In the Matter of ) ) Federal-State Joint Board ) CC Dkt. # 96-45 Universal Service ) )COMMENTS OF
AMERICA'S CARRIERS
TELECOMMUNICATIONS ASSOCIATION
("ACTA")
Regulatory Flexibility Comments: April 12, 1996
Submitted by:
Charles H. Helein
General Counsel
Of Counsel:
Helein & Associates, P.C.
8180 Greensboro Drive
Suite 700
McLean, Virginia 22101
Telephone: (703) 714-1300
Facsimile: (703) 714-1330
e-mail: helein@digitalnation.com
COMMENTS
America's Carriers Telecommunication Association ("ACTA"), by its attorneys, submits its comments on the regulatory flexibility issues raised by the Commission's Notice of Proposed Rulemaking and Order Establishing Joint Board ("NPRM") in the captioned docket. ACTA is a national non-profit trade association representing the interests of third tier interexchange carriers, their customers and their suppliers, interested in the establishment and continued advancement of a more fully competitive marketplace for today's and for the 21st Century's communications services.
The scope of the issues in this proceeding are extremely broad, diverse and complicated. Intelligent suggestions and proposals on such a variety of subjects and their specific ramifications are, therefore, quite difficult to formulate. These comments will, therefore, suggest broad guidelines from the perspective of small business carriers about some of the more significant issues under consideration.
Regulatory Parity. Small telephone companies and/or rural telephones have enjoyed the sympathy of both Commission and state regulators for years. In ACTA's view it is long overdue that, if not the same solicitude, at least similar solicitude for small long distance carriers should be applied. The Commission is urged, therefore, in recognition of the public interests represented by small carriers, to fashion its decisions in this proceeding with a conscious eye as to the impact such decisions will or may have on small carriers.
ACTA believes this goal can be accomplished in part by establishing a few overriding guidelines. For example, when contribution standards are set to support universal services, the proper approach should be to recognize that such standards will, or may need to, differ depending on the size, resources and nature of operations of the carriers that will be affected. Under the current USF methodology, the Commission, opting for administrative convenience, divided subject carriers by the number of presubscribed lines each carrier served (namely .05%).[1]
This standard has caused significant financial harm to small carriers and has been counterproductive in advancing greater competition in the long distance segment of the industry. For example, by using the number of lines, small carriers, finding they have exceeded the .05% benchmark, are suddenly confronted with a significant monthly "tax" on their earnings -- the USF charges tariffed by NECA. In many cases, the small carriers which find themselves "inducted" into the elite group of carriers liable for USF charges, have obtained that status because of their marketing focus on single-line residential services.
Serving the residential market is a far more difficult proposition for small carriers than serving businesses. For one thing, the profit margin on residential lines is much smaller which means, to serve this market, profits must come from larger volumes of traffic, meaning larger numbers of users or larger numbers of prescribed lines. But, by being "successful," the small carrier may become its own worst enemy. The fact that smaller margins are realized on residential lines, means that some larger companies with less lines, but with higher margins, are actually larger in terms of revenues and profits, but nonetheless escape the USF "tax." In short, by expanding competition to include the lower-end residential market, some small carriers are actually being penalized by the USF charges. To exacerbate the situation, these small carriers pay over these charges to assist monopoly local exchange carriers, most of which are far larger in size and resources than smaller IXCs, and which may not even operate in the same area as served by the small IXC. The result of applying otherwise potentially good public policy, without regard for its actual practical effects, is to distort the marketplace and handicap competitors and competition. The situation only grows worse now that some of these same LECs, being "subsidized" by USF funds, will become, or are direct competitors of, the small IXCs required to provide the subsidy.
Another area of concern is the inherent risk of small carriers never appearing on the policy radar screens of the decision makers and/or advisors. While much lip service is given to assisting small businesses, the real test of effective policies guarding the small businesses seeking to enter and maintain a presence in the communications marketplace, is evaluating the impact on small businesses of the policies themselves. The problems caused by the current USF charges is an example of how well-meaning policy, applied outside the context of market realities, turns out to defeat broader and more important policies. ACTA submits that the current policy on USF funding would not pass muster under the TA96 statutory requirement of "competitive neutrality."
Going forward, the Commission is urged to exercise additional diligence to evaluate policy alternatives, not only from the perspective of their impact on the highly visible carriers, but also on the small carriers and potential future entrants. ACTA does not seek "protectionism," but rational approaches to account for the disparities which exist in a market structure dominated by such radical differences in size and resources of competitors and by the fact that, small carriers are in the unenviable position whereby their main suppliers are, at the same time, their main competitors.
ACTA will review the comments submitted in the initial round. It hopes to be able to add more specific and focused comments and suggestions to the broad suggestions made in these comments, in aid of the small business regulatory flexibility analysis conducted by the Commission on universal service issues.
Respectfully submitted,
AMERICA'S CARRIERS
TELECOMMUNICATION ASSOCIATION
By:_______________________________________
Charles H. Helein
General Counsel
Of Counsel:
Helein & Associates, P.C.
8180 Greensboro Drive
Suite 700
McLean, Virginia 22102
Telephone: (703) 714-1300
Facsimile: (703) 714-1330
e-mail: helein@digitalnation.com