BEFORE THE WASHINGTON UTILITIES
 AND TRANSPORTATION COMMISSION
 UT-980311(r)

In the Matter of Developing Rules  )   COMMENTS OF SPRINT CORPORATION
And Regulations for Administering )   ON BEHALF OF UNITED TELEPHONE 
Universal Service Support in the )   COMPANY OF THE NORTHWEST AND 
State of Washington   )   SPRINT COMMUNICATION COMPANY, L.P.
    
 
Pursuant to the Notice of Opportunity to File Rulemaking Comments issued in 
this docket on May 4, 1998, Sprint Corporation (Sprint), on behalf of United 
Telephone Company of the Northwest  and Sprint Communications Company, L.P., 
respectfully submits responses to the questions contained in the Commission’s 
Notice. 
To put the responses in context, it may be helpful to first understand Sprint’s 
proposal for universal service.  Sprint proposes that the level of universal 
service support should be based on the difference between the economic, 
forward-looking cost of providing universal services as determined by BCPM 3.1 
and an affordable benchmark.  Ideally, a federal plan would be designed for 
this purpose with state augmentation.  States should be free to respond to the 
unique needs of their inhabitants and tailor their own plans if needed within 
the bounds of explicit and competitively neutral recovery. For instance, if 
Washington did not deem the federal benchmark (whatever it may be) appropriate 
for its area, then it would be free to fund the difference between the federal 
support and the additional amount the State felt appropriate to keep rates 
affordable. If the Commission decides that a safety net benchmark is needed, 
then Sprint recommends that the appropriate affordability level be based on the 
current statewide average urban rate including SLC and taxes.  To the extent 
that urban rates do not currently cover underlying costs, Sprint would expect 
prices to move above costs over time, which would in turn affect the 
affordability 
benchmark. The fund should be large enough to replace at least the implicit 
support generated by access charges, if not the implicit support generated by 
toll, vertical features, price averaging, and different pricing for business 
customers than for residential.  
Under Sprint’s proposal, all high-cost residential lines and single-line 
businesses would be supported. Funding should be portable to any designated ETC 
within a defined service area.  High-cost support amounts should be carefully 
targeted, below the exchange level--preferably at the CBG level--to reflect 
underlying cost characteristics. Targeting and service area designations should 
be coordinated with policy decisions concerning wholesale and retail pricing 
and designation of service areas.  Implementation of the plan should be 
revenue-neutral at its inception. That is, any LEC experiencing an increase in 
explicit high-cost funding must make dollar-for-dollar reductions in implicit 
subsidies, such as those inherent in access charges.  
The assessment base should be based on intrastate retail revenues. 
Contributions to the universal service fund should be recovered from end user 
customers through an explicit surcharge on all retail services.  
 GOAL OF UNIVERSAL SERVICE
Question 1: What should be the goal of a Washington universal service support 
system and fund (USF)?  In your answer, please include a separate paragraph 
which specifically details the ramifications your answer would have for various 
consumer groups, including residential and small and large business consumers.

The goal of universal service support should be to ensure that all consumers 
have access to advanced, quality telecommunications services at affordable 
rates. 
Sprint believes that its proposal would benefit residential and single-line 
businesses by assuring affordable rates for basic services. Support would be 
predictable, sufficient, and sustainable, which would encourage facility-based 
competition so consumers have more choices. the subsidy assessment and 
distribution mechanism would be competitively neutral so that no providers are 
disadvantaged.

Question 2:  Should the USF program guarantee sufficient operation revenue to 
companies serving high-cost locations no matter how much market share is lost 
to competitors?

The USF program should not be used to guarantee operating revenue to companies 
serving high-cost locations.  Rather, the USF program should be established to 
allow ETCs to recover the economic costs of providing essential services to 
customers who reside in high-cost locations.  Simply put, the USF should 
support high-cost customers, not high-cost companies.
Question 3:  What relationship, if any, should payments from a universal 
service fund bear to changes in efficiency and productivity of the recipient?

