April 11, 1996

Mr. William F. Caton
Acting Secretary
Federal Communications Commission
1919 M Street N. W.
Washington, D.C. 20554

CC Docket No. 96-45

Dear Mr. Caton:

Enclosed for filing are the original, and four (4) copies of the Comments of Fred Williamson & Associates, Inc. in the above referenced Docket. Copies have also been served on the Federal-State Joint Board, and also the Commission's copy contractor, International Transcription Service. Further, one copy of these Comments has also been provided on diskette, as requested. Also as recently requested by the FCC Staff, two additional copies are included as "Extra Public Copies" for the Record Image Process System.

Please "file stamp" and return the additional copy of the Comments in the enclosed self-addressed stamped envelope.

Sincerely,

FRED WILLIAMSON & ASSOCIATES, INC.

Marc A. Stone
Manager - Regulatory/Legislative Affairs

MAS/bls

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of:			)
					)
Federal - State Joint Board on		)	CC Docket No. 96-45
Universal Service			)		

COMMENTS OF
FRED WILLIAMSON & ASSOCIATES, INC.
in the
Notice of Proposed Rulemaking and
Order Establishing Joint Board;
Adopted and Released, March 8, 1996

April 11, 1996 Fred Williamson & Associates, Inc.
2921 E. 91st Street, Suite 200
Tulsa, Oklahoma 74137-3300

INDEX

Summary i-ii

I. Introduction and Background
Fred Williamson & Associates, Inc. and clients 1-2
Basic concern issues 2-4
Current USF benefits 4-6
Section 254 (b) seven principles 6-10

II. Definition of Universal Service Minimum Service Standards 10-11

III. Support: Beneficiaries, Levels, Calculations and Provision
Specific beneficiaries 11-12
Cost-based versus proxy models 12-13
Competitive bidding 13-14
Transition issues/index cap 14-15

IV. Other Universal Service Support Mechanisms
Subscriber Line Charges and Carrier Common Line Charge 15-17
Long Term Support 17-18

V. Administration of Support Mechanisms
Retention of NECA 18-19
Expansion of payors 19
Exemption of carriers 19-20
Methods of contribution computation 20-21

VI. Advanced Services and Funding of Other Items 21-22

VII. Conclusion 22-24

Summary

Fred Williamson & Associates, Inc. (FW&A) provides these Comments on behalf of their client companies, and other similarly-situated, small, rural, investor-owned, non-system affiliated incumbent Local Exchange Carriers.

While we applaud the FCC's intent to implement various components of the Telecommunications Act of 1996, especially Title I, Telecommunication Services, Section 254, we are concerned regarding continuing attempts to balance "competition" and "universal service." We assert, that to a major degree, these are inconsistent terms, that cannot be simultaneously resolved in legislative or regulatory arenas.

Telephone service penetration levels are at record high percentages throughout the country, and the smaller, non-system affiliated (usually rural serving) incumbent Local Exchange Carriers are currently providing the most efficient, modern, customer-responsive Public Switched Telephone Network in the world. Both of these are possible due primarily to the commitments of owners, investors, and the related financial support of government-backed programs (REA - new RUS) that rely heavily on the continuation of current implicit, and explicit, support mechanisms - especially for insular, rural, low-density high-cost serving areas of the country. It is imperative that these existing support mechanisms are allowed to continue to provide their benefits to both current and future network subscribers, while allowing the continued ability of the introduction of local dial-tone service competition;

i funding of advanced telecommunications and information services to educational, library and health care facilities and expanded support benefits to low-income families. We urge great caution as the FCC moves to implement the 1996 Act, and related Congressional intent, to assure that their actions do not either unduly enrich potential new competitors or existing interexchange carriers, at the expense of existing subscribers, nor that create economic conditions that disincent incumbent local exchange service providers from continuing their investment in the network, and related infrastructure.

We also support continuation of specific company (or study area, exchange, or other "wire center-like defined units) actual book-and-record costs as the basis for determining universal support levels as opposed to attempting to develop proxy or other "model" efforts.

