Before the WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of ) ) Universal Service Rulemaking Proceeding ) Docket No. UT-980311 ) COMMENTS OF WESTERN WIRELESS CORPORATION Gene DeJordy Michele C. Farquhar Executive Director of Regulatory Affairs David L. Sieradzki WESTERN WIRELESS CORPORATION HOGAN & HARTSON, L.L.P. 3650 - 131st Ave. S.E., Suite 400 555 13th Street, N.W. Bellevue, WA 98006 Washington, D.C. 20004 (425) 586-8055 (202) 637-5600 Counsel for Western Wireless Corporation Dated: June 8, 1998 - - TABLE OF CONTENTS Page INTRODUCTION AND SUMMARY 1 I. GOAL OF UNIVERSAL SERVICE 4 II. SUPPORTED SERVICES 6 III. AFFORDABILITY AND COMPARABILITY 9 IV. USF BENCHMARK 11 V. ELIGIBLE TELECOMMUNICATIONS CARRIERS 12 CONCLUSION 14 - - Before the WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of ) ) Universal Service Rulemaking Proceeding ) Docket No. UT-980311 ) COMMENTS OF WESTERN WIRELESS CORPORATION Western Wireless Corporation (“Western Wireless”), by its attorneys, submits these comments on the rulemaking issues in this proceeding, in response to the Notice of Proceeding issued on May 4, 1998. INTRODUCTION AND SUMMARY Western Wireless is a cellular and personal communications service (“PCS”) carrier specializing in the provision of high-quality, affordable, and reliable wireless services to subscribers in both rural/high-cost and higher-density urban areas. Western Wireless currently provides commercial mobile radio service (“CMRS”) to more than 700,000 subscribers under licenses in Washington and 21 other states, covering over 60 percent of the continental United States as well as Hawaii. Western Wireless provides PCS in southern Washington and will soon commence service in Seattle and the surrounding communities, as well as eastern Washington. Western Wireless has significant experience providing high-quality wireless telecommunications in high-cost and urban areas across the U.S., over both fixed wireless local loops and conventional mobile cellular and PCS technologies. In Nevada, Western Wireless provides basic local exchange service to approximately 50 residential consumers using wireless local loops. In Reese River Valley and Antelope Valley, Western Wireless provides fixed wireless local loop service to consumers pursuant to a stipulation reached between Western Wireless, Nevada Bell, and the Nevada Public Service Commission. Western Wireless makes available basic telecommunications and enhanced services to these consumers who otherwise would not have access to telecommunication services. Western Wireless is confident that it can provide basic and enhanced services to residential and business consumers in many rural areas more efficiently than the incumbent local exchange carriers (“ILECs”), thereby providing tremendous value to consumers while advancing the public interest. Consumers in high-cost areas should be able to select among a broad array of options in supported telecommunications services, including services from carriers like Western Wireless and other new competitors. To ensure that consumers have these choices, the Commission must design a universal service program that, as directed by the Washington state legislature, is both “competitively neutral and technologically neutral.” / Chapter 337, E.S.S.B. No. 6622, Section 1(1), Laws of 1998. See also Federal-State Joint Board on Universal Service, First Report and Order, 12 FCC Rcd 8776, 8801-06, ¶¶ 46-55 (1997) (“FCC Universal Service Order”) (establishing competitive neutrality and technological neutrality as goals of federal universal service program)./ This should benefit residents and businesses in high-cost areas while promoting local competition throughout the state. In particular, Western Wireless urges the Commission to adhere to the following three overall goals in designing every feature of its universal service program: (1) Ensure that wireless carriers can participate. For example, in defining eligible carriers’ service areas and other aspects of the support program, the Commission should ensure that there is sufficient flexibility to enable commercial mobile radio service (“CMRS”) providers and other competitive local exchange carriers (“CLECs”) to participate. The Commission must take care to avoid establishing definitions and making other decisions that, inadvertently, could have the effect of precluding wireless carriers from participating in the program. Such decisions would contravene the Washington legislature’s goals of competitive and technological neutrality, and would harm consumers. (2) Provide the same level of support to all carriers regardless of their technology, rate structure, and regulatory status. Thus, the program should provide a particular dollar amount per line per month, and the same revenue support should be available for customers who choose to take service from an ILEC, a CLEC, or a CMRS provider. Moreover, the differences between various carriers’ rate structures and service offerings, including the service areas rated as “local,” should not be relevant for universal service support purposes. Unlike ILECs, CMRS providers typically offer local service under multiple options, ranging from a low monthly rate and usage charges, to a higher monthly rate and lower usage charges. The geographic area that CMRS providers treat as “local” is typically much larger than that of most ILECs; and CMRS carriers are not subject to state rate regulation. The same level of universal service support revenue should be available regardless of the rate structure employed. (3) Keep the program as simple as possible. This will make it easier and less administratively burdensome for carriers to comply -- and for consumers to benefit. This Commission may be able to avoid some of the unnecessary complexity that currently plagues the federal universal service support program. At the same time, given the existence of a parallel federal program, there may be advantages in designing the state program to mirror the federal program in certain respects. Our detailed answers to some (but not all) of the Commission staff’s questions, set forth below, are designed to advance these overall policy objectives. I. GOAL OF UNIVERSAL SERVICE 1. What should be the goal of a Washington universal service support system and fund (USF)? As discussed above, pursuant to the Washington legislature’s directive, the goals of the program must be to ensure that the system is “competitively neutral and technologically neutral.” / See supra note 1 and accompanying text./ This will benefit all classes of consumers, by assuring that they can obtain supported telecommunications from the widest possible selection of carriers and technologies. 2. Should the USF program guarantee sufficient operating revenue to companies serving high-cost locations no matter how much market share is lost to competitors? No. The program should not be designed as a revenue guarantee to ILECs or any other carriers. Such an approach would unreasonably favor the carriers whose revenue is guaranteed, and would not be competitively neutral. Rather, as with the federal program, the Washington USF program should provide revenue support for the difference between the cost of service and a benchmark average total revenue per line in each relevant area. / FCC Universal Service Order, 12 FCC Rcd at 8899, ¶ 223./ To promote competition, the program should ensure that carriers receive support only to the extent that they provide service; if consumers choose to take service from new entrants, the support should follow the consumers. 3. What relationship, if any, should payments from a universal service fund bear to changes in efficiency and productivity of the recipient? None. The forward looking cost model used to determine the level of support should be based upon a highly efficient technology. Once the level of support per line is established in each area, it should remain constant regardless of the costs incurred by any particular carrier. This would ensure competitive neutrality, and would create incentives for carriers to improve their efficiency and productivity. II. SUPPORTED SERVICES 8a. If a business or residential customer orders one line from each of three companies, would each be a primary line? 8b. If not, which of the three would be the primary line? At this time, Western Wireless does not take a position on whether universal service support should be limited to a single primary line or should be available to additional lines. If, however, the Commission chooses to limit support to a single primary line from only one carrier, then it is critical that customers have the choice of deciding which line -- and which carrier’s service -- should get the support to which the customer is entitled. For example, residential or business customers could decide to target universal service support to their cellular or PCS phone line, rather than their wireline line -- indeed, they might decide to rely exclusively on wireless service and drop their wireline service if such support is available -- and the program should ensure that they have the opportunity to do so. This is the only outcome that is competitively and technologically neutral. Similarly, if the Commissioner decides to fund more than a single primary line, then customers should have the opportunity to buy supported services from multiple carriers, including wireless providers as well as ILECs. 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? First, the universal service program is intended to make available basic telecommunications services to all American at affordable rates. Consumers in high-cost areas who are entitled to supported services should also be able to obtain additional features or services from the carrier of their choice. For example, the additional features they may decide to obtain in conjunction with a supported service may include call waiting, voice mail, call blocking, and mobility. A specified amount of support should be available per line, per month, and subscribers should be free to choose to buy supported service -- with or without additional features -- from any carrier operating in the area. Second, the questions appear to be premised on a relationship between the universal service support program and retail rate levels in rural and urban areas. But the Commission need not introduce such unnecessary complexity, for these issues should be dealt with separately. In particular, with respect to CMRS providers and any other carriers that are not subject to rate regulation, the Commission should not (and in the case of CMRS providers, cannot) take any position on the relationship between the rate levels in rural and urban locations for either basic services or additional features. / See infra responses to questions 15, 16a, and 17a./ Finally, the Commission should not attempt to unnecessarily expand the universal service support program to include enhanced services. These services should be provided at market prices. In a competitive universal service program, all consumers stand to benefit from the innovative offerings of carriers. 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? Universal service support should be provided to the carrier providing retail service to customers -- in this case, the carrier purchasing UNEs -- regardless of what technologies or underlying facilities that retail carrier uses to provide that service. 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? Yes. As noted above, Western Wireless is currently providing universal service over wireless local loops to customers in an area of rural Nevada that previously was not served by any telecommunications carrier. This service is supported in significant part by an intrastate universal service program. The Commission should design the Washington USF to enable carriers to provide supported services to customers in all areas, including consumers located in extremely remote, unserved areas of the state. III. AFFORDABILITY AND COMPARABILITY 14a. What rate(s) for basic telecommunications service are affordable in Washington? Rather than attempting to select an “affordable” rate for telecommunications service in Washington, the Commission should use, as a benchmark, the average revenue per line (either nationwide or statewide), including monthly revenues for toll, access, and vertical services as well as basic telephone service. / FCC Universal Service Order, 12 FCC Rcd at 8919-24, ¶¶ 257-67. The FCC determined this benchmark, based on nationwide average revenues per line, to be approximately $31 per month for residential lines and $51 per month for single-line businesses. Id. at 8924, ¶ 267./ This approach promotes competitive and technological neutrality and avoids Commission review of the various rate structures and geographic service areas of potential universal service providers. In addition, this approach would be administratively simple because it matches the FCC’s approach. The Washington universal service program could simply fund 75% of the difference between cost and this benchmark (or whatever percentage the FCC ultimately decides will not be funded by the federal program). Moreover, unlike a benchmark based on subjective assessment of “affordability,” the recommended approach would enable the Commission to select a benchmark level objectively, based on available data. 14b. Is there a different affordable rate for a business and a residence? 14c. For a small business versus a large business? Western Wireless takes no position on these questions, but observes that another advantage of a benchmark based on average revenues per line, rather than a subjective “affordable” level, is that it makes it unnecessary to answer these difficult questions. Instead, objective data could be used either to derive a single benchmark for all residential, small, and large business lines (based on the overall average revenues from all these types of lines), or to derive separate benchmarks for different line types (based on the average revenues for each type of line). 15. Should business and residential lines be priced differently? If so, on what basis? 16a. If all lines are supported, should second lines be priced at the same level as primary lines? As discussed above, there is no need for the Commission to resolve pricing issues in the context of establishing a universal service policy. / See responses to Questions 11 and 14a above. / Additionally, if all lines are supported, second lines should be supported at the same level as primary lines. 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? If the Commission designs a program that provides a reasonable amount of universal service support per line, based on benchmarks derived from average revenue figures, the result will ensure that rates and services in rural and high cost areas are “reasonably comparable” to those in urban areas. It should be noted that the Commission could satisfy the Act’s general requirement that rates in high-cost and non-high-cost areas be “reasonably comparable” whether it decides to provide support for primary lines only or to provide support for all lines. / It is worthwhile to contrast the vague and general language of the “reasonably comparable” standard in Section 254(b)(3) with the very specific language of the requirement in Section 254(g) that interexchange rates charged in rural and high-cost areas “shall be no higher than the rates charged . . . in urban areas.” 47 U.S.C. §§ 254(b)(3), 254(g)./ There is no need to engage in a more specific comparison of rate levels in different geographic areas. IV. USF BENCHMARK 19a. Should the benchmark be company specific? 19c. Should the benchmark be higher or lower for some technologies based on the traditional differences in customer revenue associated with different technologies? No to both questions. The cost benchmark must be uniform across companies and across technologies to ensure that universal service support is truly portable among companies, including carriers that may use different technologies. Company-specific or technology-specific funding would violate the state legislature’s directive that the program be “technologically neutral and competitively neutral.” / Chapter 337, E.S.S.B. No. 6622, Section 1(1), Laws of 1998./ V. ELIGIBLE TELECOMMUNICATIONS CARRIERS 20. What process should be used to designate eligible telecommunications carriers (ETCs)? Should it be by petition? By some other process? The Commission should determine, “upon its own motion” / 47 U.S.C. § 214(e)(2)./ in advance, that every carrier in the state that provides the designated local telecommunications services be eligible to be deemed an ETC with respect to the geographic service areas in which it offers service (except in areas served by “rural telephone companies”). A carrier that desires to be an ETC should be required only to notify the Commission that it will provide the supported services to consumers within its service area. To the extent that waivers are necessary (e.g., with respect to the FCC’s toll blocking requirement and with respect to the E-911 requirement for wireless carriers), / Petitions of Yelm Tel. Co., et al., For Designation As An Eligible Telecommunications Carrier, Docket Nos. UT-970333, et al., Order Designating Eligible Telecommunications Carriers (Dec. 23, 1997) (“WUTC ETC Order”) at 13-14./ the Commission should issue such waivers generically in advance rather than requiring each carrier to seek them in separate petitions. This approach would avoid the administrative burden of having to seek designation as an ETC by petition, and would promote competition by ensuring that all carriers could be deemed ETCs. With respect to rural telephone company service areas, which under Section 214(e)(2) of the Act are subject to a different legal standard for designation of ETCs, the Commission should grant ETC status liberally upon petition by an eligible carrier, consistent with its current practice. / Id., passim./ 21. What criteria should apply to the designation of eligible telecommunications carriers? Compliance with the minimal requirements found in Section 214(e) of the Federal Act and Sections 54.201 - 54.207 of the FCC’s rules should be the only criteria that apply to the designation of ETCs. 22. At what geographic level (exchange, wire center, census block group or other) should ETCs be designated? Consistent with the FCC’s order and this Commission’s precedent, ETC “service areas” should be designated, pursuant to Section 214(e)(5), at the smallest practicable geographic level. / FCC Universal Service Order, 12 FCC Rcd at 8879-80, ¶¶ 184-85; WUTC ETC Order./ As the FCC has observed, this would be the optimal approach to ensure competitive neutrality, / FCC Universal Service Order, 12 FCC Rcd at 8879-80, ¶¶ 184-85./ given that ETCs are required to provide service upon demand to all consumers throughout the designated “service area.” The Commission should take account of one special issue confronting CMRS providers: the geographic areas defined in their FCC licenses do not necessarily correspond with the areas defined by conventional ILEC “exchanges” or “wire centers.” Western Wireless does not necessarily object to the use of ILEC “exchanges” or “wire centers” to define ETC “service areas,” which would be administratively simple for most carriers (although a definition of “service areas” based on the smaller “wire center” geographic area would be superior to the larger “exchange” area). But if a wireless carrier’s FCC-authorized geographic footprint does not include all of an ILEC “exchange” or “wire center,” then the Commission should establish ETC “service areas” for wireless carriers (and possibly also for others, to ensure competitive neutrality) based on the portion of the “exchange” or “wire center” that the wireless carriers are licensed to serve. CONCLUSION For the reasons stated above, the Commission should design the Washington universal service program in a competitively and technologically neutral manner, and should: (1) ensure that wireless carriers can participate; (2) provide the same level of support to all carriers regardless of their technology, rate structure, and regulatory status; and (3) keep the program as simple as possible. Respectfully submitted, WESTERN WIRELESS CORPORATION By: _____________________________ Gene DeJordy Michele C. Farquhar Executive Director of Regulatory Affairs David L. Sieradzki WESTERN WIRELESS CORPORATION HOGAN & HARTSON, L.L.P. 3650 - 131st Ave. S.E., Suite 400 555 13th Street, N.W. Bellevue, WA 98006 Washington, D.C. 20004 (425) 586-8055 (202) 637-5600 Counsel for Western Wireless Corporation Dated: June 8, 1998