[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Proposed Rules]
[Pages 63778-63809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30381]


-----------------------------------------------------------------------


FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I

[CC Docket No. 96-45: FCC 96J-3]


Universal Service

AGENCY: Federal Communications Commission.

ACTION: Recommended decision.

-----------------------------------------------------------------------

SUMMARY: On November 7, 1996, the Federal-State Joint Board adopted a 
Recommended Decision, as required by section 254 of the 
Telecommunications Act of 1996 (``1996 Act''), regarding universal 
service. In the decision, the Joint Board made numerous recommendations 
on universal service issues including, for example, issues relating to: 
universal service principles; services eligible for support; support 
mechanisms for rural, insular, and high cost areas; support for low 
income consumers; affordability; support for schools, libraries, and 
health care providers; administration of support mechanisms; and common 
line cost recovery. The Commission seeks comment on the Recommended 
Decision.

DATES: Comments should be filed on or before December 16, 1996 and 
Reply Comments on or before January 10, 1997.

ADDRESSES: Interested parties must file an original and four copies of 
their comments with the Office of the Secretary, Federal Communications 
Commission, Room 222, 1919 M Street, N.W., Washington, D.C. 20554. 
Comments should reference CC Docket No. 96-45. Parties should send one 
copy of their comments to the Commission's copy contractor, 
International Transcription Service, Room 140, 2100 M Street, N.W., 
Washington, D.C. 20037. Parties must also serve copies of their 
comments on the individuals identified in the attached service list. 
After filing, comments will be available for public inspection during 
regular business hours in the FCC Reference Center, Room 239, 1919 M 
Street, N.W., Washington, D.C. 20554.
    Parties are also asked to submit comments on diskette. Diskette 
submissions would be in addition to and not a substitute for the formal 
filing requirements addressed above. Parties submitting diskettes 
should submit them to Sheryl Todd, Common Carrier Bureau, 2100 M 
Street, N.W., Room 8611, Washington, D.C. 20554. Such a submission 
should be on a 3.5 inch diskette in an IBM compatible format using 
WordPerfect 5.1 for Windows software in a ``read only'' mode. The 
diskette should be clearly labelled with the party's name, proceeding, 
and date

[[Page 63779]]

of submission. The diskette should be accompanied by a cover letter.

FOR FURTHER INFORMATION CONTACT: Sheryl Todd at 202-530-6040.

SUPPLEMENTARY INFORMATION: The Joint Board recommended that the 
Commission specifically seek additional information and comment on a 
number of topics, including, for example:
    Principles. How should the additional principle of competitive 
neutrality be defined and applied within the context of universal 
service?
    Low-Income. What baseline amount of support should be provided to 
low-income consumers? Is the $5.25 baseline amount suggested in the 
Recommended Decision likely to be adequate? How can the FCC avoid the 
unintended consequence that the increased federal support amount has no 
direct effect on Lifeline subscribers' rates in many populous states 
with Lifeline programs, and instead results only in a larger percentage 
of total support being generated from federal sources?
    Schools/Libraries. What methods should the Commission use for 
identifying high cost areas for purposes of providing a greater 
discount to schools and libraries located in high cost areas? What 
measures of economic advantage may be readily available to identify 
economically disadvantaged non-public schools and economically 
disadvantaged libraries or, if none is readily available, what 
information could be required that would be minimally burdensome?
    Health Care. What is the exact scope of services that should be 
included in the list of additional services ``necessary for the 
provision of health care'' in a state? In responding, commenters should 
address the telecommunications needs of rural health care providers and 
the most cost-effective ways to provide these services to rural areas. 
What would be the relative costs and benefits of supporting 
technologies and services that require bandwidth higher than 1.544 
Mbps? How rapidly is local access to Internet Service Providers (ISPs) 
expanding in rural areas of the country, and what are the costs likely 
to be incurred in providing toll-free access to ISPs for health care 
providers in rural areas? What are the probable costs that would be 
incurred in eliminating distance-based charges and/or charges on 
traffic between Local Access and Transport Areas (LATAs) (interLATA 
traffic), where such charges are in excess of those paid by customers 
in the nearest urban areas of the state? Do insular areas experience a 
disparity in telecommunications rates between urbanized and non-
urbanized areas? Commenters should supply information on the size of 
cities and other demographic information pertaining to insular areas 
that might be used to establish the urban rate and rural rate in each 
of those areas. What costs would be incurred in supporting upgrades to 
the public switched network necessary to provide services to rural 
health care providers? To what extent, and on what schedule, might 
ongoing network modernization, as is currently going forward under 
private initiative or according to state-sponsored modernization plans, 
make universal service support for such upgrades unnecessary? What are 
the probable costs, and the advantages and disadvantages, of supporting 
upgrades to public switched or backbone networks where such upgrades 
can be shown to be necessary to deliver eligible services to rural 
health care providers?
    Administration. Should contributions for high cost and low-income 
support mechanisms be based on the intrastate and interstate revenues 
of carriers that provide interstate telecommunications services, based 
on the factors enumerated in the Recommended Decision? Should the 
intrastate nature of the services supported by the high cost and low-
income programs have a bearing on the revenue base for assessing funds? 
Should contributing carriers' abilities to identify separately 
intrastate and interstate revenues in an evolving telecommunications 
market and carriers' incentives to shift revenues between jurisdictions 
to avoid contributions have a bearing on this question?
    We ask parties to address the effects that the Joint Board's 
recommendations to the Commission are likely to have on small entities 
and what measures the Commission should undertake to avoid significant 
economic impact on small business entities as defined by Section 601(3) 
of the Regulatory Flexibility Act. These comments must be filed in 
accordance with the same filing deadlines as comments on the rest of 
the Recommended Decision, but they must have a separate and distinct 
heading designating them as responses to the regulatory flexibility 
analysis.
    The Commission invites interested parties to file comments on the 
Joint Board's recommendations and on the Commission's legal authority 
to implement such recommendations. Copies of the Recommended Decision 
can be obtained from (1) the International Transcription Service (ITS), 
Room 140, 2100 M Street, N.W., Washington, D.C. 20037 or (2) the FCC 
World Wide Web Home Page: http://www.fcc.gov.

Summary of Recommended Decision

    1. Principles. We recommend that policy on universal service should 
be a fair and reasonable balance of all of those principles identified 
in section 254(b) and the additional principle we identify in this 
section. We recognize, however, that our primary responsibility on this 
matter is to ensure that consumers throughout the Nation are not harmed 
and are benefited under our recommendation. To this end, we recommend 
that promotion of any one goal or principle in this proceeding should 
be tempered by a commitment to ensure quality services at just, 
reasonable, and affordable rates in all areas of the Nation, for those 
services that meet the section 254(c)(1) criteria.
    2. We recommend that the Commission also establish ``competitive 
neutrality'' as an additional principle upon which it shall base 
policies for the preservation and advancement of universal service, 
pursuant to section 254(b)(7). We ask that the Commission define the 
principle in the context of determining universal service support, as:
``COMPETITIVE NEUTRALITY--Universal service support mechanisms and 
rules should be applied in a competitively neutral manner.''
    3. We believe that the principle of competitive neutrality 
encompasses the concept of technological neutrality by allowing the 
marketplace to direct the development and growth of technology and 
avoiding endorsement of potentially obsolete services. In recognizing 
the concept of technological neutrality, we are not guaranteeing the 
success of any technology for all purposes supported through universal 
service support mechanisms but merely stating that universal service 
support should not be biased toward any particular technologies. We 
further believe that the principle of competitive neutrality should be 
applied to each and every recipient and contributor to the universal 
service support mechanisms, regardless of size, status or geographic 
location.
    4. Given the provisions elsewhere in the law that require access to 
telecommunications equipment and services by people with disabilities, 
we recommend that the Commission not adopt specific principles related 
to telecommunications users with disabilities in this universal service 
proceeding. With respect to the requests for additional principles 
designed to promote the welfare of other specific groups such as 
subscribers in rural areas and customers with low incomes, we do

[[Page 63780]]

not recommend the establishment of any additional principles.
    5. Finally, although this Joint Board supports the concept of 
administrative simplicity, we do not recommend that the Commission 
formally adopt this concept as a principle. Section 254(b)(5) provides 
that support mechanisms should be ``[s]pecific and predictable.'' We 
find that this principle encompasses administrative simplicity. In 
addition, we decline to recommend that access to the particular 
services commenters have proposed become guiding principles for the 
Commission's universal service policies. Instead, we consider whether 
these services, consistent with the principles of the 1996 Act, should 
be included in the definition of universal service.
    6. Definition of Universal Service: What Services to Support. The 
1996 Act defines ``telecommunications services'' as ``the offering of 
telecommunications for a fee directly to the public * * * regardless of 
the facilities used.'' With the exception of single-party service and 
touch-tone dialing, the core services proposed in the Notice of 
Proposed Rulemaking and Order Establishing a Joint Board (NPRM) 
represent functionalities or applications associated with the provision 
of access to the public network, rather than tariffed services. The 
Joint Board concludes that defining telecommunications services in a 
functional sense, rather than on the basis of tariffed services alone, 
is consistent with the intent of section 254(c)(1).
    7. Based on the overwhelming support in the record, the Joint Board 
recommends that the services proposed in the NPRM should be included in 
the general definition of services supported under section 254(c)(1). 
We reject the arguments of commenters that a service must meet all of 
the statutory criteria of section 254(c)(1)(A)-(D) before it may be 
included within the definition of universal service. Instead, we 
conclude that while the Joint Board must consider all four criteria 
before determining that a service or functionality should be included, 
we need not find that a particular service meets each of the four 
criteria. Accordingly, we recommend that the services proposed in the 
NPRM, namely, single-party service, voice grade access to the public 
switched telephone network (PTSN), DTMF or its functional digital 
equivalent, access to emergency services and access to operator 
services be designated for universal service support pursuant to 
section 254(c)(1).
    8. The Joint Board recommends that single-party service should 
receive universal service support. We further find that single-party 
service means that only one customer will be served by each subscriber 
loop or access line, although carriers may offer consumers the choice 
of multi-party service in addition to single-party service and remain 
eligible for universal service support. In addition, to the extent that 
wireless providers use spectrum shared among users to provide service, 
we find that wireless carriers provide the equivalent of single-party 
service since users are given a dedicated channel for each 
transmission. (Wireless carriers are not, however, required to provide 
a single channel dedicated to a particular user at all times; a 
wireless carrier provides the equivalent of single-party service when 
it provides a dedicated message path for the length of a user's 
particular transmission.) Moreover, we recommend permitting a 
transition period for carriers to make upgrades to provide single-party 
service, but only to the extent carriers can meet a heavy burden that 
such a transition period is necessary and in the public interest. Since 
state commissions will be responsible for designating carriers as 
eligible for purpose of receiving federal universal service support, we 
recommend that states make the determination as to the need for a 
transition period for a particular carrier.
    9. We find that the record provides ample support for our 
conclusion that voice grade access, an essential element to telephone 
service, is subscribed to by a substantial majority of residential 
customers and is being deployed in public telecommunications networks 
by telecommunications carriers. In addition, we find that voice grade 
access should occur in the frequency range between approximately 500 
Hertz and 4,000 Hertz, for a bandwidth of approximately 3,500 Hertz. 
Voice grade access should also include the ability to place calls, 
including the ability to signal the network that the caller wishes to 
place a call, and the ability to receive calls, including the ability 
to signal the called party that there is an incoming call. (We 
explicitly do not include call waiting within this definition.)
    10. Based on strong support in the record, we also recommend 
including a local usage component within the definition of voice grade 
access. We conclude that the states are best positioned to determine 
the local usage component that represents affordable service within 
their jurisdictions. Nonetheless, for purposes of determining the 
amount of federal universal service support, we recommend that the 
Commission determine a level of local usage.
    11. We agree with commenters who argue that ``touch-tone'' is more 
appropriately termed DTMF signaling. DTMF facilitates the 
transportation of signaling through the network. DTMF also accelerates 
call set-up time. As noted in the NPRM, other methods of signaling, 
such as digital signaling, can provide network benefits equivalent to 
that of DTMF. Therefore, we recommend that DTMF or its functional 
digital equivalent (hereinafter referred to as ``DTMF'') be supported 
under section 254(c)(1).
    12. Like the other core services, access to emergency service is a 
functionality that is widely deployed and subscribed to by a majority 
of residential subscribers. Further, access to emergency service is 
widely recognized as ``essential to * * * public safety.'' In defining 
access, the record supports the inclusion of access to 911 (but not for 
Public Safety Answering Points, which local public safety officials 
provide). Nearly 90 percent of lines today have access to 911 
capability. In addition, we recommend access to E911 service, where the 
locality has chosen to implement that service, be included in the 
definition of universal service. We do not recommend providing 
universal service support, however, for E911 service. We recommend not 
including E911 service within the definition of services to be 
supported at this time, but may recommend its consideration when the 
definition is revisited, as anticipated by section 254(c)(2).
    13. In supporting access to operator service, we recommend that the 
Commission adopt the definition of operator services it implemented for 
purposes of section 251(b)(3), namely, ``any automatic or live 
assistance to a consumer to arrange for billing or completion, or both, 
of a telephone call.''
    14. In addition to the services proposed to be included within the 
general definition of universal service by the NPRM, the Joint Board 
recommends that access to interexchange service be included. The Joint 
Board, however, recommends that access to interexchange service should 
not be defined, at this time, to include equal access to interexchange 
carriers.
    15. The Joint Board also recommends including access to directory 
assistance, specifically, the ability to place a call to directory 
assistance, in the definition of universal service. Like access to 
interexchange service, access to directory service is a functionality 
of the loop. We recommend that support be provided for access to 
directory assistance, not the service itself. Therefore, we will refer 
to voice grade

[[Page 63781]]

access to the public switched network, DTMF or touch-tone, single-party 
service, access to emergency service, access to operator service, 
access to interexchange service, and access to directory assistance as 
the ``designated'' or ``core'' services for section 254(c)(1) universal 
service purposes .
    16. We generally agree with those commenters that argue that 
carriers designated as eligible telecommunications service providers 
must provide each of the services designated for support subject to 
certain exemptions as discussed below. We recommend that 
telecommunications carriers that are unable to provide one or more of 
these services should not receive universal service support unless 
exceptional circumstances exist. We recommend that states have the 
discretion to provide for a transition period, for good cause, to allow 
carriers to make upgrades to provide single-party service.
    17. In addition to our general conclusion that carriers must 
provide each of the designated services in order to receive support, we 
find that universal service support should be available in limited 
instances where a carrier is unable to provide a few specific services. 
For example, based on our analysis of E911, discussed above, we 
conclude that access to E911 should be among those services supported 
by universal service mechanisms because, for example, it is ``essential 
to * * * public safety'' consistent with section 254(c)(1)(A). We 
realize, however, that not all carriers are currently capable of 
providing access to E911 and, in fact, not all communities have the 
facilities in place to provide E911 service. Nevertheless, we conclude 
that access to E911 should be supported to the extent that carriers are 
providing such access. Similarly, as discussed below, we find that toll 
blocking or control services should be supported when provided to 
qualifying low-income consumers, to the extent that eligible carriers 
are technically capable of providing these services. Thus, we recommend 
that eligible carriers be required to provide all of those services we 
characterize as ``designated'' services, but we also recommend that the 
Commission support additional services such as E911 and toll 
limitation, to the extent eligible carriers are providing these 
important services.
    18. Finally, we conclude that waivers should not be generally 
available to carriers that do not provide one or more of the designated 
services. Nevertheless, the record supports the contention that some 
carriers may currently be unable to offer single-party service. Because 
section 214(e) requires eligible carriers to ``offer the services that 
are supported by Federal universal service support mechanisms under 
section 254,'' we are unwilling to recommend that telecommunications 
providers be permitted to receive broad waivers from the requirement to 
provide the services we recommend designating for universal service 
support. As discussed above, however, we recommend that state 
commission be permitted to grant a request for a transition to carriers 
that cannot currently provide single-party service if the circumstances 
warrant such a transition period.
    19. We find that support for designated services provided to 
residential customers should be limited to those services carried on a 
single connection to a subscriber's principal residence. (In light of 
our recommended principle of competitive neutrality, we will 
hereinafter refer to ``connections'' rather than ``lines.'') We 
conclude that support for a single residential connection will permit a 
household complete access to telecommunications and information 
services. The Joint Board, however, declines at this time to provide 
support for other residential connections beyond the primary 
residential connection. Support for a second connection is not 
necessary for a household to have the required ``access'' to 
telecommunications and information services. We are unpersuaded that 
universal service support should be extended to second residences in 
high cost areas. We conclude that the consumer benefits that result 
from support should not be extended to second homes. Such residences 
may not be occupied at all times, and their occupants presumably can 
afford to pay rates that accurately reflect the cost of service.
    20. We find that designated services carried to single-connection 
businesses in rural, insular and other high cost areas should be 
supported by universal service mechanisms, although we find that a 
reduced level of support may be appropriate. We find general 
similarities between residential and single-line business customers. 
Both single-line business and residential subscribers require access 
for health, safety and employment reasons. We recommend making 
universal service support available for designated services carried to 
single-connection businesses in high cost areas.
    21. We conclude, however, that designated services carried to 
businesses subscribing to only one connection should not receive the 
full amount of support designated for residential connections in high 
cost areas. We recommend that, for business connections, a standard 
different from that applied to residential connections for determining 
support should be established. We recommend initially supporting the 
designated services carried on business connections in a high cost area 
at a lower level than that provided for residential connections in the 
same area. As discussed, below, we recommend that the Commission use a 
benchmark based on the revenue generated per line to determine the 
amount of support carriers should receive. Under this recommended 
approach, eligible carriers would receive less support for serving 
single-connection businesses than they would for residential service 
because business rates are higher than residential rates. As discussed 
in greater detail below, we recommend that the amount of support be 
derived from calculating the difference between the cost of providing 
service and the benchmark amount.
    22. The 1996 Act enunciates the principle that ``quality services'' 
should be available. We refrain from recommending that the Commission 
require that eligible carriers meet specific, Commission-established 
technical standards as a condition to receiving universal service 
support. We recommend that the Commission, to the extent possible, rely 
on existing data to monitor service quality. Because many states 
already have adopted service quality requirements, we do not recommend 
that the Commission undertake efforts to collect quality of service 
data in addition to those already in place with respect to price cap 
LECs. In many cases, additional requirements by the Commission would 
duplicate the states' efforts. Instead, we recommend that state 
commissions submit to the Commission the service quality data provided 
to them by carriers. We further recommend that the Commission not 
impose data collection requirements on carriers at this time. 
Therefore, we conclude that the Commission should rely on service 
quality data collected at the state level in making its determination 
that ``quality services'' are available, consistent with section 
254(b)(1).
    23. We recommend that the Commission convene a Joint Board no later 
than January 1, 2001, to revisit the definition of universal service. 
In addition, the Commission may institute a review at any time upon its 
own motion or in response to petitions by interested parties. We note 
that, in complying with the statutory mandate of section 706(b) of the 
1996 Act, the Commission may take additional steps to determine whether 
advanced

[[Page 63782]]

telecommunications capability is being deployed to all Americans.
    24. We find the record to be insufficient at this time to support 
our recommending that the Commission adopt reporting requirements in 
order to collect data that may assist the Commission in reevaluating 
the definition of universal service. We recommend that the Commission 
base future analyses of the definition of universal service on data 
derived from the Commission's existing data collection mechanisms such 
as those collected through ARMIS.
    25. Affordability. In the 1996 Act, Congress not only reaffirmed 
the continued applicability of the principle of ``just and reasonable'' 
rates, but also introduced the concept of ``affordability.'' Although 
we believe an increasingly refined understanding of the term 
affordability will evolve over time, we find that the Webster 
Dictionary definition is instructive in determining how to interpret 
the concept for purposes of crafting universal service policies 
consistent with the congressional intent underlying section 254. The 
definition of affordable contains both an absolute component (``to have 
enough or the means for'') and a relative component (``to bear the cost 
of without serious detriment''). Therefore, we conclude that both the 
absolute and relative components must be considered in making the 
affordability determination required under the statute. We find that an 
evaluation that considers price alone does not effectively address 
either component of affordability. In general, we find that factors 
other than rates, such as local calling area size, income levels, cost 
of living, population density, and other socio-economic indicators may 
affect affordability. (The specific needs of low-income consumers are 
addressed below.)
    26. Although subscribership levels can be influenced by many 
factors (such as the level of toll charges or service connection 
charges), we agree with the many commenters that argue that a general 
correlation exists between subscribership level and affordability. We 
find monitoring subscribership to be a tool in evaluating the 
affordability of rates. It should not, however, be the exclusive tool 
in measuring affordability. Subscribership levels do not address the 
second component of the definition of affordability, namely, whether 
paying the rates charged for services imposes a hardship on those who 
subscribe.
    27. We also find that the scope of the local calling area directly 
and significantly affects affordability. Therefore, the Joint Board 
concludes that the scope of the local calling area should be considered 
as another factor to be weighed when determining the affordability of 
rates. In addition, we find that in considering this last factor, 
examining the number of subscribers to which one has access for local 
service in a local calling area alone is not sufficient. A 
determination should be made that the calling area reflects the 
pertinent ``community of interest,'' allowing subscribers to call 
hospitals, schools, and other essential services without incurring a 
toll charge.
    28. Customer income level also is a factor that should be examined 
when addressing affordability. While a specific rate may be affordable 
to most customers in an affluent area, the same rate may not be 
affordable to lower income customers. We agree with the conclusions of 
many commenters regarding the nexus between income level and ability to 
afford telephone service. We conclude that per capita income of a local 
or regional area, and not a national median, should be considered in 
determining affordability. In addition to income level, we conclude 
that the cost of living in an area may affect the affordability of a 
given rate.
    29. We also recognize that many variations in a state's rates 
reflect ``legitimate local variations in rate design.'' Such variations 
include the proportion of fixed costs allocated between local services 
and intrastate toll services; proportions of local service revenue 
derived from per-minute charges and monthly recurring charges; and the 
imposition of mileage charges to recover additional revenues from 
customers located a significant distance from the wire center. We find 
that these factors too should be considered in making the determination 
of affordability of rates.
    30. In light of our conclusions regarding the importance of the 
particular factors other than rates identified in the preceding 
paragraphs, we recommend that the states exercise primary 
responsibility, consistent with the standard enumerated above, for 
determining the affordability of rates. To the extent that consumers 
wish to challenge whether a rate is truly ``affordable,'' we find the 
state commissions, in light of their rate-setting roles, are the 
appropriate forums for raising such issues. Additionally, we conclude 
that the Commission should continue to oversee the development of the 
concept of affordability, and may take action to ensure rates are 
affordable, where necessary and appropriate.
    31. Although we recommend that the states should make the primary 
determination of rate affordability, we recognize that Congress, 
through the 1996 Act, gave the Commission a role in ensuring universal 
service affordability. Subscribership levels, while not dispositive on 
the issue of affordability, provide an objective criterion to assess 
the overall success of state and federal universal service policies in 
maintaining affordable rates. Therefore, we recommend that, to the 
extent that subscribership levels fall from the current levels on a 
statewide basis, the Commission and affected state should work together 
informally to determine the cause of the decrease and the implications 
for rate affordability in that state. If necessary and appropriate, the 
Commission may open a formal inquiry on such matters and, in concert 
with the affected state, take such action as is necessary to fulfill 
the requirements of section 254. We find that this proposed dual 
approach in which both the states and the Commission play roles in 
ensuring affordable rates is consistent with the statutory mandate 
embodied in section 254(i).
    32. Carriers Eligible for Universal Service Support. We recommend 
that the Commission adopt, without further elaboration, the statutory 
criteria contained in section 214(e)(1) as the rules for determining 
whether a telecommunications carrier is eligible to receive universal 
service support. Pursuant to these criteria, a telecommunications 
carrier would be eligible to receive universal service support if the 
carrier is a common carrier and if, throughout the service area for 
which the carrier is designated by the state commission as an eligible 
carrier, the carrier: (1) offers all of the services that are supported 
by federal universal service support mechanisms under section 254(c) 
(we recommend, however, that carriers that lack the technical 
capability to offer toll-limitation services to qualifying low-income 
consumers not be required to offer such services, as otherwise provided 
below); (2) offers such services using its own facilities or a 
combination of its own facilities and resale of another carrier's 
services, including the services offered by another eligible 
telecommunications carrier; and (3) advertises the availability of and 
charges for such services using media of general distribution. We agree 
with the majority of commenters who argue that any carrier that meets 
these criteria is eligible to receive federal universal service 
support, regardless of the technology used by that carrier.