Finally, we support the continuation of NECA as administrator of Universal Service Support funding, mechanisms, and the expansion of contribution of such support from all entities who economically benefit from the public switch telephone network access - traditional providers (both wireline and wireless) and new entrants, alike.

ii

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of:		)
				)
Federal - State Joint Board on	)	CC Docket No. 96-45
Universal Service		)		

COMMENTS OF
FRED WILLIAMSON & ASSOCIATES, INC.

Fred Williamson & Associates, Inc. (FW&A) respectfully submits these Comments in response to the Federal Communications Commission's (FCC) Notice of Proposed Rulemaking and Order Establishing Joint Board (NPRM); adopted and released: March 8, 1996, in the above captioned Docket. The NPRM relates to implementation, in part, of the Congressional directives set out in Section 254 of the Communications Act of 1934, as added by the Telecommunications Act of 1996 (1996 Act).[1]

I. Introduction and Background

FW&A is a telecommunications management consulting organization located in Tulsa, Oklahoma; serving predominantly investor-owned, small, rural, independent telephone companies in Oklahoma, Kansas and Nebraska. All FW&A client companies, except for one, are currently participants/receivers of existing Universal Service Fund (USF) annual monies; and all client companies are substantially less than 200,000 access lines in size. All FW&A clients currently also qualify for full Dial Equipment Minute (DEM) weighting allocations. Additionally, all FW&A clients are members in, and participants of, the pooling processes procedures and of the National Exchange Carriers Association (NECA), and they all concur in the Common Line and Traffic Sensitive interstate tariff schedules and rates filed by NECA.

FW&A has been an active participant in the NECA/USF Industry Task Force and subsequently has continued to assist NECA in its overall administration and data collection related to USF. FW&A has been involved with the extensive steps taken by NECA, and its individual member companies, to ensure the continued integrity of the USF process. FW&A has been an active participant in various proceedings related to the previous FCC Docket 80-286 process, and has been a commentor in the various notices and rulemakings thereof. Further, FW&A has been, and will continue to be, an active participant in the Congressional process leading to the Act, and its implementation phases. Based on its involvement in these various activities, and its concerns related to its clients, FW&A provides these Comments in response to this NPRM.

FW&A's basic concerns regarding issues related to these Comments are twofold. First, our concern that the FCC clearly, and as rigidly to the letter and spirit of the Act, follow the Congressional directives as set out in the 1996 Act[2]. These are, in our opinion, both delineated in the 1996 Act itself, and set forth in the related Conference Committee report information (released concurrently with the Congressional approval of the 1996 Act). Second, as contained in the 1996 Act, our clients' concerns are related to "specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service."[3] Absent such specific and predictable support mechanisms, related to the preservation, maintenance and enhancement of Universal Service, our clients believe that their customers in rural America will be placed as potential information, or telecommunications, "have-nots" in the future. They further assert, that through the current Universal Service Fund mechanism (contained in the FCC Part 36 Rules) they have been able, on behalf of their customers and potential customers, to maintain "local rates at levels lower than they otherwise would be." Absent the continuation of mechanisms which currently result in high cost support to the rural areas, it will be impossible to maintain such local rate reasonability in the future.

The past, and continuing, investment and financial commitments of FW&A clients are indicative of the overall general investment, and continuing re-investment, that has occurred by the smaller, rural, non-RBOC companies. These companies have all totally replaced their network switching and infrastructure, from mechanical central offices and multi-party lines, to their currently installed state-of-the-art digital switches, with digital interoffice trunking (including fiber optic facilities) within the period of the current USF funding mechanism - 1983 to current. These upgrades also required substantial outside plant-related investment, including upgrade/replacement/enhancement of customer loop-related facilities to support their upgraded network(s).

