The Honorable John Wine, Commissioner

Kansas Corporation Commission

1500 S.W. Arrowhead Road

Topeka, Kansas 66604-4027

The Honorable Cynthia L. Claus, Commissioner

Kansas Corporation Commission

1500 S.W. Arrowhead Road

Topeka, Kansas 66604-4027

The Honorable Brian J. Moline, Commissioner

Kansas Corporation Commission

1500 S.W. Arrowhead Road

Topeka, Kansas 66604-4027

Subject: Docket No. 99-GCCZ-156-ETC

GCC License Corporation's Petition for

Designation as an Eligible Telecommunications

Carrier

Dear Commissioners:

The Rural Utilities Service (RUS or Agency), a rural development agency
of the United States Department of Agriculture, actively supports and
promotes the universal availability of a broad range of
telecommunications and information services in rural America. The RUS
Telecommunications Program provides technical assistance and financing
to bring state-of-the-art telecommunications to rural areas.

Since the passage of the Telecommunications Act of 1996 (1996 Act),[^1]
RUS has taken an active role in the Federal Communications Commission's
(FCC's) implementation of the 1996 Act's universal service provisions.
Throughout this process, RUS has represented the needs and interests of
all rural Americans, not just those currently served by RUS-financed
companies and cooperatives. Likewise, in its written comments, RUS has
focused on what is good for rural America, not just what is good for the
entities to which it lends.

RUS strongly supports fair competition in all local service markets
where it can be sustained without defeating the universal service
principles of the 1996 Act.[^2] RUS also strongly supports states'
rights to preserve and advance universal service within their boundaries
as provided under Section 254 of the 1996 Act.[^3]

In this docket, a carrier seeks state universal service funds without
intending to meet the data rate requirements established by Kansas law
for local exchange service with the state.[^4] Although this letter is
in reference to a specific docket, the RUS position is directed toward
general telecommunications policy. RUS notes that a carrier that seeks
universal service funding on the federal level must meet federal ETC
requirements. RUS respectfully submits that a carrier that seeks state
universal service funding should be obligated to meet state ETC
requirements regardless of whether the carrier is otherwise subject to
state regulation. The mode of transmission should not reduce the service
expectations of Kansas consumers or the conditions for receiving
universal service support.

**RUS Has Always Been a Wireless Proponent**

RUS has been a long time proponent of using wireless technologies to
solve rural telecommunications problems. RUS was part of a coalition
that won approval for using mobile telephone frequencies (from a
cellular predecessor technology known as IMTS) for fixed station
telephone service.[^5] Recently, RUS has adapted its regulations so that
providers other than local exchange carriers can receive financing for
mobile service in rural areas.

While much more capable wireless systems are on the horizon for rural
areas, this Agency views today's wireless and wireline technologies as
separate and distinct services meeting different needs. Current cellular
radio technologies were not designed to evolve over time. They provide
voice service with extremely limited data capability. Wireline plant,
properly configured, is an evolvable technology with capabilities
ranging from voice to broadband.

The RUS believes that mobile service is important in rural areas and
wishes to promote its availability but the Agency is concerned that
current cellular services are unable to provide customers "access to
advanced services" as required by Section 254 of the 1996 Act.[^6] RUS

focus on advanced services, in fact, preceded the 1996 Act. RUS has been
required by law to promote advanced services (including 1 megabit/second
data rates) since 1993.[^7] Because we believe mobile technology
fulfills a different need and is not a substitute or duplication of
local exchange service, the Agency specifically exempted wireless
services from having to meet that data requirement. However, under RUS
regulations, if a wireless service were to be used as a substitute for
local exchange service, it would have to meet the data requirement to be
eligible

for financing.

**No Carrier Should Have To Compete On a Split-Level Playing Field**

Since the passage of the 1996 Act, much attention has been focused on
creating a level playing field for all competitors (competitive
neutrality), and on ensuring that regulators do not favor a specific
technology (technological neutrality). Should Kansas exercise its
authority to permit competitive entry in the areas served by rural
carriers, it should be careful to not allow some carriers to avoid rules
that apply to other competitors or ignore technology-imposed service
capability. A split-level playing field, where one competitor must play
on one level with one set of rules, while another is allowed to play on
a different level with different rules, could profoundly affect the
quality of telecommunications in rural Kansas and throughout rural
America.

Kansas has a history of promoting modern service in rural areas. That
progress should be treasured and preserved. Under the 1996 Act, States
have extra discretion to ensure that competitive entry in the areas
served by rural LECs will meet the public interest.

