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October 21, 1999

Separate Statement
Commissioner Susan Ness

Re: Federal-State Joint Board on Universal Service (CC Docket No. 96-45).

A cornerstone of the Telecommunications Act of 1996 is the notion that all Americans should have access to telecommunications services at affordable and reasonably comparable rates. It is axiomatic that universal service benefits all Americans, not just low-income consumers or those living in high cost areas. Each time a new subscriber is added to the system, the value of that system is enhanced.

Under section 254 of the Act, the federal government and the states together share responsibility for ensuring that specific, predictable and sufficient mechanisms are in place to preserve and advance universal service.(1) A key component of universal service is the requirement that quality services be available at just, reasonable, and affordable rates.(2) Working in close consultation with our colleagues on state public utility commissions, we today adopt an order that further clarifies these principles. We identify the federal role as enabling reasonable comparability among states; the state role is to ensure reasonable comparability within its borders. We emphasize that states can and should satisfy their own rate comparability needs to the extent possible before drawing support from other states through the federal mechanism.

We also establish, in part through operation of a cost model, the amount of federal funding that non-rural carriers receive in those states that do not have sufficient resources to make local rates reasonably comparable. The cost model estimates the carriers' forward-looking cost of providing service, which is the basis for prices in a competitive market. We cannot permanently rely on a system that is based upon the historic costs of incumbent carriers - costs which are not uniformly and predictably derived. The cost model is far from perfect. But, when used to measure forward-looking costs statewide, the model appears to have gained a reasonable level of acceptance. The model was developed to determine universal service support, and is not in its current form intended to be used for other purposes, such as setting prices for unbundled network elements. I will be watching the implementation closely to determine whether the cost model achieves our objectives.

I want to underscore what I have said previously - we have made no determination as to the appropriateness of applying this model, or any model, to determine comparative funding levels for rural carriers. The Joint Board has asked the Rural Task Force to examine the unique cost structures and competitive circumstances of rural carriers. I await its recommendations next spring and Joint Board action before making any significant changes to the universal service mechanisms for rural carriers. But I urge us to move expeditiously once the Task Force has issued its report to finalize any modifications in rural carrier support.

I am also increasingly concerned about the aggregate impact of our universal service reforms on consumers, particularly those who make very few long distance telephone calls. These subscribers have not derived the benefits of the very substantial rate reductions in long distance service. This past July, we issued a Notice of Inquiry seeking comment on the aggregate impact of marketplace changes on low-volume users. We need to move swiftly to review these comments and determine what, if anything, should be done to reduce any disproportionate burden on this group.

Finally, I would have preferred to proceed concurrently with reform of high cost support and access charges. The two go hand in glove. Unfortunately, while progress has been made in access charge reform, the proposals on the table do not adequately take into account the needs of consumers. We will continue to work on access charge reform to finalize changes expeditiously, but cannot justify further delay in implementing our revisions to high cost support.

1    47 U.S.C. 254(b)(5).

2     47 U.S.C. 254(b)(1).