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
To the Joint Board:
JOINT REPLY COMMENTS OF
NATIONAL SCHOOL BOARDS ASSOCIATION, AMERICAN LIBRARY
ASSOCIATION, INCLUDING THE AMERICAN ASSOCIATION OF SCHOOL
LIBRARIANS, A DIVISION OF ALA, NATIONAL EDUCATION ASSOCIATION,
CONSORTIUM FOR SCHOOL NETWORKING, COUNCIL OF CHIEF STATE SCHOOL
OFFICERS, EDUCATION LEGISLATIVE SERVICES, INC.,
NATIONAL ASSOCIATION OF INDEPENDENT SCHOOLS, NATIONAL
ASSOCIATION OF SECONDARY SCHOOL PRINCIPALS, AMERICAN FEDERATION
OF TEACHERS, AFL-CIO, ASSOCIATION FOR THE ADVANCEMENT OF
COMPUTING IN EDUCATION, NATIONAL ASSOCIATION OF ELEMENTARY
SCHOOL PRINCIPALS, AMERICAN ASSOCIATION OF SCHOOL
ADMINISTRATORS, AMERICAN PSYCHOLOGICAL ASSOCIATION,
ASSOCIATION FOR SUPERVISION AND CURRICULUM DEVELOPMENT,
COUNCIL FOR AMERICAN PRIVATE EDUCATION,
COUNCIL FOR EDUCATIONAL DEVELOPMENT AND RESEARCH,
GLOBAL VILLAGE SCHOOLS INSTITUTE,
NATIONAL ASSOCIATION OF STATE BOARDS
OF EDUCATION, NATIONAL PARENTS AND TEACHERS ASSOCIATION,
UNITED STATES DISTANCE LEARNING ASSOCIATION,
AND CENTER FOR MEDIA EDUCATION
Summary
The joint commenters, representing a coalition of educational
and library associations (the "Coalition"), urge Joint Board to
act boldly and to resist narrow interpretations of the Telecommunications
Act of 1996 (the "Act").
The Joint Board and the Commission should reject the comments
of those parties that state that further study is needed before
services can be provided to schools and libraries at a discount.
The statute neither contemplates nor permits the Commission or
the Joint Board to direct universal service issues to a collateral
proceeding. In addition, the record already adequately describes
the services that should be provided at a discount, and includes
a rationale for including those services. Besides the Coalition's
opening comments, many individual school districts and library
associations have submitted material explaining their current
activities and future needs. Therefore, the Joint Board should
make initial recommendations so that the introduction of special
services can begin as soon as possible.
We are also concerned because many of the commenters appear
to have misconstrued the statute and the significance of the term
"universal service." Under those other proposals, the Joint Board
and the Commission would limit the amount of the universal service
fund to the total cost of implementation of a particular network
model and would develop a method of apportioning that amount among
the states, similar to a block grant or voucher program. Schools
would only get funding if they submitted plans that met criteria
established by the Commission and implemented by state-level administrative
bodies, and even then only if there were funding available.
Section 254(h), however, does not permit such an approach, for
three reasons. First, Section 254 establishes an obligation to
provide "universal service," not service to a selected group of
schools and libraries. Second, Section 254(h)(1)(B) requires all
telecommunications carriers to provide discounted services to
schools and libraries "upon a bona fide request . . ." Some commenters
have attempted to interpret "bona fide," to mean "qualified,"
when it actually means merely "good faith" or "genuine." And third,
Section 254(h)(1(B) of the Act states that payment is to be made
directly to the carrier out of the universal service fund, not
to the institution requesting service. Nowhere does the Act mention
the use of a grant process to decide which entities will receive
funding or the issuance of vouchers entitling a school district
to a certain dollar value of service.
We strongly object to those proposals that would require state-level
review or compliance with a state-level plan. Such proposals would
create a new cumbersome bureaucracy to do what local procurement
procedures can do perfectly adequately; they would either inject
the Commission and state public utility commissions directly into
educational policy or constitute an unconstitutional delegation
of federal authority; and they would impose new staffing requirements
on schools and libraries, since each school and library district
would have to prepare and update its application. Finally, such
proposals would benefit only those schools and libraries that
least need the benefits provided by the act, since affluent and
many high density areas would be better-positioned to comply with
all of the additional requirements of the state plans.
The Coalition's proposal, on the other hand, is superior because
it will promote competition and is easy to administer.
Our proposal promotes competition in several ways. First, by
allowing any service provider to bid for the right to serve a
particular school or library district and ensuring that the winning
bidder's costs will be recovered, the Coalition's plan will promote
the growth of alternative service providers. These providers will
then be able to use their new school and library-based networks
to expand service to nearby areas, in competition with incumbent
providers.
Second, permitting aggregation on the broadest possible basis
will also promote competition. Allowing pooling of demand through
liberal aggregation rules will make the provision of advanced
services to remote areas more economically feasible, thus expanding
the reach of the serving providers, and encouraging competitors
to bid.
Third, the Coalition's proposal enhances competition by making
all services available at discounted rates. This will increase
the range of service providers who can provide services and permit
the rise of niche providers, who will compete with each other
and with larger providers.