[A Policy of Competitive Neutrality Requires That Competitors Play by
the Same Rules]{.underline}

The Kansas Corporation Commission (KCC) has enacted commendable and
reasonable local service standards for its LECs.[^8] Kansas law requires
these Kansas supported services to be available to "every Kansan," and
the KCC has required all LECs in the state to comply. The result has
been national leadership by Kansas rural carriers. These standards
particularly benefit rural citizens because urban plant is inherently
easier to adapt to higher data rates.[^9] The KCC's authority to
establish standards over and above those adopted by federal regulators
is codified in the 1996 Act, and Kansas has an intrastate universal
service support mechanism to support these standards. The RUS believes
that incumbent local exchange carriers and new competitors, regardless
of the technology employed, should play on a level field where one set
of rules is in effect, and where the referees are the KCC.

In this docket, one cellular mobile radio service (CMRS) provider argues
that it does not have to play on this level of the field. It claims that
it is not a LEC and because it is subject only to federal regulation as
a CMRS provider, does not need to meet these standards. As an example of
how CMRS providers are treated differently under the 1996 Act, this
provider cites Section 332, Mobile Services, that states that "\[a\]
person engaged in the provision of commercial mobile services, insofar
as such person is so engaged, shall not be required to provide equal
access to common carriers for the provision of telephone toll
service."[^10]

The CMRS carrier is correct in that a state can not require CMRS
carriers to meet higher state service standards. However, this carrier
is seeking state ETC status, not CMRS status. Nothing in federal law
prohibits states from adopting competitively neutral universal service
eligibility requirements applicable to all. Federal CMRS status is
license to operate within a state, not license to automatically be
eligible for state universal service funds.

The FCC has adopted a common denominator of service standards for
eligible telecommunications carrier (ETC) designation, and a CMRS
carrier can perhaps argue that it should only have to meet these
standards to receive *federal* support.[^11] But the KCC has adopted a
higher set of standards for telephone service for LECs as permitted by
the 1996 Act, and as a consequence, ETC LECs must meet these standards
for Kansas universal service support. Such higher levels of service are
laudable and producing positive results. Kansas has examples of the
finest telecommunications service in the nation. For a level playing
field to exist (competitive neutrality), competitors must meet the same
standards. If not, wireline ETCs in Kansas are placed at a competitive
disadvantage because the technology they employ to serve customers
causes them to operate under service standards that CMRS providers can
choose to ignore.

Federal law allows carriers to be eligible for federal universal service
support by providing service over its own facilities or over its own
facilities in combination with those of another carrier. A CMRS provider
can choose to meet Kansas' standards by combining its services with
another carrier's services.

RUS believes that it would be unwise to level the playing field be
lowering service standards for all. The most prudent course to preserve
and advance universal service in Kansas is to link eligibility for
Kansas universal service support to one high standard. RUS recognizes
that geography, topography, or economic feasibility may prevent
[any]{.underline} carrier, incumbent or competitor, from meeting current
standards. In these discrete and limited cases, the standard should be
the same for all carriers serving that area.

A[dvanced Services - A Policy of Technological Neutrality Cannot Ignore
Technological Limitations]{.underline}

Sections 254 and 706 are designed to promote technological advancement.
The implementation of Section 254 is to be based on clear principals
designed for the preservation and *advancement* of universal service.
Prominent among these principals is that access to advanced services be
available in all regions of the nation.[^12] In addition, universal
service is defined as an evolving\
level of telecommunications services established periodically by the
FCC.[^13] States are\
specifically allowed to adopt service requirements beyond those required
under the federal mechanism as long as they provide specific,
predictable, and sufficient support that does not rely on or burden the
federal mechanism.[^14] Finally, in Section 706, the FCC and the States
are charged with encouraging the deployment of advanced
telecommunications.[^15] Based on the totality of Sections 254 and 706,
it is clear that Congress intended that advanced services will be an
ever more important part of the universal service that is to be
preserved and advanced.

