BELLS STUDYING FCC'S ORDER ON 10TH CIRCUIT REMAND

BellSouth said the FCC order generally fulfilled 10th Circuit directives by “enticing states to achieve rate comparability” but shouldn’t require all states to submit extensive rate data. It said the Commission’s proposed mechanism for additional federal support must be “stringent enough to ensure that the universal service fund remains specific, predictable and sufficient.”

Verizon urged the FCC to limit universal service funding “to the amounts needed to implement the policies and principles in the Act.” It said states seeking additional federal support for high-cost wire centers “should bear the burden of showing that they are unable to fund that support internally,” including a requirement that they had “rebalanced” business and residential rates as needed to remove any implicit subsidies: “The fund may not and should not be used as an instrument to induce states to adopt Commission policies.” However, Verizon warned the agency against imposing additional burdens on states that weren’t seeking universal service funding beyond amounts allocated to them: “The Commission therefore should not require additional reports and data from all states on their rates… Instead, only those few states that seek additional funding should need to go to the expense of compiling the rate data they need to support their request.”

Qwest said the Commission should: (1) Establish streamlined procedures for states to request additional federal support to reduce their rates in high-cost areas served by nonrural carriers below the FCC’s “reasonably comparable” benchmark. It said that to qualify for additional federal support, a state should need to demonstrate that its rural rates weren’t reasonably comparable and that it had taken all reasonable actions to achieve reasonable comparability to urban rates nationwide of rural rates in areas served by nonrural carriers. (2) Adopt its proposal to provide additional targeted federal universal service support to states that established explicit state universal service support mechanisms. “Given the inevitable erosion of the implicit subsidies on which some states depend to maintain affordable rates in rural high-cost areas today, additional federal support is needed to encourage states to move to sustainable universal service mechanisms,” Qwest said.

SBC urged the Commission to conclude that the “additional inducement” it had proposed in its rulemaking was “insufficient to satisfy the statutory requirement that the federal universal service support mechanism be designed to induce the states to move to explicit, nondiscriminatory and sufficient universal service support.” It said the FCC should make “substantial changes” in the federal mechanism to “address these shortcomings in its mechanism.” “It is not enough for the Commission to give the states enough money to ‘enable’ them to take action if they so choose,” SBC said: “Rather, as the Tenth Circuit made clear, the Commission ‘must also undertake the responsibility to ensure that the states act’ by creating some ‘carrot’ or ’stick’ significant enough ’to induce,’ not merely encourage, ‘adequate state action.'”

The universal service goals of the Telecom Act of 1996 can’t be met unless the states “replace their jury-rigged systems of implicit universal service subsidies with explicit funding mechanisms,” SBC said, adding the language of Sec. 254 of the Act made that clear, as the Commission repeatedly had acknowledged. “Universal service is neither equitable nor nondiscriminatory if one carrier -- the incumbent LEC -- is primarily responsible for sustaining it,” SBC said: “Because competition makes implicit subsidies unsustainable, a universal service regime that rests on implicit subsidies cannot meet the statute’s requirement that state and federal support be specific, predictable and sufficient.”

SBC urged the Commission to: (1) Redesign its mechanism so that all high-cost universal service support, for both rural and non-rural carriers, was “expressly conditioned on a state having adopted or demonstrating a concrete commitment to transition to an explicit support mechanism.” (2) Provide the states with guidance on what qualified as an explicit support mechanism. (3) Support the states during the transition to ensure protection of consumers and carriers.

Responding to the FCC’s question whether it should require “all states” to provide more data for certification, NASUCA said the Commission “should not require, but should permit” additional states to file information. It said the Commission had no reason to “require” all states to file data on business rate data, rate data for nonrural areas served by nonrural carriers and other rate data: “Much of the data is available from other public sources.” However, it specified that if the FCC were to “put forth a template for the information, and request that states -- whether or not the state is otherwise required to provide the information -- this would be a useful tool for further proceedings.”

“Calling scopes should be included in the rate review process,” NASUCA said. It said that while “almost all urban customers [had] broad local calling scopes,” there were “many customers of nonrural telephone companies who [were] located in rural areas who [had] restricted local calling areas.” It argued that local calling was “a fundamental of basic local exchange service… not an enhancement or an additional service that is optional, or available at extra charge, at least in most rural areas.” NASUCA said the candidate states for that process were “quite limited in number. Thus the opportunity to include calling scope issues in the rate review process will also likely be limited.”

NASUCA recommended a “functional approach” to establishing a rural local calling area that was “reasonably comparable” to an urban one. Under that approach, it said, a “reasonably comparable” local calling area for a rural exchange would be defined as the ability to reach, as a local call: (1) Each contiguous exchange. (2) The exchanges for any county seat that served any part of the exchange. (3) A metropolitan exchange, if the wire center was within the MSA of a metropolitan exchange and/or within a state-specified distance from the metropolitan exchange. It said it believed “almost all urban exchanges have local calling areas that meet this standard.”

NASUCA also said the FCC shouldn’t: (1) Develop procedures for state requests for further action: “The states do not need the detailed guidance that the Commission seeks to provide.” For example, it said the agency should leave up to individual states the type of federal action they requested and a proposed amount. (2) Adopt inducements for states to eliminate implicit universal support in intrastate rates. It said “the FCC’s proposal to give states inducements for removing implicit intrastate support, regardless of the impact on whether rates are reasonably comparable, means that states will be rewarded for actions that make rural rates less comparable to urban rates. This allows a Commission-inflated preference for explicit support to violate the fundamental directive of the Act that rates be reasonably comparable, and cannot be accepted.”

Meanwhile, the Pa. PUC asked the FCC to explain in detail what it had meant by “explicit universal service mechanisms.” It also opposed any proposal to increase the size and spending of the nonrural high cost fund, saying “none of Pennsylvania’s nonrural carriers qualify or receive support from the fund.” It said it was concerned that “the bulk of the funding flows to a limited number of states, not including Pennsylvania. The national wireline phone penetration rate is over 95% according to the FCC’s order. Thus, it appears the intent of the Act, to have universal service across the nation, is happening now without expanding the fund size.” Separately, the Ia. Utilities Board expressed concern that states would be required annually to review the comparability to urban rates nationwide of residential rates in rural areas of the state served by nonrural ILECs: “This approach appears to require each state to review the rates of all ETCs [eligible telecom carriers]. This will be difficult for Iowa to comply with, as Iowa has 16 wireless carriers that have been granted ETC status. These carriers are not regulated in Iowa and do not file tariffs with the Board.” Iowa asked the Commission to clarify how states could review the rates of entities that weren’t required to file tariffs.