The Coalition's proposal also offers ease of administration.
We propose that if a service is commercially available anywhere
in the country, then there should be a rebuttable presumption
that a school or library is eligible for that service at a discount.
This approach would relieve the Joint Board and the regulators
of the obligation of determining in advance what special services
should be made available. Regulators would only have to make that
determination with respect to a particular service in rare circumstances
when the presumption was challenged.
In addition, the Coalition proposes no new requirements for
local certification or state-level review. The existing contracting
procedures used by the purchasing entity should be the only procedures
required to make a request for service.
Finally, the cost of the Coalition's proposal is reasonable
and within the range that Congress anticipated. The estimated
cost of the proposal is on the same order of magnitude as the
total cost of the current universal service mechanism.
The Joint Board should recommend that the Commission adopt rules
in a timely manner that ensure that all eligible schools and libraries
have access to the broadest permissible range of services, at
prices that will deliver the benefits of advanced telecommunications
technology nationwide.
Table of Contents
Summary
Introduction
I. THE JOINT BOARD SHOULD PROMPTLY IMPLEMENT THE
INTENT OF CONGRESS TO PROVIDE FOR THE DELIVERY OF MODERN TELECOMMUNICATIONS
TO SCHOOLS AND LIBRARIES.
- Further Study To Identify Services Subject to
Discounted Rates Is Unnecessary.
- Congress Called for the Joint Board To Make
Recommendations and the FCC To Adopt Regulations in this Proceeding.
- A Number of Commenters Have Identified Services
To Be Provided to Schools and Libraries, Indicating that the
Joint Board and the Commission Will Have Ample Information on
which To Base a Decision.
II. THE TELECOMMUNICATIONS ACT ESTABLISHED AN
OBLIGATION FOR CARRIERS TO PROVIDE AFFORDABLE UNIVERSAL SERVICE
TO EVERY SCHOOL AND LIBRARY ON DEMAND, NOT A BLOCK GRANT OR VOUCHER
PROGRAM THAT WOULD ONLY BENEFIT SELECTED INSTITUTIONS.
- Section 254(h)(1)(B) Requires Carriers To Provide
Services Directly to all Schools and Libraries at Discounted
Rates, Provides for Payments only to Carriers, and Does Not
Permit the Use of a Grant-Type Mechanism.
- The Act Does Not Contemplate State-Level Review
or Require Compliance with Any State-Level Plan
- The Proposals of USTA and Some Local Exchange
Carriers Would Benefit only Those Schools and Libraries that
Least Need the Benefits Provided by the Act.
III. THE COALITION'S PROPOSAL WILL ENCOURAGE
COMPETITION.
- By Providing for the Solicitation of Bids
from All Telecommunications Carriers, the Coalition's Proposal
Will Encourage Participation by Service Providers other than
the LEC.
- Permitting Aggregation of Service on the Broadest
Basis Possible Will also Encourage Competition by Making It
Possible To Pool Demand and Attract Outside Carriers.
- The Coalition's Proposal Also Encourages Competition
by Allowing Each School or Library District To Select Its Own
Provider if It Chooses, Rather than Being Tied to a Larger Carrier-Based
Service Area.
- The Coalition's Proposal Enhances Competition
by Making All Services Available at Discounted Rates.
IV. THE COALITION'S PROPOSAL IS SIMPLE TO ADMINISTER.
- By Presuming that a Service Is Eligible for
a Discount if It Is Commercially Available, the Coalition's
Proposal Relieves the Regulatory Body of the Burden of Deciding
What Services Should Be Covered.
- The Coalition's Proposal Requires No Special
Certification Procedure or New Application Requirement, and
Relies Entirely on the Contracting Procedures Already in Place
in Each Jurisdiction.
- The 95% Affordability Price Point Can Be Calculated
Easily, and Regulatory Agencies Are Already Familiar with the
Concept of TSLRIC.
V. THE COST OF THE COALITION'S PROPOSAL IS REASONABLE
AND COMPARABLE TO THE CURRENT UNIVERSAL SERVICE PLAN.
