December 30, 1997

SEPARATE STATEMENT OF COMMISSIONER MICHAEL K. POWELL

Re: Fourth Order on Reconsideration, Federal-State Joint Board on Universal Service (CC Docket No. 96-45), Report and Order, Access Charge Reform, Price Cap Review for Local Exchange Carriers, Transport Rate Structure and Pricing, End User Common Line Charge (CC Docket Nos. 96-262, 94-1, 91-213, 95-72).

I write separately to explain the bases upon which I agree with this Fourth Order on Reconsideration. While I believe that this Commission needs to re-examine some of the central issues involved in universal service, those issues are not squarely presented in this order. Rather, this order makes minor adjustments to a universal service framework that, if one assumes the framework is valid, are themselves relatively unobjectionable. Consequently, I concur in the actions taken here pending further review of the framework itself.

On previous occasions, I have made clear my support for the universal service programs that it is this Commission's duty to implement under the Telecommunications Act of 1996. I wish to reaffirm that support now. The Act requires that the services designated for universal service support be "available at just, reasonable and affordable rates" in "all regions of the Nation, including low-income consumers and those in rural, insular and high cost areas." 47 U.S.C. § 254(b)(1), 254(b)(3). Further, the Act requires this Commission to establish programs whereby schools, libraries and rural health care providers may receive services at discounted rates. 47 U.S.C. § 254(h)(1). In addition, the Act requires this Commission to ensure that there are "specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service." 47 U.S.C. § 254(b)(5). I wholeheartedly endorse the overall goals of these statutory provisions, and I know that the public interest will be well-served if we remain faithful to the intent of these and other provisions in implementing universal service programs.

At the same time, I firmly believe that programs as immense and complex as these, no matter how worthy, should be subject to a constant and searching scrutiny. Such scrutiny is critical for a number of reasons. First, because universal service programs will be funded by the telecommunications industry, in which the Act compels us to promote competition, I believe we must diligently police the growth of universal service programs, lest such growth imperil carriers' efforts to bring the benefits of competition and innovation to consumers. In particular, we must limit carriers' contributions to universal service to the amounts absolutely necessary to fulfill the universal service statutory mandate. If subsidy programs get out of hand, they can dramatically raise competitors' costs and skew the economic incentives to enter markets. While in this order the Commission misses an opportunity to review the assumptions and structural underpinnings of the Universal Service Report and Order,⁽¹⁾ certain aspects of the order, such as the conclusions that the schools and libraries program will not fund either the purchase of wide area networks or internal connections in non-instructional buildings, appear, at least, not to expand the scope of universal service programs.

Second, because section 254 provides no basis for the Commission to favor certain classes of recipients over others with respect to the level or timing of universal service support flows, see generally 47 U.S.C. § 254, I believe that the various recipients of universal service support are all equally entitled to benefit from such support. I think it is imperative that we not allow some universal service programs to take priority over others.

Yet this order does not reach some of the more fundamental questions regarding universal service that were reached by our predecessors, but which the new Commission has not had a full opportunity to address. I am concerned, for example, that some universal service programs (schools, libraries and rural health care) will draw on both interstate and intrastate revenues and provide both interstate and intrastate support, whereas some programs will draw from only interstate revenues and provide only interstate support (high cost and low income). Similarly, I am concerned that our current interpretation of section 254(h)(2) and other provisions offers little guidance or discipline to this agency with respect to the range of "advanced services" (beyond Internet access and internal connections) that the Commission may ultimately determine must be supported by universal service subsidies. I do not doubt that the previous Commission felt that these approaches were reasonable ones, but given the size and importance of these programs, I feel it is my obligation to turn a fresh pair of eyes to these topics, if only to comfort myself that my predecessors did, indeed, decide these issues wisely.

As I have stated elsewhere, I am troubled that we are rushing to put in place mechanisms and procedures for universal service that are premised on prior Commission decisions that will be under reconsideration, even after this order. I fear that the institutional and analytical inertia inherent in programs of this magnitude may make it near impossible to turn back some of these initiatives if it is determined, upon further reflection, that these programs are not fully consistent with our Congressional mandate. Nevertheless, I look forward to examining universal service more thoroughly in the context of the Stevens Report, which is due to the Congress in April of next year, and I urge my colleagues to do the same.

1. ¹ Federal-State Joint Board on Universal Service, Report and Order, CC Docket No. 96-45, FCC 97-157, 12 FCC Rcd 8776 (rel. May 8, 1997).