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

COMMENTS OF MEDIA ACCESS PROJECT

AND PEOPLE FOR THE AMERICAN WAY ON SPECIFIC QUESTIONS

Gigi B. Sohn
Andrew Jay Schwartzman
Joseph S. Paykel
MEDIA ACCESS PROJECT
2000 M Street, NW
Suite 400
Washington, DC 20036
202-232-4300

Jill A. Lesser
Law Student Intern: PEOPLE FOR THE AMERICAN WAY
2000 M Street, NW
Katherine Barton Suite 400
Georgetown University Law Center Washington, DC 20036
202-467-4999

August 2, 1996

SUMMARY

Q1. The Commission cannot assume current rates are "affordable." Current rates have not resulted in universal service, occur within a largely monopoly system, and have never been subjected by the Commission to an affordability test. In addition, Congress specifically directed the Commission, through the Joint Board, to thoroughly review the existing system for universal service support.

Q3. Affordability cannot be based on a specific national benchmark rate for core services. What is affordable depends on the capabilities of each consumer: consumers of lower incomes can afford less; those with higher incomes can afford more. Affordability is a concept that must be flexible and on a sliding scale tied to income: the Commission should adopt a definition that uses a fixed or progressively increasing percentage of disposable income.

Q6. All commercially available services should be eligible for the discount required schools, libraries, and health care providers under Section 254(h). Any effort to define services eligible for a discount would be administratively difficult and costly, would hamper these institutions' ability to add new services, motivate these institutions to use services based less on need than on the availability of a discount, and would unreasonably constrain their ability to provide the services upon which the public depends. Schools and libraries in particular, as the sole source of education, training, and access for many citizens, must have the capability to provide the full array of telecommunications services.

Q8. Sections 706 and 708 are complementary to, but not a replacement for, the requirements of Section 254(h). That section mandates certain access and discounts, while Sections 706 and 708 merely encourage deployment, provide assistance and incentives for expanded educational services.

Q12. Discounts should not be directed to the states in the form of block grants. Block grants require the creation of new state bureaucracies, subject decisions about discounts to state-by-state political decisions, do not assure that the Commission will achieve its legislative mandate, and create a static, top-down decision-making process. Discounts instead should be provided through the marketplace, via a system that is non-bureaucratic, cost-effective, flexible, and avoids discrimination in the distribution of funds.

Q19. The goal of lower rates for schools and libraries in rural, insular, high-cost, and economically disadvantaged areas is laudable, but should not be achieved through a system of additional discounts. Instead, rates for schools and libraries should be determined by first applying a sliding-scale system of base rates based on the income level of the community in which they are located, and then applying an across-the-board discount.

Q21. As discussed above in Question 19, the Commission should provide lower rates for schools and libraries in rural, insular, high-cost, and economically disadvantaged areas by using a discounted, sliding-scale system of rates based on the economical wealth of the community in which the school or library is located.

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

Media Access Project and People For the American Way respectfully submit these comments in response to the Commission's Public Notice, DA 96-1078 (released July 3, 1996). Commenters here respond to selected questions included in the Public Notice.

Definitions

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?

No. Congress explicitly directed the Joint Board to review thoroughly the existing system for universal service support. H. Conf. Rep. No. 104-458, 104th Cong., 2d Sess., at 131. There are a number of reasons that such a review is necessary.

First, current rates clearly are not affordable for many economically disadvantaged people. At least 20 percent of households with annual incomes of less than $10,000 do not have a telephone. Falling through the Net: A Survey of the "Have Nots" in Rural and Urban America, National Telecommunications and Information Administration, U.S. Department of Commerce, July 1995, at Table 1. The inability of substantial numbers of people to obtain telephone service is empirical proof that the current rates are not affordable.

In addition, current rates derive from a system in which, with few exceptions, each telecommunications provider is operating in a monopoly market. Thus, current rates are likely to be artificially high. As the Telecommunications Act creates competitive markets for telecommunications services, rates should be driven down, ideally providing standard rates that truly are affordable for much of the population. But that is not the case today.