Conclusion
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 )
)
To the Joint Board:
JOINT REPLY COMMENTS OF
NATIONAL SCHOOL BOARDS ASSOCIATION, AMERICAN LIBRARY
ASSOCIATION, INCLUDING THE AMERICAN ASSOCIATION OF SCHOOL
LIBRARIANS, A DIVISION OF ALA, NATIONAL EDUCATION ASSOCIATION,
CONSORTIUM FOR SCHOOL NETWORKING, COUNCIL OF CHIEF STATE SCHOOL
OFFICERS, EDUCATION LEGISLATIVE SERVICES, INC.,
NATIONAL ASSOCIATION OF INDEPENDENT SCHOOLS, NATIONAL
ASSOCIATION OF SECONDARY SCHOOL PRINCIPALS, AMERICAN FEDERATION
OF TEACHERS, AFL-CIO, ASSOCIATION FOR THE ADVANCEMENT OF
COMPUTING IN EDUCATION, NATIONAL ASSOCIATION OF ELEMENTARY
SCHOOL PRINCIPALS, AMERICAN ASSOCIATION OF SCHOOL
ADMINISTRATORS, AMERICAN PSYCHOLOGICAL ASSOCIATION,
ASSOCIATION FOR SUPERVISION AND CURRICULUM DEVELOPMENT,
COUNCIL FOR AMERICAN PRIVATE EDUCATION,
COUNCIL FOR EDUCATIONAL DEVELOPMENT AND RESEARCH,
GLOBAL VILLAGE SCHOOLS INSTITUTE,
NATIONAL ASSOCIATION OF STATE BOARDS
OF EDUCATION, NATIONAL PARENTS AND TEACHERS ASSOCIATION,
UNITED STATES DISTANCE LEARNING ASSOCIATION,
AND CENTER FOR MEDIA EDUCATION
Introduction
The joint commenters, representing a coalition of educational
and library associations (the "Coalition"), again urge the Joint
Board to act boldly, by recommending that the Commission implement
the universal service provisions of the Telecommunications Act
of 1996 (the "Act") quickly and aggressively. Many in the telecommunications
industry would have the Joint Board find nothing in Section 254(h)
but administrative burden and expense. The Board must resist narrow
and pessimistic interpretations and ensure that the intent of
Congress to provide affordable access to telecommunications for
all schools and libraries is met. We urge the Joint Board to carefully
consider the comments of Apple Computer Company, which largely
conform to our own proposal and illustrate the kind of approach
Congress had in mind.
I. THE JOINT BOARD SHOULD PROMPTLY IMPLEMENT THE
INTENT OF CONGRESS TO PROVIDE FOR THE DELIVERY OF MODERN TELECOMMUNICATIONS
TO SCHOOLS AND LIBRARIES.
The Coalition believes that it is time to act. Many studies
have been done on the need for modern telecommunications in schools
and libraries, and the time for study has passed. "No one disputes
the benefits of providing special services to our Nation's classrooms
and libraries." Comments
of the United States Telephone Association ("USTA") at 6.
Congress recognized these facts in adopting the Snowe- Rockefeller-Exon-Kerrey
Amendment and it is now up to the Joint Board and the Commission
to implement the intent of Congress as quickly as possible.
- Further Study To Identify Services Subject
to Discounted Rates Is Unnecessary.
We are troubled by the comments of a number of parties, which
state that further study is needed regarding the services to be
provided to schools and libraries at a discount. For example,
NYNEX calls for an "Education Telecommunications Council" which
would develop proposals for schools to obtain access to new technologies,
and assist the Commission in developing an "education vision"
of the telecommunications services schools and libraries should
have. Comments
of NYNEX at 20-21. Time Warner Communications Holdings, Inc.
states that the question of which services should be provided
should be addressed in a separate proceeding. Comments
of Time Warner at 16. And Sprint Corporation argues that "it
is premature to rule on what additional or advanced services should
be supported." Comments
of Sprint at 23. Other commenters have made similar statements,
all of which add up to substantial delays in implementation.
Further delay is unwarranted. The Coalition's proposal already
adequately describes the services that should be provided at
a discount, and includes a rationale for including those services.
The Joint Board may propose a different approach to the Commission,
but that does not mean it does not have the information it needs.
For example, the KickStart Report attached to our original comments
and cited approvingly by Bell Atlantic and several other commenters
provides much relevant information. And many individual school
districts and library associations have submitted material explaining
their current activities and future needs. We are confident
that the Joint Board has an ample record on which to proceed.
- Congress Called for the Joint Board To Make
Recommendations and the FCC To Adopt Regulations Promptly and
in this Proceeding.
The statutory text simply forecloses the use of a separate proceeding.
Congress directed the Joint Board to make its recommendations
within nine months after the enactment of the 1996 Act, and specifically
stated that "[t]he Commission shall initiate a single proceeding
to implement" the Joint Board's recommendations, to be completed
within 15 months after enactment of the 1996 Act. Section
254(a)(2) (emphasis added). The law allows no time for the
Joint Board to enter into extended deliberations over the definition
of "special services," and does not allow the Commission to bifurcate
the proceeding or delegate part of its authority to a separate
standard-setting body.
In addition, Congress did not order a detailed study of the
benefits of technology or what capabilities schools and libraries
should have. What Congress did order is the implementation of
a plan to deliver modern telecommunications services to schools
and libraries everywhere in the country. Therefore, although
Congress expects the matter to be reviewed periodically because
universal service is defined as an evolving level of service,
the Joint Board should make initial recommendations so that
the introduction of special services can begin as soon as possible.
If the Commission establishes a separate body to make recommendations,
or splits the issue of what services to provide off into a separate
proceeding, the implementation of the intent of Congress will
be delayed for years.
Thus, there is no justification in law or fact for any further
delay.
- A Number of Commenters Have Identified Services
To Be Provided to Schools and Libraries, Indicating that the
Joint Board and the Commission Will Have Ample Information on
which To Base a Decision.
