In the Matter of ) ) CC Docket No. 96-45 Federal-State Joint Board on ) Universal Service )
AMERITECH'S FURTHER COMMENTS
Ameritech respectfully offers the following further comments on the universal service questions posed by the Commission's Common Carrier Bureau in the Public Notice released in this docket on July 3, 1996.
I.
INTRODUCTION AND SUMMARY
The Commission initiated this docket on March 8, 1996 when it released a Notice of Proposed Rulemaking ("NPRM") and solicited views on a wide variety of important issues relating to proposed changes in the Commission's universal service rules and regulations, changes which are intended to implement the new directives of the Telecommunications Act of 1996 (sometimes referred to as the "Act").[1] Coincident with the release of the NPRM, the Commission also established a Federal-State Joint Board to make recommendations with respect to the issues raised in the NPRM. Initial comments on the NPRM and replies were filed on April 12 and May 7, 1996, respectively.
Now, having reviewed those initial and reply comments, "the Common Carrier Bureau, at the request of the staff of the Federal-State Joint Board, seeks further comment on [72] specific issues relating to the subjects previously noticed in this proceeding [in the NPRM]."[2] In these further comments, Ameritech will address those 72 issues in seriatim, and under the classifications listed in the Public Notice.
As it resolves the issues raised in the July 3 Public Notice, and those raised in the original NPRM, the Commission must embrace an approach to universal service that is sustainable over the long term in a competitive telecommunications marketplace. This will require the elimination of implicit subsidies and the rebalancing of rates (especially for local exchange service) to reflect the actual cost of providing service.[3] It will also require that all carriers receiving universal service support for the benefit of their customers must bear the same obligations for which the support was intended.[4] Unless these two things occur, the Commission will be unable to achieve its goals for universal service, or implement the pro-competition tenants of the Telecommunications Act of 1996.
It is difficult to summarize the specific answers to the 72 distinct questions posed in the Public Notice, but the principles underlying the Ameritech's answers can be summarized as follows:
* Universal service policy must be sustainable with government's pro-competition policy.
* Prices must be restructured to eliminate implicit subsidies.
* Subsidies should only fund basic "core" services and should be targeted for the benefit of only those individuals who in fact need assistance to stay on the network.
* Explicit subsidies must be funded in a competitively neutral manner and administered by a neutral third party.
* Unilateral requirements must be applied symmetrically to all providers.
* For bilateral requirements, compensation must be paid only to those providers bearing the requirement.
* The methodology for quantifying the amount of universal service funding must strike a reasonable balance between its ability to prevent "gaming" of the regulatory process, on the one hand, and its degree of precision and the level of administrative costs, on the other.
Ameritech identified these principles in its initial and reply comments on the NPRM, and explained how they should be applied in this docket. If the Commission reflects these principles in its decision on the 72 questions posed in the Public Notice, it will have its best opportunity to achieve the goals and policies for universal service in satisfaction of the requirements of the Act.
DEFINITIONS ISSUES
1. IS IT APPROPRIATE TO ASSUME THAT CURRENT RATES FOR SERVICES INCLUDED WITHIN THE DEFINITION OF UNIVERSAL SERVICE ARE AFFORDABLE, DESPITE VARIATIONS AMONG COMPANIES AND SERVICE AREAS?
Yes. The national household penetration rate of nearly 94% and the national availability rate of nearly 95% suggest very strongly that the services which would be eligible for universal service support under the Commission's proposal[5] are generally "affordable" by any reasonable measure. The same can be said even at the lowest household penetration rate in the various states, i.e. nearly 85% in the state of New Mexico; in other words, it is not unreasonable to conclude that "core" telephone services are generally affordable when at least 85% of households subscribe to those services. And it should be noted that only three states have household penetration rates below 90%.
It is no accident that Americans enjoy a relatively high penetration rate for basic local exchange service. Historically, state regulatory commissions have implicitly considered "affordability" as one of the unwritten criteria of what constituted a "just and reasonable" rate for basic local exchange service long before that criteria was written into the Telecommunications Act of 1996. Thus, it is appropriate to assume that, overall, basic local exchange rates are affordable.
Various studies[6] show, however, that there are certain demographic groups for which penetration rates are significantly lower, and that the most reliable indicators of lower penetration rates are variables related to income. Improvements in penetration rates for such groups should be addressed through targeted assistance, such as low income assistance, or non-rate remedies, such as voluntary toll blocking programs. However, general rate levels should not be decreased for all customers in order to address the affordability issue for these demographic groups.
On the other hand, basic local exchange rates in some areas of the nation are, in fact, too low. This is true, for example, in high cost areas where basic local exchange rates are less than the nationwide average rate. In those areas, at least, rates obviously have been subsidized at greater levels than justified by simply the relative high-cost characteristics of the geographic area.
2. TO WHAT EXTENT SHOULD NON-RATE FACTORS, SUCH AS SUBSCRIBERSHIP LEVEL, TELEPHONE EXPENDITURES AS A PERCENTAGE OF INCOME, COST OF LIVING, OR LOCAL CALLING AREA SIZE BE CONSIDERED IN DETERMINING THE AFFORDABILITY AND REASONABLE COMPARABILITY OF RATES?
Non-rate factors may or may not bear on the affordability and reasonable comparability of rates. For example, as mentioned in answer 1, it is difficult to understand how basic local exchange service is not generally affordable when 85% to 98.3% of households, depending on the state, already have subscribed to the service. On the other hand, there are households that do not subscribe to telephone service even though they could afford to do so, e.g. households which for social or religious reasons do not use telephones.
In addition, total telephone expenditures as a percentage of income historically has been an indicator of affordability, but as society becomes more information and communications intensive, the percentage of income spent on telecommunications services may likely increase without necessarily indicating an affordability problem. For example, as customers do more "telecommuting" their expenditures on automobile-related costs may be reduced.
It may be rational to conclude that the cost of living may impact the affordability of "core" telephone service, but it is not therefore rational to distribute universal service assistance on that basis when the high cost area is also a relatively high income area, as well.
Likewise, it may be rational to conclude that there is a relationship between local calling area size, on the one hand, and affordability and reasonable comparability of rates, on the other; but, it is not a relationship worth studying when customers are willing to pay more for cable television service than they are paying for basic local exchange telephone service.
The point is this: there may be non-rate factors which bear on the affordability and reasonable comparability of rates, but the nature and effect of that relationship has not been made clear enough on the record in this docket to conclude that any of those factors should be a basis for allocating universal service support. Before deciding whether non-rate factors should be used for that purpose, Ameritech suggests that the Commission undertake an empirical study on the impediments to subscribership. Once that analysis is completed, the Commission would be in a better position to evaluate whether non-rate factors bear on the affordability and reasonable comparability of rates.
3. WHEN MAKING THE "AFFORDABILITY" DETERMINATION REQUIRED BY SECTION 254(i) OF THE ACT, WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF USING A SPECIFIC NATIONAL BENCHMARK RATE FOR CORE SERVICES IN A PROXY MODEL?
Before answering this question, a small caveat is in order. The determination required by Section 254(i) is not limited to "affordability." Section 254(i) says that "[t]he Commission and the States should ensure that universal service is available at rates that are just, reasonable, and affordable."
Although not entirely clear, the implication of question 3 is that "affordability" is the only requirement in Section 254(i), and that a determination of rate "affordability" can be made wholly apart from the determination of what rate is "just and reasonable." That is not consistent with the plain language of Section 254(i).
The advantages and disadvantages of a specific national benchmark rate for core services in a proxy model depend on how the model is used. For example, the model could be used to identify high cost areas. If used for this purpose, the main advantage of the proxy model is that its use would likely decrease the incentives a company would have to "game" the regulatory process simply in order to become eligible for high cost support. If the reasonableness of a proxy model were demonstrated on the public record, Ameritech would support the use of such a model for the purpose of identifying high cost areas.
Some have suggested, however, that a proxy model should be used, not simply for the limited purpose of identifying high cost areas, but to quantify the amount of high cost assistance. Ameritech opposes the use of a proxy model for that purpose. A proxy model, by definition, is based on averages. Therefore, a proxy model will be most inaccurate for "outliers," which tend to be high cost areas. This is a significant deficiency that more than outweighs the advantages of the simplicity implicit in any proxy model.
4. WHAT ARE THE EFFECTS ON COMPETITION IF A CARRIER IS DENIED UNIVERSAL SERVICE SUPPORT BECAUSE IT IS TECHNICALLY INFEASIBLE FOR THAT CARRIER TO PROVIDE ONE OR MORE OF THE CORE SERVICES?
This question posits the situation where some carriers are able to provide the services which the Commission defines as core and thus receive universal service support, but other carriers are not able to provide one or more core services because it is not technically feasible to do so and, therefore, are not eligible for universal service support. Of course, if it is infeasible for any carrier to provide the services which the Commission defines as "core" then the definition of "core" service itself is a barrier to entry that adversely affects competition. Assuming that the core service is generally feasible, then it is not entirely clear how it would be infeasible for a particular telecommunications carrier to provide that core service given the general availability of resale opportunities. And it is equally unclear whether a state regulatory commission would grant a certificate of operating authority to a telecommunications carrier that was unable to provide a generally available core service to the public.
Nevertheless, if a carrier cannot provide one or more core services, for technical reasons or otherwise, that carrier is not[7] (and should not be) eligible for universal service support. That does not adversely affect competition. Indeed, the opposite would be true: competition would be adversely affected if a carrier not providing one or more core services is still eligible for financial aid which is designed to support core services, particularly when that carrier is competing with others who are providing core services in accordance with the rules. Ameritech believes that universal service support should be available only to those carriers which actually provide the "core" services for which universal service support was intended. That is the kind of symmetry Congress determined was necessary to promote competition.
