Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

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

Reply Comments of General Communication, Inc.

Kathy L. Shobert
Director, Federal Affairs
901 15th St., NW
Suite 900
Washington, D.C. 20005
(202)842-8847

May 7, 1996

SUMMARY

Universal service support is dependent on a system that ensures distribution through a competitive neutral system and which breaks the link between increases in costs translating into increases in subsidy. The Commission should restructure support so that carriers will minimize, not maximize their cost and provide the most efficient network. A plan that begins with reported costs and credits and reduces costs over time through competition should be implemented. This will result in overall lower costs and rates to consumers while also ensuring speedy deployment of new technology. In implementing this new system, the Commission should not protect any incumbent LEC, including rural telephone companies from competition.

TABLE OF CONTENTS

Introduction 1 I. Support for Rural, Insular and High Cost Areas 3
A. Definition of Universal Service 3
B. How Support Should Be Paid 9
II. Low Income Consumers 14
III. Services for Schools, Libraries and
Health Care Providers 15

IV. Administration of Support 16

Conclusion 16

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

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

Reply Comments of General Communication, Inc.

General Communication, Inc. (GCI) hereby submits reply comments in response to the Commission's Notice of Proposed Rulemaking and Order Establishing Joint Board (Notice).[1] The Notice invited comment on various policy questions regarding universal service as outlined in the Telecommunications Act of 1996 (1996 Act). Specifically, the Commission initiated this rulemaking (1) to define the services that will be supported by Federal universal support mechanism; (2) to define those support mechanisms; and (3) to recommend changes to the Commission's regulations to implement the universal service directives of the 1996 Act.

Introduction

Any universal service system adopted by the Commission must be competitively neutral both in its collection and distribution of funds. Further, any system must mandate the deployment of technology and services only where market forces do not meet the Commission's objectives. This is supported by the 1996 Act which provides

for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition.[2]

Allowing competition to expand is the key to this goal. Not allowing competition or creating barriers to entry, especially in rural areas, will create a system of have and have nots with rural America becoming the have nots. Choosing to protect the incumbent carrier from competition was not the intent of Congress, even in rural America. Consumers in all areas of the country must be allowed to choose their local carrier, pay lower rates, and have new technology deployed quickly and efficiently. The Commission must not stand in the way of this revolutionary deployment of new technology and advanced services by all providers. The Commission cannot continue practices created in a monopoly environment. The existing universal service process was developed for a monopoly environment and is inconsistent with a competitive environment. The process must be modified so as not to impede competition.

The Commission cannot wait for competition to occur prior to instituting a competitively neutral universal service policy. Waiting will impede competition and delay the benefits of lower prices, more choices and better technology. In the past, when the incumbent carriers were the direct beneficiaries of an existing program, it was always to their benefit to advocate delay. The same is true here. The Commission must set up a system that fulfills all of its goals, not just the goals of the incumbent carrier. The 1996 Act is consistent with this position in encouraging competition in all sectors of America.

To achieve its goals, the Commission must adopt a plan that fully satisfies the principles outlined by Congress. These goals must be embraced for all America, not just urban America. GCI supports the principles as outlined. Any system adopted must not shield non-Tier 1 LECs from an assistance system that is competitively neutral.[3]

I. Support for Rural, Insular and High Cost Areas

A. Definition of Universal Service

The 1996 Act defines universal service as an "evolving level of telecommunications services."[4] The 1996 Act states that

the definition of services that are supported by Federal universal services support mechanisms shall consider the extent to which such telecommunications services -

(A) are essential to education, public health or public safety;

(B) have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers;

(C) are being deployed in public telecommunications networks by telecommunications carriers; and,

(D) are consistent with the public interest, convenience and necessity.[5]

Any service included in the definition of universal service must meet all of these objectives. The Commission proposes to allow the following core services to receive universal service support:

(1) voice grade access to the public switched network, with the ability to place and receive calls, whether provided by wireline or wireless technology; (2) touch-tone; (3) single party service; (4) access to emergency services; and, (5) access to operator services.[6]

The Commission just last year concluded the Alaska Joint Board[7] proceeding that terminated the subsidy received by Alascom to provide interexchange facilities and services to Alaska. Even though Alascom received subsidies over a twenty year period, the Alaska Bush[8] continues to be the only place in America where interexchange carriers cannot build duplicative satellite earth station facilities.[9] The citizens that live in the Alaska bush receive the worst telephone service in the United States. Today, the same earth stations with analog technology that were installed in the Alaska bush in the late 70's and early 80's are still in operation, even through Alascom received substantially over $1 billion dollars in subsidy to provide the service. It is difficult to talk to these locations, and sometimes impossible to send faxes in and out of these locations because of the antiquated technology. Due to the lack of competition or even the threat of competition, service to these locations is disastrous.

