In the Matter of )
)
Federal-State Joint Board on ) CC Docket No. 96-45
Universal Service )
Reply Comments of the
Alaska Public Utilities Commission
Date: May 6, 1996 Don Schröer, Chairman
Alaska Public Utilities Commission
1016 West Sixth Avenue, Suite 400
Anchorage, Alaska 99501
Executive Summary
The Alaska Public Utilities Commission (APUC) recommends that telecommunications support for high-cost, rural and insular areas of the nation be provided, in a fair manner, consistent with the provisions of the Telecommunications Act of 1996 (The Act) that require services included in the definition of universal service bear no more than a reasonable share of common and joint costs of the facilities used to provide those services. Support must be sufficient and include provisions to fund necessary infrastructure changes and to provide affordable services to all customers regardless of geographic location. Efforts to make the funding mechanism more competitively neutral should not lead to rate increases. Any changes to the funding mechanism that result in significant increases in local rates or decreases in support funding should be phased-in. Use of support funds should be tracked to ensure that the public obtains the intended benefits of any support mechanisms. Proposals that limit funding to only the primary line of the subscriber require further review.
The APUC agrees with those commentors who recognize that there are differences in value, quality, and scope of local services between urban and rural areas of the nation. To ensure comparability in services between urban and rural areas, it may be necessary to provide rural customers with more support and services than the five core services proposed in the Notice of Proposed Rulemaking in this proceeding. If key services cannot soon be provided in rural areas, the Federal Communications Commission (FCC) may wish to consider requiring provision of services at regional centers.
The APUC believes that the concept of affordability must consider state regional income, the total price of telecom-munications services, penetration levels, cost of living, local-calling-area size, current rate levels, and other regional effects.
The FCC should consider requiring that schools, libraries, and health-care providers be billed services at the billing utility's lowest available contract or tariffed rate, with discounts given, if necessary to reach a benchmark rate. A life-line support mechanism may be needed for those areas with unusual circumstances where the standard discounted rate is not affordable.
The APUC opposes any increases to the Subscriber Line Charge and suggests that this charge become a responsibility of the interstate interexchange carriers, to allow the market to deter-mine how this cost should be recovered.
The APUC opposes those proposals that would restrict the decisionmaking responsibility delegated to states under The Act.
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Federal-State Joint Board on ) CC Docket No. 96-45
Universal Service )
)
Reply Comments of the
The Alaska Public Utilities Commission (APUC) encourages the Federal Communications Commission (FCC) to adopt regulations on the universal service issue that ensure delivery of essential services to all subscribers and promote the public interest. The APUC provides the following comments in response to the April 1996 filings in CC Docket No. 96-45.
Funding Issues and Mechanisms for High-Cost, Rural, and Insular Areas
(1) Support must be adequate to meet need and be developed in a fair manner: Several commentors argued that support funding should be determined using a forward-looking, estimated, incremental cost analysis or variations of that concept.[1] The FCC should adopt only a funding methodology that recognizes that local rates should not shoulder an undue portion of the utility's joint and common costs. Consistent with the Telecommunications Act of 1996 (The Act), universal service should bear no more than a reasonable share of these costs. (Section 254(k).) Adequate and sufficient support should also be provided to ensure that whatever joint and common costs are assigned to local customers are affordable.
The principle under The Act at Section 254(b)(5) that the high-cost mechanism must be "sufficient" requires that support be based on real-world conditions. Any costing model must consider all material costs that may affect service, including regional high-cost factors such as those faced in Alaska (e.g., harsh climate, lack of roads). The failure to consider such regional costs will lead to inadequate levels of support.[2] Utilities receiving support should have the ability to (a) demonstrate that any national costing model provides inadequate funding given local conditions and (b) seek appropriate relief.
In addition, if a forward-looking, incremental model is adopted, the FCC should create provisions under the model to recognize that small local exchange carriers do not fit the standard Tier 1 model network structure. For example, many small local exchange carriers in Alaska currently share advanced switching technology with larger carriers (a fact that is recognized by Congress and addressed in The Act at Section 259, Infrastructure Sharing). As a result, these small carriers will have different cost characteristics that should be recognized by any costing model that is used.
(2) Efforts to make the system more competitively neutral should not lead to rate increases: The APUC agrees with those who filed comments in this proceeding that the FCC should not adopt mechanisms that increase competition but lead to rate increases.[3] Competition should, among other things, lead to efficiency improvements and not just result in cost shifting among customers. If rates go up for those with the least-competitive choice, subscribership will decline. The Senate Report on S. 652 has made it clear that "any action to reduce or eliminate support mechanisms shall only be done in a manner consistent with the obligation to preserve and advance universal service for all Americans." (Senate Report No. 104-23, supra, at 26.)