[[Page 63783]]

    33. In addition, we recommend that companies subject to price cap 
regulation be eligible to receive universal service support. We agree 
with those commenters that argue that price cap regulation is an 
important tool to smooth the transition to competition and that its use 
should not foreclose price cap companies from receiving universal 
service support. Having recommended against the exclusion of price cap 
companies, we conclude that we need not address how to define precisely 
which carriers are subject to price cap regulation.
    34. Section 214(e)(1) requires that, in order to be eligible for 
universal service support, a common carrier must offer universal 
service throughout the state-designated service area either using its 
own facilities or a combination of its own facilities and the resale of 
another carrier's services, including those of another eligible 
carrier. We find that the plain meaning of this provision is that a 
carrier would be eligible for universal service support if it offers 
all of the specified services throughout the service area using its own 
facilities or using its own facilities in combination with the resale 
of the specified services purchased from another carrier, including the 
incumbent LEC or any other carrier. We do not recommend that a carrier 
that offers universal service solely through reselling another 
carrier's universal service package should be eligible for universal 
service support. Similarly, we do not recommend that only those 
telecommunications carriers that offer universal service wholly over 
their own facilities should be eligible for universal service.
    35. The NPRM sought comment on various other issues related to 
eligibility. Specifically, it sought comment on whether rules should be 
developed to: (1) ensure that universal service support be used as 
intended (i.e., for the ``provision, maintenance, and upgrading of 
facilities and services for which the support is intended''); (2) 
ensure that only eligible carriers receive support; and (3) set 
guidelines for advertising. Because relatively few commenters addressed 
these issues, there are few detailed proposals in the record on how to 
resolve them. For the first of these issues, developing rules to ensure 
that universal service support is used as intended, we believe that 
concerns about misuse of funds would largely be alleviated once 
competition arrives. We find that a competitive market would minimize 
the incentives and opportunities to misuse funds. In the absence of 
competition, we find that the optimal approach to minimizing misuse of 
funds is to adopt a mechanism that will set universal support at levels 
that reflect the costs of providing universal service efficiently. 
Should additional measures be necessary, we recommend that the 
Commission, to the extent that states monitor carriers to ensure the 
provision of the supported services, rely on the states' monitoring. 
Where necessary (for example, if the state has insufficient resources 
to support such monitoring programs) we recommend that the Commission 
conduct periodic reviews to ensure that universal service is being 
provided. On the question of ensuring that only eligible carriers 
receive support, we agree with commenters that additional rules are 
unnecessary because only carriers found eligible by the states will 
receive funding. We recommend no additional rules at this time.
    36. We recommend that the Commission not adopt, at this time, any 
national guidelines relating to the requirement that carriers advertise 
throughout the service area the availability of and rates for universal 
service using media of general distribution. We recommend that states 
should, in the first instance, establish guidelines, if needed, to 
govern such advertising.
    37. We recommend that the Commission retain the current study areas 
of rural telephone companies as the service areas for such companies. 
Section 214(e)(5) provides that for an area served by a rural telephone 
company, the term ``service area'' means such company's study area 
``unless or until the Commission and the States, after taking into 
account the recommendations of a Federal-State Joint Board instituted 
under section 410(c), establish a different definition of service area 
for such company.''
    38. We find that sections 214(e)(2) and 214(e)(5) grant to the 
state commissions the authority and responsibility to designate the 
area throughout which a carrier must provide the defined core services 
in order to be eligible for universal service support. We further 
conclude that, while this authority is explicitly delegated to the 
state commissions, states should exercise this authority in a manner 
that promotes the pro-competitive goals of the 1996 Act as well as the 
universal service principles of section 254. The Joint Board thus 
recommends that the Commission urge the states to designate service 
areas for non-rural telephone company areas that are of sufficiently 
small geographic scope to permit efficient targeting of high cost 
support and to facilitate entry by competing carriers. We recommend 
that the Commission encourage states, where appropriate to foster 
competition, to designate service areas that do not disadvantage new 
entrants. Consequently, we recommend that the geographic size of the 
state designated service areas should not be unreasonably large.
    39. Even if the state commission were to designate a large service 
area, however, we believe that it would be consistent with the 1996 Act 
to base the actual level of support, if any, that non-rural telephone 
company carriers would receive for the service area on the costs to 
provide service in sub-units of that area. We recommend that the 
Commission, where necessary to permit efficient targeting of universal 
support, establish the level of universal service support based on 
areas that may be smaller than the service area designated by the 
state. The service area designated by the state is the geographic area 
used for ``the purpose of determining universal support obligations and 
support mechanisms.'' We find that this language refers to the 
designation of the area throughout which a carrier is obligated to 
offer and advertise universal service. It defines the overall area for 
which the carrier will receive support from the ``specific, 
predictable, and sufficient mechanism established by the Commission to 
preserve and advance universal service.'' We conclude that this 
language would not bar the Commission from disaggregating the state-
designated service area into smaller areas in order to: (1) Identify 
high cost areas within the service area; and (2) determine the level of 
support payments that a carrier would receive for the overall service 
area based on the sum of the support levels as determined by the costs 
of serving each of the disaggregated areas. Other than the requirements 
contained in section 214(e)(3), we recommend that the Commission not 
adopt any particular rules to govern how carriers for unserved areas 
are designated.
    40. High Cost Support. We believe that a properly crafted proxy 
model can be used to calculate the forward-looking economic costs for 
specific geographic areas, and be used as the cost input in determining 
the level of support a carrier may need to serve a high cost area. We 
cannot recommend, however, that any of the proxy models submitted in 
this proceeding thus far--the BCM, the BCM2, the CPM, and the Hatfield 
model--should be used to determine universal service support levels. 
While the proxy models continue to evolve and improve, none of those 
submitted in this proceeding are sufficiently

[[Page 63784]]

developed to allow us to recommend a specific model at this time. The 
Joint Board therefore recommends that the Commission continue to work 
with the state commissions to develop an adequate proxy model that can 
be used to determine the cost of providing supported services in a 
particular geographic area, and in calculating what support, if any, a 
carrier should receive for providing services designated for universal 
service support. We recommend that a proxy model be developed such that 
it can be adopted by the Commission by May 8, 1997, the statutory 
deadline for the Commission to implement our recommendations in this 
proceeding.
    41. We find that forward-looking economic costs should be used to 
determine the cost of providing universal service. Those costs best 
approximate the costs that would be incurred by an efficient competitor 
entering that market. We believe that support should be based on the 
cost of an efficient carrier and should not be used to offset the costs 
of inefficient provision of service, or costs associated with services 
that are not included in our definition of supported services, such as 
private lines, interexchange services, and video services. The actual 
level of support that a carrier receives from federal universal service 
support mechanisms, if any, would be based on the difference between 
the cost of service as determined by a proxy model and the benchmark 
amount.
    42. The Joint Board recommends that the forward-looking economic 
cost of providing supported services should include all of the costs of 
the telephone network elements that are used to provide supported 
services. We acknowledge that the loop is essential for the provision 
of all services, not just those supported by the federal universal 
service mechanisms. We note, however, that supported services include 
not only local service but also access to interexchange service. The 
cost of loop can vary depending on the type of services provided. We 
recognize that the provision of ISDN and video services could increase 
the cost of the loop, but the additional loop costs incurred to provide 
these services should be excluded from costs considered here. In the 
proxy models, the fiber-copper cross-over point determines the relative 
share of fiber in the loop plant. We believe that the reasonable cross-
over point should reflect the least cost provision of the supported 
services rather than the provision of video or advanced services.
    43. We recommend that the Commission consider the following 
criteria in order to evaluate the reasonableness of any proxy model 
that it would use to estimate the forward-looking economic cost of 
providing the supported services:

    (1) Technology assumed in the model should be the least-cost, 
most efficient and reasonable technology for providing the supported 
services that is currently available for purchase, with the 
understanding that the models will use the incumbent LECs' wire 
centers as the center of the loop network for the reasonably 
foreseeable future.
    (2) Any network function or element, such as loop, switching, 
transport, or signaling, necessary to produce supported services 
must have an associated cost.
    (3) Only forward-looking costs should be included. The costs 
should not be the embedded cost of the facilities, functions or 
elements.
    (4) The model should measure the long-run costs of providing 
service by including a forward-looking cost of capital and the 
recovery of capital through economic depreciation expenses. The long 
run period used should be a period long enough that all costs are 
treated as variable and avoidable.
    (5) The model should estimate the cost of providing service for 
all businesses and households within a geographic region. This 
includes the provision of multi-line business services. Such 
inclusion allows the models to reflect the economies of scale 
associated with the provision of these services.
    (6) A reasonable allocation of joint and common costs should be 
assigned to the cost of supported services. This allocation will 
ensure that the forward-looking costs of providing the supported 
services do not include an unreasonable share of the joint and 
common costs incurred in the provision of both supported and non-
supported services, e.g., multi-line business and toll services.
    (7) The model and all underlying data, formulae, computations, 
and software associated with the model should be available to all 
interested parties for review and comment. All underlying data 
should be verifiable, engineering assumptions reasonable, and 
outputs plausible.
    (8) The model should include the capability to examine and 
modify the critical assumptions and engineering principles. These 
assumptions and principles include, but are not limited to, the cost 
of capital, depreciation rates, fill factors, input costs, overhead 
adjustments, retail costs, structure sharing percentages, fiber-
copper cross-over points, and terrain factors. The models should 
also allow for different costs of capital, depreciation, and 
expenses for different facilities, functions or elements.

    44. The parties have brought three models to our attention in this 
proceeding. While the models hold much promise, at this time, we cannot 
endorse a specific model as the tool the Commission should use for 
calculating costs of supported services.
    45. We therefore urge the Commission to conduct a series of 
workshops at which federal and state staff can work with industry 
participants to refine the models so that it could become possible to 
select or create a proxy model that could then be used in calculating 
universal service support. We recommend that these workshops begin no 
later than January 1997.
    46. The state members of the Joint Board will submit a report to 
the Commission on the use of proxy models and the application of such 
models in this proceeding for funding universal service. The report of 
the state members will be filed prior to a Commission decision in this 
proceeding on proxy models. The Commission and state members should 
continue to work cooperatively and remain integrally involved in the 
development of an acceptable proxy model.
    47. While we recommend using forward-looking economic costs 
calculated through the use of a proxy model to determine high cost 
support for all carriers, we are concerned that moving small, rural 
carriers to a proxy model too quickly may result in large changes in 
the support that they receive. Since rural carriers generally serve 
fewer subscribers compared to the large incumbent LECs, serve more 
sparsely-populated areas, and do not generally benefit from economies 
of scale and scope as much as non-rural carriers, they often cannot 
respond to changing operating circumstances as quickly as large 
carriers. We therefore recommend that those carriers not move 
immediately to a proxy model, but transition to a proxy over six years. 
For three years, starting on January 1, 1998, high cost assistance, DEM 
weighting and LTS benefits for rural carriers will be frozen based on 
historical per line amounts. Rural carriers would then transition over 
a three year period to a mechanism for calculating support based on a 
proxy model. Prior to that transition, however, we recommend that the 
Commission, working with the state commissions, review the proxy model 
to ensure that it takes into consideration the unique situations of 
rural carriers. We emphasize our recommendation that, after the 
transition, the calculation of support for rural telephone companies 
should be based on a proxy model, although we recognize that 
alternative support mechanisms, such as competitive bidding, may also 
promote efficient service provision. Further, we recommend that, on 
request, any rural carrier should be permitted to elect to use a proxy 
model to determine its support level, and that any carriers electing to 
use the proxy model not be allowed to use the embedded cost approach 
thereafter.

[[Page 63785]]

    48. The Joint Board recommends, however, that rural carriers be 
able to move to a proxy-based system earlier if they choose to do so. 
We recommend that the Commission define ``rural'' as those carriers 
that meet the statutory definition of a ``rural telephone company.'' 
See 47 U.S.C. 153(37). In order for the administrator to know which 
carriers are to receive support payments based on the proxy model or 
their embedded costs, we recommend that carriers notify the Commission 
and the state commissions that for purposes on universal service 
support determinations they meet the definition of a ``rural telephone 
company.'' Carriers should make such a notification each year prior to 
the beginning of the payout period for that year. The carriers may also 
use that notification as the means by which to let the Commission, the 
state commissions, and the administrator know if they have chosen to 
voluntarily move to a proxy model before the end of the transition 
period.
    49. We also find that LTS payments constitute a universal service 
support mechanism. As the Commission noted in the NPRM, LTS payments 
serve to equalize LECs' access charges by raising some carriers' 
charges and lowering others'. While some commenters have noted the 
beneficial purposes currently served by LTS, no commenter argued that 
LTS was not a support flow.
    50. We therefore recommend that beginning in 1998 and continuing to 
the end of the year 2000, support payments for high cost assistance, 
DEM weighting and Long Term Support, be frozen for each carrier at the 
same amounts paid on a per line basis to qualifying carriers. High cost 
support would be based on the assistance received in 1997, and DEM 
weighting and LTS benefits received during calendar year 1996. 
Beginning in the year 2001, and through the year 2003, we recommend 
that support be gradually shifted to a proxy-based methodology. In the 
year 2001, support would be based on 75 percent frozen levels and 25 
percent proxy; in 2002 support will be based on 50 percent frozen 
levels and 50 percent proxy; in 2003 support will be based on 25 
percent frozen levels and 75 percent proxy. Beginning in 2004 support 
will be 100 percent based on a proxy methodology. The total period for 
transition for rural carriers to a proxy based system is six years.
    51. Freezing support will encourage rural carriers to operate 
efficiently because no additional support will be provided for 
increased costs. We recognize that the number of subscribers served by 
rural carriers could increase and associated with such increases is an 
increase in costs. Therefore, we recommend that support not be frozen 
at a total dollar amount, but instead, at a per line amount. Rural 
carriers would receive additional support at the same amount per line 
as the number of subscribers increase. A frozen level of high cost 
support will prepare these LECs for both their move to a proxy model 
and the advent of a more competitive marketplace.
    52. High cost assistance to carriers with high loop costs that will 
be paid during 1997 are based on those carriers' 1995 embedded costs. 
Additionally, loop counts to determine the 1995 average costs per loop 
for each carrier are based on year-end 1995 loop counts. To determine 
the amount of frozen high cost support per line for carriers with high 
loop costs, we recommend that the total amount paid to each carrier 
during 1997, based on 1995 embedded costs, be divided by the number of 
loops served at the end of 1995. The amount of high cost assistance to 
be paid in 1998 will then be the same per line amount paid in 1997 
multiplied by the year end loop count for 1996. Calculation of payments 
would continue in this manner throughout the transition period.
    53. Currently, DEM weighting assistance is an implicit support 
mechanism that is recovered through the switched access rates charged 
to interexchange carriers by those carriers serving less than 50,000 
lines. In order to calculate the per-line DEM weighting benefit, we 
recommend that the amount of additional revenues collected by each 
carrier above what would be collected without DEM weighting, be 
calculated for the calendar year 1996. That amount, divided by the 
number of loops served at the year-end 1996 would be the basis for the 
frozen per line support to be paid beginning in 1998. Until December 
31, 1997, DEM weighting benefits would continue under the present 
rules. Although we could have recommended the calendar year 1997 as the 
basis for determining the frozen per-line amount for DEM weighting 
benefits during the transition period, we find that sufficient time 
will be needed for the fund administrator to gather the data and 
calculate payments before frozen DEM weighting benefits begin in 1998. 
We chose to use year-end 1996 loop counts because this calculation 
would have already been made for loop high cost assistance purposes. 
For 1999, the amount of frozen DEM weighting support would be based on 
the frozen per line amount multiplied by the number of lines served for 
the year-end 1997. Calculation of payments would continue in this 
manner throughout the transition period.
    54. LTS payments are currently determined by comparing the amount 
pool members will receive in SLCs and CCL charges to the pool's 
projected revenues requirement. In order to determine the frozen LTS 
payment for the Common Line pool members, we recommend that each member 
be allocated a percentage of the total LTS contribution from the non-
pooling LECs. We recommend that the allocation be made on the basis of 
each member's common line revenue requirement relative to the total 
common line pool revenue requirement. We recommend that the frozen LTS 
payments to pool members during the year ending 1996 and the loop 
counts at year-end 1996 be used as the historical basis for computing 
the frozen per line LTS payment beginning in 1998. For 1999, the amount 
of frozen LTS payments would be based on the frozen per line amount 
multiplied by the number of lines served for the year-end 1997. 
Calculation of payments would continue in this manner throughout the 
transition period.
    55. We recommend that the Commission make frozen support payments 
portable. A CLEC should be allowed to receive support payments to the 
extent that it is able to capture subscribers formerly served by 
carriers eligible for frozen support payments or to add new customers 
in the ILEC's study area. Because we have recommended that frozen 
support payments be computed on the basis of working loops, ILECs will, 
under our recommendation, automatically lose frozen support payments 
for loops serving subscribers lost to a competitor. We find that 
competition would best be served if the frozen support payment 
attributable to that line were paid instead to the CLEC that won the 
subscriber. Likewise, a CLEC should receive support for new customers 
that it serves in the ILECs study area. Since rural ILECs have the 
option at any time to convert their support basis to a proxy 
methodology, we find that a CLEC should also have the opportunity to 
choose proxy-based support when it enters a rural ILEC's study area.
    56. We propose that rural carriers in Alaska and in insular areas 
not be required to shift to a support system in which support levels 
are calculated based on a proxy model at this time. While we believe 
that proxy models may provide an appropriate determination of costs on 
which to base high cost support, we are less certain that they may do 
so for rural carriers in Alaska and insular areas. Consequently, we 
recommend that rural carriers serving Alaska and insular areas should

