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 NEWS  News  media  Information  202  /  418-  0500  TTY  202  /  418-  2555  Fax-  On-  Demand  202  /  418-  2830  Internet:  http://  www.  fcc.  gov  ftp.  fcc.  gov  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  This  is  an  unofficial  announcement  of  Commission  action.  Release  of  the  full  text  of  a  Commission  order  constitutes  official  action.  See  MCI  v.  FCC.  515  F  2d  385  (D.  C.  Circ  1974). 
 FOR  IMMEDIATE  RELEASE:  NEWS  MEDIA  CONTACT: 
 May  10,  2001  Michael  Balmoris  202-  418-  0253 
 Email:  mbalmori@  fcc.  gov 


 FCC  MODIFIES  HIGH-  COST  UNIVERSAL  SERVICE  SUPPPORT  SYSTEM  TO  PRESERVE  AND  ADVANCE  AFFORDABLE  TELEPHONE  SERVICE 
 Commission  Action  Ensures  that  Telephone  Carriers  Providing  Service  to  Rural  Areas  Have  Specific,  Predictable,  and  Sufficient  Support 


 Washington,  D.  C.  –  The  Federal  Communications  Commission  (FCC)  today 
 modified  its  existing  universal  service  support  mechanism  for  rural  local  telephone 
 companies  to  ensure  that  telephone  service  is  affordable  and  reasonably  comparable 
 throughout  the  country.  Specifically,  the  Commission  adopted  an  interim  embedded,  or 
 historical,  cost  mechanism  for  a  five-  year  period  that  provides  predictable  levels  of  support 
 to  rural  carriers  so  that  they  can  continue  to  provide  affordable  phone  service  and  make 
 needed  investments  in  their  networks. 


 The  FCC’s  action  today  is  consistent  with  the  mandate  established  by  Congress  in 
 the  Telecommunications  Act  of  1996  to  provide  universal  service  support  to  states  where 
 the  costs  of  providing  telephone  service  are  significantly  higher  than  in  other  areas  of  the 
 country.  Additionally,  today’s  action  is  based  on  recommendations  made  by  the  Rural 
 Task  Force  (see  attached  summary),  a  broad  cross-  section  of  individuals  representing  rural 
 telephone  companies,  competitive  local  exchange  carriers,  long  distance  carriers,  wireless 
 providers,  consumer  advocates,  and  state  regulators. 


 With  today’s  Order,  the  Commission  completes  the  third  piece  of  a  four-  piece 
 puzzle  of  comprehensive  universal  service  reform.  The  goal  of  this  effort  is  to  provide 
 certainty  and  stability  for  competitive  market  entry,  while  at  the  same  time  preserving  and 
 advancing  the  policy  goal  of  affordable  universal  phone  service.  The  four  elements  are: 


 1.  Reform  of  the  High  Cost  Mechanism  for  Rural  Carriers  –  Today’s  action  to 
 modify  the  embedded  cost  mechanism  for  1,300  small  local  telephone  companies 
 for  a  five-  year  period. 


 2.  Reform  of  the  High  Cost  Mechanism  for  Non-  Rural  Carriers  –  The  FCC 
 adopted  two  companion  Orders  in  October  1999  that  reformed  the  high-  cost 
 support  mechanism  for  the  largest  local  telephone  companies. 
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 3.  Access  Charge  Reform  for  Price-  Cap  Carriers  –  The  FCC  began  this  effort  in 
 May  1997,  and  completed  this  effort  with  the  CALLS  Order  in  May  2000,  which 
 identified  $650  million  in  implicit  support  in  interstate  access  for  the  largest  local 
 telephone  companies. 


 4.  Access  Charge  Reform  for  Rate-  of-  Return  Carriers  –  The  FCC  intends  to  act 
 expeditiously  on  these  issues,  which  are  presented  in  the  Multi-  Association  Group 
 (MAG)  proceeding. 


 High-  cost  universal  service  support  gives  consumers  access  to  telecommunications 
 services  in  areas  where  the  cost  of  such  service  otherwise  might  be  prohibitively 
 expensive.  In  the  past,  this  access  has  been  achieved  both  through  explicit  support 
 payments  and  implicit  support  flows,  such  as  business  customers  subsidizing  residential 
 local  rates,  to  enable  carriers  to  serve  high-  cost  areas  at  below-  cost  rates. 


 The  universal  service  fund  (USF)  is  the  support  mechanism  established  by  the 
 Commission  to  ensure  that  affordable  telecommunications  service  is  available  to  all 
 Americans.  The  USF  provides  support  and  discounts  for:  1)  telecommunications  services 
 for  consumers  who  live  in  high-  cost  areas;  2)  telecommunications  services  for  low-  income 
 consumers;  3)  telecommunications  services,  Internet  access  and  internal  connections  for 
 schools  and  libraries;  and  4)  telecommunications  services  for  rural  health  care  providers. 


 Action  by  the  Commission  May  10,  2001,  by  14  th  Report  and  Order  and  21  st  Order 
 on  Reconsideration  in  CC  Docket  No.  96-  45,  and  Report  and  Order  in  CC  Docket  No.  00-256 
 (FCC  01-  157).  Chairman  Powell,  Commissioners  Ness  and  Tristani,  with 
 Commissioner  Furchtgott-  Roth  concurring  and  Chairman  Powell  and  Commissioner  Ness 
 issuing  separate  statements. 


 -FCC-Common 
 Carrier  Bureau  Staff  Contacts:  Gene  Fullano  or  Katherine  Schroder  at  202-  418-7400 


 CC  Docket  Nos.  96-  45  and  00-  256 
 News  about  the  Federal  Communications  Commission  can  also  be  found 
 on  the  Commission’s  web  site  www.  fcc.  gov. 
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