5. A NUMBER OF COMMENTERS PROPOSED VARIOUS SERVICES TO BE INCLUDED ON THE LIST OF SUPPORTED SERVICES, INCLUDING ACCESS TO DIRECTORY ASSISTANCE, EMERGENCY ASSISTANCE, AND ADVANCED SERVICES. ALTHOUGH THE DELIVERY OF THESE SERVICES MAY REQUIRE A LOCAL LOOP, DO LOOP COSTS ACCURATELY REPRESENT THE ACTUAL COST OF PROVIDING CORE SERVICES? TO THE EXTENT THAT LOOP COSTS DO NOT FULLY REPRESENT THE COSTS ASSOCIATED WITH INCLUDING A SERVICE IN THE DEFINITION OF CORE SERVICES, IDENTIFY, AND QUANTIFY OTHER COSTS TO BE CONSIDERED.
The cost of a loop is the cost of the loop. To the extent a loop is used to provide a telecommunications service, the cost of that service includes the cost of the loop. However, under no circumstances does the cost of the loop reflect the only cost of providing that service. The total cost, by definition, must reflect not only loop cost, but other joint, common, and residual costs associated with that service, as well. For example, the cost of single party, voice-grade telephone service includes not only the cost of the loop, but also a portion of the cost of the local switch, as well as maintenance, other joint and common costs and residual costs. The nature and specific amount of these other costs will vary based on the particular service or group of services.
SCHOOLS, LIBRARIES, HEALTH CARE PROVIDERS
6. SHOULD THE SERVICES OR FUNCTIONALITIES ELIGIBLE FOR DISCOUNTS BE SPECIFICALLY LIMITED AND IDENTIFIED, OR SHOULD THE DISCOUNT APPLY TO ALL AVAILABLE SERVICES?
The answer to this question can be found in the language of the act. Section 254(h)(1)(A) of the act, relating to health care providers for rural areas, provides inter alia as follows:
A telecommunications carrier shall, upon receiving a bona fide request, provide telecommunications services which are necessary for the provision of health care services in a State, including instruction relating to such services, to any public or nonprofit health care provider that serves persons who reside in rural areas in that State at rates that are reasonably comparable to rates charged for similar services in urban areas in that State.
(emphasis added). Likewise, Section 254(h)(1)(B) of the Act, relating to educational providers and libraries, provides inter alia as follows:
All telecommunications carriers serving a geographic area shall, upon a bona fide request for any of its services that are within the definition of universal service under subsection (c)(3), provide such services to elementary schools, secondary schools, and libraries for educational purposes at rates less than the amounts charged for similar services to other parties.
(emphasis added). Thus, services and functionalities eligible under the Act for discounts do not include "all available services". Rather, for public or nonprofit health care providers, the services eligible for a discount are those "telecommunications services which are necessary for the provision of health care services in a State, including instruction relating to such services ... ." And for educational providers and libraries, the services eligible for a discount are those "that are within the definition of universal service under subsection (c)(3) ... ."
7. DOES SECTION 254(h) CONTEMPLATE THAT INSIDE WIRING OR OTHER INTERNAL CONNECTIONS TO CLASSROOMS MAY BE ELIGIBLE FOR UNIVERSAL SERVICE SUPPORT OF TELECOMMUNICATIONS SERVICES PROVIDED TO SCHOOLS AND LIBRARIES? IF SO, WHAT IS THE ESTIMATED COST OF THE INSIDE WIRING AND OTHER INTERNAL CONNECTIONS?
The answer to the first part of this question is "no." The plain language of Section 254(c)(1), which sets out the definitional characteristics of universal service, provides inter alia as follows:
The Joint Board in recommending, and the Commission in establishing, the definition of the services that are supported by Federal universal service support mechanisms shall consider the extent to which such telecommunications services ... .
(emphasis added). The term "telecommunications service" is defined in Section 3 (46) of the Act by reference to "telecommunications," a term which is defined in Section 3 (43) as "the transmission ... of information of the user's choosing, without change in the form or content of the information as sent and received." (emphasis added). That definition does not include inside wire and other internal connections to classrooms, any more than it includes customer premises equipment.
Section 254(c)(3) allows the Commission to designate additional services for universal service support for purposes of Section 254(h) when it comes to schools, libraries and health care providers. However, Section 254(h)(1)(B) speaks to the provision by a telecommunications carrier of "its services" to educational providers and libraries. Inside wire and connections on the customers' side of the demarcation point, by definition, cannot constitute such services.
If the Commission wants to promote the deployment of inside wire or connections on the customers' side of the network demarcation point, it must provide for advanced telecommunications incentives under Section 706 and rely on the National Education Technology Funding Corporation under Section 708.
Some estimates of the cost to provide connections to and within schools are attached as Attachments A-1, A-2, B-1, B-2 and C.
8. TO WHAT EXTENT SHOULD THE PROVISIONS OF SECTIONS 706 AND 708 BE CONSIDERED BY THE JOINT BOARD AND BE RELIED UPON TO PROVIDED ADVANCED SERVICES TO SCHOOLS, LIBRARIES AND HEALTH CARE PROVIDERS?
None. Advanced services for schools, health care providers and libraries are addressed in Section 254(h)(2) ("Advanced Services"), not Sections 706 and 708.
Section 254(h)(2) provides inter alia that:
The Commission shall establish competitively neutral rules -- (A) to enhance, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms, health care providers, and libraries ... .
On the other hand, Section 706 describes actions the Commission can take to "encourage the deployment ... of advanced telecommunications capability ... " (emphasis added) and Section 708 addresses how the National Education Technology Funding Corporation can "leverage resources and stimulate private investment in education technology infrastructure". See Section 708 (a)(1)(C)(i). (emphasis added).
9. HOW CAN UNIVERSAL SERVICE SUPPORT FOR SCHOOLS, LIBRARIES, AND HEALTH CARE PROVIDERS BE STRUCTURED TO PROMOTE COMPETITION?
The best way to ensure that universal support mechanisms promote competition is for the Commission to require that every telecommunications provider contribute on an equitable and nondiscriminatory basis to the universal service fund as they are required by Section 254 (d), and to direct universal service support only to those telecommunications providers which shoulder the same universal service obligations.
All technologies and eligible providers should have an equal opportunity to earn the business of a school, library or health care provider. The best way to ensure this result is to give the responsible officer in the school, library or health care facility as much discretion as possible in selecting the service they think will best suit their individual needs.
10. SHOULD THE RESALE PROHIBITION IN SECTION 254(h)(3) BE CONSTRUED TO PROHIBIT ONLY THE RESALE OF SERVICES TO THE PUBLIC FOR PROFIT, AND SHOULD IT BE CONSTRUED SO AS TO PERMIT END USER COST BASED FEES FOR SERVICES? WOULD CONSTRUCTION IN THIS MANNER FACILITATE COMMUNITY NETWORKS AND/OR AGGREGATION OF PURCHASING POWER?
The language of Section 254(h)(3) is plain and unambiguous:
Telecommunications services and network capacity provided to a public institutional telecommunications user under this subsection may not be sold, resold, or otherwise transferred by such user in consideration for money or any other thing of value.
There is no need to "construe" this statutory provision because it is clear enough on its face. Any "end user cost based fees" arrangement of the type described in Question 10 would constitute the transfer of the service in consideration for money or another thing of value and, therefore, would be a clear violation of Section 254(h)(3).[8]
11. IF THE ANSWER TO THE FIRST QUESTION IN NUMBER 10 IS "YES," SHOULD THE DISCOUNTS BE AVAILABLE ONLY FOR THE TRAFFIC OR NETWORK USAGE ATTRIBUTABLE TO THE EDUCATIONAL ENTITIES THAT QUALIFY FOR THE SECTION 254 DISCOUNTS?
The answer to Question 10 is "no."
12. SHOULD DISCOUNTS BE DIRECTED TO THE STATES IN THE FORM OF BLOCK GRANTS?
Discounts under the Act potentially could take various forms. For example, discounts could be effectuated through a percent reduction in a bill, coupons, rebates, or "block grants." The concept of a "block grant" is sometimes referred to as "funds to schools." A block grant approach (unlike, perhaps, a percent discount) has the potential benefit of being predictable, a principle which underlies Section 254. There are numerous issues associated with this approach which would have to be addressed and resolved on the public record. For example, how would block grants be implemented in a manner that satisfies the provisions of the Act which relates to discounts for schools and libraries? How would the fund in the block grant be sized? How would the fund be administered? These and other related issues need to be explored. But, the underlying concept may prove to be a reasonable approach to fulfilling the requirements of Section 254 as they relate to schools and libraries.
13. SHOULD DISCOUNTS FOR SCHOOLS, LIBRARIES, AND HEALTH CARE PROVIDERS TAKE THE FORM OF DIRECT BILLING CREDITS FOR TELECOMMUNICATIONS SERVICES PROVIDED TO ELIGIBLE INSTITUTIONS?
That would be a simple and direct method.
14. IF THE DISCOUNTS ARE DISBURSED AS BLOCK GRANTS TO STATES OR AS DIRECT BILLING CREDITS FOR SCHOOLS, LIBRARIES, AND HEALTH CARE PROVIDERS, WHAT, IF ANY, MEASURES SHOULD BE IMPLEMENTED TO ASSURE THAT THE FUNDS ALLOCATED FOR DISCOUNTS ARE USED FOR THEIR INTENDED PURPOSES?
