Support For Rural Support For Rural AmericaAmerica

William MaherWilliam MaherChief, Wireline Competition Chief, Wireline Competition

BureauBureauJuly 2, 2003July 2, 2003

Universal Service and The

FCC

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What is Universal What is Universal Service?Service?

An evolving level of An evolving level of telecommunications service at telecommunications service at affordable rates, defined by the FCC affordable rates, defined by the FCC with input from the states, that is with input from the states, that is supported by the Universal Service supported by the Universal Service Fund.Fund.

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Universal Service Universal Service HistoryHistory

A major goal -- Communications Act of A major goal -- Communications Act of 19341934

1996 Telecommunications Act codified 1996 Telecommunications Act codified and expanded FCC’s historical and expanded FCC’s historical commitmentcommitment

Movement from implicit to explicit supportMovement from implicit to explicit support

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Guiding Principles of the Guiding Principles of the ActAct

-- Explicit support-- Explicit support

-- Affordable rates-- Affordable rates

-- Specific, predictable and sufficient -- Specific, predictable and sufficient supportsupport

-- Equitable and non-discriminatory -- Equitable and non-discriminatory contributionscontributions

Additional principles of the FCC:Additional principles of the FCC:

-- Competitive neutrality-- Competitive neutrality

-- Portability of support-- Portability of support

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Who Promotes Universal Who Promotes Universal Service?Service?

Carriers and their customers contributeCarriers and their customers contribute

Recipients implementRecipients implement

Federal and State regulators develop Federal and State regulators develop policypolicy

A third party administrator (USAC) A third party administrator (USAC) administers the Universal Service Fund administers the Universal Service Fund under direction from the FCCunder direction from the FCC

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Four Major Fund Four Major Fund ComponentsComponents

High Cost: Access to High Cost: Access to telecommunications services in rural or telecommunications services in rural or high cost areas at rates comparable to high cost areas at rates comparable to urban ratesurban rates

Low Income: Support for low-income Low Income: Support for low-income customerscustomers

Rural Health Care: Discounted service Rural Health Care: Discounted service for rural health care facilitiesfor rural health care facilities

Schools and Libraries: Discounted Schools and Libraries: Discounted service service

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ContributorsContributors

o Interstate telecommunications carriers Interstate telecommunications carriers (interpreted to include providers of both (interpreted to include providers of both interstate and international interstate and international telecommunications)telecommunications)

o Other providers of interstate Other providers of interstate telecommunications, if the public interest telecommunications, if the public interest so requires (as determined by the FCC)so requires (as determined by the FCC)

o De minimisDe minimis exemption: carriers whose exemption: carriers whose annual contribution to universal service is annual contribution to universal service is less than $10,000 (many rural carriers less than $10,000 (many rural carriers meet this criteria)meet this criteria)

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ContributionsContributions

Snapshot of 2002:Snapshot of 2002:o About 2,500 ContributorsAbout 2,500 Contributors

o Interexchange carriers responsible Interexchange carriers responsible for about 59% of the contributionsfor about 59% of the contributions

o Local exchange carriers -- about 26%Local exchange carriers -- about 26%o Wireless – about 15% Wireless – about 15%

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SupportSupport

Total 2002 Support: About $5.9 Total 2002 Support: About $5.9 BillionBillion

o High Cost ($2.9 billion)High Cost ($2.9 billion)o Schools and Libraries ($2.2 Schools and Libraries ($2.2 billion)billion)

o Low Income ($681 million)Low Income ($681 million)o Rural Health Care ($27 million)Rural Health Care ($27 million)

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Definition of Supported Definition of Supported ServiceService

Single-party serviceSingle-party service Voice grade access to the public Voice grade access to the public

telecom networktelecom network Dual tone multi-frequency signalingDual tone multi-frequency signaling Access to emergency, operator, and Access to emergency, operator, and

interexchange services, and directory interexchange services, and directory assistanceassistance

Toll limitation services for qualifying Toll limitation services for qualifying low-income consumers low-income consumers

FCC is reviewing this definitionFCC is reviewing this definition

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High Cost Support – High Cost Support – Six ComponentsSix Components

High Cost Loop SupportHigh Cost Loop Support Local Switching SupportLocal Switching Support Long Term SupportLong Term Support Interstate Common Line SupportInterstate Common Line Support High Cost Model SupportHigh Cost Model Support Interstate Access SupportInterstate Access Support

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Schools and LibrariesSchools and Libraries

Eligible schools and libraries apply for Eligible schools and libraries apply for discounts on telecommunications discounts on telecommunications services, Internet services, and internal services, Internet services, and internal connections.connections.

Discount based on percent of students Discount based on percent of students eligible for the school lunch program.eligible for the school lunch program.

Discounts vary between rural and urban Discounts vary between rural and urban areas. Rural applicants are eligible for a areas. Rural applicants are eligible for a an additional 10% discount up to a an additional 10% discount up to a maximum of 90%.maximum of 90%.

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Schools and LibrariesSchools and Libraries

Provider reimbursed for discounts from Provider reimbursed for discounts from 20-90%.20-90%.

Schools and libraries must Schools and libraries must competitively bid for services and apply competitively bid for services and apply every year.every year.

Combating waste, fraud, and abuse.Combating waste, fraud, and abuse.

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Low IncomeLow Income

Components of Low Income Components of Low Income SupportSupport

o Link Up Link Up discount on installation (up to discount on installation (up to $30)$30)

o LifelineLifeline discount on monthly service discount on monthly service (up to $9.50)(up to $9.50)

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Rural Health CareRural Health Care

Eligible health care providers apply for Eligible health care providers apply for discounts on telecommunications discounts on telecommunications services. Eligible entities include: services. Eligible entities include: teaching hospitals, medical schools, teaching hospitals, medical schools, community health centers, not-for-profit community health centers, not-for-profit hospitals and rural health clinics. hospitals and rural health clinics.

Rural health care provider must apply Rural health care provider must apply every year.every year.

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Rural Health CareRural Health Care Health care providers may receive Health care providers may receive

support for up to 30 hours ($180) per support for up to 30 hours ($180) per month of toll charges to reach the month of toll charges to reach the internet, if no local dial-up access is internet, if no local dial-up access is available.available.

Disbursements capped at $400 million Disbursements capped at $400 million dollars annually dollars annually

Historically, only a fraction of the Historically, only a fraction of the eligible providers have participated for eligible providers have participated for a variety of reasons. RHC disbursed a variety of reasons. RHC disbursed $27 million in 2002.$27 million in 2002.

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Competition in Rural Competition in Rural Areas :Areas :Eligible Eligible

Telecommunications Telecommunications Carrier Designations Carrier Designations In general, wireline and wireless In general, wireline and wireless competitors may qualify to receive competitors may qualify to receive support from the federal universal support from the federal universal service mechanisms.service mechanisms.

Must be designated eligible Must be designated eligible telecommunications carriers (ETC) by telecommunications carriers (ETC) by the relevant state commission or the the relevant state commission or the FCC.FCC.

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Eligible Eligible Telecommunications Telecommunications Carrier DesignationsCarrier Designations Competitive ETCs generally receive Competitive ETCs generally receive

the same per-line amount of high-the same per-line amount of high-cost support that the incumbent cost support that the incumbent would receive for serving a given would receive for serving a given customer. Support for competitive customer. Support for competitive ETCs generally is based on the ETCs generally is based on the incumbent’s costs.incumbent’s costs.

Competitive ETCs receive low-Competitive ETCs receive low-income support based on the same income support based on the same criteria that are applied to the criteria that are applied to the incumbent.incumbent.

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Thank YouThank YouContact Information:Contact Information:

William MaherWilliam Maherwmaher@fcc.govwmaher@fcc.gov(202) 418-1500(202) 418-1500Further Information:Further Information:www.universalservice.orgwww.universalservice.orgwww.fcc.govwww.fcc.gov