CC Docket 96-45

COMMENTS OF CHURCHILL COUNTY TELEPHONE & TELEGRAPH

April 12, 1996

Churchill County Telephone & Telegraph (CCTT) respectfully submits its comments in this proceeding.

CCTT is a local telephone company serving approximately 11,500 access lines within Churchill County, Nevada - an area of approximately 5.000 square miles located in North Central Nevada. Our principal population center is the town of Fallon, Nevada located approximately 60 miles east of Reno, Nevada.

In October of 1994, CCTT had filed comments in Docket 80-286 regarding the Universal Service issues facing our nation. A copy of these brief comments are attached as Appendix A.

In the current proceeding the FCC has been tasked by Congress in Public Law 104-104 to facilitate a very difficult transition toward nationwide competition in a very short timeframe while preserving the policy of Universal Service throughout our country. Given the complexity of issues and the mountains of comments likely to be riled, we will try to keep ours brief and to the point.

PL 104-104 addresses seven specific principles to be considered for the provision of Universal Service:

1) Quality services at just, reasonable and affordable rates

As a small telephone company CCTT would not presume to define such terms as "quality," "just," or "reasonable" for nationwide standards, yet we believe that nationwide standards are already being applied to some extent and may be used as a foundation for further development of Universal Service goals.

For example, currently a nationwide average cost per access line is used as the basis for calculating various support for small companies. The nationwide average will change over time with competition and the advent of new technology, but surely in the short term it might be useful to look at using it as a starting point for determining what is "just, reasonable, and affordable." The rules governing how this average is calculated are already well established and can be modified over time as may be necessary to keep up with changes in the industry. The nationwide average has the advantage of being based on historical cost rather than guessing at what the future might bring. Current practices for receiving Universal Service funds are based on data submitted to NECA two years in arrears. This gives small telephone companies significant advantages in their planning window by knowing that future funds two years away are based on current actual data.

2) Access to Advanced Services in all regions

Here again defining what constitutes "Access to" "Advanced Services" and "all Regions" is difficult at best. It is certain that the definition of advanced services should be flexible enough to accommodate future services. We believe that as new services become available in major metropolitan arm and are subscribed to by a majority of customers in those areas, that small companies such as CCTT must be able to offer similar services at affordable rates. Unfortunately the economies of scale are vastly different and we will continue to need the incentives provided by Universal Service Funding in order to upgrade out networks to be able to offer new services.

For switched services, upgrading the switching center does not always provide the final solution because in many cases outside plant must also be upgraded, but we do believe that "access to" should at a bare minimum include the switching centers. Whether or not high speed services to public locations such as the local library or schools will constitute adequate "access to" or whether every single line subscriber should be afforded this access to their home or business is a matter of strong debate throughout the nation. We do feel that policies and regulations should discourage "cherry picking- of high usage customers and Universal Service Policies need to address these concerns in small rural communities.

Obviously we do feel that "all regions- should include the area presently served by CCTT

3) Access in Rural and High Cost areas

Our comments are similar to those stated above under point #2. We understand that "high cost" is a point of debate. Here again if we use a nationwide average as a basis to build upon it simplifies much of the debate. For companies whose cost of providing service exceeds that nationwide average cost, there should be a sliding scale developed to determine the level of support necessary which can include a cap if warranted. In terms of prices charged, prices to consumers in high cost areas should be set at least high enough to recover the nationwide average cost per access line, with universal service funding available to make up the difference or at least a portion of the difference in cost.

If the present nationwide average is about $230.00 per line annually this means that before a company could draw universal service funding, they should set local line prices to recover at least $19.17 per month per line average (including subscriber line charges). This rate would not necessarily have to be across the board if a company can charge some classes of customers more or less than others via their rate structure because even small companies need some rate flexibility, but the company should be required to recover at least the nationwide average per line before drawing upon universal service funds. A recent study by OPASTCO describes the consumer response to rate increases in small rural markets. Evidence suggests that a local rate of under S20 per month would not cause significant drop off in subscriber rates. For low income consumers, the Lifeline programs should be maintained to make up the difference.