Verification that universal service funds are used only as authorized is a legitimate concern given the potential for fraud. If direct payments are used, it would not be unreasonable to require the school principal, librarian or health care provider's financial officer to sign a personal, sworn attestation that the funds have been used as provided in the Act. A copy of that attestation should be made public and available to the telecommunications carrier that provided the service.
15. WHAT IS THE LEAST ADMINISTRATIVELY BURDENSOME REQUIREMENT THAT COULD BE USED TO ENSURE THAT REQUESTS FOR SUPPORTED TELECOMMUNICATIONS SERVICES ARE BONA FIDE REQUESTS WITHIN THE INTENT OF SECTION 254(h)?
The best way to ensure that the request is bona fide is have the requester put some of its own money at risk. Administrative costs could be reduced if the carrier provided eligible services at a discount and then made the corresponding off-sets to its payment to the universal service fund.
16. WHAT SHOULD BE THE BASE SERVICE PRICES TO WHICH DISCOUNTS FOR SCHOOLS AND LIBRARIES ARE APPLIED: (A) TOTAL SERVICE LONG-RUN INCREMENTAL COST; (B) SHORT-RUN INCREMENTAL COSTS; (C) BEST COMMERCIALLY-AVAILABLE RATE; (D) TARIFFED RATE; (E) RATE ESTABLISHED THROUGH A COMPETITIVELY-BID CONTRACT IN WHICH SCHOOLS AND LIBRARIES PARTICIPATE; (F) LOWEST OF SOME GROUP OF THE ABOVE; OR (G) SOME OTHER BENCHMARK? HOW COULD THE BEST COMMERCIALLY-AVAILABLE RATE BE ASCERTAINED, IN LIGHT OF THE FACT THAT MANY SUCH RATES MAY BE ESTABLISHED PURSUANT TO CONFIDENTIAL CONTRACTUAL ARRANGEMENTS?
The discount should be based on the carrier's rate which is generally available to all customers, based on tariff, price list or other public document[9] and the beneficiary of the discount should be the one to decide which telecommunications service to obtain. As long as the beneficiary of the discount, having shopped around in the market, is satisfied with its after-discount price, that should be sufficient for the Commission.
The use of TSLRIC or short-run incremental costs to establish base service prices is inappropriate. Such cost standards may be properly used in the context of determining whether there is economic cross-subsidization between or among services. However, such cost standards are inappropriate for setting prices of services, such as the prices for services to schools and libraries. In fact, if a multiproduct firm prices each of its services at incremental costs, it eventually will be driven out of business if it cannot recover its shared and common costs.
Use of the "best commercially-available" rate would not be reasonable because that would require a carrier to disclose the rates of some of its more competitively sensitive contracts and would require the carrier to continually track exactly what is offered under special contractual arrangements so as to ensure an "apples to apples" comparison with what is provided to schools and libraries.
17. HOW SHOULD DISCOUNTS BE APPLIED, IF AT ALL, FOR SCHOOLS AND LIBRARIES AND RURAL HEALTH CARE PROVIDERS THAT ARE CURRENTLY RECEIVING SPECIAL RATES?
If a customer eligible under the Act for a discount has already subscribed to a telecommunications service and is receiving a special rate pursuant to a special arrangement, including a special tariff, then the terms and conditions of that special arrangement continue to govern. There is nothing in the Act to suggest otherwise. Once that special arrangement expires, then the customer can take advantage of its opportunities for discounts under the Act.
18. WHAT STATES HAVE ESTABLISHED DISCOUNT PROGRAMS FOR TELECOMMUNICATIONS SERVICES PROVIDED TO SCHOOLS, LIBRARIES, AND HEALTH CARE PROVIDERS? DESCRIBE THE PROGRAMS, INCLUDING THE MEASURABLE OUTCOMES AND THE ASSOCIATED COSTS.
The discount programs established in Ameritech's midwest region are discussed in Attachment D.
19. SHOULD AN ADDITIONAL DISCOUNT BE GIVEN TO SCHOOLS AND LIBRARIES LOCATED IN RURAL, INSULAR, HIGH-COST AND ECONOMICALLY DISADVANTAGED AREAS? WHAT PERCENTAGE OF TELECOMMUNICATIONS SERVICES (E.G., INTERNET SERVICES) USED BY SCHOOLS AND LIBRARIES IN SUCH AREAS ARE OR REQUIRE TOLL CALLS?
Section 254(h)(1)(B) of the Act provides for discounts to schools and libraries but does not provide for an additional level of discounts for schools and libraries located in rural, insular, high-cost and/or economically disadvantaged areas and it is not clear that data is available to identify schools and libraries based on the criteria set out in Question 19. Until that data is collected and analyzed on the public record, the Commission should not even consider proposing such an additional discount program.
20. SHOULD THE COMMISSION USE SOME EXISTING MODEL TO DETERMINE THE DEGREE TO WHICH A SCHOOL IS DISADVANTAGED (E.G., TITLE I OR THE NATIONAL SCHOOL LUNCH PROGRAM)? WHICH ONE? WHAT, IF ANY, MODIFICATIONS SHOULD THE COMMISSION MAKE TO THAT MODEL?
Ameritech has no comment on this question, except to say that the relative degree to which a school may be "disadvantaged" in an economic sense does not appear to be relevant under the Act.
21. SHOULD THE COMMISSION USE A SLIDING SCALE APPROACH (I.E., ALONG A CONTINUUM OF NEED) OR A STEP APPROACH (E.G., THE LIFELINE ASSISTANCE PROGRAM OR THE NATIONAL SCHOOL LUNCH PROGRAM) TO ALLOCATE ANY ADDITIONAL CONSIDERATION GIVEN TO SCHOOLS AND LIBRARIES LOCATED IN RURAL, INSULAR, HIGH-COST, AND ECONOMICALLY DISADVANTAGED AREAS?
See answer to Question 19.
22. SHOULD SEPARATE FUNDING MECHANISMS BE ESTABLISHED FOR SCHOOLS AND LIBRARIES AND FOR RURAL HEALTH CARE PROVIDERS?
It is not clear why it would be necessary or desirable to establish separate funding mechanisms, but it would be helpful to maintain separate accounting for these programs in order to give the Commission the opportunity to phase-out one or the other should that be reasonable to do in the future.
23. ARE THE COST ESTIMATES CONTAINED IN THE MCKINSEY REPORT AND NII KICKSTART INITIATIVE AN ACCURATE FUNDING ESTIMATE FOR THE DISCOUNT PROVISIONS FOR SCHOOLS AND LIBRARIES, ASSUMING THAT TARIFFED RATES ARE USED AS THE BASE PRICES?
Ameritech has not had an opportunity to study the McKinsey report and Kickstart Initiative in sufficient detail to determine whether the funding estimates contained therein are accurate or reasonable. It appears that this report is the only study that has been conducted using tariff rates as the basis for the funding estimate. The study was conducted using 1994 data and assumed the deployment of technology in schools at that time as the starting point for the study. The study also assumed specific technologies (e.g., ISDN) as the basis for connection to the schools. Since the time of the study, a large number of the nation's schools have implemented technology solutions that were not present at the time of the McKinsey study, e.g. connections to the Internet. Therefore, before any discount program is implemented on the basis of the McKinsey study, the study would have to be updated to include the current state of technology in the schools, and the universal service definition ultimately adopted by the Commission.
Ameritech has estimated the funding requirements implicit in the McKinsey report under several scenarios. Those data are shown on Attachments A-1, A-2, B-1, B-2 and C. These data are provided simply to assist the Commission in understanding the order of magnitude involved in such an undertaking.
24. ARE THERE OTHER COST ESTIMATES AVAILABLE THAT CAN SERVE AS THE BASIS FOR ESTABLISHING A FUNDING ESTIMATE FOR THE DISCOUNT PROVISIONS APPLICABLE TO SCHOOLS AND LIBRARIES AND TO RURAL HEALTH CARE PROVIDERS?
McKinsey & Company identified several models and cost estimates from other studies in its report. Aside from those examples, Ameritech is not aware of any studies that have been conducted on this subject.
25. ARE THERE ANY SPECIFIC COST ESTIMATES THAT ADDRESS THE DISCOUNT FUNDING ESTIMATES FOR ELIGIBLE PRIVATE SCHOOLS?
It is Ameritech's understanding that none of the studies cited by McKinsey & Company, nor the McKinsey study itself, includes funding estimates for eligible private schools.
HIGH COST FUND
GENERAL QUESTIONS
26. IF THE EXISTING HIGH-COST SUPPORT MECHANISM REMAINS IN PLACE (ON EITHER A PERMANENT OR TEMPORARY BASIS), WHAT MODIFICATIONS, IF ANY, ARE REQUIRED TO COMPLY WITH THE TELECOMMUNICATIONS ACT OF 1996?
Ameritech explained the deficiencies of current high-cost support mechanism in its initial and reply comments on the NPRM. In addition, and in order to comply with the Act, the Commission must take steps to ensure that the high-cost support mechanism is made more competitively neutral. For example, the Commission should require all telecommunications providers to contribute to the high-cost fund and must not limit eligibility to only those carriers of a certain size.
27. IF THE HIGH-COST SUPPORT SYSTEM IS KEPT IN PLACE FOR RURAL AREAS, HOW SHOULD IT BE MODIFIED TO TARGET THE FUND BETTER AND CONSISTENTLY WITH THE TELECOMMUNICATIONS ACT OF 1996?