[[Page 63786]]

be able to continue to use embedded costs to determine their costs of 
offering universal service. We further recommend that this system for 
rural carriers in Alaska and insular areas be revisited in the future 
to determine whether changes in proxy models allow them to be utilized 
effectively in Alaska and insular areas.
    57. We recommend that the Commission establish a benchmark to 
calculate the support that eligible telecommunications providers will 
receive when a proxy model is used to calculate the costs of providing 
services designated for support from universal service mechanisms. We 
believe it is desirable that the benchmark be based on the amount the 
carrier would expect to recover from other services to cover the cost 
of providing supported services in rural, insular, and high cost areas, 
but final determination of the methodology for selecting the benchmark 
must also consider the revenue base for universal service 
contributions. Those eligible telecommunications providers for which 
the cost of providing supported services exceeds the benchmark would be 
permitted to receive universal service support.
    58. We believe that it is desirable for the Commission to set a 
nationwide benchmark to use in calculating the amount of support 
eligible telecommunications providers will receive. Final determination 
of this issue, however, must also take into consideration the 
contribution base for the federal universal service mechanisms. We 
recommend that the benchmark the Commission adopts should be easy to 
administer and should be set to minimize the probability that 
residential rates would increase while the new support mechanisms are 
being implemented. The carrier's draw from the federal universal 
service support mechanism for serving a customer would be based on the 
difference between the costs of serving a subscriber calculated using a 
proxy model and the benchmark. A carrier could draw from the fund for 
providing supported services to a subscriber only if the cost of 
serving the subscriber, as calculated by a proxy model, exceeds the 
benchmark.
    59. There are essentially three approaches to setting such a 
nationwide benchmark to be used with the proxy model for calculating 
support. In setting a benchmark, the Commission could use average 
revenues per line, average rates, or relative cost. We recommend that 
the Commission adopt a benchmark based on the nationwide average 
revenue-per-line. We recommend that the Commission review the benchmark 
on a periodic basis, and consider the need to make appropriate 
adjustments.
    60. We find that it is advisable to construct two benchmarks, one 
for residential service and a second for single-line business service, 
since we are recommending that primary residential and single business 
lines be supported. The residential benchmark, if ultimately adopted by 
the Commission, should be set equal to the sum of the revenue generated 
by local, discretionary, and access services provided to residential 
subscribers divided by the number of residential lines. The single-line 
business benchmark should be set equal to the sum of the revenue 
generated by local, discretionary, and access services provided to 
single- line business subscribers divided by the number of single-line 
business lines.
    61. Although we recognize that competitive bidding may provide a 
market-based method for determining support levels, we recommend that 
the Commission not adopt at this time any specific plan for using 
competitive bidding to set support levels in rural, insular, and high 
cost areas. While the record in this proceeding persuades us that a 
properly structured competitive bidding system could have significant 
advantages over other mechanisms used to determine the level of 
universal service support for high cost areas, we find that the 
information contained in the record does not support adoption of any 
particular competitive bidding proposal at this time. We recommend that 
the Commission, together with the state commissions, continue to 
explore the possibility of using competitive bidding for determining 
the level of federal universal support.
    62. We find that sections 254 and 214(e) and the record developed 
in this proceeding provide some guidance about how any potential 
competitive bidding should be structured. We recommend that any 
competitive bidding system be competitively neutral and not favor 
either the incumbent or new entrants. Any carrier that meets the 
eligibility criteria for universal service support should be permitted 
to participate in the auction. Any competitive bidding proposal must be 
consistent with the goals and requirements of the 1996 Act, including 
that universal service support be ``specific, predictable and 
sufficient.'' Any competitive bidding system adopted should minimize 
the ability of bidders to collude. Various commenters, for example, 
urge the Commission to establish and enforce stiff penalties against 
collusion, while others suggest that the Commission rely on its 
experience with spectrum auctions to devise protections against 
collusion. We recommend that any final competitive system be designed 
to minimize the incentives to collude and that any colluding carrier be 
subject to stiff penalties.
    63. The Joint Board recommends that the Commission set an effective 
date of January 1, 1998, for the new universal service support 
mechanism for rural, insular, and high cost areas that we have 
recommended in this section of the Recommended Decision take effect 
beginning January 1, 1998. The current universal service support 
mechanisms operate on a calendar year, and January 1, 1998, will be the 
beginning of the first calendar year after the Commission adopts rules 
establishing the new support mechanisms. Starting at that date, 
carriers other than rural telephone companies would begin to receive 
support based upon the proxy model.
    64. Support for Low-income Consumers. Congress included section 
254(j), which provides that ``[n]othing in [section 254] shall affect 
the collection, distribution, or administration of the Lifeline 
Assistance Program provided for by the Commission.'' Yet the current 
Lifeline program is not competitively neutral, nor is it available in 
all regions of the nation. We find that the provisions of section 
254(j) can be reconciled with other portions of section of 254 
regarding competitive neutrality and support for low-income consumers 
in all regions of the nation. As an initial matter, we believe that 
Congress did not intend for section 254(j) to codify the existing 
Lifeline program. Had Congress intended for section 254(j) to have that 
effect, it would have chosen clearer, less equivocal language. Instead, 
Congress simply provided that nothing in section 254 should affect the 
collection, distribution, or administration of the program. We 
therefore conclude that Congress intended, in section 254(j), to give 
the Joint Board and the Commission permission to leave the Lifeline 
program in place without modification, despite its inconsistencies with 
other provisions of section 254 and the 1996 Act generally. We further 
conclude that a necessary corollary to this interpretation of section 
254(j) is that this Joint Board has the authority to recommend, and the 
Commission has the authority to adopt, changes to the Lifeline program 
to make it more consistent with Congress's mandates in section 254 if 
such changes would serve the public interest.
    65. We find no statutory basis to recommend continuing to fund the 
federal Lifeline program in a manner

[[Page 63787]]

that places some IXCs at a competitive disadvantage, or that provides 
no support for low-income consumers in several portions of the nation. 
We conclude that our recommendations would make universal service 
support mechanisms for low-income individuals more consistent with 
Congress's express goals without fundamentally changing the basic 
nature of the existing Lifeline program. Moreover, this approach is 
consistent with Congress's expression of approval for the current 
Lifeline program in section 254(j).
    66. The Joint Board agrees with the vast majority of commenters and 
recommends that, through universal service support mechanisms, low-
income consumers should have access to the same services designated for 
support for rural, insular, and high cost areas. We further recommend 
that the designated services should be made part of the modified 
Lifeline Assistance program that we recommend adopting in section. 
Thus, low-income consumers eligible for Lifeline Assistance would 
receive, at a minimum, the designated services.
    67. The Joint Board recommends that the Lifeline Assistance program 
for eligible low-income consumers include support for voluntary toll 
limitation (by which we mean both toll blocking service and toll 
control service), in addition to the services mentioned above. We 
recommend, however, that only carriers that currently possess the 
capability of providing these services be required to provide them to 
Lifeline-eligible consumers and receive universal service support for 
such services. Eligible telecommunications carriers that are 
technically incapable of providing any toll-limitation services should 
not be required to provide either service, and such an incapability 
should not affect their designation as eligible telecommunications 
carriers. We recommend, however, that eligible telecommunications 
carriers not currently capable of providing these services be required 
to add the capability to provide at least toll blocking in any switch 
upgrades (but we do not recommend that universal service support be 
provided for such switch upgrades). We further recommend that carriers 
offering voluntary toll-limitation services receive support based on 
the incremental cost of providing those services.
    68. Further, the Joint Board recommends that the Commission 
prohibit carriers receiving universal service support for providing 
Lifeline service from disconnecting such service for non-payment of 
toll charges. This recommendation should not be construed to affect the 
ability of the states to implement a policy prohibiting disconnection 
of local service for non-payment of toll charges for non-Lifeline 
customers.
    69. We further recommend, however, that the Commission provide 
state utilities regulators with the authority to grant carriers a 
limited waiver of this requirement if the carrier can establish that: 
(1) it would incur substantial costs in complying with such a 
requirement; (2) it offers toll-limitation services to its Lifeline 
subscribers at no charge; and (3) telephone subscribership among low-
income consumers in the carrier's service area is at least as high as 
the national subscribership level for low-income consumers. We 
recommend that this waiver be extremely limited and that a carrier 
should be required to meet a very heavy burden to obtain a waiver. 
Furthermore, we recommend that the waiver would terminate after two 
years, at which time carriers could reapply for the waiver.
    70. The Joint Board recommends modifying the federal Lifeline 
program to reach low-income consumers in every state. (Hereinafter, 
``states'' will refer to all states, territories, and commonwealths 
within the jurisdiction of the United States.) We further recommend 
that, in order to be eligible for support from the new national 
universal service support mechanism pursuant to section 214(e)(1), 
carriers must offer Lifeline assistance to eligible low-income 
customers. We are reluctant, however, to recommend mandatory 
participation by states or carriers in a program that requires states 
to generate support from the intrastate jurisdiction.
    71. In order to reconcile our finding that Lifeline support should 
be extended to all states with our desire to maximize states' 
incentives to generate matching intrastate support for the program, we 
recommend that the Commission eliminate the state matching requirement 
and provide for a baseline level of federal support that would be 
available to low-income consumers in all states. In order to ensure 
adequate Lifeline support in states that choose not to generate 
intrastate matching funds, we believe this baseline federal support 
level should exceed the current $3.50. To maximize matching incentives, 
however, we believe the baseline support level should be less than 
$7.00. We therefore propose a baseline federal level halfway between 
the two figures at $5.25, and recommend that the Commission seek 
additional information on this issue before establishing a precise 
baseline level. To create further incentives for matching, we recommend 
that the Commission provide for additional federal support equal to one 
half of any support generated from the intrastate jurisdiction, up to a 
maximum of $7.00 in federal support.
    72. Although we believe this recommendation will best reconcile our 
competing objectives of providing adequate nationwide support and 
maximizing state matching incentives, we are concerned that the 
implementation of this recommendation could have no direct effect on 
Lifeline subscribers' rates in many populous states with existing 
Lifeline programs, and could instead result only in a larger percentage 
of the total support being generated from federal sources. Therefore we 
recommend that the Commission seek additional information on ways to 
avoid this unintended consequence before implementing this 
recommendation.
    73. We also find it essential that the state members of the Joint 
Board maintain a continuing role in refining specific aspects of the 
Lifeline program. The state members of the Joint Board will submit a 
report to the Commission on Lifeline issues. The report of the state 
members will be filed prior to the Commission's decision on the 
Lifeline program in this proceeding. Thereafter, the Commission and the 
state members should continue to work cooperatively and remain 
integrally involved in refining the Lifeline program.
    74. To make the Commission's Lifeline program competitively 
neutral, the Joint Board recommends that support for eligible low-
income consumers no longer be achieved through charges levied on only 
IXCs. We recommend that the programs be supported by a fund to which 
all telecommunications carriers that provide interstate service 
contribute on an equitable and nondiscriminatory basis as a function of 
their revenues, consistent with sections 254(d) and (e). Thus, for 
example, LECs, wireless carriers, and other interstate 
telecommunications service providers would contribute. De-linking 
Lifeline from the Commission's Part 69 rules would promote competitive 
neutrality by allowing the participation of carriers who do not charge 
SLCs, such as CLECs and wireless providers. We conclude that the new 
funding mechanism that we recommend will be more competitively neutral 
than the current system, which passes the entire federal burden of low-
income support to IXCs, without sacrificing the targeting that has 
characterized the current program. We also conclude that low-income

[[Page 63788]]

consumers will continue to benefit directly under our recommendation.
    75. In addition to changing the contribution method for the 
Lifeline program, we recommend amending the program to enable all 
eligible telecommunications carriers, not just LECs, to be eligible to 
receive support for serving qualified low-income consumers. Currently, 
only ILECs serving eligible low-income consumers can receive support. 
We find, however, that eligible telecommunications carriers other than 
ILECs should have the ability to compete to serve low-income consumers 
and in turn receive Lifeline support in a manner similar to the current 
program. We recommend that in order to participate, a carrier must 
demonstrate to the public utility commission of the state in which it 
operates that it offers a Lifeline rate to qualified individuals. We 
recommend that the Lifeline rate be the carrier's lowest comparable 
non-Lifeline rate reduced by at least the $5.25 amount of federal 
support. We further recommend that support be provided directly to 
carriers based on the number of eligible consumers they serve under 
administrative procedures determined by the fund administrator.
    76. Currently, state agencies or telephone companies administer 
customer eligibility determinations pursuant to narrowly-targeted 
programs approved by the Commission. We recommend that the Commission 
maintain this basic framework for administering Lifeline eligibility in 
states that provide matching support for the Lifeline program. We also 
recommend that the Commission require states that provide matching 
funds to base eligibility criteria solely on income or factors directly 
related to income (such as participation in a low-income assistance 
program). We further recommend that the Commission adopt specific 
means-tested eligibility standards to apply in states that choose not 
to provide matching support from the intrastate jurisdiction. 
Specifically, we recommend that low-income consumers participating in a 
state-administered, low-income welfare program (and who are not 
considered dependents for federal income tax purposes, with the 
exception of dependents over the age of 60) would be eligible for 
Lifeline assistance.
    77. The Joint Board recommends that the Commission adopt the 
changes to the Link Up program's funding mechanism proposed in the 
NPRM. We recommend that the Link Up funding mechanism be removed from 
the jurisdictional separations rules, and that the program be funded 
through equitable and non-discriminatory contributions from all 
interstate telecommunications carriers. Funding the program through 
contributions from all interstate carriers will allow for an explicit 
and competitively neutral funding mechanism consistent with sections 
254 (d) and (e).
    78. We recommend that the Commission amend its Link Up rules to 
make the present level of Link Up support available to qualifying low-
income consumers requesting service from any telecommunications carrier 
providing local exchange service. Support would be available only for 
the primary residential connection. As amended, the Link Up rules 
should thus provide that any eligible telecommunications carrier may 
draw support from the new Link Up funding mechanism described above if 
that carrier offers to eligible customers a reduction of its service 
connection charges equal to one half of the carrier's customary 
connection charge or $30.00, whichever is less. Where the carrier 
offers eligible customers a deferred payment plan for connection 
charges, we recommend that the Commission provide support to reimburse 
carriers for waiving interest on the deferred charges for eligible 
subscribers as Link Up currently provides for incumbent LECs' charges. 
To ensure that the opportunity for carrier participation is 
competitively neutral, we recommend that the Commission's rules be 
amended to eliminate the requirement that the commencement-of-service 
charges eligible for support be filed in a state tariff. In the absence 
of evidence that increasing the level of Link Up support for connecting 
each eligible customer would significantly further universal service 
goals, however, we recommend that the level of support for Link Up not 
be increased.
    79. With respect to subscribers' eligibility to participate in the 
Link Up program, the Joint Board recommends that the same modifications 
be made to the Link Up program that we have recommended for the 
Lifeline program. That is, we encourage states to set means-tested 
eligibility criteria, and we recommend that a federal eligibility 
``floor'' be established that would serve as eligibility criteria in 
states that choose not to define means-tested eligibility criteria of 
their own. Consistent with some commenters' proposals, we also 
recommend that the Commission prohibit states from restricting the 
number of service connections per year for which low-income consumers 
who relocate can receive Link Up support.
    80. We recommend that the Commission implement a national rule 
prohibiting telecommunications carriers from requiring Lifeline-
participating subscribers to pay service deposits in order to initiate 
service if the subscriber voluntarily elects to receive toll blocking.
    81. Issues Unique to Insular Areas. We recognize the special 
circumstances faced by carriers and consumers in the insular areas of 
the United States, particularly the Pacific Island territories. We note 
at the outset that carriers in these areas, like all other carriers, 
will be eligible for universal service support if they serve high cost 
areas. We recommend that rural carriers serving high cost insular 
areas, as well as rural carriers serving high cost areas in Alaska, 
should continue to receive universal service support based on their 
embedded costs.
    82. We recommend that the Commission take no specific action 
regarding cost support for toll service to the Northern Mariana Islands 
at this time, but revisit this issue at a later date. Guam and the 
Northern Mariana Islands will be included in the North American 
Numbering Plan by July 1, 1997. To implement section 254(g), the 
Commission will require interstate carriers serving the Pacific Island 
territories to integrate their rates with the rates for services that 
they provide to other states no later than August 1, 1997. (An 
interexchange carrier must establish rates for services provided to the 
Northern Mariana Islands and Guam consistent with the rate methodology 
that it employs for services it provides to other states. Carriers can 
choose among several ways to integrate the rates for services to these 
islands, including expanding mileage bands, adding mileage bands or 
offering postalized rates. A carrier must also offer optional calling 
plans, contract tariffs, discounts, promotions, and private line 
services using the same rate methodology and structure that it uses in 
offering those services to subscribers on the mainland.
    83. Once those carriers integrate their rates, the residents of 
Guam and the Northern Mariana Islands will be able to make 1+ calls to 
the mainland United States at domestic instead of international rates. 
Residents of Guam and the Northern Mariana Islands will also have 
direct access to toll-free (e.g., 800, 888) services. The decision 
whether to provide toll-free services to a specific area, such as the 
Pacific Island territories, is a business decision of the carrier's 
business customer, weighing the cost of toll charges to the islands 
against the economic benefit of

[[Page 63789]]

providing toll free access. Businesses currently make that same 
determination in deciding in which areas to provide toll free access 
within the fifty states, and, for business reasons, some of them choose 
to limit access to certain areas. Similarly, information service 
providers make the same type of business decision as to whether to 
locate in a certain area or provide toll-free access to an area. Until 
the islands join the NANP and are included in carriers' rate averaging, 
it is difficult for businesses to make such judgments as to whether, 
and how, to serve the islands.
    84. We are concerned that residents of Guam and the Northern 
Mariana Islands have access to toll free service and information 
services. We therefore recommend that the Commission revisit the 
question of comparable access and rates for toll-free and information 
services at some time after the Pacific Island territories have been 
included in the NANP and have integrated rates to determine whether 
there is any need to support these services.
    85. Support for Schools and Libraries. We recommend that the 
Commission adopt a rule that provides schools and libraries with the 
maximum flexibility to apply their universal service discount to 
whatever package of telecommunications services they believe will meet 
their telecommunications service needs most effectively and 
efficiently.
    86. We recommend that the Commission also provide eligible schools 
and libraries with discounts for Internet access pursuant to section 
254(h)(2). These discounts would apply to basic conduit, i.e., non-
content, access from the school or library to the backbone Internet 
network. This access would include the communications link to the ISP, 
whether through dial-up access or via a leased line, and the 
subscription fee paid to the ISP, if applicable. The discount would 
also apply to electronic mail, but any charges for such services would 
not be subject to the discount discussed herein. Schools and libraries 
would be permitted to apply the discount to the entire ``basic'' charge 
by an ISP that bundled access to some minimal amount of content, but 
only under those circumstances in which the ISP basic subscription 
charge represented the most cost-effective method for the school or 
library to secure non-content conduit access to the Internet.
    87. We also do not recommend that a discount mechanism for other 
information services be established at this time.
    88. We recommend that the Commission expressly acknowledge that 
schools and libraries may receive discounts on charges for internal 
connections. We find that Congress recognized that such connections are 
a critical element for achieving the congressional purpose of section 
254(h), and thus contemplated that schools and libraries receive 
universal service support for internal connections.
    89. Consistent with our recommendation to establish a competitively 
neutral program for discounting all telecommunications services and 
Internet access under section 254(h)(2)(A), we recommend that internal 
connections within schools and libraries, which may include such items 
as routers, hubs, network file servers, and wireless LANs, but 
specifically excluding personal computers, be included within the 
section 254(h) discount program.
    90. We recommend that schools and libraries be required to seek 
competitive bids for all services eligible for section 254(h) 
discounts. We recommend that schools and libraries be required to 
submit their requests for services to the fund administrator, who would 
post the descriptions of services sought on a web site for potential 
providers to see. The posting of a school or library's description of 
services would satisfy the competitive bid requirement. We recommend 
that the lowest corresponding price, defined as the lowest price 
charged to similarly situated non-residential customers for similar 
services, constitute the ceiling for the competitively bid pre-discount 
price. In areas in which there is no competition, we recommend that the 
lowest corresponding price constitute the pre-discount price. In both 
cases, the carrier would be required to self-certify that the price 
offered to schools and libraries is equal to or lower than the lowest 
corresponding price. We further recommend that schools, libraries, and 
carriers be permitted to appeal to the Commission, regarding interstate 
rates, and to state commissions, regarding intrastate rates, if they 
believe that the lowest corresponding price is unfairly high or low.
    91. We recommend that the Commission adopt a rule which provides 
support to schools and libraries through a percentage discount 
mechanism. The mechanism would be adjusted for schools and libraries 
that are defined as economically disadvantaged and those schools and 
libraries located in high cost areas. In particular, we recommend that 
the Commission adopt a matrix that provides discounts from 20 percent 
to 90 percent, to apply to all telecommunications services, Internet 
access, and internal connections, with the range of discounts 
correlated to the indicators of economic disadvantage and high cost for 
schools and libraries. We decline, however, to recommend a 100 percent 
discount for any category of schools or libraries.
    92. We recommend that the following matrix of percentage discounts 
be applied in the schools and libraries programs. The matrix represents 
an example of an appropriate distribution of schools across the five 
discount levels, according to the specified metric for determining the 
wealth of a school. If a different metric for determining the wealth of 
a school is ultimately chosen for the purposes of this program, we 
would expect that a similar distribution of schools across the discount 
range would be reflected. The principles in determining the final 
matrix should ensure that the greatest discounts go to the most 
disadvantaged schools and libraries, while an equitable progression of 
discounts should be applied to the other categories, keeping within the 
parameters of 20 percent to 90 percent discounts.

