[2] The Act defines "telecommunications service" as

the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

See Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996), Section 153(46) [emphasis supplied]. All citations to the Act herein reference the Section numbers as they will be codified under Title 17 of the United States Code, except for Sections 706 and 708 of the Act. "Telecommunications" is defined as

the transmission between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received.

Section 153(43) [emphasis supplied]. Any provider of a "telecommunications service" shall be "treated as a common carrier... to the extent that it is engaged in providing telecommunications services....." Section 153(44) [emphasis supplied].

[3] Specifically, Section 254(h)(1)(A) requires telecommunications carriers to provide "telecommunications services which are necessary for the provision of health care services....at rates that are reasonably comparable to rates charged for similar services in urban areas...." The amount of the support to the service provider is "the difference, if any, between the rates for services provided to health care providers for rural areas...and the rates for similar services provided to other customers in comparable rural areas...."

[4] Section 254(c)(1) [emphasis supplied].

[5] Section 254(c)(1) [emphasis supplied].

[6] Section 153(44).

[7] A telecommunications carrier may provide not only traditional common carrier services, but also other non-common carrier services, such as customer premises equipment services, enhanced services, credit card services, etc.

[8] National Association of Regulatory Utility Commissioners v. F.C.C., 533 F.2d 601, 609 (D.C. Cir. 1976).

[9] Modifications to the Uniform System of Accounts for Class A and B Telephone Companies, 48 Fed. Reg. 50534 (Nov. 2, 1983); Detariffing the Installation and Maintenance of Inside Wiring, CC Docket No. 79-105, Second Report and Order, released February 24, 1986; 47 C.F.R. Section 68.3.

[10] McKinsey Report, Appendix A, p. 57, Ex. 16.

[11] "Advanced telecommunications capability" is defined as "high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology." Section 706(c)(1).

[12] It is widely understood and accepted that the various elements involved in the effort to make available advanced telecommunications services and technologies to schools for use in a meaningful way involves not only the physical transport capabilities, but also high-quality educational courseware, video programs, and on-line services; curriculum development that uses communications technology; training programs for teachers so they can learn to use the new technology and incorporate it effectively into their classrooms; ongoing technical support; security for equipment; and parental involvement in what their children are doing and learning. See, e.g., FCC News Release, "Reed Hundt Announces New FCC Education Task Force to Ensure That Children's Needs Are Met in Telecom Act Implementation," March 18, 1996. See also U.S. Advisory Council on the National Information Infrastructure, "KickStart Initiative, Connecting American's Communities to the Information Superhighway."

[13] In contrast, a mechanism which requires that straight discounts be provided off of existing rates for existing services, or cost-based formulas such as Total Service Long-Run Incremental Cost ("TSLRIC") models, would not incent competing providers to offer innovative solutions. With discounts off of existing rates for existing services, the school or school district would have less choice as to where to apply its available funds, would achieve fewer benefits by pooling resources, and would be less of a market force. Moreover, if carriers are required to provide discounts off of TSLRIC levels, they may be disincented from providing service to schools, let alone seeking out and competing for the business of schools, given the inadequacy of such a costing approach to fully compensate the carrier for the services provided. Moreover, any requirement to establish TSLRIC levels could entail time-consuming, regulatory cost proceedings which could hamper the ability of telecommunications carriers to act quickly to develop solutions to meet the evolving telecommunications needs of schools and libraries.

[14] Section 254(h)(1)(A).

[15] For instance, a school may have been able to obtain better rates through use of the universal service funding mechanisms and a competitive bidding process than it would otherwise have been able to obtain and should not be able to over-order capacity with the intent of reselling the excess. Otherwise, such entities could themselves become telecommunications service providers for their local communities, and distinguishing school and library-related "educational use" from other uses such as general business use within the community (especially where accomplished over residence lines) would appear to be virtually impossible.

[16] Any attempt to tie the base service price to the best commercially-available rate could lead to an endless downward spiral. Some LECs today in some states already have the obligation to provide service to the state at the lowest price at which service is offered to any other entity. If such a LEC today were required to provide service to public institutional telecommunications users at a discount off of such rates, then it would, in turn, have to adjust downward the rate at which such service is provided to the state government, which would, in turn, require a downward adjustment at which the service is provided to the public institutional telecommunications user, and on and on.

[17] As BellSouth indicated in its response to Question # 9 note 13, the TSLRIC also has the disadvantage of potentially disincenting carriers from actively seeking out the business schools and libraries and from actively attempting to identify innovative solutions to their service needs.

[18] McKinsey Report, Appendix B.

[19] As was noted in BellSouth's original comments, if a component of universal service support is established to deal with the reserve deficiency, then this component of support should only be available to the carrier that incurred the reserve deficiency (ie. -it should not be portable).