In addition to the Coalition, several commenters have identified
particular services that should be made available to schools and
libraries. For example, US West proposes that schools and libraries
be provided with 56/64 Kbps circuits and toll-free access to an
Internet service provider. Comments
of US West at 22-23. BellSouth recommends including voice-grade
circuits connecting schools and libraries to the public switched
telephone network, and up to 1.544 Mbps circuits for voice, data,
video and imaging services. Comments
of BellSouth at 19. We support the provision of all of these
services to schools and libraries at a discount, although we do
not believe either proposal goes far enough. For more comprehensive
lists of services, see the comments
of the Wisconsin Department of Public Instruction at p. 1,
and the comments
of Apple Computer Company at p. 4. In any event, the fundamental
point on which we agree with US West and BellSouth is that further
study is not necessary: The Joint Board should act based on the
record before it.
II. THE TELECOMMUNICATIONS ACT ESTABLISHED AN OBLIGATION
FOR CARRIERS TO PROVIDE AFFORDABLE UNIVERSAL SERVICE TO EVERY SCHOOL
AND LIBRARY ON DEMAND, NOT A BLOCK GRANT OR VOUCHER PROGRAM THAT
WOULD ONLY BENEFIT SELECTED INSTITUTIONS.
Many of the commenters appear to have misconstrued the statute
and the significance of the term "universal service." The traditional
goal of universal service has been to try to provide every American
who wanted it with residential telephone service at a just and
reasonable rate. In other words, "universal" means "available
to all." Section 254 of the Act continues this tradition. First,
it expands the definition of universal service in the residential
context to allow the Commission to include certain new services
in the group of subsidized core residential services that will
now constitute "universal service;" and second, it extends the
concept of universal service to include schools and libraries,
including special services designated by the Commission. Congress
clearly meant to provide special services to every school upon
request.
The co-sponsors of Section 254(h), Senators Snowe, Rockefeller,
Exon and Kerrey, have made this point clear in their letter to
Chairman Hundt of April 24, 1996 (attached as Exhibit A): "To
fulfill the intent of the law, every school and library submitting
a bona fide request deserves a significant, real, and meaningful
discount that ensures classrooms and libraries access to the information
superhighway." (emphasis added).
- Section 254(h)(1)(B) Requires Carriers To
Provide Services Directly to all Schools and Libraries at Discounted
Rates, Provides for Payments only to Carriers, and Does Not
Permit the Use of a Grant-Type Mechanism.
USTA has proposed a scheme under which the Joint Board and the
Commission would limit the amount of the universal service fund
to the total cost of implementation of a particular network model,
and develop a method of apportioning that amount among the states.
Comments
of USTA at 6-10. Schools would only get funding if they submitted
plans that met criteria established by the Commission and implemented
by state-level administrative bodies, and even then only if there
were funding available. Once the state's funding allocation had
been reached, no further funding would available. In other words,
USTA has proposed something very much like a block grant. Several
carriers, including NYNEX, BellSouth and GTE, have proposed similar
plans.
Section 254(h), however, does not permit such an approach,
for three reasons. First, as discussed above, Section 254 establishes
an obligation to provide "universal service," not "selective
service." By including schools and libraries in a new "universal
service" mechanism, Congress implicitly intended the benefit
to be available to all, not only to those who get their applications
in before the money runs out.
Second, Section 254(h)(1)(B) requires all telecommunications
carriers to provide discounted services to schools and libraries
"upon a bona fide request . . ." As the letter from the co-sponsors
of Section 254(h) says, every bona fide request must be honored.
By interpreting the term "bona fide," to mean "qualified," USTA
and others are importing a new concept into the Act, which was
not intended by the drafters. "Bona fide" actually means merely
"good faith" or "genuine," and the Act does not provide for
or contemplate a complicated process for determining the good
faith or genuineness of a request. Therefore, the Act gives
the Commission no authority to establish complicated certification
or application requirements that would limit the eligibility
of a school or library for discounted rates.
Third, the Act states that payment is to be made directly
to the carrier out of the universal service fund, not to the
institution requesting service. Section 254(h)(1)(B). Nowhere
does the Act mention the use of a grant process to decide which
entities will receive funding, or the issuance of vouchers entitling
a school district to a certain dollar value of service. The
USTA proposal calls for a state administrator to "disburs[e]
the appropriate funding to each school and library . . ." Comments
of USTA at 9. This is clearly not permitted by the law.
NYNEX attempts to avoid this problem by giving each school or
library what amounts to a credit or voucher, rather than a direct
cash payment. Comments
of NYNEX at 22, n. 38. This mechanism amounts to a grant
to the user, however, even if it superficially complies with
the terms of Section 254(h)(1)(B) by transferring cash only
to the carrier. Any such proposal is directly contrary to the
intent of the Act and is not justified by the language of the
Act.
- The Act Does Not Contemplate State-Level
Review or Require Compliance with Any State-Level Plan.
The USTA and related proposals would impose an additional level
of bureaucratic review that is unnecessary and neither provided
for nor contemplated by the Act. Further, such interposition of
state educational authorities would be an unconstitutional delegation
of Federal authority unauthorized either by Section 410(a) of
the 1934 Act or by Section 254. As discussed above, universal
service is supposed to be a means of delivering certain services
to the parties that need those services, and the Act clearly contemplates
that services will be made available to schools and libraries
upon request. Despite this, USTA and others would require any
school that wants services to first submit an application to a
state-level entity. Comments
of USTA at 8-9. That entity would review the application and
determine whether it met certain requirements -- only if it did
would the school or library be permitted to purchase discounted
services.
