The Honorable Reed E. Hundt
Chairman
Federal Communications Commission
1919 M Street, NW Room 814
Washington, D. C. 20554
Re: In the Matter of Federal-State Joint Board on Universal Service, CC Docket No. 96-45
Dear Chairman Hundt:
I am contacting you as the Chairman of the Federal-State Joint Board on Universal Service ("Joint Board") regarding the Recommended Decision recently released by the Joint Board (FCC 96J-3). I would like to commend you and all the members and staff of the Commission and the Joint Board for your tireless work on implementing the Telecommunications Act of 1996 ("1996 Act"). Much of the implementation work done by the Commission to date has set the foundation for the realization of the vision embodied in that landmark legislation. The Office of Advocacy is particularly supportive of the Commission's efforts to promulgate national interconnection rules. The Commission's local competition rules, if upheld by the court of appeals, promise to open monopoly markets for new competitors - many of which will be small businesses - and create new choices and lower prices for consumers across the country.
In many ways, the Recommended Decision on universal service also represents an important step toward the realization of the goals of the Telecommunications Act of 1996. I am, however, troubled by one portion of the Recommended Decision's impact on small businesses in rural, high-cost areas.
I have serious concerns about that part of the decision that proposes to restrict or eliminate entirely universal service support mechanisms for business consumers and other institutional consumers in rural, high-cost areas (see paragraphs 91-92). The Recommended Decision interprets the 1996 Act to restrict universal service support to residential consumers and proposes to exclude major groups of businesses and other institutional consumers from this support. The decision further suggests that all support for rural businesses may ultimately be eliminated. Yet nowhere in the 1996 Act is there a reference to this or any other limit on the types of rural consumers that would receive, indirectly, universal service support. Moreover, no such distinction has ever been made in all the years of universal service support to rural areas.
The Recommended Decision also proposes to eliminate universal service support for certain types of residential consumers. Given that the mandate of the Office of Advocacy is to represent the views and interests of small businesses, I do not address my concerns directly to this portion of the Joint Board's decision. The decision suggests the following cuts in universal service support for rural telephone companies: (1) an immediate termination of all universal service support for all multiple line business users, (2) an immediate undefined reduction in support for all single line business users, and (3) a complete termination of support for single line business users at an undefined point in the future.
The proposed cuts in universal support would have a significant impact on rural telephone rates for rural business consumers and other institutional consumers such as town halls, police stations, churches, local school boards, nursing homes, doctor's offices, fire stations, etc. Rates for such institutional consumers could increase significantly as support payments to rural telephone companies are progressively eliminated. Competition is unlikely to offset these rate increases in the foreseeable future. Since it is generally recognized that competition, if it arrives at all, will arrive in rural areas long after it arrives in urban and suburban areas.
The decision apparently assumes that rural businesses and other institutional users will not leave the network if forced to pay the increased rates necessary to cover the full cost of service. The increased cost of service in many rural areas, however, would be so high that it would discourage use of the network and ultimately lead to the loss of a significant number of subscribers.
Excluding any major group of rural consumers would have a serious impact on all rural consumers. The proposed decision is likely to result in significant telephone rate increases for small rural businesses. This would discourage growth and economic development in rural areas. Such rate increases would tend to further isolate rural America. Many small rural institutions' access to advanced telecommunications services would be constrained, distancing them from the benefits of the information revolution - an outcome contrary to the Joint Board's other efforts to encourage access to advanced telecommunications services. Significant rate increases could lead some small rural businesses to leave rural areas and others to drop off the network entirely. Ultimately, the Joint Board's actions on this issue could have an adverse impact on the economic structure of rural America.
Universal service support systems should continue to encompass all rural consumers. Reform of universal service support mechanisms does not require the exclusion of small rural business consumers. I urge you, the FCC Commissioners, and the members of the Joint Board to consider the impact this part of the Recommended Decision will have on small rural businesses, other small rural institutions and, ultimately, all rural Americans. If you have any questions, please do not hesitate to contact me or David Zesiger of my staff at 205-6532.
Sincerely,
Jere W. Glover
Chief Counsel
cc: Senator Thomas Daschle
Senator Byron Dorgan
Senator Christopher Bond
Rep. James Talent
Rep. John Tanner