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© 1995 - International Research Center

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UNIVERSAL SERVICE AROUND THE NATION
In order to help policy makers better understand the current and future status of Universal Service in the United States, International Research Center conducted structured telephone interviews with a key informant in each of the 50 states and the District of Columbia, either senior level staff or Commissioners involved in telecommunication policy formulation in their state. Interview questions focused on:

Information gathered from these interviews was supplemented with other secondary information for each state. This secondary information included demographic information about the state's population, geographic size, and median income; census data on poverty levels (percent on public assistance and percent below poverty); FCC data on the state's telephone system (number of LECs, penetration rate, technology), and data from a study on rural LECs conducted by the Organization for the Protection and Advancement of Small Telephone Companies (OPASTCO). In addition, key informants in states which had or were actively involved in developing a Universal Service program forwarded copies of relevant legislation, commission orders, and staff proposals.

Information gathered through the interviews was combined with the secondary data to generate a profile for each state. These profiles are included in Appendix E. To ensure the accuracy of the state profiles, a draft profile was faxed to the key informant in the state for review and modification. Changes were made to 26 state profiles based on key informant comments. In a number of cases, the changes updated the secondary data with more current information. Information from the state profiles was then aggregated into a number of matrixes which are presented and discussed below.

What is "basic service"?

Consistent with the Federal definition, states have defined Universal Service as the availability of telephone service at reasonable rates to all citizens in the state. Basic service, on the other hand, has been defined by a limited number of states, and those definitions vary from state to state. Table 1 shows the states that have defined basic service and the elements included in their definitions. Asterisks (*) indicate states with definitions that are pending. Twenty-five states have a pending or approved definition of basic service at this time. Based on these definitions basic service in the United States typically consist of a single party (16) voice grade (18) touch tone (20) line with access to emergency services (23) , directory assistance (16), operator services (14), long distance services (17), and a white page listing (18). A number of states also include Telecommunication Relay Services (TRS) for the hearing impaired (8). These are the identical elements as in the Arizona Corporation Commission's proposed definition for basic service in Arizona.

Less common elements included in the definition of basic service are a modem capable line (6), privacy protection (6), and access to repair services (5). The most unique services included are a required usage element (Connecticut and Ohio), non-published service (New York), access to optional digital services (Alaska), ANI capability (Connecticut), access to custom calling features (Missouri and Oklahoma), toll blocking capability (Oregon and Wisconsin), educational discounts (Tennessee), and an annual directory (Wisconsin). While 25 states and DC did not have a definition of basic service at this time, a number of states are developing them in conjunction with open dockets on local competition or Universal Service.

Table 1: State Definitions of Basic Telephone Service

State Single
party 		Multi-
party 		Touch
tone 		Rotary Voice
grade
line 		Fax
grade
line 		(911) (411) Operator
services 		White
page
listing 		Long
distance
access 		Modem
capable 		Repair
services 		Privacy
protect 		Other
Alaska*
Yes

Yes

Yes

Yes
Yes

Yes

Yes

Access to optional digital services
Arizona*
Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes


Telecomm relay services
California

Yes

Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Colorado
Yes

Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
2400
Yes
Yes

Connecticut
Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes

Yes
ANI Capability; Usage element
Delaware


Yes


Yes
Yes
Yes
Yes




Switch/relay access
Florida

Yes

Yes

Yes
Yes
Yes

Yes


Flat rate residential
Georgia
Yes

Yes



Yes




9600

1+ dialing
Hawaii*
Yes

Yes

Yes

Yes
Yes
Yes
Yes




Access to relay services
Louisiana
Yes

Yes



Yes
Yes
Yes
Yes
Yes


Affordable line connection; Telephone relay service;

Customer support

Massachusetts













Unlimited calling in local exchange calling area
Michigan








Yes



Dial tone
Missouri
Yes

Yes

Yes

Yes



Yes



Access to custom calling features
Nevada

Yes

Yes

Yes


Yes
Yes


Dial tone
New Jersey
Yes
Yes
Yes
Yes
Yes


Yes
Yes
Yes
Yes
New York*

Yes

Yes

Yes
Yes
Yes
Yes
Yes

Yes
Exchange access; Statewide relay service; Non-published service; Direct inward dialing
North Carolina*
Yes

Yes

Yes









Flat rate local calling
Ohio*
Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes
14400
Yes
Yes
 Usage packet (400 minutes); Telecomm relay services
Oklahoma
Yes

Yes



Yes


Yes

Yes


Custom calling features available
Oregon
Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes


Toll blocking; Relay services
Pennsylvania
Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes


Disability services; Access to incoming and outgoing calls
Tennessee

Yes

Yes

Yes


Yes




Access line; Telecomm relay services; Educational discounts
Vermont

Yes

Yes

Yes
Yes


Yes


Enhanced 911 services; Telecomm relay services
West Virginia*





Yes
Yes
Yes
Yes
Yes


Telephone number; Local call switching; Telecomm relay services
Wisconsin*
Yes

Yes


Yes
Yes
Yes
Yes
Yes
Yes
9600


Telecomm relay services; Toll blocking; Annual directory; Reasonably adequate calling area
Wyoming
Yes



Yes

Yes



Yes



Residential or business; Flat or measured rate
Total
16
1
20
2
18
2
23
16
14
18
17
6
5
6
( * - Definition Pending)

What does "basic service" cost?

Table 2 shows the residential telephone rates (R1- flat rate) for the BOC in each state, and the range of rates for the LECs in each state. Since this information was not available from a secondary source, we relied on the key informant in each state to provide this information. Specifically, the key informant was asked what the rate would be for "basic service". Given the complexity of rate structures in some states, the variations in telephone service across the states, and the fact that half of the states don't have a definition for basic service, the rate information should be viewed with caution. Perhaps as more states develop definitions of "basic service", it will be possible to develop a better overall picture of the price of basic service in the United States and what customers should expect to pay for basic service. In Table 2, states with definitions of basic service are identified by asterisks.

