2 Notice of Proposed Rulemaking and Order Establishing Joint Board, CC Docket No. 96-45, FCC 96-93 (released March 8, 1996) ("Notice").
3 See, e.g., Sprint Comments at 19-20; AT&T Comments at 2; Southwestern Bell Telephone Company ("SWB") Comments at 1-4; Bell Atlantic Comments at 2.
4 See, e.g., Western Wireless Comments at 10-11; LDDS Comments at 2-3; AT&T Comments at 1-10; Bell Atlantic Comments at 4-5.
5 See, e.g., Vanguard Cellular Comments at 3; Ameritech Comments at 7; Bell Atlantic Comments at 2-3; Sprint Comments at 7-8; BellSouth Comments at 5-6. This is in addition to the services mandated by the Telecommunications Act of 1996 (Pub. L. No. 104-104, 110 Stat. 56 (1996) ("1996 Act") for educational and health service organizations.
6 The 1996 Act identifies low-income subscribers and subscribers in high-cost areas as deserving of support. In addition, it calls for preferential rates for schools and health care providers in certain circumstances.
7 See, e.g., NECA Comments at 18; USTA Comments at 24; BellSouth Comments at 15-16; Ameritech Comments at 23; Associated Communications & Research Services, Inc. Comments at 5; NCTA Comments at 23-24; John Stairulakas, Inc. Comments at 17; Wyoming PCS Comments at 4; Idaho PUC Comments at 17; GTE Comments at 16; USTA Comments at 23-25; LDDS Comments at 17-19.
8 47 U.S.C. [[section]] 254(k). A separate rulemaking is slated to address Section 254(k) requirements.
9 See, e.g., Time-Warner Comments at 8-9, 11-12; Nat'l Assoc. of State Utility Consumer Advocates' Comments at 13-14.
10 See, generally, Ameritech Comments at 3-5; see also Bell Atlantic Comments at 2, 8-10.
11 In estimating costs with proxy models, the Commission should estimate the forward-looking costs of an efficient provider. This approach will most closely mimic competitive forces, will provide incentives for cost reduction, and will limit the ability of any carrier to use universal service support funds to cross-subsidize other services.
12 Thus, we disagree with Bell Atlantic (Comments at 3) that new entrants to high- cost areas should not be eligible for universal service support funds.
13 See Bell Atlantic Comments at 8-9, where it is proposed that statewide average costs be used to determine eligibility for high-cost support.
14 See, e.g., SWB Comments at 23-25; BellSouth Comments, Attachment at 9.
15 By definition, common costs cannot be ascribed, on the basis of cost causation, to the services being supported by universal service.
16 See In the Matter of Amendment of the Commission's Rules and Policies to Increase Subscribership and Usage of the Public Switched Network, CC Docket No. 95-115, Notice of Proposed Rulemaking, 60 Fed. Reg. 44296 (August 25, 1996).
17 For a summary of the optimal taxation literature, see Anthony B. Atkinson and Joseph E. Stiglitz, Lectures on Public Economics. New York: McGraw-Hill, 1980. See also Alan Auerbach, "The Theory of Excess Burden and Optimal Taxation." In Handbook of Public Economics Vol. 1, edited by Alan J. Auerbach and Martin Feldstein. Amsterdam: North Holland, 1985.
18 The answer to question (2) will follow from the overall program funding needs (which, in turn, are determined by the universal service policy choices discussed in Section I above) and the answer to question (1).
19 For a survey, see Richard A. Musgrave, "A Brief History of Fiscal Doctrine." See also Handbook of Public Economics Vol. 1, edited by Alan J. Auerbach and Martin Feldstein. Amsterdam: North Holland, 1985.
20 Residential and business subscribers in high-cost areas may benefit from the fact that their neighbors are being subsidized, but, of course, they themselves are being subsidized, rather than contributing to the program.
21 These net benefits are what economists refer to as consumer surplus. Consumer surplus is the standard measure of consumer welfare used in antitrust and other policy analyses.
22 See, generally, the record developed In the Matter of Motion of AT&T Corp. to be Reclassified As a Non-Dominant Carrier, Order, 11 F.C.C. Rcd. 3271 (1995).
23 As long as the lump-sum amount is either fixed or depends only on characteristics that the taxpayer cannot control, the tax creates no distortionary incentives.
24 Ramsey, Frank P. "A Contribution to the Theory of Taxation." Economic Journal, Vol. 37 (1927).
25 Indeed, this is not only sound economics, it is mandated by the 1996 Act.
26 See n.7 supra.
27 See, e.g., Ameritech Comments at 23-24. USTA also argues that double-counting must be avoided. See USTA Comments at 24.
28 Another possibility for consideration is to assess contribution on a per-call basis. The advantage of this approach is that it would not distort consumers' marginal incentives with respect to the choice of call length in the way that a revenues or per-minute approach would. However, collection of universal service contribution on a per-call basis could be expected to distort consumer choices with respect to the number of calls made. Thus, in choosing among these traffic-sensitive approaches the Commission must balance the different types of distortion.
29 Several parties oppose the use of per-minute assessments but do not provide analysis to support their positions. See Ameritech Comments at 24, where it favors net revenues and opposes per-minute tax basis on the grounds that it would not be competitively neutral. Ameritech does not explain how it reached this conclusion. Similarly, NCTA states the per-minute charges can give rise to economic distortions (NCTA Comments at 24) but again does not provide any analysis to back up this claim.
30 With well-defined eligibility criteria, such a system will account more effectively for differences in ability to pay than will an indirect approach like a net revenues tax. To the extent that there is a lack of correlation between telephone consumption levels (beyond basic hook-up) and income, use of revenues will not tie in well to income.
31 Moreover, Bell Atlantic argues that phasing in annual increases in the SLC of up to 25cents will not have major impacts on subscribership. See Bell Atlantic Comments at 3.
32 Alternatively, the Commission could levy a per-minute surcharge on all services and allow netting out along the lines proposed by others in the gross v. net revenues discussion.
33 See AirTouch Comments at 2-5.
34 Ameritech Comments at 22. NCTA also supports combining inter and intrastate revenues; see NCTA Comments at 23 and 24.
35 See discussion supra.
36 See, e.g., AirTouch Comments at 2-4; PCIA Comments at 9-12; Mobile Media Comments at 3-8; CTIA Comments at 4-8.
37 See 47 U.S.C. [[section]] 332(c)(3).
38 See Comments of State of Maine Public Utilities Comm'n, et al. at 14.
39 See e.g., BellSouth Comments at 15-16; Ameritech Comments at 23; GTE Comments at 16; PacTel Comments at 21; NYNEX Comments at 23-24.
40 See e.g., Ameritech Comments at 8; Bell Atlantic Comments at 7-8; BellSouth Comments at 6.
41 As discussed in Section II.B. above, a broader base will reduce the inefficiency of the tax collection. For a system of traffic-sensitive charges, a broader base allows lower per-unit charges and, hence, induces less distortion in consumption decisions.