BEFORE THE WASHINGTON UTILITIES & TRANSPORTATION COMMISSION

IN THE MATTER OF:

DETERMINING COSTS FOR UNIVERSAL SERVICE,

DOCKET NO. 980311(r)

COMMENTS OF UNITED STATES CELLULAR CORPORATION


 United States Cellular Corporation ("USCC") hereby submits the following 
comments in response to the Commission's Notice of Proceeding: Opportunity to 
File Rulemaking Comments dated May 4, 1998.
 I.  INTRODUCTION

 USCC is a nationwide commercial mobile service provider offering wireless 
telecommunications services in 26 states.  USCC is predominantly a rural 
wireless carrier.  It switched on the first free-standing wireless Rural 
Service Area ("RSA") in the continental United States.  USCC, through its 
subsidiaries and affiliates, holds FCC licenses to provide cellular service to 
the following metropolitan statistical area ("MSAs") and RSAs in the State of 
Washington:  Yakima (MSA), Richland (MSA), Washington RSA No. 4 (Grays Harbor), 
Washington RSA No. 5 (Kittitas), Washington RSA No. 6 (Pacific) and Washington 
RSA No. 7 (Skamania).  On December 23, 1997 the Commission entered an order 
designating USCC, as an Eligible Telecommunications Carrier ("ETC") for 
purposes of eligibility to draw from the federal universal service fund ("USF") 
for provision of defined telecommunications services in high-cost areas 
pursuant to 47 U.S.C. § 254(b).  USCC sought and received ETC designation for 
10 local exchange company exchanges of either US West Communications, Inc. ("US 
West") or GTE Northwest, Incorporated ("GTE").
 USCC fully plans to participate in the federal USF program. However, on a 
state level USCC contends that this Commission does not possess the authority 
to require CMRS providers such as USCC to make contributions to a state 
universal service fund.  Indeed, the question of a state's ability to require 
USF contributions from CMRS providers has not been resolved and is being 
litigated at the federal level.  At least two federal courts that have 
addressed this issue have reached differing conclusions.See Metro Mobile Courts 
of Fairfield County, Inc., et al. v. Connecticut Dept. of Public Utility, 1996 
WL 737480 (Ct. Sup. Ct. 1996) and Mountain Solutions, Inc. v. State Corp. 
Commission of State of Kansas, 966 F.Supp. 1043 (D. Kan. 1997).  See also, 
Memorandum Opinion and Order in the Petition of Pittencrieff Communications, 
Inc. for a declaratory ruling regarding preemption of the Texas Public Utility 
Regulatory Act of 1995, FCC 97-343, dated October 2, 1997, on appeal before the 
D.C. Circuit in Washington, D.C.  
 Federal law clearly preempts state rate and entry regulation of wireless 
carriers.  In addition, in Washington, the law clearly exempts CMRS providers 
from the remaining Commission regulations.  See RCW 80.36.370(b), 80.66.010.  
Accordingly, USCC opposes any system of regulations or rules from this 
Commission on the issue of universal service.  However, because it is important 
for this Commission to hear from the unique perspective of wireless carriers if 
it is going to engage in universal service rule making that may impact wireless 
carriers, USCC submits the following responses to the questions for universal 
service rulemaking posed by the Commission.
 As a background to its responses, as a wireless carrier, USCC wishes to 
impress upon the Commission certain fundamental principles underlying federal 
universal service support.  It is important for the Commission to recognize 
that eligibility to be designated as an ETC is in no way limited because a 
carrier uses wireless technology.  The FCC Report and Order, In the Matter of 
Federal-State Joint Board on Universal Service, CC Docket No. 96-45, released 
May 8, 1997 ("FCC Order") stresses the importance of "competitive neutrality."  
(See, FCC Order § 61, 71, 79).  In fact, the FCC recognizes that, especially in 
rural areas, wireless carriers can provide a unique benefit to customers by 
offering low cost services.  (FCC Order § 190).
 The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 80, 47 
U.S.C. 151 et seq., ("Telecommunications Act") places requirements on the FCC 
and the states to define and fund affordable, high quality basic services in 
rural, high cost and insular areas.  At the same time, state commissions must 
encourage the development of competition throughout all sectors of the 
telecommunications industry. While competition for local exchange landline 
service has occurred in fits and starts, wireless service was created in a 
competitive environment and wireless providers have experienced substantial 
annual percentage gains in customers.  Moreover, as recognized by the FCC, 
wireless providers have the potential of satisfying universal service 
requirements in rural and high cost areas at a cost potentially less than 
landline companies.  The benefits to customers of incorporating wireless 
providers into the solution to universal service requirements are substantial 
in this state.  Consequently, if wireless providers are to be part of the 
answer for providing universal service in high cost areas, they should not be 
encumbered by any state regulatory scheme. Wireless service represents the 
success of the competitive market paradigm, which serves as the basis for 
telecommunications policy today, under both state and federal 
telecommunications law.
 II.  RESPONSE TO SPECIFIC QUESTIONS