Since most recipient companies (including FW&A clients), and their subscribers who "benefit" from USF fund availability, are often in the more rural, less densely populated, insular, geographic regions of the country, one has seen a normally expected growth in the cost-per-loop for these areas, especially as service is extended to more remote areas. Yet rates have remained "reasonable," while these companies are maintaining existing standards for high service quality, as the network infrastructure continues to be built/enhanced to support these customers; and as customer service requirements continue to evolve as more technically sophisticated and service intensive. The current USF has met its intended goals of providing a continued incentive to invest in rural infrastructure, and has clearly met the goals of maintaining local rates at reasonable levels (or those lower than would otherwise be imposed). It is imperative that in the future not only must current mechanisms be allowed to continue, but also that the predictable and stable nature of the support envisioned by the 1996 Act be implemented. These support mechanisms are continuingly important, as future enhanced services and expansion of the information infrastructure related to the Information Highway, are expanded throughout America, especially to schools, libraries, hospitals, etc. These existing implicit, and explicit, mechanisms must continue in some form of continued financial support if the rural subscriber is to be able to reap the advantages envisioned, in the 1996 Act.

FW&A, on behalf of its clients, asserts that there has been a "social contract" between interstate and intrastate regulators (and legislators) that has encouraged, and in fact ordered, network and infrastructure improvements (as they have made for their subscribers) under the promise of fair and equitable - as well as stable and predictable - abilities for investors' recovery of such investments and related costs; while preserving the ability of these small rural companies to maintain local service rates at "reasonable" levels. To overturn, or immediately eliminate, any existing support mechanisms under which these companies have, in good faith, made investments (and reinvested capital) related to service for existing, and planned future subscribers would be patently wrong; and would do severe harm to the abilities of rural subscribers to continue to be both connected to the network, and more importantly to avail themselves of the Information Highway.

We, therefore, urge great caution as the FCC proceeds forward in this NPRM, so that there is not only the ability to maintain the stability and predictability of current support mechanisms, but so that other related implicit support mechanisms are not negatively impacted by actions taken by the FCC regarding implementation of the 1996 Act. Further, it is clear that the various state regulators are concerned in the proper application, and interpretation, of the 1996 Act (i.e., that "Universal Service" support, as defined, relating to service classified under Section 254, shall be supported by the "specific federal Universal Support") and further that individual states which choose to adopt regulations for additional definition and standards to preserve and advance Universal Service (within that state) are therefore only required to specifically support such additional definitions and standards.

We wish also to comment on how each of the seven principles enunciated in Section 254 (b)[4] should in our opinion influence the FCC policies on Universal Service. The first principle, which introduces the concept of "quality services" we believe can best be assessed within each state; where its own, and often unique, quality of service standards are currently enforced. Also, this principle directs the FCC to ensure that quality service be available at "just, reasonable and affordable rates"; and again we believe that such affordability standards are best left to each state.

In regard to the second principle, that of the FCC designing policies to foster access to advanced telecommunications and information services for "all regions of the nation," we urge caution in focusing on specific, technology-based, advanced telecommunication and information services. Current service penetration studies, and related information, provide some specific guidance toward the level of current availability of ubiquitous Universal Service throughout the country. Based on this information, we suggest there should be a difference in policies which foster access, and those which mandate access to advanced telecommunication and information services. We believe it is much better left to the individual consumer, or other requesting party, to specify how, and when, such advanced telecommunication and information service delivery is required for their location; as opposed to establishing mandatory, arbitrary standards to be universally implemented - when in fact consumer demand may not be there to support the need for such standards.

The need for tailoring rules to consumer demand also relates to the third principle, that stresses consumers in "rural insular and high cost areas and low income customers should have access to telecommunications and information services that are reasonably comparable to those services provided in urban areas."[5] FW&A, and its clients, believe that the goals of ensuring consumers in all regions, and at all income levels, are able to enjoy affordable access to service is directly dependent upon the continuation of predictable, and stable, support mechanisms - as it is these current mechanisms which provide all telecommunication service users with benefits. Again, existing service penetration studies, and related information, are probably the best ways to incorporate the ability to "adjudicate" the penetration, and availability, of services in urban areas as opposed to rural areas.

In relation to the fourth and fifth principles of support mechanisms for Universal Service, (i.e., the fourth principle calling for "equitable and non-discriminatory contributions from all providers of telecommunications services," and the fifth principle directing that "the state and federal mechanisms be specific, predictable and sufficient"[6]), we believe that these principles are the most important issues that are, and must be explored and resolved within this NPRM. As we progress along the Act's continuum towards competition, it is apparent that all those who will, or do, benefit from such competition, including access to and from the nationwide switched public telephone network must contribute their "fair and equitable" contribution towards the maintenance, enhancement and expansion of this network. And, as previously mentioned, it is of the utmost importance that subscribers continue to realize and, recognize, the benefits of Universal Service. There must be continued specific, predictable, and sufficient support mechanisms, such as those that now provide support and incentive for the benefit of high-cost rural telephone subscribers.