In spite of these qualifications, there are a number of interesting patterns within the data. First, in some states the BOC has a single statewide residential rate, while in others there are a range of rates depending generally on the subscribers geographic location and calling area. The lowest reported rate for a BOC was in DC. DC, however, does not have a definition of basic service, has only one LEC, and this is a special rate for low income households. Of the states with a definition of basic service, Wisconsin has the lowest BOC rate ($5.40 for measured service) and New York has the highest rate ($22.27). The average rate for "basic service" for states with a definition is $11.95. In four small states, there is only one LEC, typically the BOC (Delaware, DC, Hawaii, Rhode Island). The number of LECs in the remaining states range from 2 (Maryland) to 160 in Iowa. The range in residential rates for LECs in almost all states was greater than the range of rates for the BOC. Thus, there are some LECs in each state with lower rates for residential service than the BOC and some with higher rates. LECs with the lowest rates typically have very limited calling areas, while LECs with the higher rates are in high cost/rural areas. Again, looking at those states with a definition of basic service, the lowest LEC rate was in North Carolina ($2.56) and the highest was in West Virginia ($36.00). The average of the lowest LEC rate for states with a definition was $7.30 and the average of the highest rates was $18.00.

Table 2 also presents results from the OPASTCO study (last three columns) which provides insights into the costs of providing basic service in rural/high cost areas. In 1994, OPASTCO examined the consequences of changes in FCC regulations that would eliminate federal support mechanisms for small rural LECs (i.e., DEM weighting, 25% gross allocator, USF, and federal Lifeline and Link-up America programs). The first column in this section of Table 2 shows the local service revenues per subscriber

per month for small rural LECs included in the OPASTCO study group. The average for the 424 LECs induced in the study group was $15.31. The second column shows OPASTCO's estimate of the average local service revenues per subscriber per month that would be required if federal supports were eliminated. The average for the study group was $28.75. This means that, on average, local service revenues would have to go up by 72.3%, if federal supports were eliminated. Required revenue increases vary widely from state to state with greatest estimated increases being in New Mexico (228.8%), Texas (176.1%), North Dakota (170.4%), Idaho (157.6%), and Nebraska (154.4%). OPASTCO also surveyed a random sample of the study group's subscribers to determine the impact the estimated rate increase might have on continued telephone service. Twenty percent of the subscribers said they would discontinue service if the rates were increased to the estimated level.

Arizona's average local service revenues per subscriber per month in the OPASTCO study group ($21.05) was above the overall average ($15.91), but the percent increase in revenues needed, 47.8%, was less than the national average. This still reflects an average estimated increase in local service revenues of $9.64 per subscriber per month for customers served by Arizona's 13 rural LECs. Thirteen percent of those survey by OPASTCO in Arizona said they would disconnect service if rates went up by that amount. This would equate to 9,700 access lines in rural Arizona. The OPASTCO study findings are important since they highlight one of the biggest issues related to Universal Service; that is, how to provide affordable telecommunication services to rural areas which have significantly higher costs than urban areas. The study provides an indication of what the actual costs are to provide telephone service in high costs areas, and the possible consequences of federal and state governments not taking necessary steps to maintain Universal Service in the new competitive telecommunication market.

Table 2: State Residential Telephone Rates


Bell Operating Co.
Local Exchange Carriers
OPASTCO Study



State



BOC



Rates
Number

of LECs
Lowest

Rate
Highest

Rate
Rev/

Customer
Rev w/o Subsidy


% Increase
AlabamaBell South
$16.00-15.00
34


$18.94
$30.42
60.6%
Alaska*na
na
23
$5.00
$30.00
$20.94
$34.73
65.9%
Arizona*US West
$13.18
14
$4.50
$21.00
$21.05
$30.69
47.8%
ArkansasSW Bell
$14.00
27
$5.00
$32.00
$16.71
$28.66
71.5%
California*Pacific
$11.25
23
$11.25
$17.80
$20.64
$48.77
136.9%
Colorado*US West
$17.82
36
$4.15
$30.00
$21.31
$36.10
69.4%
Connecticut*NYNEX
$12.50
3
$8.00
$15.00
na
na
na
Delaware*Bell Atlantic
$9.40
1
$9.40
$9.40
na
na
na
Dist. of Col.Bell Atlantic
$3.00-14.60
1
$3.00
$14.60
na
na
na
Florida*Bell South
$10.65
13
$6.00
$11.63
$16.77
$30.32
80.8%
Georgia*Bell South
$14.33
36
$4.00
$18.00
$18.12
$32.09
77.1%
Hawaii*na
na
1
$14.40
$14.40
na
na
na
IdahoUS West
$11.61
16
$9.40
$17.20
$14.51
$37.37
157.6%
IllinoisAmeritech
$11.20
56
$5.40
$28.00
na
na
na
IndianaAmeritech
$13.50
43
$3.00
$25.00
$16.19
$24.75
52.9%
IowaUS West
$11.05-13.05
160
$2.00
$24.78
$13.92
$24.40
75.3%
KansasSW Bell
$11.00
45
$3.50
$13.00
$13.55
$28.07
107.2%
KentuckyBell South
$18.00
20
$5.00
$18.00
na
na
na
Louisiana*Bell South
$10.97-15.05
21
$9.00
$18.50
$21.95
$44.24
101.5%
MaineNYNEX
$10.50-12.50
24
$4.75
$14.50
$11.09
$25.63
131.1%
MarylandBell Atlantic
$9.52-11.17
2