GCI has teamed with several companies to develop a bush earth station technology that is low cost and easily upgradeable that could replace this antiquated system. Scientific Atlanta and GCI have developed a small DAMA earth station which will improve service to the Alaska bush. GCI has fought for over 5 years to open bush Alaska to competitive service.[10] GCI has recently received from the Commission a partial waiver that will allow it to deploy and operate up to fifty DAMA earth stations in bush Alaska.[11] In response, Alascom has announced that it will finally deploy new technology in the bush. The Alaska situation for interexchange service should remind the Commission that subsidies for competitive services are unnecessary and should not be permitted. The Commission went through a twelve year process to eliminate the subsidy Alascom claimed as its right and as necessary to provide service to remote locations in Alaska. Obviously, Alascom did not use the monies received over the years to improve service in these areas. They used the support in competitive areas to try and drive out competition.[12] Currently, interexchange services are provided in a competitive manner and not subsidized.[13] Services that are not subsidized in any way today should not be included in the core services.[14]

Relay services are currently provided under a state certification policy and receive support based on a nationwide average cost. This situation should not be changed in this proceeding. Directory listing should not be considered a service which receives universal service support. In fact, the 1996 Act mandates subscriber list information be provided on a timely and unbundled basis to any person to publish directories in any format.[15] It is clear that Congress did not intend to provide universal service support for these services.

The Commission should not include advanced services in the definition of universal service at this time. Advanced services are in their infancy. As supported by many parties, the Commission should wait and see how the natural deployment of advanced services develops before requiring their inclusion in the definition of universal service. Natural competitive forces should be allowed to work prior to providing support for a service. As the 1996 Act states, the Commission is to reevaluate the definition of universal service from "time to time."[16] This will give the Commission an opportunity to expand or contract the definition as time dictates. The quickest and most efficient way to expand the provision of service is to endorse competition and allow the market forces to create and deploy new technology. The Commission should not create an expanded definition of universal service that will inhibit market forces.

Some parties suggest that the Commission should adopt a specific data transmission rate for these services. The Commission should not target a data rate which can interfere with market forces and development of technology. GCI's DAMA earth stations outlined above are not currently able to provide 28.8 kbps. However, Scientific Atlanta and other vendors are aggressively working to develop high data transmission rates for the earth stations. As pointed out above, the new technology is better by leaps and bounds than the current service. GCI will work aggressively with vendors to develop quicker data transmission rates for the service.

Alternatively, the Commission[17] should adopt certain service quality standards for those services included in the definition of universal service. Such quality standards could include an evaluation of valid complaints filed by consumers and customers[18] at both the Commission and the state commission and the timing of filling customer service orders. As GCI proposed in its comments, a carrier which did not comply with the service quality standards would be penalized whereby the carrier would not receive its full amount of universal service support. This will help ensure that areas that do not have alternative carriers from day one will still have to achieve certain service standards or they will be penalized.

B. How Support Should Be Paid

Support must be collected and distributed in a competitively neutral manner, even in rural America. GCI supports a system that uses credits or vouchers over a specified area payable to the customer's provider of choice. The monies can either be based on proxies or on the incumbents actual cost at some specific point in time.[19]

If the Commission is not ready to move to a proxy system, it could begin with the costs of the incumbent carrier. In order to promote efficiency and competition the link between the costs of the incumbent carrier and the amount of USF assistance must be broken. As GCI proposed in its comments, the Commission could start with the incumbent carriers reported costs (minus the adjustments made under Option One in comments filed in CC Docket 80-286) and convert those costs to a per line credit. Each present USF recipient would determine the existing amount of support per access line. Under the new system, that amount would be credited to the consumer or alternatively could be paid directly to the carrier. Thus, on day one of the new system, the incumbent carrier with 100% of the customers would experience no change in support.[20]

Other carriers would be eligible for the same support. Competition could develop with each competitor having access to the same potential subsidy or alternatively, the new entrant could receive a percentage of the support the incumbent LEC would receive per line.[21] The link between the costs of the incumbent carrier and the amount of the USF credit would end on the day the new USF system is implemented.[22] From that day forward, the forces of competition and the resulting efficiencies should be used to drive the amount of the required subsidy downward.[23] If the Commission continues to believe that reported costs should be the starting point,[24] the goal is to set the initial credit amount, to break the link between costs and credits, and to use competition and efficiency to drive down the level of subsidy to an amount actually required by the market to provide service at levels that are acceptable and that will promote universal service.[25] This system is administratively easy and begins with the costs of the incumbent carrier. The costs and support are split after the initial determination and is reduced as competitors enter the marketplace.

The Commission proposes to look at costs on a more disaggregated basis than a study area and proposes to use Census Block Groups (CBGs) and proxies. Many incumbent LECs oppose this, claiming that they will not be able to receive enough USF to meet their obligations. However, these companies also state that they should not be required to merge separate study areas[26] within a state and that multiple study areas in a state should be allowed because they are based on practical business decisions.[27] In fact, these study areas are based on the incentives resulting from the existing structure. Since this structure and the resulting incentives will change with a new program, existing business decisions should not act as a block to change.