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 their answer would have for various 
consumer groups, including residential and small and large business consumers?
 Answer:  Any USF system must strive to meet the following goals:
•A USF fund should, first and foremost, fund affordable high-quality basic 
services in rural, high cost and insular areas;
•A USF fund should encourage the development of competition to maximize 
consumer choice;
•A USF program must be technology neutral.
•A USF program must be competitively neutral.
•A USF program with minimum regulatory features should be designed.
•A USF program should be designed to support the high cost customer rather than 
a carrier.
 If these goals are achieved, consumers will benefit by having more choices due 
to an increased number of providers and the funds to enable freedom of choice.  
 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?
 Answer:  No.  This would constitute a return to traditional "rate of return" 
regulation which is inconsistent with the goals of promoting competition, 
letting the market determine outcomes and competitive and technological 
neutrality.
 3. What relationship, if any, should payments from a universal service fund 
bear to changes in efficiency and productivity of the recipient?
 Answer:  To the extent the recipient of universal service funds provides the 
required services at a cost lower than the benchmark costs used to determine 
the payment amount, the recipient will be incented to be more efficient and 
productive.
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?
 Answer:  Because a wireless provider need not be a customer's primary carrier 
to be eligible for ETC status according to the FCC, USF support should be 
available to a wireless carrier even if it is not the customer's primary 
carrier.  As the FCC stated:  "We need not adopt at this time a rule stating 
that a wireless carrier may receive support only if the wireless carrier is a 
customer's primary carrier (see FCC Report and Order on Universal Service, 
Docket No. 94-45 ("Report and Order") dated May 8, 1997, ¶ 146).
 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)?
 Answer:  USCC would not vary USF support based upon customer class 
distinctions.
 6a. If you propose support for one primary line, particularly for only one 
residential primary line, how do you propose this be administered?
 Answer:  Not applicable.
 6b. Could a family of three (two parents and a minor child) order three 
primary lines?  Order two, one for each adult?
 Answer:  Not applicable.
 6c. How many primary lines could be ordered for a residence occupied by a 
group of college students?  By persons who share an apartment?
 Answer:  Not applicable.
 de. Could a residential customer order a primary residential line and a 
primary business line?
 Answer:  Not applicable.
 7a. If you propose support for only one business primary line, how do you 
propose this be administered?
 Answer:  Not applicable.
 7b. Could a partnership order a primary line for each partner?
 Answer:  Not applicable.
 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?
 Answer:  Not applicable.
 8a. If a business or residential customer orders one line from each of three 
companies, would each be a primary line?
 Answer:  Not applicable.
 8b. If not, which of the three would be the primary line?
 Answer:  Not applicable.
 8c. Who would make the determination?  Who would verify it?
 Answer:  Not applicable.
 9. Please estimate the cost, in detail, of administering a program which 
supports less than all lines.
 Answer:  Not applicable.
 10. Should unsubscribed lines be supported?
 Answer:  No.  Customers -- not lines -- should be supported by the USF program.
 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?
 Answer:  State rate regulation for wireless carriers is federally preempted.  
These services should not be subsidized.  The market for these services should 
determine these prices.
 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?
 Answer:  The ETC providing retail service to the end user customer should 
receive the USF support.
 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.)
 Answer:  USCC has no position on this question.  According to federal law, 
wireless carriers cannot be required to serve as carriers of last resort.
AFFORDABILITY AND COMPARABILITY
 14a. What rate(s) for basic telecommunications service are affordable in 
Washington?

