Agenda Date: December 29, 1999 Item Number: 2E Docket: UT-970345 Company Name: United States Cellular Staff: Bob Shirley, Regulatory Consultant Recommendation: Determine that designation of United States Cellular as an additional Eligible Telecommunications Carrier (ETC) in certain rural telephone company exchanges is in the public interest and approve the petition as modified in the Order to increase the number of geographic service areas for which United States Cellular is designated an ETC. Discussion: In 1997, United States Cellular requested designation as an ETC for nine geographic service areas that corresponded to nine wireline exchange areas served by GTE and U S WEST. The designation was granted in a consolidated order that included requested designations made by all the wireline carriers. In the Order designating U S Cellular as an ETC, the Commission found that it offers the services required by 47 C.F.R. §54.101(a) with the exception of enhanced 911 service, and the Commission granted a waiver for E 911 service. The list of basic services in RCW 80.36.600(6)(b) does not include access to enhanced 911 service, only access to 911 service. In this petition, United States Cellular requests that additional designations be made extending its obligations as an ETC to 72 additional exchanges. Sixty (60) of the additional exchanges are served by rural telephone companies. (Appendix A contains a list of the exchanges for which designation is sought; also included on the list in Appendix A are the original nine exchanges for which designation was made in 1997. Public Interest Determination Required In order to designate more than one ETC for an area served by a rural telephone company, the Commission must find that it is consistent with public interest, convenience, and necessity to make the additional designation. 47 U.S.C. §214(e)(2). Section 214(e)(2) is not perfectly clear about the finding to be made. Justice Scalia has criticized the Telecommunications Act of 1996 as poorly drafted. “It would be gross understatement to say that the Telecommunications Act of 1996 is not a model of clarity. It is in many important respects a model of ambiguity or indeed even self-contradiction.” AT&T v. Iowa Utilities Board, 119 S. Ct.721, 738 (1999). (2) DESIGNATION OF ELIGIBLE TELECOMMUNICATIONS CARRIERS.–A State commission shall upon its own motion or upon request designate a common carrier that meets the requirements of paragraph (1) as an eligible telecommunications carrier for a service area designated by the State commission. Upon request and consistent with the public interest, convenience, and necessity, the State commission may, in the case of an area served by a rural telephone company, and shall, in the case of all other areas, designate more than one common carrier as an eligible telecommunications carrier for a service area designated by the State commission, so long as each additional requesting carrier meets the requirements of paragraph (1). Before designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the State commission shall find that the designation is in the public interest. Docket UT-970345 December 29, 1999 Page 2 Section 214 gives no guidance for the determination of the public interest for designations. In the absence of guidance or standards, staff recommends the factors to be weighed in this public interest determination are the benefits and burdens such a designation would place on customers. Cf. 47 U.S.C. §251(f) (A) and (B), requiring a determination that interconnection with a rural telephone company will not be unduly economically burdensome, is technically feasible, and is consistent with §254. This approach is also consistent with the policies reflected in state statute concerning universally affordable service; maintaining and advancing the efficiency and availability of service; ensuring that customers pay only reasonable charges for service; ensuring that noncompetitive services do not subsidize competitive services; promoting diversity in the supply of services; and permitting flexible regulation of competitive services. RCW 80.36.300. Section 214(e)(2) requires that additional designations be made where a non-rural company serves. Promotion of Competition and Increased Service U S Cellular states in its petition that it is in the public interest to make the designation because it supports the efforts of wireless carriers to provide competitive, low-cost telecommunications alternatives to rural customers. U S Cellular cites the Federal Communications Commission’s November 2, 1999 Report and Order that recognized Docket UT-970345 December 29, 19999 Page 3 wireless carriers as both contributors and potential recipients of universal service funds. ¶ 4, In the Matter of Federal-State Joint Board on Universal Service, CC Docket No. 96-45, November 2, 1999. In the same Report and Order, the FCC stated that universal service funds should be available to wireless carriers that offer service which meets the criteria for ETCs. Id. at ¶ 18. Staff adds that additional benefits generally resulting from competition are increased service offerings and innovation in existing and new services. The wireless carriers and their services are testimony to this benefit of competition. Lack of Service and Higher Rates In the past, rural companies have expressed concern that competition in smaller exchanges may result in neither carrier earning sufficient funds to be profitable. If this should occur, and neither carrier can sustain service, the burden that could fall on customers would be the complete absence of service. In the alternative, there is the concern that to remain profitable both carriers will have to increase local service rates. The present mechanism for sustaining universal service in Washington includes state and federal support. State support is not at issue here because U S Cellular is not eligible to receive explicit state support because it cannot charge access fees, the method used for state explicit support. State support for rural companies is provided through access fees that are not tied to the number of customers served; any diminution in the number of customers served will not necessarily reduce state support for rural companies. Rural company support is based on historic costs and if a rural company’s customer base and access minutes decline, it could request increased per-minute access rates to earn the revenue permitted under the current mechanism. Rural companies are already insulated from the possibility that competitors could receive substantial federal high-cost support while serving only customers in the low-cost portions of rural company exchanges. The FCC granted the petition of this Commission and twenty rural telephone companies to approve a system of exchange-level de- averaging of federal support payments. Even if a rural company loses customers to competition, it will lose federal support only in proportion to the cost the lost customer placed on the company. Higher local service rates could be one outcome of a market split by competition, but it is Docket UT-970345 December 29, 1999 Page 4 by no means the only possible outcome. In the event a rural incumbent were to request a basic service rate increase, the Commission would have the option of approving increases in that rate, an increase in the terminating access rate for universal service, or an increase in both rates, or other rates. In the event U S Cellular should increase its rates, customers may return to the rural incumbent to avoid increased rates. In either event, an increase in local rates for customers is not a foregone conclusion. Conclusion: The petition of U S Cellular promotes competition and customer choice, and the benefits that result. This is consistent with Commission efforts to insure that all customers, no matter where located, receive all the benefits that competition in the telecommunications sector can provide. Granting the petition is in the public interest. Attachment