*[SUMMARY OF HIGH COST UNIVERSAL SERVICE ORDERS]{.underline}*

**Input Values for the Forward-Looking Cost Model (CC Docket Nos. 96-45,
97-160)**

-   This Order adopts the input values to be used in the cost model to
    determine non-rural carriers\' forward-looking costs to provide the
    supported services. Those costs will then be used to provide
    high-cost universal service support pursuant to the forward-looking
    methodology discussed below.

-   On October 28, 1998, the FCC completed the first stage of the
    proceeding to select a forward-looking cost model with the selection
    of the model platform. The platform encompasses the aspects of the
    model that are essentially fixed, primarily assumptions about the
    design of the network and network engineering.

-   In this Order, the FCC completes the second stage of this proceeding
    by adopting the input values for the cost model, such as the cost of
    cables, switches, and other network components, as well as various
    capital cost parameters.

-   In addition, the FCC adopts a road surrogate algorithm to determine
    the location of customers and a data set of customer locations.

-   The FCC will use these input values in the cost model to estimate
    the forward-looking cost of providing supported services, which is
    the basis for determining federal support amounts for non-rural
    carriers, effective January 1, 2000.

-   The FCC made no finding as to whether the federal model would be
    appropriate for purposes other than determining federal universal
    service support.

-   The FCC also clarifies its interpretation of \"rural telephone
    company,\" a term used to determine whether a carrier is rural or
    non-rural for the universal service support mechanism. The Order
    modifies the filing requirements for rural carriers that certify
    themselves as rural, eliminating such annual filings in most cases.

**New Mechanism for Federal Universal Service High-Cost Support Provided
to Non-Rural Carriers (CC Docket No. 96-45)**

-   [Federal and State Roles in Providing Universal Service Support for
    Intrastate Rates]{.underline}:

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-   The FCC concluded that the primary role of federal high-cost support
    is to enable reasonably comparable rates *among* states, while the
    primary role of each state is to ensure reasonably comparable rates
    *within* its borders.

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-   Based on these federal and state roles, the FCC adopted a new
    forward-looking methodology for calculating high-cost support for
    non-rural carriers.

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-   [Methodology for Calculating Support]{.underline}:

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-   Beginning on January 1, 2000, the FCC's universal service cost model
    will be used to estimate the forward-looking costs incurred by
    non-rural carriers to provide supported services.

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-   The statewide average cost per line for all lines served by
    non-rural carriers in a given state will be compared to a national
    cost benchmark, set at 135 percent of the national average
    forward-looking cost per line.

-   The new federal high-cost support mechanism will provide support to
    non-rural carriers in a state where the statewide average cost per
    line exceeds the national cost benchmark. The federal support
    mechanism will provide support for *all* forward-looking intrastate
    costs per line that exceed the national benchmark. The new federal
    mechanism takes into account the FCC's separations rules and the
    division of cost recovery between the state and federal
    jurisdictions, and therefore provides 76 percent of the portion of
    the forward-looking costs of providing the supported services.

-   Because statewide averaging of costs better ensures that each
    state\'s resources are brought to bear before federal support is
    provided, the FCC reconsidered and eliminated the state share
    requirement described in the May 28, 1999 high-cost order. The
    federal support mechanism will *not* impute a per-line amount to
    each state to support its universal service needs internally.

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-   [Interim Hold-Harmless Provision]{.underline}:

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-   The interim hold-harmless provision ensures that the amount of
    support provided to a carrier by the forward-looking mechanism will
    be no less than the amount of support provided to the carrier by the
    present mechanism.

-   The interim hold-harmless approach is designed to prevent potential
    rate shocks and disruptions in state rate designs when the
    forward-looking mechanism takes effect.

-   Interim hold-harmless support is determined on a per-line basis; if
    a carrier loses a line, it loses the support for that line.
    Hold-harmless support is targeted, based on wire center costs, to
    the highest cost wire centers.

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-   [Portability of Support]{.underline}:

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-   Federal universal service support will be portable among all
    eligible telecommunications carriers. When a competitor acquires a
    subscriber line from an incumbent receiving support, the competitor
    will receive the incumbent\'s support.

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-   [Use of Support]{.underline}:

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-   The total amount of support indicated by the forward-looking
    mechanism on a statewide basis is targeted so that the amount of
    support available to a competitor depends on the wire center cost of
    the line that the competitor wins from the customer.

-   As mandated by section 254(e) of the Communications Act, carriers
    must use universal service support only for the provision,
    maintenance, and upgrading of facilities and services for which the
    support is intended.

-   States must certify to the Commission that non-rural carriers
    receiving federal high-cost support will use that support in
    compliance with section 254(e).

-   To the extent that forward-looking support calculations exceed
    current support levels, no non-rural carrier in a particular state
    will receive federal support in excess of current support levels
    until that state files the required certification with the
    Commission. No non-rural carrier in a particular state will receive
    *any* federal support after January 1, 2001 if that particular state
    has not filed the required certification with the Commission.

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-   [High-Cost Loop Support for Rural Carriers]{.underline}:

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-   The high-cost support mechanism for rural carriers is not scheduled
    to be revised until January 1, 2001, at the earliest, and only after
    the FCC and the Joint Board have completed further deliberations on
    the matter based on recommendations from the Rural Task Force.

-   Consistent with the FCC's commitment not to consider significant
    changes in rural carriers' support until after the Rural Task Force
    and Joint Board recommendations, we will continue to calculate the
    loop expense adjustment for the rural carriers based on loop data
    for both rural and non-rural carriers.

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-   [Lifting the Stay of the Commission's Section 251 Pricing
    Rules]{.underline}:

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-   Effective six months from the date of release of today's Order, the
    FCC will lift the stay of its rule requiring each state commission
    to establish different rates for interconnection and unbundled
    network elements in at least three defined geographic areas within
    the state to reflect geographic cost differences.

-   The FCC had stayed this rule to allow states to come into compliance
    following the Supreme Court\'s affirmation of the FCC's rule in
    January 1999.