HD15 - Report of the State Corporation Commission to the Joint Commission on Technology and Science Pursuant to House Joint Resolution No. 635


Executive Summary:
In light of the Telecommunications Act of 1996, which included provisions for nationwide universal service and, more particularly, aid for local schools and libraries, the 1997 General Assembly passed House Joint Resolution No. 635. This resolution required the State Corporation Commission to report its findings and recommendations by November 15, 1997, in areas relating to local and long distance competition and universal service.

Pro-competitive efforts in the long distance markets began in Virginia as early as 1983 and continue today with the recent opening of the intraLATA market, implementation of dialing parity, and the expected future entry of Bell Atlantic in the interLATA market once conditions of the 1996 Telecommunications Act have been satisfied.

Much work has been done in opening local markets to competition, including processing applications for approval of sixty-one interconnection agreements and processing certificate applications from fifty-five new local companies. Several of these companies are already providing local service in Virginia. These markets will be slower to develop, however, due to many court challenges and the natural monopoly characteristics of local services. The slow development of local competition has been disappointing, given the considerable work that has gone into creating a fertile competitive environment in Virginia.

The Federal Communications Commission is re-examining and overhauling many of its traditional universal service programs including high cost support to telephone companies and assistance to low-income consumers. We are closely monitoring these proceedings and taking action as required at the state level.

Because Virginia has historically been a relatively low-cost state compared to others, it will likely be a net contributor to the federal Universal Service Fund, notwithstanding that we are continuing to monitor FCC developments to ensure that the objectives of accuracy and fairness are met. Funding mechanisms based on accuracy and fairness should satisfy and minimize cross-subsidy concerns while meeting nationwide universal service goals.

The FCC has established a federal fund of $2.25 billion to give assistance for telecommunications services to schools and libraries. A prerequisite is state approval of this program, which was timely done by our order of June 30, 1997. We will continue to monitor and coordinate the implementation of these discounts and assess this program's ongoing effectiveness.

Our recommendations pursuant to HJR No. 635 are to:

1. Continue long distance and local competition initiatives;

2. Continue monitoring FCC universal service proceedings and taking action as appropriate;

3. Allow the federally-funded school and library discount program to operate for at least two years prior to assessing the need for any additional state funding; and

4. Keep the General Assembly informed, as necessary, should state legislation be needed at some future time.