4) Equitable and Non-Discriminatory Contributions

This is a difficult principle to address given the new entrants into the telecommunications market whose networks and capital structure may be vastly different from the traditional telco model. No matter what formula is used, there will be those who seek to evade contributing. We have reviewed -contributions based on cost using complex separations rules or contributions based on revenues using formulas similar to those in use for the Telecommunications Relay Service fund and both methods seem to fall short. Perhaps a nationwide fee similar to the Interstate excise tax should be used where the charges are clearly identified on the customer's bill whether it be for local, toll or other form of service. It would be the responsibility of each telecommunications provider to assess and collect the fees and send them in to the USF administrator.

5) Specific and Predictable Support Mechanisms

Although we understand that consumer groups and others may be outraged by the proposal of a "tax-like" fee as we suggested under point 4 above, it is equally clew that the 'intent of Congress is to make these support mechanism explicit rather than buried in a myriad of complex formulas. A nationwide fee would certainly be "specific" although the level of predictability may be dubious. If the current fee is based on historical data the total USF requirement should be predicable, however the rate of the fee may not be as predictable given that current usage patterns vary by service and geographic area. Consideration should be given for frequent rate changes (quarterly or even monthly) under the method we propose in order to "guarantee" we will recover the specific level of support required.

6) Access to advanced services for schools, libraries, and health care providers

While we agree with the overall goals of this principle, we would urge that support for these efforts be tracked in a separate fund from the support necessary for regular services. More stringent guidelines need to be applied to prevent abuse. As a nation we already have poured so much "Public money" into these facilities that many businesses and providers alike are asking when will it be enough?

We are seriously concerned with the problem of educating our youth in ultra high tech schools and then having them leave our small communities to seek employment elsewhere because no local businesses can afford to implement the technology that the kids were taught in school! This is not to suggest that schools not be afforded access to high technology services, but rather to warn the policy makers that unless these technologies are widely available in the commercial markets (especially in small communities), it is counter productive to teach it in schools. We need practical technologies that can be used by the kids in their hometowns when they graduate.

In the case of public health care providers in rural communities we have a stronger case for universal service support, but again we feel that funding should be separate and perhaps distributed via grants to those entities who meet the criteria.

7) Other principles necessary to protect the public interest, convenience, and necessity

We believe that serious consideration should be given to developing nationwide policy at the federal level, but not in so much minute detail that it requires hiring a team of lawyers and accountants to administer it. Rather we feel that implementation of nationwide policies and guidelines should be left up to the states to administer. The states are better equipped to dead with specific companies and geographic differences.

We feel strongly that the National Exchange Carrier Association (NECA) should continue to administer the Federal Universal Service Program in cooperation with the states. NECA has done an outstanding job of balancing the needs of the various parties in the past, as well as providing needed training and public relations material to assist consumers in understanding how the funding mechanisms benefit all of us.

We feel that the programs developed need to be as simple and straightforward as possible.

THIS CONCLUDES OUR COMMENTS RELATIVE TO THE SEVEN PRINCIPLES ABOVE

Support for Low Income Consumers

In addition to the seven principles discussed above. our comments regarding assistance to low income consumers stem from experience with the present Lifeline program in place today.

In our service territory we have worked diligently with state and county government authorities to have these entities provide the necessary certification of consumer eligibility and we would support the continuation of such a program provided it does not become too burdensome for these entities to manage. We did this for two reasons: 1) these governmental entities are in a better position than the local telephone company to assess the eligibility of the consumer using the established standards. and 2) this provides consistency in the process.

We require regular re-certification to prevent abuse. Each time a certification is entered in our system it carries an expiration date which generates a letter to the Customer requiring re- certification (usually every 6-12 months). This adds a measure of accountability to the process. By having the state and local governments involved, they we able to spot abuse through their superior training in welfare fraud.

