Re: Report in Response to Senate Bill 1768 and Conference Report on H.R. 3579.

I write separately to explain why I am dissenting from this Report to Congress. The Common Carrier Bureau has done an admirable job of drafting the text of this Report over the last several weeks despite uncertainties regarding whether Congress would ultimately request the Report and what that request would entail. As a result of poor internal Commission processing, however, I have not been given a full opportunity to consider and influence the content of this Report. Because I do have some concerns with the content of the Report, I feel I have no choice but to dissent.

In the interest of being responsive to Congress, however, I briefly describe below some of my concerns regarding the Report and our universal service programs generally:

• I am increasingly troubled by the suggestion, evidenced in the Report, that carriers should conceal their universal service contributions or not allow carriers to recover such contributions from consumers. Section 254(e) of the Act expressly mandates that universal service support be "explicit." 47 U.S.C. § 254(e). Further, as the Report recognizes, carriers have the flexibility to decide how they will recover their universal service contributions, and I doubt the Commission has authority to prevent carriers from recovering from their customers. My fear is that, rather than accept our apparent lack of authority to prevent carriers from passing their contributions on to their customers, the Commission will continue down the road, as evidenced in the Report, of suggesting that politically-unpopular methods of recovering such contributions (i.e., line items on consumer telephone bills) somehow amount to fraud or misrepresentation. Clearly, carriers should not be allowed to commit fraud or misrepresentation. Yet I am hesitant to suggest that carriers are guilty of these offenses simply because they inform their customers that a component of their bills will be used to recover contributions mandated by the government. To the extent we are, as a practical matter, scrutinizing statements and line items on bills to pressure carriers into hiding from the customer support mechanisms that the Act requires be made explicit, I must respectfully object. I also must object to the notion, implicit in some calls for scrutiny of carriers' bills, that carriers commit misrepresentation if they do not indicate that they have benefited from access reductions at the same time they make their recovery of universal service contributions explicit on customer bills.

• I seriously question the Report's suggestion that the starting point for determining the appropriate level of funding for the Schools and Libraries program should be an assumption that all reductions in access charges be used to fund that program. The Commission should acknowledge that the Act's addition of various universal service programs to the traditional high cost, low income and other programs will require the overall amount of universal service subsidies to rise relative to the sum of implicit and other subsidies that existed prior to the Act's passage. At the very least, we should expect that carriers will seek to recover their contributions to these additional, new programs from their customers. Indeed, I believe it would be inconsistent with the statutory mandate that universal service support be made explicit if the Commission were to -- formally or informally -- attempt to force carriers to conceal from customers the recovery of costs attributable to government-mandated programs. The Act mandates that we compensate for reductions in implicit access charges by adding explicit universal service subsidies. Consequently, "access charge reductions" cannot be viewed as a quid pro quo for lowering or eliminating the amounts carriers recover as explicit line items on customers bills. Moreover, I seriously question the validity of tying the funding level of any of our universal service programs to reductions in access charges.

• I also am concerned that a sizeable portion of demand for the Schools and Libraries program is attributable to discounts for internal connections and Internet access, which the Commission is not required to fund as advanced services pursuant to section 254(h); rather, the Commission could decide to postpone funding internal connection and Internet access discounts temporarily or indefinitely. (It is noteworthy that, had the Commission decided not to fund internal connections and Internet access at this time, funds collected for the first 6 months of 1998 would likely cover the demand by schools and libraries for discounted telecommunications services.)

• I would support limiting the revenue base of the Schools and Libraries program to interstate revenues. I remain unconvinced that there is a principled basis for assessing contributions based on both intrastate and interstate revenues for that program, while limiting assessment of contributions for other universal service programs to interstate revenues.

• I am not yet persuaded that, contrary to the analysis of the General Accounting Office, the Commission acted lawfully in directing that NECA establish the Schools and Libraries Corporation and the Rural Health Care Corporation as a condition of its appointment as temporary administrator. Under the Government Corporation Control Act, "[a]n agency may establish or acquire a corporation to act as an agency only by or under a law of the United States specifically authorizing the action." 31 U.S.C. § 9102. To my knowledge, no law specifically authorizes the Commission to establish corporations, and I find arguments that the Commission merely directed the establishment of the corporations as a condition of appointment unavailing. If there is a distinction between directing the establishment of the corporations as a condition of appointment and establishing the corporations outright, it appears to be a distinction without a meaningful difference.

I also note that Commissioner Furchtgott-Roth raises additional, serious concerns in his statement dissenting from this Report. Had the Commission's internal processes afforded me more of an opportunity to engage with my colleagues regarding the contents of this Report, I might have been persuaded that there are equally valid arguments in opposition to the criticisms I highlight above. Regrettably, that opportunity was never presented.

As I stated in my statement for the April 10, 1998 Report to Congress, I fear that support for these beneficial programs will erode among both legislators and the general public if we cannot find a way to make critics in Congress and elsewhere believe that we are working to preserve and advance universal service in a prudent and responsible manner. With the issuance of this Report, I regret that we pass up yet another opportunity to foster such belief, in part, because we failed to allow for full consideration of this matter by the entire Commission.