The sixth principle, relating to "elementary and secondary schools and classrooms, health care providers and libraries having access to advanced telecommunication services[7]" again, in our opinion, should be left to each individual state, and perhaps in some cases to specific communities. These state or community regulators/legislators are the basic funders, and service need definers, for the specific service requirements in these entities. Although it is a noble concept that there be a concern and interest, at the federal level, regarding educational facilities access to advanced telecommunications services, this type of concern has often been, and appears to continue to be, another unfunded mandate of the federal government. It is no more fair, nor correct, that such unfunded mandates (which are often applied to state or local governmental units) should, as a result of the 1996 Act become applicable towards private enterprise, such as those who provide telecommunications services to subscribers throughout the country.

In respect to the final principle listed in Section 254, which authorizes the Commission and Federal State Joint Board to base Universal Services policies on "such other principles as they determine are necessary and appropriate for the protection of the public interest, convenience and necessity and are consistent with the Act,"[8] we note that the FCC must be very careful in balancing the needs and desires of "the rush to competition" contained in the 1996 Act, while still allowing the ability for those (who have and will continue to invest in the nationwide public switched telephone network and its infrastructure) to continue to recover a "reasonable return" for use of their property placed in use for the public. Again, such placement was made following rules/regulations prescribed by the FCC which warrants every expectation for full and proper recovery of investment. We find nothing in the 1996 Act that revokes, or disenfranchises, these current regulatory and capital recovery principles that underlie current ratemaking principles. Recovery of the investment for property dedicated to the public use that has occurred in the past sixty-two years under the Communications Act of 1934, and related effects upon rules and regulations of both federal and state regulatory bodies, is not being changed by any portion of the 1996 Act, and therefore remain sacrosanct and must be allowed to function unimpeded by actions in this NPRM.[9]

II. Definition of Universal Service Minimum Service Standards[10]

FW&A supports the concept that a universal standard, determining the minimum components of telephone service for all telephone end-users is necessary in regard to implementation of the 1996 Act, and the need herein to set the requirements for determining the stable, predictable funding mechanisms related to it. We suggest that the following minimum components be considered related to such service: a) Individual line service, with a uniform local access charge for all end users of a given class within an exchange (i.e., single party service without mileage or zone charges for subscribers located outside base rate areas); b) Dual tone multi-frequency signalling; c) Interoffice capability to access at a minimum speed of fifty-six (56) kilobytes per second on circuits; d) Availability of custom calling features (e.g. Call Waiting, Call Forwarding, Three-

Way Calling, etc.); e) Access to emergency telephone number service capable of automatic number identification, automatic location identification and call routing facilities to facilitate public safety response (e.g. Enhanced 911 Service, where a public safety answering point has been provided by a local government agency); f) Availability to the Link-Up Program; g) Equal access to interexchange long distance (non-local) service; h) Access to telecommunications relay services; i) Access to directory assistance service; j)  Access to operator services; k) White page directory listing; l) The ability to reach one's local service provider for billing information, or maintenance-related, customer inquiry absent additional long distance charges; and m) The ability to obtain the above services in a "reasonable" period of time based upon customer service requested dates.

III. Support: Beneficiaries, Levels, Calculations and Provision

With respect to various support mechanism questions raised in the NPRM[11], FW&A contends that the beneficiaries of such support mechanisms are ultimately all subscribers who are connected to the Public Switched Telephone Network. If one were to attempt to determine "direct" beneficiaries, for example specifically residential users or residential and single business line, or all users, we believe it would be impossible to separate them on an individual basis. When reviewing how the public switched network functions, including not only access to, but access from the network, this two way functionality blurs how specific beneficiaries may be "determined." Therefore, it is important that any support mechanism be aimed at continuing the overall access to and from the current network for all users! As far as affordability and reasonability issues raised in the NPRM, FW&A asserts that it should be ultimately left to each state regulatory authority to determine rate levels that are "affordable and reasonable." This state regulatory authority is where local service exchange ratemaking has traditionally resided, and we find nothing in the 1996 Act that now delegates such authority to the FCC, in lieu of the states.