 Answer:  In USCC's view, the rates it currently charges are affordable to its 
wireless customer.  However, for purposes of a temporary starting point, the 
Commission could use landline rates as a benchmark affordable rate.
 14b. Is there a different affordable rate for a business and a residence?
 Answer:  See response to No. 14.

 14c. For a small business versus a large business?*
 Answer:  See response to No. 14.
 15. Should business and residential lines be priced differently? If so, on 
what basis?*
 Answer:  See response to No. 14.
 16a. If all lines are supported, should second lines be priced at the same 
level as primary lines?
 Answer:  See response to No. 14.
 16b. Should there be an even greater charge for each additional line above two?
 Answer:  See response to No. 14.
 16c. Would this present administrative problems and expenses?*
 Answer:  USCC has no position on this 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?
 Answer:  USCC has no position on this question.

 17b. Will the access to telecommunications and information services be 
reasonably comparable?
 Answer:  USCC has no position on this 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?"*
 Answer:  See response to No. 14.
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?
 Answer:  As a temporary starting point for setting a USF benchmark cost, the 
Commission could continue to determine the company-specific costs of the 
ILEC's.  That is because for the near future ILEC's, with their networks 
already in place, will continue to be the most ubiquitous providers of 
universal service.  Thus, the forward-looking costs of the ILEC's, which are 
yet to be established in other Commission proceedings, could be used to 
determine the amount of required universal service support.
 The issue of USF cost determination for wireless carriers is new to them and 
to the Commission.  What would work for landline carriers will not work for 
wireless carriers.  At this time, USCC opposes the calculation of different 
cost benchmarks for different technologies.  To do so, would discourage 
competitive entry, create an administrative nightmare and engender significant 
opposition from the non-regulated community, such as the wireless industry.  
Wireless carriers are not regulated by this Commission.  Requiring the 
submission of cost data from wireless carriers would impose impermissible 
regulations on these carriers and severely chill wireless participation in 
meeting USF goals.
 Until there is a clearer understanding of the wireless industry by the 
Commission and a clearer understanding of the Commission's USF policies by the 
wireless industry, use of ILEC costs as a benchmark would be appropriate.  
Using the ILEC's costs as the benchmark would reduce regulatory burdens and 
invite competitive entry.  If a new provider with new technology can provide 
service at a cost lower than the ILEC, such carrier should be incented to enter 
if that carrier would receive USF support measured by the ILEC's costs.
 19a. Should the benchmark be company specific?
 Answer:  No.  See response to No. 18.
 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.)
 Answer:  See response to Nos. 18 and 19a.
 19c. Should the benchmark be higher or lower for some technologies based on 
the traditional differences in customer revenue associated with different 
technologies?
 Answer:  See response to No. 18.
 19d. How should it be calculated for each technology?
 Answer:  See response to No. 18.
ELIGIBLE TELECOMMUNICATIONS CARRIERS

 20. What process should be used to designate eligible telecommunications 
carriers (ETCs)?See 47 U.S.C. § 214(e) for a definition of ETC.  Should it be 
by petition?  By some other process?
 Answer:  Washington should adopt the same requirements as are provided in the 
Telecommunications Act which are satisfied by use of a petition process.  
Section 47 U.S.C.(e)(1) sets forth the requirements to be an ETC:
  1. The carrier must offer the services that are supported by universal 
service support mechanisms;

  2. The carrier must offer the services using its own facilities or a 
combination of its own facilities and resale of another carrier's services;