We object to this proposal for three reasons. First, it would
create a new cumbersome bureaucracy to do what local procurement
procedures can do perfectly adequately. Second, it would inject
the Commission and state public utility commissions directly
into educational policy, since it would be the Commission that
would have to decide what state-level entities would be permitted
to review the applications. The Commission has no jurisdiction
over such matters, and has neither the authority nor the expertise
to decide who should approve grants or on what criteria they
should be based. Neither do the state telecommunications regulators.
Third, each school and library district would have to either
hire new staff or impose new burdens on existing staff to prepare
the new applications. This process would inevitably become a
new permanent requirement, as plans would presumably have to
be updated to ensure continued funding.
We support the comments
of the Idaho Public Utilities Commission, at pp. 12 and
17, which point out a number of the flaws of such a plan.
- The Proposals of USTA and Some Local Exchange
Carriers Would Benefit only Those Schools and Libraries that
Least Need the Benefits Provided by the Act.
The flawed nature of the USTA and like proposals becomes obvious
when one considers their likely effect on schools and libraries
in rural, high-cost and poor areas. Many such districts must spend
disproportionate amounts of money on access to telecommunications,
making it more difficult for them to acquire hardware and other
facilities needed to maintain a high level of technology. Other
districts, particularly in suburban areas, may have greater funding
available for hardware, training and the like because their telecommunications
services costs are generally lower. In addition, more affluent
districts are able to afford higher levels of technology because
their overall funding is generally higher.
The USTA plan cleverly notes that there are seven items needed
to provide telecommunications services in schools and libraries:
connectivity, inside wire, hardware, software, training, removal
of cultural and social barriers, and ongoing operations support.
USTA then proposes that its members pay only to support telecommunications
services, and goes on to propose that under the state review
process schools and libraries be required to submit a "comprehensive
plan" showing how they will cover the costs of all seven components.
Comments
of USTA at 8.
Under USTA's proposal, therefore, affluent and suburban areas
will benefit disproportionately, just as they do in the current
system. As a rule, those districts will be able to demonstrate
that they have complied with whatever funding plan would be
established by the Joint Board and the Commission, because they
are more likely to have invested in hardware, software and training.
Thus, they will be more likely to qualify for a grant to pay
for connectivity. And they are more likely to be able to afford
to put together an attractive grant proposal or plan that will
catch the attention of the state administrative body making
the grants.
Finally, a state approval requirement injects state politics
into what ought to be a local procurement decision. We fear
that the USTA plan would degenerate into a contest for political
favors, with funding going only to those localities that had
particular influence with the approving body. It seems unlikely,
in most cases, that this would lead to support going to those
communities that most needed it.
Thus, the proposal of USTA and similar plans will not provide
universal service, and will not benefit the institutions that
the Act was intended to help.
III. THE COALITION'S PROPOSAL WILL ENCOURAGE COMPETITION.
The Coalition's proposal not only meets the Congressional goal
of ensuring that all schools and libraries that want access to
modern telecommunications services are able to obtain access,
but it also meets the goal of promoting competition for local
exchange service and other services that would be covered under
the definition of special services.
- By Providing for the Solicitation of Bids
from All Telecommunications Carriers, the Coalition's Proposal
Will Encourage Participation by Service Providers other than
the LEC.
Under the Coalition's proposal, any school or library district
would be permitted to issue a request for proposals, requesting
competitive bids for one or more telecommunications services.
Any entity willing to provide such services would be entitled
to bid. Presumably, the provider of the lowest cost technology
for a given area would be able to underbid the other service providers
and win the contract. Because service providers will be guaranteed
to recover their costs under either the benchmark method or the
TSLRIC approach, service providers will have an incentive to bid
at their costs. Thus, new service providers will be encouraged
to compete against the local exchange carriers for business.
As one example, the costs of asbestos removal and installation
of internal networks in older buildings may make wireless technology
a competitive alternative in the educational market. Once in
place, such providers would have a base from which to expand
their services to surrounding areas in competition with wireline
carriers.
As another example, the National Cable Television Association
("NCTA") reports that 73% of schools and 81% of students currently
receive free cable in the classroom. Comments
of NCTA at n. 12. In other words, the vast majority of schools
are already served by a one-way broadband network. Cable operators
may be able to provide two-way services by installing cable
modems and routing equipment to connect their school networks
to the public switched network. A local exchange carrier, on
the other hand, would have to install not only a broadband connection
to the school but miles of internal wiring to compete with a
cable operator. If cable operators can convert their networks
at a low enough cost, they may be able to underbid the LEC in
competing for school and library business, because they will
only have to recover the cost of the conversion, and not of
the entire network.
Cable operators should not, however, receive support or compensation
for free services they are already required to provide to schools
and libraries under their franchise agreements with local governments.
See comments
of NCTA at 18 (stating that any discount off prevailing
market price meets the Act's requirements, apparently even if
free services are already being provided). Indeed, we believe
that they would have an incentive not to try to recover those
costs in an effort to underbid competitors for the service.
If this proves not to be the case, however, cable operators
should only be compensated for the additional investment required
to convert their school-based networks to switched, two-way
networks.