na
na
na
Massachusetts*NYNEX
$16.85
5

na
na
na
Michigan*Ameritech
$10.38
38
$3.76
$12.30
$11.31
$19.87
75.7%
MinnesotaUS West
$14.10
103
$5.00
$30.00
$15.25
$23.02
51.0%
MississippiBell South
$14.85- 19.00
20
$11.50
$18.00
$21.40
$39.36
83.9%
Missouri*SW Bell
$7.55-12.50
42
$4.00
$16.00
$13.91
$26.02
87.1%
MontanaUS West
$13.84
8
$7.10
$16.38
$13.39
$31.70
136.7%
NebraskaUS West
$14.90
42
$4.00
$15.00
$12.90
$32.83
154.5%
Nevada*Nevada Bell
$10.00
13
$5.75
$16.00
$15.56
$30.86
98.3%
New HampshireNYNEX
$18.00
14
$6.00
$9.00
$11.20
$22.04
96.8%
New Jersey*Bell Atlantic
$7.00-8.00
3
$5.30
$8.30
na
na
na
New MexicoUS West
$10.96-15.86
14
$10.96
$15.86
$16.26
$63.22
288.8%
New York*NYNEX
$12.45-22.27
40
$3.84
$17.92
$16.33
$26.15
60.1%
North Carolina*Bell South
$9.94 -13.94
20
$2.56
$18.26
$19.07
$23.94
25.5%
North DakotaUS West
$12.00
29

$14.22
$38.45
170.4%
Ohio*Ameritech
$15.25
42
$2.70
$22.90
$18.31
$21.88
19.5%
Oklahoma*SW Bell
$9.50-13.00
47
$5.00
$20.00
$13.94
$33.84
142.8%
Oregon*US West
$12.80
33
$8.00
$16.00
$15.99
$29.31
83.3%
Pennsylvania*Bell Atlantic
$8.20-12.95
38
$3.25
$17.73
$12.09
$24.96
106.5%
Rhode IslandNYNEX
$7.50-22.00
1
$7.50
$22.00
na
na
na
South CarolinaBell South
$14.20-16.90
28
$3.00
$16.90
$18.37
$24.80
35.0%
South DakotaUS West
$12.00-15.20
31
$5.25
$15.75
$11.85
$28.20
138.0%
Tennessee*Bell South
$7.50-12.15
18
$6.00
$13.00
$16.67
$22.83
37.0%
TexasSW Bell
$8.15-11.05
58
$5.05
$19.00
$15.55
$42.94
176.1%
UtahUS West
$3.50 -7.98
14
$10.00
$12.00
$12.60
$29.13
131.2%
Vermont*NYNEX
$12.75
9
$6.00
$16.00
$15.15
$28.68
89.3%
VirginiaBell Atlantic
$8.51-14.82
21
$6.00
$16.35
$13.05
$25.94
98.8%
WashingtonUS West
$8.75-12.75
26
$7.00
$26.00
$13.10
$25.94
98.0%
West Virginia*Bell Atlantic
$15.80
9
$22.00
$36.00
$25.56
$49.37
93.2%
Wisconsin*Ameritech
$5.40
86
$2.90
$25.00
$13.49
$17.45
29.4%
Wyoming*US West
$12.64-14.64
14
$5.75
$16.80
$16.05
$35.26
119.7%

(Note: * indicates states with a definition of basic service)

How is "basic service" delivered?

Table 3 shows the types of technology used to provide telephone service in each state. Again, asterisks indicate states with a definition of basic service. Each year the FCC aggregates data on the types of equipment LECs have deployed, as reported by the LECs. The FCC has considerable information about telephone equipment in each state, but much of it is beyond the scope of this project. One general indicator of the level of the technology used to provide basic service is the extent to which the local loop circuit is digital or analog. Using FCC data on the "total equipped local loop circuit", the percent digital was calculated for each state (see column 1). Overall, 39% of the local loop is digital, but there are wide variations between states. In five states the local loop circuit is all digital, and in 18 other states including Arizona the local loop is more than 95% digital. States with relatively low levels of digital circuits included California (9.61%), Louisiana (10.58%), Massachusetts (6.95%), Nevada (10.36%), New York (8.41%), and Rhode Island (9.57%).

The key informants were also questioned about the type of technology used to provide basic service both in the "last mile" and in the infrastructure. All informants indicated that they used both copper and fiber optic to deliver basic service. Twisted pair into the residence, with copper and fiber in the infrastructure was the primary reported technology. Three states also were installing Hybrid Fiber Optic cable and 17 were using some microwave. Key informants were also asked if there were any unique technologies used to provide service, especially to rural areas. Nine states reported using Basic Exchange Telephone Radio Service (BETRS) and three reported using fixed cellular to provide basic service to isolated areas of their state, and one mentioned satellites (Alaska).

In summary, basic telephone service, for those states that have defined it, typically is a single party voice grade touch tone line with access to emergency services, directory assistance, operator services, long distance services, and a white page listing. The rates for basic service for BOCs is around $12.00 per month, but can cost be as much as $22.27 per month or as little as $5.40, and LECs may have rates exceeding $30.00 per month. Basic service is typically provided using twisted pair copper wire into the house with a mixture of fiber and copper in the infrastructure, although some remote areas require wireless technologies.

What is the status of Universal Service programs in each state?

In order to make telephone service available and affordable to all citizens, federal programs have been put in place to support Universal Service in every state and a some states have developed their own Universal Service programs. The oldest state program was established in California in 1983. Given recent trends toward deregulation of telecommunications and the introduction of local competition, almost very state is now involved to some degree in examining or reexamining Universal Service. For states which have had a Universal Service program, like Arizona, this has lead to a comprehensive change in the program. States which have not had a Universal Service program have responded quite differently. Some are just beginning to examine the issue, wondering if they need a fund. Others are finishing up the rule making process, and will be soon establishing their state's first Universal Service program. This section of the report examines state participation in federal programs, status of state Universal Service programs, and characteristics of established state Universal Service programs. Key informants in each state were also asked to identify activities related to the provision of advanced information services such as video/cable, Internet, etc. Since the key informants are not directly involved in the regulation of these advanced services, they generally provided very limited, second hand information. However, one important exception involved rate cases where the Commission used its regulatory authority over local telecommunication companies as a means for enhancing the development of advanced information services. In a number of states, the Commission had used rates case findings and excess earnings as a vehicle to require a carrier, usually the BOC, to provide resources to increase the capabilities and access to advanced information services.