As Ameritech detailed in its initial and reply comments to the NPRM, the Commission should adopt an "affordability benchmark rate" whereby eligible local exchange carriers would get universal service support when their costs for "core" services exceed the affordability benchmark rate for the difference between (a) the benchmark rate and their actual cost for core services, or (b) their actual rate and their actual cost for "core" services, whichever is less.
28. WHAT ARE THE POTENTIAL ADVANTAGES AND DISADVANTAGES OF BASING THE PAYMENTS TO COMPETITIVE CARRIERS ON THE BOOK COSTS OF THE INCUMBENT LOCAL EXCHANGE CARRIER OPERATING IN THE SAME SERVICE AREA?
If a new local exchange carrier bears the same obligation as the incumbent carrier for high cost areas, then a methodology for determining the level of high cost support must be chosen. For example, each carrier could present its own cost estimates in the context of a bidding process and the lowest bid determines the level of support. Or the Commission could adopt a proxy model, assuming the merits could be demonstrated on the record. But, a new local exchange carrier should not receive support based on the book costs of the incumbent because they bear no relationship to the new carrier's costs.
29. SHOULD PRICE CAP COMPANIES BE ELIGIBLE FOR HIGH-COST SUPPORT, AND IF NOT, HOW WOULD THE EXCLUSION OF PRICE CAP CARRIERS BE CONSISTENT WITH THE PROVISIONS OF SECTION 214(e) OF THE COMMUNICATIONS ACT? IN THE ALTERNATIVE, SHOULD HIGH-COST SUPPORT BE STRUCTURED DIFFERENTLY FOR PRICE CAP CARRIERS THAN FOR OTHER CARRIERS?
Price cap carriers should remain eligible for universal service support. This is required in order to have competitive neutrality in the administration of a high cost fund and to comply with the definition of an "eligible carrier" under the Act. The cost characteristics of serving an area relative to what is affordable, is what should determine eligibility for high cost support for an area, regardless of the size, identity or price cap regulation of the carrier serving the area.
Moreover, it is the nature of the obligations imposed on and accepted by a carrier serving a high cost area which should govern the support that such a carrier should receive. As long as the obligations are the same, the high cost support fund does not need to be structured differently just because the carrier in question may be regulated under price caps as opposed to revenue requirements.
30. IF PRICE CAP COMPANIES ARE NOT ELIGIBLE FOR SUPPORT OR RECEIVE HIGH-COST SUPPORT ON A DIFFERENT BASIS THAN OTHER CARRIERS, WHAT SHOULD BE THE DEFINITION OF A "PRICE CAP" COMPANY? WOULD COMPANIES PARTICIPATING IN A STATE, BUT NOT A FEDERAL, PRICE CAP PLAN BE DEEMED PRICE CAP COMPANIES? SHOULD THERE BE A DISTINCTION BETWEEN CARRIERS OPERATING UNDER PRICE CAPS AND CARRIERS THAT HAVE AGREED, FOR A SPECIFIED PERIOD OF TIME, TO LIMIT INCREASES IN SOME OR ALL RATES AS PART OF A "SOCIAL CONTRACT" REGULATORY APPROACH?
See answer to Question 29.
31. IF A BIFURCATED PLAN THAT WOULD ALLOW THE USE OF BOOK COSTS (INSTEAD OF PROXY COSTS) WERE USED FOR RURAL COMPANIES, HOW SHOULD RURAL COMPANIES BE DEFINED?
Ameritech believes that there should not be a bifurcated plan between "rural" and other companies. Support should be based on the characteristics of the area served and the obligations imposed on the carrier, not the identity or size of the carrier serving the area.
32. IF SUCH A BIFURCATED APPROACH IS USED, SHOULD THOSE CARRIERS INITIALLY ALLOWED TO USE BOOK COSTS EVENTUALLY TRANSITION TO A PROXY SYSTEM OR A SYSTEM OF COMPETITIVE BIDDING? IF THESE COMPANIES ARE TRANSITIONED FROM BOOK COSTS, HOW LONG SHOULD THE TRANSITION BE? WHAT WOULD BE THE BASIS FOR HIGH-COST ASSISTANCE TO COMPETITORS UNDER A BIFURCATED APPROACH, BOTH INITIALLY AND DURING A TRANSITION PERIOD?
See answer to Question 31.
33. IF A PROXY MODEL IS USED, SHOULD CARRIERS SERVING AREAS WITH SUBSCRIPTION BELOW A CERTAIN LEVEL CONTINUE TO RECEIVE ASSISTANCE AT LEVELS CURRENTLY PRODUCED UNDER THE HCF AND DEM WEIGHTING SUBSIDIES?
No. The current high cost fund and Dial Equipment Minute ("DEM") weighting subsidies should be eliminated upon the implementation of a new high cost fund pursuant to the Act.
PROXY MODELS
34. WHAT, IF ANY, PROGRAMS (IN ADDITION TO THOSE AIMED AT HIGH-COST AREAS) ARE NEEDED TO ENSURE THAT INSULAR AREAS HAVE AFFORDABLE TELECOMMUNICATIONS SERVICE?
None.
35. US WEST HAS STATED THAT AN INDUSTRY TASK FORCE "COULD DEVELOP A FINAL MODEL PROCESS UTILIZING CONSENSUS MODEL ASSUMPTIONS AND INPUT DATA," US WEST COMMENTS AT 10. COMMENT ON US WEST'S STATEMENT, DISCUSSING POTENTIAL LEGAL ISSUES AND PRACTICAL CONSIDERATIONS IN LIGHT OF THE REQUIREMENT UNDER THE 1996 ACT THAT THE COMMISSION TAKE FINAL ACTION IN THIS PROCEEDING WITHIN SIX MONTHS OF THE JOINT'S BOARD'S RECOMMENDED DECISION.
Ameritech is willing to cooperate in the public review and analysis of any proxy model which has been proposed by industry members, but it is not reasonable to expect companies to commit that such a review will be completed within six months. Companies that have not been involved in the development of this model will require some time to become familiar with it, and then some additional time to complete their analysis.
36. WHAT PROPOSALS, IF ANY, HAVE BEEN CONSIDERED BY INTERESTED PARTIES TO HARMONIZE THE DIFFERENCES AMONG THE VARIOUS PROXY COST PROPOSALS? WHAT RESULTS HAVE BEEN ACHIEVED?
The United States Telephone Association ("USTA") has convened an industry group to develop a "Best of Breed" among the various proxy models which have been proposed during the past year. The first meeting of that group was held July 29-30, 1996 and no results have been achieved at this time.
37. HOW DOES A PROXY MODEL DETERMINE COSTS FOR PROVIDING ONLY THE DEFINED UNIVERSAL SERVICE CORE SERVICES?
It doesn't. A proxy model includes more than core services and it is not clear how the proxy models that have been identified to-date could be re-calibrated for purposes of core services only.
38. HOW SHOULD A PROXY MODEL EVOLVE TO ACCOUNT FOR CHANGES IN THE DEFINITION OF CORE SERVICES OR IN THE TECHNICAL CAPABILITIES OF VARIOUS TYPES OF FACILITIES?
The most that can be said at this time is that such updates must occur. How that evolution will occur will depend on the actual changes which are made in the definition of core services and in the technical capabilities available in the marketplace. But those modifications must be made as changes in the definition of core services and changes in technology occur.
39. SHOULD A PROXY MODEL ACCOUNT FOR THE COST OF ACCESS TO ADVANCED TELECOMMUNICATIONS AND INFORMATION SERVICES, AS REFERENCED IN SECTION 254(B) OF THE ACT? IF SO, HOW SHOULD THIS OCCUR?
This would be necessary only if the advanced telecommunications and information services are defined as "core" services.
40. IF A PROXY MODEL IS USED, WHAT, IF ANY, MEASURES ARE NECESSARY TO ASSURE THAT URBAN RATES AND RATES IN RURAL, INSULAR, AND HIGH-COST AREAS ARE REASONABLY COMPARABLE, AS REQUIRED IN SECTION 254(B)(3) OF THE 1996 ACT.
A proxy model is not used to establish rates; it is used to estimate costs. Rates are established by the appropriate regulatory commission and that determination will be made on the basis of a number of factors, including the requirements of the Act.
41. HOW SHOULD SUPPORT BE CALCULATED FOR THOSE AREAS (E.G., INSULAR AREAS AND ALASKA) THAT ARE NOT INCLUDED UNDER THE PROXY MODEL?
There is no reason why those areas should not be included in a proxy model.
42. WILL SUPPORT CALCULATED USING A PROXY MODEL PROVIDE SUFFICIENT INCENTIVE TO SUPPORT INFRASTRUCTURE DEVELOPMENT AND MAINTAIN QUALITY SERVICE?
The proxy model is used to estimate costs, not to set rates. These incentives will be based on the extent to which the corresponding costs will be recovered.
43. SHOULD THERE BE RECOURSE FOR COMPANIES WHOSE BOOK COSTS ARE SUBSTANTIALLY ABOVE THE COSTS PROJECTED FOR THEM UNDER A PROXY MODEL? IF SO, UNDER WHAT CONDITIONS (FOR EXAMPLE, AT WHAT COST LEVELS ABOVE THE PROXY AMOUNT) SHOULD CARRIERS BE GRANTED A WAIVER ALLOWING ALTERNATIVE TREATMENT? WHAT STANDARDS SHOULD BE USED WHEN CONSIDERING SUCH REQUESTS?
If a proxy model is used at all, it should be used to identify high cost areas, and not used to allocate support. If the Commission adopts a proxy model to identify high cost areas, then the model should be used and there really should be no exceptions. Because the model would identify high cost areas and would not be used to set rates, it is not apparent why there would be a need for any exceptions.