Finally, the Telecommunications Act of 1996 ("Telecommunications Act") for the first time explicitly mandates a universal service requirement and specifically requires that services be "affordable." Telecommunications Act [[section]] 254(b)(1). Since, until now, universal service has simply been one component of determining what is "just and reasonable," the Commission has never addressed the question of what is "affordable." Notice of Proposed Rulemaking and Order Establishing Joint Board, FCC 96-93, CC Docket No. 96-45, March 8, 1996, at II.4, III.A.14. The Commission cannot assume that any particular rates are affordable before it explicitly defines affordability.

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?

While there may be advantages to a specific national benchmark rate in terms of consistency and ease of administration, they are clearly outweighed by the disadvantages.

What is affordable depends on the capabilities of each consumer: consumers of lower incomes can afford less; those with higher incomes can afford more. There is evidence that Congress intended such an approach: The Senate Report described affordability as "what consumers are willing and able to pay." It also characterized the term as involving a determination of "what is an affordable rate for any particular area." S. Rep. No. 104-23, 104th Cong., 1st Sess., at 26. A single national benchmark rate is inappropriate for determining affordability: it would leave services unaffordable for many low-income consumers, while providing an unnecessary subsidy to wealthier consumers.

Affordability is a concept that must be flexible and placed on a sliding scale tied to income. No flat-rate concept of affordability can suffice for all people and all areas. The Commission should adopt a definition that uses a fixed or progressively increasing percentage of disposable income.

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 discount for schools, libraries, and health care providers should apply to all commercially available services. Any effort to define with particularity those services eligible for a discount would be administratively difficult and costly, would hamper the institutions' ability to add new services, could skew the services used by these institutions, and would unreasonably constrain their ability to provide the services that the public depends on them for.

First, it would be difficult and costly for the Commission to go through a proceeding to determine which services should receive a discount and which shouldn't. It would be even more burdensome for the Commission to have to review and revise such a list as available services expand and evolve. The Commission could find itself repeatedly called upon to initiate new proceedings as new services became available; while waiting for the FCC to add services to the eligibility list, schools, libraries and health care providers would likely be unable to obtain such services on an affordable basis. An open-ended definition of services that qualify for the discount will avoid such bureaucratic logjams and allow schools, libraries, and health care providers to add or change services without needless delay.

Also, by defining a list of services that are eligible for the discount, the Commission will drive schools, libraries, and health care institutions to emphasize use of services that are discounted over those that aren't. These may not be the services that these institutions most need, particularly as needs and available services change over time. Providing a discount for all commercially available services puts all of these services on an equal footing and allows the needs of the institutions and the relative costs and benefits of the services to motivate the institutions' decisions about what services to purchase.

Finally, as a policy matter, these institutions should have the opportunity to operate with the full range of telecommunications services that they can make use of. Schools and libraries, for example, will increasingly serve as centers of education, training, and access to information services for a large segment of the population. Schools and libraries, in fact, will be the only place where many citizens can go to learn how to use computer services, get access to and assistance in using information networks and multimedia services. As institutional centers for telecommunications and information services, schools and libraries must have the capability to provide access to the full array of telecommunications and information services, including advanced information services. Without discounts, such access simply will not be affordable for most of these institutions. Thus, discounts should be available for the full array of possible services.

8. To what extent should the provisions of Sections 706 and 708 be considered by the Joint Board and be relied upon to provide advanced services to schools, libraries and health care providers?

Sections 706 and 708 are complementary to, but not a replacement for, the requirements of Section 254(h). Section 706 encourages the deployment of advanced telecommunications capability on a reasonable and timely basis throughout the country, not just to schools and libraries. The goal is to encourage prompt deployment; the vehicles for achieving this goal are measures to remove barriers and promote competition.

These are laudable goals, and they will enhance the ability of schools, libraries, and health care providers to have access to advanced services. However, the requirements of Section 254(h) are much more focused and explicit: they mandate that these institutions shall be provided telecommunications services, that these services will be provided at a discount, and that telecommunications carriers may be required to connect their network to these institutions in defined circumstances. These are explicit mandates that the Commission must implement through regulatory requirements and a discount scheme. Measures to encourage deployment under Section 706 will make it easier for telecommunication service providers to meet the mandates of Section 254, but do not replace them.