Table 3: State Telecommunication Technologies for Providing Basic Service




State
Percent Local Loop Digital


Copper



Fiber Optic



Hybrid Fiber



Microwave



Other
Alabama
18. 59%
Yes
Yes



Alaska*
na
Yes
Yes

Yes
 Satellite, BETRS
Arizona*
98.47%
Yes
Yes

Yes
 BETRS
Arkansas
99.41%
Yes
Yes


ISDN
California*
9.61%
Yes
Yes



Colorado*
94.04%
Yes
Yes
Yes
Yes
 ISDN on 70% of lines
Connecticut*
90.87%
Yes
Yes
Yes


Delaware*
100.00%
Yes
Yes


ISDN
District of Columbia
100.00%
Yes
Yes



Florida*
35.43%
Yes
Yes


95% Digital Switches
Georgia*
27.79%
Yes
Yes

Yes
Hawaii*
73.23%
Yes
Yes

Yes
Idaho
98.91%
Yes
Yes

Yes
 95% Digital Switches
Illinois
95.26%
Yes
Yes



Indiana
99.46%
Yes
Yes



Iowa
92.32%
Yes
Yes



Kansas
100.00%
Yes
Yes



Kentucky
17.70%
Yes
Yes



Louisiana*
10.58%
Yes
Yes



Maine
14.21%
Yes
Yes

Yes
 BETRS
Maryland
100.00%
Yes
Yes

Yes
Massachusetts*
6.95%
Yes
Yes



Michigan*
99.96%
Yes
Yes



Minnesota
99.78%
Yes
Yes



Mississippi
16.44%
Yes
Yes



Missouri*
94.93%
Yes
Yes

Yes
Fixed cellular
Montana
76.27%
Yes
Yes

Yes
 BETRS
Nebraska
72.15%
Yes
Yes

Yes
Nevada*
10.36%
Yes
Yes
Yes

Fixed cellular, BETRS
New Hampshire
12.92%
Yes
Yes

Yes
New Jersey*
99.98%
Yes
Yes



New Mexico
99.02%
Yes
Yes

Yes
 BETRS
New York*
8.41%
Yes
Yes



North Carolina*
23.00%
Yes
Yes



North Dakota
84.82%
Yes
Yes



Ohio*
96.88%
Yes
Yes


ISDN
Oklahoma*
99.70%
Yes
Yes



Oregon*
98.63%
Yes
Yes

Yes
 BETRS
Pennsylvania*
99.20%
Yes
Yes



Rhode Island
9.57%
Yes
Yes



South Carolina
25.01%
Yes
Yes



South Dakota
66.30%
Yes
Yes

Yes
Tennessee*
19.96%
Yes
Yes


ISDN
Texas
99.00%
Yes
Yes



Utah
98.03%
Yes
Yes



Vermont*
14.27%
Yes
Yes



Virginia
99.74%
Yes
Yes



Washington
97.73%
Yes
Yes


ISDN, BETRS
West Virginia*
100.00%
Yes
Yes



Wisconsin
96.22%
Yes
Yes

Yes
Wyoming*
67.96%
Yes
Yes

Yes
 Fixed cellular, BETRS
AVG./TOTAL
39.02%
51
51
3
17

(Note: * indicates states with a definition of basic service)

Listed below are the states and, in brief, the programs they developed:

Participation in Federal Universal Service Programs

The federal government has three programs states can voluntarily participate in to promote Universal Service in their state -- Lifeline, Link-up America, and High Cost (USF) programs. Lifeline and Link-up America are targeted towards low income groups, while the High Cost fund is targeted to LECs in rural areas. Since these programs are voluntary, all states do not participate in all programs. Table 4 shows states' participation in the federal programs and related demographic data. The key informants provided the information on participation, while the demographic information was from the U.S. Census. Thirty-nine states and DC participate in the Lifeline program, while 45 states and DC participate in Link-up America. Arizona participates in both programs. Three were reasons given by those not participating.

  • The state does not have the authority to mandate participation in a voluntary federal program.
  • The state can not provide matching funds required by the program and cannot require the LECs to provide matching funds (i.e., Lifeline).
  • The state is prohibited from validating income information required by the program.

Thus, in the case of these programs, lack of participation has little to do with the need for subsidized rates or reduced hook-up charges for low income households, and more to do with general statutory barriers. Some states that do not participate in these programs now are considering changing the law to allow participation, especially in those states contemplating the creation of a state Universal Service Fund. They may require LECs to participate in federal programs as a prerequisite to participation in a state program.