44. HOW CAN A PROXY MODEL BE MODIFIED TO ACCOMMODATE TECHNOLOGICAL NEUTRALITY?
The proxy models identified to-date are based on wireline technology; wireless technology should be included in the model as it is utilized.
45. IS IT APPROPRIATE FOR A PROXY MODEL ADOPTED BY THE COMMISSION IN THIS PROCEEDING TO BE SUBJECT TO PROPRIETARY RESTRICTIONS, OR MUST SUCH A MODEL BE A PUBLIC DOCUMENT?
It is difficult to understand how the Commission could adopt any proxy model unless and until its reasonableness was demonstrated on the public record. If a portion of the model is proprietary, then the appropriate confidentiality agreements can be executed and the confidential portion of the Commission's order can be redacted as appropriate. But, the public must have access to the model in the first instance.
46. SHOULD A PROXY MODEL BE ADOPTED IF IT IS BASED ON PROPRIETARY DATA THAT MAY NOT BE AVAILABLE FOR PUBLIC REVIEW?
See answer to Question 45.
47. IF IT IS DETERMINED THAT PROPRIETARY DATA SHOULD NOT BE EMPLOYED IN THE PROXY MODEL, ARE THERE ADEQUATE DATA PUBLICLY AVAILABLE ON CURRENT BOOK COSTS TO DEVELOP A PROXY MODEL? IF SO, IDENTIFY THE SOURCE(S) OF SUCH DATA.
If book costs are going to be relied upon, there is no need for a proxy model. If a proxy model is going to be used, then public Census Bureau information may be available for that purpose.
48. SHOULD THE MATERIALITY AND POTENTIAL IMPORTANCE OF PROPRIETARY INFORMATION BE CONSIDERED IN EVALUATING THE VARIOUS MODELS?
Yes, but see answer to Question 45.
COMPETITIVE BIDDING
The questions in this sub-section concern the use of a competitive bidding process for purposes of quantifying the compensation to be made available for high cost funds. To date, GTE has presented the most comprehensive proposal for a competitive bidding process. However, it is essential to recognize that GTE's proposal is a competitive bidding process for purposes of selecting and quantifying support for local exchange carriers of last resort ("COLRs") in designated areas. Where such areas are also high cost areas, GTE's proposal subsumes support for high cost support so that the quantification role of the bidding process is to determine the amount of support needed to provide universal service for both COLR and high cost purposes.
In order to ensure that all customers in high cost areas are and remain served, carrier of last resort obligations (i.e. an obligation to serve the entire area with a barrier to exit) must be imposed on at least one carrier serving the high cost area. For the carrier bearing such obligations, its bid must include the costs associated with being a COLR for that area. To the extent that other carriers may provide universal service to customers in the same high cost area but without being a COLR, the bids submitted by such carriers will be lower (to reflect the lower financial risk and investment of having no exit barrier) than that of the carrier bearing the COLR designation. To then allow carriers that are non-COLRs to serve customers in high cost areas and to receive the same amount of high cost support as the carrier that is a COLR would threaten the ability of the COLR to continue to fulfill its COLR obligations. This is because the COLR is bearing a greater financial burden and risk associated with the COLR obligations but without being compensated for the additional burden. It is for this reason that GTE states that only COLRs should be eligible for high cost support under its proposal. Ameritech agrees with this conclusion.
Furthermore, continuous provision of service to high cost customers is inextricably intertwined with a restriction on exit from the marketplace. It is for this reason that Ameritech believes that GTE's bidding proposal is based on selecting COLRs, where the support for COLRs also happens to subsume the support needed for high costs when the designated area is a high cost area.
The only other alternative would be to pay the non-COLRs less high cost support than that paid to the COLR, where the difference reflects the increased financial burden and risk borne by the COLR. However, given the difficulty for carriers or regulators to quantify the necessary difference in compensation in a dynamic competitive environment, it may be preferable to have the bidding process based on eliciting bids in high cost areas for purposes of both committing to serve the entire area and with the same restriction on exit for all bidders. This is what the GTE plan proposes, and Ameritech agrees that this is a sustainable and possibly preferable approach.
Ameritech also believes that basing the competitive bidding process to include carrier of last resort obligations in high cost areas, and paying support only to those providers agreeing to be COLRs, is not inconsistent with Section 102 of the Telecommunications Act of 1996 (amending 47 U.S.C. Section 214) regarding carriers eligible for support. In determining whether a carrier is in fact complying with the requirement of 47 U.S.C. Section 214(e)(1)(A), the State commission (pursuant to sub-section (e)(2)) may find that assumption of carrier of last resort obligations is necessary in order for a carrier to have actually committed to serving the high cost area. This is consistent with how high cost support has been administered in the past. Furthermore, for a state commission to not require a restriction to exit, as described earlier, is inconsistent with how service to high cost customers can in fact be ensured over time as is required under the Telecommunications Act of 1996 to make services available to all at just, reasonable, and affordable rates.
Ameritech, therefore, answers questions 49-55 based on the type of competitive bidding approach where the purpose of the bid is to include carrier of last resort obligations, such as that proposed by GTE. By these comments, Ameritech does not (at least at this time) support use of a competitive bidding process. However, if a bidding mechanism is to be used, Ameritech does note that GTE has properly posed some important issues that need to be considered in designing a bidding process, such as the issues discussed above. As to further implementation issues of the GTE plan, Ameritech has no comments at this time, as it is Ameritech's understanding that GTE intends to distribute a revised plan (which may significantly change various aspects of its previously distributed plan) in the very near future.
49. HOW WOULD HIGH-COST PAYMENTS BE DETERMINED UNDER A SYSTEM OF COMPETITIVE BIDDING IN AREAS WITH NO COMPETITION?
If there is only one bidder to serve an area, then high cost payments should be based on that bid. And only the bidder should be eligible for support if it is the only carrier taking on the obligations associated with serving a high cost area, e.g. serving the entire area, barrier to exit, etc.
50. HOW SHOULD A BIDDING SYSTEM BE STRUCTURED IN ORDER TO PROVIDE INCENTIVES FOR CARRIERS TO COMPETE TO SUBMIT THE LOW BID FOR UNIVERSAL SERVICE SUPPORT?
A couple of basic features should be included. Funding should be based on the lesser of actual cost minus existing rates and actual costs minus benchmark rates. All carriers receiving high cost support must take on the same obligations in serving the high cost area. And, the incumbent provider in a high cost area should be given a reasonable opportunity to be compensated for the obligations borne in high cost areas prior to the implementation of a new bidding process to determine prospective providers in high cost areas.
51. WHAT, IF ANY, SAFEGUARDS SHOULD BE ADOPTED TO ENSURE THAT LARGE COMPANIES DO NOT BID EXCESSIVELY LOW TO DRIVE OUT COMPETITION?
It is not clear what incentive a company would have to bid "excessively low" even if there was some reasonable way to determine when that has occurred. The only incentive that might exist is if a company could engage in cross-subsidization from other services. That opportunity does not exist for price cap companies and, if the Commission institutes the other pro-competition provisions in the Act, the risk of cross-subsidization will be reduced overall.
52. WHAT SAFEGUARDS SHOULD BE ADOPTED TO ENSURE ADEQUATE QUALITY OF SERVICE UNDER A SYSTEM OF COMPETITIVE BIDDING?
Minimum quality of service standards should be imposed and monitored as is already done in many state jurisdictions. These standards should be a part of any bidding process adopted by the Commission.
53. HOW IS COLLUSION AVOIDED WHEN USING A COMPETITIVE BID?
In assessing this risk, the Commission must consider the incentives. A carrier has little incentive to purposely underbid in a predatory sense because if successful, the carrier would be required to provide service below cost. Even if there is some basis to engage in cross-subsidization (see answer to Question 51), it would be difficult for a carrier to sustain such a tactic. Moreover, since all telecommunications carriers pay into the universal service fund, then each carrier has an incentive to keep the total fund as small as possible. This will reduce the incentive carriers have to collude in a manner that increases the size of the fund. Finally, if a carrier was to be found guilty of collusion, the appropriate penalty should be imposed, e.g. fines, disqualification for future bids.
54. SHOULD THE STRUCTURE OF THE AUCTION DIFFER IF THERE ARE FEW BIDDERS? IF SO, HOW?
The structure of the bidding process should not change simply because there are fewer bidders.
55. HOW SHOULD THE COMMISSION DETERMINE THE SIZE OF THE AREAS WITHIN WHICH ELIGIBLE CARRIERS BID FOR UNIVERSAL SERVICE SUPPORT? WHAT IS THE OPTIMAL BASIS FOR DETERMINING THE SIZE OF THOSE AREAS, IN ORDER TO AVOID UNFAIR ADVANTAGE FOR EITHER THE INCUMBENT LOCAL EXCHANGE CARRIERS OR COMPETITIVE CARRIERS?
The size of the area for eligibility purposes should be competitively neutral and bear a reasonable relationship to the way that telecommunications services are technically provided. Ameritech believes that the optimal basis for the size of a serving area is a wire center within a geographic area because that is the basis on which the network is engineered and costs are incurred.
BENCHMARK COST MODEL (BCM)
56. HOW DO THE BOOK COSTS OF INCUMBENT LOCAL EXCHANGE CARRIERS COMPARE WITH THE CALCULATED PROXY COSTS OF THE BENCHMARK COST MODEL (BCM) FOR THE SAME AREAS?
