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Federal Communications Commission
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Washington, D.C. 20554
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Internet: http://www.fcc.gov

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).

July 17, 1998


Today the FCC embarks on the final leg in the reform of universal service support for non- rural local exchange carriers serving rural, high cost, and insular areas. By referring several crucial issues to the Federal-State Joint Board on universal service, as requested by the state members of the Joint Board, we set into motion a series of actions that will conclude on July 1, 1999, the day on which the transition to the new high cost mechanism will be completed for non-rural LECs. Below I lay out the specific timetable I envision for the Commission.

In today's order, we request that the Joint Board provide its recommendations to us by November 23, 1998. In the meantime, the Commission will continue to advance the other facets of high cost universal service reform. The Commission previously has determined that it will calculate the amount of universal service support due to a particular carrier by calculating its forward looking economic cost of providing supported services in a given geographic area. This means that we must first adopt an economic cost model appropriate for all non-rural LECs, and then adopt a method to calculate the cost inputs that will vary from LEC to LEC and from region to region. Inputting the cost variables into the model will generate the total forward looking cost of providing service. The final step is to establish a benchmark equal to the revenues that the carrier can reasonably be expected to collect directly from its customers who purchase the supported services. To the extent that the forward-looking cost of providing service exceeds the revenue benchmark, universal service support should be available to make up the difference.

By October of this year, I expect the Commission to have selected the appropriate model that will serve as the platform for determining the cost of providing universal service in a given area. I intend that by early January, 1999, the Commission will have adopted the method of calculating the cost inputs. By the end of April, 1999, I expect the Commission to have calculated the appropriate revenue benchmark, and to have acted on the recommendations of the Joint Board with respect to the issues we have referred to them today. I am confident that this schedule will allow non-rural LECs to take the further steps necessary to ensure that the transition to the new high cost mechanism is completed by July 1, 1999.

The recommendations we receive from the Joint Board will greatly assist us in determining, among other things, the amount of universal service support that should be provided by the federal mechanism, the relationship between universal support and interstate access charges, and the means by which carriers should be permitted to recover their universal service support obligations. I look forward to working with our state colleagues in the coming months as we bring about the completion of universal service reform.

- FCC -