[26 Pa.B. 1456]
[Continued from previous Web Page]
4. Universal Service Section 254(f) of the act addresses State authority in the universal service area. Section 254(f) provides as follows:
(f) STATE AUTHORITY-A State may adopt regulations not inconsistent with the Commission's rules to preserve and advance universal service. 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 that State. A State may adopt regulations to provide for additional definitions and standards to preserve and advance universal service within that State only to the extent that such regulations adopt additional specific, predictable, and sufficient mechanisms to support such definitions or standards that do not rely on or burden Federal universal service support mechanisms.
Under section 254, the FCC must promulgate regulations which implement the recommendations of a Federal-State Joint Board on Universal Service within 15 months of enactment of the act.
At the State level, the Commission is presently conducting an on-the-record proceeding to address universal service in the Universal Service Investigation at I- 00940035, and has initiated a rulemaking proceeding at L-00950105 designed to establish a State universal funding mechanism. At least at the present time, the Commission's actions and stated course in its universal service dockets appear to be completely consistent with the direction of the Federal government as set forth in the act. However, some issues deserve discussion at this time.
Under the Commission's present rulemaking proposal, the Commission would create a State universal service fund to replace historic subsidies to high cost areas of the Commonwealth as those subsidies are identified in the litigation docket. The fund, as presently proposed, would be contributed to by all jurisdictional telecommunications carriers on a pro rata basis based on a given company's share of jurisdictional Statewide intrastate operating revenue. The fund would reimburse any carrier, incumbent or new entrant, which served a given customer in a high cost area in an amount equal to the historic subsidy as calculated by the Commission. Although the Commission's proposal only requires contribution by jurisdictional carriers, the Commission has previously requested comment as to whether nonjurisdictional telecommunications carriers should also contribute.
In its rulemaking comments to the Commission submitted in January of this year, the Independent Regulatory Review Commission questioned the Commission's legal authority under State law to establish a State universal service fund. While the Commission continues to strongly believe that it has authority under the Public Utility Code to establish a fund and proceed with its rulemaking, section 254(f) expressly recognizes the authority and the expectation that states, including the Commission on behalf of the Commonwealth, will promulgate regulations to preserve and advance universal service in the manner consistent with that proposed by the Commission. In this regard, section 254(f) appears to expressly enable State commissions, including the Commission, to promulgate regulations to establish a universal service funding mechanism, even if it were determined that the Commission lacks authority under State law on a stand alone basis. Interested parties should comment on this issue.
Under its present rulemaking proposal, the Commission only requires contribution to universal service by jurisdictional telecommunications carriers. However, section 254(f) mandates that every telecommunications carrier, as defined in section 3(a)(49) of the act, contribute to the State universal service funding mechanism. Given this statutory language, it appears clear that the nonjurisdictional telecommunications carriers, like cellular companies and possibly even cable companies, operating in Pennsylvania would be required by Federal law to contribute to the Commonwealth's universal service funding mechanism. Interested parties should comment on whether they agree with this analysis.
Under the Commission's present rulemaking proposal, carriers automatically qualify to receive universal service funding if they serve customers in a high cost service area. No universal service certification or designation is required as a prerequisite.
Under section 214 of the act, carriers must receive designation from the State commission in order to be eligible to receive Federal universal service support19 in a given service area--which service areas are also to be established by the State commission.20 In order to qualify for State commission designation, a carrier must offer basic universal service to all parts of the universal service area for which it seeks designation and must advertise in the media the availability of charges for basic universal service.21 Procedures are also established by section 214(e)(4) of the act for the State commission to permit a carrier to relinquish its designation in an area upon approval of the State commission upon a finding that all customers in the area will be able to receive basic universal service from another designated carrier in the area.
Clearly there is a difference in approach between the Commission's present rulemaking proposal and the approach adopted by the act. Under the Commission's proposal, any carrier which serves any customer22 in a high cost service area would be automatically eligible for support from the State fund. Under the act, carriers will not be eligible for designation for support until the carrier commits to making service available to all customers in a given service territory. Although, the requirements and procedures of section 214 are expressly restricted to the Federal universal funding mechanism, interested parties should provide comments as to whether the Commission should or is required to take the Federal approach in proceeding with its universal service rulemaking. Interested parties should also include in their comments recommendations pertaining to the development of procedures for the Commission to administer designation for universal service support whether or not such designation is relevant to both the State and Federal universal service funding mechanism or just the Federal mechanism.23
Section 254(h) makes special provision for health care providers and educational providers and libraries within the universal service context. As to health care providers, section 254(h)(1)(A) requires carriers to make necessary services and instruction pertaining to the services available to rural health care providers at rates reasonably comparable to rates charged urban health care providers. As to educational providers and libraries, section 254(h)(1)(B) of the act requires that carriers make universal services, as will be defined by the FCC under section 254(c)(3) of the act or as may be defined by the State commission, available to all educational providers and libraries at a discounted rate. As to intrastate services, the act assigns responsibility for determining the amount of the discount to State commissions. Carriers which provide universal services to either health care providers or educational providers and libraries are eligible for support or reimbursement through universal service funding mechanisms.