To the extent this analysis has been undertaken for Ameritech (and it has not been completed), the relationship is reasonably close. When discrepancies occur, it usually is the result of errors in the BCM. The model is most inaccurate when it comes to "outliers." Actual costs on a wire center basis are far superior to costs created on a proxy basis.
57. SHOULD THE BCM BE MODIFIED TO INCLUDE NON-WIRELINE SERVICES? IF WIRELESS TECHNOLOGY PROVES LESS COSTLY THAN WIRELINE FACILITIES, SHOULD PROJECTED COSTS BE CAPPED AT THE LEVEL PREDICTED FOR USE OF WIRELESS TECHNOLOGY?
Ameritech continues to support the use of actual costs by wire center. If a company is utilizing non-wireline services then the BCM should allow them to be included. Ameritech does not support the arbitrary capping of the projected costs at the level predicted for wireless technology because it would be inconsistent with the use of actual costs.
58. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF USING A WIRE CENTER INSTEAD OF A CENSUS BLOCK GROUP AS THE APPROPRIATE GEOGRAPHIC AREA IN PROJECTING COSTS?
Wire centers have the advantage of being the basis on which networks are engineered and costs incurred. Use of wire centers generates results that are more exacting than any averaging method. Census Block Group data do not match up with the exchange areas served by a wire center and frequently are incorrectly matched with the wrong wire center. Moreover, Census Block Group data are updated only every 10 years.
59. THE MAINE PUC AND SEVERAL OTHER STATE COMMISSIONS PROPOSED INCLUSION IN THE BCM OF THE COSTS OF CONNECTING EXCHANGES TO THE PUBLIC SWITCHED NETWORK THROUGH THE USE OF MICROWAVE, TRUNK, OR SATELLITE TECHNOLOGIES. THOSE COMMENTERS ALSO PROPOSED THE USE AN ADDITIONAL EXTRA-HIGH-COST VARIABLE FOR REMOTE AREAS NOT ACCESSIBLE BY ROAD. WHAT IS THE FEASIBILITY AND THE ADVISABILITY OF INCORPORATING THESE CHANGES INTO THE BCM?
It clearly is appropriate to allow the inclusion of additional high cost factors when utilizing the proxy models. At some point, however, the process produces a result which is already known: actual book costs.
60. THE NATIONAL CABLE TELEVISION ASSOCIATION PROPOSED A NUMBER OF MODIFICATIONS TO THE BCM RELATED TO SWITCHING COST, FILL FACTORS, DIGITAL LOOP CARRIER SUBSCRIBER EQUIPMENT, PENETRATION ASSUMPTIONS, DEPLOYMENT OF FIBER VERSUS COPPER TECHNOLOGY ASSUMPTIONS, AND SERVICE AREA INTERFACE COSTS. WHICH, IF ANY, OF THESE CHANGES WOULD BE FEASIBLE AND ADVISABLE TO INCORPORATE INTO THE BCM?
There are a variety of ways of dealing with NCTA's points. Ameritech believes that the use of actual costs of the switch should be used, and should be included in the BCM if that model is adopted after it is reviewed on the public record. Regarding the fill factor, it is reasonable that spare capacity be allocated across all services since all services benefit from that spare capacity. Digital loop carrier book costs should be included; that will account for any discounts. Likewise, the actual book costs of plant between the wire center and the subscriber should be utilized.
61. SHOULD THE SUPPORT CALCULATED USING THE BENCHMARK COST MODEL ALSO REFLECT SUBSCRIBER INCOME LEVELS, AS SUGGESTED BY THE PUERTO RICO TELEPHONE COMPANY IN ITS COMMENTS?
No. The concept of income is relevant for low-income assistance programs. For high cost support, income may be a factor in the overall development of an "affordability benchmark rate" as proposed by USTA and various other parties, including Ameritech. But income itself is not relevant with regard to the construction of a cost model, such as the Benchmark Cost Model.
62. THE BCM APPEARS TO COMPARE UNSEPARATED COSTS, CALCULATED USING A PROXY METHODOLOGY, WITH A NATIONWIDE LOCAL BENCHMARK RATE. DOES USE OF THE BCM SUGGEST THAT THE COSTS CALCULATED BY THE MODEL WOULD BE RECOVERED ONLY THROUGH SERVICES INCLUDED IN THE BENCHMARK RATE? DOES THE BCM REQUIRE CHANGES TO EXISTING SEPARATIONS AND ACCESS CHARGE RULES? IS THE MODEL DESIGNED TO CHANGE AS THOSE RULES ARE CHANGED? DOES THE COMPARISON OF MODEL COSTS WITH A LOCAL RATE AFFORDABILITY BENCHMARK CREATE AN OPPORTUNITY FOR OVER-RECOVERY FROM UNIVERSAL SERVICE SUPPORT MECHANISMS?
The costs calculated in the BCM would be recovered through services included in the benchmark rate. Changes would be required in the Part 36 separations rules in Subpart F, paragraphs 36.601 through 36.641, and in Part 69, paragraphs 69.116 and 69.413. Changes in the BCM presumably would be made by the custodian of the model. Finally, if the model results exceed the local benchmark rate, then the carrier would be eligible for support; if results are less than the benchmark then no support would be permitted.
63. IS IT FEASIBLE AND/OR ADVISABLE TO INTEGRATE THE GRID CELL STRUCTURE USED IN THE COST PROXY MODEL (CPM) PROPOSED BY PACIFIC TELESIS INTO THE BCM FOR IDENTIFYING TERRAIN AND POPULATION IN AREAS WHERE POPULATION DENSITY IS LOW?
Terrain and density are important factors, but Ameritech has not had sufficient experience with the CPM and the BCM to comment on this question.
COST PROXY MODEL PROPOSED BY PACIFIC TELESIS
64. CAN THE GRID CELL STRUCTURE USED IN THE CPM REASONABLY IDENTIFY POPULATION DISTRIBUTION IN SPARSELY-POPULATED AREAS?
Ameritech has not had sufficient exposure to the CPM to comment on this question.
65. CAN THE CPM BE MODIFIED TO IDENTIFY TERRAIN AND SOIL TYPE BY GRID CELL?
See answer to Question 64.
66. CAN THE CPM BE USED ON A NATIONWIDE BASIS TO ESTIMATE THE COST OF PROVIDING BASIC RESIDENTIAL SERVICE?
Yes, it could be used and it is reasonable to assume that such use would produce results that will be different from actual book costs.
67. USING THE CPM, WHAT COSTS WOULD BE CALCULATED BY CENSUS BLOCK GROUP AND BY WIRE CENTER FOR SERVING A RURAL, HIGH-COST STATE (E.G., ARKANSAS)?
See answer to Question 64.
68. IS THE CPM A SELF-CONTAINED MODEL, OR DOES IT RELY ON OTHER MODELS, AND IF SO, TO WHAT EXTENT?
See answer to Question 64.
SLC/CCLC
69. IF A PORTION OF THE CCL CHARGE REPRESENTS A SUBSIDY TO SUPPORT UNIVERSAL SERVICE, WHAT IS THE TOTAL AMOUNT OF THE SUBSIDY? PLEASE PROVIDE SUPPORTING EVIDENCE TO SUBSTANTIATE SUCH ESTIMATES. SUPPORTING EVIDENCE SHOULD INDICATE THE COST METHODOLOGY USED TO ESTIMATE THE MAGNITUDE OF THE SUBSIDY (E.G., LONG-RUN INCREMENTAL, SHORT-RUN INCREMENTAL, FULLY-DISTRIBUTED).
For Ameritech, of the total $211M CCL revenue, $55.9M is attributable to NECA Long Term Support Payments and $144M is attributable to the Base Factor Portion ("BFP") Overflow.
BFP Overflow is caused by two things. First, under the Part 36 Separations Rules, loop costs are allocated to the interstate jurisdiction using a frozen factor of 25%. Actual interstate usage of the loop, for Ameritech, is much lower, varying from 11% to 14%. Second, the amount of interstate loop costs recovered from end users is based on the subscriber line charge ("SLC"). The SLC is capped at $3.50 per month for residence and single line business customers and at $6.00 for multi-line business customers. To the extent that these amounts are insufficient to recover the interstate loop costs, the BFP overflow results.
70. IF A PORTION OF THE CCL CHARGE REPRESENTS A CONTRIBUTION TO THE RECOVERY OF LOOP COSTS, PLEASE IDENTIFY AND DISCUSS ALTERNATIVES TO THE CCL CHARGE FOR RECOVERY OF THOSE COSTS FROM ALL INTERSTATE TELECOMMUNICATIONS SERVICE PROVIDERS (E.G., BULK BILLING, FLAT RATE/PER-LINE CHARGE).
The SLC could be increased as appropriate to allow for the elimination of BFP Overflow or bulk billing could be instituted in accordance with Ameritech's Customer First Waiver.
LOW-INCOME CONSUMERS
71. SHOULD THE NEW UNIVERSAL SERVICE FUND PROVIDE SUPPORT FOR THE LIFELINE AND LINKUP PROGRAMS, IN ORDER TO MAKE THOSE SUBSIDIES TECHNOLOGICALLY AND COMPETITIVELY NEUTRAL? IF SO, SHOULD THE AMOUNT OF THE LIFELINE SUBSIDY STILL BE TIED, AS IT IS NOW, TO THE AMOUNT OF THE SUBSCRIBER LINE CHARGE?
The answer to the first question is "yes." Regarding the second question, the amount of the subsidy need not be tied to the amount of the SLC. A fresh evaluation of the financial/affordability needs of low income individuals must occur to determine the appropriate amount of support for them. Furthermore, the combination of support from federal and state jurisdictions must also be taken into account. Finally, a new evaluation may show that the requisite remedy for some individuals is not money but some other capability of the telecommunications system, such as toll blocking.
