near term. I have little confidence, however, that rural carriers can count on this promise for long. This Commission has so substantially increased universal service funding for other, less essential programs that, if and when it finally turns to addressing the issue of rural universal service support, I question whether there will be any money left for rural telephone companies.
The Commission's Model Is Unwieldy, Easily Manipulated, and Will Require Constant Maintenance. Not only does the Commission have its universal service priorities wrong, but also the model on which it relies is inconsistent with the Telecommunications Act's requirement that universal service support be "specific" and "predictable." The model is an immensely complicated computer program that requires around 180 hours more than one week to run. In the course of this proceeding, the Commission has made numerous changes to the model platform, and each change has required interested parties to go back to their computers and spend days testing the model. Only in the last few weeks has the Commission decided on final input values. In my view, it is unclear whether interested parties have even had the opportunity meaningfully to comment on a final version of the model, as the Administrative Procedure Act requires.
The model is also completely dependent on hundreds of assumptions about the local exchange markets and costs. The bottom line is that, simply by making different assumptions about local exchange networks, or by picking different input values for costs, the Commission is able to push the end result in whatever direction it chooses. I do not believe that a system that can be manipulated in this way will generate the "specific" and "predictable" universal service support that the 1996 Act requires. In addition, the fact that the Commission has found it necessary to tinker with this model so extensively reflects its fundamental lack of confidence in its model.
The model is also going to be enormously time-consuming and expensive to maintain. Each time technology or prices change, the Commission's staff will be required to adjust the model. I am opposed to wasting resources on this effort.
The Commission's Approach to Universal Service Means that Consumers Will Pay More. As a final matter, I want to point out what the Commission's current approach to high- cost universal service will mean for consumers. According to the model, carriers in a few states (primarily Mississippi and Alabama) should receive significantly more funding than they currently do, and the Commission plans to increase subsidies for carriers in these states. But the model also says that carriers in many other states should receive less universal service funding than they now do. The Commission, however, does not plan to follow the model's guidance with respect to these carriers. Instead, because it committed to Congress in April 1998 that universal service support would not decrease for any state, the Commission plans to continue distributing current levels of universal service support to carriers in all states.
The result of this so-called "hold harmless" requirement is that all carriers will receive as much or more universal service funding as they did before the issuance of these two orders. In other words, the bill for high-cost universal service support will go up, and consumers' phone bills are going to increase correspondingly. I predict that these will be only the first of several increases that consumers can expect to see in the upcoming months as a result of this Commission's misguided universal service policies.