----------------------------------------------------------------------------------------------------------------
                                                                      Cost of service  (estimated percent in    
                                                                                     category)                  
            Discount matrix                                      -----------------------------------------------
                                                                     low cost        mid-cost      highest cost 
                                                                       (67%)           (26%)           (7%)     
----------------------------------------------------------------------------------------------------------------
How disadvantaged? based on percent of  < 1 (3%)................              20              20              25
 students in the national school lunch  1-19 (30.7%)............              40              45              50
 program (estimated percent in          20-34 (19%).............              50              55              60
 category).                             35-49 (15%).............              60              65              70
                                        50-74 (16%).............              80              80              80
                                        75-100 (16.3%)..........              90              90              90
----------------------------------------------------------------------------------------------------------------


[[Page 63790]]

    93. In addition, we recommend that the Commission set an annual cap 
on spending of $2.25 billion per year. In addition, any funds that are 
not disbursed in a given year may be carried forward and may be 
disbursed in subsequent years without regard to the cap. We further 
recommend that the Commission establish a trigger mechanism, so that if 
expenditures in any year reach $2 billion, rules of priority would come 
into effect. Under the rules of priority, only those schools and 
libraries that are most economically disadvantaged and had not yet 
received discounts from the universal service mechanism in the previous 
year would be granted guaranteed funds, until the cap was reached. 
Other economically disadvantaged schools and libraries would have 
second priority for support if additional funds were available at the 
end of the year. Finally, all other eligible schools and libraries 
would be granted funding contingent on availability after economically 
disadvantaged schools and libraries had requested funding. We also 
recommend that the Joint Board, as part of its review in the year 2001, 
revisit the effectiveness of the schools and libraries program.
    94. We recommend that the statutory definition of ``affordable'' 
must take into account the cost of service in an area. Thus, we 
recommend that the Commission take into account the cost of providing 
services when setting discounts for schools and libraries. To achieve 
this, we recommend that the Commission consider a ``step'' approach 
that would calibrate the cost of service in some reasonable, practical, 
and minimally burdensome manner. Other methods for determining high 
cost may also be appropriate, and we encourage the Commission to seek 
additional information and parties' comments on this issue prior to 
adopting rules.
    95. To minimize any additional recordkeeping or data gathering 
obligations, we seek the least burdensome manner to determine the 
degree to which a school or library is economically disadvantaged. We 
recommend that the Commission seek additional information and parties' 
comments on what measures of economic disadvantage may be readily 
available for identification of economically disadvantaged non-public 
schools or, if not readily available, what information could be 
required that would be minimally burdensome.
    96. The national school lunch program reflects the level of 
economic disadvantage for children enrolled in school. While using a 
model that measures the wealth of an entire school district may better 
reflect per-pupil expenditures in that district, we conclude that a 
model measuring the wealth of students enrolled in school will more 
accurately reflect the level of economic disadvantage in all of the 
schools and libraries eligible for universal service support under 
section 254, including both public and non-public schools. We find, 
therefore, that using the national school lunch program to determine 
eligibility for a greater discount appears to fulfill more accurately 
the statutory requirement to ensure affordable access to and use of 
telecommunications and other covered services for schools and 
libraries.
    97. If it decides to use the national school lunch program as the 
model for determining eligibility for a greater discount, we recommend 
that the Commission require the entity responsible for ordering 
telecommunications services or other covered services for schools to 
certify to the administrator and to the service provider the percentage 
of its students eligible for the national school lunch program when 
ordering telecommunications and other covered services from its service 
providers. For schools ordering telecommunications and other covered 
services at the individual school level, which should include primarily 
non-public schools, the person ordering such services should certify to 
the administrator and to the service provider the percentage of 
students eligible in that school for the national school lunch program. 
Each school's level of discount will then be calculated by the 
administrator based on the percentage of students eligible for the 
national school lunch program.
    98. For schools ordering telecommunications and other covered 
services at the school district level, we seek to target the level of 
discount based on each school's percentage of students eligible for the 
national school lunch program, if the national school lunch program is 
selected as the appropriate measure of economic disadvantage. At the 
same time, we seek to minimize the administrative burden on school 
districts. Therefore, we recommend that the district office certify to 
the administrator and to the service provider the number of students in 
each of its schools who are eligible for the national school lunch 
program. We recommend that the district office may decide to compute 
the discounts on an individual school basis or it may decide to compute 
an average discount. We further recommend that the school district 
assure that each school receive the full benefit of the discount to 
which it is entitled.
    99. We recommend that schools or districts do not have to 
participate in the national school lunch program in order to 
demonstrate their level of economic disadvantage. Schools or districts 
that do not participate in the national school lunch program need only 
certify the percentage of their students who would be eligible for the 
program, if the school or district did participate. Since libraries do 
not participate in the national school lunch program, we recommend that 
they be eligible for greater discounts based on their location in a 
school district serving economically disadvantaged students. That is, 
the administrator would average the percentage of students eligible for 
the national school lunch program in all eligible schools, both public 
and non-public, within the school district in which a library was 
located. The library would then receive the level of discount 
representing the average discount offered to the school district in 
which it was located. We find that this is a reasonable method of 
calculation because libraries are likely to draw patrons from an entire 
school district and this method does not impose an unnecessary 
administrative burden on libraries. We recommend that the Commission 
seek additional information and parties' comments on what measures of 
economic disadvantage may be readily available for identification of 
economically disadvantaged libraries or, if not readily available, what 
information could be required that would be minimally burdensome.
    100. We also recommend that the Commission adopt a step approach 
for calculating the level of greater discount available to economically 
disadvantaged schools and libraries. A step approach would provide 
multiple levels of discount based on the percentage of students 
eligible for the national school lunch program.
    101. We also recommend that the Commission establish a separate 
category for the least economically disadvantaged schools, those with 
less than one percent of their students eligible for the national 
school lunch program. Those schools should have comparatively 
sufficient resources within their existing budgets so that they may 
secure affordable access to services at lower discounted rates. In our 
effort not to duplicate research already conducted and to tailor 
greater discounts based on level of economic disadvantage more 
accurately, we recommend using the Department of Education's five-step 
breakdown to calculate the greater discounts on telecommunications and 
other covered

[[Page 63791]]

services for economically disadvantaged schools.
    102. To the extent that a state desires to supplement the discount 
financed through the federal universal service fund by permitting its 
schools and libraries to apply the discount to the special low rates, 
its actions would be consistent with sections 254(h) and 254(f). 
Furthermore, we believe that it would also be permissible for states to 
choose not to supplement the federal program and thus prohibit its 
schools and libraries from purchasing services at special state-
supported rates if they intend to secure federal-supported discounts.
    103. We recommend that the Commission not require any schools or 
libraries that had secured a low price on service to relinquish that 
rate simply to secure a slightly lower price produced by including a 
large amount of federal support. No discount would apply, however, to 
charges for any usage of telecommunications or information services 
prior to the effective date of rules promulgated pursuant to this 
proceeding.
    104. We recommend that the Commission recognize that it can provide 
for federal universal service support to fund intrastate discounts. We 
also recommend that the Commission adopt rules that provide federal 
funding for discounts for schools and libraries on both interstate and 
intrastate services to the levels discussed above, and that 
establishment of intrastate discounts at least equal to the discounts 
on interstate services be a condition of federal universal service 
support for schools and libraries in that state. If a state wishes to 
provide an intrastate discount less than the federal discount, then it 
may seek a waiver of this requirement.
    105. On careful review, we conclude that, despite the difficulties 
of allocating costs and preventing abuses, the benefits from permitting 
schools and libraries to join in consortia with other customers in 
their community outweigh the danger that such aggregations will lead to 
significant abuse of the prohibition against resale. We recommend that 
state commissions undertake measures to enable consortia of eligible 
and ineligible entities to aggregate their purchases of 
telecommunications services and other services being supported through 
the discount mechanism, in accordance with the requirements set forth 
in section 254(h).
    106. We recommend that the Commission interpret section 254(h)(3) 
to restrict any resale whatsoever of services purchased pursuant to a 
section 254 discount.
    107. Section 254(h)(3)'s prohibition on resale, however, would not 
prohibit either computer lab fees for students or fees for Internet 
classes. Because these are not services that schools or libraries 
purchased at a discount under the 1996 Act, they are not subject to the 
resale ban. Therefore, we recommend that schools and libraries be 
expected to comply with three bona fide request requirements.
    108. First, we find that it would not be unduly burdensome to 
expect schools and libraries to certify that they have ``done their 
homework'' in terms of adopting a plan for securing access to all of 
the necessary supporting technologies needed to use the services 
purchased under section 254(h) effectively.
    109. Second, we recommend that schools and libraries be required to 
send a description of the services they desire to the fund 
administrator or other entity designated by the Commission. They can 
use the same description they use to meet the requirement that most 
generally face to solicit competitive bids for all major purchases 
above some dollar amount. The fund administrator or this other entity 
could then post a description of the services sought on a web site for 
all potential competing service providers to see and respond to as if 
they were requests for proposals.
    110. Third, we recommend that, to ensure compliance with section 
254, every school or library that requests services eligible for 
universal service support be required to submit to the service provider 
a written request for services. We recommend that the request should be 
signed by the person authorized to order telecommunications and other 
covered services for the school or library, certifying the following 
under oath: (1) the school or library is an eligible entity under 
section 254(h)(4); (2) the services requested will be used solely for 
educational purposes; (3) the services will not be sold, resold, or 
transferred in consideration for money or any other thing of value; and 
(4) if the services are being purchased as part of an aggregated 
purchase with other entities, the identities of all co-purchasers and 
the portion of the services being purchased by the school or library.
    111. We recommend that schools and libraries, as well as carriers, 
be required to maintain for their purchases of telecommunications and 
other covered services at discounted rates the kinds of procurement 
records that they already keep for other purchases. We expect schools 
and libraries to be able to produce such records at the request of any 
auditor appointed by a state education department, the fund 
administrator, or any other state or federal agency with jurisdiction 
that might, for example, suspect fraud or other illegal conduct. We 
recommend that schools and libraries also be subject to random 
compliance audits to evaluate what services they are purchasing and how 
such services are being used. Such information would permit the 
Commission to determine whether universal service support policies 
require adjustment. The fund administrator should also develop 
appropriate reporting information for the schools and libraries to 
advise on their progress in obtaining access to telecommunications and 
other information services.
    112. Section 254(h)(1)(B) requires that telecommunications carriers 
providing services to schools and libraries shall either apply the 
amount of the discount afforded to schools and libraries as an offset 
to its universal service contribution obligations or shall be 
reimbursed for that amount from universal service support mechanisms. 
We conclude that section 254(h)(1)(B) requires that telecommunications 
carriers be permitted to choose either reimbursement or offset. Because 
non-telecommunications carriers are not obligated to contribute to 
universal service support mechanisms, they would not be entitled to an 
offset. Non-telecommunications carriers providing eligible services to 
schools and libraries, therefore, would be entitled only to 
reimbursement from universal service support mechanisms.
    113. We recommend that the Commission adopt rules that will permit 
schools and libraries to begin using discounted services ordered 
pursuant to section 254(h) at the start of the 1997 - 1998 school year. 
We anticipate that they may begin complying with the self-certification 
requirements as soon as the Commission's rules become effective.
    114. Support for Health Care Providers. We find that the record is 
insufficient to support a recommendation on the exact scope of 
services, in addition to designated services, that should be supported 
for rural health care providers. We therefore recommend that the 
Commission solicit additional information and expert assessment of the 
exact scope of services that should be included in the list of those 
additional services ``necessary for the provision of health care in a 
state.'' We recommend that the Commission seek information on the 
telecommunications needs of rural health care providers and on the most 
cost-effective ways to provide these services to rural America. 
Finally, we recommend that the Commission take

[[Page 63792]]

this information and these assessments into account in deciding what 
services to include as services eligible for universal service support.
    115. In reaching its decision on the scope of services to support, 
we recommend that the Commission include terminating as well as 
originating services for universal service support in cases where the 
eligible health care provider would pay for terminating as well as 
originating services, such as in the case of cellular air time charges.
    116. Further, we recommend that the Commission initially designate 
only telecommunications services as eligible for support as expressly 
provided under the terms of sections 254(c)(1) and 254(h)(1)(A). We do 
not, at this time, recommend that the Commission find that customer 
premises equipment should be eligible for support.
    117. After the Commission designates those services eligible for 
support for rural health care providers, we recommend that the 
Commission's list of supported telecommunications services be revisited 
in 2001, when the Commission is scheduled to reconvene a Joint Board on 
universal service.
    118. On the question of determining the urban rate, we recommend 
that, for each telecommunications service delivered to a qualified 
health care provider as provided in section 254(h)(1)(A), the 
Commission should designate as the rate ``reasonably comparable to 
rates charged for similar services in urban areas in that state'' (the 
``urban rate''), the highest tariffed or publicly available rate 
actually being charged to commercial customers within the 
jurisdictional boundary of the nearest large city in the state 
(measured by airline miles from the health care provider's location to 
the closest city boundary point). We do not recommend an exact 
definition of the size of population a city must have to qualify as 
``large'' for purposes of calculating the urban rate. We leave that 
determination to the Commission.
    119. Because we are recommending that the highest tariffed or 
publicly available urban rate be used to set the urban rate charged to 
the health care provider, we think it is important to use for this 
purpose an urban boundary smaller than a county boundary so as to 
minimize the possibility of inadvertently including distance-based or 
lower-density-based surcharges within the comparable urban rate. We 
also believe that using larger cities for this purpose will increase 
the likelihood that the rates in those cities will reflect to the 
greatest extent possible, reductions in rates based on large-volume, 
high-density factors that affect telecommunications rates. Because we 
see nothing in the 1996 Act or its legislative history that would 
prohibit using different definitions of urban for different purposes in 
section 254, we recommend using, for purposes of determining the 
``urban rate in the closest urban area,'' the jurisdictional boundaries 
of larger cities. We further recommend that the Commission designate by 
regulation the exact city population size to define the term ``large 
city,'' that it finds will best balance the factors described in this 
paragraph.
    120. We recommend that the Commission seek additional information 
on the rate of expansion of local access coverage of ISPs in rural 
areas of the country and the costs likely to be incurred in providing 
toll-free access to ISPs for health care providers in rural areas. We 
also recommend that the Commission take this information into account 
in deciding what services to include as services eligible for universal 
service support.
    121. We encourage the Commission to solicit additional information 
on the probable costs that would be incurred in eliminating distance-
based and LATA crossing (InterLATA) charges for rural health care 
providers where such charges are in excess of those paid by customers 
in the nearest urban areas of the state. We recommend that the 
Commission take this information into account in deciding whether to 
include these charges in the list of charges eligible for universal 
service support.
    122. We further recommend that the Commission solicit further 
information on these topics and make appropriate provision for 
equalizing any disparities between urban and rural telecommunications 
rates to health care providers in insular areas.
    123. On the question of determining the rural rate, mindful of the 
Commission's obligation to craft a mechanism that is ``specific, 
predictable and sufficient,'' we recommend that the rural rate be 
determined to be the average of the rates actually being charged to 
customers, other than eligible health care providers, for identical or 
technically similar services provided by the carrier providing the 
service, to commercial customers in the rural county in which the 
health care provider is located. For all purposes associated with 
determining the rural rate, we recommend that the term ``rural county'' 
be defined as any ``non-metro'' county as defined by the Office of 
Management and Budget Metropolitan Statistical Areas (OMB MSA) list, 
along with the non-urban areas of those metro counties identified in 
the Goldsmith Modification used by the Office of Rural Health Policy of 
the Department of Health and Human Services (ORHP/HHS). We also 
recommend that the rates averaged to calculate the rural rate not 
include any rates reduced by universal service programs and paid by 
schools, libraries or rural health care providers.
    124. We further recommend that, where the carrier is providing no 
identical or technically similar services in that rural county, the 
rural rate should be determined by taking the average of the tariffed 
and other publicly-available rates charged for the same or similar 
services in that rural county by other carriers. If no such services 
have been charged or are publicly available, or if the carrier deems 
the method described here, as it would be applied to the carrier, to be 
unfair for any reason, the carrier should be allowed, in the first 
instance, to submit for the state commission's approval a cost-based 
rate for the provision of the service in the most economically 
efficient, reasonably available manner. Where state commission review 
is not available, the carrier should be allowed to submit the proposed 
rate to the Commission for its approval. The proposed rate should be 
supported, justified, reviewed and approved, in the initial submission 
and periodically thereafter, according to procedures and requirements 
similar to those used for establishing tariffed rates for 
telecommunications services in that state.
    125. In cases where there are no similar services being provided in 
the rural county, either by the carrier or by others, and thus no 
comparable rates to average, or where the carrier concludes that rates 
derived from this formula are unfair, we find the availability of a 
cost-based rate application procedure becomes an important backstop. We 
intend that this procedure will ensure greater fairness to the carrier 
and further ensure that the support mechanism is more likely to be 
``sufficient'' as required by section 254. We note, however, that the 
record is inadequate on this issue and, accordingly, we recommend that 
the Commission request additional information prior to adopting final 
rules, on the costs that would be incurred in supporting necessary 
upgrades to the public switched network. We also recommend that the 
Commission seek additional information as to what extent ongoing 
network modernization, as is currently going forward under private 
initiatives or according to state-sponsored modernization plans, might 
make universal service support of this element unnecessary. We further

[[Page 63793]]

recommend that the Commission take this information into account in 
deciding whether to include network upgrades in the list of services 
eligible for universal service support.
    126. We recommend that there be no separate funding mechanism for 
eligible health care providers and schools and libraries. We further 
recommend that separate accounting and allocation systems be maintained 
for the funds collected for the two groups.
    127. We recommend that to define ``rural areas'' the Commission use 
non-metro counties (or county equivalents), as identified by the OMB 
MSA list of metro and non-metro counties, together with rural areas in 
metro counties identified in the most currently available ``Goldsmith 
Modification'' of the MSA list used by the ORHP/HHS. To the extent that 
the Commission can improve upon these definitions prior to its 
statutory deadline, by identifying other rural areas in metro counties 
not identified in the current version of the Goldsmith Modification, we 
encourage the Commission to do so.
    128. We conclude that where all rural areas are entitled to a rate 
no higher than the highest rate in the closest city, there is no need 
to make additional provisions for frontier areas, or areas with extra-
low population density, as some parties suggest.
    129. We recommend creating a mechanism that makes eligible the 
largest reasonably practicable number of health care providers that 
primarily serve rural residents and that, due to their location, are 
prevented from obtaining telecommunications services at rates available 
to urban customers. We agree, therefore, with the commenters that urge 
that eligibility to obtain telecommunications services at rates 
reasonably comparable to rates in the state's urban areas be limited to 
providers that are physically located in rural areas.
    130. We recommend that the Commission attempt no further 
clarification of the definition of the term ``health care provider.'' 
We find that section 254(h)(5)(B) adequately describes those entities 
intended by Congress to be eligible for universal service support. 
Therefore, we decline to recommend expanding or broadening those 
categories.
    131. We recommend that the Commission allow telecommunications 
carriers providing services to health care providers at reasonably 
comparable rates under the provisions of section 254(h)(1)(A), to treat 
the amount eligible for support, calculated as recommended herein, as 
an offset toward the carrier's universal service support obligation. We 
recommend that the Commission disallow the option of direct 
reimbursement although we recognize that this alternative is within the 
Commission's authority. We also recommend that carriers be allowed to 
carry offset balances forward to future years so that the full amounts 
eligible to be treated as a credit may be applied to reduce their 
universal service obligation.
    132. We recommend that every health care provider that makes a 
request for universal service support for telecommunications services 
be required to submit to the carrier a written request, signed by an 
authorized officer of the health care provider, certifying under oath 
the following information:

    (1) Which definition of health care provider in section 
254(h)(5)(B) the requester falls under;
    (2) That the requester is physically located in a rural area OMB 
defined non-metro county or Goldsmith-define rural section of an OMB 
metro county);
    (3) That the services requested will be used solely for purposes 
reasonably related to the provision of health care services or 
instruction that the health care provider is legally authorized to 
provide under the law of the state in which they are provided;
    (4) That the services will not be sold, resold or transferred in 
consideration of money or any other thing of value;
    (5) If the services are being purchased as part of an aggregated 
purchase with other entities or individuals, the full details of any 
such arrangement, including the identities of all co-purchasers and 
the portion of the services being purchased by the health care 
provider.