ADMINISTRATION OF UNIVERSAL SERVICE SUPPORT
72. SECTION 254(D) OF THE 1996 ACT PROVIDES THAT THE COMMISSION MAY EXEMPT CARRIERS FROM CONTRIBUTING TO THE SUPPORT OF UNIVERSAL SERVICE IF THEIR CONTRIBUTION WOULD BE "DE MINIMIS." THE CONFERENCE REPORT INDICATES THAT "[T]HE CONFEREES INTEND THAT THIS AUTHORITY WOULD ONLY BE USED IN CASES WHERE THE ADMINISTRATIVE COST OF COLLECTING CONTRIBUTIONS FROM A CARRIER OR CARRIERS WOULD EXCEED THE CONTRIBUTION THAT CARRIER WOULD OTHERWISE HAVE TO MAKE UNDER THE FORMULA FOR CONTRIBUTIONS SELECTED BY THE COMMISSION." WHAT LEVELS OF ADMINISTRATIVE COSTS SHOULD BE EXPECTED PER CARRIER UNDER THE VARIOUS METHODS THAT HAVE BEEN PROPOSED FOR FUNDING (E.G., GROSS REVENUES, REVENUES NET OF PAYMENTS TO OTHER CARRIERS, RETAIL REVENUES, ETC.)?
The amount of administrative costs, to a fund administrator or even to the carriers themselves, cannot be determined a priori. The costs to a fund administrator should be determined through a bidding process among neutral third parties. Only after that process is completed and the costs are known can the de minimis standard be evaluated. In any event, the administrative costs of a funding method must be balanced with its elements of competitive neutrality. For example, a retail revenues or net revenues methodology may have somewhat higher administrative costs than a gross revenues methodology, but their competitive neutrality properties are far superior.
II.
CONCLUSION
Ameritech appreciates the opportunity to offers its answers to the 72 questions posed in the Public Notice, and trusts they will assist the Joint Board and the Commission as they craft new rules for universal service under the Telecommunications Act of 1996.
Respectfully submitted,
Michael J. Karson
Counsel for Ameritech
Room 4H88
2000 West Ameritech Center Drive
Hoffman Estates, Il. 60196-1025
847-248-6082
August 2, 1996 Attachment A-1
Example of Funding for Schools Assuming Nynex Education Plan*
Connection to Schools Only
Millions of Dollars
Net Total Revenue: Funding Contribution by Year
Company Amount % of Total 1 2 3 4 5 6 +
AT&T $21,441 13.3% $60.1 $77.3 $82.4 $84.1 $94.5 $68.7
MCI $6,758 4.2% $18.9 $24.4 $26.0 $26.5 $29.8 $21.7
Sprint/United $7,129 4.4% $20.0 $25.7 $27.4 $28.0 $31.4 $22.8
Ameritech $9,349 5.8% $26.2 $33.7 $35.9 $36.7 $41.2 $30.0
Bell Atlantic $9,987 6.2% $28.0 $36.0 $38.4 $39.2 $44.0 $32.0
Bell South $12,252 7.6% $34.3 $44.1 $47.1 $48.1 $54.0 $39.3
US West $7,995 5.0% $22.4 $28.8 $30.7 $31.4 $35.2 $25.6
Nynex $11,145 6.9% $31.2 $40.2 $42.8 $43.7 $49.1 $35.7
Pacific $7,716 4.8% $21.6 $27.8 $29.7 $30.3 $34.0 $24.7
SBC $6,468 4.0% $18.1 $23.3 $24.9 $25.4 $28.5 $20.7
GTE $10,449 6.5% $29.3 $37.7 $40.2 $41.0 $46.0 $33.5
Cincinnati $507 0.3% $1.4 $1.8 $2.0 $2.0 $2.2 $1.6
SNET $1,250 0.8% $3.5 $4.5 $4.8 $4.9 $5.5 $4.0
Rochester $244 0.2% $0.7 $0.9 $0.9 $1.0 $1.1 $0.8
Lincoln $143 0.1% $0.4 $0.5 $0.6 $0.6 $0.6 $0.5
Puerto Rico $862 0.5% $2.4 $3.1 $3.3 $3.4 $3.8 $2.8
Others $6,738 4.2% $18.9 $24.3 $25.9 $26.4 $29.7 $21.6
Cable Industry $22,786 14.2% $63.9 $82.1 $87.6 $89.4 $100.4 $73.0
Wireless Industry $17,481 10.9% $49.0 $63.0 $67.2 $68.6 $77.0 $56.0
Total $160,698 100% $450.3 $579.1 $617.8 $630.7 $707.9 $515.0
Nationwide Access Lines (Millions) 157.173 165.031 173.283 181.947 191.045 200.597
$/Access Line/Month $0.24 $0.29 $0.30 $0.29 $0.31 $0.21
Notes: * Nynex Education Plan assumes deployment of the "partial classroom
model" contained in the Kickstart Initiative paper. This model would connect
half the Public school classrooms in America over the next 5 years. The costs
of Connection to the School were identified by McKinsey and Company to be
$1.715 billion in initial costs and $1.030 billion in ongoing costs. The Nynex
Education Plan assumes that the Benchmark Discount costs would be set at 75%
for initial costs and at 50% for ongoing costs. Further the Plan assumes a
deployment of 25% for Year 1, 25% for Year 2, 20% for Year 3, 15% for Year 4,
and 15% for Year 5. Additional amounts would be necessary to include Private
Schools.
Funding Based on Total Revenues Net of Payments to Others
Cable Industry Revenue: from Table 6, CS Docket 95-61, Second Annual Report, FCC data for 1994
Wireless Industry Revenue: CTIA Revenue for 6 months ended June, 1995; annualized
IXC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 1.4.
Access Payments estimated based on % Share of Toll Revenue
LEC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 2.9
Access Lines assumed to grow at 5% per year
Attachment A-2
Example of Funding for Schools Assuming Nynex Education Plan*
Connection to Schools Only
Millions of Dollars
Net Interstate Revenue: Funding Contribution by Year
Company Amount % of Total 1 2 3 4 5 6 +
AT&T $16,090 31.8% $143.4 $184.3 $196.7 $200.8 $225.4 $163.9
MCI $5,072 10.0% $45.2 $58.1 $62.0 $63.3 $71.0 $51.7
Sprint/United $3,807 7.5% $33.9 $43.6 $46.5 $47.5 $53.3 $38.8
Ameritech $2,210 4.4% $19.7 $25.3 $27.0 $27.6 $31.0 $22.5
Bell Atlantic $2,713 5.4% $24.2 $31.1 $33.2 $33.9 $38.0 $27.6
Bell South $3,245 6.4% $28.9 $37.2 $39.7 $40.5 $45.4 $33.1
US West $2,245 4.4% $20.0 $25.7 $27.4 $28.0 $31.5 $22.9
Nynex $3,102 6.1% $27.6 $35.5 $37.9 $38.7 $43.4 $31.6
Pacific $1,682 3.3% $15.0 $19.3 $20.6 $21.0 $23.6 $17.1
SBC $1,912 3.8% $17.0 $21.9 $23.4 $23.9 $26.8 $19.5
GTE $2,592 5.1% $23.1 $29.7 $31.7 $32.3 $36.3 $26.4
Cincinnati $107 0.2% $1.0 $1.2 $1.3 $1.3 $1.5 $1.1
SNET $343 0.7% $3.1 $3.9 $4.2 $4.3 $4.8 $3.5
Rochester $58 0.1% $0.5 $0.7 $0.7 $0.7 $0.8 $0.6
Lincoln $30 0.1% $0.3 $0.3 $0.4 $0.4 $0.4 $0.3
Puerto Rico $194 0.4% $1.7 $2.2 $2.4 $2.4 $2.7 $2.0
Others $5,139 10.2% $45.8 $58.9 $62.8 $64.1 $72.0 $52.4
Cable Industry NA 0.0% $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Wireless Industry NA 0.0% $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Total $50,544 100% $450.3 $579.1 $617.8 $630.7 $707.9 $515.0
Nationwide Access Lines (Millions) 157.173 165.031 173.283 181.947 191.045 200.597
$/Access Line/Month $0.24 $0.29 $0.30 $0.29 $0.31 $0.21
Notes: * Nynex Education Plan assumes deployment of the "partial classroom
model" contained in the Kickstart Initiative paper. This model would connect
half the Public school classrooms in America over the next 5 years. The costs
of Connection to the School were identified by McKinsey and Company to be
$1.715 billion in initial costs and $1.030 billion in ongoing costs. The
Nynex Education Plan assumes that the Benchmark Discount costs would be set at
75% for initial costs and at 50% for ongoing costs. Further the Plan assumes a
deployment of 25% for Year 1, 25% for Year 2, 20% for Year 3, 15% for Year 4,
and 15% for Year 5. Additional amounts would be necessary to include Private
Schools.