Table 4: State Participation in Federal Programs





State



Percent on Public Assistance
Percent Below Poverty

Level
Federal Lifeline

Program
Federal

Link-Up

Program



Proportion Rural



Subscribers Per Sq Mile
Federal

High Cost

Program
Alabama
7.10%
17.10%
Yes
Yes
39.6%
13.6
Yes
Alaska
6.70%
10.00%
Yes
Yes
32.5%
0.3
Yes
Arizona
6.40%
15.10%
Yes
Yes
12.5%
2.6
Yes
Arkansas
6.80%
17.40%
Yes
Yes
46.5%
9.6
Yes
California
10.70%
15.80%


74.0%
5.8
Yes
Colorado
5.00%
10.60%
Yes
Yes
17.6%
1.4
Yes
Connecticut
6.00%
9.40%
Yes
Yes
20.9%
na

Delaware
5.20%
7.60%

27.0%
na
Dist. of Col.
13.30%
20.30%
Yes
Yes
0.0%
na
Florida
6.80%
15.30%
Yes
Yes
52.0%
13
Yes
Georgia
8.50%
17.80%
Yes
Yes
36.8%
13.9
Yes
Hawaii
5.90%
11.00%
Yes
Yes
11.0%
na
Idaho
3.20%
15.00%
Yes
Yes
12.6%
0.7
Yes
Illinois
7.90%
15.30%

Yes
15.4%
9.9
Yes
Indiana
5.00%
11.70%

Yes
35.1%
12.9
Yes
Iowa
5.00%
11.30%

Yes
39.4%
8.5
Yes
Kansas
4.60%
11.00%

Yes
30.9%
4.6
Yes
Kentucky
9.80%
19.70%

Yes
48.2%
15.7

Louisiana
10.20%
24.20%
Yes
31.9%
10.7
Yes
Maine
7.60%
13.40%
Yes
Yes
55.4%
11
Yes
Maryland
6.00%
11.60%
Yes
Yes
18.7%
77.1
Massachusetts
7.50%
10.00%
Yes
Yes
15.7%
91.6
Yes
Michigan
9.00%
13.50%
Yes
Yes
29.5%
11.7
Yes
Minnesota
5.70%
12.80%
Yes
Yes
30.1%
6.8
Yes
Mississippi
11.80%
24.50%
Yes
Yes
52.9%
8.2
Yes
Missouri
6.80%
15.60%
Yes
Yes
31.3%
9.0
Yes
Montana
5.40%
13.70%
Yes
Yes
47.5%
0.5
Yes
Nebraska
4.20%
10.30%

Yes
33.9%
2.3
Yes
Nevada
3.60%
14.40%
Yes
Yes
11.7%
0.5
Yes
New Hampshire
3.40%
8.60%
Yes
49.0%
30.9
Yes
New Jersey
6.10%
10.00%

Yes
10.6%
387.2

New Mexico
8.00%
21.00%
Yes
Yes
27.0%
0.5
New York
9.00%
15.30%
Yes
Yes
15.7%
21.8
Yes
North Carolina
7.20%
15.70%
Yes
Yes
49.6%
30.0
Yes
North Dakota
4.30%
11.90%
Yes
Yes
46.7%
1.4
Yes
Ohio
8.70%
12.40%
Yes
Yes
25.9%
17.8
Yes
Oklahoma
6.40%
18.40%
Yes
Yes
32.3%
4.6
Yes
Oregon
5.20%
11.30%
Yes
Yes
29.5%
2.9
Yes
Pennsylvania
6.90%
11.70%
Yes
Yes
31.1%
36.9
Yes
Rhode Island
8.00%
12.00%
Yes
14.0%
na
South Carolina
6.70%
18.90%
Yes
Yes
45.4%
25.8
Yes
South Dakota
4.60%
14.80%
Yes
Yes
50.0%
1.4
Yes
Tennessee
8.60%
17.00%
Yes
Yes
39.1%
16.0
Yes
Texas
6.30%
17.80%


19.7%
2.4
Yes
Utah
3.80%
9.30%
Yes
Yes
13.0%
0.6
Yes
Vermont
7.20%
10.40%
Yes
Yes
67.8%
23.1
Yes
Virginia
4.80%
9.40%
Yes
Yes
70.6%
15.0
Yes
Washington
6.90%
11.00%
Yes
Yes
23.6%
11.6
Yes
West Virginia
9.70%
22.30%
Yes
Yes
63.9%
8.9
Yes
Wisconsin
6.90%
10.80%
Yes
Yes
34.3%
13.6
Yes
Wyoming
5.20%
10.30%
Yes
Yes
35.0%
0.2
Yes
U.S. TOTAL
7.60%
14.5%
40
46
24.8%
4.4
42

According to the key informants, 42 states, including Arizona, participate in the federal High Cost program (USF). The predominate reason for LECs not participating is the state is not a high cost state. This typically means the state is small with a predominately urban population and/or they have no LEC (often they only have one LEC) with costs above 115% of the national average. Thus, barriers to participation in this program have less to do with statutory constraints and more to do with the LECs need for support.

Status of State Universal Service Programs. Key informants were asked a series of questions about the current status of any state Universal Service programs, and any pending actions related to Universal Service. Based on this information, five categories were developed to characterize the status of different state efforts with regard to Universal Service. The categories, referred to as "Status" in Table 5, are:

  1. No statutes, regulations, or commission orders mandating Universal Service. States in this category did not have a mandate for Universal Service at this time. However, this did not mean the state was not considering a state Universal Service program, or that it did not have a general statement to promote Universal Service. In fact, almost all states falling in this category were actively investigating Universal Service, and determining whether it should be mandated. In many cases these states were studying Universal Service as a part of, or as an off-shoot of, a docket on local competition. Nineteen states fell into this category.
  2. Mandated Universal Service in initial stages of rule making process. States in this category had a statute or commission order mandating Universal Service, and they were in the early stages of the investigative process. Five states fell into this category.
  3. Mandated Universal Service actively involved in rule making process. States in this category had a mandate for Universal Service and were actively involved in developing rules related to Universal Service, again often as a part of, or extension of, a docket on local competition. Many of these states had legislative mandates to develop proposed rules for Universal Service, and were given specific time frames for completion. This category included nine states.
  4. Mandated Universal Service rules with approved rules, fund not in place. States in this category had essentially finished the rule making process, and were waiting for final legislative approval to set up a state Universal Service fund. Two states, Wisconsin and Wyoming, were in this category.
  5. Mandated Universal Service rules with approved rules, fund in place. States in this category had a mandate, rules and an approved state Universal Service Fund in place. However, these are not newly established funds, but are typically existing funds established in the late 80's. So, while the 16 states in this category have a fund in place, all except one, are in some stage of revision or modification. Nevada is the only state in this category finished this rule making process, and they have yet to collect or distribute Universal Service Funds. These states would fall into categories 2, 3, or 4, if they had not previously established a state Universal Service Fund. And like states in those categories, the redesign of the existing programs has been triggered by deregulation and local competition.