Similarly, Section 708, establishing the National Education Technology Funding Corporation ("NETFC"), provides a mechanism to enhance the provision of information services in schools and libraries by building on but not supplanting the requirements of Section 254(h). In fact, the enhancements the NETFC promises depend on the requirement that educational institutions have fundamental access to discounted services as provided for in Section 254(h). Once schools have such access, Section 708 can stimulate additional investment, provide funding for hardware and training, provide technical assistance, and encourage the development of innovative technology-based instructional tools and applications. However, while NETFC could theoretically provide funds to help schools obtain advanced services, there is nothing in the Act that mandates such action. Moreover, the NETFC is not yet funded, nor is funding mandatory. Thus, the NETFC cannot provide a reliable mechanism for meeting the 254(h) mandates.

12. Should discounts be directed to the states in the form of block grants?

No. The establishment of a state block grant program would create several problems. It would demand the creation of 50 new state bureaucracies to administer the funds and make decisions on distribution -- a costly proposition. It would leave decisions about who would receive funds to the states, leaving the Commission with little or no oversight capability to assure that the distribution of funds is in line with the Commission's legislative mandates. Block grants also would subject decisions about allocation to a political process at the state level, which could be subject to abuse and result in discrimination in the distribution of funding.

The fundamental notion of distributing discounts through block grants is flawed. It assumes that "discounts" should be given by creating a pool of money that would be distributed to selected institutions and/or for selected services through a static, top-down decision-making process. As discussed in our response to Question 6, schools, libraries, and health-care providers should have access to discounts for all services and should obtain these discounted services in the marketplace. Such a system allows these institutions to decide what services they need, to choose a mix of services based on their discounted market costs, to negotiate deals for such services in the marketplace, and to mix flexibly, add, or change services as new services become available or their needs or capabilities evolve. In contrast to block grants, such a system is non-bureaucratic, cost-effective, flexible, and avoids discrimination in the distribution of funds.

19. Should an additional discount be given to schools and libraries located in rural, insular, high-cost and economically disadvantaged areas?

The goal of providing discounts to schools and libraries is to make these services affordable for these institutions. As discussed in our response to Question 3, what is affordable depends on ability of the individual -- or in this case, institution -- to pay. Thus, schools and libraries in economically disadvantaged areas should pay less for services than such institutions in wealthier areas, and such institutions should not have to pay higher rates if they are located in rural, insular areas where cost of providing of such services is high.

However, the best way to achieve affordability for these institutions is first to apply a sliding-scale concept of affordability, based on income levels in a geographic area, as discussed in the response to Question 3 above. Under this concept of affordability, rates would depend not on the cost of delivery, but on the ability of the consumer to pay.[1] Discounts then would be applied on top of this sliding-scale affordability formula. This would have the effect of providing lower than average rates to institutions in economically disadvantaged areas and providing deep discounts from cost-based rates in high-cost areas.

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 in rural, insular, high-cost, and economically disadvantaged areas?

See response to Question 19 above. The Commission should use a sliding scale approach for setting "just, reasonable, and affordable" rates as required by Section 254(b) and should then apply a system of discounts on top of these rates. If base rates are determined by a sliding scale, the discounts can be even across the board, and additional assistance programs along the lines of the Lifeline assistance program should be unnecessary.

Respectfully Submitted,

Gigi B. Sohn

Andrew Jay Schwartzman

Joseph S. Paykel
MEDIA ACCESS PROJECT
2000 M Street, NW
Washington, DC 20036
Suite 400
202-232-4300

					Jill A. Lesser
Law Student Intern:			PEOPLE FOR THE AMERICAN WAY
					2000 M Street, NW
Katherine Barton			Suite 400	
Georgetown University Law Center	Washington, DC 20036

August 2, 1996

CERTIFICATE OF SERVICE

I, Gigi B. Sohn, certify that on this 2nd day of August 1996, I caused copies of the foregoing "Comments of Media Access Project and People for the American Way on Specific Questions" to be served by mail, first class postage prepaid, on the parties listed in Attachment 2 to the Public Notice, DA 96-1078, (released July 3, 1996). I further certify that I submitted a diskette containing the aforementioned comments as required in the Public Notice.

____________________________

Gigi B. Sohn