CMRS is not currently advanced services capable. A more important
question is whether it ever will be. The answer to that question is
almost certainly "no." The cellular technology employed by the CMRS
provider is a narrow-band, voice-oriented technology built with almost
no\
provision to evolve over time as contemplated by the Act. The provider
suggests that that it will supplement the existing technology with Local
Multipoint Distribution Service (LMDS) at some point in the future,[^16]
but this is not an evolutionary step. It would require a wholesale
overlay\
and reengineering of the entire system including the customer equipment.
LMDS operates in a frequency range which gives it a service radius of
only about 3 or 4 miles, which might require 100 times as many cells as
does CMRS in the lowest density areas. Finally, LMDS is an\
emerging technology, the economics of which are highly speculative. It
cannot be assumed that LMDS would be feasible in every area in which
they seek to obtain universal service support. Ignoring the question of
spectrum availability, such a wholesale overlay is at best a
possibility.

A carrier that seeks universal service funding on the federal level must
meet federal ETC requirements and should be expected to meet future
requirements in a timely manner as they evolve. Likewise, a carrier that
seeks state universal service funding should meet state ETC requirements
and should be expected to meet future state requirements in a timely
manner as they evolve. Otherwise, universal service funds serve the
perverse purpose of encouraging the construction of new roadblocks to
broadband. Such a result would be inconsistent with Section 254 and 706
of the 1996 Act.

Current CMRS carriers may provide a service that meets today's federal
definition of supported service but have little prospect of meeting
Kansas' requirements or any expected advanced services requirements at
either the federal or state level. Because Section 254 mechanisms must
both preserve *and advance* universal service, it can not be in the
public interest to use universal service support to encourage the
building of new technological roadblocks to the future or of devolving
rather than evolving the network..

**[Kansas' Policy of Supporting only the Primary Line Combined with
"Split-Level Rules Could Devaste Rural Service]{.underline}**

One of the characteristics of the Kansas intrastate universal service
support mechanism is that it only supports one line per customer (the
primary line). This policy is based on the assumption that the
incremental cost of a second line is quite small compared to the primary
line. However, this assumption is not true when a customer receives
service from both a wireless and a wireline carrier.

This policy, if coupled with the split-level playing field would be a
serious threat to universal service in rural areas. With a little
competitive imagination, a carrier could evolve from a player operating
under easier rules enforced by distant referees, to a nefarious
competitor. A wireless carrier is not under rate regulation and could
choose to reward its customers for designating it the primary carrier
with pricing incentives or by not offering the service except as a
primary line.\
For example, the CMRS carrier with ETC designation under a "split-level"
regime could offer the service only to customers who designate their
service as the primary line. The wireline ETC could not do this without
KCC approval. If a CMRS carrier sweeps up the bulk of available state
support and leaves the incumbent with state and federal
carrier-of-last-resort responsibilities, it would only be a matter of
time berfore wireline service would suffer and collapse.

Internet Access is another serious area of concern. According to the
U.S. Department of Commerce, 38.9% of rural households now have Internet
access.[^17] Current cellular technology can only be expected to provide
about 9.6 kilobits-per-second, which is simply not acceptable to the
vast majority of users. It can be expected that current internet
customers would still need to subscribe to a wireline service to obtain
reasonable internet access. If a customer subscribes to a wireline
service in addition to the CMRS provider's universal service package,
the wireline\
carrier would receive no intrastate support for its line.

In a competitive environment, a competitor may drive the incumbent out
of business. In effect, the KCC could be in the position of using state
support to subvert its own service requirements. Under Kansas law, a LEC
is required to provide ubiquitous 19.2 kilobit/second service capability
in its service area[^18] whether or not a customer chooses to use the
circuit for data. If a non-LEC can win a large percentage of the
"voice-only" customers and the associated universal service support, it
may be impossible for that LEC to continue to provide more sophisticated
services to its remaining customers.

It is not enough to say that this problem can be addressed if it
happens. If three, five, or seven years down the road, an unregulated
CMRS provider drives the LEC out of business, the state may gain the
power to regulate that CMRS provider as a LEC, but no amount of
regulation will change the CMRS technology so that it is capable of
providing advanced services.

Conclusion

A split-level playing field makes fair competition impossible. A policy
of competitive neutrality requires that competitors play by the same
rules. A policy of technological neutrality cannot ignore technological
differences in capability and evolvability. Kansas' policy of support
only\
for the primary line, a policy abandoned by the FCC, if combined with a
split-level regime, can have devastating consequences for universal
service when the primary and secondary lines are obtained from different
facilities with differing capabilities.