Besides showing the status or each state's Universal Service program, the relevant statutes, regulations or commission orders are cited in Table 5. In addition, the status of local competition and the date is was permitted is presented. This information was gathered from the FCC's report on Common Carrier Competition and updated by seven key informants on their draft state profiles. A brief summary of pending actions related to Universal service is also presented. More detailed descriptions of pending actions are included in each state profile (Appendix E).

Description of State Universal Service programs.

Eighteen states have approved Universal Service programs in place. These states and descriptions of their programs are shown in Tables 6 and 7. With the exception of state penetration rates, the information was gathered through key informant interviews and examination of commission orders and regulations. Penetration rate data is from the FCC's 1993/4 Statistics of Communication Common Carriers. Like the federal programs, state Universal Service programs generally target two different groups -- LECs in high cost areas and low income/economically disadvantaged households. Sixteen of the eighteen states with programs, are targeted at LECs in high cost areas, and eight are targeted to low income/economically disadvantaged. Seven states have programs targeted at just high cost LECs and only one state (Connecticut) is targeted at just low income/economically disadvantaged. Colorado, Texas, and Wisconsin have programs for users with disabilities, while Vermont has targeted emergency services and Wisconsin has targeted homeless and advanced services to schools and health care organizations.

Table 5: Status of State Universal Service Programs

State Status State
Statute 		Commission
Order 		LEC
competition
permitted		 Pending Activities Related to Universal Service
Alabama
1


8/95
APSC has docket and workshop on US.
Alaska
2
4205.145
R-94-5
policy barrier
APUC has a rule making docket to adopt US. Statute allows for creation of USF for long distance service.
Arizona
5

Contel Rate case
7/95
 ACC has draft rules to establish a new USF that is more structured and rule based
Arkansas
5
23-17-304

prohibited
Statute gives commission authority to continue or change the USF. The APSC hasn't held hearings.
California
5
Moore Univ. Act 1983
84-04-053

PU Code 871
7/95
 The CPUC has a major rule making investigation and is looking at a complete revision of the US program.
Colorado
5
House Bill 1335

5/95
Colorado has a high cost fund in place, but is currently developing revised rules for new act.
Connecticut
5
Section 16247

7/94
The dominant LEC is proposing a creation of a high cost fund. The CPUC is reviewing the proposal.
Delaware
1


no regulatory barrier
Delaware has a general statement to promote universally available and affordable service but not a US program.
District of Columbia
3

Rate case #850
statutory barrier
The PSC is looking at US as part of a new rate case.
Florida
2
CHAP 364.025

6/95
The FPSC just completed evidentiary policy making proceedings on an interim US mechanism.
Georgia
3
Sen Bill 137

7/95
The GPSC is in process of developing rules for a USF.
Hawaii
3
Act 225 1995

6/95
The HPUC has opened a docket and issued draft rules on competition and Universal Service.
Idaho
5
62-610 1988

prohibited
The IPUC has nothing pending regarding US, but a task force is looking at Idaho's telecommunications law.
Illinois
5
13-801

1988
Staff is filing proposed rules for US. They expect to be done by April, 1996.
Indiana
5
8-1-2.6

no regulatory barrier
The IURC is in the middle of a workshop on local competition, and is reviewing the US program.
Iowa
1


5/95 (never prohibited)
They are looking at US as part of a docket on local competition.
Kansas
1


no statutory barrier
The KCC has an active docket examining US in Kansas.
Kentucky
1


policy barrier
The KPSC has a docket on local competition that includes US and a USF. They expect to finish in 1997.
Louisiana
3

V-20883-Sub Docket A
prohibited
The Commission has proposed regulations for local competition which includes a mandate for US.
Maine
2
Title 35A, PT7, CH71

no regulatory barrier
The MPCU is considering polices to establish local competition which may lead to consideration of US.
Maryland
1


1994
US may be a commission case in future due to local competition.
Massachusetts
1


1991
US is one part of a pending docket on local competition. The MPUC should have a decision in March, 1996.
Michigan
1


1991
The MPSC has nothing pending regarding US.
Minnesota
3
Chap 156,

S.F. No 752

8/95
Legislature required Commission to develop rules for US. The statutory dealine is August, 1997.
Mississippi
5

77-3-35
policy barrier
The MPSC opened a docket for local competition which will include US. They will hold hearings in 1996.
Missouri
1


prohibited
The MPSC has a docket on local competition which may bring up the issue of US.
Montana
1


not prohibited
A task force is looking at the issue of US. They may addresss this issue as part of local competition.
Nebraska
1


not prohibited
The NPSC has a docket on US, and are in the comment stage. They also have a docket on local competition.
Nevada
5

RO63-95
5/95
 They just adopted new omnibus telecommunications regulations that includes a Universal Service Fund.
New Hampshire
2
SB-106

8/95
The NHPUC has a docket on local competition and they are currently doing background research.
New Jersey
1


under consideration
The NJBPU has nothing pending regarding US.
New Mexico
5
63-9A-6.1

1985
The NMCC will be opening up a docket on local competition which may involve US.
New York
3

94-C-0095
1992
 DPS has a docket on local competition and one part of it involves US.
North Carolina
1


1995
The NCUC has a docket on local competition and US. Interim rules are due 12/31/96, final rules by 7/1/98.
North Dakota
1


no regulatory barrier
The NDPSC has minimal jurisdiction over telecommunications. Nothing is pending regarding US.
Ohio
3
ORC 497-202 1988