(3) Any high-cost support method must fund the infrastructure: Support should be available to fund infrastructure changes necessary to make essential services available to the customer.[4] Cost support is insufficient and a wasted effort if it merely provides the customer with an access line but the customer cannot use the line to obtain essential services due to limitations in the overall telecommunications network. For example, support would be insufficient if it provided a customer with affordable local modem access to the 25 customers in the customer's small local calling area but failed to provide for infrastructure changes necessary to remove limitations in the toll network that prohibit the customer from accessing the rest of the United States.
(4) All customers require affordable rates, not just residential customers: The APUC disagrees with the commentors who would limit support to residential customers.[5] Under The Act, all customers (residential and business, urban and rural) are required to have affordable rates, with the goals of geographic ubiquity:[6]
(3) ACCESS IN RURAL AND HIGH COST AREAS - Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecom-munications and information services, including inter-exchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas. (The Act, Section 254(b)(3).)
The APUC believes that support for affordable service should not be limited to residential local exchange service.
(5) Track Use of Funds: The APUC agrees with the comments of Pacific Telecom, Inc. (PTI), that there should be annual accountability and reporting standards that identify the uses of universal service fund proceeds.[7]
(6) Phase-In: The APUC supports the comments of several entities who propose that if the FCC makes major changes to the universal service mechanism, they should be phased-in over a period of years if the results of changes increase consumer rates and significantly reduce existing levels of support provided to carriers.[8] The period of the phase-in would depend upon the degree of change to the system.
(7) Further review is required before adopting a proposal to limit support to a single line to each household: Some commentors propose that universal service support should provide funding for only the primary access line to a household even though utilities as a common practice wire more than one physical line to each location.[9] The APUC believes that several issues must be further explored before such a proposal is adopted. First, the proposal does not specify what type of "line" (e.g., fiber optic, coax, or copper) should be funded. Funding one line per household may provide different quality of service to the end customers depending upon whether the customers are served by fiber or copper wire.
Second, there are no allocation procedures to identify how to determine the costs for the primary "line" versus any addi-tional lines (or capacity). Without such allocation procedures, the "single-line" proposal cannot be fully evaluated, and it cannot be determined whether the price of the second "line" will rise to unaffordable levels or will rise to the point that demand is suppressed leading to higher overall rates for all customers. Developing "single-line" cost allocation rules would likely be a daunting, controversial task.
Third, providing two "lines" to each household allows a back up in case of failure of the primary "line" and may reduce construction costs and installation time if the customers ever seek a second circuit, raising quality-of-service questions. Therefore, the proposal to fund only the first "line" to a household should be further reviewed.
Services To Be Supported
(1) Rural customers may need additional support and services: The APUC believes that many of the proposals filed in this proceeding do not comply with Section 254(b)(3) of The Act that requires that rural, insular, and high-cost areas have access to telecommunications and information services, including inter-exchange service and advanced telecommunications services, that are reasonably comparable to those in urban areas and that the services are available at rates that are reasonably comparable to rates charged for similar services in urban areas.[10]
Rural and urban local services are now dissimilar because they differ in quality, availability of services, functions provided, and scope of calling areas. Rural areas often have higher rates but smaller calling areas than urban areas. Rural areas, especially those in Alaska, often do not have local tele-communications access to information services via modem (including the Internet), fire, police, medical emergency, and other services that are taken for granted in the more urban areas.[11]
Universal service (and sufficient funding) should therefore be provided to allow a reasonably adequate local calling area in order for customers to have affordable access to telecommunica-tions and information services that they need and that are reasonably comparable to those services provided to urban areas. In Alaska, toll service is a necessary component to provide full participation in the telephone network and useful access to services included in the definition of universal service. For example, most rural Alaska customers must make an intrastate toll call to have access to a doctor, emergency services, and stores other than the local village store, if there is one.
(2) Provide Advanced Services: Section 254(b)(3) requires that reasonably comparable access to advanced services and information services be available in all areas of the nation. The FCC should therefore broaden the definition of universal service beyond its initial five core services (e.g., "POTS")[12] as proposed in the NPRM.[13] Several of the filed comments demonstrate that modem and Internet access, while commonly deployed urban services, are difficult or expensive to obtain in some rural areas.[14]
For example, the Rural Utilities Service (RUS) perceives that the ability to provide digital 28.8 kilobytes-per-second (kbps) modem service should be an intrinsic characteristic of the local network and is possible over the "short loops" that "comprise the overwhelming majority of suburban and urban areas."[15] In urban areas, customers have significant and flexible use of 28.8 kbps transmission to contact several information services within their local area. In comparison, in Alaska most rural communities are distant from and have no road access to other rural and urban locations. These rural communities are dependent upon inter-exchange services to provide access to Internet and other information services. In Alaska, the facility of 28.8 kbps modem access on a local line is often relatively useless without comparable toll access because of the extremely limited-size local calling areas.[16]
(3) Regional Centers: If carriers cannot quickly modernize their facilities to provide needed services in rural, high-cost, and insular areas, then efforts should be made to provide community access centers so that some point of access to essential services, including the Internet, can be made available in each community. Comments from various library associations would suggest that libraries would be available for the regional center function.[17]
(4) Rate deaveraging and support to AT&T: In its comments AT&T seeks financial support to provide geographic rate averaging in some high-cost areas that it serves.[18] If the FCC grants such support, AT&T should be required to appropriately reduce its rates. The APUC believes, however, that AT&T has not demonstrated that it needs support to preserve geographic rate averaging.