  3. The carrier must advertise the availability of such services and the 
charges therefor using media of general distribution; and 

  4. The carrier must offer such services throughout the service area for which 
the designation is received.

 For purposes of receiving federal universal service support, the Commission is 
prohibited from requiring any criteria in addition to that listed above.  The 
FCC stated, "We conclude that section 214(e)(2) does not permit the [FCC] or 
the states to adopt additional criteria for designation as an eligible 
telecommunications carrier."  (FCC Order § 135).
 21. What criteria should apply to the designation of eligible 
telecommunications carriers?
 Answer:  See response to No. 20.
 22. At what geographic level (exchange, wire center, census block group or 
other) should ETCs be designated?
 Answer:  The ultimate goal of the Commission should be to allow providers to 
self-select service territories for ETC designation as much as possible.
 For rural areas, the Commission, at the very least, should be as flexible as 
possible and designate contiguous portions of a rural study area.  The FCC 
found that, "universal service policy objectives may be best served if a state 
defines rural service areas to consist only of the contiguous portion of a 
rural study area, rather than the entire study area."  (FCC Order ¶ 190).  The 
FCC identified this issue as one which could have an anti-competitive impact on 
wireless carriers in the very area where wireless providers could potentially 
provide a significant cost savings to consumers:
We find that imposing additional burdens on wireless entrants would be 
particularly harmful to competition in rural areas, where wireless carriers 
could potentially offer service at much lower costs than traditional wireline 
service.

(FCC Order ¶ 190).
 With respect to non-rural areas, USCC believes that carriers should have the 
ability to self-select the service areas now.
We agree with the Joint Board that, although this authority is explicitly 
delegated to the state commissions, states should exercise this authority in a 
manner that promotes the pro-competitive goals of the 1996 Act as well as 
universal service principles of section 254.  We also adopt the Joint Board's 
analysis and recommendation that states, designate services areas that are not 
unreasonably large.

(FCC Order ¶ 184).
 An overly large service area would not only increase start up costs and 
discourage competition but would not be competitively neutral.  (FCC Order ¶ 
184).  USCC agrees with the FCC that a service area must be "sufficiently small 
to ensure accurate targeting of high cost support and to encourage entry by 
competitors."  (FCC Order ¶ 185).
 The ability to self-select will be the best arbiter of whether a non-rural 
service area is too large and thus anti-competitive.  The carrier seeking entry 
has the competitive incentive to make the area as large as possible while still 
being able to provide service at competitive prices.  Market forces should be 
the prevalent theme, not numerous proceedings to reduce or enlarge the size of 
a pre-established area.
 23. Should a bidding process be utilized to select ETCS?  If yes, describe in 
detail how such a process would work.
 Answer:  No.  The process should be by petition, consistent with the federal 
requirements.
 24. What facilities, if any, should an ETC be required to self-provide?
 Answer:  No specific facilities should be required.
 25. Should the Commission adopt ETC basic service advertising guidelines that 
differ from the federal guidelines?
 Answer:  No.
 26. For what service areas can the provision of support payments be reasonably 
administered?
 Answer:  USCC does not understand this question.

FUNDING

 27. How should the USF be funded?  What is an "equitable" basis for all 
telecommunications providers and services to contribute to the USF?
 Answer:  In USCC's view, it participates in the funding of the federal USF and 
it expects to be able to draw from that fund because it is a 
federally-designated ETC.  However, USCC at this time opposes any state 
obligation which would significantly increase its existing USF funding 
obligation.
 As previously stated USCC contends that the Commission does not possess the 
authority to require CMRS providers to make contributions to a state universal 
service fund because it is preempted under 47 U.S.C. § 332(c)(3)(A).Section 47 
U.S.C. § 332(c)(3)(A) provides:

State Pre-emption.  

