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

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

COMMENTS OF
THE ILLINOIS COMMERCE COMMISSION

The Illinois Commerce Commission (ICC) hereby submits its comments pursuant to the Federal Communications Commission's (FCC_s) Notice of Proposed Rulemaking (NPRM) regarding the establishment of the Federal-State Joint Board, CC Docket No. 96-45.

The ICC supports the FCC's goal to be consistent with the Telecommunications Act of 1996 (the Act) and the underlying Congressional intent and is grateful for the opportunity to offer its input regarding the Act as it relates to universal service. The ICC will briefly indicate the efforts it is making to better evaluate the advanced telecommunications needs of educational institutions, libraries and healthcare providers. The ICC will concentrate its comments on the definition of basic universal service, the Benchmark Cost Model (BCM) as a model to estimate the cost of basic service and the funding mechanism for universal service (collection, distribution, structure, and administration of the fund).

I. Assistance to Educational Institutions, Libraries and Healthcare Providers

The ICC shares the FCC's concern over universal service assistance to educational institutions, libraries and healthcare providers. Illinois does not currently require telecommunications carriers to provide special programs to assist rural area healthcare providers, educational providers and libraries with advanced telecommunications services at discounted rates. However, Section 13-505.7 was added to the Public Utilities Act in 1995, which allows telecommunications carriers to offer special interactive video learning services for the exclusive use of qualified educational institutions, and exempts such services from existing statutory imputation requirements. The special video learning services consist of video, data, voice, and electronic information used by a qualified educational institution for instruction, learning, and training. Qualified educational institutions are limited to school districts, public or private not-for-profit schools enrolling more than 20 pupils for kindergarten through grade 12, and public or private-degree granting, not-for-profit colleges or universities.

Since this amendment to the Public Utilities Act was enacted, Ameritech Illinois has filed a tariff providing discounted advanced telecommunications services to qualified educational institutions. GTE North has indicated that it plans to file a tariff for such services in the near future.

The ICC has been in contact with representatives of educational institutions, healthcare providers and libraries, to gather information on their specific advanced telecommunications services needs, as well as their needs for financial assistance and discounts. We are also gathering information regarding the types of services that telecommunications carriers are currently providing the above mentioned institutions.

II. Definition of Basic Universal Service

The ICC agrees with the FCC's proposed definition of basic universal service that includes (1) voice grade access to the public switched network, with the ability to place and receive calls; (2) touch tone; (3) single party service; (4) access to emergency services (911); and (5) access to operator services.[1] The ICC also recommends that the universal service definition include access to enhanced 911 service when available, as it offers additional capabilities such as automatic number identification and automatic location information, which may be vital in an emergency situation. The ICC also recommends that the definition be expanded to include access to several other services.

The ability to place and receive calls should include access to both local and long distance calling. The ICC notes that in several instances, especially for persons who live in smaller towns and rural areas, access to long distance service is necessary to complete important calls like those to healthcare providers, employers and in some cases government agencies. However, usage itself should not be included as part of basic universal service, except possibly a small amount that could be used for critical communications. Discretionary usage should instead be subject to market influences, for two reasons. First, usage is a key element through which competitive telecommunications providers can differentiate themselves, and at the same time, specifically address and provide for the needs of their customers. Second, subsidizing discretionary usage would send distorted signals to end users and create a bias toward higher consumption for subsidized services relative to consumption for nonsubsidized services, for no reason other than the presence of a subsidy.