The certification should be renewed annually.
    133. We recommend that the Commission require the universal service 
fund administrator to establish and administer a monitoring and 
evaluation program to oversee the use of universal-service-supported 
services by health care providers, and the pricing of those services by 
carriers.
    134. We also recommend that the Commission encourage carriers 
across the country to notify eligible health care providers in their 
service areas of the availability of lower rates resulting from 
universal service support so that the goals of universal service to 
rural health care providers will be more rapidly fulfilled.
    135. We recommend that health care providers be encouraged to enter 
into aggregate purchasing and maintenance agreements for 
telecommunications services with other public and private entities and 
individuals, provided however, that the entities and individuals not 
eligible for universal service support pay full rates for their portion 
of the services. In addition, in these arrangements, we recommend that 
the Commission's order make clear that the qualified health care 
provider can be eligible for reduced rates, and the telecommunications 
carrier can be eligible for support, only for that portion of the 
services purchased and used by the health care provider.
    136. The Commission's adoption of rules providing universal service 
support under section 254(h)(1) will significantly increase the 
availability and deployment of telecommunications services for rural 
health care providers. Furthermore, we conclude that the additional 
action the Commission will undertake, as discussed above, will be 
sufficient to ensure the enhancement of access to advanced 
telecommunications and information services for these and other health 
care providers.
    137. We propose that the Commission establish rules governing the 
implementation of the support mechanisms recommended above. We 
anticipate that the fund administrator will begin receiving and 
processing telecommunications service requests on or about June 1, 
1997. Therefore, we recommend that the Commission advise eligible 
health care providers that they may begin submitting requests to 
carriers for supported services as soon as practicable after the 
Commission adopts final rules.
    138. The rules should provide that the telecommunications carrier 
may begin to deploy the requested service as soon as practicable after 
it has received (1) a written request for an eligible 
telecommunications service, (2) a properly completed signed and sworn 
certification as provided in paragraph 92 of this section, (3) 
approval, if necessary, from the appropriate agency of the rate to be 
charged for the requested service, and (4) satisfactory payment or 
payment arrangements for the portion of the rate charged that is the 
responsibility of the health care provider.
    139. Interstate Subscriber Line Charges and Carrier Common Line 
Charges. We recommend that the Commission adopt the tentative 
conclusion reached in the NPRM that LTS payments constitute a universal 
service support mechanism. As the Commission noted in the NPRM, LTS 
payments serve to equalize LECs' access charges by raising some 
carriers' charges and lowering others.
    140. We recommend that the LTS system no longer be supported via 
the access charge regime. We recommend that rural LECs continue to 
receive payments comparable to LTS from the

[[Page 63794]]

new universal service support mechanism. Such payments would be 
computed on a per-line basis for each ILEC currently receiving LTS, 
based on the LTS payments that carrier has received over a historical 
period prior to the release of this Recommended Decision. In the 
interest of competitive neutrality, such payment would also be 
portable, on a per-line basis, to competitors that win the ILEC's 
subscribers. To this extent, we recommend that the Commission adopt the 
position of those commenters favoring the reformation of the LTS 
mechanism to make it consistent with the 1996 Act. We make this 
recommendation because we find that LTS payments currently serve the 
important public interest function of reducing the amount of loop cost 
that high cost LECs must seek to recover from IXCs through interstate 
access charges, and thereby facilitating interexchange service in high 
cost areas.
    141. The Joint Board concludes that the current $3.50 SLC cap for 
primary residential and single-line business lines should not be 
increased. In the event that the Commission implements a rule assessing 
carriers' universal service contributions based on all 
telecommunications revenues regardless of jurisdictional 
classification, we recommend that the benefits from these CCL 
reductions be apportioned equally between primary residential and 
single-line-business subscribers to local exchange service, on the one 
hand, through a reduction in the SLC cap for those lines, and 
interstate toll users, on the other hand, through lower CCL charges.
    142. Currently, ILECs are required to recover through traffic-
sensitive CCL charges those interstate-allocated loop costs not 
recovered through SLCs and LTS payments. In the NPRM, the Commission 
referred to the Joint Board questions related to the recovery of these 
loop costs, and suggested that the current mechanism may constitute a 
universal service support flow. The Joint Board reaches no conclusion 
on this question. We believe, however, that it would be desirable for 
the Commission in the very near future to consider revising the current 
CCL charge structure so that LECs are no longer required to recover the 
NTS cost of the loop from IXCs on a traffic-sensitive basis.
    143. Administration of Support Mechanisms. We recommend to the 
Commission that the statutory requirement that ``all carriers that 
provide interstate telecommunications services'' must contribute to 
support mechanisms be construed broadly. A broad base of funding will 
ensure that competing firms make ``equitable and nondiscriminatory 
contributions'' and will reduce the burden on any particular class of 
carrier. In order to interpret the term ``telecommunications carrier'' 
as broadly as possible, we recommend providing a non-exclusive, 
illustrative list of ``interstate telecommunications.'' We recommend 
requiring any entity that provides any interstate telecommunications 
for a fee to the public, or to such classes of eligible users as to be 
effectively available to a substantial portion of the public, to 
contribute to the fund.
    144. Thus, for the purposes of identifying which entities must 
contribute to universal service support mechanisms, the Joint Board 
recommends that the Commission adopt a definition of ``interstate 
telecommunications'' that is similar to the one used for determining 
TRS support. We recommend that ``interstate telecommunications'' 
include, but not be limited to, the interstate portion of the 
following:

    cellular telephone and paging, mobile radio, operator services, 
PCS, access (including SLCs), alternative access and special access, 
packet switched, WATS, toll-free, 900, MTS, private line, telex, 
telegraph, video, satellite, international/foreign, intraLATA, and 
resale services

Generally, telecommunications are ``interstate'' when the communication 
or transmission originates in one state, territory, possession or the 
District of Columbia and terminates in another state, territory, 
possession or the District of Columbia. In addition, under the 
Commission's rules, if over ten percent of the traffic over a private 
or WATS line is interstate, then the revenues and costs generated by 
the entire line are allocated to the interstate jurisdiction.
    145. We recommend adoption of the TRS approach, because carriers 
and the Commission are already familiar with this approach. 
Contributions to the TRS fund are based on gross interstate 
telecommunications revenues. We do not recommend that the Commission 
base contributions to the support mechanism in this manner. We find no 
reason to exempt from contribution CMRS, satellite operators, 
resellers, paging companies, utility companies or carriers that serve 
rural or high cost areas that provide interstate telecommunications 
services, because the 1996 Act requires ``every telecommunications 
carrier that provides interstate telecommunications services'' to 
contribute to support mechanisms. Thus, to the extent that these 
entities are considered ``telecommunications carriers'' providing 
``interstate telecommunications services,'' they must contribute to 
universal service support mechanisms.
    146. We recommend that ``wholesale'' carriers, carriers that 
provide services to other carriers, should be required to contribute, 
because such carriers' activities are included in the phrase ``to such 
classes of eligible users as to be effectively available to a 
substantial portion of the public.'' The Commission has interpreted 
this phrase to mean ``systems not dedicated exclusively to internal 
use,'' or systems that provide service to users other than 
significantly restricted classes. We recommend adopting the same 
definition for universal service purposes. Thus, for example, to the 
extent PMRS MSS providers lease capacity to other carriers, they would 
be considered carriers that provide interstate telecommunications 
services.
    147. We do not find any reason to define ``for a fee'' as ``for 
profit'' and recommend that the Commission interpret the phrase ``for a 
fee'' as meaning services rendered in exchange for something of value 
or a monetary payment. The Joint Board concludes that the requirement 
that ``every telecommunications carrier'' contribute towards the 
support of universal service, requires all interstate 
telecommunications carriers, including wholesalers and non-profit 
organizations, to contribute to support mechanisms. Thus, we recommend 
that the Commission require any entity that provides any of the listed 
interstate telecommunications services on a wholesale, resale or retail 
basis to contribute to support mechanisms to the extent that it 
provides interstate telecommunications services.
    148. We recommend that information service providers and enhanced 
service providers not be required to contribute to support mechanisms. 
We note, however, that if information or enhanced service providers 
provide any of the listed interstate telecommunications to the public 
for a fee, they would be required to contribute to support mechanisms 
based on the revenues derived from telecommunications services. We also 
recommend that the Commission re-evaluate which services qualify as 
information services in the near future to take into account changes in 
technology and the regulatory environment.
    149. With respect to the issue of whether CMRS providers should 
contribute to state universal service support mechanisms, we find that 
section 332(c)(3) does not preclude

[[Page 63795]]

states from requiring CMRS providers to contribute to state support 
mechanisms. In addition, section 254(f) requires that all contributions 
to state support mechanisms be equitable and nondiscriminatory.
    150. We recommend that the Commission not require ``other providers 
of telecommunications'' to contribute to support mechanisms at this 
time.
    151. The Joint Explanatory Statement states that the de minimis 
exemption applies only to those carriers for which the cost of 
collection exceeds the amount of contribution. Thus, we recommend that 
the Commission interpret the de minimis exemption in this manner. We 
find that the legislative history of section 254(d) indicates Congress' 
intent that this exemption be narrowly construed.
    152. We recommend that, once it determines the administrator's cost 
of collection, the Commission exempt carriers for which the 
contribution would be less than the cost of collection. We suggest that 
such carriers be exempt from contribution and reporting requirements. 
We also recommend that the Commission re-evaluate administrative costs 
periodically once the contribution mechanisms are implemented. We 
reject requiring flat minimum payments for carriers qualifying for the 
de minimis exemption, because it would be impractical to require a 
payment that would result in a net loss to the support mechanism.
    153. We recommend that contributions be based on a carrier's gross 
telecommunications revenues net of payments to other carriers.
    154. The Joint Board acknowledges that some ILECs may not be free 
to adjust rates to account for the amount of their contributions to 
universal service support. We therefore recommend clarifying that, 
under the Commission's section 251 rules, ILECs are prohibited from 
incorporating universal service support into rates for unbundled 
network elements. We note, however, that carriers are permitted under 
section 254 to pass through to users of unbundled elements an equitable 
and nondiscriminatory portion of their universal service obligation.
    155. We recommend that the Commission clarify that contributions to 
support mechanisms may be made in cash or through the provision of 
``in-kind'' services at ``comparable'' or ``discounted'' rates.
    156. The Joint Board recommends that universal service support 
mechanisms for schools and libraries and rural health care providers be 
funded by assessing both the intrastate and interstate revenues of 
providers of interstate telecommunications services. The Joint Board 
makes no recommendation concerning the appropriate funding base for the 
modified high cost and low income assistance programs, but does request 
that the Commission seek additional information and parties' comment, 
particularly the states, regarding the assessment method for these 
programs.
    157. The 1996 Act reflects the continued partnership between the 
states and the FCC in preserving and advancing universal service. 
Together, sections 254(d) and 254(f) contemplate continued 
complementary state and federal programs for advancing universal 
service. The Joint Board finds that state universal service programs 
should continue to play an important role in ensuring universal service 
to all consumers.
    158. While section 254(d) prescribes that every telecommunications 
carrier that provides interstate communications services shall 
contribute on an equitable and nondiscriminatory basis to the specific, 
predictable and sufficient universal service support mechanisms 
established by the Commission, the statute does not expressly identify 
the assessment base for the calculation. We recognize that the 
universal service mechanism established in this proceeding to address 
the needs of rural, insular and high cost areas will be combined with 
the existing high cost assistance, DEM weighting, Linkup, Lifeline and 
Long Term Support funding mechanisms.
    159. The appropriate revenue base for collecting support for the 
high cost and low income programs must be considered in tandem with the 
distribution of these funds. The current federal high cost and low 
income programs are supplemented by existing state programs. As we have 
discussed, the development and composition of a universal service 
support mechanism based on a proxy model has been deferred for decision 
at this time, pending the convening of staff workshop sessions. We have 
also deferred decision on the appropriate revenue benchmark to compute 
the level of federal universal service support. Similarly, the 
modifications to the Lifeline program have been tentatively identified 
and set forth in this Recommended Decision for further comment. We find 
that it would be premature at this time to conclude how the high cost 
assistance fund and low income assistance programs should be funded, 
i.e., whether interstate telecommunications carriers' contributions 
should be confined to interstate revenues or whether they should 
include a combination of interstate and intrastate revenues.
    160. The Joint Board recommends that the Commission seek further 
information and parties' comments on the issue of whether both 
intrastate and interstate revenues of carriers that provide interstate 
telecommunications should be assessed to fund the Commission's high 
cost and low income support mechanisms. The role of complementary state 
and federal universal service mechanisms requires further reflection. 
An additional consideration is whether the states have the ability to 
assess the interstate revenues of providers of intrastate 
telecommunications services to fund state universal service programs 
and whether that assessment capability would affect the funding base 
for federal universal service programs. In addition, we recommend that 
the Commission seek additional information and parties' comment on 
whether the intrastate nature of the services supported by the high 
cost and low income assistance programs should have a bearing on the 
revenue base for assessing funds. We also recommend that commenting 
parties address the ability to separately identify intrastate and 
interstate revenues in the evolving telecommunications market where 
services typically associated with particular jurisdictions are likely 
to be packaged together. Finally, we ask that parties comment on 
whether carriers will have an incentive to shift revenues between 
jurisdictions to avoid universal service contributions.
    161. The state members of the Joint Board will include a discussion 
of the appropriate funding mechanism for the new high cost fund and low 
income programs as part of the report(s) on each of those programs 
discussed above. These reports by the state members will be filed prior 
to the Commission's decision in this proceeding on the high cost and 
low income funds.
    162. With respect to administration of the new federal universal 
service fund, we recommend, based on the record in this proceeding, 
that the Commission appoint a universal service advisory board to 
designate a neutral, third-party administrator. Administration by a 
central administrator, as opposed to individual state PUCs, would be 
more efficient and would ensure uniform decisions and rules.
    163. Although we do not recommend direct administration by state 
PUCs, we recommend creating a universal service advisory board, 
pursuant to the Federal Advisory Committees Act, including

[[Page 63796]]

state and Commission representatives, to select, oversee, and provide 
guidance to the chosen administrator. To expedite the formation of the 
advisory board and its selection of a permanent administrator, we 
encourage the Commission to limit the number of advisory board members 
as much as possible. To ensure that administrative costs are kept to a 
minimum, we recommend that the universal service advisory board select 
an administrator through a competitive bidding process. The chosen 
administrator, including its Board of Directors, must: (1) Be neutral 
and impartial; (2) not advocate specific positions to the Commission in 
non-administration-related proceedings; (3) not be aligned or 
associated with any particular industry segment; and (4) not have a 
direct financial interest in the support mechanisms established by the 
Commission. As several commenters note, any candidate must also have 
the ability to process large amounts of data and to bill large numbers 
of carriers. We recommend that the advisory board fund the 
administrator's costs through the support mechanism.
    164. The Joint Board strongly advises the Commission to create a 
universal service advisory board as quickly as possible because it will 
be responsible for selecting an administrator. The board, in turn, 
should quickly select an administrator because implementation of the 
new universal service support mechanisms is of utmost importance to the 
nation. The Joint Board recommends that the universal service advisory 
board appoint a neutral, third-party administrator through competitive 
bidding no later than six months after the board is created. We also 
recommend that the Commission and the advisory board require the 
administrator to implement the new support mechanisms no later than six 
months after its appointment.
    165. We recommend that NECA be appointed the temporary 
administrator of support mechanisms for schools, libraries and health 
care providers. Prior to appointment as the temporary administrator, we 
recommend, however, that the Commission permit NECA to add significant, 
meaningful representation for non-incumbent LEC carrier interests to 
the NECA Board of Directors. NECA could begin collecting carrier 
contributions and processing requests for services soon after adoption 
of the Commission's rules and would continue to do so until the 
permanent administrator is ready to begin operations. We recommend 
that, in addition to operating the new support mechanisms for schools, 
libraries and health care providers, NECA would continue to administer 
the existing high cost and low income support mechanisms until the 
permanent administrator is prepared to implement the new high cost and 
low income support mechanisms.
    166. Conclusion. The 1996 Act instructs the Joint Board and the 
Commission to adopt a new set of universal service support mechanisms 
that are explicit and sufficient to preserve and advance universal 
service. We believe that the recommendations, discussed above, will 
achieve Congress's goals and will ensure quality telecommunications 
services at affordable rates to all consumers, in all regions of the 
Nation.

Initial Regulatory Flexibility Analysis

    167. As required by section 603 of the Regulatory Flexibility Act 
(RFA), the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) that expands on the IRFA prepared for the NPRM of the 
expected significant economic impact on small entities by the 
recommendations made by the Federal-State Joint Board in the 
Recommended Decision (CC Docket No. 96-45). Written public comments are 
requested on the IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments that are set forth 
above. The Secretary shall send a copy of this Recommended Decision 
including the IRFA set out below to the Chief Counsel for Advocacy of 
the Small Business Administration in accordance with section 603(a) of 
the RFA.
    168. Need for and Objectives of the Recommended Decision: The 
Telecommunications Act of 1996 (1996 Act) directed the Commission to 
initiate a rulemaking to reform our system of universal service so that 
universal service is preserved and advanced as markets move toward 
competition. Issues related to universal service were referred to a 
Federal-State Joint Board for recommended decision, pursuant to section 
254 of the Communications Act of 1934, as amended by the 1996 Act. On 
November 8, 1996, the Joint Board released the Recommended Decision 
that is summarized above and made recommendations on universal service 
issues including, for example, universal service principles, services 
eligible for support, support mechanisms for rural, insular, and high 
cost areas, support for low-income consumers, affordability, support 
for schools and libraries, health care providers, administration of 
support mechanisms and common line recovery.
    169. The Joint Board's recommendations were intended to assist and 
counsel the Commission in the creation of an effective universal 
service support mechanism that would ensure that the goals of 
affordable, quality service and access to advanced services are met by 
means that enhance competition. The Joint Board also sought to develop 
recommendations that could be interpreted easily and readily applicable 
and, whenever, possible, minimize the regulatory burden on affected 
parties. The objective of the Public Notice, released by the 
Commission's Common Carrier Bureau on November 18, 1996, was to provide 
an opportunity for public comment and to provide a record for a 
Commission decision on the issues addressed and the recommendations 
made by the Joint Board in the Recommended Decision.
    170. Legal Basis: The Joint Board, in compliance with section 
254(a)(1) and section 410(c) of the Communications Act of 1934, as 
amended by the 1996 Act, adopted the Recommended Decision (CC Docket 
No. 96-45) to ensure the prompt implementation of section 254, which 
contains the universal service provisions.
    171. Description and Estimate of the Number of Small Entities 
Affected: For the purposes of an IRFA, the RFA defines a ``small 
business'' to be the same as a ``small business concern'' under the 
Small Business Act, 15 U.S.C. 632, unless the Commission has developed 
one or more definitions that are appropriate to its activities. Under 
the Small Business Act, a ``small business concern'' is one that: (1) 
Is independently owned and operated; (2) is not dominant in its field 
of operation; and (3) meets any additional criteria established by the 
Small Business Administration (SBA). SBA has defined a small business 
for Standard Industrial Classification (SIC) categories 4812 
(Radiotelephone Communications) and 4813 (Telephone Communications, 
Except Radiotelephone) to be small entities when they have fewer than 
1,500 employees. This IRFA first discusses generally the total number 
of small telephone companies falling within both of those SIC 
categories. Then, it discusses total numbers of other small entities 
potentially affected and attempts to refine those estimates.
    172. Consistent with the Commission's prior practice, small 
incumbent LECs are excluded from the definition of a small entity for 
purposes of this IRFA. We note that the Commission has consistently 
certified under the RFA that incumbent LECs are not subject to 
regulatory flexibility analyses because they are not small businesses. 
Incumbent LECs do not

[[Page 63797]]

qualify as small businesses since they are dominant in their field of 
operation and hence exempt from treatment as a small business under 
prong (2) of the SBA test set out supra. Accordingly, the use of the 
terms ``small entities'' and ``small businesses'' does not encompass 
``small incumbent LECs.'' We will however, out of an abundance of 
caution and prudence, include small incumbent LECs in this IRFA to 
eliminate any possible issue of RFA compliance. We use the term ``small 
incumbent LECs'' to refer to any incumbent LECs that arguably might be 
defined by SBA as ``small business concerns.'' In addition, the 
Commission will take appropriate steps to ensure that the special 
circumstances of smaller incumbent LECs are carefully considered.

