[2]Conference Report at 1.

[3]With the advent of new technologies, such as PCS, areas that are currently non-competitive will become competitive in the near future. The Commission should not wait until there is evidence of true competition, as suggested by many incumbent carriers. Delay will benefit the incumbent LEC, not customers.

[4]Section 254(1).

[5]Section 254(c).

[6]Notice at 12.

[7]In re Application of Alascom, Inc., AT&T Corporation and Pacific Telecom, Inc. for Transfer of Control of Alascom, Inc. from Pacific Telecom, Inc. to AT&T Corporation, File Nos. W-P-C-7037, 6520, Order And Authorization, FCC No. 95-334 (released August 2, 1995); Integration of Rates and Services, 9 FCC Rcd 3023 (1994), adopting Final Recommended Decision, 9 FCC Rcd 2197 (1994).

[8]The Alaska Bush is defined as places with less than a thousand people with an existing MTS satellite earth station. Policies Governing the Ownership of Domestic Satellite Earth Stations in the Bush Communities of Alaska, 96 FCC 2d 522, 541 (1984).

[9]Given the fact that these villages cannot be reasonably served with any other technology except satellite earth stations, there is basically a prohibition on entry in the Alaska bush.

[10]GCI Petition for Rulemaking, RM-7246, filed January 10, 1990.

[11]Petition of General Communication, Inc. for a Partial Waiver of the Bush Earth Station Policy, File No. 122-SAT-WAIV-95, released January 30, 1996. GCI is allowed to construct and operate up to 50 earth stations for a period of two years.

[12]GCI began service in Anchorage in 1982 after a multi-year regulatory battle with Alascom just to enter the market. Alascom said that GCI would never expand beyond Anchorage. As GCI expanded to each community, Alascom would state that GCI would not expand any further because the remaining markets were uneconomic. However, GCI continued to expand and now serves over 90% of the access lines in the state. As GCI expanded, Alascom would upgrade their facilities in each community from analog to digital and begin to offer customer service in locations where customer's had rarely seen an Alascom representative. The same claims about competitive expansion and low margin markets are now being made by the incumbent LECs. The same results can occur. Competition should not only be allowed, but wholeheartedly encouraged in rural areas so that consumers can benefit.

[13]Carriers should not be allowed to expand the subsidy system. United Utilities, Inc. (UUI) proposed to put interexchange services into the universal service. UUI proposed to provide "local service" to four remote locations using satellite technology. The four locations, three of which are sites of a multi-million dollar fish hatchery, are separated by up to 30 miles and would be connected, via satellite, through facilities in Anchorage, 40 miles away. UUI proposed to categorize all the equipment from each hatchery, over the satellite, and back to Anchorage as "local loop" eligible for USF support. The Audits and Accounting Division of the Commission has determined that the equipment outlined by UUI should be classified in Category 4.23, All Other Interexchange Circuit Equipment. See, Letter from Kenneth P. Moran, Chief, Audit and Accounting Division to William K. Keane, dated July 15, 1994. UUI has asked the Division to reconsider its ruling. The Alaska Public Utilities Commission (APUC) determined that the service proposed by UUI would be interexchange service. The APUC also stated that the four locations do not constitute a community because they are not in the same location under the same government, they are separated by as much as 40 miles and that commercial enterprises do not constitute a community. The APUC further stated that universal service is "not void of limitations." They concurred with the general guidelines previously established in Alaska that subsidized telecommunications services should occur in communities with a minimum population of 25. See, Application of United Utilities, Inc., APUC Docket U-94-1, Order No. 8, dated September 11, 1995. Any definition for universal service must not be overly inclusive and should not include interexchange costs and other costs that should not be subsidized by USF.

[14]Of course, interexchange carriers pay access charges, which include carrier common line rates which include LEC subsidies. However, interexchange services are not subsidized today.

[15]Section 222(e).

[16]Section 254(c)(2).

[17]The state commissions could adopt such standards. However, the standards should not be a barrier to entry.

[18]This should include customers such as interexchange carriers and all interconnectors.

[19]The Commission could use proxies for Tier 1 LECs and actual costs for other LECs. However, once the initial level of support was determined from the incumbent LECs actual costs, the link between costs and subsidy must be broken.

[20]GCI proposes below penalties for not complying with the Commission's service requirements.

[21]The Commission should not require new entrants to report costs to receive subsidy. This would continue the current system with its warped incentive structure. The relationship between costs and subsidy must be broken.

[22]The Commission should not bulk bill DEM for small telephone companies. Any bulk billing guarantees that the incumbent LEC will be made whole. This is inconsistent with a competitive marketplace.

[23]This could be accomplished in one of several ways. For example, the costs of the incumbent carrier might be $30 per month; but with USF existing bills are $20, a rate which is deemed an acceptable local exchange rate and which becomes the maximum "target" rate. The difference between the $30 cost and the $20 rate becomes the amount of credit, $10. A competitive carrier could enter the market and, with a lower cost structure, be able to offer consumers service at a lower rate. For example, the new carrier might be able to offer service for a net bill of $19. The consumers who choose the competitive carrier would be getting service for $1 less than the subsidized rate that was deemed acceptable when the program began. If the competitive carrier gains a market share of at least 25%, that would indicate consumer acceptance of the competitive carrier. At that point, the amount of the credit should decrease to $9, which is the difference between the competitors rate and the acceptable rate of $20. If the rate of any competitor with 25% market share remained at $19 (or any amount below the $20 target) for an additional six months, then the credit would again be reduced by the difference between the $19 net amount and the $20 target. The process could continue until the lowest competitive rate is achieved. Alternatively, the Commission could set time lines for the reductions to occur, weather or not new entrants received 25% market share.

[24]This system should be supported by the rural telephone companies. They get their subsidies set at today's actual costs. However, going forward they are subject to competition. The Commission cannot continue to believe that the consumer and the incumbent carrier's position are the same, even through the rural telephone companies assert they are the same.

[25]The Commission should also impose penalties on all recipients based on their provisioning of service. For example, if a carrier did not provide single party service throughout its own service area it would be penalized and only receive 80% of its universal service funds. This will encourage compliance by carriers who do not currently face competition from other providers.

[26]GCI supports a move to costs based on wire centers as proposed by many incumbent LECs. However, most non-tier 1 LECS argue that they should not be forced to disaggregate their costs down to the wire center, but should be allowed to do so at their discretion, i.e., when competitors enter their markets. The Commission should require all LECs, including non-tier 1 LECs, to adopt a wire center approach.

[27]Id. New entrants should be allowed to determine their own study area and should not be required to match the study area of the incumbent LEC. This would interfere with the practical business decisions of the new entrant.

[28]Originally, the independent LECs opposed the equal access requirements.

[29]Also, Congress did not support abandonment of the principals outlined in 251(b). Congress allowed for suspensions and modifications of the requirements of 251(b) and (c) for telephone companies with less than 2% of the access lines in the country, i.e., everyone except the BOCs and GTE. These suspensions or modifications of the requirements are mainly to allow for more time to comply with the standards so as to avoid a significant adverse impact on users generally, to avoid imposing a requirement that is unduly economically burdensome or to avoid imposing a requirement that is technically infeasible and is consistent with the public interest. A situation might arise when the LEC is waiting for a manufacturer's upgrade of a switch to perform a function such as number portability. However, the Commission could impose alternative obligations such as RFC or DID in the interim.

[30]Section 254(h)(1).

[31]The carrier and eligible entity should provide information to the Commission prior to the trial occurring if the carrier expects reimbursement from the USF. Other parties should be allowed to comment on the proposal.

[32]A free grab of everything in the kitchen sink should not be authorized.