Access to directory assistance is needed in cases when a person does not have access to a telephone directory, or to access a telephone number that was recently connected and is not yet listed in the telephone directory. Directory assistance may be needed to reach a healthcare provider or employer. Access to 800 numbers is needed because key institutions like healthcare providers, banks, professional organizations, telecommunications relay service providers, government organizations, consumer complaint centers, and others may be accessible through 800 numbers. The ability to reach such numbers would significantly reduce the expense incurred by telecommunications end users, when they need to contact these institutions. Access to repair service is essential to guarantee that a telecommunications end user will not be left without service unnecessarily. This is important so that, in case of emergency, the end user can in fact rely on telecommunications service to contact the necessary authority or healthcare provider. A white page listing should be included. The ICC notes that the recurring charge for excluding a telecommunications end user from white page listings exceeds the cost of listing that end user. Also, providing an end user with an annual local directory significantly decrease directory assistance charges that end user would need to pay to obtain needed telephone numbers.

Access to toll blocking and blocking of 900 and 976 numbers are not needed as part of the definition of basic universal service to be supported in high cost areas, since most telecommunications providers in Illinois already include these services as part of their standard service offerings. However, it may be appropriate to offer these services on a subsidized basis to low income customers to assist them in controlling their toll usage and telephone bills. This, in turn, could decrease their disconnection from the network and ease the pressure on assistance programs like Link Up America.

The ICC believes that the universal service designation should be limited to a primary network access line for residential customers. Assistance should not be extended to second or additional residential lines, nor to business customers, or institutions, other than educational institutions, healthcare providers and libraries as specified by the Act.

III. Estimating the Cost of Basic Universal Service

The FCC NPRM contains extensive discussion regarding estimating the cost of basic universal service. This discussion concentrated on the cost of providing such service to high cost and rural telecommunications carriers. More specifically, it concentrated on the ability of the Benchmark Cost Model (BCM) to provide an accurate estimate of the cost of service in high cost areas. During the ICC_s universal service workshops, several telecommunications providers presented their universal service costing models. These models included BCM as well as modifications made to the BCM by GTE and proposed by MCI.

Although the ICC is not prepared to recommend a costing model to the FCC at this time, it would like to indicate some of the criteria it considers essential for the estimation of the cost of providing basic universal service. First, and foremost, a model that estimates the cost of providing universal service should, to the maximum extent possible, depict the realities of offering basic universal service. It should take into account elements like actual switch locations, loop lengths between a central office and a household being served, and geographic and density conditions that add to the cost of service. Second, the model should provide a forward looking method of cost estimation. Finally, a costing model should not be made technology neutral, as it would lose most of its meaningful estimation powers. A model needs to take into account the characteristics inherent in a given type of service, with its underlying technology, in order to give an accurate estimate of the costs associated with offering that particular service.

A State commission or the FCC may wish to offer a single level of support to all providers in a high cost area, based on the cost of the most efficient technology, thereby discouraging inefficient technologies. Alternatively, if it were determined that more than one technology should be explicitly supported, the model could be modified to accommodate the characteristics of additional technologies.

IV. Funding Universal Service

Once the FCC has determined the appropriate model to estimate the cost of providing service in a high cost area, it must determine a level of assistance to be extended to providers in the high cost area. Assistance should be based on the difference between the cost of providing universal service in the high cost area and an average benchmark cost or rate that has been determined to be acceptable. This difference, when multiplied by the number of eligible subscribers, would provide the size of the universal service fund needed to finance basic universal service. The ICC is not prepared to make recommendations regarding setting the average benchmark cost or rate. However, we believe that components of a universal service mechanism should be chosen carefully to minimize the amount of funding necessary to achieve the desired social policy objectives.[2]

Once the size of the universal service fund has been estimated, the FCC must decide upon the means through which it will finance its funding mechanism. The ICC agrees strongly with the Act's requirements that funding be specific, predictable and sufficient (Sec. 254(d)). It further recommends that the universal service funding mechanism should be administratively simple, technologically neutral, and that the mechanism should collect and distribute funds in a competitively neutral manner. The ICC also fully supports the Act's requirement that all telecommunications carriers contribute to the funding of universal service (Sec. 254(d) and (f).[3] The ICC further believes that the group of telecommunications carriers required to contribute to the federal Telecommunications Relay Service fund is consistent with the Act_s requirement that all telecommunications contribute to universal service. These carriers include local exchange providers, interexchange providers, cellular telephone and paging companies, personal communications services providers, resellers, 900 services providers, and satellite, video and paging providers.[4] Finally, the ICC encourages the FCC to move away from the pooling process and separations mechanisms as a means to achieve high cost funding.[5] In its place, a uniform assessment should be placed on all telecommunications carriers.