8/95
The PUCO has a docket on local competition with US being a key part. Staff is now developing comments.
Oklahoma
1


possible statutory barrier
The Commission has a docket on local competition and draft rules, and US is a part of that docket.
Oregon
5
759-1103
95-1103
1993
 Oregon has completed Phase I of a docket on US. Phase II will create the funding mechanism.
Pennsylvania
3
House File 518
Docket No 1-940035
yes
 The PPUC has a Universal Service docket, and they expect to have their policy in place by Summer 1996.
Rhode Island
1


yes
RIPUC has nothing pending regarding US. They do have a docket on local competition.
South Carolina
1


possible statutory barrier
The SCPSC is just forming a task force to look at local competition. The task force will address US issues.
South Dakota
2
49-31-4.1 1988

yes
SDPUC has nothing pending regarding US.
Tennessee
3
Sec 65-5-207

1995
The TPSC has established a proceeding on local competition and is developing rules for US.
Texas
5
1987
1995
TPUC is currently revising rules for its high cost fund.
Utah
5
54-86-11&12

1995
Utah is revising its US program and expects to be done by September 1996. They have an interim USF.
Vermont
5
Chap. 87

no regulatory barrier
VPSB has a US program in place and is developing a formula for distributing high costs funds.
Virginia
1


1995
VCC does not have a docket on US now, but will after they issue rules on local competition.
Washington
5

U-85-23
1994
 WUTC is developing a position paper on US and a USF in response to a LEC's request.
West Virginia
1


no regulatory barrier
WV is considering US as part of a docket on local competition, and they have formed a task force to look at US.
Wisconsin
4
S196.218 1994
1-AC-155
yes
 The PSC has submitted rules to the legislature for their US program. The program is to start January, 1996.
Wyoming
4
37-14-501

1995
The PSC has nearly finished its rule making process for US, and the Governor will sign the rules within 60 days of final adoption.

Programs that are targeted at high cost areas are not portable, while programs targeted at low income/ economically disadvantaged, or users with disabilities are portable. That is, for these later groups the subsidy goes with the individual; if the person moves to another carrier's exchange, the subsidy moves to the new carrier. Portability should not confused with whether the individual gets a voucher or credit on their bill or not, or whether the funds go to the LEC. It is possible to have a voucher or credit go to a customer in a high cost area, even though it isn't portable. One informant suggested the idea of including a credit or voucher in high cost areas, so the customers would realize the subsidy they were receiving, even though it wasn't portable. Another interviewee suggested their state's high cost program should be modified so that only those who needed a high cost subsidy would get it -- that wealthy individuals would not receive a subsidy just because they lived in a high cost area. Doing this, would in affect make the states high cost subsidy portable. State Universal Service Funds are typically administered by an independent third party (4) or a LEC Association (5). In four states the commission is currently responsible for administering the fund, and in four the BOC administers the fund. Table 7 shows the funding mechanisms for current state Universal Service Funds. In all states except Illinois and Mississippi, LECs, the BOC and the IXCs contribute to the fund. Only six states currently require providers of wireless telecommunication services to contribute to the fund, and in all cases these are providers of cellular service. The trend in pending programs, however, is to define contributors as broadly as possible. Many states are developing mechanisms that will require wireless companies and resellers to contribute. One of the barriers these states face is they do not currently regulate wireless communication, and resellers are often located out of state. Arizona is one of the states that have defined contributors very broadly in their proposed rules to include providers of cellular, paging and commercial mobile radio services. Cable companies will also become contributors in many states once they are providers of local service. As one interviewee stated, "Any company that benefits from the network should contribute to the Fund."

Table 6: Description of State Universal Service Programs

State Status Penetration Rate Targeted Groups Administration Is subsidy portable?
Arizona
5
94.1%
Rural/high cost BOCNo
Arkansas
5
90.0%
Rural/high cost BOCNo
California
5
95.2%
Rural/high cost

Low income/economically disadvantanged

Independent

3rd party

 Yes, for low income
Colorado
5
95.7%
Rural/high cost CommissionNo
Connecticut
5
96.4%
Low income/economically disadvantanged LECs (changing to 3rd party) Yes
Idaho
5
94.8%
High cost (not stated but implicit) Independent

3rd party

 No
Illinois
5
93.5%
Low income/economically disadvantaged

Rural/high cost

Non-profit organization; LEC Assoc. Yes, for low income
Indiana
5
92.9%
Rural/high cost BOCNo
Mississippi
5
88.7%
None BOCNo
Nevada
5
92.8%
Rural/high cost Independent

3rd party

 No
New Mexico
5
88.6%
Low income/economically disadvantaged

Rural/high cost

Commission established boardNo
Oregon
5
96.2%
Rural/high cost

Low income/economically disadvantaged

LEC Assoc.

(OECA)

No
Texas
5
91.5%
Rural/high cost

Low income/economically disadvantaged Users with disability

LEC Assoc. (TECA) Yes, for low income and disabled
Utah
5
96.6%
Rural/high cost CommissionNo
Vermont
5
94.7%
Rural/high cost

Low income/economically disadvantaged Emergency services (911)

LEC Assoc.

(NECA)

Yes, for low income
Washington
5
95.7%
Rural/high cost LEC Assoc. (WECA)No
Wisconsin
4
97.0%
Rural/high cost

Low income/economically disadvantaged

Users with disability, Homeless

Advanced services to schools & health care

Independent

3rd party

 Yes, for low income and disabled
Wyoming
4
92.6%
Rural/high rate CommissionNo

States with a Universal Service Fund tend to use some variation or combination of "total revenues", "total access lines", or "total minutes of use" as the basis for determining each carriers contribution to the fund. The carries contribution is typically based on their proportion of the total for the state (i.e., what proportion the carrier's total revenues are in comparison to the total revenues for all carriers in the state). There are no distinctions made between business or residential "revenues", "access lines" or "minutes of use". Perhaps the most unique program currently in place is Illinois' program were customers can make a voluntary contribution to a fund that is used to waive installation charges to low income subscribers.