A.  Notwithstanding sections 2(b) and 221(b) . . . no state or local or local 
government shall have any authority to regulate the entry of or the rates 
charged by any commercial mobile service or any private mobile service except 
that this paragraph shall not prohibit a state from regulating the other terms 
and conditions of commercial mobile services.  Nothing in this subparagraph 
shall exempt providers of commercial mobile services (where such services are a 
substitute for landline telephone exchange service for
a substantial portion of the communications within such state) from 
requirements imposed by a state commission on all providers of 
telecommunications services necessary to insure the universal availability of 
telecommunications service at affordable rates.  . . .    Thus, there is no 
final, clear or controlling precedent giving this Commission the power to 
require cellular providers to pay into any Washington universal service fund 
without first finding that cellular service is a substantial substitute for 
landline service. As discussed in its opening the question of state pre-emption 
by federal law on the issue of universal service fund contribution is still an 
open question.  Several states such as Wisconsin and Connecticut when 
confronted with seeking USF contribution from wireless carriers, have decided 
to not seek such contributions from CMRS providers.  Therefore at this time 
Washington State should not seek USF contributions from wireless providers.
 28. What telecommunications carriers must contribute to the USF?
 Answer:  Those carriers not specifically preempted by federal law should 
contribute to a state USF.
 29. How often should USF contributions be collected?
 Answer:  If the law requires USCC to contribute, these contributions should be 
collected and distributed in a manner consistent with the federal USF program.
 30. How should USF contributions be recovered by a carrier that also makes 
payments to the fund?
 Answer:  See response to No. 29.
ADMINISTRATION OF THE UNIVERSAL SERVICE FUND

 USCC has no formal position on the administration of a state USF fund, except 
to request that any state USF fund be administered in a manner consistent with 
the federal USF fund.  Therefore, USCC has no response to the questions in this 
section, except for No. 34.
 31. Who should administer the USF and how should the administrator be selected?

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

 33. What are the responsibilities of the Administrator?

 34. How should the Administrator handle proprietary and other data received 
from telecommunications providers?
 Answer:  Because the wireless industry is so competitive, its proprietary 
information must be protected in the event it is requested. Current protections 
in the Commission's rules are inadequate because they place the ultimate burden 
of protecting confidential information on the providers.
 35. Are changes to RCW 42.17, public disclosure, needed for administration of 
the fund?

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

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

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

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

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

DISTRIBUTIONS FROM THE UNIVERSAL SERVICE FUND

 41. With what frequency should the Administrator distribute USF support to 
each ETC?
 Answer:  If USCC is required by law to contribute to a state universal service 
fund, then it should be eligible to draw from that fund.  USCC would urge any 
state USF program to be structured consistent with the federal program.
 42. What basis should be used for distributing funds to ETCs?
 Answer:  See response to No. 41.
 43. How should any excess funds not distributed during a year (or other 
administrative period) be used?
 Answer:  See response to No. 41.
 44. How should any funding shortfalls be recovered?
 Answer:  See response to No. 41.
 45. What systems and procedures may most cost effectively be used to 
distribute USF support payments?
 Answer:  See response to No. 41.
 III.  CONCLUSION

 USCC believes that wireless carriers will significantly enhance the utility of 
the federal universal service program.  For a state USF program, the Commission 
should adopt procedures that are both competitively neutral as well as 
efficient.  To the greatest extent possible, the Commission should allow 
carriers to self-certify and to self-select.  Market forces will provide the 
incentive for carriers to provide quality service, to select areas that are 
appropriate in size, and to advertise effectively.  In addition, because new 
entrants are engaged in an uphill battle with incumbents, the Commission 
should, wherever possible, waive requirements which will accelerate the ability 
of new entrants to create competitive markets.
 At this point, USCC contends that federal law precludes wireless contributions 
to, and participation in, state USF programs.  Even if the law declares 
otherwise, USCC urges the Commission to accept its suggestions for appropriate 
USF rules.
 RESPECTFULLY SUBMITTED this _____ day of June, 1998.


  WILLIAMS, KASTNER & GIBBS PLLC



  By  
   Judith A. Endejan
   WSBA #11016
   Attorneys for
   United States Cellular Corporation