Interested parties should provide comment as to what parameters and procedures should be utilized to fulfill the Commission's responsibilities to assure required universal service protections for rural health care providers and all educational providers and libraries. Parties should include recommendations in their comments as to what extent the Commission can address these issues in its pending Universal Service dockets.
Finally, section 254(k) of the act provides as follows:
(k) SUBSIDY OF COMPETITIVE SERVICES PROHIBITED.-A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the states, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services.
Clearly, our Commission has already commenced implementation of this subsection in its Competitive Safeguards and Universal Service dockets and it appears the Commission's course is completely consistent with the subsection's requirements. Interested parties should include discussion of this issue in their respective comments.
6. Prohibition Against Interexchange Service Rate De-Averaging Section 254(g) of the Act generally prohibits providers of interexchange service from de-averaging interexchange toll rates between urban and rural areas. Subsection (g) provides as follows in relevant part:
(g) INTEREXCHANGE AND INTERSTATE SERVICES-Within 6 months after the date of enactment of the Telecommunications Act of 1996, the Commission shall adopt rules to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas shall be no higher than the rates charged by each such provider in urban areas . . ..
While it is clear subsection (g) assigns responsibility to the FCC to implement and enforce the de-averaging prohibition, application of the subsection will undoubtedly have significant effect on intrastate toll rates. For example, presently some interexchange carriers charge different toll rates in different local exchange carrier service territories and, in fact, higher rates may be economically justified (although apparently now prohibited by the act) in areas where access rates are higher. See, generally, AT&T Petition for Approval of Revised Optional Calling Plans, L-00920069, et al., (January 24, 1995), Pennsylvania Public Utility Commission v. AT&T Communications of Pennsylvania, Inc., M-00940503F0095 (March 31, 1995). Furthermore, it is unclear as to what extent the subsection applies to promotional and/or contractual service offerings. Accordingly, interested parties should provide comment as to what type of activity is permitted and prohibited by subsection (g) within the intrastate context.
7. In-Region InterLATA Services For Bell Under section 271(c) of the act, a Bell affiliate24 is permitted to provide in-region interLATA services if either a facilities-based competitor is providing local service through a qualifying interconnection arrangement in Bell's service territory or if during a certain time frame specified by section 271(c)(1)(B) Bell has not received a request for access and interconnection.25 In order for an interconnection arrangement to qualify, the arrangement must meet a competitive checklist as established by section 271(c)(2)(B). While the checklist is relatively detailed and specific, its application will undoubtedly be subject to varying interpretations.
The review process governing a Bell affiliate's entry into the in-region interLATA market is governed by section 271(d). Section 271(d) provides as follows in relevant part:
(d) ADMINISTRATIVE PROVISIONS-
(1) APPLICATION TO COMMISSION-On and after the date of enactment of the Telecommunications Act of 1996, a Bell operating company or its affiliate may apply to the Commission for authorization to provide interLATA services originating in any in-region State. The application shall identify each State for which the authorization is sought.
(2) CONSULTATION-
* * * * * (B) CONSULTATION WITH STATE COMMISSION-Before making any determination under this subsection, the Commission shall consult with the state commission that is the subject of the application in order to verify the compliance of the Bell operating company with the requirements of subsection (c).
(3) DETERMINATION-Not later than 90 days after receiving an application under paragraph (1), the Commission shall issue a written determination approving or denying the authorization requested in the application for each state . . ..''
Review of any future Bell affiliate in-region interLATA application before the FCC, given the expected highly contentious nature of any such application, is placed on an extremely fast track and will involve statutorily required consultation between the Commission and the FCC--an unprecedented process--to address whether the competitive checklist has been met. Accordingly, interested parties should provide comment identifying how it is envisioned this process will operate and should address what factors should be considered by the Commission in reviewing whether the Bell affiliate has complied with the competitive checklist. Commentators should specifically address what input, if any, should be received by the Commission from interested parties during the application process in developing the Commission's positions for purposes of consultation with the FCC. If outside input is warranted, commentators should address how the opportunity for input should be procedurally structured.