As far as calculating a specific amount(s) of universal service subsidy, we believe that current methodologies contained in Part 36 Rules provide a rational starting point for the continuation of not only USF subsidies, and also all more correctly-named "implicit support mechanisms" relating to every facet of Universal Service. Existing USF mechanisms, which are limited to support to the carrier of last resort for their provision of service to subscribers such as recovery of loop costs in access of nationwide average cost[12], and the dial equipment minute (DEM) weighting assistance[13] programs, must be continued. Additionally, these cost support mechanisms, which are based on individual carrier specific costs must be continued in this specific reported cost basis, as no empirical evidence has been provided in any FCC Dockets which call for the use of proxy, or other models, in lieu of information and data specifically from books and records, for determination of these existing cost mechanisms. Proxy models, as previously proposed, are fatally flawed as they relate to developing specific support required on an individual exchange, or study area basis, when compared to any of the existing specific cost methodologies. Further, the use of proposed study area alternatives like census block groups do not adequately reflect rural America real-world conditions, and their unique cost structures and/or service requirements. The idea that census block, or other proxy models, better provides specific information for support mechanisms has yet to be proven in any forum. Therefore, FW&A continues to assert (until contrary empirical data is provided), that it is incumbent upon the FCC to maintain existing specific company booked cost-based mechanisms, and related methodologies for any computation of support.

FW&A is perplexed by the FCC's continued questions regarding the desirability of developing a competitive bidding process[14] as a potential method of delivering support in the higher cost, rural, insular areas. Incumbent LECs have, as part of their obligation in the current regulatory compact as carriers of last resort, provided sufficient infrastructure to serve not only existing customers, but also have been required to provide ready-to-serve facilities for potential new subscribers - without current revenues for these in addition to the facilities which provide current revenue. Further, many of these facilities have been placed utilizing Rural Electrification Administration (REA or now RUS) funding programs which have required that no "duplication of facilities" occurs with facilities built utilizing such funding. These U. S. government-backed programs have been initiated and implemented based on companies' ability to repay calculated on their anticipated revenue streams, which include current universal support mechanisms. If the FCC were to suddenly overturn, or delete, existing support mechanisms, and to remove such support mechanisms on an arbitrary basis, their ability for repayment could be severely impinged; and for the first time in its history a potential default of a telecommunications service provider to RUS could be a possibility. Further, the private financing sector has also, in good faith, provided its financing to these companies for the construction and maintenance of facilities as carriers of last resort anticipating continuation of the existing regulatory compact and its related revenue stream(s). Overturning or eliminating existing support mechanism cash flow on an arbitrary "bidding basis" or to foster some type of a lower level of support and (perhaps lower level of service) based on some new "regulatory program" on an arbitrary basis is not only counterproductive, it is also patently unfair. FW&A urges the Commission to reject any "competitive bidding process" for Universal Service support in any areas that have facilities already in place. Perhaps for new service areas, or for new "advanced" telecommunication or information services, (if such are to be supported through a Universal Service mechanism), a competitive bidding process might have some merit; but clearly it has no merit in relationship to existing facilities or in any areas served by the current carriers of last resort.

Turning to transition areas and issues[15], FW&A asserts that the current cap on the Universal Service Fund, implemented in conjunction with the previous FCC Docket 80-

286, which is to expire on July 1, 1996, must be allowed to expire. This index cap has no relationship to the 1996 Act, nor was it ever "proven" to be an effective or necessary mechanism for the current Universal Service Fund process. There have been no substantiation of previous allegations regarding "erratic or unexpected growth" in the current Universal Service Fund mechanisms, and no benefits are served by any continuation of this current cap.