1. Telephone Companies (SIC 4813)

    173. Total Number of Telephone Companies Affected. Many of the 
recommendations of the Joint Board, if adopted by the Commission, may 
have a significant effect on a substantial number of the small 
telephone companies identified by SBA. The United States Bureau of the 
Census (``the Census Bureau'') reports that, at the end of 1992, there 
were 3,497 firms engaged in providing telephone services, as defined 
therein, for at least one year. This number contains a variety of 
different categories of carriers, including local exchange carriers, 
interexchange carriers, competitive access providers, cellular 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, PCS providers, covered SMR providers, and 
resellers. It seems certain that some of those 3,497 telephone service 
firms may not qualify as small entities or small incumbent LECs because 
they are not ``independently owned and operated.'' For example, a PCS 
provider that is affiliated with an interexchange carrier having more 
than 1,500 employees would not meet the definition of a small business. 
It seems reasonable to conclude, therefore, that fewer than 3,497 
telephone service firms would qualify as small entity telephone service 
firms or small incumbent LECs, as defined above, that may be affected 
by the Recommended Decision.
    174. Wireline Carriers and Service Providers. SBA has developed a 
definition of small entities for telephone communications companies 
other than radiotelephone (wireless) companies. The Census Bureau 
reports that there were 2,321 such telephone companies in operation for 
at least one year at the end of 1992. According to SBA's definition, a 
small business telephone company other than a radiotelephone company is 
one employing fewer than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone companies listed by the Census Bureau were reported to 
have fewer than 1,000 employees. Thus, even if all 26 of those 
companies had more than 1,500 employees, there would still be 2,295 
non-radiotelephone companies that might qualify as small entities or 
small incumbent LECs. Although it seems certain that some of these 
carriers are not independently owned and operated, we are unable at 
this time to estimate with greater precision the number of wireline 
carriers and service providers that would qualify as small business 
concerns under SBA's definition. Consequently, we estimate that there 
are fewer than 2,295 small entity telephone communications companies 
other than radiotelephone companies that may be affected by the 
Recommended Decision.
    175. Local Exchange Carriers. Neither the Commission nor SBA has 
developed a definition of small providers of local exchange services. 
The closest applicable definition under SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of LECs nationwide of which we are aware appears to be the data that 
the Commission collects annually in connection with the 
Telecommunications Relay Service (TRS). According to the most recent 
data, 1,347 companies reported that they were engaged in the provision 
of local exchange services. Although it seems certain that some of 
these carriers are not independently owned and operated, or have more 
than 1,500 employees, we are unable at this time to estimate with 
greater precision the number of LECs that would qualify as small 
business concerns under SBA's definition. Consequently, we estimate 
that there are fewer than 1,347 small incumbent LECs that may be 
affected by the Recommended Decision.
    176. Interexchange Carriers. Neither the Commission nor SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under SBA rules is for telephone communications companies 
other than radiotelephone (wireless) companies. The most reliable 
source of information regarding the number of IXCs nationwide of which 
we are aware appears to be the data that the Commission collects 
annually in connection with TRS. According to the most recent data, 97 
companies reported that they were engaged in the provision of 
interexchange services. Although it seems certain that some of these 
carriers are not independently owned and operated, or have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of IXCs that would qualify as small business 
concerns under SBA's definition. Consequently, we estimate that there 
are fewer than 97 small entity IXCs that may be affected by the 
Recommended Decision.
    177. Competitive Access Providers. Neither the Commission nor SBA 
has developed a definition of small entities specifically applicable to 
providers of competitive access services (CAPs). The closest applicable 
definition under SBA rules is for telephone communications companies 
other than radiotelephone (wireless) companies. The most reliable 
source of information regarding the number of CAPs nationwide of which 
we are aware appears to be the data that the Commission collects 
annually in connection with the TRS. According to the most recent data, 
30 companies reported that they were engaged in the provision of 
competitive access services. Although it seems certain that some of 
these carriers are not independently owned and operated, or have more 
than 1,500 employees, we are unable at this time to estimate with 
greater precision the number of CAPs that would qualify as small 
business concerns under SBA's definition. Consequently, we estimate 
that there are fewer than 30 small entity CAPs that may be affected by 
the Recommended Decision.
    178. Operator Service Providers. Neither the Commission nor SBA has 
developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
SBA rules is for telephone communications companies other than 
radiotelephone (wireless) companies. The most reliable source of 
information regarding the number of operator service providers 
nationwide of which we are aware appears to be the data that the 
Commission collects annually in connection with the TRS. According to 
the most recent data, 29 companies reported that they were engaged in 
the provision of operator services. Although it seems certain that some 
of these companies are not independently owned and operated, or have 
more than 1,500 employees, this IRFA is unable at this time to estimate 
with greater precision the number of operator service providers that 
would qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are fewer than 29 small entity 
operator service providers

[[Page 63798]]

that may be affected by the Recommended Decision.
    179. Pay Telephone Operators. Neither the Commission nor SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(wireless) companies. The most reliable source of information regarding 
the number of pay telephone operators nationwide of which we are aware 
appears to be the data that the Commission collects annually in 
connection with the TRS. According to the most recent data, 197 
companies reported that they were engaged in the provision of pay 
telephone services. Although it seems certain that some of these 
carriers are not independently owned and operated, or have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of pay telephone operators that would qualify as 
small business concerns under SBA's definition. Consequently, we 
estimate that there are fewer than 197 small entity pay telephone 
operators that may be affected by the Recommended Decision.
    180. Wireless (Radiotelephone) Carriers. SBA has developed a 
definition of small entities for radiotelephone (wireless) companies. 
The Census Bureau reports that there were 1,176 such companies in 
operation for at least one year at the end of 1992. According to SBA's 
definition, a small business radiotelephone company is one employing 
fewer than 1,500 persons. The Census Bureau also reported that 1,164 of 
those radiotelephone companies had fewer than 1,000 employees. Thus, 
even if all of the remaining 12 companies had more than 1,500 
employees, there would still be 1,164 radiotelephone companies that 
might qualify as small entities if they are independently owned and 
operated. Although it seems certain that some of these carriers are not 
independently owned and operated, we are unable at this time to 
estimate with greater precision the number of radiotelephone carriers 
and service providers that would qualify as small business concerns 
under SBA's definition. Consequently, we estimate that there are fewer 
than 1,164 small entity radiotelephone companies that may be affected 
by the Recommended Decision.
    181. Cellular Service Carriers. Neither the Commission nor SBA has 
developed a definition of small entities specifically applicable to 
providers of cellular services. The closest applicable definition under 
SBA rules is for radiotelephone (wireless) companies. The most reliable 
source of information regarding the number of cellular service carriers 
nationwide of which we are aware appears to be the data that the 
Commission collects annually in connection with the TRS. According to 
the most recent data, 789 companies reported that they were engaged in 
the provision of cellular services. Although it seems certain that some 
of these carriers are not independently owned and operated, or have 
more than 1,500 employees, we are unable at this time to estimate with 
greater precision the number of cellular service carriers that would 
qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are fewer than 789 small entity 
cellular service carriers that may be affected by the Recommended 
Decision.
    182. Mobile Service Carriers. Neither the Commission nor SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers, such as paging companies. The closest 
applicable definition under SBA rules is for radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of mobile service carriers nationwide of which we are aware appears to 
be the data that the Commission collects annually in connection with 
the TRS. According to the most recent data, 117 companies reported that 
they were engaged in the provision of mobile services. Although it 
seems certain that some of these carriers are not independently owned 
and operated, or have more than 1,500 employees, we are unable at this 
time to estimate with greater precision the number of mobile service 
carriers that would qualify under SBA's definition. Consequently, we 
estimate that there are fewer than 117 small entity mobile service 
carriers that may be affected by the Recommended Decision.
    183. Broadband PCS Licensees. The broadband PCS spectrum is divided 
into six frequency blocks designated A through F. As set forth in 47 
CFR 24.720(b), the Commission has defined ``small entity'' in the 
auctions for Blocks C and F as a firm that had average gross revenues 
of less than $40 million in the three previous calendar years. Our 
definition of a ``small entity'' in the context of broadband PCS 
auctions has been approved by SBA. The Commission has auctioned 
broadband PCS licenses in Blocks A, B, and C. The Commission does not 
have sufficient data to determine how many small businesses bid 
successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auction. Based 
on this information, we conclude that the number of broadband PCS 
licensees affected by the Recommended Decision includes, at a minimum, 
the 90 winning bidders that qualified as small entities in the Block C 
broadband PCS auction.
    184. At present, licenses are being awarded for Blocks D, E, and F 
of broadband PCS spectrum. A total of 1,479 licenses will ultimately be 
awarded in the D, E, and F Block broadband PCS auctions, which began on 
August 26, 1996. Eligibility for the 493 F Block licenses is limited to 
entrepreneurs with average gross revenues of less than $125 million. We 
cannot estimate, however, the number of these licenses that will be won 
by small entities, nor how many small entities will win D or E Block 
licenses. Given that nearly all radiotelephone companies have fewer 
than 1,000 employees and that no reliable estimate of the number of 
prospective D, E, and F Block licensees can be made, for purposes of 
this IRFA, we assume that all of the licenses in the D, E, and F Block 
Broadband PCS auctions may be awarded to small entities that may be 
affected by the Recommended Decision.
    185. SMR Licensees. Pursuant to 47 CFR 90.814(b)(1), the Commission 
has defined ``small entity'' in auctions for geographic area 800 MHz 
and 900 MHz SMR licenses as a firm that had average annual gross 
revenues of less than $15 million in the three previous calendar years. 
This definition of a ``small entity'' in the context of 800 MHz and 900 
MHz SMR has been approved by the SBA. The Recommended Decision may 
apply to SMR providers in the 800 MHz and 900 MHz bands that either 
hold geographic area licenses or have obtained extended implementation 
authorizations. The Commission does not know how many firms provide 800 
MHz or 900 MHz geographic area SMR service pursuant to extended 
implementation authorizations, nor how many of these providers have 
annual revenues of less than $15 million. For purposes of this IRFA, we 
assume that all of the extended implementation authorizations may be 
held by small entities that may be affected by the Recommended 
Decision.
    186. The Commission recently held auctions for geographic area 
licenses in the 900 MHz SMR band. There were 60 winning bidders who 
qualified as small entities in the 900 MHz auction. Based on this 
information, we conclude that the number of geographic area SMR 
licensees affected by the Recommended Decision includes these 60 small 
entities. No auctions have been held for 800 MHz geographic area SMR 
licenses.

[[Page 63799]]

Therefore, no small entities currently hold these licenses. A total of 
525 licenses will be awarded for the upper 200 channels in the 800 MHz 
geographic area SMR auction. The Commission has not yet determined how 
many licenses will be awarded for the lower 230 channels in the 800 MHz 
geographic area SMR auction. There is no basis, moreover, on which to 
estimate how many small entities will win these licenses. Given that 
nearly all radiotelephone companies have fewer than 1,000 employees and 
that no reliable estimate of the number of prospective 800 MHz 
licensees can be made, for purposes of this IRFA, we assume that all of 
the licenses may be awarded to small entities that may be affected by 
the Recommended Decision.
    187. Resellers. Neither the Commission nor SBA has developed a 
definition of small entities specifically applicable to resellers. The 
closest applicable definition under SBA rules is for all telephone 
communications companies. The most reliable source of information 
regarding the number of resellers nationwide of which we are aware 
appears to be the data that the Commission collects annually in 
connection with the TRS. According to the most recent data, 206 
companies reported that they were engaged in the resale of telephone 
services. Although it seems certain that some of these carriers are not 
independently owned and operated, or have more than 1,500 employees, we 
are unable at this time to estimate with greater precision the number 
of resellers that would qualify as small business concerns under SBA's 
definition. Consequently, we estimate that there are fewer than 206 
small entity resellers that may be affected by the Recommended 
Decision.

2. Cable System Operators (SIC 4841)

    188. SBA has developed a definition of small entities for cable and 
other pay television services that includes all such companies 
generating less than $11 million in revenue annually. This definition 
includes cable systems operators, closed circuit television services, 
direct broadcast satellite services, multipoint distribution systems, 
satellite master antenna systems and subscription television services. 
According to the Census Bureau, there were 1,323 such cable and other 
pay television services generating less than $11 million in revenue 
that were in operation for at least one year at the end of 1992.
    189. The Commission has developed its own definition of a small 
cable system operator for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company,'' is one serving fewer 
than 400,000 subscribers nationwide. Based on the Commission's most 
recent information, we estimate that there were 1,439 cable operators 
that qualified as small cable system operators at the end of 1995. 
Since then, some of those companies may have grown to serve over 
400,000 subscribers, and others may have been involved in transactions 
that caused them to be combined with other cable operators. 
Consequently, we estimate that there are fewer than 1,468 small entity 
cable system operators that may be affected by the Recommended 
Decision.
    190. The Communications Act defines a small cable system operator, 
as ``a cable operator that, directly or through an affiliate, serves in 
the aggregate fewer than 1 percent of all subscribers in the United 
States and is not affiliated with any entity or entities whose gross 
annual revenues in the aggregate exceed $250,000,000.'' There were 
63,196,310 basic cable subscribers at the end of 1995, and 1,450 cable 
system operators serving fewer than one percent (631,960) of 
subscribers. Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250,000,000, we are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.

3. Rural Health Care Providers

    191. Neither the Commission nor SBA has developed a definition of 
small, rural health care providers. According to the SBA's regulations, 
hospitals must have annual gross receipts of $5 million or less in 
order to qualify as a small business concern. There are approximately 
3856 hospital firms in the nation, of which 294 have gross annual 
receipts of $5 million or less (SIC 8060).
    192. We recognize that the potential class of health care providers 
that may be affected by the Recommended Decision is at the same time 
broader and more refined than the class of providers identified in 
these SBA figures. On the one hand, the potential class of health care 
providers that may be affected by the Recommended Decision includes 
additional categories of providers other than small hospital firms. 
Additional categories of providers not encompassed within the SBA's 
figures would include, for example, rural community colleges, medical 
schools with rural programs, community health centers or health centers 
providing health care to migrants, local health departments or 
agencies, community mental health centers, and rural health clinics. On 
the other hand, the potential class of health care providers that may 
be affected by the Recommended Decision is more refined than the class 
of providers identified in the SBA figures to the extent that the 
former class is comprised only of rural health care providers. Given 
that it is not yet practicable to identify all rural health care 
providers that potentially may be impacted by the Recommended Decision, 
5 U.S.C. 607, we ask commenters to submit detailed information to 
assist the Commission in identifying and estimating the number of small 
entities that may be impacted.

4. Schools and Libraries

    193. SBA has defined small elementary and secondary schools (SIC 
8211) and small libraries (SIC 8231) as those with under $5 million in 
annual revenues. The most reliable source of information regarding the 
total number of kindergarten through 12th grade (K-12) schools and 
libraries nationwide of which we are aware appears to be data collected 
by the National Center for Educational Statistics. Based on that 
information, it appears that there are approximately 112,314 public and 
private K-12 schools in the United States. It further appears that 
there are approximately 15,904 libraries, including branches, in the 
United States. Although it seems certain that not all of these schools 
and libraries would qualify as small entities under SBA's definition, 
we are unable at this time to estimate with greater precision the 
number of small schools and libraries that would qualify as small 
entities under the definition. Consequently, we estimate that there are 
fewer than 112,314 public and private schools and fewer than 15,904 
libraries that may be affected by the Recommended Decision.
    194. Due to the number and complexity of the issues involved in the 
Recommended Decision, it is not yet practicable or reliable for the 
Commission to identify all entities potentially impacted by the 
Recommended Decision. 5 U.S.C. 607. Accordingly, we seek comment on any 
additional entities that potentially may be affected by the Recommended 
Decision. Additionally, we seek comment on the general proposals set 
forth in the IRFA and any other comments concerning the potential 
impact of the Joint Board's recommendations on small entities.
    195. Summary Analysis of the Projected Reporting, Recordkeeping, 
and Other Compliance Requirements and Significant Alternatives to

[[Page 63800]]

Recommended Decisions That Minimize Significant Economic Impact on 
Small Entities and Accomplish Stated Objectives: 
    196. Structure of the Analysis. In this section of the IRFA, we 
analyze the projected reporting, recordkeeping, and other compliance 
requirements that might apply to small entities and small incumbent 
LECs if the recommendations made by the Joint Board pursuant to the 
Recommended Decision are adopted by the Commission. This section also 
includes a discussion of some of the types of skills that might be 
needed to meet the recommended requirements. We also describe the steps 
taken by the Joint Board to minimize the economic impact of its 
recommendations on small entities and small incumbent LECs, including 
the significant alternatives considered and rejected. The following 
analysis is organized under individual section headings that correspond 
to the sections of the Recommended Decision.
    197. Any references to the Recommended Decision contained in this 
IRFA are intended to provide context for the analysis performed in this 
IRFA. To the extent that any statement contained in this IRFA is 
perceived as creating ambiguity with respect to any statement or 
recommendation made in the Recommended Decision, the statement or 
recommendation made in the Recommended Decision shall be controlling.

Summary Analysis of Section III

Principles

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    198. The Joint Board recommended no reporting or other compliance 
requirements relating directly to the six principles enumerated in 
section 254(b) or relating directly to the additional principle of 
competitive neutrality, as considered by the Joint Board pursuant to 
section 254(b)(7).
    Significant Alternatives to Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    199. The Joint Board concluded in section III of the Recommended 
Decision that consumers and businesses would benefit from competitively 
neutral application of the universal service rules. While a few 
commenters contended that competition alone would not fulfill the goals 
of section 254, the Joint Board concluded that competitive neutrality 
would favorably impact business entities, including smaller entities, 
by providing for access to quality and advanced services at just, 
reasonable, and affordable rates. By recommending that the Commission 
adopt the additional principle of competitive neutrality, the Joint 
Board sought to ensure a level playing field for all carriers, 
including smaller entities, insofar as contributions to the universal 
service fund and disbursements from it would not be biased either in 
favor of or against one category of carriers over another.

Summary Analysis of Section IV

Definition of Universal Service

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    200. The Joint Board recommended no reporting or recordkeeping 
requirements in this section. All eligible carriers would be required, 
however, to provide each of the services designated for universal 
service support in order to receive such support, subject to certain 
enumerated exceptions.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    201. The Joint Board recommended providing universal service 
support for all eligible carriers that provide each of the designated 
services. This recommendation would permit cellular and other wireless 
carriers and non-incumbent providers, many of which may be small 
businesses, to compete in high cost areas. The Joint Board specifically 
did not recommend that the Commission withhold universal service 
support for cellular providers based on its finding that this approach 
would impede the competitive entry of certain types of carriers, many 
of which may be small entities, and, therefore, was inconsistent with 
the pro-competitive goals of the 1996 Act.
    202. The Joint Board made a number of recommendations in this 
section that were designed to minimize the burdens on smaller entities 
wishing to become eligible to receive universal service support. For 
example, state commissions would be permitted to approve transition 
periods for eligible carriers that would permit carriers, many of which 
might be smaller entities, that are not currently providing single-
party service to make the upgrades necessary to do so. The 
recommendation would allow certain small, rural carriers to continue to 
receive universal service support during the time they are making the 
upgrades that are needed in order to provide single-party service. In 
making this recommendation, the Joint Board sought to strike a 
reasonable balance between the need for single-party service in a 
modern telecommunications network and the recognition that exceptional 
circumstances may prevent some carriers from initially offering single-
party service.
    203. The Joint Board also would not require telecommunications 
providers to provide access to E911 service in order to receive 
universal service support, but recommended that such access would be 
supported in high cost areas if a carrier does provide it. 
Specifically, the Joint Board determined that immediately requiring all 
eligible carriers to provide access to E911 service effectively would 
exclude certain wireless carriers, whose networks would require 
significant technical upgrades. To the extent that this class of 
cellular and other wireless carriers includes smaller carriers, this 
recommendation would permit those carriers to receive universal service 
support notwithstanding their inability to provide access to E911 
service.
    204. Although other services were suggested by commenters for 
inclusion in the definition of universal service, the Joint Board 
declined to expand the definition to include those services at this 
time. The Joint Board determined that an expansion of the definition to 
include additional services would have precluded certain carriers that 
were unable to provide those services from receiving universal service 
support. The Joint Board concluded that an overly-broad definition of 
universal service might have the unintended effect of creating a 
barrier to entry for some carriers, many of which may be small 
entities, because they would be technically unable to provide all of 
the designated services.
    205. The Joint Board recommended that designated services carried 
to single-connection businesses in high cost areas also be supported at 
a reduced rate. Recognizing that the majority of single-connection 
businesses in high cost areas may be presumed to be small businesses, 
this recommendation specifically was intended to benefit those small 
businesses. The Joint Board rejected arguments opposing any support for 
business connections. The Joint Board also rejected suggestions to 
extend universal service benefits to multiple-line businesses, 
recognizing that the cost of service would be more likely to be 
prohibitive to small, single-connected businesses in high cost areas,

[[Page 63801]]

as opposed to larger businesses, without universal service support.
    206. The Joint Board declined to recommend the implementation of 
additional quality of service standards. Rather, the Joint Board 
recommended that the Commission, to the extent possible, rely on 
existing data, including the ARMIS data filed by price-cap LECs, to 
monitor service quality. By avoiding the creation of additional 
standards, this recommendation would have the effect of minimizing the 
reporting burden of affected carriers, including that of smaller 
carriers.

Summary Analysis of Section V

Affordability

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    207. The 1996 Act does not require and the Joint Board did not 
recommend any new reporting, recordkeeping or other compliance 
requirements in this section.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    208. This section includes recommendations that would directly 
impact small entities only to the extent that the Joint Board 
recommended that the states be given primary responsibility for 
monitoring the affordability of telephone service rates and, in concert 
with the Commission, ensuring the affordability of such rates. Ensuring 
the affordability of telephone service rates clearly would have a 
positive economic impact on small businesses and other small entities.

Summary Analysis of Section VI

Eligibility for Universal Service Support

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    209. The 1996 Act provides that, after the effective date of the 
Commission's regulations implementing section 254, only carriers 
designated as eligible carriers pursuant to section 214(e) shall be 
eligible for specific federal universal service support. Thus, any 
carrier, including incumbent carriers, that wish to receive universal 
service support must request to be designated as an eligible carrier by 
the applicable state commission. Section 214(e) establishes criteria 
that carriers must meet to be designated as an eligible carrier. The 
Joint Board recommended in section VI.B that the Commission adopt these 
statutory criteria, without further elaboration, as the rules for 
determining whether a telecommunications carrier is eligible to receive 
universal service support. These statutory criteria require that a 
telecommunications carrier be a common carrier and offer, throughout a 
service area designated by the state commission, all of the services 
supported by federal universal service support either using its own 
facilities or a combination of its own facilities and resale of another 
carrier's services. A carrier must also advertise the availability of 
and charges for these services throughout its service area. Compliance 
with these statutory requirements may require administrative and legal 
skills.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    210. The Joint Board recommended minimal national rules for 
eligibility, requiring only that carriers meet the eligibility criteria 
established by Congress in the 1996 Act. As discussed in section VI.B, 
the Joint Board rejected arguments calling for more stringent 
eligibility rules, such as requiring new entrants to comply with any 
state rules applicable to the incumbent carrier, which could have 
imposed additional burdens on new entrants, many of which may be small 
businesses. Additionally, the Joint Board recommended that eligibility 
rules be technologically neutral, in order to ensure that all 
telecommunications carriers, regardless of the technology used, could 
potentially qualify for federal universal service support. The Joint 
Board also recommended that, for rural telephone companies, the 
designated service area throughout which they must offer and advertise 
supported services be the areas in which they currently operate. 
Finally, where states are responsible for designating a carrier's 
service area, the Joint Board recommended that the Commission encourage 
states to designate service areas that do not disadvantage new 
entrants. The Joint Board concluded that these provisions would 
minimize reporting requirements and other burdens on small entities.