8. InterLATA EAS for Bell and GTE Section 601(a) of the act supersedes the AT&T and GTE consent decrees which had required Bell and GTE to seek waivers from the Department of Justice (DOJ) before carrying any traffic across a LATA boundary. At the State level, the DOJ waiver process became relevant in situations involving interLATA EAS where the Commission ordered that a given interLATA route be converted from a toll route to a local route. Under this scenario, if Bell or GTE was the originating carrier (and in some cases the terminating carrier) for an interLATA EAS route, Bell or GTE was required to seek and receive a consent decree waiver prior to conversion of the route to local. In this regard, Commission regulations at 52 Pa. Code § 63.75(6) provide as follows:
(6) In cases where the local exchange carrier is prohibited from providing service between the calling exchange and the receiving exchange by Federal antitrust consent decree restrictions and a waiver is necessary to implement EAS, the local exchange carrier shall apply for a waiver of Federal antitrust restrictions to allow it to implement EAS. The Commission will file a statement affirmatively supporting the waiver application.
The consent decree restrictions pertaining to interLATA EAS have been superseded by the act and Bell and GTE are no longer subject to Federal restrictions historically imposed by consent decree in carrying local traffic across a LATA boundary for interLATA EAS purposes. At the time of enactment, Bell had at least two interLATA EAS waiver requests pending before the DOJ which it appears should be withdrawn or transferred. In any case, interested parties should comment on the effect of the Act on interLATA EAS situations involving Bell or GTE and whether the Commission's regulations at section 63.75(b) should be modified.
9. Bell IntraLATA Toll Imputation Requirement Under section 271(e)(2)(A) of the act, once granted authorization to provide in-region interLATA services, the Bell affiliate may not start to offer and provide in-region interLATA services until it makes intraLATA presubscription available throughout its service territory in a given state. Given this provision, it is extremely likely that the Bell affiliate will start to provide in-region interLATA services coincidental with the availability of intraLATA presubscription (most likely to the day).
Section 272(e) of the act defines the relationship between Bell and its interLATA affiliate. Under section 272(e)(3), Bell:
(3) shall charge the affiliate described in subsection (a), or impute to itself (if using the access for its provision of its own services), an amount for access to its telephone exchange service and exchange access that is no less than the amount charged to any unaffiliated interexchange carriers for such service . . ..
Therefore, it appears that once the Bell affiliate enters the in-region interLATA market, coincident with the availability of intraLATA presubscription in Bell's service territory, Bell is subject to a mandatory imputation requirement for the provision of its services which utilizes its access services, apparently including Bell's intraLATA toll services.
In Pennsylvania, on December 14, 1995, the Commission entered an Opinion and Order in Investigation Into IntraLATA Interconnection Arrangements, I-00940034, which set forth the terms and conditions under which intraLATA presubscription would be made available in the Commonwealth. As to Bell, the Commission required that intraLATA presubscription be made available by no later than June 30, 1997. Furthermore, the Commission refrained from imposing an imputation requirement on intraLATA services provided once presubscription is available, on either local exchange carriers, including Bell, or interexchange carriers. Instead, the Commission determined that, at least initially, the marketplace should be permitted to govern the pricing of intraLATA services and that the Commission would monitor the marketplace on an ongoing basis to assure that no carrier was engaging in anticompetitive behavior. The monitoring of the intraLATA market would commence upon the availability of intraLATA presubscription in a given area.
It appears that the effect of section 272(e)(3) is to require that Bell be made subject to an imputation requirement upon the availability of intraLATA presubscription in its service territory. Accordingly, interested parties should comment on whether the Commission's December 14, 1995 Order at I-00940034 requires revision given the application of the act.
10. Audits Section 272(d) of the act establishes an audit requirement for Bell and its interLATA service affiliates. Section 272(d) provides as follows:
(d) BIENNIAL AUDIT.-
(1) GENERAL REQUIREMENT.-A company required to operate a separate affiliate under this section shall obtain and pay for a joint Federal/State audit every 2 years conducted by an independent auditor to determine whether such company has complied with this section and the regulations promulgated under this section, and particularly whether such company has complied with the separate accounting requirements under subsection (b).