If there were one area we would change today It is to require consumers on Lifeline to be ineligible for toll and certain optional features unless they pay the full line rate. OUT customers on Lifeline receive a subsidy of $6.00 to $10.00 per month and some still subscribe to high priced services such as Caller ID We don't think this is fair. We would also be willing to give away toll restriction to these customers if necessary to help them contain their costs. and in some cases we do already. Whenever this is suggested we hear an outcry from the toll providers so we are left With the age old dilemma: How much can these people really afford?

Local telephone companies don't want to subsidize local rates only to have the customer run up a high toll bill every month, so where do we draw the line? If we make Lifeline available on]%, to customers who want local dialing access for emergency services and the like and don't offer them high priced optional services it makes more sense. If however, we continue to offer access to toll services and high priced optional services, we feel the consumer should be required to pay the full rate for basic local service also regardless of income eligibility - unless the toll providers also intend to offer subsidized toll rates........ ? What about other companies who enter the market such as cable TV providers - will they also be required to offer a Lifeline rate on telephone service while charging full rate for CATV? Perhaps we should put a subsidized call box for 91 1 emergency service on every block and forget the Lifeline altogether.

Final Comments & Conclusion

Right now CCTT receives approximately $6.50 per line per month in direct USF support. In addition we receive implicit subsidies of $6-8 per line per month via other mechanisms including DEM Weighting. Our rates are comparable to the next highest metropolitan area which is Reno, Nevada and we are near the nationwide average.

We need these funds to continue to provide high quality services to our customers. As the data in Table I of Appendix A suggests, we have not had a major increase in rates for about 4 years - although we had increased rates for several years in a row. It may be useful and more politically feasible to look at increasing the Subscriber Line charges again to keep pace with inflation as well as consider some small increases in basic rates to keep current with the nationwide average, but we do not believe our customers can stand a $ 13-14 per month increase should the current funding mechanisms be discontinued.

Furthermore we have used the funds provided through the years wisely. Please see Table 2 in Appendix A for details on how we have upgraded our network. Since that data in Table 2 was compiled, we have added fiber optic cable to all of the schools in our district including the Community College as well as provided fiber optic cable to our Community Hospital. We began offering Internet Access services on a limited basis in June of 1995 although we have not yet implemented ISDN in our area.

Although we are seldom one of the first to implement new technology, we try not to lag behind the industry by more than 2-3 years if the services being deployed make economic business sense for us to implement in our area. We began offering SS7 technology more than 18 months ago, but there are still several carriers who have not upgraded their trunking. With the FCC mandated Caller ID transport, we are seeing an increase in orders for SS7 by the carriers. Universal service mandates need to consider the entire network of providers. If local exchange carriers are expected to upgrade their networks, then the long distance providers connecting the local exchange companies should be required to use these services in order to provide nationwide ubiquity.

Questions concerning these comments may be directed to Mr. Dale White, Commercial Services Manager.

Respectfully Submitted,

Dale White
Commercial Services Manager
Churchill County Telephone & Telegraph
PO Box 1390
50 West Williams Avenue
Fallon. Nevada 89406

(702)423-7171

APPENDIX A
to comments filed in Docket 96-45

Before the
Federal Communications Commission
Washington, DC 20554

CC Docket No. 80-286

In the Matter of

Amendment of Part 36 of the
Commission's Rules and
Establishment of a Joint Board

Comments of
Churchill County Telephone &, Telegraph System

These comments are being provided by Churchill County Telephone in response to the Notice of Inquiry (NOI) released August 30, 1994 in Docket 80-286 (FCC 94-199).

Churchill County Telephone serves nearly 10,000 customers in the north central region of the State of Nevada. Our geographic service area encompasses about 5,000 square miles - thus we serve approximately two customers per square mile. We have been in business for over 105 years providing service to areas previously unserved by the Bell company. During the last decade in particular the Universal Service Fund and DEM weighting included in the Part '36 Rules have facilitated our efforts in providing quality telephone service to our customers at reasonable rates.

Table 1 at the end of these comments provides a summary of rate changes affecting the price of local service to our customers. Even with the generous incentives provided through Universal Service Funding, we have found it necessary to increase local rates over 150% since Divestiture in order to offset losses from long distance subsidies and other cost/price relationships.