The ICC prefers that the new federal universal service collection mechanism be based on the gross interstate telecommunications revenues of all interstate telecommunications providers net of payments to other carriers, if administratively feasible. This approach is consistent with the FCC's mechanism utilized for the assessment and collection of regulatory fees.[6] It prevents the double counting of revenue dollars like access charges and payments for wholesale services. However, if the administrative costs of netting out payments to other carriers are excessive, the ICC would agree to a collection mechanism in which contributions depend solely on gross interstate revenues. Such an approach would be consistent with the mechanism utilized to assess carrier contribution to the interstate Telecommunications Relay Service fund.

During universal service workshops held in Illinois recently, some carriers recommended that carrier contribution be assessed on gross retail revenues net of payments to other carriers. However, the ICC believes, since wholesale revenues are also a source of income to carriers, that wholesale revenues should be included in universal service fund assessments. The ICC recognizes that some carriers currently operate, or may choose to operate in the future, solely in the wholesale market. Such carriers should also contribute to the funding of universal service. However, the assessment should exclude payments to other carriers, in order to prevent assessing contribution on the same revenue dollar twice.

Telecommunications carriers with minimal revenues should be exempted from their assessments to the fund, if the cost of collecting their share exceeds its benefits.

The ICC recommends that all funds collected from interstate telecommunications carriers for federal universal service assistance purposes be placed in one comprehensive interstate fund to be administered by an independent third party administrator. The ICC agrees with the FCC that the interstate fund administrator should have large scale information processing and data base capabilities, and be able to administer the fund in an efficient, fair and competitively neutral manner.[7] The ICC proposes that the interstate fund administrator_s duties include collecting the necessary information from telecommunications providers to determine size, collecting and distributing assistance funds, recommending the size of the fund for the following year, and submitting an annual report to the FCC. The independent administrator should be subject to an independent auditor and to FCC oversight.

IV. Conclusion

[2]The ICC filed comments supporting similar policies in:

NARUC's Request for a Notice of Inquiry Concerning Access Rules, DA 93-847, Comments of the Illinois Commerce Commission, filed September 20, 1993, at 14.

Inquiry into Policies and Programs to Assure Universal Telephone Service in a Competitive Market Environment, RM 8388, Comments of the Illinois Commerce Commission, filed December 16, 1993, at 10.

[3]The ICC has filed comments previously in the following dockets generally supporting this concept:

Expanded Interconnections with Telephone Company Facilities; Amendment of the Part 69 Allocation of General Support Facility Costs, CC Docket No. 91-141, CC Docket 92-222, Comments of the Illinois Commerce Commission, filed January 12, 1993, at 11.

NARUC_s Request for a Notice of Inquiry Concerning Access Rules, DA Docket 93-847, Reply Comments of the Illinois Commerce Commission, filed September 20, 1993, at 14.

Inquiry into Policies and Programs to Assure Universal Telephone Service in a Competitive Market Environment, RM 8388, Comments of the Illinois Commerce Commission, filed December 16, 1993, at 10.

[4]FCC Universal Service Task Force, Preparation for Addressing Universal Service Issues: A Review of Current Interstate Support Mechanisms, February 23, 1996, at 46.

[5]The ICC filed comments supporting a similar policy in:

Regulatory Reform for Local Exchange Carriers Subject to Rate of Return Regulation, CC Docket No. 92-135, Comments of the Illinois Commerce Commission, filed Sept. 25, 1992, at 8.

[6]NPRM at 59.