(2) RESULTS SUBMITTED TO COMMISSION: STATE COMMISSIONS.-The auditor described in paragraph (1) shall submit the results of the audit to the Commission and to the State Commission of each State in which the company audited provides service, which shall make such results available for public inspection. Any party may submit comments on the final audit report.
Interested parties should comment on what the Commission's role, if any, should be in the joint audit process for Bell. Commentators who advocate an active role for the Commission should provide further comment regarding the intended scope of any such audit. Parties should also address the audit comment process established by section 272(d)(2) and discuss what procedures should be utilized by the Commission to evaluate final audit report comments and what alternatives are available to the Commission to address these comments.
Furthermore, section 103 of the act amends section 34(d) of the Public Utility Holding Company Act of 1935 (15 U.S.C.A. §§ 79 et seq.), so as to establish independent audit authority for State commissions to audit telecommunications affiliates of public utility holding companies which are categorized as exempt telecommunications companies by the FCC. Although the subsection goes on to impose auditor selection requirements and time deadlines for such a State audit, the language of the subsection is permissive, not mandatory, and does not require the Commission to conduct such audits unless they are found by the Commission to be necessary. Interested parties should provide comment as to whether such audits, if found to be necessary, can be integrated into the Commission's normal audit functions.
11. Notice of FCC Filings In addition to the wide variety of filings which are required by the act to be filed with state commissions, the act also contains many filing requirements to be submitted to the FCC. Although in most instances the act does not expressly require documents filed by Pennsylvania carriers at the FCC to be submitted to the Commission, it appears important that Federal documents be shared with the Commission in order to assure the coordinated Federal/State activity envisioned by the act. At a bare minimum, it appears that the Commission should receive notice of all Federal filings by Pennsylvania carriers, particularly those which ultimately will require some action by the Commission or which trigger a deadline which requires Commission involvement. Interested parties should submit comments regarding this proposal.
12. Public Forum In addition to receipt and evaluation of the written comments of interested parties, it appears valuable to create a setting for an open discussion of these important issues. Accordingly, the Commission will hold a public forum to address the issues raised by this Order and any other issues relevant to interpretation, application and administration of the act. The public forum will be held on April 3, 1996, at 10 a.m. in Hearing Room No. 1. All interested parties are welcome to attend. Parties who wish to actively participate in the public forum should contact Otto F. Hofmann, Deputy Executive Director at (717) 783-5375 by no later than 5 days following publication of this Order in the Pennsylvania Bulletin. In both written comments submitted under this Order and any oral discussions at the public forum, parties should be careful not to discuss the substantive merits of any issue pending before the Commission in any contested on-the- record proceeding.
13. Conclusion Overall, issuance of this Order represents the Commission's initial attempt to commence the arduous task of implementation of the Federal Telecommunications Act of 1996. Through this Order, the Commission establishes a 30-day comment period following publication for interested parties to comment on the wide variety of issues pertaining to Commission implementation of the Federal Act. The Commission is hopeful that interested parties give requested comments the time and effort these issues deserve so that the Commission can move forward in a timely manner to implement the act and, in doing so, bring its current procedures into compliance with Federal law, develop procedures and plan the allocation of resources to accomplish its newly created responsibilities; Therefore,
It Is Ordered That:
1. The Commission hereby solicits comment from all interested parties on all of the issues discussed in the body of this Order and any other issues pertaining to Commission implementation of The Telecommunications Act of 1996.
2. The Secretary is hereby directed to serve this Order on the Office of Consumer Advocate, the Office of Small Business Advocate, each jurisdictional telecommunications carrier, the Pennsylvania Electric Association, the Pennsylvania Gas Association, the A-310213F0002 service list and the Commission's Chapter 30 service list.
3. The Secretary shall duly certify this Order and deposit it with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
4. The Executive Director's Office shall schedule a public forum on for April 3, 1996, at 10 a.m. in Hearing Room No. 1 for interested parties to openly discuss all issues raised by this Order and any other issues relevant to interpretation, application or administration of The Telecommunications Act of 1996. Parties wishing to make an oral presentation at the public forum shall notify Otto Hofmann, Deputy Executive Director at (717) 783-8156 by no later than 5 days following publication of this Order in the Pennsylvania Bulletin.
5. Within 30 days of publication, an original and 10 copies of any comments concerning the subject matter addressed in the Order shall be submitted to the Pennsylvania Public Utility Commission at the above-captioned docket. The contact person is Alan Kohler, Assistant Counsel, (717) 772-8840. In addition to the original and 10 copies filed with the Commission's Secretary, each set of comments shall be served on each Commissioner's office.