No relationship should exist between changes in the efficiency and productivity 
of a company and the support they receive from the fund.  Under Sprint’s plan, 
the economic costs generated by BCPM 3.1 are developed based on forward 
looking, least cost technology (i.e., the costs that an efficient competitor 
would incur).  ETCs will only receive support for economic costs, based on the 
most efficient network available, that exceeds the affordability benchmark.  
Therefore, the efficiency and/or productivity of a company will not affect the 
amount of USF contribution that they receive.    
SUPPORTED SERVICES
Question 4: Should USF provide support for each customer’s primary line only?  
Or should USF provide support for all lines or some number of lines greater 
than one but less than all lines?

Sprint has grappled with this question over the past few years in an attempt to 
balance sound public policy with a plan that is administratively workable.  At 
one point, Sprint advocated that USF should be restricted to high-cost primary 
residential lines.  However, after careful consideration, Sprint has concluded 
that USF should provide support for all high-cost residential lines, and for 
high-cost single business lines. 
Providing support for all high-cost residential lines would eliminate many of 
the administrative difficulties inherent in trying to distinguish between 
primary and secondary lines, as well as the difficulty of monitoring and 
enforcement. The effect of limiting support to high-cost primary residential 
lines is that additional lines will become more expensive in rural, high-cost 
areas, and may no longer be affordable. This could perpetuate, rather than 
erode, existing disparities between rural and urban customers in terms of 
ability to access telecommunications and information services. 
Question 5: If you propose that USF support less than all lines, should the 
support vary by class of customer (e.g. small and large business)?

 Sprint proposes that all high-cost residential lines and single line business 
lines should be supported.  Multi-line business lines would not be supported by 
USF.
Businesses in rural, high cost areas are often small businesses with a single 
telephone line.  These customers are particularly dependent upon telephone 
service for their livelihood and should not be disadvantaged by having to pay 
substantially higher prices than their urban counterparts.  Arguably, the 
single-line business customer may be able to afford more than the average 
residential customer.  For this reason, Sprint recommends separate 
affordability benchmarks. 
Question 6a: If you propose support for one primary line, particularly for only 
one residential primary line, how do you propose this be administered?

Sprint proposes that all high-cost residential lines be supported.
Question 6b: Could a family of three (two parents and a minor child) order 
three primary lines?  Order two, one for each adult?

Sprint proposes that all high-cost residential lines be supported.
Question 6c: How many primary lines could be ordered for a residence occupied 
by a group of college students?  By persons who share an apartment?

Sprint proposes that all high-cost residential lines be supported.
Question 6d: Could a residential customer order a primary residential line and 
a primary business line?



Yes.  A customer could order both a residential line and a business line to 
serve a single location under two separate accounts.  Both lines could receive 
support under Sprint’s proposal if the economic cost of each exceeds the 
affordable benchmark.  The affordable benchmark would vary between residential 
and business line.
Question 7a: If you propose support for only one business primary line, how do 
you propose this be administered?

Business billing account detail would identify whether the account is for a 
single or multi-line business.  Multi-business accounts would not be 
supported.  Single-line businesses would receive support to the extent the 
economic cost of providing service exceeds the affordability benchmark for 
single-line business.  ETCs would report to the Administrator the number of 
single businesses being served in high-cost areas, but would not report 
multi-line businesses since they would not be eligible for support.
Question 7b: Could a partnership order a primary line for each partner?
Each partner could order a separate business line under separate accounts.  If 
the cost exceeded the affordable benchmark, each line could receive support. 
Question 7c: Would, for example, a real estate broker who had individual agents 
order their own line be receiving service through many primary lines?  In this 
example, if the lines rolled over to any other line would any or all of the 
lines be primary lines?

Each agent could establish a separate business line. Sprint is unclear on the 
meaning of  “rolled over.”  A single business line does not include lines 
connected to key or PBX systems, or to Centrex.
Question 8a: If a business or residential customer orders one line from each of 
three companies, would each be a primary line?

Sprint proposes that all high-cost residential lines should receive support 
regardless of whether one company provides all lines or whether multiple 
companies provide the residential lines.  In the case of a business that orders 
multiple lines from multiple providers, each high-cost line would receive 
support if each provider were to bill the customer for only one business line 
on the account.
Question 8b: If no, which of the three would be the primary line?
Not applicable.
Question 8c: Who would make the determination?  Who would verify it?
Not applicable.
Question 9: Please estimate the cost, in detail, of administering a program, 
which support less than all lines.

Sprint does not have information available to estimate the cost of 
administrating USF within the State of Washington.
Question 10: Should unsubscribed lines be supported?
Yes.  Sprint interprets the term “unsubscribed line” to mean that the line is 
not presubscribed to an interexchange carrier.  By not presubscribing to an 
interexchange carrier, a subscriber is restricted from using a 1+ 10 digit 
dialing pattern for toll calls; however the subscriber continues to have access 
to long distance services (one of the universal services).  Therefore, a 
customer’s decision to be “unsubscribed” should have no effect on the cost of 
providing universal services or the need for affordable rates in high-cost 
rural areas.
Question 11: Universal service is intended to assure affordable access to the 
network to use a group of enumerated services (see ESSB 6622, Sec. 1(7)(b)(i) 
through (ix)).  Many customers desire additional features or services, for 
example, call waiting, voice mail, and call blocking.  Should features or 
services in addition to those which constitute basic service, when provided to 
customers in high-cost locations, be priced the same, or higher or lower than 
they are priced in non-high-cost locations?

 A local provider should have the pricing flexibility to make this 
determination.  The reason is there are many factors that must be considered in 
establishing prices for vertical features and other discretionary services.  
These factors include costs, consumers’ willingness and ability to pay, 
substitute services, product lifecycle, overall marketing strategy, and the 
complexity of selling and billing.  A competitive market will tend to limit the 
prices that local providers can 
charge. Additionally, a local provider will want to ensure that prices cover at 
least the fixed and variable costs of providing discretionary services. 
Depending on the extent of cost variance and competitive conditions, a local 
provider may be able to use price-averaging across its markets for vertical 
services; however, an incumbent provider should not be required to average 
prices as a public policy means of promoting service availability in rural 
high-cost areas.  Such mandates would likely backfire by encouraging 
competition in low-cost areas where margins are high, and deterring competition 
in high-cost areas.  After losing it’s low-cost customers, the incumbent may no 
longer be able to provide vertical features profitably, or would be required to 
recalculate the average for the remaining rural subscribers at a rate that is 
unaffordable.
 As a side note, the fact that vertical and discretionary service prices are 
likely to be relatively variable over time is one reason why a revenue 
benchmark comprised of all state and local revenues is less desirable than an 
affordability benchmark for calculating universal service support.
Question 12: When an incumbent local exchange carrier (ILEC) provides unbundled 
network elements (UNEs) to another carrier designated as an ETC, how should USF 
support be allocated between the companies?

An ETC providing the defined basic services over its own facilities or through 
the purchase of UNEs from an ILEC is entitled to the entire USF subsidy 
associated with serving the customer.  The ILEC providing the UNEs will be 
fairly compensated providing that the UNEs are priced to recover TELRIC and a 
reasonable share of joint and common costs.
Question 13: Should the universal service fund be used to pay for 
infrastructure necessary to provide service to potential customers who do not 
reside within established company service areas?  (Please see material related 
to Obligation To Serve in Docket No. UT-970325.)

The universal service fund, along with end user line extension charges, should 
be used to pay for infrastructure (annual cost, not up-front capital) necessary 
to provide actual customers the defined basic services outside established 
company serving areas. Sizing the fund to provide 

for universal service to potential customers who may never request service 
would unnecessarily inflate the size of the fund.  Line extension tariffs, 
which apply in certain instances to defray the cost of providing service to an 
unserved area within an exchange boundary, should also apply to customers 
requesting service outside exchange boundaries.  Requiring customers, who 
reside outside established company service areas, to be held to the Commission 
approved line extension tariff will ensure non-discriminatory pricing to all 
end users and will help reduce the size of the universal service fund. 
AFFORDABILITY AND COMPARABILITY
Question 14a: What rate(s) for basic telecommunications service are affordable 
in Washington?

Sprint recommends that the initial affordability level be set at the national 
affordability level unless there are unique reasons why Washingtonians are less 
able to afford universal services than the average American.  In this case, 
Sprint recommends basing the Washington benchmark on the statewide average 
urban rate including SLC and taxes. Presumably, the urban rates are affordable 
given the high penetration level and the limited use of the Lifeline program. 
To the extent that urban rates do not currently cover underlying costs, Sprint 
would expect to see prices increase over time in keeping with the goal of the 
Telecommunications Act of 1996 to reduce implicit subsidies in order to foster 
competition.  This would in turn increase the affordability benchmark 
(presumably this Commission would not permit local rate increases beyond what 
they deem affordable without explicit support from the Lifeline program or 
other sources). It is quite possible that Washington local rates could be set 
higher and still be considered affordable, which would minimize the size of the 
state fund. 
Question 14b: Is there a different affordable rate for a business and a 
residence?
Yes, as indicated in response to question 14a.
Question 14c: For a small business versus a large business?
Although larger businesses (with single lines) may need less support, the 
administrative cost and lack of readily available information to distinguish 
between differently sized companies would likely outweigh any benefit. Sprint 
does not recommend that universal service support extend to multi-line 
businesses.
Question 15: Should business and residential lines be priced differently?  If 
so, on what basis?
Sprint believes prices should recover costs up to the point that affordability 
is jeopardized. Costs for business lines are not likely to be greater than for 
residential lines.  However, Sprint suggests the use of current state urban 
rates for residential and business lines to determine affordability levels for 
residential and business customers. Since business rates are higher than 
residential rates, and thus the affordability level would be higher for 
business than residential lines, the two would continue to be priced 
differently. As competitive market forces begin to move business and 
residential rates closer together, the Commission may want to establish a 
different basis for the affordability benchmark for businesses.
Question 16a: If all lines are supported, should second lines be priced at the 
same level as primary lines?

The prices for services should recover underlying costs, or be increased to the 
maximum affordable level with USF support covering the difference between price 
and cost.  Each residential line at a location should be priced at the same 
level regardless if the line is the only line serving the customer or is an 
additional line at that location.  
Question 16b: Should there be an even greater charge for each additional line 
above two?
See response to 16a.
Question 16c: Would this present administrative problems and expenses?
Sprint believes that administrative problems would arise if additional lines 
were priced higher than the first line at a residence.  Determination of 
support amounts for a provider will be complicated with additional tracking and 
reporting mechanisms.  Pricing differences will invite abuse (i.e., gaming the 
system), and will necessitate dispute resolution processes and enforcement 
measures.  As a result, local providers and the administrator of the Washington 
fund will incur additional administrative costs that will ultimately be borne 
by the customers of telecommunications services in Washington.  
Question 17a: If all lines are not supported and second lines are priced at 
cost, will the rates for high-cost and non-high-cost areas be “reasonably 
comparable” as required by the Telecommunications Act of 1996?

No. 
Question 17b: Will the access to telecommunications and information services be 
reasonably comparable?

No.  If prices for additional lines are set to cover underlying costs without 
universal service support, Sprint believes that customers in high-cost areas 
will be disadvantaged vis-à-vis customers in low-cost areas. Many customers in 
high-cost areas will not be able to afford the second lines that would meet 
their telecommunications and information service needs.
Question 17c: Expressed in dollars or as a multiple (e.g. twice, four times), 
what rate above your answer for an affordable rate (question 14) would no 
longer be “comparable”?

The idea behind using average state urban rates as an affordability benchmark 
is that rural rates would be reasonably comparable to urban rates.  Sprint does 
not have price elasticity data specific to second lines in order to determine 
the price point at which customers would forgo second lines.  However, 
intuitively it seems like any price differential above a few dollars a month 
would motivate customers to “game the system.” 
USF BENCHMARK
Question 18: What cost of providing basic telecommunications service in 
Washington should be deemed to be “high cost” (what is the benchmark figure)?  
How should it be determined?

Ideally, the national affordability rate (yet to be established) could be used 
for Washington.  However, if the State determines that Washingtonians are less 
able to afford universal services than the average American, then Sprint 
proposes that the state urban rate including SLC and taxes be used as the 
affordability benchmark for the state of Washington.  An affordability 
benchmark should be based upon what residential customers are able to pay for 
basic service. Presumably, the state urban rates are affordable given the high 
percentage of consumers who subscribe to universal services, and the limited 
use of the State’s telephone assistance program for low income consumers. It is 
quite likely that local rates could be increased to come closer to covering 
underlying costs (as implicit subsidies are eliminated), and still remain 
affordable. In that case, the affordability benchmark would correspondingly 
increase.  USF support should be available in instances where the economic 
costs of the CBG, as calculated in BCPM 3.1, exceed the affordability benchmark.
Question 19a: Should the benchmark be company specific?
No.  The affordability benchmark should be based on the national affordability 
benchmark, or a state-specific benchmark if Washingtonians are less able to 
afford universal service than the average American. Though consumer income 
levels may vary by geographic market, consumer income is not correlated to the 
companies that provide service.  Moreover, with the advent of competition the 
current situation in which an incumbent provides virtually all universal 
services within a geographic market will no longer hold.  
Question 19b: If so, what common factors should be used to derive the benchmark 
number for each company?  (If you are answering for a carrier and your answer 
to part one of this question is yes, please state in dollars the benchmark you 
recommend for your company and how you determined it.)

Sprint supports one statewide affordability benchmark.
Question 19c: Should the benchmark be higher or lower for some technologies 
based on the traditional differences in customer revenue associated with 
different technologies?

No.  USF should be based on the difference between cost, using least-cost 
technology, and an affordable rate benchmark.  Some customers may be willing to 
pay more for advanced services above and beyond universal services, or may be 
willing to pay more for cellular technology, but the affordability of (i.e., 
the ability to pay for) universal services should not vary with technology.   
If a revenue per line benchmark is used in place of an affordable rate 
benchmark, and the revenue includes all state and local services, then the 
amount of support for universal services will vary depending upon the 
deployment, penetration, and the prices charged for services that use advanced 
technologies, such as ISDN, Frame Relay, and ADSL--even though these revenues 
have no relationship to the cost of providing universal services.  The effect 
could be that rural rates would not be affordable nor comparable with urban 
rates. 
Question 19d: How should it be calculated for each technology?
Again, Sprint does not believe that the affordability benchmark should vary 
with the technology used to provide universal services.
 ELIGIBLE TELECOMMUNICATIONS CARRIERS
Question 20: What process should be used to designate eligible 
telecommunications carriers (ETCs)?  Should it be by petition?  By some other 
process?

Carriers requesting ETC status for a designated area should file a petition 
with the Commission.  Public notice should be given regarding the requesting 
company’s intentions.  Any interested party should be allowed to file comments 
with the Commission.  After reviewing the comments of all parties and 
determining whether the carrier has met all of the defined criteria, the 
Commission would then accept or deny the petition.
Question 21: What criteria should apply to the designation of eligible 
telecommunications carriers?

Sprint believes that the Commission should adopt the designation criteria 
outlined in section 254(e) and 214(e) of the Act, and as adopted by the Federal 
Communications Commission in its May 8, 1997 order (CC Docket No.  96-45, FCC 
97-157). Additional state-specific criteria could potentially add 
administrative costs to the process as telecommunications providers will have 
to develop different administrative procedures based on individual state’s 
criteria.  The criteria could be modified in the future if the Commission 
determined that the proposed criteria did not meet the needs of the state of 
Washington.
Question 22: At what geographic level (exchange, wire center, census block 
group or other) should ETCs be designated?

Under the Act, rural providers are to be designated at the study area level 
unless and until the state and the FCC, after taking into account the 
recommendations of the Federal-State Joint Board establish a different 
definition. Section 214(e)(5). Sprint advocates that cost and distribution of 
funds should be determined at a CBG level to ensure proper targeting of 
support. Sprint would be amenable to designation of serving areas for its 
Washington rural operations below the study area (e.g., to contiguous portions 
of the study area) as long as costing and distributions were calculated on a 
consistent or narrower basis. 
Question 23: Should a bidding process be utilized to select ETCs?  If yes, 
describe in detail how such a process would work.

No bidding process should be utilized to select ETCs.  Any carrier meeting the 
Commission’s ETC criteria should be granted ETC status.  Any bidding process 
whereby only a defined number of carriers could receive ETC status would deter 
competition by creating competitive advantages for select companies, and would 
be at odds with the intent of the Act.
Question 24: What facilities, if any, should an ETC be required to self-provide?
In order to receive universal service support, an ETC must provide universal 
services over its own facilities or through the purchase of UNEs from another 
carrier.  An ETC should not receive support if universal services are provided 
via the resale of another carrier’s service.  When a carrier is providing 
service via resale, the underlying carrier providing the facilities would be 
eligible for support.  
Question 25: Should the Commission adopt ETC basic service advertising 
guidelines that differ from the federal guidelines?


The Commission should adopt the federal advertising guidelines as set forth in 
Section 214(e)(1)(B) of the Act.
Question 26: For what service areas can the provision of support payments be 
reasonably administered?

Support levels should be administered at the CBG level.  Any statewide or wire 
center calculation would be inappropriate to determine the size of the 
universal service fund. Costs clearly vary by geography within a state as 
indicated by both the Hatfield and BCPM models.  Sprint advocates 
administration of the fund at a CBG level. In virtually every high cost wire 
center, while there are high cost customers in remote areas, there are a 
significant number of low cost customers in close proximity to the central 
office. If an explicit subsidy is based upon wire center average costs, there 
will be an incentive for new entrants to focus their marketing efforts to lower 
cost customers in the wire center.  This will allow the new entrants to reap a 
potential windfall of support, which in not the intent of the Act.  Even if new 
competitors are required to offer service in an entire wire center, they still 
possess the ability to aggressively target low cost customers.  To achieve 
results consistent with the intent of the Act, Sprint believes that support 
levels should be administered at the CBG level, or at least below the wire 
center level.
 FUNDING
Question 27: How should the USF be funded?  What is an “equitable” basis for 
all telecommunications providers and services to contribute to the USF?

Sprint believes that all telecommunications carriers offering intrastate 
services within the state of Washington should contribute to the universal 
service through an equal percentage surcharge on all intrastate retail 
revenue.  Section 254(f) of the Act states that “Every telecommunications 
carrier that provides intrastate telecommunications services shall contribute, 
on an equitable and nondiscriminatory basis, in a manner determined by the 
State to the preservation and advancement of universal service in the State.” 
Question 28: What telecommunications carriers must contribute to the USF?

Sprint agrees with the Commission’s recommendation to the legislature that 
Washington should require contributions from the same telecommunications 
carriers as the FCC, including private service providers that sell or lease 
capacity. 
Question 29: How often should USF contributions be collected?
USF contributions should be collected on a monthly basis.
Question 30: How should a carrier that also makes payments to the fund recover 
USF contributions?
The details should be determined by the fund administrator.  If payments and 
receipts are made at the same time, then netting the two amounts might reduce 
administrative costs.
 ADMINISTRATION OF THE UNIVERSAL SERVICE FUND
Question 31: Who should administer the USF and how should the administrator be 
selected?

A neutral third party, selected by the Commission, should administer the 
universal service fund.  The administrator should be independent of the 
entities that either draw from the fund or contribute to the fund.  The 
criteria for selection of an administrator should include the administrator’s 
ability to operate cost-effectively, as well as industry experience and 
competence. 
Question 32: What role should the industry have in selecting and administering 
the USF?
The industry should have an opportunity to provide input on the candidates for 
fund administration in order to express any concerns regarding competitive 
neutrality, conflict of interests, etc.
Question 33: What are the responsibilities of the Administrator?
The administrator would be responsible for assessing telecommunications 
carriers, and for distributing funds to the various qualified recipients.  
Additionally, the administrator would be responsible for preparing and filing 
the results of any audits of the fund performed by an independent third party.  
The administrator might also make recommendations to the Commission on the 
ongoing operation and modifications to the fund.
Question 34: How should the Administrator handle proprietary and other data 
received from telecommunications providers?

The data necessary to administer the USF should be handled in a proprietary 
manner.  Total industry aggregated dat