Credits should be available anywhere for any carrier. They should not be limited to areas where "true" competition "actually" exists as proposed by incumbent LECs. Waiting until true competition actually exists will ensure administrative complexity whereby some carriers are determining USF under one system and other carriers are determining USF under an entirely different system. The Commission and the state commissions will be inundated with hundreds of regulatory proceedings to determine whether true competition exists. This will further delay benefits to the consumer and force both the incumbent LEC and all new entrants to spend time and money in numerous regulatory proceedings to make this determination over and over again. This is contrary to the intent of the 1996 Act. Rural telephone companies were given exemptions from complying with 251(c) of the Act because they pleaded that competition would not come to rural areas and that they would have to seek suspensions and modifications of the rules via complex regulatory proceedings until a potential competitor surfaced. Therefore, a compromised was reached between those carriers wishing to enter a rural market and the rural telephone companies to require interconnection as outlined in 251(c) upon a bona fide request. This was fashioned after the equal access requirement.[28] Contrary to the assertions of the rural telephone companies, Congress did not intend to adopt protectionist measures for rural telephone companies.[29]

Implementation issues for credits should be evaluated and determined at one time for the entire country. You should not implement a different system for New York than for Alaska. Otherwise, the goals of the Commission will only be achieved in New York. Of course, this would be inconsistent with the 1996 Act.

II. Low Income Consumers

The Commission proposes to provide the following for low income consumers: (1) free access to telephone service information so as to report repairs, inquire about bills or eligibility for special programs; (2) toll limitation services, so as to avoid involuntary termination; (3) reduced service deposit; (4) services other than conventional residential services; and, (5) other services for low income subscribers.

The Commission should require all LECs, subject to availability of facilities, to offer low income customers a minimum level of service that would be free of charge and without subsidy. This minimum service level should include the ability to receive calls and the ability to originate 911 and toll free (800 and 888) interexchange calls.

The cost to the carriers to provide such service would be virtually zero. With modern switches, GCI expects that once software changes are made the service could be provided with ease. Of course, if service is given away free of charge, there should be a means test, similar to that for Lifeline and LinkUp for any services that are provided for low income consumers.

III. Services for Schools, Libraries and Health Care Providers

As outlined in the 1996 Act, services for schools must be provided for educational purposes. For rural health care providers, the services must be "necessary for the provision of health care services in a State." Carriers should be required to submit information to the Commission setting out its services and rates charged to calculate "the amount equal to the difference, if any, between the rates for services provided to health care providers for rural areas in a State and the rates for similar services provided to customers in comparable rural areas in that State."[30] Schools, libraries and health care providers list a litany of services that they wish to have for either free or at substantial discounts. The parties further state that they need among other things hardware, software, inside wire, maintenance and training so as to use the facilities properly. GCI proposes that the Commission create public forum task forces to further resolve the necessary items that schools, libraries and health care providers need. At the same time, the Commission should urge carriers to work with these entities to resolve their realistic needs. GCI further proposes that the Commission allow trials between carriers and authorized entities to be conducted.[31] The needs of the eligible entities are diverse. A one size fits all proposition should not necessarily be adopted.[32]

IV. Administration of Support

As supported by most parties, all telecommunications providers, including local, long distance competitive access providers, cellular telephone companies, pay phone providers, enhanced service provider, should be required to contribute to support universal service. Support should be based on the carriers interstate revenues, net of what each carrier pays any other carrier. Otherwise some carriers would be double taxed.

Conclusion

Universal service support is dependent on a system that ensures distribution through a competitive neutral system and which breaks the link between increases in costs translating into increases in subsidy. The Commission should restructure support so that carriers will minimize, not maximize their cost and provide the most efficient network. A plan that begins with reported costs and credits and reduces costs over time through competition should be implemented. This will result in overall lower costs and rates to consumers while also ensuring speedy deployment of new technology.

Respectfully submitted,

GENERAL COMMUNICATION, INC.

Kathy L. Shobert
Director, Federal Affairs
901 15th St., NW
Suite 900
Washington, D.C. 20005
(202)842-8847

May 7, 1996

STATEMENT OF VERIFICATION

I have read the foregoing, and to the best of my knowledge, information and belief there is good ground to support it, and that it is not interposed for delay. I verify under penalty of perjury that the foregoing is true and correct. Executed May 7, 1996.

Kathy L. Shobert
Director, Federal Affairs
901 15th St., NW
Suite 900
Washington, D.C. 20005
(202)842-8847

CERTIFICATE OF SERVICE

I, Kathy L. Shobert, do hereby certify that on this 7th day of May, 1996 a copy of the foregoing was mailed by first class mail, postage prepaid, to the parties listed below.

[Service list deleted from online version.]

ITS

2100 M St., NW, Suite 140

Washington, DC 20037