WPCX 2BJ Z Courier3|wCG Times BoldX@`7X@HP LaserJet 4M (PCL) (Add) RM 802HL4MPCAD.PRSx  @\#SX@2 6F v3|xCourierCG TimesHPLAS5P.PRS5x  @\n#rqX@a8DocumentgDocument Style StyleXX` `  ` 2=pRkk-a4DocumentgDocument Style Style . a6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# a2DocumentgDocument Style Style<o   ?  A.  2votY a7DocumentgDocument Style StyleyXX` ` (#` BibliogrphyBibliography:X (# a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  X(# a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` 2  o  a3DocumentgDocument Style Style B b  ?  1.  a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers Uj` `  @ a. ` (# a5Right ParRight-Aligned Paragraph Numbers _o` `  @h(1)  hh#(#h 22   Y 2 a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p Tech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technical2d 4Ba1DocumentgDocument Style Style\s0  zN8F I. ׃  a5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . a2TechnicalTechnical Document Style<6  ?  A.   2"o1a3TechnicalTechnical Document Style9Wg  2  1.   a4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   a7TechnicalTechnical Document Style(@D i) . 2 3oea8TechnicalTechnical Document Style(D a) . Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:NE,&_ x7X<?xxx,ix6X@`7X@%ANE,mR PE37PD&@NE,-_ pi7'>NE,&_ x7X(7jC:,/9Xj\  P6G;XP8wC;,Xw PE37XP hh#(#h  PE37PuRuuuuRNNu<<uuuuuNuR"uuCuNNNuuuuNuhupcuuuNNNNh[hhh[Ahhuhuuuhh[uhNNuuuuuuuNuhN /;k  PP9~~+k~~KkKk&&pY2Af D1/<?<K4?",tB^ f ^ENluuNNNuNNNNuuuuuuuuuuNNu[pNNNuuNuhhRuANAuh[Nuuuhuuuu=uuuuuNuuuuuuuuAuuuuuhhhhh[A[A[A[AuuuuuuuuuuuuugguuguuguuuuuYAuuu[uuA]u[AuugguY[Yu]OuughguuuuNuuNNNWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNuuuNuccuuuuuuRuuuuRNNu<<uuuuuNuR"uuCuNNNuuuuNuhupcuuuNNNNh[hhh[Ahhuhuuuhh[uhNNuuuuuuuNuhN /;k  PP9~~+k~~KkKk&&pYCourierCG TimesCG Times BoldCG Times ItalicTimes New RomanCourierCG TimesCG Times BoldCG Times ItalicTimes New RomanpppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDdDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddxHxxHvppDXd<"dxtldpxxd"i~'^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxdC\2&Mf AIWZ'7i",tB^ f ^ENpuuNNNuNNNNuuuuuuuuuuNNuNhuNNNuuNuuhuhAuuAAhAuuuuYYAuhhhYhuhu=uuuuuNuuuuuuuuuAuuuuuhhhhhNANANANAuuuuuuuuuhuuuuhuuuuugguuguuguuuuuuuOAuuuuNuuuuuATuAAuuuuuYYuuYuYuYuuTAuuuuuuuuYYYuuuuuuuNuuNNNWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNuuuNulluuuuuuRuuuuRNNuuuAAuuuuu}uuNuuR"utuCuNNNuuuuNuhulcuhhNNNNh[huhNAhhuhuuuhhNuhNNuuuuuuuNuhN /;k  PP9~~+k~~KkKk&&pY2f XMX",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`L  b<H# PE37mRP#COMMISSIONER FURCHTGOTTROTH'S ADDRESS TO THE NATIONAL d$mH  MCONFERENCE OF THE UNITED STATES TELEPHONE ASSOCIATION MARCH 4, 1998  : TP  d$mI xThank you for inviting me here today to address USTA. It has always been a pleasure to work with USTA's staff including Mary McDermott and Roy Neel. xDuring the drafting of the Telecommunications Act of 1996, on behalf of Chairman Bliley I had the pleasure of working with numerous USTA staff and USTA members to craft many of the important sections of the Act, particularly universal service. I learned a lot from USTA and its members and its many friends on Capitol Hill. xWhat resonated most were stories of everyday Americans. America is filled with great communities. Some urban, some rural. We all have a lot of different characteristics. But we share a lot in common. We are all Americans. And, from time to time, we like to use a telephone. xUSTA and its members worked hard on the Telecommunications Act. Your efforts were in large part on behalf of ordinary Americans. People who think that Act should lead to lower not higher phone rates. People who think that universal service means greater access, not people being priced off of the system with new taxes. People who believe that this great country can and will":'0*0*0*!*:" work. As your Members leave Washington and go home to their communities around America, I hope that they will take at least three messages with them: telecommunications markets are changing rapidly; universal service needs a significant review; and that there is hope to correct these problems with Section 11 of the Act.  a< Telecommunications Markets Are Changing Rapidly xFor the past fifteen years, all consumers had to know about telecommunications services was that they had a local phone company and a longdistance phone company. One did not compete with the other. There was not much else to know. There were not many other choices. The simple world of the past is fast disappearing. In its place is a far more complex world with new and differing services, and with new and differing packages of services. The distinctions between local and longdistance phone companies is blurring slightly today, and may become completely blurred in the future. And other providersnew entrants, cable, d$mCterrestia d$mC terrestrial d$mC  d$mCl  wireless, and satellite wirelessare all fighting for the same markets. It is an exciting time to