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.
     

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