IV. Other Universal Service Support Mechanisms

The NPRM raises several issues that have been considered, and discussed at length, in prior deliberations of not only the FCC, but in various Joint Board and other related forums. Specifically, these relate to both the Subscriber Line Charge (SLC) and the per-minute-of-use Carrier Common Line (CCL)[16] charges paid by IXCs and by end-users subscribers. On several occasions, and in various prior FCC Notices, there have been questions related to the continuation, or change in the price level, of these items.

FW&A contends that drastic increases to residential SLC could, in fact, cause subscriber drop-off from the current network. If one compares the current SLC rate of $3.50 per month for individual residential and single line business users to many rural small exchange low-volume users' total monthly bills, it is apparent that the existing SLC is a major component of the monthly rate paid by such subscribers. Drastic increases to the SLC, especially for those who would receive no benefits from any reduction of long distance charges since they make few, if any, non-local calls, seems potentially counterproductive. It is also impossible to explain to those subscribers what benefit they will derive by such change of pricing philosophy, that being to increase their SLC so that the large interexchange carriers may benefit by lower rates overall. Concomitantly, reductions or changes to the CCL rate produce some similar lack of positive costs/benefits for these same subscribers, versus the extremely positive benefits achieved by large corporate interexchange carriers through this repricing. There was extensive inquiry and investigation at the time of implementation of federal access charges in 1984, which led to the implementation and rate determination methodologies of both of these currrent mechanisms (SLC and CCL). Nothing is contained in the 1996 Act, nor within Congressional intent, that requires the FCC to make, or consider, drastic changes in these existing cost recovery and price mechanisms.

FW&A remains perplexed at the FCC's ongoing efforts to continue its review of these recovery mechanisms, as well as its proposals that appear to benefit the large interexchange carrier - to the detriment of the small residential rural users of telecommunication services. Current cost recovery/pricing mechanisms such as the SLC and CCL have produced dramatic decreases in interexchange toll calling rates since 1984 (although recently these prices appear to be on the rise based upon the interexchange carriers' unceasing quest for increased profits), and there has been no evidence in prior dockets, nor in this NPRM, that additional changes of shifting cost recovery directly to end users will produce additional rate reductions from the interexchange carriers, thereby benefitting the overall telecommunications market. Again, even if such were to occur, there are a vast number of rural residential users utilizing minimal interexchange services who, even if such massive rate reductions were to be accomplished, would still end up having their telecommunications bills increase! Again, the proposals appear to be so structured that the large corporate interexchange carrier's cost could decrease, at least on a per-unit basis, and provide no assurance of the benefit to rural subscriber or small volume users.

We believe such actions would cause unacceptable harm to both existing, and potential subscribers, and that they in no case provide any benefits designed towards increasing, enhancing or maintaining universal service. We believe that existing methods of recovery of common line costs via a CCL charge, and related jurisdictional cost allocations to both the interstate and intrastate jurisdictions, comports to economic efficiency, and are not affected by any mandates for change included in the 1996 Act. We believe that increases in the SLC potentially could reduce telephone subscribership, and further provide no direct, or specific benefits, to most rural subscribers; but rather only provide "benefits" for the interexchange carrier.

Finally, we are troubled by the NPRM proposal to eliminate the recovery of Long Term Support ("LTS")[17] revenues through the incumbent LECs' interstate CCL charges, as related to the existing NECA pooling process. We do not understand how, and why, the FCC has introduced this specific proposal into this NPRM. We find nothing in the 1996 Act that speaks to the elimination of the recovery of the existing LTS revenues, and therefore wonder how and why the FCC has included this in this NPRM? Further, we do not understand what, if any, data the Commission has analyzed to propose this elimination? Further, and more importantly, on what basis would future recovery of the current LTS revenue be accomplished as proposed by the FCC in this NPRM? Again, it appears that the FCC may have reached some decision on this issue prior to their referring it to the Joint Board, or prior to including it in this NPRM? No public record exists, nor has any opportunity for dialogue been afforded any party to this proceeding, regarding the LTS issues. FW&A therefore contends it is patently unfair, and perhaps contrary to the FCC's own rules, to include any proposal for elimination of the recovery of existing LTS revenues in this NPRM.

