NEWS
	Federal Communications Commission 1919 - M Street, N.W. Washington, D.C. 20554	News media information 202 / 418-0500 Fax-On-Demand 202 / 418-2830 Internet: http://www.fcc.gov ftp.fcc.gov
	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).
	May 7, 1997
	Press Statement of FCC Commissioner Rachelle Chong Re: Universal Service May 7, 1997
	Today, we answer Congress' call to restructure universal service in a way that will make sense in a competitive marketplace. I have always believed that job one of universal service is to try to connect every American to the telephone network. As a Nation, we currently enjoy 94% telephone subscribership, which is pretty darned good compared to most of the world. But, typical Americans, we always strive do better! Universal telephone service is a worthy goal indeed, because telephones have become a practical necessity for our citizens. It is how we communicate, how we call for help in an emergency, and now, how we access the Internet and, through it, the entire world. Congress has asked us to do an important job -- to transform our current universal service system, and make explicit the many embedded implicit subsidies that exist in our federal system. The universal service plan we set in motion today seeks to make our system compatible with competition. To this end, we introduce a plan that is competitively neutral. It will allow, for the first time, competitors to the local telephone companies to receive universal service support. Contributions: We make the collection of universal service contributions more competitively neutral as well, by enlarging the sea of contributors into the universal service system. I have lodged a mild dissent on one contribution issue, however. I have dissented to the portion of the decision that requires carriers providing both interstate and international telecommunications services, to base their universal service contributions on international -- as well as interstate -- revenues. I believe this may disadvantage our U.S. carriers when they directly compete with foreign carriers for international service. High Cost and Rural: We are not flash-cutting to a new universal service system in today's order. Although the Federal-State Joint Board had hoped to pick a high cost model by now, we have been unable to reach closure on this issue despite our best efforts. I am pleased, however, that we have committed to choosing a model for non-rural carriers as a platform by year's end. This will give us time to work out the remaining kinks and improve the model, so that it is ready for prime time when we launch our new system in 1999. During our transition period, rural consumers will continue to receive full support. We will be taking up the issue of whether a cost model or some other approach would be appropriate for rural carriers. We hope that the states will continue to work closely with us on the cost model between now and year's end. I would like to recognize and thank the State Commissioners, the consumer representative, and their staffs for their excellent ongoing efforts on this challenging project. Low Income, Insular and Unserved Areas: In keeping with Congress' mandate to make rates affordable, I support the program we adopt today to expand our existing Lifeline and Link-Up programs and make them available in all parts of the nation. I am especially pleased that we are making these low income programs available in insular areas such as American Samoa and CNMI. Another problem I have focused on has been the low telephone subscribership rates in insular areas. To address this problem, we commit today to a Public Notice that seeks data on the affordability of service in insular areas. Finally, I am also pleased that we have asked our state colleagues for further data on unserved areas in their jurisdictions. I am very concerned about these areas, and hope together, we can find a solution to make telephone service truly universal. Schools/Libraries: I am pleased that we have generally remained true to the Joint Board commitments. We have agreed on a sensible start date of January 1, 1998. This date should give schools and libraries time to prepare for the program, give the states time to create a comparable intrastate discount program, and also give the new Interim Administrator time to gear up. I am also pleased that in implementing this program, we adopt a "pay as you go" mechanism. This should address concerns regarding overcollection of funds. I also support the decision to provide schools and libraries with substantial discounts for internet access and internal connections. I think this will help prepare our children for the Information Age. Critical to my support of this piece of the schools and libraries program is that any type of provider -- both telecom carriers and nontelecom carriers -- can obtain universal service support for providing internet access and internal connections. This result is competitively neutral, and consistent with the Act's procompetitive mandate. Although I concur in the result, I would have used a different legal rationale to get there. I will discuss this in my separate statement. Health Care: As to the other Section 254(h) program, I am pleased that we have agreed to kick off our rural health care initiative. While it is a measured approach to start, I think it will provide telemedicine out in rural America as Congress intended. ###

	NEWS
	Federal Communications Commission 1919 - M Street, N.W. Washington, D.C. 20554	News media information 202 / 418-0500 Fax-On-Demand 202 / 418-2830 Internet: http://www.fcc.gov ftp.fcc.gov
	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).