Table 2 at the end of these comments provides a summary of improvements offered to our customers over the past decade which were made possible by the incentives provided from Universal Service Funding, DEM weighting and other special consideration of small company needs in the Commission Rules. As a small company we feel very fortunate to have been able to offer many new services to our customers.

We are very concerned that any modifications to than programs and incentives resulting from this inquiry must continue to incorporate the needs and interests of small companies and rural subscribers.

Paragraph 3 of the NOI indicates that the commission believes it is the appropriate time to consider how well tile USF and DEM weighting programs have worked. These programs have worked very well for Churchill County, Telephone by allowing us to provide high quality service while maintaining affordable local rates. Based on 1993 data, if these programs were not available, $13.30-per subscriber loop per month would be shifted to the state jurisdiction to be paid for by the local rate payers.

Prior to the implementation of the Universal Service Fund, Exchange Carriers received support through the assignment of loop costs to interstate using the Subscriber Plant Factor (SPF). In 1984, the Commission adopted a plan which would transition from the SPF to a fixed allocator of 25% with additional loop cost being assigned for high cost companies utilizing an interstate expense adjustment. To assist the Commission in evaluating the effectiveness of this program, we have calculated our 1993 interstate costs using our 1981 SPF. This computation resulted in an interstate common line requirement of $2,795,938 compared to $1,965,706 under the current plan. We believe that this transition, which we (and our ratepayers) have already-, experienced, resulted in a significant reduction in support on an industry-wide basis while still targeting appropriate support to the small high cost local exchange carriers.

In paragraphs 18-20 of the NOI, the Commission expresses concern about the rate of growth in the support provided through the current mechanisms and that the burden on the Interexchange Carriers (IXC's) may result in increased toll rates. This tends to give one the impression that the Commission believes the burden on the IXC's has been growing. We believe the burden on the IXC's has declined dramatically with the transition from the SPF allocation to the current plan. A significant portion of the interstate loop cost is now paid by the end users through local and end user common line access charges, and by other LEC's through long term support payments.

Of the $2,795,938 in interstate 1993 common line requirements calculated under the previous plan using SPF, only $1,176,456 was actually paid by IXC's in 1993 - including carrier common line charges and USF payments - a decrease of nearly 60%! Where did the rest of the money come from? The answer is local rate increases and end user common line charges phased in over the past decade! (Ref. Table 1).

In the NOI the Commission specifically. requests our comments related to certain changes in two areas:

1) From NOI Paragraph 54: If the threshold for High Cost assistance is changed from I 1 5% to 130% of the national average loop cost, Churchill Telephone will lose an average of $212,000 or $1.76 per customer per month.

2) From NOI Paragraph 33: If Accounts 6120, 6710, and 6720 are EXCLUDED, Churchill Telephone will lose another $332,500 or $2.75 per customer per month.

The combination of these two changes alone will cause an increase to local rates of $4.51 per month-an increase of over 30%!

Churchill County, Telephone is excited about the new information super highway services which are being contemplated. We believe that we are in the best position to make this dream a reality for the customers in our area, but only if the necessary funds are available for investment in the required infrastructure. The definition of Universal Service needs to be flexible enough to accommodate these new services. Just as the definition of Universal Service was able to accommodate the changes from manual operator to dial service, from multi-party to single-part),, from analog voice to digital - it must also encompass switched broadband services, video dialtone. optical switching networks, intelligent database services, and access to all of the information on the new super highway, of the future. If we fail to recognize the need for these services in small rural communities and provide the necessary capital to fund development, we automatically create an "information-illiterate" class of citizens who will not be able to stay current with technology, and whose children will not be able to compete for jobs in the information age to come.

Much of our customer base and local economy is based on agriculture. We see a lot of movement toward small home-based businesses, or cottage Industries. Specialized home-based education is becoming more prevalent. Telecommuting is on the rise. All of these factors point toward the need for more and more information to be delivered to the home. With the proper communications infrastructure in place, rural Americans will be just as productive as our urban counterparts - perhaps even more so due to the relatively stress-free rural lifestyle. Programs such as Universal Service Funding and DEM weighting are STILL necessary, for the foreseeable future.

