Summary: Oakland Unified School District

OAKLAND UNIFIED SCHOOL DISTRICT: SUMMARY OF COMMENTS

Dr. Eugene Stovall
MIS Department
Oakland Unified School District

The Oakland Unified School District submitted three sets of comments on the FCC's NOTICE OF PROPOSED RULEMAKING AND ORDER ESTABLISHING THE JOINT BOARD on the matter of Universal Service. In our March 8, 1996 comments, we established the basis for school discounts and the "principle of total school service". In our reply comments of April 29, 1996 we addressed the specific issue of Subscriber Line Charges (SLCs), Common Carrier Line Charges (CCLs) and the proposed cost reallocations for maintaining the network from the vendors to the end users. Our further comments submitted July 31, 1996, recommended a competitive methodology for providing discounts to the schools which would use the universal fund to incent and facilitate rather than fund educational discounts.

The one ideal which directed all three comments was that Congress intended that the Telecommunication Act of 1996 rapidly transform the telecommunications industry from a regulated monopoly controlled by a few large vendors to a competitive marketplace open to all. In signing the Telecommunications Act of 1996, President Clinton said:

"Today our world is being remade yet again by an information revolution, changing the way we work, the way we live, the way we relate to each other. Already the revolution is so profound that it is changing the dominant economic model of this age....

"But this revolution has been held back by outdated laws, designed for a time when there was one phone company, three TV networks, [and] no such thing as a computer. Today, with the stroke of a pen, our laws will catch up with our future.

We will help to create an open marketplace where competition and innovation can move as quick as light.

COMMENTS OF MARCH 8, 1996:

The District believes that the 1996 Telecommunications Act should provide discounts on all universal service utilized by schools defined in terms of access to the public switched network, switching within the public switched network and features utilized on the public switched network. The District also believes that the federal universal service support mechanisms should apply to the broad array of high speed digital services. Finally, the District believes that Internet access should also be included under this classification of advanced services and Internet Service Providers (ISPs) be included under the category of telecommunications carriers.

In these first comments, we believed the basis of school discounts would be the following:

• Flat rate service for all network access lines

  Schools should have flat rate access to the network at the same cost as residential customers. Just as with residential service, all usage charges should be eliminated for local calls.

• Elimination of all inter-office facility charges; and

  One of the anomalies of the current telephone delivery structure is the concept of the telephone central office. All local rates and local services are based upon the arbitrarily defined central office locations of the local exchange carrier. These boundaries are nothing more than historic relics of the way communities developed and grew. They are neither standardized nor are they rational. They overlap and cut over school district boundaries. Local exchange carrier (LEC) central office boundaries create excess charges for schools. For large school districts such as Oakland, the excess telephone service charges are bloated by the fact that these large school districts overlap several LEC central offices. To obtain telephone service between these different central offices, many school districts must incur telephone company-imposed inter-office facility charges such mileage and termination charges. These charges are all the more excessive because most LECs have implemented the as Signaling System 7 technology which have virtually eliminated any additional cost to the LEC for providing service across the LEC' s central office boundaries. Eliminating all interoffice facility charges including mileage, terminations, and local loop charges for providing services to schools across central office boundaries is a reasonable discount mechanism.

• Bulk rate or quantity discounts applied to all services

  In general, discounts are given customers by the telecommunications vendors. One taken into consideration is quantity. The District proposes that quantity discounts be initiated for all services.

REPLY COMMENTS OF APRIL 29, 1996

In its April 29, 1996 comments, the Oakland Unified School District replied to the comments of Ameritech, Southwestern Bell, et. al. on the issue of increased rates to the end user. Specifically, the incumbent local exchange carriers (LECs) want to eliminate the common carrier line (CCL) charges which are paid into the universal fund to maintain the public switched network. The shortfall would be made up by an increase in the subscriber line charges (SLCs) which are end user fees mandated by regulation.

This would have to results. First, long distance rate discounts given to large corporate users would be funded by small residential and non-long distance users. Second, long exchange carriers will have their entry fees into the long distance market paid by the end user.

This issue is of particular importance to schools which are low users of long distance service. Many of Oakland Unified School District's telephone lines are connected to automated intrusion and fire alarms and electrical and heat monitoring circuits. These lines only call out to other district locations which monitors alarm conditions and dispatches the appropriate emergency team. The district does not need long distance access on these lines. If Congress truly intended the Act to create market conditions for telephone services, the government would not mandate that schools must pay for services the schools do not require. These government mandated access charges, SLCs, merely put an unfair economic burden on schools and other organizations which do not require that all telephone lines have long distance access. Eliminating CCLs and raising the government -mandated SLCs will result in an unfair penalty for low end users such as schools and a boon for high end users such as corporations. Most corporations are multinational with far-flung locations throughout the United States and all over the world. They benefit a robust and ubiquitous interexchange, interstate long distance network. Low end users should not be forced through government mandates to pay a disproportionate amount of the costs for supporting this network.

In its reply comments, dated May 8, 1996, NARUC stated:

"The record lacks crucial evidence concerning the probable impact of SLC increases and suggests, through oppositions from almost all major commenting groups, the impropriety of increasing the SLC from both a policy and legal perspective."

1. Eliminate of all government-mandated subscriber line charges (SLCs)

Consistent with a market driven telecommunications approach, end users should be given a choice as to whether or not they want access to a long-distance carrier. Carriers should be permitted to charge their customers a market based price for long distance access. The charges could be based upon usage or some fully allocated costing formula for maintaining the network.