As far as the LEC's are concerned, the Coalition's proposal
represents an opportunity to increase their market share. If
they are able to serve a school or library district at the lowest
cost, they will be providing additional services to entities
that are currently not being served at all. Furthermore, by
using schools and libraries to introduce new services, they
will create demand for these services by others in the community.
In short, the Coalition's proposal promises to create a huge
new customer base that is not served by any entrenched monopoly
at a time when new competitors are poised and looking for new
markets to enter. There is every reason to believe that there
will be fierce competition for this new market, if the Commission
adopts the right set of rules. On the other hand, if institutions
have a limited range of services from which to choose and are
forced into complicated bureaucratic selection processes, they
are more likely to make conservative choices to satisfy grant
reviewers, and those choices may not always be economically
rational.
- Permitting Aggregation of Service on the
Broadest Basis Possible Will also Encourage Competition by Making
It Possible To Pool Demand and Attract Outside Carriers.
Many commenters agree with the proposition that aggregation should
be permitted on a broad geographic basis. We also believe, as
stated by Apple Computer, Inc., that aggregation should be permitted
among different types of entities. Comments
of Apple at 6-7. As noted by the Washington Utilities and
Transportation Commission ("WUTC"), the use of demand aggregation
and partnerships makes the provision of advanced services to remote
areas more economically feasible. Comments
of WUTC at 17.
While public institutional telecommunications users should
not be permitted to sell or resell capacity or services, there
are many instances in which aggregation with noneligible users
should still be permitted. For instance, if a library and school
district combine to establish a local educational network, the
utility of such a network would be greatly enhanced if local
government agencies or institutions of higher education had
access to it. We believe that allowing an eligible entity to
recover the costs associated with such shared use of a network
should not be considered the sale or resale of services or capacity
so long as the network is predominantly used by public institutional
telecommunications users for educational purposes.
We also agree with WUTC's statement that interpreting Section
254(h)(3) too narrowly "may limit or even impose an outright
prohibition on many demand aggregation arrangements." Comments
of WUTC at 15. The comments of the Mendocino Unified School
District offer an excellent example of how demand aggregation
can be used to deliver services to all segments of a community
in a remote area. Forcing schools and libraries to operate separate
networks may make it impossible to bring together enough users
to make any network viable. The statute should not be construed
to require any entity eligible for special services to forego
the benefits of those services. Any small benefit to the private
sector should be considered as more than offset by the benefit
to the educational community. Comments
of the Idaho Public Service Commission at 11, 13.
Finally, we support the Missouri Public Service Commission's
("MoPSC") proposal to define the term "library" to include community
information networks, and to treat any consortium that includes
a rural school as a "rural" entity. Comments
of MoPSC at 15, 20.
- The Coalition's Proposal Also Encourages
Competition by Allowing Each School or Library District To Select
Its Own Provider if It Chooses, Rather than Being Tied to a
Larger Carrier-Based Service Area.
We wish to clarify that the Commission should not adopt any proposal
that might limit competition by creating an incentive to deal
solely with the LEC, or that would establish service areas in
which all schools and libraries would be required to obtain service
from a particular carrier. We are unaware of any proposal that
explicitly provides for such a mechanism but some commenters,
such as Southwestern Bell Telephone Company, appear to be calling
for geographically-based universal service areas that might apply
to schools and libraries. Such forced packaging is not permitted
by the statutory language, which requires all carriers serving
an area to provide services, upon request. Section 254(h)(1)(B).
The only context in which a school or library should be assigned
to a particular carrier's service area is for the provision
of services in the event that a school or library district issues
an RFP for a service for which there is no tariff and receives
no bids. In that case, as discussed below, there must be a means
for ensuring that service is provided, and a geographically-based
carrier of last resort should be designated to provide the service.
- The Coalition's Proposal Enhances Competition
by Making All Services Available at Discounted Rates.
As we stated in our initial comments, the Joint Board should not
recommend that the Commission merely classify a few particular
services as special services. Instead, the full range of services
currently being used in schools and libraries should be eligible
for the discount. Having a range of services available at different
prices will ensure that schools and libraries make rational economic
decisions by not requesting services that exceed their requirements.
By building in this economic rationality, the Commission also
will be able to enhance competition by increasing the range of
service providers who can provide services. Creating only a handful
of services might allow a few providers to dominate the market,
but allowing for greater selection may permit the creation of
niche markets. These niche providers will compete with each other
and with larger providers and will contribute to an overall reduction
in the cost of service.
Indeed, promoting competition in general will tend to reduce
costs and thus tend to reduce the level of contributions to
the universal service fund.
THE COALITION'S PROPOSAL IS SIMPLE TO ADMINISTER.
The Coalition's proposal minimizes the role of outside regulatory
bodies in the delivery of services to schools and libraries, and
relies to the greatest degree possible on existing administrative
structures. This ease of administration will encourage school
and library districts to expand their use of telecommunications
and will reduce the overall cost of providing services.