Summary Analysis of Section VII

High Cost Support

    Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements.
    211. Small, rural carriers comprise the specific class of small 
entities that are subject to high cost reporting requirements. The 
Joint Board recommended that the Commission define ``rural'' as those 
carriers that meet the statutory definition of a ``rural telephone 
company,'' pursuant to 47 U.S.C. 153(37). These reporting and 
recordkeeping requirements would utilize accounting and legal skills.
    212. Currently, a LEC is eligible for support if its embedded loop 
costs, as reported annually, exceed 115 percent of the national average 
loop cost. The Joint Board recommended that a proxy model for 
calculating a carrier's costs be adopted by the Commission by May 8, 
1997. Thus, beginning January 1, 1998, non-rural carriers would receive 
support based on the difference between the cost of service as 
determined by a proxy model and a benchmark amount. However, to 
minimize the financial impact of this rule change on small entities, 
the Joint Board recommended that, beginning January 1, 1998, small, 
rural carriers receive high cost support on a frozen per-line amount 
based on previous years' reported costs, for years, 1998, 1999, and 
2000. Furthermore, small, rural carriers would gradually transition to 
a proxy model during a three year period, for the years 2001, 2002, and 
2003. (Small, rural carriers serving high cost areas in Alaska and 
insular areas would not transition to proxy models at that time, but 
rather would continue to receive support based on the frozen per-line 
amount until further review.) This six-year transition period for 
small, rural carriers would enable small carriers to adjust their 
operations in preparation for the use of proxy models. In order for 
small, rural carriers to receive high cost support based on their 
frozen embedded costs, they would be required to report the number of 
lines they serve at the end of each year.
    213. Since the new support mechanism for small, rural carriers 
would be based on previous years' frozen embedded costs, the carriers 
would no longer have to report each year's embedded costs. Thus, the 
Recommended Decision would require less reporting and recordkeeping for 
small, rural carriers. Accordingly, the Joint Board anticipated that 
those entities' cost of compliance with reporting and recordkeeping 
requirements would be less than what they currently incur. Since large 
entities also would have to report the number of lines they serve in 
order to receive support under a proxy model, these requirements would 
not affect small entities disproportionately.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.

[[Page 63802]]

    214. Commenters offered a number of alternative methodologies, 
including continuing the current embedded cost methodology, providing 
support based on combined loop and switching costs, limiting allowable 
costs, eliminating de minimis support lowering payout percentages, 
readjusting study areas, and capping support levels. Although these 
small, rural carriers may receive more support under the current 
embedded cost methodology, the Joint Board rejected that proposal as a 
long-term solution based on its finding that the current system 
promotes economic inefficiencies and is inconsistent with the 
principles of the 1996 Act. The remaining alternatives, however, would 
result in even lower support levels than the methodology recommended by 
the Joint Board. By transitioning small, rural carriers to a proxy 
model over a six year period, the Recommended Decision's proposed 
methodology for calculating support for small, rural carriers would 
minimize the adverse effects of an immediate, unplanned shift to a 
proxy model.

Summary Analysis of Section VIII

Support for Low-Income Consumers

    Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements.
    215. The Joint Board recommended that, in order to participate in 
the Lifeline program, carriers would have to demonstrate or, in some 
cases, continue to demonstrate, to the public utility commission of the 
state in which they operate that they offer a Lifeline rate to 
qualified individuals. In addition, carriers participating in Lifeline 
would be required to submit certification applications to the new 
federal fund administrator. State agencies and carriers participating 
in Lifeline would administer customer eligibility determinations. These 
recommended reporting and recordkeeping requirements may require 
clerical and administrative skills.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    216. The Joint Board recommended that all eligible 
telecommunications carriers now participate in Lifeline. To participate 
in the Lifeline program, carriers would be required to keep track of 
the number of their Lifeline customers and to file information with the 
federal fund administrator. Based on the Commission's prior experience 
administering Lifeline, the Joint Board believed that such a 
requirement would not impose a significant burden on small carriers due 
to the insubstantial amount and general accessibility of the 
information. Accordingly, the Joint board did not anticipate that this 
recommendation would impose a significant burden on small carriers.

Summary Analysis of Section IX

Insular Areas

    Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements.
    217. The 1996 Act does not require and the Joint Board did not 
recommend any new reporting, recordkeeping or other compliance 
requirements in this section.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    218. The Joint Board did not make any recommendations at this time 
which uniquely impact small entities in insular areas. The Joint Board 
recommendations in other areas, such as high cost support and support 
for schools and libraries, would apply to insular areas as well as to 
the mainland, however. We therefore tentatively conclude that this 
section of the Recommended Decision on issues unique to insular areas 
will not have a significant economic impact on a substantial number of 
small entities.

Summary Analysis of Section X

Schools and Libraries

    Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements.
    219. The Joint Board recommended requiring service providers to 
self-certify, to the fund administrator, that the price offered to 
schools and libraries would be no more than the lowest price charged to 
similarly situated non-residential customers for similar services. This 
requirement was designed to ensure that schools and libraries would 
receive the lowest pre-discounted price available in the marketplace 
for someone with their needs. The Joint Board also recommended 
requiring service providers to keep and retain careful records of how 
they have allocated the costs of shared facilities used by consortia to 
ensure that only eligible schools and libraries derive the benefits of 
section 254(h) discounts and that no prohibited resale occurs.
    220. The Joint Board recommended that, for schools ordering 
telecommunications services, the person ordering such services for the 
individual school or school district should self-certify to the fund 
administrator and to the service provider the number of students in 
each of its schools who are eligible for the national school lunch 
program or other comparable indicator of economic disadvantage 
ultimately selected by the Commission. This requirement arises in the 
context of determining which schools are eligible for the greater 
discounts to meet the statutory requirement that ``affordable'' access 
be provided.
    221. The Joint Board also recommended that schools and libraries 
self-certify, to the fund administrator, that they will be able to 
deploy any necessary hardware, software, and wiring, and to undertake 
any necessary teacher training required to use the services ordered 
pursuant to section 254(h). This requirement would help ensure that 
schools and libraries avoid the waste that might arise if schools and 
libraries ordered inexpensive services before they realized what other 
resources they needed to be able to use those services effectively.
    222. The Joint Board recommended requiring schools and libraries to 
send a description of the services they desire to the fund 
administrator or other entity designated by the Commission. The fund 
administrator or other entity would then post a description of the 
services sought on an Internet website or some similar location for all 
potential competing service providers to review. The Joint Board 
concluded that this requirement would help achieve Congress's desire 
that schools and libraries take advantage of the potential for 
competitive bids and, therefore, would satisfy the competitive bid 
requirement the Joint Board recommended imposing on schools and 
libraries.
    223. The Joint Board recommended that, to ensure compliance with 
section 254, every school and library that requests services eligible 
for universal service support should be required to submit to the 
service provider a written request for services. The Joint Board 
recommended that the request should be signed by the person authorized 
to order telecommunications and other covered services for the school 
and library, self-certifying the following under oath: (1) the school 
or library is an eligible entity under section 254(h)(4); (2) the 
services requested will be used solely for educational purposes; (3) 
the services will not be sold, resold, or transferred in consideration 
for money or any other thing of value; and (4) if the services are 
being purchased as part of an aggregated purchase with other entities, 
the identities of all co-

[[Page 63803]]

 purchasers and the portion of the services being purchased by the 
school or library.
    224. The Joint Board recommended requiring schools and libraries, 
as well as carriers, to maintain records for their purchases of 
telecommunications and other covered services at discounted rates, 
similar to the kinds of procurement records that they already keep for 
other purchases. The Joint Board expected that schools and libraries 
should be able to produce such records at the request of any auditor 
appointed by a state education department, the fund administrator, or 
any other state or federal agency with jurisdiction to review such 
records for possible misuse. The Joint Board believed that these 
reporting and recordkeeping requirements would be necessary to ensure 
that schools and libraries receive the discounted telecommunications 
services for the purposes intended by Congress.
    225. Similarly, the Joint Board recommended that schools and 
libraries that desire additional support due to their location in a 
high cost area be permitted to demonstrate this by providing the 
necessary information to show that they meet the Commission's high cost 
standards.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    226. Although service providers would be required to self-certify 
to the fund administrator that the prices they charged to eligible 
schools and libraries were no more than the lowest price charged to 
similarly situated non-residential customers for similar services, this 
requirement should be minimally burdensome, given that service 
providers could be expected to review the prices they charged to 
similarly situated customers when they set the price for schools and 
libraries. The Joint Board expressly rejected suggestions that it 
require all carriers to offer services at total service long-run 
incremental cost levels, due to the burdens it would have created. 
Similarly, given that schools and libraries that form consortia with 
non-eligible entities would need to inform the service provider of what 
portion of shared facilities purchased by the consortia should be 
charged to eligible schools and libraries (and discounted by the 
appropriate amounts), it should not be burdensome for carriers to 
maintain records of those allocations for some appropriate amount of 
time.
    227. With respect to service providers, the Joint Board 
specifically rejected a suggestion to interpret ``geographic area'' to 
mean the entire state in which a service provider served. This could 
have forced service providers to serve areas of a state that they were 
not previously serving, thereby unreasonably burdening small carriers 
that were only prepared to serve some small segment of a state. The 
Joint Board also rejected requirements that carriers notify customers 
of the availability of discounts, recommending that the Commission only 
recommend that carriers provide such notification, rather than 
requiring them to do so.
    228. Schools and libraries should not be significantly burdened by 
the requirement that they certify that (1) they are eligible for 
support under section 254(h)(4); (2) the services requested are used 
for educational services; and (3) that such services will not be 
resold. Assuming that schools and libraries would need to inform 
carriers about what discount they are eligible for to receive that 
discount, there should be no significant burden imposed by requiring 
them to self-certify that they would satisfy the statutory requirements 
that Congress imposed. While the requirement that they disclose how 
shared facilities are used by the members of a consortia, if they form 
one, may be somewhat complicated, the Joint Board found that the 
members of the consortia would need to allocate such costs to determine 
which party was responsible for what portion of the bill, even without 
any discount. Given that such allocations would be undertaken for that 
reason, the Joint Board concluded that it would not be burdensome to 
require schools and libraries to disclose those allocations when 
submitting their certification of eligibility. In fact, schools that 
found such reporting to be burdensome could avoid such consortia, but 
the Joint Board found it desirable, however, to provide small schools 
and libraries to join with other customers, including large commercial 
customers, to enable them to enjoy discounts comparable to other larger 
customers.
    229. A requirement that schools and libraries submit a description 
of the services and facilities they desire to purchase at a discount to 
the administrator or other designated entity should also be minimally 
burdensome. The Joint Board's understanding was that school and library 
boards generally already require schools and libraries to seek 
competitive bids for substantial purchases and this forces them to 
create a description of their purchase needs. The Joint Board found 
that it would be only minimally burdensome to require schools and 
libraries to submit a copy of that description to the fund 
administrator. It further found that this requirement would be much 
less burdensome than requiring schools and libraries to submit a 
description of their requests to all telecommunications carriers in 
their state, as proposed by one commenter. It also would be less 
burdensome than a requirement that they demonstrate that schools and 
libraries have employed a competitive bidding process.
    230. The Joint Board concluded that it would not be burdensome to 
require schools and libraries to self-certify that they have a plan for 
deploying any necessary resources to be able to use their discounted 
services and facilities effectively. It anticipated that few schools or 
libraries would propose to spend their own money for discounted 
services until they believed that they could use the services 
effectively. Therefore, simply requiring them to certify that they had 
done such planning would be the least burdensome way to ensure that 
schools and libraries were aware of the other resources they would need 
to procure before ordering discounted telecommunications services and 
facilities. The Joint Board anticipated that the burden here would be 
particularly light, given the development of clearinghouses of 
information for schools and libraries on the Internet. The Joint Board 
found this alternative significantly less burdensome than the proposed 
requirement that schools and libraries secure outside approval of their 
technology plans from a government entity before they could receive any 
support.
    231. The Joint Board also tentatively concluded that the least 
burdensome manner for schools and libraries to demonstrate that they 
are disadvantaged would be to self-certify to the fund administrator 
and to the service provider the portion of students in their school 
eligible for the national student lunch program, although the Joint 
Board remained open to other comparable indicators of economic 
disadvantage that might be less burdensome or sufficiently more precise 
as to justify any additional burden. The Joint Board found that the 
national student lunch program appears to be the most widely known and 
easily applied mechanism for achieving the goal of identifying 
disadvantaged schools and libraries, despite its flaws, and anticipated 
that the burden it would create for schools and libraries that did not 
otherwise participate in the national student lunch program would be 
minimal. Schools and libraries that preferred not to provide 
information about how

[[Page 63804]]

disadvantaged they were would still qualify for a recommended 20% 
discount on eligible purchases.
    232. The Joint Board also found it reasonable to expect schools and 
libraries that desire additional support due to their location in a 
high cost area to demonstrate this by providing the necessary 
information to show that they meet the Commission's high cost 
standards. Finally, the Joint Board found that requiring schools and 
libraries to retain records of their purchases of services and 
facilities under this program for an appropriate amount of time would 
not be unreasonable.

Summary Analysis of Section XI

Health Care Providers

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    233. The 1996 Act provides in section 254(h)(1)(A) that a 
telecommunications carrier providing service shall be entitled to have 
an amount equal to the difference, if any, between the rates for 
services provided to health care providers for rural areas in a state 
and the rates for similar services provided to other customers in 
comparable rural areas in that state treated as a service obligation as 
part of its obligation to participate in the mechanisms to preserve and 
advance universal service. The Joint Board recommended that every 
health care provider, including small entities, that makes a request 
for universal service support for telecommunications services be 
required to submit to the carrier a written request, signed by an 
authorized officer of the health care provider, certifying certain 
information. The Joint Board recommended that this certification be 
renewed annually.
    234. In formulating a recommendation as to the method for ensuring 
that requests are bona fide, the Joint Board was mindful of choosing a 
method that minimizes, to the extent consistent with section 254, the 
administrative burden on health care providers. Therefore, the Joint 
Board sought to recommend the least burdensome certification plan that 
would provide safeguards that are adequate to ensure that the supported 
services would be used lawfully and for their intended purpose.
    235. The Joint Board recommended that the Commission require the 
universal service fund administrator to establish and administer a 
monitoring and evaluation program to oversee the use of universal 
service support to health care providers and the pricing of those 
services by carriers. This compliance program would be necessary to 
ensure that services are being used for their intended purpose, that 
requesters are complying with certification requirements, that 
requesters are otherwise eligible to receive universal service support, 
that rates charged comply with the statute and regulations and that 
prohibitions against resale or transfer for profit are strictly 
enforced.
    236. The Joint Board recommended that the Commission encourage 
carriers across the country to notify eligible health care providers in 
their service areas of the availability of lower rates resulting from 
universal service support so that the goals of universal service to 
rural health care providers would be more rapidly fulfilled.
    237. The Joint Board recommended using rates publicly filed or 
obtained in the ordinary course of Commission proceedings to determine 
the rural as well as the urban rate. The Joint Board specifically 
rejected any suggestion that rates not publicly available should be 
required to be disclosed in order to implement a universal service 
mechanism because it found this method to be excessively burdensome.
    238. The Joint Board recommended that a sufficient audit program be 
established to monitor and evaluate the use of supported services in 
aggregated purchase arrangements. The Joint Board emphasized that the 
qualified health care provider could be eligible for reduced rates, and 
the telecommunications carrier could be eligible for support, only on 
that portion of the services purchased and used by the health care 
provider. Accordingly, the carrier would have to keep appropriate 
records.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    239. The Joint Board considered several certification plans 
suggested by commenters. It sought to recommend the least burdensome 
certification plan that would provide adequate safeguards to ensure 
that the supported services are being used for their intended purpose. 
The Joint Board rejected a five-component plan because it was too 
expensive and burdensome. It also rejected a suggestion that 
certification include verification of the existence of a technology 
plan and a checklist of other information helpful in tracking universal 
service. Although such plans might be useful in a discount plan where 
disincentives to overpurchasing are needed, the Joint Board found that 
such a requirement would be unnecessarily burdensome where health care 
providers would be required to invest substantial resources in order to 
pay urban rates for these services. The Joint Board also rejected 
suggestions that health care providers be required to certify that 
hardware, wiring, on-site networking and training would be deployed 
simultaneously with the service. Finally, the Board rejected a proposal 
that the financial officers of health care provider organizations be 
required to attest under oath that funds have been used as intended by 
the 1996 Act, because it found that the pre-expenditure affidavit 
described above, which would be submitted to the carrier along with the 
request for services, would be sufficient under these circumstances.
    240. The 1996 Act provides that a telecommunications carrier shall 
provide telecommunications services to any public or non-profit health 
care provider at rates that are reasonably comparable to rates charged 
for similar services in urban areas in that state. In the NPRM, the 
Commission stated its intention to minimize, to the extent consistent 
with section 254, the administrative burden on regulators and carriers. 
Thus, the Joint Board recommended that the urban/rural rate 
differential be based on the rates charged for similar services in the 
urban area closest to the health care provider's location. The Joint 
Board believed that this method would be easy to use and understand. 
Thus, it complies with the Joint Board's guidelines that implementation 
of universal service support mechanisms be fashioned to minimize 
administrative burdens. Because it would involve a one-step process, 
this method would be less administratively burdensome than a 
competitive bidding system or a process based on the current Lifeline 
assistance program. This method also was deemed preferable to plans 
that would require obtaining information about private contract rates, 
which are proprietary and not obtainable without elaborate 
confidentiality safeguards.
    241. The Joint Board recommended using the Office of Management and 
Budget's Metropolitan Statistical Area method of designating rural 
areas along with the Goldsmith Modification because it would meet the 
``ease of administration'' criterion. Since lists of MSA counties and 
Goldsmith-identified census blocks and tracts already exist, updated to 
1995, any health care provider could easily determine if it were 
located in a rural area and, therefore, whether it would meet the test 
of eligibility for support.

[[Page 63805]]

Summary Analysis of Section XII

Subscriber Line Charges and Carrier Common Line Charges

    Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements.
    242. The Joint Board's recommendations regarding the interstate 
subscriber line charge and carrier common line charges would not impose 
any additional reporting requirements on any entities, including small 
entities. These charges currently exist. Although the Joint Board 
recommended changes in the amounts of the charges, the recommended 
changes would have no impact on the information collection requirement, 
and would not extend the charges to additional carriers.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    243. Because the SLC and CCL charges would recover ILECs' costs for 
portions of their network, reporting requirements were deemed necessary 
to track the costs and allow for their recovery. No alternatives were 
presented that would have eliminated or substantially reduced those 
reporting requirements. The Joint Board's recommendation has no impact 
on the information collection requirement, and would not extend the 
charges to any additional carriers.

Summary Analysis of Section XIII

Administration

    Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements.
    244. Section 254(d) states ``[t]hat all telecommunications carriers 
that provide interstate telecommunications services shall make 
equitable and nondiscriminatory contributions'' toward the preservation 
and advancement of universal service. The Recommended Decision would 
require all telecommunications carriers that provide interstate 
telecommunications services to contribute to the universal service 
support mechanism. In order to compute carrier contributions, carriers 
must submit an annual universal service worksheet. The worksheet would 
require all carriers to submit information relating to revenues derived 
from telecommunications services and their payments made to other 
telecommunications carriers for telecommunications services to the 
administrator of the support mechanism. After receiving the worksheet, 
the administrator would calculate each carriers' contribution and bill 
each carrier. Carriers that provide services to schools, libraries and 
health care providers might be eligible to receive a credit against 
their contribution. Carriers seeking a credit would have to submit 
additional information on a monthly basis regarding the services 
provided at less than cost to the administrator in order to receive the 
credit. Approximately 3,500 telecommunications carriers would be 
required to submit revenue and payment information. The estimated 
burden on the respondent for filling out the worksheet would be 4 hours 
and for those submitting monthly information regarding the schools, 
libraries, and health care providers, 1 hour. These tasks may require 
some legal and accounting skills.
    245. The Joint Board recommended that certain carriers be exempted 
from the contribution requirement when their contribution is determined 
to be de minimis under section 254(d). The Board concluded that the de 
minimis exemption should apply where the administrator's cost of 
collecting the contribution exceeds the carrier's contribution. Exempt 
carriers would not be required to submit an annual worksheet. The Joint 
Board anticipated that this recommendation would provide relief to many 
small entities qualifying under the de minimis exemption. The Joint 
Board sought to limit the information requirements to the minimum 
necessary for evaluating and processing the application and to deter 
against possible abuse of the process.
    Significant Alternatives To Recommended Decisions Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives.
    246. The Joint Board determined that small carriers should not be 
given preferential treatment in the determination of contributions to 
the universal service support mechanism solely on that status given 
section 254(d)'s explicit directive that every telecommunications 
carrier that provides interstate telecommunications services shall 
contribute to the preservation and advancement of universal service. 
The Joint Board considered the suggestions of commenters regarding 
various graduated contribution schemes that would favor small entities. 
It rejected these suggestions based on the language of the statute, 
legislative history and the regulatory burdens that such graduated 
schemes would entail. The Joint Board further considered commenter 
suggestions that small carriers be exempted from contribution on the 
basis of the de minimis provision of section 254(d). It rejected these 
suggestions on the basis of the legislative history surrounding section 
254(d) which provides that the de minimis exemption should be limited 
to those carriers for whom the cost of collecting the contribution 
exceeds the amount of the contribution. The Joint Board concluded that 
expansion of the definition of de minimis to include ``small'' carriers 
would violate the pro-competitive intent of the 1996 Act and require 
complex administration and regulation to determine and monitor 
eligibility for the exemption. The Joint Board believed that small 
entities would benefit under the de minimis exemption as interpreted in 
the Recommended Decision without an explicit exemption for all small 
entities.
    247. Federal rules that may duplicate, overlap, or conflict with 
the Recommended Decision. None.

Recommending Clauses

    248. For the reasons discussed in this Recommended Decision, this 
Federal-State Joint Board, pursuant to section 254(a)(1) and section 
410(c) of the Communications Act of 1934, as amended, 47 U.S.C. 
Sec. 254(a)(1), 410(c), recommends that the Federal Communications 
Commission adopt the proposals, as described above, implementing new 
section 254 of the Telecommunications Act of 1934, as amended, 47 
U.S.C. 254.
    249. The Joint Board further recommends that parties submitting any 
comments or additional information in this docket be required to serve 
each member of the Federal-State Joint Board and the Joint Board staff. 
These submissions should be served in accordance with the service list 
attached.