Another issue critical to us as a small local provider of service is the Federal requirement for geographically arranged toll rates. Without this requirement, our customers would have to pay much higher rates for long distance since our facilities are a greater distance (60 miles) from most long distance carrier's point of Connection. In addition, the problems of originating versus terminating rates would be much greater since our population is small compared to our nearest urban area (Reno) and we have fewer customers. This combination of long distances and small population leads to a higher cost per customer - whether the customer is the end user or the long distance carrier. If rates were deaveraged it would make matters even worse by providing a greater incentive to bypass the local network in favor of direct connections between large end users and long distance companies. When these large customers bypass the local network - and rates continue to be cost-based rather than market driven - it causes a spiral increase in prices to those customers remaining on the local network until eventually only a few can afford service. This same principle applies to our access charges as well. If access rates were ever deaveraged it would put many small LXC's and resellers out of business.

Concerning targeting of high cost assistance to the users of service rather than the providers of service we feel that consideration needs to be given to who should receive the incentive to build the network necessary for the delivery of services to the customer. We believe that few companies, if any, would have tile incentive to build facilities in our area based on the accumulation of service credits from users. We strongly feel that 'incentives should continue to be targeted for the providers of service and more specifically, only to the single provider of last resort. To the extent that these high cost assistance programs keep prices below competitive market levels we feel they are successful.

We ask the Commission to carefully consider any proposed revisions to support mechanisms so that the goals of affordable service to all communities and customers is advanced -- not hindered. While we could comment on many other related aspects of the NOI, we feel that these summary points adequately cover our concerns relative to this proceedings

High Cost Support should go to the LEC's who provide the infrastructure
A sliding scale of support based on company size (including a cap on LEC size) is appropriate
Any modifications should include incentives to control unwarranted expenditures
NECA is the best choice to be the administrator of the system
DEM weighting is still appropriate for small companies
Actual costs should be used - not proxies
The definition of Universal Service should be flexible enough to include new services
Any modifications to the present plan should provide appropriate mechanisms to assure that rural customers have services comparable to urban customers

Thank you for the opportunity to comment in these proceedings. We gratefully acknowledge the assistance of GVNW, NECA, and USTA in providing factual data and administrative support used in the preparation of these comments. Questions relative to these comments may be directed to Mr. Dale White, Commercial Services Manager.

CHURCHILL COUNTY TELEPHONE
TABLE 1
INCREASES IN LOCAL RATES SINCE DEREGULATION OF INTERSTATE
LONG DISTANCE

06/85   Federal Subscriber Line Charges are initiated at starting rate 
	of $1.00 per month.

04/86   Dropped Mileage charges, went to Zone rates (revenue neutral to 
	company, but effectively increased rates on downtown subscribers 
	and lowered rates on subscribers located more than 9 miles from 
	switch.

04/86   As a result of deregulation, inside wiring maintenance is no 
	longer "free" by being bundled into the local service rate.  
	Separate charges for inside wiring maintenance are
	initiated while local service rates remain the same.

06/86   Federal Line Charge increases from $1.00 to $2.00

07/87   Federal Line Charge increases from $2.00 to $2.60

12/88   Federal Line Charge increases from $2.60 to $3.20

04/89   Federal Line Charge increases from $3.20 to $3.50

06/90   Inside wire maintenance fee increased to $1.00

07/91   Increased Local Service Rates by an average $3.00

07/92   Increased Local Service Rates by an average $1.50

CERTIFICATE OF SERVICE

I, Dale White, an employee of Churchill County Telephone and Telegraph System, certify that on this 12th day of April, 1996, I have caused one copy of the foregoing to be sent via first class U.S. Mail, postage prepaid the following:

ITS
Room 640
1990 M Street, NW
Washington, DC 20036

[Service list deleted from online version.]

Dale White