- By Presuming that a Service Is Eligible for
a Discount if It Is Commercially Available, the Coalition's
Proposal Relieves the Regulatory Body of the Burden of Deciding
What Services Should Be Covered. <
In our initial comments, the Coalition stated that there should
be a presumption that if a service is commercially available in
an area, then it should be made available to schools and libraries
at a discount. The Coalition also stated that the fundamental
rule for deciding whether a service should be considered eligible
for a discount should be whether the service is now being used
by a school or library anywhere in the country. This definition
of the level of service would be periodically reviewed and revised
to include technologies just short of the leading edge. We now
wish to develop and expand this concept somewhat, to illustrate
how an expanded presumption will reduce the task before the Joint
Board and the Commission.
We propose that if a service is commercially available anywhere
in the country, then there should be a rebuttable presumption
that a school or library is eligible for that service at a discount.
In certain cases -- described further below -- a carrier would
be able to present to the Commission or the appropriate state
regulator evidence that either (i) the requested service is
in fact not commercially available; or (ii) the requested service
was in fact not being used by a school or library as of a date
specified in the Commission's rules. That date would be some
time prior to the effective date of the Commission's rules or
their later amendment, but not before the date of enactment
of the Act. This would establish a buffer between the services
used by the most advanced schools and the standard available
to all at a discount.
Relying on a rebuttable presumption would relieve the Joint
Board and the regulators of the obligation of determining in
advance what special services should be made available. Regulators
would only have to make that determination with respect to a
particular service in occasional circumstances when the presumption
was challenged.
Such cases will be rare. In most cases, there will be one
or more bidders, in which case the willingness to provide the
service should be treated as proof of the accuracy of the presumption.
There are two other possible scenarios, however. In the first,
there will be a published tariff for the requested service that
can serve as the basis for determining the discounted rate.
The existence of a tariff would prove that the service is commercially
available, but the carrier might choose to contest whether the
service is actually eligible for the discount. In that case,
it would be relatively simple for the regulatory body to ascertain
whether in fact the presumption had been rebutted, by hearing
clear and convincing evidence regarding what services were actually
used by schools and libraries as of the date set in the rules.
In the second scenario, if there are no bidders and no tariff,
the carrier of last resort for the geographic region including
the school or library district would be required to provide
the service, unless it could show that no school or library
in the country was using the requested service on the specified
date. This is the only instance in which the identity of the
service provider should be tied to a particular geographic area.
The carrier of last resort should be the same carrier designated
to provide residential service; there is no reason to designate
a different carrier or to go through a separate process for
designating one.
This provision for a carrier of last resort is necessary to
ensure that all schools and libraries everywhere in the country
have access to reasonably comparable services, as required by
principles 3 and 6 of Section 254(b). Without this requirement,
some rural and high cost areas might never receive an adequate
level of service.
We believe that wireless carriers and other alternative service
providers will actually be willing to bid in many such instances,
so the number of cases in which the carrier of last resort is
called on to provide service may not be great. In addition,
as discussed above and in our initial comments, the Coalition's
proposal will give schools and libraries a wide range of options,
so the likelihood that a particular institution will request
a high-end service that is not already available in an area
is also small. But at the same time, those institutions that
have a need and are willing to make the additional investment
to obtain a more advanced and more expensive service, should
have that option. Otherwise, the goals of the legislation will
not be met.
- The Coalition's Proposal Requires No Special Certification
Procedure or New Application Requirement, and Relies Entirely
on the Contracting Procedures Already in Place in Each Jurisdiction.
As we said in our initial comments, the existing contracting procedures
used by the purchasing entity should be the only procedures required
to make a bona fide request for service. There is absolutely no
need to establish different standards. Nor is there any need to
establish any additional certification requirement. The vast majority
of institutions requesting service will clearly be eligible. In
the rare case in which a carrier believes that an institution
is not eligible for a discount, it may informally request information
verifying that the institution meets one of the definitions in
Section 254(h)(5). This should satisfy any reasonable concerns
about a requesting institution's eligibility.
- The 95% Affordability Price Point Can Be
Calculated Easily, and Regulatory Agencies Are Already Familiar
with the Concept of TSLRIC.
The primary role for any regulatory body under the Coalition's
proposal would be determining the discounted rate. Two primary
issues arise in that respect. The first is the computation of
the 95% affordability price point. The chart attached as Exhibit
B illustrates how this would be done. Using available data and
appropriate assumptions for each service, the regulatory body
would compute a curve showing the amount of each service that
would be bought at a given price. The point at which the amount
of the service sold corresponds to 95% market penetration would
be the discounted price. This approach may yield only rough approximations
with services that are rarely used by schools and libraries, but
as more institutions subscribe to a service the data could be
refined and a more accurate price calculated. It would not be
difficult to gather sufficient data to establish reasonably accurate
prices using this method -- the point is to calculate a discounted
price that will advance the goals of the statute, not perfect
accuracy -- and the data can be refined over time. Consequently,
the burden of administering the process should be relatively light.
The second alternative, calculation of TSLRIC, is one that
telecommunications regulators are very familiar with and that
has been proposed by several other commenters. See, e.g., Comments
of LDDS WorldCom at 23; Comments
of Missouri Public Service Comm'n at 17-18. Deciding how
to compute TSLRIC and what elements to include in the definition
of TSLRIC may require discussion by the Joint Board and regulatory
entities, but this is a process they are well-prepared to handle.
