[2] FCC 96-93, released March 8, 1996.

[3] Telecommunications Act of 1996 (the "1996 Act"), Pub. L. No. 104-104, 110 Stat. 56, [[section]] 101(a) (1996) (adding new Section 254 to be codified at 47 U.S.C. [[section]] 254).

[4] 27 LPRA [[section]] 403(a). PRTC is wholly owned by the Puerto Rico Telephone Authority ("PRTA"), a governmental instrumentality of the Commonwealth of Puerto Rico. Law Number 25 of the Commonwealth of Puerto Rico, approved May 6, 1974, established PRTA, a government corporation, and provided for the purchase of PRTC by PRTA. 27 LPRA [[section]] 404.

[5] The penetration rates for Puerto Rico and the U.S. are for December and July 1995, respectively. Telephone Subscribership in the United States, FCC CCB Industry Analysis Division at 14 (Dec. 1995). Only 3 states have penetration rates below 90%: Mississippi, 88.6%; New Mexico, 88.3%; and South Carolina 89.4%. Monitoring Report, CC Docket No. 87-339 (May 1995) Table 1.2 at 27 ("1995 Monitoring Report").

[6] PRTC has two study areas -- one with approximately 160,000 lines, the other with approximately 1,044,700 lines. (The smaller study area includes the municipalities of Aibonito, Aguas Buenas, Caguas, Cayey, Cidra, Culebra, Guaynabo, Gurabo, Juncos, Las Piedras, San Lorenzo, and Vieques. The larger study area includes all other municipalities in Puerto Rico.) In December 1995, penetration varied by exchange area from 57% to 90% in the smaller area and from 46% to 90% in the larger study area.

PRTC has two study areas due to the historical development of telephone service in Puerto Rico. In the 1920s, the Commonwealth of Puerto Rico formed a telephone company to provide telephone service to the interior of the island because the independent telephone company was not doing so. The Commonwealth did not acquire the independent telephone company which provided telephone service to the remainder of the island (now PRTC) until 1974.

[7] Not only are rates stable but PRTC absorbs 60cents of the monthly subscriber line charge for each customer.

[8] 1995 Monitoring Report at 14.

[9] Preparation for Addressing Universal Service Issues: A Review of Current Interstate Support Mechanisms, Common Carrier Bureau (1996) at 16.

[10] Telephone Subscribership in the United States, FCC CCB Industry Analysis Division at 24 (Dec. 1995).

[11] H.R. Rep. No. 458, 104th Cong., 2d Sess. at 131 (1996).

[12] 1990 Census of Population and Housing, Summary Social, Economic, and Housing Characteristics, PUERTO RICO, 1990 CPH-5-53 (1993) at 191.

[13] 1990 Census Summary of Social, Economic, and Housing Characteristics, UNITED STATES, 1990 CPH-5-1 (1992) at 228.

[14] 1995 Monitoring Report at 24.

[15] Preparation for Addressing Universal Service Issues: A Review of Current Interstate Support Mechanisms, Common Carrier Bureau (1996) at 16.

[16] There are a number of reasons why loop cost is high in Puerto Rico:

(1) a number of households that do not take service are passed by PRTC facilities (penetration is below 50% in some exchange areas, see Exhibit A); thus, PRTC generally cannot take full advantage of economies of scale associated with the higher penetration rates of similar size LECs;

(2) the topography of Puerto Rico is unusually rugged (a mountain chain runs nearly the entire length of the interior of the island, with peaks ranging from 1500 to greater than 3500 feet);

(3) the climate in Puerto Rico is especially wet and humid;

(4) the transportation cost for goods delivered to Puerto Rico generally is higher than for goods delivered to the U.S. mainland because (a) Puerto Rico is located in the Caribbean (1,000 air miles from Miami), and (b) U.S. law requires that goods shipped between the U.S. and Puerto Rico be carried only on U.S. flag ships which generally cost more than non-U.S. flag ships; and

(5) certain goods imported to Puerto Rico, including most telephone equipment, are subject to a 6.6% excise tax placed on the importation of goods.

[17] Eligibility would be easy to determine since the U.S. Department of Commerce, Bureau of the Census, annually establishes poverty line criteria based on family size. The preliminary estimate of the poverty threshold for a family of 3 in 1995, for example, is $12,156. Preliminary Estimates of Poverty Thresholds in 1995, U.S. Department of Commerce, Bureau of the Census (Feb. 1, 1996).

[18] The U.S. average monthly residential rate in 1994 was $13.34 for unlimited local calling (exclusive of the subscriber line charge, taxes and touch-tone charge). See Statistics of Communications Common Carriers at 340, Table 8.4, Average Monthly Residential Rates 1994 (1994/1995 ed.).

[19] Figures used in the example have been selected based upon the average monthly residential rate and a subsidy amount that would reduce the rate sufficiently to attract low-income subscribers and keep them on the network. PRTC uses these particular figures to initiate discussion of its proposal and suggests that discussion should include a more precise determination of appropriate rate and subsidy figures.

[20] This number is derived by finding the estimated annual increase in revenue requirement per additional local loop. See 1995 Monitoring Report, Tables 3.5 at 84 (Unseparated NTS Revenue Requirement) and Table 3.6 at 85 (Number of Loops).

Year-end Year-end Increase

1992 1993 (1993-1992)

1. Unseparated NTS

Revenue Requirement $ 34,069,278,000 $ 36,002,857,000 $ 1,933,579,000

2. Number of Loops 143,492,443 148,190,420 4,697,977

3. Cost per Loop (1/2) $ 237.43 $ 242.95 $ 411.58

The estimated annual cost per incremental loop installed during 1993 is the quotient of the annual increase in Unseparated NTS Revenue Requirement (from 1992 to 1993) divided by the annual increase in Number of Loops (from 1992-1993).

[21] See supra n.19.

[22] PRTC, through significant investment in network expansion, is increasing penetration at approximately 4% per year.

[23] See 47 U.S.C. [[section]] 151 (the Commission should "make available, so far as possible, to all the people of the United States without discrimination on the basis of race, color, religion, national origin, or sex a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges . . . .").