June 8, 1998



SENT BY ELECTRONIC MAIL AND ORIGINAL SENT AIRBORNE EXPRESS



Paul Curl, Acting Executive Secretary
Washington Utilities and Transportation Commission
1300 S. Evergreen Park Drive, SW
Olympia, WA 98504

RE: Docket No. UT-980311

Dear Mr. Curl:

 MCI Telecommunications Corporation (MCI) is sending these comments on 
Discussions of Procedural Aspects relating to Universal Service Issues for 
filing in the above referenced docket through electronic mail. MCI is also 
sending overnight, for Tuesday delivery, the original and twenty copies of 
these reply comments via Airborne Express. Please return one date-stamped copy 
in the self addressed stamped envelope.

 If you have further questions concerning this matter, please contact me at 
303.390.6106.

      Sincerely,



      Rogelio E. Peña
      Senior Attorney



Enclosures




BEFORE THE WASHINGTON UTILITIES AND
TRANSPORTATION COMMISSION


Re: Universal Service Issues Proceeding ) Docket No. UT-980311(r)


COMMENTS OF
MCI TELECOMMUNICATIONS CORPORATION

 Pursuant to The Washington Utilities and Transportation Commission’s 
(Commission) Notice of Proceeding, Opportunity to File Rulemaking Comments, 
dated May 4, 1998, MCI Telecommunications Corporation (MCI) submits its 
comments to the questions set forth in theCommission’s Notice.
     If the federal universal service fund is properly implemented there should 
be no need for a Washington state fund.  MCI has filed comments before the 
Federal Communications Commission (FCC), in its CC Docket Nos. 96-45 and 
97-160, recommending that the FCC clarify its rules to allow non-rural carriers 
to continue to book costs pursuant to 47 U.S.C. § 36.361.  These comments also 
recommend that the federal USF be 100% supported through interstate revenues.  
If this occurs, it should not be necessary to have a specific intrastate 
Washington fund.  Those MCI FCC comments are being submitted as Attachment 1 to 
these comments.   MCI is responding to these question under the hypothetical 
that a state fund will be necessary; however, MCI does not believe a state fund 
will be necessary if the federal fund is properly implemented and administered.

RESPONSES TO NOTICE QUESTION

A. GOAL OF UNIVERSAL SERVICE


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.

MCI Comment:  
If the federal USF program is properly implemented and administered as proposed 
in MCI’s attached FCC comments, there should be no need for a separate 
Washington USF. Notwithstanding this qualification, the goal of a universal 
service support (USS) system should be that all consumers who desire basic 
local exchange service should be able to receive quality service at just, 
reasonable and affordable rates, consistent with the federal Telecommunications 
Act of 1998 (the Act).  Basic local exchange service is that service which is 
essential to education, public health or the public safety.    47 U.S.C. 
Section 254(c)(A).
Consumer in all areas should also have access to advanced telecommunications 
and information services that are reasonably comparable.  The USS mechanism 
should be nondiscriminatory, specific, predictable, and portable.


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?

MCI Comment:
No, universal service is intend as a safety net for consumers — to ensure that 
consumers have telecommunications services.  It is not to act as a revenue 
guarantee for incumbent local exchange carriers.  The USS should not be 
considered to be a revenue neutrality mechanism or guaranteed rate of return 
program for incumbent local exchange carriers. 
 A competitive market allow companies to respond in a competitive manner, i.e., 
becom more efficient, offer new services, when it loses market share.  A 
company should not receive additional USF monies merely because it loses market 
share.  This would negate all the incentives inherent in a competitive market.


3. What relationship, if any, should payments from a universal service fund 
bear to changes in efficiency and productivity of the recipient.

MCI Comment:
There should be no relationship or correlation between the USS received and the 
efficiency and productivity of the recipient.  The USS amount should be based 
on the difference between the forward-looking economic costs of providing 
service, which is established in a Commission-selected cost model and the 
revenue benchmark of the incumbent local exchange carrier.  If a company’s 
efficiency and productivity decreases, the USS amount should not increase.  It 
is the responsibility of the carrier, especially in a competitive or emerging 
competitive market, to operate in the most efficient and productive manner so 
that the USS amount covers the cost it is intended to cover.


B. SUPPORTED SERVICES

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?

MCI Comment:
Universal service support should be provided only for the primary residential 
line of those consumers living in Commission designated high cost areas.  It 
must be remembered that it will be all Washington consumers of 
telecommunications services that will contribute to the USF and there must be 
reasonable efforts to keep the fund, and the concurrent surcharges that 
consumers pay to support the fund, at a reasonable level.  The USF should not 
be viewed as a “free lunch” for all services, to whatever amount or extent some 
consumers may desire.


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)?

MCI Comment:
No.  As stated above, it is MCI’s position that only primary residential lines 
should receive USS.  MCI has previously submitted comments in support of its 
position which sets out why business, small or large, should not receive 
support.  To attempt to provide a different level of support for businesses 
would unnecessarily expand and complicate the USS system.



6a. If you propose support for one primary line, particularly for only one 
residential primary line, how do you propose this to be administered?

MCI Comment:
The designation and reporting of which line is the primary residential line 
must be the responsibility of the consumer.  The responsibility for tracking 
this designation is an oversight function of the fund administrator.


6b. Could a family of three (two parents and a minor child) order three primary 
lines? Order two, one for each adult?

MCI Comment:
While a family of three can order lines, the family, if it is located in a 
Commission-designated high-cost area, can only designate one of those lines as 
primary for purposes of receiving USS.  Additionally, multiple lines are not 
necessary  to ensure that the family has access to basic local exchange 
service, which is “essential to education, public health or public safety, as 
required by the Act, section 254(c)(A).


6c.  How many primary lines could be ordered for a residence occupied by a 
group of college students? By persons who share an apartment?

MCI Comment:
As with the response to 6b. above, the number of lines ordered is irrelevant.  
It is also irrelevant if unrelated people occupy the same residence.  The USF 
program should support the primary residential line, no matter what the make-up 
of the residence, in high-cost areas.


6d. Could a residential customer order a primary residential line and a primary 
business line?

MCI Comment:
The support, in the case of a residential customer that orders a residential 
line and a business line, should be only for the primary residential line.

7a. If you propose support for only one business primary line, how do you 
propose this be administered?

MCI Comment:
As set out previously in MCI’s comments on this matter, business lines should 
not be subsidized by Washington consumers.


7b. Could a partnership order a primary line for each partner?

MCI Comment:
See response to 7a. above.


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?

MCI Comment:
See response to 7a. above.


8a. If a business or residential customer orders one line from each of three 
companies, would each be a primary line?

MCI Comment:
No.  First, only the residential customer could designate his or her line as 
primary for purposes of receiving USS.  Second, it would be the responsibility 
of the consumer to designate which line, if it had ordered concurrent 
residential lines from different companies, was primary for purposes of 
receiving USS.


8b. If not, which would be the primary line?

MCI Comment:
See response to 8a.


8c.  Who would make the determination? Who would verify it?

MCI Comment:
As stated in response to 8a, it is the responsibility of the consumer to 
designate which line is the primary line.  The verification and tracking of 
such a designation would be a function of the fund administrator, which also 
has the task of administering the portability of the subsidy.

9. Please estimate the cost, in detail, of administering a program which 
supports less than all lines.

MCI Comment.  
MCI has no estimates of the costs at this time.  However, considering that the 
Federal Communications Commission (FCC), along with other jurisdictions, i.e., 
Puerto Rico and California, have already decided that only primary lines will 
be supported, MCI believes that in today’s highly competitive computer software 
industry, some sort of tracking program will be designed that will allow 
adminstration of the program at reasonable costs. 


10. Should unsubscribed lines be supported?

MCI Comment:
No.


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?

MCI Comment:
Services that are not contained in the definition of basic local exchange 
“cores services” should not be subsidized.  Also, to the extent that some 
services may be designated as competitive they should not be subsidized by 
Washington consumers.


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?

MCI Comment:
If the competitive local exchange carrier (CLEC) is providing service through a 
combination of UNEs and its own facilities, the CLEC should receive the whole 
USS and there should be no allocation between companies.  However, if the CLEC 
is totally using UNEs to provide service, the FCC’s Universal Service rules set 
out, under rule 54.307(a)(3), that the carrier providing the customer’s line 
shall receive the support, not to exceed the cost of the UNEs.  Any remaining 
support will go the the ILEC to recover the economic costs of providing those 
UNEs in the designated high-cost area.

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).

MCI Comment:
USF should not be used to build infrasture, especially in a speculative 
manner.  The only exception to this might be possibly in the instance of 
unserved areas and in this instance an auction program should be used.  MCI has 
submitted comments in the Commission’s above-referenced Docket No. UT-970325,


C. AFFORDABILITY AND COMPARABILITY

14a. What rate(s) for basic telecommunications service are affordable in 
Washington?

MCI Comment:
Washington State’s high telephone penetration rates would tend to indicate that 
the current rates are affordable.  Otherwise, MCI has not made a determination 
of what should be considered affordable.


14b. Is there a different affordable rate for a business and a residence?

MCI Comment: 
USF should not subsidize business services.  Therefore, it is not necessary to 
establish an affordable business rates for purposes of USS.


14c. For a small business versus a large business?

MCI Comment:
See response to 14b.


15. Should business and residential lines be priced differently? If so, on what 
basis?

MCI Comment:
See response to 14b.



16a. If all lines are supported, should second lines be priced differently? If 
so, on what basis?


MCI Comment:
Only the primary residential line should receive USS, therefore the pricing of 
second lines is not an issue for the USF program.


16b.  Should there be an even greater charge for each additional line above two?

MCI Comment:
See response to 16a.


16c. Would this present administrative problems and expenses?

MCI Comment:
No, because support and pricing of second lines should not be a USF program 
issue.


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?

MCI Comment:
As long as the rate for the primary, residential basic local exchange line, 
which is necessary for access to essential services for purposed of education, 
public health and safety, is affordable for consumers, the requirements of the 
Act will be met.


17b. Will the access to telecommunications and information services be 
reasonably comparable?

MCI Comment:
As already noted above, Washington state has a high penetration rate, including 
second lines and availability of telecommunications and information services.  
This indicates that telecommunications and information services are priced 
affordably and do not require additional regulatory oversight.



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”?

MCI Comment:
 MCI is unable to provide an answer to this question at this time.


D. USF BENCHMARK

18. What cost of providing basic telecommunication service in Washington should 
be deemed to be “high cost” (what is the benchmark figure)? How should it be 
determined?

MCI Comment:

The cost used in the subsidy calculation should be the forward-looking economic 
cost (FLEC) of providing service, based on the cost model chosen by the 
Commission.  In order to provide the incentive for efficiency in a market that 
is not yet competitive, it is appropriate to base the subsidy on the state-wide 
average costs and revenue benchmark. The high cost benchmark should be 
considered the difference between the state-wide average FLEC for primary 
residential lines in a non-rural ILEC study area less its statewide revenues.  
For every dollar of explicit subsidy collected, the current implicit subsidies 
from services priced above costs must be decreased a dollar, or customers will 
be double billed and LECs will enjoy a windfall double recovery.
 In calculating FLEC, it is possible to perform the analysis at varying levels 
of geographic disaggregation.  The smaller the area over which the cost 
calculations are performed, the less the averaging of higher and lower cost 
customers that would mask high cost customers, and thus the greater the subsidy 
calculation.  But the need for a disaggregated, explicit high cost Universal 
Service subsidy fund for non-rural LECs should be tied directly to the extent 
to which the current regime of implicit subsidies are being eroded by 
competition.  
 Competitive entry will largely be driven by unbundled network element (UNE) 
loop rates.  Where UNE loop rates are deaveraged to reflect underlying costs, 
entry can occur in low cost areas and an explicit Universal Service fund will 
be needed that is based on those deaveraged loop rates.  The less deaveraging 
of UNE loop rates, the less likely local competition will be able to develop.  
Consequently, the degree of disaggregation used in the Universal Service 
subsidy calculations need only reflect the level of deaveraging used to set UNE 
loop rates.  At the extreme, if UNE loop rates are not deaveraged at all, then 
the high averaged loop rate will preclude wide scale competition in low cost 
areas and the Universal Service subsidy can, and should, be calculated 
study-area-wide, based on the single, averaged loop rate.  In sum, sound public 
policy principles suggest that the calculations for the explicit Universal 
Service fund be performed over the same cost zones that each state has used for 
setting loop rates.


19a. Should the benchmark be company specific?

MCI Comment.  
Yes, the support benchmark should be company specific. 


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).

MCI Comment:
The support or revenue benchmark should include revenues from local services, 
access services and discretionary services to the extent that rates for  access 
and discretionary services have not been reduced to forward-looking economic 
costs.  The revenues from the whole operating area of the ILEC should be 
included.


19c.  Should the benchmark be higher or lower for some technologies based on 
the traditional differences in customer revenue associated with different 
technologies.

MCI Comment.  
The USF program should only support residential basic local exchange service; 
therefore, it is not necessary to establish a revenue benchmark for any other 
service(s).


19d. How should it be calculated for each technology?

MCI Comment:
See response to 19c.


D. ELIGIBLE TELECOMMUNICATIONS CARRIERS

20. What process should be used to designate eligible telecommunications 
carriers (ETCs)? Should it be by petition? By some other process?

MCI Comment:
The responsibility for initiating the process should lie with the carrier 
desiring the ETC status; therefore, a petition process seems appropriate.


21. What criteria should apply to the designation of eligible 
telecommunications carriers?

MCI Comment:
Section 214(e) of the Act sets forth the criteria for ETC status.  The 
Commission should not go beyond this criteria.


22. At what geographic level (exchange, wire center, census block group or 
other) should ETCs be designated?

MCI Comment:
The ILEC’s study area should be the geographic level used to designate a 
support area.  
It should be noted that while it should be mandatory that an ETC be required to 
serve the entire designated support area, it is not in the best interest of 
both consumers and the development of competition to confine all entrants to 
the same geographical levels that are required for those seeking ETC status.


23. Should a bidding process be utilized to select ETCs? If yes, describe in 
detail how such a process would work?

MCI Comment:
No.  The bidding process should only be utilized in the instance of an unserved 
area.


24. What facilities, if any,  should an ETC be required to self-provide?

MCI Comment:
It is not necessary for an ETC to provide any facilities in order to receive 
funding.  The FCC concluded in para. 156 of its Universal order that the intent 
of the Act was not to “deny designation as eligible to a carrier, given that 
the Act contemplates the use of unbundled network elements as one of the three 
primary paths of local market.” Additionally, the FCC’s rules, at section 
54.307(a)(3), designate how those carriers that provide service totally through 
UNEs will receive USS funds.


25. Should the Commission adopt ETC basic service advertising guidelines that 
differ from the federal guidelines?

MCI Comment:
No.


26. For what service areas can the provision of support payments be reasonably 
administered?

MCI Comment:
All jurisdictions in the state.


E. FUNDING

27. How should the USF be funded? What is an “equitable” basis for all 
telecommunications providers and services to contribute to the USF?

MCI Comment:
The USF should be funded by an explicit surcharge on all end-user retail 
revenues.  An “equitable” basis means that all providers and all services 
contribute, based on the same formula or percentage.


28. What telecommunications carriers must contribute to the USF?

MCI Comments:
All telecommunication providers of intrastate services should contribute.  All 
providers of those services as described in paragraph 780 of the FCC’s 
Universal Service Order, May 8, 1997, should contribute.


29. How often should USF contributions be collected?

MCI Comment:
Contribution should be collected monthly by the carrier through the end-user 
surcharge. The funds should be remitted to the administrator quarterly.  The 
collection of the USF surcharges should commence one quarter prior to any 
disbursements.



30. How should USF contributions be recovered by a carrier that also makes 
payments to the fund?

MCI Comments:
The ETC should receive support for the designated support area net of its own 
USF obligation.


F. ADMINISTRATION OF THE UNIVERSAL SERVICE FUND

31. Who should administer the USF and how should the administrator be selected.

MCI Comment:
The fund should be administered by a neutral third party selected by an RFP 
process. Neither WECA nor NECA would qualify as a neutral third party.


32. What role should the industry have in selecting and administering the USF?

MCI Comment:
The Commission should have sole responsibility in selecting the USF 
administrator.


33. What are the responsibilities of the Administrator?

MCI Comment:
MCI supports Rule 10 of the rules attached to AT&T’s comments in this 
proceeding, which sets forth the selection criteria, qualifications, duties, 
responsibilities and oversight authority of the fund administrator.


34. How should the Administrator handle proprietary and other data received 
from telecommunications providers?

MCI Comment:
MCI supports AT&T Rule 10.10.


35. Are changes to RCW 42.17, public disclosure, needed for administration of 
the fund?

MCI Comment:
MCI concurs with AT&T’s response to this question.


36. What authority should be granted to the Administrator to ensure program 
compliance of the individual USF contributors and recipients?

MCI Comment:
MCI concurs with AT&T response 36.


37. Who should perform audits of the USF (the program and the fund, not the 
participants) and how often?

MCI Comment:
An independent auditor, chosen by the Commission, should audit the USF.  This 
should occur no less than once every three years or any more than once a year.  
The Commission can determine how often this should occur.  However, upon proper 
showing of need, a company could call for a special audit.


38. How should the costs associated with the administration of the USF be 
recovered?

MCI Comment:
Reasonable expenses for administration of the fund should be recovered from the 
USF.


39. What operations systems of ETCs and contributing carriers will be impacted 
by administration of the USF?

MCI Comment:
Except for how the surcharge is billed, which should be equitable among all 
carriers, other operating systems of ETCs is an issue best left to the 
resolution of individual carriers based on their own business needs.


40. How can administration of the USF most efficiently utilize the operations 
systems of ETCs and contributing carriers?

MCI Comment:
Any funding mechanism must minimize administrative costs.  Efficiency requires 
that the funds be easily billed and collected by each company.  If the 
Universal Service charge is not made explicit and collected in a competitively 
neutral manner, it will appear to customers to be a price increase by only some 
competitors, thus hurting those companys’ images, as well as placing them at a 
price disadvantage in relation to other competitors. If a company is forced to 
be a collector for other companies, which is currently the problem with the 
federal PICC, and has no simple way to collect the assessments, it may be 
forced to use collection methods that annoy customers and therefore could harm 
its reputation.
 A specific, explicit end-user surcharge ensures that the surcharge is not 
taxed thus avoiding the transaction costs associated with taxation.  This also 
avoids the problems associated with the surcharge being included in the excise 
tax on the total bill.  Likewise a surcharge which is passed through to the 
end-user in rates results in a higher tax bill to the consumer and does not 
provide the consumer with full information as to the cost associated with the 
USF.


G. DISTRIBUTIONS FROM THE UNIVERSAL SERVICE FUND

41. With what frequency should the Administrator distribute USF support to each 
ETC?

MCI Comment:
As with the contributions, the distributions of USF to each ETC should be on a 
quarterly basis.  There could be an exception, upon a showing of need, for 
smaller carriers.


42. What basis should be used for distributing funds to ETCs?

MCI Comments:
First, the basis for distributing USF support to ETCs first should be a 
demonstrated need for a designated area.  The FLEC from the Commission-approved 
cost model, less the statewide average revenue benchmark of the ILEC results in 
the cost exceeding revenues, whic