In short, any proposal will require a mechanism for setting
rates, and the Coalition's proposal is no more burdensome in
that regard than any other. When other elements of the various
proposals are considered as well, the Coalition's is far less
burdensome on the whole because it avoids unnecessary state-level
procedures or additional local certification requirements.
V. THE COST OF THE COALITION'S PROPOSAL IS REASONABLE
AND COMPARABLE TO THE CURRENT UNIVERSAL SERVICE PLAN.
Congress was aware of the current universal service program
and the costs it imposes on carriers and consumers when it established
the new universal service requirement for schools and libraries.
Congress must also have anticipated that expanding universal service
as it did would impose some additional costs, since Congress did
not entirely eliminate the existing mechanism for subsidizing
residential service.
The Coalition's proposal is in line with these expectations.
For example, the Classroom
Model described in the KickStart Report estimates the ongoing
cost of T-1 service to the classroom, including internal networks
and comparable service in libraries, as roughly $1.7 billion per
year. We support the conclusions and recommendations of the KickStart
Report, but must note that the costs cited in that report may
be inaccurate for two reasons. First, if the costs were based
on current rates quoted by service providers, they may be much
higher than actual costs. In addition, if cable operators are
able to use their existing plant to provide a significant amount
of service, costs may be even lower. See discussion at III.A,
supra. Thus, we believe the KickStart Report's figures should
be considered an upper limit on costs.
In any event, the Annual Report of the National Exchange Carrier
Association for 1995 states that approximately $735 million flowed
through the current universal service fund in 1995. This amount
does not include internal flows borne by the seven Bell operating
companies, nor does it include any intrastate subsidies. The existing
total cost of universal service, nationwide, therefore appears
to be substantially more than $735 million, and certainly of the
same order of magnitude as the Kickstart Report's estimate of
$1.7 billion. Including the KickStart Report's initial deployment
costs increases the total cost, although, as noted above, the
KickStart Report's figures should be considered an upper bound
and actual costs may well be lower. In any case, the Coalition's
proposal is within the realm of experience and thus within the
ambit of reasonable Congressional expectations of the cost of
implementing Section 254(h).
Conclusion
For the foregoing reasons, the joint commenters urge the Joint
Board to recommend that the Commission adopt rules in a timely
manner that ensure that all eligible schools and libraries have
access to the broadest permissible range of services, at prices
that will deliver the benefits of modern telecommunications technology
nationwide.
Respectfully submitted,
Nicholas P. Miller
William Malone
Matthew C. Ames
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.
1225 Nineteenth Street, N.W.
Suite 400
Washington, D.C. 20036-2420
Telephone: (202) 785-0600
Fax: (202) 785-1234
Attorneys for the Joint Commenters
Washington, D.C.
May 7, 1996
WAFS1\44983.1\107496-00001
The USTA plan has the apparent virtue of recognizing and controlling
costs. "But cost recognition alone does not address the intent
of Congress. It is clear that universal service, comparable technology,
and comparable pricing were also primary Congressional concerns."
Comments
of the South Dakota Public Utilities Commission at 3.
Incidentally, we note that a number of commenters would exclude
internal networks from the list of eligible services. We reiterate
that such networks are within the scope of services contemplated
by the law because the Act specifically provides for service to
classrooms, and those services are necessary if the legislation
is to serve its purpose. Section 254(h)(2).
Continental Cablevision gives a detailed description of its
involvement in delivering advanced telecommunications capabilities
to schools, arguing that this indicates that there is no need
for a large universal service fund. Comments of Continental at
5-7. This may well be true, if cable operators are prepared to
bid for services and can convert their networks to switched operation
at reasonable cost. Tele-Communications, Inc. goes further, however,
and claims that "even rural schools do not need federal subsidies"
to purchase telecommunications services. Comments
of TCI at 23. This is simply untrue, as indicated by the comments
of the South Dakota Public Service Commission and the Wisconsin
Department of Public Instruction.
We disagree, therefore, that no subsidy will be required, and
that market mechanisms are all that is required. The truth of
these claims remains to be seen, and depends largely on the willingness
of operators like Continental and TCI to enter the fray of true
competition.
The California Department of Consumer Affairs ("CDCA") argues
that the Commission can best serve the interests of schools and
libraries by providing incentives for the development of a fiber
optic broadband network. Comments
of CDCA at 21-22. We believe that the two goals complement
one another -- and that promoting the growth of school and library
networks will enhance competition and the growth of the network
in general. See Comments of the Governor of South Dakota at 4.
We also would point out that the Coalition's proposal does not
constitute a Fifth Amendment taking of property dedicated to public
access by the carriers, because the carriers will always have
an opportunity to recover their marginal costs. Thus, although
their profits from jurisdictional services may be reduced, they
will never be faced with an actual economic loss that might be
considered a taking.
NCTA makes a similar proposal, but would require other users
to pay a pro rata share of network costs at non-discounted prices.
Comments
of NCTA at 19. We again caution that cable operators and other
service providers should not be permitted to avoid their franchise
obligations to provide free service to governmental entities merely
because they are also using the same networks to serve schools
and libraries.
