Report No. DC-2600 ACTION IN DOCKET CASE May 19, 1994 NEW COMPETITIVE MARKET STRUCTURE ADOPTED FOR TELECOMMUNICATIONS SERVICE IN ALASKA (CC DOCKET 83-1376) The Commission has adopted a new market structure for telecommunications service in Alaska that will ensure universal service to Alaskans, more fully open the Alaskan telecommunications market to competition, and foster improved efficiency and economic growth. The new market structure is patterned after the competitive market structures in the rest of the country, where carriers compete on price and services. The new structure will replace the Joint Services Arrangement (JSA) under which AT&T and Alascom, Inc., currently provide telecommunications service to and from Alaska. The JSA will be terminated on January 1, 1996. The Commission generally adopted, with minor clarifications and modifications, the Final Recommended Decision adopted by the Alaska Joint Board on October 26, 1993. The Commission said that the recommendations were in the public interest because they provide a comprehensive solution to the Alaska market issues and because they best achieve the five objectives adopted earlier by the Joint Board -- preservation of universal service; continuation of rate integration; maintenance of revenue requirement neutrality; allowance of market-based competitive entry; and encouragement of increased efficiency. Under the market structure adopted in the order, AT&T must provide interstate message telephone service and wide area telecommunications service (collectively referred to as MTS) between Alaska and the lower 48 states at integrated rates and under the same terms and conditions, including quality, technical standards, and availability, applicable to AT&T's provision of services in the Lower 48 states. AT&T must also furnish MTS service between Alaska and Hawaii at integrated rates. (over) - 2 - After the JSA is terminated, Alascom can offer interstate MTS, independently from AT&T, under its own tariff with no obligation to charge AT&T's integrated rates. Alascom must provide common carrier services to other interexchange carriers providing service to Alaska on a nondiscriminatory basis under tariff at rates that reflect Alascom's cost of service. Alascom's tariff will provide separate rate schedules for competitive (non-Bush) and Bush areas of Alaska. The costs of service in each of these categories will be prepared pursuant to a cost allocation plan developed by Alascom and approved by the FCC. Alascom will continue to have a facilities-based monopoly in the Bush. As the only carrier providing facilities in the Bush, other carriers must use Alascom's facilities to provide service to and from the Bush. Alascom will recover the costs of providing service to the Bush, including satellite and other facilities, through tariffs. Moreover, the order retains the factor for circuit equipment that allocates 86% of the costs of such equipment, including satellite costs, to the interstate jurisdiction. The Commission emphasized its commitment to ensuring preservation of telecommunications service to the Bush. The order requires a four year transition and a number of transition mechanisms before the new market structure is fully implemented. During the first phase, beginning July 1, 1994, AT&T and Alascom will continue to provide service jointly pursuant to the JSA. The JSA will terminate at the end of the first phase effective January 1, 1996. During the second phase AT&T and Alascom may provide service independently. AT&T will be required to purchase from Alascom a fixed amount of service that declines over the two and one half year period. The order requires that the amount AT&T must purchase is based on the demand for north and south bound traffic in the last year of the JSA. This amount is then adjusted to reflect the use by Alascom and other interexchange carriers of Alascom's facilities for interstate MTS. AT&T is required to fund a reduction in Alascom's plant balances by a transition payment to Alascom of $150 million in two installments of $75 million to be paid on July 1, 1994 and upon termination of the JSA. Alascom must apply the payment first to reduce its central office switching plant accounts and then the remaining depreciable accounts. This payment by AT&T to Alascom is eligible for exogenous treatment under the Commission's price cap rules for AT&T. Finally, the order allows AT&T to request equal access from Alaska local exchange carriers. - 3 - Action by the Commission May 19, 1994, by Memorandum Opinion and Order (FCC 94-116). Chairman Hundt, Commissioners Quello and Barrett. - FCC - News Media contact: Rosemary Kimball at (202) 632-5050. Common Carrier Bureau contacts: Rose Crellin at (202) 632- 1292 and Robert Hall at (202) 634-1861.