    Federal Communications Commission.
William F. Caton,
Acting Secretary.

Appendix I--Analysis of Proxy Models

    1. We have briefly discussed the criteria that the Commission 
should consider in evaluating the reasonableness of using a proxy 
model to determine the level of universal service support a carrier 
should receive for a particular geographic area. In this Appendix, 
we highlight some of the issues raised by commenters, differences 
between the models, and the results each model produces. At the 
workshops that we have recommended that the Commission conduct, we 
expect that model proponents would be prepared to discuss the 
relative merits of each model, the criticisms raised by commenters, 
and the major causes of the substantial differences between the size 
of

[[Page 63806]]

the high cost assistance support derived by the models.
    2. As we have discussed, the proxy model must rely on the 
forward-looking economic cost of developing and operating the 
network facility and functions used to provide services supported 
under Section 254(c)(1). Costs for providing universal service 
should be based on the most efficient technology that can be 
deployed using the incumbent local exchange carrier's (LEC) current 
wire-center locations. For the most part, we believe that the useful 
aspects of ``forward-looking'' approach are captured by the least 
cost concept. To the extent that reliable new technologies represent 
the least cost method for providing the supported services, they 
should be incorporated in the model. Firms in a competitive market 
may well choose to place facilities with the capability of providing 
a number of competitive services beyond the supported services. To 
the extent that this is true, the network we are modelling may 
depart from that which a firm may choose to install. However, to the 
extent that new technologies are necessary to provide a platform for 
a number of other competitive services, they should not be included 
in the model. The model should be sufficiently flexible to 
incorporate new technologies as the cost of these facilities falls 
such that they become the most efficient way to provide the 
supported services. In addition, the model must be sufficiently 
flexible to include the functionalities necessary to provide an 
evolving set of supported services.
    3. Model Assumptions and Results--Demand. We agree that the 
models should reflect the impact on costs of the number and 
distribution of residential and business lines. The models start 
with an assignment of one residential line to each household in 
every census block group (CBG) reported in the 1990 Census. The 
Hatfield model uses recent Census estimates to update the 1990 
Census values. Because not all households have telephone service and 
some households have more than one line, the models are calibrated 
to match state and study area residential demand totals. Currently, 
the models use data on employees per CBG to assign the relative 
number of business lines per CBG. Because the ratio of business 
telephones to employees is not constant across all industries, a 
model used for calculating universal service support would need to 
include a better indicator of business lines per CBG. Numerous 
commenters have reported unexplained variations between model line 
demand and expected line demand. The models should attempt to 
simulate the actual location of households and the placement of 
facilities to reach those households through a technically feasible 
route.
    4. Loop Investments. Loop investments, i.e., outside plant, 
include the investments in cable and wire from an end user's home or 
business to the telephone company central office. They also include 
the investment in structures that support the cable and wire, such 
as poles and conduits, and the cost of placing the cable and wire. 
The models provide different estimates of loop investment because of 
different assumptions regarding fill factors, terrain impacts, 
structure sharing and the fiber/copper cross-over point. For the 
reasons set forth below, we believe that these inconsistencies must 
be resolved in order for the models to provide reasonable estimates 
of loop investments. Furthermore, the models should more accurately 
reflect the network topography necessary to serve an area. For 
example, many rural areas are extremely high cost regions which the 
models currently may not adequately represent. If the model does not 
accurately account for extreme geographic or climatic conditions, it 
may underestimate support necessary to serve these ares and may put 
continued service at risk.
    5. A fill factor represents the percentage of the loop facility 
that is being used. Fill factors must be below 100 percent because 
it is necessary to have reserve capacity to replace damaged 
facilities and serve new demand. Because it is cheaper to build 
plant in discrete increments rather than adding one loop at a time, 
fill factors are generally lower if there is an anticipation of 
growth. In residential markets, telephone companies traditionally 
place additional or spare distribution plant so customers could 
purchase more than one line. In business markets, many telephone 
companies may increase loop investment as part of a strategy to 
provide Centrex service. These practices lower the fill factors. The 
original BCM uses fill factors lower than those in the Hatfield 
model. BCM2, however, uses fill factors that are very similar to the 
Hatfield estimates. In response to the Common Carrier Bureau's 
information request, the models' proponents indicate that the fill 
factors that are calculated as ratio of demand divided by the number 
of loops constructed by the models are less than the input fill 
factors. This occurs because cable can be purchased only in 
increments, such as 100 pair cable, and therefore, will always 
exceed the required demand.
    6. Terrain impacts refer to the effect of soil composition, the 
level of the water table and slope characteristics. BCM2 develops 
unique factors for 54 different combinations of terrain impacts. It 
appears that changes in terrain impacts are responsible, in part, 
for the increase in BCM2 investment relative to the BCM investment. 
The Hatfield model incorporates adverse terrain conditions by 
increasing the loop length by 20 percent rather than estimating the 
impacts of each terrain characteristic. Detailed documentation to 
support the terrain-impact-input analysis is essential to an 
evaluation of the reasonableness of these assumptions.
    7. Structure sharing refers to the practice of sharing 
investments with other utilities in poles, trenches and conduits. 
The Hatfield model assumes that structures are shared equally by 
telephone, electric and cable companies; this assumption reduces the 
assumed investment in structures to one third of their estimated 
cost. In contrast, BCM2 assumes that the telephone company is 
responsible for 100 percent of the structure costs. The difference 
in the sharing assumption accounts for approximately 13 to 15 
percent of the difference in the model's forward-looking cost 
estimate for high cost areas. We are unconvinced that sharing exists 
to the extent the Hatfield model presumes, but we do not conclude, 
as do the proponents of the BCM2, that the cost of structures is 
never shared among the utilities. The model proponents should be 
prepared to supplement their current filings with documentation that 
supports their position regarding this issue as well as the related 
issue of whether the percentage of sharing is a function of the type 
of structure, e.g., is there more sharing of poles than conduit?
    8. The fiber-copper cross-over point refers to choice of using 
copper or fiber in the feeder plant. Each model specifies a default 
loop length. It then assumes that, if the loop is greater than the 
default length, the feeder plant will be fiber and if the loop is less 
than the default length, the feeder plant will be copper. The cross-
over point should be based on engineering practice. Neither model 
proponent submits studies to support the engineering practice it 
assumed. Commenters show that assumptions about this practice can lead 
to different costs. We note that an examination of both model results 
shows that over 50 percent of the lines will be served by digital loop 
carrier connected to central offices by fiber, while currently less 
than five percent of lines use that type of facility. We believe that 
our forward looking cost principles would require a determination of 
whether either of the engineering practices posited in the models is 
the least-cost method of placing loop facilities.
    10. Switching Investment. Switching investments include the cost of 
the switch, distribution frame, power expenses and the wire center 
building. The models use only digital switches. The BCM2 proponents 
allege that they have placed host, stand alone, and remote switches in 
wire centers according to the current placement of such switches. The 
Hatfield model uses only host switches. Commenters claim that these 
assignments do not reflect the forward-looking cost of switching. We 
share the commenters' concern regarding which type of switch, host, 
stand-alone or remote is assigned to each wire center and suggest that 
further work by interested parties would clarify this issue. We also 
have concerns regarding whether switches are included in the models 
that accurately reflect switching needs, particularly in sparsely 
populated areas. These concerns should be addressed.
    11. Obtaining non-proprietary estimates of the cost of switches is 
difficult. The proponents of the Hatfield model and the BCM2 obtained 
switch cost estimates from several sources. The BCM2 switch input costs 
are lower than those in BCM and now approach the switch cost used by 
the Hatfield model.

[[Page 63807]]

Moreover, the switching costs reported in the information requests for 
each of the three study areas, PacTel of California, GTE of Arkansas, 
and Southwestern Bell of Texas, are very similar.
    12. The Hatfield model assigns over 80 percent of the switch cost 
to supported universal services and BCM2 assigns over 90 percent of the 
switch to services that are supported. These percentages are greater 
than the ratio of local usage to total usage. These assignments are 
higher than the usage ratio because certain switch components, such as 
the processor, are allocated solely to the provision of supported 
universal services. We suggest that assignment of switch costs be 
reviewed to determine whether a more accurate assessment of costs be 
allocated to universal support mechanisms.
    13. Depreciation. Depreciation rates determine the level of 
expenses associated with the use of investments. Commenters disagree on 
whether depreciation rates used in the proxy models are too high or too 
low. Their positions reflect opinions regarding the impact of 
competition on depreciation rates and the extent to which the cost of 
supported services should be affected by competitive pressures. We 
believe that proxy models should use depreciation rates that reflect 
economic costs and should be flexible enough to permit depreciation 
rates set by regulators.
    14. Annual Charge Factors. Annual charge factors or expense factors 
determine the level of expenses. In the BCM2 and Hatfield proxy models, 
plant-specific annual charge factors are determined as the ratio of 
ARMIS expenses to investment. Several commenters express concern that 
use of the ARMIS data conflicts with the desire to develop forward-
looking costs because the ARMIS data are embedded cost statistics. The 
proxy models do not rely on the ARMIS expenses, but rather on the 
ratios of expenses to investment. The ARMIS expense to investment ratio 
is a ratio of current year expenses to investments purchased over many 
years. We recommend that the level of expenses be based on an analysis 
that calculates forward-looking expenses. If the Commission concludes 
that the ARMIS expense ratios are a reasonable starting position for 
determining forward-looking expenses, then we recommend that these 
ratios be modified to reflect changes in the expenses required to 
support and maintain forward-looking investments. For example, because 
the models only use digital switches, switch maintenance expenses 
should not include maintenance expenses associated with analog stored 
program or electromechanical switches. Expenses used in the models 
should be accurately reflected.
    15. Joint and Common Costs. In its Local Competition Order, the 
Commission defined common costs as ``costs that are incurred in 
connection with the production of multiple products or services, and 
remain unchanged as the relative proportion of those products or 
services varies (e.g., the salaries of corporate managers).'' With 
regard to the proxy models used for the purpose of establishing 
universal service support the Commission must determine how to allocate 
common costs among the services supported by the universal service 
mechanism and all other services.
    16. The Hatfield model estimates the common cost of corporate 
operations by multiplying all other expenses by 10 percent. This 
procedure generates corporate operations expenses that are between 25 
and 50 percent of the corporate operations expenses reported in ARMIS. 
The BCM2 divides ARMIS total corporate operations expenses for all 
reporting companies by the total number of lines served by these 
companies. It assigns 75 percent of this per-line value to the cost of 
providing the supported services. These differences explain 
approximately 11 percent of the difference between the average monthly 
forward-looking costs estimated by the Hatfield and BCM2 models. 
Further investigation is required before it would be possible to 
conclude that either of the proposed approaches or some other approach 
to the estimation is a reasonable level of corporate operations 
expenses to be included in calculation of the cost of providing the 
supported services.
    17. Retail Costs. Retail costs are the costs associated with 
billing and collection, product management, sales, and advertising and 
other customer service expenses. The Hatfield model excludes product 
management, sales, and advertising expenses. It includes billing and 
collection costs and other customer services expenses. Because of these 
assumptions, the Hatfield model includes only 21 to 25 percent of ARMIS 
customer operations expenses in its cost estimates. The BCM2 model 
incorporates 75 percent of the ARMIS customer operations expenses in 
its cost estimates. The differences in the treatment of customer 
operations accounts for 19 percent of the difference between the 
average monthly forward-looking costs estimated by the Hatfield and 
BCM2 models.
    18. NCTA's ETI report asserts that regulators should rigorously 
evaluate the ARMIS data before accepting them as a basis for forward-
looking costs. Its investigation of a Massachusetts cost study reveals 
that a significant proportion of product management expenses are 
related to market management and planning for business customers. NCTA 
argues that close examination of sales and advertising expenses reveals 
that these expenses are not related to the provision of basic 
residential service. It concludes that only four percent of marketing 
expenses should be assigned to the cost of providing the supported 
services. We agree that rigorous evaluation of the ARMIS data, to the 
extent ARMIS data are used, is necessary. We are not willing, however, 
to conclude that ARMIS data are the only data that should be used to 
determine retail costs. Therefore, we are not prepared to recommend 
what would be the reasonable amount of retail costs.
    19. Model results. The model results produce significantly 
different estimates of the nationwide total amount of support required 
to maintain the provision of the supported services in high costs 
areas. For example, at a $20.00 benchmark, using the model's default 
settings, the Hatfield model indicates that the universal service 
support would be $5.3 billion, which is the sum of $3.4 billion for 
large LECs and $1.9 billion for non-Tier1 LECs. The BCM2, at a $20.00 
benchmark, indicates that support would be $14.6 billion. The remaining 
difference, $9.5 billion, is a function of the model input costs and 
engineering design principles.
    20. Another means of evaluating the models is to compare their 
results to the results generated by embedded-cost studies. Because 
forward-looking and embedded costs rely on different input costs and 
technologies, the results from these studies are likely to differ. We 
are concerned, however, about large changes in the relative position of 
the states when comparing our embedded cost results to the results 
generated by the proxy models. The state characteristics, such as 
population density and terrain factors, that cause telephone companies 
in a state to exhibit high forward-looking costs in the models, do not 
cause those telephone companies to exhibit relatively high embedded 
costs. Alternatively, the change in position could be caused by 
specific management or accounting practices that affect embedded costs 
but that would not be reflected in forward-looking costs. A state's 
relative position can be measured by its rank, where the

[[Page 63808]]

state with the lowest cost has a rank of one and the state with the 
highest cost would have a rank of 51. A change in the rank order is the 
difference between the rank order estimated by a model and the rank 
order according to the current high cost assistance mechanism, which 
ranks states by embedded loop costs. For example, the change in rank 
order for California is three because it is the third lowest cost state 
according the BCM2 and it is the sixth lowest cost state according to 
the High Cost Fund. There are fifteen states for which the change in 
rank order is greater than ten. (For those fifteen states, the change 
in cost per line per month ranged from $3.06 to $24.41, with an average 
change of $10.47.) We believe it is necessary to determine why these 
large changes occur, and to ensure that the change in rank order does 
not threaten the provision of the supported services in these states.
    21. Measure of support. The two models on the record calculate 
support required for the provision of the supported services as the 
product of the number of lines in a geographic area and the difference 
between a cost estimate and a uniform benchmark amount. BCM2 uses the 
CBG as the geographic area to measure the line count and cost estimate. 
BCM2 sums the support across all CBGs in a state to determine the 
state-wide support level. Calculation of support at either the wire 
center, study area, or density zone level is not a standard output of 
the model. Further manipulation of the BCM2 input sheets is required to 
obtain these results. The Hatfield model estimates the cost per CBG. 
The model average CBG cost estimates across six density zones. It uses 
the difference between the density zone average and the benchmark to 
determine the per-line support per density zone. It multiplies the per-
line support by the number of lines per density zone to estimate the 
density zone support and then sums across all density zones to 
determine the support for the study area. Calculation of support at 
either the CBG or wire center level is not a standard output of the 
model. Further manipulation of the Hatfield model input sheets is 
required to obtain these results.
    22. Any proxy model used to calculate universal support levels 
should be able to provide estimates of support at various geographic 
levels with a state, such as on a study area, wire center, density 
zone, or CBG basis. These estimates would enable the Commission and 
state commissions to compare alternative decisions regarding support 
areas, and it is necessary so that we will be able to establish a 
specific, predictable and sufficient mechanism to preserve and advance 
universal service.

Appendix II--Service List

The Honorable Reed E. Hundt, Chairman
    Federal Communications Commission, 1919 M Street, NW, Room 814, 
Washington, DC 20554
The Honorable Rachelle B. Chong, Commissioner
    Federal Communications Commission, 1919 M Street, NW, Room 844, 
Washington, DC 20554
The Honorable Susan Ness, Commissioner
    Federal Communications Commission, 1919 M Street, NW, Room 832, 
Washington, DC 20554
The Honorable Julia Johnson, Commissioner
    Florida Public Service Commission, 2540 Shumard Oak Blvd., 
Gerald Gunter Building, Tallahassee, FL 32399-0850
The Honorable Kenneth McClure, Commissioner
    Missouri Public Service Commission, 301 W. High Street, Suite 
530, Jefferson City, MO 65101
The Honorable Sharon L. Nelson, Chairman
    Washington Utilities and Transportation Commission, PO Box 
47250, Olympia, WA 98504-7250
The Honorable Laska Schoenfelder, Commissioner
    South Dakota Public Utilities Commission, State Capitol, 500 E. 
Capitol Street, Pierre, SD 57501-5070
Martha S. Hogerty
    Public Counsel for the State of Missouri, PO Box 7800, Jefferson 
City, MO 65102
Anna Gomez, Federal Staff Chair
    Federal Communications Commission, 2100 M Street, NW, Room 8617, 
Washington, DC 20036
Paul E. Pederson, State Staff Chair
    Missouri Public Service Commission, PO Box 360, Jefferson City, 
MO 65102
Lisa Boehley
    Federal Communications Commission, 2100 M Street, NW, Room 8605, 
Washington, DC 20554
Charles Bolle
    South Dakota Public Utilities Commission, State Capitol, 500 E. 
Capitol Street, Pierre, SD 57501-5070
Deonne Bruning
    Nebraska Public Service Commission, 300 The Atrium, 1200 N 
Street, PO Box 94927, Lincoln, NE 68509-492
James Casserly, Senior Legal Advisor
    Office of Commissioner Susan Ness, Federal Communications 
Commission, 1919 M Street, Room 832, Washington, DC 20554
John Clark
    Federal Communications Commission, 2100 M Street, NW, Room 8619, 
Washington, DC 20554
Bryan Clopton
    Federal Communications Commission, 2100 M Street, NW, Room 8615, 
Washington, DC 20554
Irene Flannery
    Federal Communications Commission, 2100 M Street, NW, Room 8922, 
Washington, DC 20554
Daniel Gonzalez, Legal Advisor
    Office of Commissioner Rachelle B. Chong, Federal Communications 
Commission, 1919 M Street, NW, Room 844, Washington, DC 20554
Emily Hoffnar
    Federal Communications Commission, 2100 M Street, NW, Room 8623, 
Washington, DC 20554
L. Charles Keller
    Federal Communications Commission, 2100 M Street, NW, Room 8918, 
Washington, DC 20554
Lori Kenyon
    Alaska Public Utilities Commission, 1016 West Sixth Avenue, 
Suite 400, Anchorage, AK 99501
David Krech
    Federal Communications Commission, 2025 M Street, NW, Room 7130, 
Washington, DC 20554
Debra M. Kriete
    Pennsylvania Public Utilities Commission, PO Box 3265, 
Harrisburg, PA 17105-3265
Diane Law
    Federal Communications Commission, 2100 M Street, NW, Room 8920, 
Washington, DC 20554
Mark Long
    Florida Public Service Commission, 2540 Shumard Oak Blvd., 
Gerald Gunter Building, Tallahassee, FL 32399
Robert Loube
    Federal Communications Commission, 2100 M Street, NW, Room 8914, 
Washington, DC 20554
Samuel Loudenslager
    Arkansas Public Service Commission, PO Box 400, Little Rock, AR 
72203-0400
Sandra Makeeff
    Iowa Utilities Board, Lucas State Office Building, Des Moines, 
IA 50319
Philip F. McClelland
    Pennsylvania Office of Consumer Advocate, 1425 Strawberry 
Square, Harrisburg, Pennsylvania 17120
Michael A. McRae
    D.C. Office of the People's Counsel, 1133 15th Street, NW.--
Suite 500, Washington, DC 20005
Tejal Mehta
    Federal Communications Commission, 2100 M Street, NW., Room 
8625, Washington, DC 20554
Terry Monroe
    New York Public Service Commission, 3 Empire Plaza, Albany, NY 
12223
John Morabito, Deputy Chief, Accounting and Audits Division
    Common Carrier Bureau, Federal Communications Commission, 2000 L 
Street, NW., Suite 812, Washington, DC 20554
Mark Nadel
    Federal Communications Commission, 2100 M Street, NW., Room 
8916, Washington, DC 20554
John Nakahata, Senior Legal Advisor
    Office of Chairman Reed E. Hundt, Federal Communications 
Commission, 1919 M Street, NW., Room 814 Washington, DC 20554
Lee Palagyi
    Washington Utilities and Transportation Commission, 1300 South 
Evergreen Park Drive SW., Olympia, WA 98504
Kimberly Parker

[[Page 63809]]

    Federal Communications Commission, 2100 M Street, NW., Room 
8609, Washington, DC 20554
Barry Payne
    Indiana Office of the Consumer Counsel, 100 North Senate Avenue, 
Room N501, Indianapolis, IN 46204-2208
Jeanine Poltronieri
    Federal Communications Commission, 2100 M Street, NW., Room 
8924, Washington, DC 20554
Michael Pryor
    Federal Communications Commission, 2100 M Street, NW., Room 
8905, Washington, DC 20554
James Bradford Ramsay
    National Association of Regulatory Utility Commissioners, PO Box 
684, Washington, DC 20044-0684
Brian Roberts
    California Public Utilities Commission, 505 Van Ness Avenue, San 
Francisco, CA 94102
Gary Seigel
    Federal Communications Commission, 2000 L Street, NW., Suite 
812, Washington, DC 2055
    2100 M Street, NW., Room 8605, Washington, DC 20554
Pamela Szymczak
    Federal Communications Commission, 2100 M Street, NW., Room 
8912, Washington, DC 20554
Lori Wright
    Federal Communications Commission, 2100 M Street, NW., Room 
8603, Washington, DC 20554

[FR Doc. 96-30381 Filed 11-29-96; 8:45 am]
BILLING CODE 6712-01-P