Most state Universal Service Funds provide a rate subsidy to the carrier or the customer, and even when the subsidy is for the customer, it typically goes directly to the carrier to off-set a credit on the customers bill. The trend in pending programs is to continue providing subsidies to carriers. Few states currently provide direct infrastructure reimbursement to the carriers, and when they do it is on a case by case basis. The criteria used to distribute funds is closely tied to the selected target group. Generally, programs that target rural/high cost groups distribute funds to carriers based on the carriers costs or rates being above the statewide average by some percentage. Many current programs modeled their program after the federal high cost program, providing subsidies to LECs whose unsupported NTS loop costs were greater than 115% of the statewide average. Others states based distributions on the LEC's rates being a certain percentage above the statewide (i.e., Idaho, Wyoming) or above a certain fixed amount established by the Commission (Oregon, Utah). Programs that target low income/economically disadvantaged or disabled, subsidized carriers based on the number of eligible subscribers who receive credits. Wisconsin's program is unique in that distributes "high rate assistance" based on the median income in the service area (i.e., if the rate for basic service is greater than 2% of the median income for the service area subscribers receive a subsidy). Many pending programs have yet to determine the manner in which they will distribute funds. Fund distribution is perhaps the most complex, unresolved and difficult issue in pending programs. Even those with proposed rules have yet to specify exactly how funds will be distributed.

In summary, states' Universal Service programs are generally targeted to high cost areas, and this trend continues in pending programs that are developing in response to local competition. Only a few small, urban states are focusing primarily on low income households. The selected target group, in turn, typically determines the type of subsidy and its portability, with most high cost programs providing rate subsidies to carriers. While some states use direct infrastructure reimbursement, they do not rely on this for promoting Universal Service to rural areas. There is clearly trends to broaden the base of contributors to state funds to include all telecommunication carriers that benefit from the network and to better target areas by using Census tracts for identifying high-cost areas. The greatest variation in programs, and perhaps the toughest issue is how to distribute funds. Many states are still trying to resolve this issue.

Table 7: Description of State Universal Service Funding Mechanisms

State Contributors Basis for Contribution Types of Subsidies
Who Draws From Fund
ArizonaLECs, BOC, IXCs Surcharges per access line and per minute of use on intrastate toll Rate subsidyLECs who demonstrate high cost (one LEC now)
ArkansasLECs, BOC, wireless, IXCs % of retail billed minutes of useRate subsidy LECs with intrastate NTS costs per loop > 115% of statewide weighted average
CaliforniaLECs, BOC, wireless, IXCs % of billable revenues Carrier rate subsidy; Subsidy to customer LECs with high cost and eligible subscribers
ColoradoLECs, BOC, IXCs Minutes of use and access charge per lineRate subsidy Costs above average investment for the traffic
ConnecticutLECs, BOC, IXCs Total gross revenues as a percent of total state revenues Rate subsidy with subsidy going to customer LECs with eligible subscribers

Subscriber receives credits for intra and interstate service

IdahoLECs, BOC, IXCs Surcharge on all local access lines and each intrastate toll minute Bulk check to carrierLECs with rate for 1-party single line in excess of 125% of weighted statewide avg.; or avg. charge per minute for NTS/ WTS in excess of statewide avg.
IllinoisCustomer contributions, and IXCs Customer voluntary, and LEC intrastate minutes of use for high cost program Waiver of installation charge to customer; Sliding scale subsidy to carrier for costs above statewide average LECs based on the number of eligible PA customers; Small LECs based on average costs per access line versus statewide average
IndianaLECs, BOC, wireless, IXCs Intrastate carrier common originating and terminating access minutes Rate subsidy; Direct infrastructure reimbursement; waiver of hook-up charge. LECs with intrastate NTS costs above the statewide average
MississippiBOC, LECs Minutes of useRate subsidy; Direct infra- structure reimbursement 13 LECs with high-cost
NevadaAll telecommuni-cation providers % of intrastate retail revenuesRate subsidy; Direct infra- structure reimbursement Small LECs with rate of return below commission set level
New MexicoNo one currently Total revenuesRate subsidy No one is drawing from fund
OregonLECs, BOC, IXCs % of gross revenuesRate subsidy; Direct infra-structure reimbursement LECs who show cost shift would cause residential rates to exceed $15.00
TexasLECs, BOC, IXCs Access minutes of useRate subsidy to carrier; Equipment reimbursement; Customer rate reduction LECs with high cost who show cause or those with eligible customers
UtahLECs, BOC, wireless, IXCs 1/2 cent/minute NTS trafficDirect infrastructure reimbursement, Cost of service subsidy LECs (not BOC) whose rates equal or exceed a target rate set by the UPSC
VermontLECs, BOC, wireless, resellers 2% surcharge on all bills including interstate, cellular, directory assistance, 2-way cable, PCN service Rate subsidy; Direct infrastructure reimbursement Reimbursement to providers of TRS service; Rate subsidy to eligible customers; Direct infrastructure reimbursement to carrier for 911 upgrades
WashingtonLECs, BOC, IXCs Carriers proportion of total access minutes Rate subsidy to eligible carriersLECs whose unsupported loop costs is 115% of statewide avg.
WisconsinAll providers of telecomm services with rev > $200K % of gross revenuesRate subsidy, Direct infrastructure reimbursement; Equip-ment reimbursement LECs for eligible subscribers (low income and disabled); High rate assistance based on median income in service area
WyomingLECs, BOC, IXCs, wireless % of gross retail revenuesRate subsidy to carrier with credit on bill LECs with rates above 135% of statewide average

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