	May 7, 1997
	Press Statement of FCC Commissioner Rachelle Chong Re: Access Charge Reform May 7, 1997
	If you look up "access charges" in a thesaurus, the synonyms you will find include: "complicated, intricate, bewildering, unfathomable." For all of its complexity, our existing access charge system has remained a constant landmark in our telecommunications landscape during the past decade. With the passage of the Telecom Act, however, the days of the access charge system are numbered. In the Act, Congress told the FCC to make implicit universal service subsidies explicit -- and thereby, create a universal service program that would make sense in a new competitive world. No one can deny that access charges create distortions in the marketplace and vast economic inefficiencies. Both because of its structure and pricing level, the current access charge system results in higher costs to interexchange carriers. These costs, of course, are eventually passed through to consumers and show up on our long distance bills in the form of a higher per minute rate. I believe our actions today -- both in this docket and the price cap proceeding will bring about a drop in access charges. These per-minute price reductions, however, will not come about with the wave of a magic wand. They will occur because of the three step process we implement today. First, we create a framework so that the rates charged for the components of access are more reflective of costs. Second, we will move residual costs that were traditionally recovered on a per minute basis into a more efficient flat-rated charge system. Finally, multi-line business and multi-line residential customers will pick up a greater share of costs through increased subscriber line charges and flat-rated charges. The one major concern I have about this approach is the impact that these increased flat rate charges will have on small business users during the early years of the transition. Because we seek to protect single line customers, the new flat rate charges fall disproportionately upon the shoulders of multi-line customers and may have a disparate impact on small businesses and people who have a second line at home. I have worked hard with my colleagues to soften the blow of these new charges on small businesses, particularly those who do not make many long distance calls and will not experience the full benefits of lower per minute calling rates that will be enjoyed by a large business. ###

	NEWS
	Federal Communications Commission 1919 - M Street, N.W. Washington, D.C. 20554	News media information 202 / 418-0500 Fax-On-Demand 202 / 418-2830 Internet: http://www.fcc.gov ftp.fcc.gov
	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).
	May 7, 1997
	Press Statement of FCC Commissioner Rachelle Chong Re: Price Caps May 7, 1997
	Along with the Access Charge Reform and Universal Service orders, the Price Caps decision adopts much-needed reforms which are important to the progressive deregulation of incumbent LECs as competition increases. Price caps will continue to keep access charges in check as we make our transition to an access charge regime based on forward looking economic costs. As competition develops, however, we will gradually deregulate incumbent LEC interstate access services by removing services from price caps where actual competition has arisen. The price cap plan we adopt today contains a challenging unitary X-factor of 6.5 percent annually. While picking an X-factor is not an exercise that brings one to a state of metaphysical certitude, I feel confident that the X-factor we have chosen is a reasonable one and well-supported by the record. We have selected this X-factor after very careful analysis of the growth rate of incumbent LEC total factor productivity (TFP) and the rate of change of LEC input prices. I believe the new X factor of 6.5 will be a more reliable measure of incumbent LEC potential productivity gains than our interim price cap plan, which offered three X-factors, some with sharing obligations. In the unlikely event we have made the X-factor too challenging for some LECs, we retain our low end adjustment mechanism. I think this is a wise safety net. To ensure that consumers share in LEC efficiency increases, we have added a 0.5 Consumer Productivity Dividend (CPD) to the X-factor. I recognize that some have argued that the CPD was initially adopted as a way to flow through the first benefits of the price cap plan to access charge customers, and that it may be time to bid the CPD a fond adieu. Given the current state of competition in most price cap LEC markets, we have decided to continue use of the CPD as a way to ensure that productivity gains realized by the LEC will be shared between ratepayers and shareholders. In the future, of course, the Commission may decide that competition has progressed to the stage where a CPD mechanism could be safely discarded because market forces will provide consumers with the benefit of the LEC's productivity. Finally, I am particularly pleased that today's order puts a stake through the heart of "sharing," the requirement that ILECs earning more than specified rates of return must "share" half or all of the amount above those rates of returns with their access customers in the form of lower rates during the next year. I have long believed that a system of pure price caps without sharing would be preferable, because sharing comes from a rate-of-return era. I believe that we have correctly found today that sharing tends to blunt the efficiency incentive we sought to create through the price cap plan. ###