November 23, 1998

Re:	Federal-State Joint Board on Universal Service, Second Recommended Decision

I support today's recommendation by the Universal Service Joint Board. I believe that it fairly and responsibly balances the need to provide sufficient federal support to carriers serving high cost areas with the need to avoid creating an unreasonably large federal universal service fund.

It should be noted that the Recommended Decision expresses appropriate caution regarding the use of a cost proxy model to calculate federal support. Specifically, if the cost proxy model now under development would produce excessively high or low federal support amounts, the Joint Board recommends that the Commission retain the longstanding mechanisms for providing support. Whether the model will produce appropriate support levels will not be known until the Commission, in consultation with state members of the Joint Board, adopts the inputs to the model and makes the difficult policy decisions addressed in this Recommended Decision.

I am very pleased that the Recommended Decision also contemplates some circumstances in which carriers could use federal support to connect areas that are unserved today. Congress charged the Joint Board and the Commission with the preservation and advancement of universal service. I believe that connecting unserved areas is within our mandate under section 254 and should become a higher priority for the Commission. I look forward to a Commission proceeding to examine the nature and extent of the unserved areas problem.

While I support most of today's Recommended Decision, I am uncomfortable with its treatment of three discrete issues. Therefore, I respectfully dissent from those aspects of the Recommended Decision. The first issue is the Joint Board's recommendation regarding which carriers receive more explicit federal support than they receive today. The first step in that determination is to identify non-rural carriers whose costs, on a study-area basis, are "significantly above" the national average. The Recommended Decision determines that the appropriate cutoff for this first step is somewhere between 115 and 150 percent of the national average. That may turn out to be right, but it is not clear to me that we have a record to make this recommendation. We have no model to work with at this point because the Commission has not determined the model's inputs. Without a working model, I am unable to say that a cutoff in the 115-150 range will permit the Commission to strike the right balance between providing sufficient support to high cost areas while minimizing the overall burden on consumers nationwide.

Second, the Recommended Decision appears to encourage the Commission to assess contributions for high cost support on intrastate revenues as well as interstate revenues. I believe a more neutral approach on this issue would have been prudent because the Commission's legal authority to assess intrastate revenues will be clarified by the courts in the near future. Moreover, I am not sure whether it would be desirable for the Commission to assess both interstate and intrastate revenues if it turns out that some state commissions are legally unable to do the same. For these reasons I would have reserved judgment on that issue.

Third, I would have preferred that the Recommended Decision take a less definite position regarding the proposal to distribute high cost support directly to state commissions rather than to carriers. I believe the current record does not provide a sufficient basis for the Joint Board's rejection of this idea. Even though my initial view of this proposal is that the current distribution mechanisms better serve our goals in this area, I believe the alternative distribution proposal merits further consideration.