JOHN G. ALFORD,
Secretary
Statement of Chairperson John M. Quain On February 8, 1996, President Clinton signed the Telecommunications Act of 1996 (Act) into law. The Act represents a landmark piece of legislation, which for the first time in 62 years, comprehensively amends the federal law which governs the provision of telephone service throughout the nation.
The Law Bureau introduction states that the ''far reaching nature of the Act and its profound effects on the future regulation of telecommunications services at both the State and Federal levels are best summarized in the Congressional Conference Report which states that the purpose of the Act is:
. . .To provide for pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition and for other purposes. . .In my view Congress has given the Federal Communications Commission and the individual State Commissions a distinct mandate for implementation of this legislation.
The Law Bureau Tentative Decision before us today initiates the arduous task to implement the legislation in the Commonwealth of Pennsylvania. I challenge all interested parties to give diligent thought to their responses to the procedural considerations set out in the proposed Tentative Decision. Unlike past regulatory schemes, both regulators and industry need to work together to meet the ultimate goal of economic growth through competition.
I look forward to working with all interested parties on this monumental task. We have the challenge so we must move forward expeditiously but with some level of caution. Pennsylvania and consumers can benefit from this process.
Statement of Vice Chairperson Lisa Crutchfield The recently enacted federal Telecommunications Act of 1996 (Act) sets the stage for a new era of competition in an industry that accounts for over $200 billion in annual sales.26 The Act, which amended the Communications Act of 1934, provides for a ''pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans. . . .''27 Long distance carriers, cable companies and other companies, including public utilities such as electric companies are no longer prevented from offering local telephone services. Local telephone companies are permitted to offer long distance telephone service as well as deliver video to homes and businesses.
The Act removes existing entry barriers to the local telephone market by preempting state or local statutes and regulations that excludes entities other than the traditional local exchange carrier (LEC) monopoly from providing telecommunications services. All carriers are subject to a number of access requirements which are intended to provide for open and fair competition. Additionally, in an effort to address the growing gap between the information ''haves'' and ''have nots,'' the Act contemplates the development of an evolving definition for universal service as well as the establishment of a universal service fund.
A basic thrust of the Act is regulatory parity whereby all providers of telecommunications services are regulated in the same manner. The Act also provides for technologi-cal neutrality thereby preventing regulation from determining the appropriate technology (i.e. telephone, cable, satellite or wireless) that is used to provide services to consumers.
I envision a broadband, multimedia electronic network through which digitally coded information (i.e. voice, video, text, data, graphic or what have you) which runs to and from any point in the network to any other point in the network. This advance technology will serve important national goals, including (1) expansion of social services such as access to government information, improved health care, broader educational resources and (2) an increase in commercial activity including advanced manufacturing, more extensive electronic commerce and wider telecommuting.
The Act affects either directly or indirectly most areas of intrastate telecommunications services. There will be a significant impact on the Commission's regulatory activity. For example, the Act prohibits the Commission from restricting entry to the intrastate market. We currently regulate the entry to the intrastate market through the issuance of a certificate of public convenience pursuant to 66 Pa.C.S. §§ 1101 and 1103. This type of regulation is no longer permitted under the Act. There are other provisions of the Act that assign new areas of responsibility to the Commission thereby impacting our regulatory activity. These areas of responsibility include matters regarding interconnection, virtual collocation, Bell Operating Companies (BOC) requests for in-region interLATA services, and universal service. For example, the Act requires the Commission to approve negotiated interconnection agreements. Additionally, the Commission, pursuant to the Act, is permitted to mediate differences and to arbitrate unresolved disputes that arise during the course of interconnection negotiations.
This Commission deems it appropriate to take internal and external measures in order to implement the Act. The Executive Director's Office will serve as the chair of an internal implementation task force. The Law Bureau has prepared for our consideration today an implementation Order, in tentative form, to be issued for comment. Additionally, a public forum is scheduled to be held in April. This forum will provide an opportunity for dialogue with stakeholders and other interested parties. I believe these activities will provide for the orderly implementation of the Act. I commend the Law Bureau for its actions to date in preparing this Commission for the implementation of the Act. I, however, offer the following additional areas for consideration of comments by the parties in response to the Tentative Order.