States, as a practical matter, may have to abandon service modernization
progress made over the years to prevent destruction of the LECs they
regulate. If rural carriers lose customers, in effect, they become
carriers serving lower density areas, which increases costs whether they
are computed with a proxy model or embedded costs. The results of this
are increased costs of universal service support for both federal and
state systems, less revenue for the carriers to modernize plant, and
ultimately higher customer rates for lower quality, less capable, and
less reliable service. Most rural service areas cannot sustain the
resulting losses and some carriers serving them will fail. If those
failures occur among the carriers who can provide advanced services and
enhanced services, and the surviving carriers are unable to provide
these services, serious harm will occur to customers in those areas.

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[^1]: 1\. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat.
    56 (1996), codified at 47 U.S.C. §151 *et seq*. \[hereinafter 1996
    Act\].

[^2]: . Section 254(b)(2) provides that "(a)ccess to advanced
    telecommunications and information services should be provided in
    all regions of the Nation." Section 254(b)(3) provides that
    "(c)onsumers in all regions of the nation, including low-income
    consumers and those in rural, insular, and high cost areas, should
    have access to telecommunications and information services,
    including interexchange services and advanced telecommunications and
    information services, that are reasonably comparable to those
    services provided in urban areas and that are available at rates
    that are reasonably comparable to rates charged for similar services
    in urban areas."

[^3]: . Section 254(f) provides that "(a) state may adopt regulations to
    provide for additional definitions and standards to preserve and
    advance universal service within that State only to the extent that
    such regulations adopt additional specific, predictable, and
    sufficient mechanisms to support such definitions or standards that
    do not rely on or burden Federal universal service support
    mechanisms."

[^4]: . *See* Kansas Statute 66-2011 (b): "All rural telephone
    companies, including local exchange carriers pursuant to subsection
    (c), shall provide dial-up access to support at least 14.4 kilobit
    per second service ubiquitously throughout the exchange service
    area, with 19.2 kilobit per second service on and after July 1,
    1999."

[^5]: . IMTS stands for *Improved Mobile Telephone Service.* In the
    1980s, the FCC began allowing IMTS spectrum s to be used on a
    secondary basis for fixed station telephone service know as *Basic
    Exchange Telephone Radio Service* or BETRS.

[^6]: . *See supra* note 1.

[^7]: . Rural Electrification Loan Restructuring Act, Pub. L. No.
    103-129, 107 Stat. 1356, codified at 7 U.S.C. 902 *et seq. See*
    §935(d)(3) regarding requirements for State Telecommunications
    Modernization Plans and the requirement that customers be able to
    transmit and receive data at a rate of 1,000,000 bits per second.

[^8]: . *See supra* note 3.

[^9]: . National Telecommunications and Information Administration, U.S.
    Department of Commerce, and Rural Utilities Service, U.S. Department
    of Agriculture, *Advanced Telecommunications in Rural America*
    (April 2000) at 12-13.

[^10]: . *See* 47 U.S.C. 332(c)(8).

[^11]: The RUS believes these to be a set of *lowest* common
    denominators of services available today. *See* RUS Exparte Comments
    to the FCC on redefining voice grade access, filed April 11, 2000,
    at http://www.usda.gov/rus/telecom/telecomact/2000actdocs.htm

[^12]: *See supra* note 2.

[^13]: . Section 254(c)(1) states that "(u)niversal service is an
    evolving level of telecommunications services that the Commission
    shall establish periodically under this section, taking into account
    advances in telecommunications and information technologies and
    services."

[^14]: . *See supra* note 3.

[^15]: . Telecommunications Act, *supra* note 4. Section 706(a) provides
    that "(t)he Commission and each State commission with regulatory
    jurisdiction over telecommunications services shall encourage the
    deployment on a reasonable and timely basis of advanced
    telecommunications capability to all Americans (including, in
    particular, elementary and secondary schools and classrooms) by
    utilizing, in a manner consistent with the public interest,
    convenience, and necessity, price cap regulation, regulatory
    forbearance, measures that promote competition in the local
    telecommunications market, or other regulating methods that remove
    barriers to infrastructure investment."

[^16]: . *See supra* note 9 at 15-16 and 27 for a description of Local
    Multipoint Distribution System.

[^17]: . National Telecommunications and Information Administration,
    U.S. Department of Commerce, *Falling Through the Net* (October
    2000).

[^18]: . Kansas Statute 66-2011 (b) provides that "(a)ll rural telephone
    companies, including local exchange carriers pursuant to subsection
    (c), shall provide dial-up access to support at least 14.4 kilobit
    per second service ubiquitously throughout the exchange service
    area, with 19.2 kilobit per second service on and after July 1,
    1999."