Funding Based on Interstate Revenues Net of Payments to Others
IXC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 1.4
Access Payments estimated based on % Share of Toll Revenue. Interstate Revenue estimated based on % Interstate Access Revenue
LEC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 2.9
Access Lines assumed to grow at 5% per year
Attachment B-1
Example of Funding for Schools Assuming Nynex Education Plan*
Connection to Schools and Connection within Schools
Millions of Dollars
Net Total Revenue: Funding Contribution by Year
Company Amount % of Total 1 2 3 4 5 6 +
AT&T $21,441 13.3% $192.6 $216.6 $202.1 $182.8 $197.2 $96.1
MCI $6,758 4.2% $60.7 $68.3 $63.7 $57.6 $62.2 $30.3
Sprint/United $7,129 4.4% $64.0 $72.0 $67.2 $60.8 $65.6 $31.9
Ameritech $9,349 5.8% $84.0 $94.5 $88.1 $79.7 $86.0 $41.9
Bell Atlantic $9,987 6.2% $89.7 $100.9 $94.2 $85.2 $91.9 $44.7
Bell South $12,252 7.6% $110.1 $123.8 $115.5 $104.5 $112.7 $54.9
US West $7,995 5.0% $71.8 $80.8 $75.4 $68.2 $73.5 $35.8
Nynex $11,145 6.9% $100.1 $112.6 $105.1 $95.0 $102.5 $49.9
Pacific $7,716 4.8% $69.3 $78.0 $72.7 $65.8 $71.0 $34.6
SBC $6,468 4.0% $58.1 $65.4 $61.0 $55.2 $59.5 $29.0
GTE $10,449 6.5% $93.9 $105.6 $98.5 $89.1 $96.1 $46.8
Cincinnati $507 0.3% $4.6 $5.1 $4.8 $4.3 $4.7 $2.3
SNET $1,250 0.8% $11.2 $12.6 $11.8 $10.7 $11.5 $5.6
Rochester $244 0.2% $2.2 $2.5 $2.3 $2.1 $2.2 $1.1
Lincoln $143 0.1% $1.3 $1.4 $1.4 $1.2 $1.3 $0.6
Puerto Rico $862 0.5% $7.7 $8.7 $8.1 $7.4 $7.9 $3.9
Others $6,738 4.2% $60.5 $68.1 $63.5 $57.4 $62.0 $30.2
Cable Industry $22,786 14.2% $204.7 $230.2 $214.8 $194.3 $209.6 $102.1
Wireless Industry $17,481 10.9% $157.1 $176.6 $164.8 $149.1 $160.8 $78.3
Total $160,698 100% $1,443.8 $1,623.8 $1,515.0 $1,370.3 $1,478.3 $720.0
Nationwide Access Lines (Millions) 157.173 165.031 173.283 181.947 191.045 200.597
$/Access Line/Month $0.77 $0.82 $0.73 $0.63 $0.64 $0.30
Notes: * Nynex Education Plan assumes deployment of the "partial classroom model" contained in the Kickstart Initiative paper. This model would connect half the Public school classrooms in America over the next 5 years. The costs of Connection to the School were identified by McKinsey and Company to be $1.715 billion in initial costs and $1.030 billion in ongoing costs. The costs of Connection within the School were estimated to be $5.025 billion initial and $0.410 billion ongoing. The Nynex Education Plan assumes that the Benchmark Discount costs would be set at 75% for initial costs and at 50% for ongoing costs. Further the Plan assumes a deployment of 25% for Year 1, 25% for Year 2, 20% for Year 3, 15% for Year 4, and 15% for Year 5. Additional amounts would be necessary to include Private Schools.
Funding Based on Total Revenues Net of Payments to Others
Cable Industry Revenue: from Table 6, CS Docket 95-61, Second Annual Report, FCC data for 1994
Wireless Industry Revenue: CTIA Revenue for 6 months ended June, 1995; annualized
IXC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 1.4
Access Payments estimated based on % Share of Toll Revenue
LEC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 2.9
Access Lines assumed to grow at 5% per year
Attachment B-2
Example of Funding for Schools Assuming Nynex Education Plan*
Connection to Schools and Connection within Schools
Millions of Dollars
Net Interstate Revenue: Funding Contribution by Year
Company Amount % of Total 1 2 3 4 5 6 +
AT&T $16,090 31.8% $459.6 $516.9 $482.3 $436.2 $470.6 $229.2
MCI $5,072 10.0% $144.9 $162.9 $152.0 $137.5 $148.3 $72.2
Sprint/United $3,807 7.5% $108.7 $122.3 $114.1 $103.2 $111.3 $54.2
Ameritech $2,210 4.4% $63.1 $71.0 $66.3 $59.9 $64.6 $31.5
Bell Atlantic $2,713 5.4% $77.5 $87.2 $81.3 $73.6 $79.4 $38.6
Bell South $3,245 6.4% $92.7 $104.2 $97.3 $88.0 $94.9 $46.2
US West $2,245 4.4% $64.1 $72.1 $67.3 $60.9 $65.7 $32.0
Nynex $3,102 6.1% $88.6 $99.6 $93.0 $84.1 $90.7 $44.2
Pacific $1,682 3.3% $48.1 $54.1 $50.4 $45.6 $49.2 $24.0
SBC $1,912 3.8% $54.6 $61.4 $57.3 $51.8 $55.9 $27.2
GTE $2,592 5.1% $74.1 $83.3 $77.7 $70.3 $75.8 $36.9
Cincinnati $107 0.2% $3.1 $3.4 $3.2 $2.9 $3.1 $1.5
SNET $343 0.7% $9.8 $11.0 $10.3 $9.3 $10.0 $4.9
Rochester $58 0.1% $1.6 $1.8 $1.7 $1.6 $1.7 $0.8
Lincoln $30 0.1% $0.9 $1.0 $0.9 $0.8 $0.9 $0.4
Puerto Rico $194 0.4% $5.5 $6.2 $5.8 $5.3 $5.7 $2.8
Others $5,139 10.2% $146.8 $165.1 $154.1 $139.3 $150.3 $73.2
Cable Industry NA 0.0% $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Wireless Industry NA 0.0% $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Total $50,544 100% $1,443.8 $1,623.8 $1,515.0 $1,370.3 $1,478.3 $720.0
Nationwide Access Lines (Millions) 157.173 165.031 173.283 181.947 191.045 200.597
$/Access Line/Month $0.77 $0.82 $0.73 $0.63 $0.64 $0.30
Notes: * Nynex Education Plan assumes deployment of the "partial classroom model" contained in the Kickstart Initiative paper. This model would connect half the Public school classrooms in America over the next 5 years. The costs of Connection to the School were identified by McKinsey and Company to be $1.715 billion in initial costs and $1.030 billion in ongoing costs. The Nynex Education Plan assumes that the Benchmark Discount costs would be set at 75% for initial costs and at 50% for ongoing costs. Further the Plan assumes a deployment of 25% for Year 1, 25% for Year 2, 20% for Year 3, 15% for Year 4, and 15% for Year 5. Additional amounts would be necessary to include Private Schools.
Funding Based on Interstate Revenues Net of Payments to Others
IXC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 1.4
Access Payments estimated based on % Share of Toll Revenue. Interstate Revenue estimated based on % Interstate Access Revenue
LEC Revenue Source: Statistics of Communications Common Carriers, December, 1995, Table 2.9
Access Lines assumed to grow at 5% per year
Attachment C
The costs identified by McKinsey and Company for the "partial classroom model" are as follows: $ Millions Initial Ongoing Connection to School $ 1,715 $ 1,030 Connection within School $ 5,025 $ 410 Hardware $13,740 $ 1,130 Content $ 3,505 $ 1,715 Professional Development $ 3,665 $ 2,435 System Operation $ 1,220 $ 810 TOTAL $28,870 $ 7,530The examples in attachments A-1, A-2, B-1, and B-2 are based on the McKinsey report and on the Nynex Education Plan (NEP). The NEP assumes a 5-year deployment of the partial classroom model with a 75% discount for initial costs and a 50% discount for ongoing costs. Further, it assumes a deployment schedule of 25% for year 1, 25% for year 2, 20% for year 3, 15% for year 4, and 15% for year 5. Thus, the NEP assumes costs of:
$ Millions Year 1 Year 2 Year 3 Year 4 Year 5 Year 6+ Connection to School Initial $ 322 $ 322 $ 257 $ 193 $ 193 $ 0 Ongoing $ 129 $ 258 $ 361 $ 438 $ 515 $ 515 Total $ 450 $ 579 $ 618 $ 631 $ 708 $ 515 Connection to School & Connection within School Initial $1,264 $1,264 $1,011 $ 758 $ 758 $ 0 Ongoing $ 180 $ 360 $ 504 $ 612 $ 720 $ 720 Total $1,444 $1,624 $1,515 $1,370 $1,478 $ 720Attachment D
Description of Educational Discount Plans for States in the Ameritech Region
Ohio
Ameritech Ohio has an established discount program where state chartered educational institutions (any grade K-12) receive a 10% discount off rates for intrastate regulated services provided by Ameritech Ohio.
The educational 10% discount program has resulted in savings to schools of $1,116,217 in 1995 and of $463,075 through April, 1996.
Measurable outcomes of this discount are not available.
Wisconsin
Wisconsin has one discount program for schools, libraries, and health care providers in its Universal Service Rules which went into effect 5/1/96. This program provides discounts according to the following schedule:
Maximum of 30% or 300/month for year 1
Maximum of 20% or 200/month for year 2
Maximum of 10% or 100/month for year 3.
These discounts are for Internet access connections, distance learning or high speed data connections for schools, colleges, libraries, and non-profit hospitals.
In addition, the following restrictions apply:
- Discounts are for new services only
- There is only one discount at a time per eligible customer.
The program is funded through a state tax on intrastate revenues placed on the services of all providers. The only exception is cellular, which is exempted by state law. The money is collected by the state and placed in a Universal Service fund. The money is dispersed directly to the institutions with the Wisconsin PUC acting as the administrative disbursing agency. The estimated contribution for Ameritech-Wisconsin for 1996 is $2 million. Since the program has just begun, there are no measurable results yet available.