The Honorable Reed E. Hundt
Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554
Re: Federal-State Joint Board on Universal Service,
CC Docket No. 96-45
Dear Chairman Hundt:
On May 8, the Commission intends to issue an order
fulfilling the mandate of the Telecommunications Act of 1996
(1996 Act) to establish a new framework for ensuring that basic
telephone service remains available and affordable for all
Americans. That order will doubtless build on the
recommendations by the Federal-State Joint Board, which are the
fruit of close and conscientious collaboration between Federal
and State regulators. As the Commission completes its review of
the many comments on the Joint Board's recommendations and
prepares its own decision, the National Telecommunications and
Information Administration (NTIA) would like to reiterate and to
reinforce its views on several of the principal issues under
consideration.
1. Connecting Schools and Libraries
As the Commission is aware, NTIA strongly supports the basic
tenets of the Joint Board's recommendations concerning the
provision and funding of essential telecommunications services to
our nation's schools and libraries. For example, we believe that
the proposed level of support for schools and libraries -- $2.25
billion -- is a reasonable estimate of the amount required
annually to provide necessary services to those institutions,
although the Commission and the Joint Board should reassess that
level periodically to ensure that it is neither excessive nor
inadequate.
We also strongly urge that the widest feasible range of
providers should be entitled to receive money from the universal
service fund if they furnish qualifying services to schools and
libraries at discounted rates. Section 254(h)(2)(A) of the 1996
Act charges the Commission with establishing "competitively
neutral rules" to enhance access by those entities to both
"telecommunication and information services." Maximizing the
number of eligible providers would likely increase the number of
potential suppliers to schools and libraries. Additional
competition should, in turn, reduce the prices that those
institutions must pay, as well as expand the range of services,
particularly advanced telecommunications and information
services, made available to them. Moreover, competition will
ensure a more efficient use of the fund as prices are pushed
downward.
Finally, the Commission should ensure that mechanisms are in
place to implement the discount plan. Thus, for example, it
should not only select a Fund Administrator, but it should
clearly delineate the Administrator's duties (e.g., assessing and
collecting contributions to the fund from carriers, disbursing
funds to service providers, maintaining a database of services
provided and rates charged to particular schools and libraries
for use by others). The Commission should also, in NTIA's view,
specify that Requests for Proposals (RFPs) should be the vehicles
by which schools and libraries solicit and providers furnish
qualifying telecommunications services.
2. Rural Health Care Clinics
The 1996 Act establishes the principle that rural health
care providers are entitled to receive "telecommunications
services which are necessary for the provision of health care
services" at prices that "are reasonably comparable to rates
charged for similar services in urban areas."(1) NTIA believes
that the largest pricing disadvantage faced by rural health care
providers are the distance and usage charges associated with many
of the services they purchase. For example, the average annual
charge for a T-1 circuit in rural areas is at least three times
that in urban areas. Similarly, if a rural health care provider
wishes to connect to an Internet Service Provider in order to
access and retrieve medical information, the provider frequently
must incur toll charges that an urban counterpart does not. For
these reasons, NTIA recommends that the Commission take
appropriate steps now to ensure that qualifying services provided
to rural health care providers do not include distance-sensitive
elements and that those providers do not have to pay toll charges
to access the Internet.
3. Support to High Cost Areas
One of the most contentious aspects of the universal service
debate concerns the amount of support needed to ensure affordable
service for subscribers living in high cost areas, including
rural areas. NTIA favors a strong high cost program and has
endorsed the Joint Board's tentative recommendation to use so-called proxy models to quantify the amount of subsidies needed.
We understand, however, that there are legitimate questions about
the ability of existing models to estimate accurately the costs
of serving rural and other high cost areas. We endorse the
adoption of an interim plan until such time as the new scheme is
workable. Any such plan should hold steady the existing support
for high cost areas, while minimizing the imposition of new
assessments while further work is completed. We strongly urge the
Commission to continue the Joint Board process and to work with
stakeholders to improve on the existing proxy models to make them
a suitable vehicle for calculating high cost support.
In addition, we urge the Commission and State regulators to
coordinate their policies, particularly with regard to universal
service and other interstate and intrastate pricing reforms, to
ensure that the new Federal universal service regime is
synchronized with the removal of implicit subsidies, thus
prohibiting double recovery of costs.
4. Consumer Impacts
At the same time that the Commission issues its universal service order, other proceedings to implement the 1996 Act are pending on both the Federal and State levels. We believe that it is important to implement the various reforms necessitated by the Act in a manner that maximizes consumer benefits and avoids unreasonable rate shock.
The introduction of meaningful and effective competition
into all segments of the telecommunication market will best
provide consumers with the promises of the Act -- better choice
in price and service. In this regard, we applaud the Commission
and the State commissions for their vigilant efforts to implement
the interconnection provisions of the Act. We appreciate the
difficulty in predicting when the full effects of competition
will be felt by a wide range of consumers and understand the need
for transition mechanisms to move from a monopoly to a
competitive market. At the same time, we urge the Commission to
take immediate action to achieve a number of consumer benefits
envisioned by the Act, such as affordable service to schools,
libraries, and rural health care clinics, continued support for
customers in high cost areas, and reductions in rates that
consumers ultimately pay.
In this regard, the Commission apparently plans to complete
its pending rulemaking to reform interstate access charges. A
number of different plans have been offered for restructuring
existing access charges, including comments filed by NTIA. In
assessing these various proposals, and in crafting a new access
charge plan, we urge the Commission to keep its eyes on the
fundamental objective -- an access regime that garners for
consumers the benefits of local and long distance competition,
promotes efficient investment in the nation's telecommunications
infrastructure and, most importantly, protects customers from
sharp and sudden rate increases. By so doing, the Commission
will assure that its actions in the access charge proceeding will
be compatible with the central purpose of universal service
reform -- to make affordable basic telephone service available to
all Americans.
Sincerely,
Larry Irving
cc: Commissioner James H. Quello
Commissioner Rachelle B. Chong
Commissioner Susan Ness
1. 47 U.S.C. § 254(h)(1)(A).