be a phone company. Some will say that the real"|'0*0*0*N*:" wars for telephony are fought here in Washington. I don't believe that for a minute. xThere is a simple paradigm that I have learned from economics. It says: "Demand creates supply; supply does not create demand." xTranslating that into English, consumers are sovereign and they will dictate what services they want, and ultimately what prices they are willing to pay. The warfare in Washington regulation is about who will supply that demand. But at the end of the day, it is the consumer that must part with his or her hardearned money. Thus, it is the consumer that decides. This is not to say that the battles of Washington are unimportant. They are vitally important to individual businesses to see who will survive in the market. xBut don't expect consumers to be patient or understanding of Washington warfare. Consumers want higher quality services at lower prices. Period. They don't have much patience for explanations about hidden taxes and charges that lead to higher prices and deter investment in the industry. And yet I do not have to tell you that there are many new fees and regulations coming from the FCC. While regulation and taxes evolve, technology is not remaining constant. Yesterday, I spoke at a conference on broadband technology sponsored by the"|'0*0*0*N*:" Economic Strategy Institute. There are a lot of new technologies rolling out to consumers. No one knows for sure how these and other technologies will evolve in the market. xWhat do all of these changes portend for the local telephone industry? Who knows? Your business strategy of yesterday may not be the same tomorrow. Yesterday's enemy may be tomorrow's ally, and vice versa. But one factor will always remain constant, and that is where you have a distinct advantage. The constant factor is the sovereignty of the local consumer, and no one in the industry knows the local customer better than the USTA members. Your greatest asset is perhaps not a switch, or loop, or transport lines. Your greatest asset may well be the good will with a local consumer base. Value your consumers. Understand them. Try to meet their needs and wants, and you will prevail in the market, despite, and not because, of anything Washington may do. Other companies may have whizz bang d$mDtechnoloige d$mD technologies d$mD  d$mDs . Other companies may have whizz bang business plans and marketing strategies. But if you are loyal to your customers, there will always be a place for you in the market.  ah%< Current Approaches to Universal Service Are Unsustainable xAnd you will need the support of your customer base more than ever in"|'0*0*0*N*:" the future. Despite our best efforts, the FCC is not necessarily making your life any easier. The most obvious example is universal service.  I believe that the Commission continues down a path for universal service that cannot be sustained. I am concerned that we are implementing this new program without being fully aware of the effect on ratepayers. Many of you may have heard from your customers recently regarding their bills. I know that I have certainly received many complaints. And I don't blame consumers. Charges are going up, new lineitems are appearing, and no one seems to be able to fully explain why. I believe the scheme that the FCC has put in place cannot succeed for following reasons. 1. TELECOMMUNICATIONS RATES WILL HAVE TO GO UP TO PAY FOR THE NEW SCHOOLS AND LIBRARIES AND RURAL HEALTH CARE PROGRAMS, AND WE CANNOT HIDE THAT FACT FROM CONSUMERS. Apparently, some believe that the new Universal Service Fund for Schools and Libraries can be funded entirely out of access charge reductions. But I have news for such folks, there is no pot of gold at the end of the access charge rainbow. To the extent that, dollar for dollar, we are reducing access charges and simultaneously increasing the universal service fund and contributions to the schools and libraries and rural health care"|'0*0*0*N*:" corporations, then consumers will not see the benefit of lower long distance rates. Moreover, consumers will end up paying more somewhere. It does not matter whether we call those increased charges higher "slicks" (SLC subscriber line charges) or "pixies" (PICC presubscribed interexchange carrier charges) or simply higher cellular or long distance or local rates. To the extent that new social programs have been put in place and they are funded out of fees (a modern euphemism for taxes) on telecommunications revenues, that money must come from somewhere. There has to be upward pressure on some charge that consumers pay. And there is. When you go from Washington home to your customers, you will find some mighty angry Americans. And they should be. Washington has harmed them in three separate ways in the universal service section alone. xFirst, while completing action on Schools and Libraries, the Commission has failed to come to closure on the high cost issues. Some will say "Oh, that's a separate fund from schools and libraries, and it is all right to deal with it separately and later." The only problem is that statute does not specifically call for a separate fund. This has been a construction of the FCC."