2. Standard Carrier Common Line (CCL) Rates

All interexchange carriers should bear the cost of maintaining the public switched network from which they derive significant value in the form of revenue. In a market-driven economy, the cost of opportunity is charged to the provider rather than the consumer.

3. Prohibition of Interexchange Line of Business Subsidies for LECs

While the Act permits LECs to enter the interexchange, long-distance business, it does not permit entry to be subsidized by local rates. Mechanisms should be put in place to guarantee that the LECs do not enjoy a competitive advantage over other telecommunications carriers. LECs should pay the same standard CCL charges incurred by current long distance carriers.

FURTHER COMMENTS OF JULY 31, 1996

The Oakland Unified School District has provided further comments to the specific questions asked by the Common Carrier Bureau. These further comments attempt to focus attention on using competitive as a method for providing discounts to schools. We advocated a competitive bidding process because we wished rate payers, tax payers and consumers to be protected from being forced to pay the entire cost of the educational discounts envisioned by the Telecommunications Act. Our plan is that subsidies from the universal fund should be used to stimulate and incent innovation and efficiencies among incumbent telecommunications providers as well as new entrants into the industry. We hoped to remove the most inefficient aspect of regulatory monopolies: subsidizing inefficient and unimaginative telcos. It is our view that restricting discounts to those which the consumer must pay the monopoly to provide will result in less benefit to the schools and contrary to congressional intent.

The following is a summary of the District's responses to the specific common carrier bureau questions

Question #

6. Should the services or functionalities eligible for discounts be specifically limited and identified or should the discount apply to all available services?

School discounts should apply to all universal services providing access, switching and features on the public switched network.

7. Does Section 254(h) contemplate that inside wiring or other internal connections to classrooms may be eligible for universal service support of telecommunications services provided schools and libraries? If so, what is the estimated cost of the inside wiring and other internal connections?

Inside wiring and other internal connections are ineligible for discounts.

8. To what extent should the provisions of Section 706 and 708 be considered by the Joint Board and be relied upon to provide advanced services to schools, libraries and health providers?

Sections 706 and 708 in no way should be considered by the joint Board as a means of providing schools, libraries and health providers advanced telecommunications services.

9. How can universal service support for schools, libraries, and health care providers be structured to promote competition?

The Oakland Unified School District proposes a method of permitting telecommunication services providers to compete for the right to provide schools, libraries and health care providers with discount services and minimize the demand upon the universal fund.

10. Should the resale prohibitions in Section 254(h)(3) be construed to prohibit only the resale of services to the public for profit, and should it be construed so as to permit end user cost based fees for services? Would construction in this manner facilitate community networks and/or aggregation of purchasing power?

The prohibition on resale by schools should allow schools to enter into consortiums with other community groups and facilitate community networks by allowing the pro rata share of telecommunications costs to be distributed among all participants. The prohibition against profit making should be maintained.

11. If the answer to the first question in number 10 is "yes", should the discounts be available only for the traffic or network usage attributable to the educational entities that qualify for the Section 254 discounts?

When discounts are applied to services for educational or community-based consortiums, the costs for telecommunication services are bundled together in a way that it is not feasible to separate out the actual school or educational usage.

12. Should discounts be directed to the states in the form of block grants?

Discounts should not be directed to states in block grants. [NB: In further discussions with the Working Group established by the Research, Evaluation and Technology Division's K-12 Network Planning Unit which is drafting a universal service comment for the California Department of Education, the District has subsequently modified this position.]

13. Should discounts for schools, libraries, and health care providers take the form of direct billing credits for telecommunications services provided eligible institutions?

Discounts should not take the form of direct billing credits. Neither of these methods accomplish the type of "value" infusion into telecommunications required to convert it from a monopoly dominated by a few into an industry open to many and able to provide jobs to our students.

15. What is the least administratively burdensome requirement that could be used to ensure that requests for supported telecommunications services are bona fide requests within the intent of section 254(h)?

The least burdensome requirement for bona fide requests is that schools be certified by the States and that telecommunications services be provided on the "total school" principle.

16. What should be the base service prices to which discounts for schools and libraries are applied: (a) total service long-run incremental cost; (b) short-run incremental costs; (c) best commercially-available rate; (d) tariffed rate; (e) rate established through a competitively-bid contract in which schools and libraries participate; (f) lowest of some group of the above; or (g) some other benchmark? How could the best commercially-available rate be ascertained, in light of the fact that many such rates may be established pursuant to confidential contract arrangements?

The base service prices to which discounts for schools and libraries are applied should be a rate established through a competitively-bid contract in which schools and libraries participate.

17. How should discounts be applied, if at all, for schools and libraries and rural health care providers that are currently receiving special rates?

With the implementation of the Oakland proposal, institutions receiving special rates would have a choice between their special rates and the new discount rates. This freedom of choice is consistent with moving the industry into a competitive environment.

18. What states have established discount programs for telecommunications services provided to schools, libraries, and health care providers? Describe the programs including measurable outcomes and associated costs.

In California, Pacific Bell has an educational tariff for the ISDN product; however, ISDN is a product that has not received the acceptance in the marketplace and is generally considered inferior. In a monopoly environment, discount services often mean inferior services.

22. Should separate funding mechanisms be established for schools and libraries and for rural health care providers?

The Oakland proposal anticipates providing discounts to all three types of users; however, there is a real need for rural health care providers to receive special attention.

23. Are the cost estimates contained in the McKinsey Report and NII Kickstart initiative an accurate funding estimate for the discount provisions for schools and libraries, assuming that tariffed rates are used as the base prices?

Any cost estimate which is not based upon a competitive bidding process is one which supports the current monopolistic thinking. The only true estimate is one based upon the reality of competitive bidding.