Affordability to All Customers
(1) The concept of affordability to all customers should be broad based: The APUC agrees with the comments that support the concept that rate affordability should consider state regional income, the total price of telecommunication service, penetration levels in the area, cost of living, local-calling-area size, current rate levels, and state rate setting policies.[19]
(2) Do not use a percentage of the national median income to determine affordability: Proposals that merely consider national median income to determine affordability should not be adopted. Specifically, Keystone proposes that an affordability benchmark ($28/month) be set at about 1 percent of the national median income.[20] Many places in rural Alaska have average incomes that fall well below the national average. Given this circum-stance, the $28/month rate would appear too high as a gauge of affordability. For example, a $28/month phone bill represents about 7 percent of the average annual income for a household in Birch Creek, Alaska. At this level, citizens in Birch Creek may not be able to afford phone service. If a percentage of average income is used as the benchmark of affordability, the percentage should be based on state regional average income.
(3) The national average rate for service is not, by itself, a good indicator of affordability: Some commentors suggest that the national average rate be used as an indicator of telephone affordability.[21] The APUC believes that the national average rate, by itself, is not a good indicator of affordability. Components of the local rate (e.g., touch-tone), quality of service, value of service, and size of the local calling area vary from location to location, making it difficult to develop a valid national average rate. Furthermore, as previously discussed, affordability cannot be gauged merely by price but is governed by customer income, cost of living, and other factors.
Schools, Libraries, and Health Care Providers
(1) Proposal for provision of discounts: The APUC agrees with those commentors who suggest that schools, libraries, and health-care providers should be billed for service at the billing utility's lowest available contract or tariffed rates for their region.[22] To ensure that services are universally available, states could develop benchmark rate schedules that would allow interstate funding for schools, libraries, and health-care providers to cover the portion of the bill above the benchmark rates.
To encourage incentives for efficiency, the FCC may also wish to consider requiring the schools, libraries, and health-care providers to bear a portion (possibly 10 percent) of the cost difference between the benchmark rate and the billed rate. When developing these benchmark rates, the APUC suggests that consideration be given to providing mileage-insensitive rates.
(2) Lifeline support: Schools, libraries, and health-care providers will sometimes face unusual circumstances that make the discounted rate unaffordable. The APUC agrees in concept with the National School Board, et al. (NSB), that schools, libraries, and health-care providers that can document extreme need should receive lifeline-like support.[23]
Subscriber Line Charges (SLC) and Carrier Common Line Charges (CCLC)
(1) Do not increase the SLC: The APUC agrees with NASUCA that the SLC represents a local rate increase to customers who have no means of economizing to avoid the charge and minimize expenses.[24] Interexchange carriers (IXCs) that employ the local loop for provision of their services should pay a fair share of local loop costs. The free use of the local loop by IXCs constitutes an unjustified subsidy and an unreasonable sharing of joint and common costs.
(2) If the SLC is increased, toll rates should decrease: Customers should not be required to experience a rate increase, through higher SLC charges, without obtaining some benefit. As a result, any increase in SLC should result in a mandatory decrease in IXC rates.[25]
(3) Replace the SLC mechanism: The APUC supports those comments that propose transfer of the responsibility to pay the interstate SLC to the IXCs to allow the market to determine how such costs should ultimately be recovered.[26] If necessary, the IXCs could themselves adopt end-user charges similar to the SLC. In the alternative, NARUC has suggested other options available to the FCC to reduce the CCLC instead of increasing the SLC.[27]
Preemption
The FCC should not adopt proposals that restrict the decisionmaking responsibility delegated to the states by The Act. For example, Section 214(e)(2) allows state commissions to designate carriers as eligible carriers for a specific service area designated by the state commission. New entrants, therefore, should not be allowed to determine their own study areas for eligibility purposes.[28]
RESPECTFULLY SUBMITTED this 6th day of May, 1996.
BY DIRECTION OF THE COMMISSION
__________________________________________
By: Commissioner Don Schröer, Chairman
Alaska Public Utilities Commission
cc: William F. Caton
Acting Secretary
Federal Communications Commission
Attached List