V. Administration of Support Mechanisms[18]

FW&A supports the continued administration of any Universal Service support programs by NECA - for any new or additional support mechanism programs that are implemented relative to the 1996 Act. We believe that NECA has done an overall efficient, competent, and "neutral" job of implementing existing FCC rules and regulations, for not only current Universal Service Funding mechanisms, but also for other funding mechanisms, such as Telecommunication Relay Service, assigned to it by the FCC. FW&A sees no advantage to the establishment of any new and costly organization, or authority, to carry out these functions, and which could provide the ability to fairly, and equitably administer (at reasonable costs) those functions provided today by NECA. Since the 1996 Act mandates that telecommunication carrier contributions to fund Universal Service support are to be extended beyond those which currently contribute, it is logical that the organization currently administering existing programs be continued as the administrator of existing and new universal support programs.

Section 254 (d) of the 1996 Act clearly provides for imposing obligations upon "other providers of intrastate telecommunications," and, therefore, we urge the Commission to include all such providers within that definition, so that there is not only an equitable, and just, support for universal service, but more importantly, that all those firms which economically benefit from access to and from the public switch telephone network be required to provide their fair and equitable contribution to the maintenance, enhancement and continuation of the network, and access thereto.

We see no need for exemption of carriers or class of carriers from any obligation to make such contributions[19] if, in fact, they economically benefit from access to or from the network. If any exemption(s) were to be granted, it would be precedential, and would do nothing but provide additional loopholes for others to attempt to not make their fair and equitable contribution to universal service, thereby burdening further those who are paying their equitable and fair contribution to universal support. FW&A does not believe that an equitable definition of "very small telecommunications providers" can be developed that, by itself, will not create loopholes which will ultimately burden those who presently provide their fair and equitable share.

FW&A believes that all three contribution methods proposed in the NPRM: based on gross revenues, based on revenues net of payment to other carriers and, based on per-line or per-minute units[20], depending on application and applicability, could be alternative methodologies each providing fair and equitable methods of determining carrier or service provider's contribution to universal service support. There are issues in each method that will be championed by various parties, and certainly each method has a cost-benefit unique to itself. We believe the Joint Board should assess, and develop its recommendation, after considering a range of methodologies which could be utilized in the development of universal support contribution. It may be necessary to use more than one of these methods, depending on the service or service provider involved, to develop the most fair and equitable method of determining all carriers', or service providers', contributions. A blend, or combination of methods, may be more desirable than reliance upon a single, possibly arbitrary, method to recover costs assigned to all services, and service providers. The choice of method(s) will impact both cost of collection, and cost of data verification, which will, therefore, impact the universal service funding (as such cost becomes part of the process) of the universal cost support. The FCC should not impose methods of determining carrier, or service provider, percentage contributions that greatly increase the cost of computation of such contributions, or add substantial verification costs by the administrator, to determine both the adequacy of cost computation and the fairness of application of rules or regulations.

VI. Advanced Services and Funding of Other Items

The 1996 Act requires both that "Universal Service is an evolving level of telecommunications services," and requires "the Commission to periodically establish the definition, taking into account advances in telecommunications and information technologies and service." The 1996 Act also contains items relating to support for low income subscribers and also hospitals, schools and libraries as part of its goals and principles. The Act allows the Commission to designate additional special services for universal support "for eligible schools, libraries and health care providers." As relates to both of these issues[21], FW&A's concern, on behalf of its clients, is that such expansion or addition of universal service support should not in any way impair, or negatively effect, the current support mechanisms and their currently provided level of support. The FCC has traditionally been exploring, and in prior Docket action requested comment on, a variety of issues and items which clearly were developed under a philosophy that would cause a long term reigning - in of implicit/explicit universal cost support mechanisms, and a diminishing of the flow of support dollars to current recipients. FW&A believes that the Congressional intent contained in the 1996 Act is: current support mechanisms should not only be continued, but that new mechanisms (and recipients or services), should be considered for expansion or addition to existing programs. We find no evidence, or expressions of legislative intent, that such addition or expansion should be at any expense of existing support programs. It appears to us that the Congressional intent is for expansion of support to information services, as well as advanced telecommunications services, in addition to any expansion to the low income subscribers specifically delineated in the 1996 Act. Further, we find no reference in the 1996 Act to the addition of support of these items, or services, at any detriment to existing support mechanisms related to universal service. We believe that wording within the Act[22] explicitly reference Federal mandate for funding universal service support and, as such, we find no indication or evidence that any existing support mechanisms (be they implicit or explicit) should be negatively impacted by any actions taken by the FCC in this NPRM implementing the 1996 Act. We note that several recent news articles and publications have indicated the concurrence in this opinion by several Congressional leadership members, and others directly involved in the development and approval process of the 1996 Act. FW&A believes it is incumbent upon the FCC to maintain, and possibly enhance, current support mechanism flows, while they add to these existing mechanisms for the aforementioned items relating to low income subscribers, schools, libraries and health care providers.