1. Repeal or Amend Provisions of the Public Utility Code and Pennsylvania Code
Existing laws under the Public Utility Code are subject to preemption under the Act. I request interested parties to identify and provide explanations as to any statutory requirements under the Public Utility Code which it believes is subject to Federal preemption and requires the Commission to seek the General Assembly's action to repeal or amend the particular law. Additionally, the Act preempts Commission regulations that are inconsistent with the Act as well as the Federal Communications Commission (FCC) regulations. Accordingly, I request interested parties to identify Commission regulations that should be repealed or amended.
2. Interconnection
Section 251 of the Act includes general standards governing interconnection; however, it permits the Commission to enforce its regulations and policies governing access and interconnection obligations so long as the requirements are not inconsistent or prevent the implementation of the Act. The Commission's Application of MFS Intelenet of Pennsylvania, Phase II, at Docket No. A-310213F002, proceeding includes the unbundling and general interconnection pricing standards for The Bell Atlantic-Pennsylvania (Bell). The Tentative Order requires the parties, in this proceeding, to address the Act. Since this proceeding only examines unbundling and interconnection pricing standards for Bell as the incumbent LEC, I would like interested parties to comment on whether the Commission should institute a limited generic investigation or expand the MFS Phase II proceeding to include all other incumbent LECs.
Section 251(c)(6) requires incumbent LECs to provide for physical collocation unless it demonstrates to the Commission that physical collocation is not practical for technical reasons or there are space limitations. I encourage interested parties to comment on technical and space limitation standards the Commission should utilize in determining whether physical collocation is feasible and practical.
Section 251(f) of the Act exempts a rural telephone company from meeting the interconnection requirements of Section 251(c) until the company receives a bona fide request for interconnection service. The Act requires the Commission to make a determination as to whether the request is unduly economically burdensome, technically feasible and consistent with the universal service requirements. I request interested parties to identify standards the Commission should consider in making its determination as to the economic and technical feasibility of such interconnection request.
3. Universal Service
Section 254(f) permits a state to advance and preserve universal service. All intrastate telecommunications providers are required to contribute to universal service within a state as determined by the state. The FCC and the state are responsible for ensuring universal service is available at just, reasonable and affordable rates. The Tentative Order points out that the Independent Regulatory Review Commission, in comments to the Commission's universal service rulemaking, questioned our legal authority under state law to establish a state universal service fund. The Order specifically states that ''[w]hile the Commission continues to strongly believe that it has authority under the Public Utility Code to establish a fund and proceed with its rulemaking, Section 254(f) expressly recognizes the authority and the expectation that states, including the Commission on behalf of the Commonwealth, will promulgate regulations to preserve and advance universal service in the manner consistent with that proposed by the Commission.''
It is interesting to note that Congress specifically delineated the state commission as the responsible entity for carrying out certain provisions of the Act. As it relates to universal service, the Act specifically refers to the state rather than the state commission. We may require legislative action delegating to the Commission the state's responsibility relative to universal service. I request interested parties to comment on whether the Commission has the authority to oversee and implement the universal service provisions of the Act which are specifically reserved to the state.
4. Exempt Telecommunications Companies
Section 103 of the Act amends the Public Utility Holding Company Act of 1935 (PUCHA) to permit registered electric and gas holding companies to establish affiliates to provide telecommunications services. The Tentative Order provides for service of the Order on the Pennsylvania Electric Association and the Pennsylvania Gas Association. In order to facilitate the comment process, I recommend that the Tentative Order be served on all jurisdictional electric and gas companies.
5. Audits
Section 272 of the Act requires Bell and its interLATA service affiliates to obtain a biennial joint Federal/State audit. The Act also requires the state commission to implement procedures to protect proprietary information submitted during the course of the audit. The Commission currently has procedures governing the protection of proprietary information. I request interested parties to comment on the adequacy of the Commission's existing procedures.
Statement of Commissioner David W. Rolka The Federal law specifically prescribes procedures for state certification of eligible telecommunications carriers (ETC) for purposes of qualifying for universal service funding. For areas served by a rural telephone company, state certification of more than one ETC must be based on a public interest finding. One of the requirements that an ETC must meet is to offer services that are supported by Federal universal service support mechanisms and to advertise the availability of such services and charges therefor, throughout the service area applicable to the ETC designation. These provisions, found at Sections 254 and 102/214(e) of the Act, link a carrier's eligibility to receive Federal universal service financial support with a carrier's obligation to serve throughout a particular service territory that is determined by the state commission. Section 253(f) expressly provides that a state may require as a condition of market entry that a carrier seeking to serve a rural telephone company area must meet the ETC standard prescribed in Section 214(e)(1).