|'0*0*0*N*:"ԌSo what is the big deal about being a year or two late on high cost issues. Most Americans don't live in high cost areas anyway. That's an easy remark to make in Washington. And if you listen closely, you'll hear it all of the time. Rural America just doesn't matter much here. But the Americans who live in rural America do matter. And simply sweeping their problems under the rug won't make them go away. The regulatory uncertainty about universal service in high cost areas is harmful to all Americans. It makes it hard for new competitive businesses to invest in high cost areas. Not good, if you want competition. And if you are an incumbent phone company in a high cost area, the uncertainty is more than an annoying inconvenience. It is a matter of economic viability. xIt would be bad enough if the FCC had simply failed to address all universal service issues, but instead the Commission has addressed some but not others. The FCC has earmarked $2.25 billion for schools and libraries and a few hundred million for rural health care. xNow everyone likes schools and libraries and rural health care facilities. Through federal income and other taxes, Americans help finance tens of billions of dollars annually for federal education programs including some that go to provide infrastructure for wiring schools. And they pay hundreds of billions of dollars in state and local taxes to support schools. And a lot of that money"|'0*0*0*N*:" goes for telecommunications services. Now $2.25 billion is a small amount of total government support for education, but it is a staggering and large amount of federal money for direct universal service support. Universal service support that will not now be used for high cost areas. Universal service support funds that will notas required by statutego only to carriers. Oh, you are the carriers. You should be getting all of the federal money, whether for schools and libraries or for high cost, but you won't be, at least not for schools and libraries. Well, let me tell you, you are being hoodwinked left and right on this universal service fund, and it's time that you stood up and told the FCC to start following the law, not reinventing it. And your customers are being hoodwinked left and right. Access charges are coming down, but every penny is going to schools and libraries taxes. It is bad enough if you are a local phone company and you lose access charges. It's worse if your customers don't see any reduction in other rates such as longdistance rates. xThink about it: reduced access charges places pressure on you to raise local rates. Longdistance companies cannot lower rates because they have to"|'0*0*0*N*:" shift all of the money to schools and libraries plus they must pay the new PICC. So there is actually pressure on longdistance rates to rise. What is in this universal service package for consumers? Let me be clear: the dollarfordollar transfer of reduced access charges to schools and libraries is anticonsumer. There is nothing in it for the consumer. But that is precisely the secret deal that was cut in the middle of the night between the FCC and major long distance carriers. In addition, the Commission has made a concerted effort to hide new fees and taxes from consumers increased prices will necessarily result form these new programs. Last December, I dissented from the Commission's Order setting the universal service contribution factors for the first six months of 1998 because of my concern that it was part of an agreement to keep interexchange carriers from placing any line item on their residential customers' bills. I was not a party to any such negotiations. I suspect that hundreds of millions of American consumers were not a party either. I am reluctant to support any new fees or taxes on consumers; I will never support any new fees or taxes negotiated in secret, without public notice and comment. x2. THE FCC APPEARS TO HAVE EXCEEDED ITS LEGAL AUTHORITY BY TAXING FOR GENERAL PURPOSES AND BY CREATING TWO PRIVATE CORPORATIONS TO ADMINISTER"|' 0*0*0*N*:" GOVERNMENT FUNCTIONS. Recently, there have been many Congressional concerns with respect to both the scale and scope of these new programs. Just last week the House Judiciary Committee held a hearing on whether the universal service charges are an unconstitutional tax, as the Constitution mandates that only Congress has such power. I am similarly concerned with the FCC's asserted authority to collect any fee whether its called a tax or not on intrastate services. In addition, on February 10, 1997 GAO reported to Senator Stevens that the FCC exceeded its statutory authority when it created the Schools and Libraries and Rural Health Care Corporations. X` hp x (#%'0*,.8135@8: