BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION Establishing Universal Service Mechanisms ) for Intrastate Service, Including the Definition ) Docket No. UT-980311(r) and Identification of High Cost Areas, Finding ) the Costs of Serving Such Areas, Setting Out ) COMMENTS OF the Organizational Elements for an Intrastate ) SPRINT SPECTRUM, L.P. Funding Mechanism, and any Related Matters ) (D/BA SPRINT PCS) Sprint Spectrum L.P., doing business as Sprint PCS (“Sprint PCS”) hereby submits its Comments pursuant to the May 4, 1998 Notice of Proceeding (“Notice”) issued in the above-captioned docket. Sprint PCS welcomes this opportunity to provide the Commission with an idea of how wireless carriers are affected by and can assist in the implementation of a universal service program in the state of Washington. Sprint PCS is one of the leading nationwide providers of Personal Communications Services, a state-of-the-art digital mobile communications service. Sprint PCS is currently offering service in markets nationwide (including several communities in Washington), and is in the process of constructing additional facilities to expand its service coverage. Sprint PCS offers its customers a full range of digital communications services, including basic telephone service. Additional features and functions that Sprint PCS does or will shortly provide include call waiting, call forwarding, three-way calling, voice mail, and short message service (i.e., paging). As requested by the Commission, the following paragraphs are numbered to correspond to the specific questions in the Notice. Issues as to which Sprint PCS has no comments at this time are omitted. GOAL OF UNIVERSAL SERVICE 1. This Commission should strive to formulate a universal service policy that is consistent with the policy of the federal Telecommunications Act of 1996 (“1996 Act”) to “promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.” Pub. L. 104-104, 110 Stat. 56. The Revised Code of Washington similarly provides that it is the policy of the state to “promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state.” Wash. Rev. Code. Ann. § 80.36.300(5) (1996). In conformance with these goals, a progressive universal service policy should seek to “promote competition” and “promote diversity in the supply of telecommunications services and products” to low-income consumers or to rural or high-cost areas, so as to extend to consumers in these areas the same benefits – better services, advanced technologies, and lower prices – that telecommunications providers will bring to consumers in urban areas. Conversely, there is no reason to believe that urban or business consumers will suffer any harm through the creation of an intrastate universal service program. If anything, by making explicit the subsidies that have traditionally been an implicit part of business and urban service rates, the Commission is taking an important step toward creating a more efficient and effective market for all providers and consumers. ELIGIBLE TELECOMMUNICATIONS CARRIERS 20. Sprint PCS believes that the petition process is an appropriate means of designating telecommunications service providers as eligible telecommunications carriers (“ETCs”). Considering each carrier’s qualifications individually through the petition process will enable the Commission and interested parties to engage in a more thorough analysis, allow each potential ETC a greater opportunity to advocate its cause in detail, and is fully consistent with the approach taken by numerous states and the Federal Communications Commission (“FCC”). 21. Consistent with the goal of bringing competition and new technology to all areas of Washington, the only criteria for receiving universal service support should be those criteria set forth expressly in the 1996 Act and adopted by the FCC: i.e., that the eligible carrier (1) must be a common carrier, (2) must offer the supported services either using its own facilities or a combination of its own facilities and resale of another carrier’s services, and (3) must advertise the availability of such services and the charges for them, using media of general distribution. 47 U.S.C. § 214(e)(1) (1996); Federal-State Joint Board on Universal Service, CC Docket 96-45, Report and Order (rel. May 8, 1997) (“Universal Service Order”), at ¶ 135. Sprint PCS, for example, is willing and able to meet those requirements in the areas of Washington in which it currently serves, and believes that while doing so it will be able to offer consumers in these areas the benefits of new telecommunications technologies at reasonable and competitive prices. Imposition of additional criteria beyond those provided for federal support will only serve to impede the introduction of competitive services and new technologies to rural and high-cost areas. As the FCC correctly found, “additional requirements would raise potential competitors’ expected costs of entry and thus discourage competition.” Universal Service Order, at ¶ 143. As such, additional eligibility requirements would violate the federal policy of fostering competition and new technologies for customers in all areas, including rural and high cost areas. Like the FCC, this Commission should reject any proposals that would make all ETCs subject to the regulatory requirements that govern incumbent carriers, including “pricing, marketing, service provisioning, and service quality requirements, as well as carrier of last resort (COLR) requirements.” Universal Service Order, at ¶ 142. Specifically, section 253(b) of the 1996 Act provides that state universal service requirements which impose barriers to entry must be competitively neutral. The FCC has found that “the imposition of additional eligibility criteria would ‘chill competitive entry into high cost areas.’” Universal Service Order, at ¶ 144 (quoting the Federal-State Joint Board on Universal Service). Typically, such additional eligibility requirements deny subsidized status to competitive carriers by imposing criteria which only the incumbent LECs meet. Such additional requirements pose a barrier to entry and contravene the mandate in section 253(b) that all eligibility criteria should be competitively neutral. Using only the criteria set forth in section 214 to determine eligibility would ultimately serve to the benefit of consumers. Section 254(b)(3) of the 1996 Act establishes as one of the principles of universal service that “[c] onsumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services . . . that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.” Similarly, section 80.36.300 of the Revised Code establishes that it is the policy of Washington to “preserve affordable universal telecommunications service,” and to “promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state.” Wash. Rev. Code Ann. § 80.36.300(1) and (5) (1996). Imposing on wireless carriers additional eligibility requirements that were tailored for incumbent wireline carriers will serve only to keep wireless carriers out of rural and other high-cost areas, thereby denying consumers in those areas access to advanced and diversified telecommunications services and products that is “reasonably comparable to those services provided in urban areas.” 22. See response to Question 26, below. 25. The Commission should adopt ETC basic service advertising guidelines that are consistent with the FCC’s requirement that carriers advertise the availability of supported services and the charges therefor using “media of general distribution.” 47 C.F.R. 54.201(d)(2) (1997). The FCC’s guidelines – which were developed over the course of several months through both a collaborative process and a rulemaking proceeding – should provide sufficient notification to consumers regarding the availability of supported services. Additional requirements, on the other hand, would only increase the burden of compliance, and could possibly confuse consumers if federally supported services could be advertised in one manner and state-supported services in another. 26. The Commission should allow eligible carriers to designate their own service areas for the purposes of providing universal service and obtaining support. “Service area” is generally defined in section 214(e)(5) of the 1996 Act as “a geographic area established by a state commission for the purpose of determining universal service obligations and support mechanisms.” 47 U.S.C. § 214(e)(5) (1996). By contrast, the statute states that a rural telephone company service area will be defined as that company’s study area unless the FCC and Joint Board determine otherwise. Thus, this Commission is under no statutory obligation to tie a service area for universal service purposes to the service area as defined by the incumbent, except where that incumbent qualifies as a rural telephone company. Even in areas served by rural telephone companies, the state retains the authority to establish alternative service areas to the study areas served by the rural incumbents. Id. Indeed, Sprint PCS contends that it would be anticompetitive to define service areas on the basis of the incumbent’s coverage areas. The 1996 Act requires this Commission to promote local competition and encourage the deployment of advanced telecommunications technologies. Accordingly, new entrants should not be forced to build and conform their network deployment and use of technologies in a manner identical to the plan developed by the incumbent in non-rural areas. Instead, if the state commission finds within the context of considering a petition for ETC status that the new entrant’s service to an alternatively defined area advances the goals of universal service, that area should be defined as the service area for universal service purposes. FUNDING 27. To the extent that the Commission’s consideration results in the funding of a universal service program through “contributions” from providers of intrastate telecommunications services, Sprint PCS urges that such contributions be assessed on a per-line rather than a revenues basis. Although the FCC has adopted a system of interstate universal service contributions based on gross interstate end-user revenues, state commissions are free to adopt alternative approaches. The 1996 Act requires only that the states assess universal service contributions on “telecommunications carriers;” that such contributions must be “equitable and nondiscriminatory;” and, to the extent that the state adopts additional definitions and standards, the support mechanisms must be “specific, predictable and sufficient” and must not burden the federal support mechanisms. Id. at § 254(f). Within these broad parameters, contributions are to be assessed “in a manner determined by the State.” Id. A flat per-line charge would conform to the broad federal parameters, while at the same time being far easier for the Commission to administer than a revenue-based system. Charges based on revenue are particularly susceptible to difficult interpretative questions at best, and outright gaming of the system at worst. For example, under federal law a revenue-based contribution may be assessed on “telecommunications services,” but not on “information services” including “enhanced services.” Competitors in the telecommunications market frequently offer new pricing plans that involve bundling of services, some of which would be subject to a revenue-based assessment and some of which would not. But how would the bundled charge be allocated as among exempt and non-exempt services? For example, a cable company might provide a bundled package of cable service, local telephony and PCS, all for a single monthly charge. How should the cable company allocate its revenue? Or a commercial mobile radio service (“CMRS”) provider might offer a customer a subsidized phone with a bundled service of “basic” CMRS plus voice mail and caller ID. How would the monthly fees be allocated as between “basic” service (which is “telecommunications” service subject to universal services contributions) and equipment, voice mail and information services (which are not)? Added to these complications is the fact that, in this ever-changing market, new services are constantly being offered. This will give rise to a stream of problems involving interpretation of “standardized” definitions of exempt information and enhanced services, particularly since competitors will attempt to design and package their products to fit within whatever definition gives them the lowest rate of contribution. A system that is complicated to administer will not only strain the Commission’ s resources unnecessarily; it will also favor the large incumbent carriers that can devote administrative resources to dealing with the proliferating regulatory complication that will result from a revenues-based system. In addition, the competitive process will be hampered, to the advantage of incumbents, since each new competitive pricing package will give rise to legal and accounting issues, slowing down the process by which competitors seek new ways of satisfying customer preferences in this fast-moving marketplace. In lieu of complex and administratively expensive revenue-based assessments, the Commission should require that any universal service contributions be assessed on a per-line basis; i.e., a flat amount for each voice-grade line or equivalent having access to the public switched telephone network. In a per-line system, services such a PBX trunks and dedicated access lines that allow connection of more than one user to the public network should be assessed on a line-equivalence basis, using standard traffic engineering formulas. Both local and long-distance providers should be subject to assessment, with the long-distance providers assessed based on their equivalent pre-subscribed lines and dedicated access lines. The 1996 Act limits both federal and state universal service support contributions to carriers that provide “telecommunications services.” Under these provisions, revenue-based contributions are limited to “telecommunications revenues.” The statute also requires that intrastate revenues be segregated from interstate revenues, since only the former are subject to assessment under section 254(f). Similarly, intrastate revenues in Washington must be segregated from those attributable to other jurisdictions. 28. The Commission should note that there is a serious issue as to its authority to require universal service contributions from CMRS providers at this time. Section 332(c)(3)(A) of the Communications Act of 1934, as amended, preempts the states from regulating CMRS entry or rates, subject to the proviso that states may impose universal service requirements on providers of CMRS service if “such services are a substitute for land line telephone exchange service for a substantial portion of the communications within such state,” a condition that clearly has not been satisfied yet in the state of Washington or anywhere in the United States (although Sprint PCS hopes that it will be met in the future). Although the FCC and a federal district court in Kansas have already ruled that section 332(c)(3)(A) does not preclude states from assessing CMRS providers with universal service contributions, even if they are not a substitute for land line service, See Universal Service Order, at ¶.791; Petition of Pittencrieff Communications, Inc. for Declaratory Ruling Regarding Preemption of the Texas Public Utility Regulatory Act of 1995, File No. WTB/POL 96-2, Memorandum Opinion and Order (rel. Oct. 2, 1997); Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Fourth Order on Reconsideration, Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Transport Rate Structure and Pricing, End User Common Line Charge, CC Docket Nos. 96-262, 94-1, 91-213, 95-72 (rel. Dec. 30, 1997), at ¶¶ 301-305; Citizens Util. Ratepayer Bd. v. State Corp. Comm’n, 1998 WL 110548, at *21 (Kan.). the FCC’s decisions are currently on appeal in a number of jurisdictions. See, e.g., Texas Ofc. of Pub. Util. Counsel, et. al. v. F.C.C., Case Nos. 97-60421, et. al. (consol.) (5th Cir. 1997); Mtn. Solutions, et. al. v. State Corp. Comm’n, Case Nos. 97-3180, 97-3186 (consol.) (10th Cir. 1997); Cellular Telecom. Industry Assn., et. al. v. F.C.C., Case Nos. 97-1690, 97-1703, 97-1705 (consol.) (D.C. Cir. 1997). The Commission should also note that the Connecticut Department of Public Utility Control (“DPUC”), after initiating a new universal service investigation and facing challenges to its proposal to require universal service payments from CMRS providers, announced that it would “not seek contributions from the plaintiffs pursuant to the challenged orders.” Metro Mobile Cts. of Fairfield County, Inc. v. DPUC, 702 A.2d 1179, 1180 (Conn. 1997). Until the appellate courts clarify the states’ authority in this area, the Commission should not assess universal service contributions on CMRS providers. ADDITIONAL MATTERS – DESIGNATION OF ETCs IN AREAS SERVED BY RURAL TELEPHONE COMPANIES Section 214(e)(2) of the 1996 Act provides that before designating an additional eligible carrier in an area served by a rural telephone company, the state commission shall make a public interest finding. Section 214(e)(2) also provides that in such areas, additional designations must be “consistent with the public interest, convenience, and necessity.” The Commission should be aware that the service coverage of some wireless carriers may in fact include areas within territories currently served by rural telephone companies. In anticipation that some new entrants will eventually seek designation as ETCs in rural telephone company service areas, the Commission should adopt rules specifying the principles it will apply in implementation of these standards. Without such rules or guidelines, additional designations would be susceptible to expensive and time-consuming litigation which incumbent carriers could use to protect their position and retard the process of bringing consumers in rural and high-cost areas the benefits of competition and new technology. In considering rural designation requests, the Commission should apply a presumption that consumer choice is in the public interest, and that the deployment of new telecommunications technologies in rural areas is consistent with the public interest, convenience and necessity. Such a presumption is required by the policies of federal and state law to provide consumers in rural areas with diversified services comparable to those available in urban areas. Rural areas should not become telecommunications backwaters where residents are forced to accept second-class technology or limited service choices in exchange for subsidized prices offered by a single privileged carrier. Respectfully submitted, Jonathan M. Chambers Andrew D. Lipman Roger C. Sherman Russell M. Blau Sprint Spectrum L.P. (d/b/a Sprint PCS) Swidler & Berlin, Chtd. 1801 K Street, N.W., Suite M112 3000 K Street, N.W., Suite 300 Washington, D.C. 20006 Washington, D.C. 20007 (202) 835-3617 (Tel) (202) 424-7500 (Tel) (202) 835-2092 (Fax) (202) 424-7645 (Fax) Counsel for Sprint Spectrum L.P. (d/b/a Sprint PCS) Dated: June 6, 1998