The state commissions also may continue to prescribe a carrier's obligation to serve within non-rural markets under the new federal law. Section 253(b) expressly preserves the states' ability to impose, on a competitively neutral basis and consistent with Section 254, ''requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.'' However, sole reliance on Section 253(b) would be incomplete if I failed to note that the authority set forth in subsection (b) is limited by subsection (a) of Section 253. Subsection (a) forbids the imposition of requirements which prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. My interpretation of these sections is that the state commission may not impose geographic boundaries on the scope of a carrier's operating authority as a condition to market entry because that may be a barrier to entry. However, the carrier may be required to identify the geographic boundaries in which it intends to provide service, and must comply with the associated common carrier responsibilities which includes the obligation to serve within the carrier's defined service territory.
These provisions pursuant to Section 253 authorize state commissions to impose a common carrier obligation to serve on all carriers seeking to provide local exchange service, independent of and regardless of whether the carrier is certified by the state commission as an ETC under Section 214(e) to receive federal universal service financial support. Carriers which seek entry into areas served by rural telephone companies may have to meet an additional public interest threshold pursuant to Sections 253(f) and 214(e). All carriers, nonetheless, which seek entry into telecommunications markets, may be required to undertake an obligation to serve, consistent with the states' continued authority over such matters such as universal service, public safety and welfare and quality of service.
Under this interpretation of the Federal act, new competitors or new entrants could have the ability to serve narrow geographic segments of the Commonwealth and could more easily focus their energies in those areas where profit is expected to be most substantial. This may increase the potential for new competitors to ''cream skim'' the incumbent's customers, and may create pressure on incumbents to seek to deaverage rates as a responsive tactic. Given that both Pennsylvania and federal law prohibit deaveraged interexchange rates, local rate deaveraging is expected to be the primary focus for rate rebalancing efforts. Such efforts could seriously jeopardize the affordability of local basic rates. We must be mindful that like Pennsylvania's Chapter 30, the federal law establishes a framework for local exchange competition and for the advancement and preservation of universal service. Affordability of rates is a common goal of both the state and federal law. Our implementation efforts must take into account that the federal law was enacted to benefit customers through the introduction of competition. While the industry structure must undergo some further transition as the bill's framework is implemented, the perspective of the end result to the customer--the monthly bill--must always be a guiding factor.
In our pending docket on universal service, rules have been proposed that any carrier which serves a high cost customer could qualify to receive intrastate universal service financial support. The proposed Tentative Order before us today poses the question of whether a carrier's eligibility to receive intrastate universal service support should be predicated on the same basis as the eligibility to receive federal financial support, namely the carrier's obligation to serve throughout the service area. This approach might limit a new entrant's interest in ''creamskimming'' to only those areas where the new entrant would be willing to serve without qualifying for federal universal service support and perhaps state universal service financial support (if the state's eligibility criteria were revised to reflect the standards prescribed in Section 254).
In our pending Universal Service Investigations at Docket Nos. I-940035 and L-950105, the proposed rules would allow all local exchange service providers which serve subscribers in a high cost service area to receive universal service support. Some commenting parties have challenged this framework and have suggested that state universal service funding should be disbursed only to the incumbent carriers because only those carriers have an obligation to serve. Such a limitation appears to be foreclosed by the federal act for those facilities-based carriers which serve non-rural markets, because Section 214(e) prescribes that the state commission shall certify as an ''eligible telecommunications carrier'' any carrier which: (1) agrees to offer the set of services included within the Section 254 definition of universal service; (2) agrees to advertise the availability of such services; and (3) which offers the universal services using its own facilities or a combination of its own facilities and resale of another carrier's services. If a facilities-based carrier undertakes the obligation to provide service within a non-rural service area, the state commission must certify the carrier as an ETC, which renders the carrier eligible to receive universal service support pursuant to Section 254. Section 254 establishes the ETC certification as a prerequisite for receiving Federal universal service support and further prescribes that state regulations must not be inconsistent with the FCC rules. These provisions appear to prohibit the limitation of availability of either state or federal universal service support mechanisms to incumbent carriers who are serving non-rural markets.
The law contemplates that the FCC and state commissions will work together to develop and implement policies governing telecommunications services. The FCC's deadlines for promulgating regulations to implement the various provisions and requirements of the law are very compressed, and consequently, the states must diligently and promptly pursue their implementation efforts so that we can be assured that federal and state policy making will be coordinated. As the proposed Tentative Order notes, Pennsylvania already has a number of proceedings well under way that will address various aspects of the federal law. In particular the second phase of our local competition docket will address various aspects of unbundling; the universal service docket will address cost and pricing issues for local call termination rates in addition to universal services and the competitive safeguards investigation will identify appropriate requirements applicable to Bell's provision of competitive services. Those dockets are currently scheduled to produce recommendations for Commission consideration in June of 1996. It will be imperative for the Commission to promptly review and dispose of these recommendations so that we can promptly implement our responsibilities under the federal law. This effort will also demonstrate to the FCC that we intend to be a full partner in fulfilling the requirements of the new law.
I noted with interest the statutory interpretation issue raised in Vice Chairman Crutchfield's Statement regarding this matter. In particular, the Statement seeks comment on whether the use of the term ''state'' rather than ''state commission'' in Section 254 means that legislative action is required to delegate to this Commission the state's responsibility relative to universal service. I would request commenting parties to consider whether the use of the terms ''state'' and ''state commission'' are interchangeable in Title II of the Federal Act. For example, Section 254 uses the term ''state,'' while its companion section, 214(e) uses the term ''state commission.'' Similarly, Section 253 uses the term ''state,'' while Section 252 uses both terms within different subsections. Section 252(e)(1) and (2) refers to ''state commission,'' whereas Section 252(e)(6) uses both terms within that subsection:
(6) REVIEW OF STATE COMMISSION ACTIONS--In a case in which a State fails to act as described in paragraph (5), the proceeding by the Commission under such paragraph and any judicial review of the Commission's actions shall be the exclusive remedies for a State commission's failure to act. . . .(Emphasis added). Another such example is evident in Section 214(e)(3), which uses the term ''state commission.'' In contrast, the Conference Committee Report uses the term ''state'' to describe the responsibilities and requirements set forth in Section 214(e).
By making state universal service support mechanisms available to new entrants as well as incumbents, the fund can be used as an incentive to obtain new entrants' commitments to serve particular areas and to minimize the potential for creamskimming. If the funds are not available to new entrants that are willing to undertake an obligation to serve in non-rural markets, the new entrants will be disadvantaged by having to compete with incumbents who would be able to qualify for such support. Additionally, the use of the fund as a tool to encourage more competition will be lost.
The interplay between Section 253(a) and 253(b) also raises a more general question of whether the state commission may revoke the operating authority of a telecommunications service provider and what alternative forms of recourse might be available. We should proceed cautiously before concluding that the fitness requirements prescribed in Chapter 30 should be nullified. The Tentative Order indicates that these criteria may be entry barriers. I suggest that they could also be construed as reasonable terms and conditions permitted by Section 253(b). We must consider an appropriate analytical framework for identifying market entry barriers versus reasonable terms and conditions.
I request commenting parties to address the analysis and ideas proposed in this Statement in their formal comments as well as at the public forum scheduled in the Tentative Order.
[Pa.B. Doc. No. 96-517. Filed for public inspection March 29, 1996, 9:00 a.m.] _______
19 In interpreting the Act, it is important to distinguish between the issue of which carriers are required to contribute to the universal service funding mechanism and which carriers are eligible for universal service support. While, under Section 254(f) every intrastate telecommunications carrier must contribute to the universal service funding mechanism, only carriers designated under Section 214(e) are eligible for universal service support.
20 In the on-the-record component of the Commission's Universal Service Investigation, the Commission is presently addressing the establishment of service areas for universal service support purposes.
21 The difference in the standard applicable to state commission review of universal service designation for a rural telephone company service area has been previously discussed in the discussion pertaining to removal of entry barriers.
22 The issue as to whether or to what extent to include commercial customers in a high cost area in the universal service funding mechanism is an issue which has not been determined and is subject to inquiry in the proposed rulemaking docket.
23 Pursuant to Section 214(e)(3), of the Act the Commission is assigned the responsibility to determine which carrier or carriers should be designated to serve unserved areas. Interested parties should also comment on what standards and procedures should be utilized by the Commission in making this determination.
24 Pursuant to Section 272 of the Act, Bell is required to structurally separate its in-region interLATA activities, once approved, through operation of an affiliate.
25 It is so unlikely that Bell will not receive a request for access and interconnection during the time frame prescribed by Section 271(c)(1)(B) that the possibility is not worth further discussion.
26Source: Economic Report of the President to Congress (February 14, 1996).
27H.R. Conf. Rep. No. 104-458, 104 Cong., 2d Sess. (1996).
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