VII. Conclusion

FW&A respectfully urges the Commission to consider the impact of its actions, or proposed, actions in this NPRM upon the rural, insular, subscribers served by FW&A clients, and other similarly situated small, investor-owned, non-system affiliated, telecommunication service providers. These companies today are, and plan to continue to be, the carrier of last resort in the high cost rural areas of this country. FW&A reminds the Commission that these providers exist primarily because no one else cared, or was willing, to provide service to these areas of the country prior to the long and significant commitment of these current service providers. It is only through the careful development and nurturing of current federal/state regulatory compacts that these providers have been able to maintain, and provide, the high levels of quality telecommunication services to their subscribers at reasonable rates - those lower than otherwise would be necessary absent existing implicit/explicit support mechanisms. FW&A, therefore, urges the FCC to consider not only continuation of existing, stable, predictable support flow mechanisms which allow these providers to provide their subscribers high quality services - equivalent to those available in the lower cost urban areas - but also to consider the Congressional intent of the 1996 Act as relating to advanced information and telecommunication services. We believe the current record, and data previously provided the FCC, indicates that the current mechanisms are not only fair and equitable to recipients, but also to the payors of implicit/explicit support. When viewed in context to overall costs, including existing SLC charges imposed directly upon service subscribers, they provide not only necessary benefits and service affordability levels, but also have been responsible for the achievement of record levels of service penetration levels in the insular, rural, high-cost areas of this country. In our opinion, it appears that nearly all those who currently wish to be connected to the public switch telephone network are currently able to do so at existing "reasonable" rate levels, which are supported by current implicit/explicit cost subsidy mechanisms. Any attempt by the FCC which greatly changes, reduces, modifies, eliminates or, otherwise negatively impacts existing support mechanism flows to rural high cost service areas can only negatively effect the penetration, and availability, of universal service to all citizens of this country. We, therefore, respectfully urge the FCC to act not only with great caution, but to recognize the specific high cost low density needs of rural America.

Respectfully submitted,

FRED WILLIAMSON & ASSOCIATES, INC.

Marc A. Stone
Manager - Regulatory/Legislative Affairs

[2] Telecommunications Act of 1996, Pub. L No. 104-104, 110 Stat. 56 (1996) (to be codified at 47 U.S.C. [[section]][[section]] 151 et. seq.)

[3] Supra, Title I, Telecommunication Services, Section 254, Universal Service (2)(b)(5).

[4] NPRM [[paragraph]]4-8.

[5] NPRM [[paragraph]]6.

[6] NPRM [[paragraph]]7.

[7] NPRM [[paragraph]]7.

[8] NPRM [[paragraph]]8.

[9] Constitutional protection of "unjust confiscation" has been established in case law such as: Federal Power Common vs. Hope Natural Gas, 320 U.S. 591 (1944), and Duquesne Light Co. vs. Barasch, 488 U.S. 299, 307 (1989).

[10] NPRM [[paragraph]]15-23.

[11] NPRM [[paragraph]]24.

[12] FCC Rules Part 36, 36.621-731.

[13] FCC Rules Part 36, 36.125.

[14] NPRM [[paragraph]]35.

[15] NPRM [[paragraph]]40.

[16] NPRM [[paragraph]]112-114.

[17] NPRM [[paragraph]]115.

[18] NPRM [[paragraph]]116-131.

[19] NPRM [[paragraph]]120.

[20] NPRM [[paragraph]]121-126.

[21] NPRM [[paragraph]]71-110.