Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554

In the Matter of ) ) IP-Enabled Services ) WC Docket No. 04-36

COMMENTS OF GCI

Tina M. Pidgeon Marty W. Weinstein Lisa R. Youngers Regulatory Attorney General Communication, Inc. General Communication, Inc. 1130 17th Street, NW, Suite 410 2550 Denali Street Washington, D.C. 20036 10th Floor Tele: (202) 457-8815 Anchorage, Alaska 99503 : (202) 457-8816

May 28, 2004

TABLE OF CONTENTS

I. INTRODUCTION AND SUMMARY...... 1

II. CABLE IS ONLY ONE OF THE DELIVERY MECHANISMS FOR GCI’S COMPETIVE LOCAL SERVICE OFFERINGS...... 5

III. THE COMMISSION SHOULD NOT FORMULATE REGULATION FOR LIKE SERVICES THAT DISTINGUISHES BASED ON TECHNOLOGY ...... 8

IV. THE COMMISSION SHOULD FOLLOW A COMPETITIVELY-NEUTRAL REGULATORY FRAMEWORK AMONG PROVIDERS OF COMPARABLE SERVICES...... 11

A. Preserving Non-Discriminatory Access to the Network...... 11

B. Access Charges...... 14

C. Universal Service Eligibility...... 15

D. Regulations Designed to Protect the Public Safety...... 17

V. CONCLUSION...... 18

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554

In the Matter of ) ) IP-Enabled Services ) WC Docket No. 04-36 )

COMMENTS OF GCI

General Communication, Inc. (“GCI”) hereby submits these comments in response to the

Commission’s Notice of Proposed Rulemaking, issued on March 10, 2004, in the above- captioned proceeding (“NPRM”), regarding the appropriate regulatory framework for IP-enabled services.

I. INTRODUCTION AND SUMMARY

GCI urges the Commission to adopt a competitively- and technologically-neutral framework that:

• ensures nondiscriminatory access to incumbent LEC bottleneck facilities;

• prohibits escape from applicable loop unbundling and interconnection obligations

under Section 251(c) simply by changing from a circuit-switched to packet-based

technology;

• requires service providers to pay the same costs to access the PSTN, regardless of

the technology used in either end of the call; and

• prohibits arbitrary disqualification from eligibility for USF support based on

technology or service classification.

A regulatory framework that incorporates these features will neither disadvantage providers of those services that fall within the potentially broad category of “IP-enabled services” nor unintentionally or arbitrarily relieve incumbent local exchange carriers (“ILECs”) of those obligations that are necessary for the continued development of facilities-based local competition.

GCI is an Alaska-based company providing local and long distance voice, video, and data communications services. It provides competitive and cable services to more than 200 communities in Alaska, and since 1996, GCI has invested approximately $534 million in developing a facilities-based network throughout Alaska. GCI has a long history of investment and innovation, to the benefit of consumers. GCI’s first service offering, initiated over 20 years ago, introduced long distance competition to Alaska. In 1991, GCI entered the long distance haul fiber optic cable market, bringing competition into the market for submarine cable transport between Alaska and the “Lower 48,” and in 1998 it built the first modern and upgradeable fiber optic cable between Alaska and the rest of the continental U.S. Additionally,

GCI just recently completed construction of a second submarine cable (Alaska United West) that runs between Seward, Alaska and Warrington, Oregon, providing redundant, ring-protected services between Alaska and the lower-48.

In 1996, GCI installed DAMA-capable earth stations in 50 bush communities (i.e., extremely remote, rural communities throughout Alaska), significantly improving service and service capabilities by eliminating the double-hop satellite transmission previously required to complete calls into and out of bush villages. In 1997, GCI entered the local exchange market in

Anchorage, followed by Fairbanks and Juneau in 2001 and 2002, respectively, and consumers in these areas have benefited from service and bundling innovations and lower rates. Today, GCI is in the midst of rolling out cable telephony for the service of local customers in Anchorage.

-2- In short, investing in markets that are open to competitive entry by utilizing new technologies is familiar territory for GCI. In this proceeding, the Commission is considering how best to regulate, or not regulate IP-enabled services, which may be offered over existing facilities, new facilities, or some combination of the two. GCI urges the Commission to adopt policies that do not disadvantage new entrants and competitors in favor of incumbent local exchange carrier networks, and that do not make arbitrary regulatory distinctions among providers based on technology. As to the first point, many residential and business consumers still have a single, and sometimes inferior (meaning not equipped to provide advanced services at the FCC-defined speed), connection to the public switched telephone network and the .

According to the Commission’s most recent report on High-Speed Services for Internet access, over 42 percent of the U.S. zip codes are served by only two or fewer high-speed service providers,1 and even this data does not demonstrate that all premises within a specific zip code have multiple providers. Thus, in many cases, the phone line is the consumer’s only “on-ramp” to the PSTN and the Internet, and access to that facility must remain available to competitors so that consumers may receive the full benefits of competition, including innovative services and lower prices.

Policies adopted in this proceeding, therefore, must not discourage competition by denying access to bottleneck facilities by competitors, including where the incumbent telecommunications facilities provider is offering so-called “IP-enabled services” via those facilities. In fact, it is only through the ability to compete for and serve that customer that new entrants have the opportunity to build a customer base and thus generate sufficient cash flow to invest in facilities build-out, bringing the facilities-based competition that was a preeminent goal

1 “High-Speed Services for Internet Access: Status as of June 30, 2003,” Industry Analysis and Technology Division, Wireline Competition Bureau (Dec. 2003) at Table 12, June 2003 data.

-3- of the Telecommunications Act of 1996. By the same token, competitive entry or the threat of competitive entry provides the necessary incentives for investment and innovation by the incumbents themselves.

Likewise, the policies adopted here should not favor one technology or service provider over another. For the promise of the innovation and investment that comes with competition—or sometimes just the threat of competition—to come to fruition, competitively neutral regulatory policies (consistent with nondiscriminatory access to bottleneck facilities at similar costs for similar usage) are also required. Thus, a provider should be neither advantaged or disadvantaged based on the technology used to deliver the service. A prime example is USF distribution policies. Any carrier that provides services that satisfy the requirements of Section 214(e) of the

Act and Section 54.201 of the Commission’s rules must be eligible to receive support, without regard to the technology used to deliver that service. An overly broad application of an

“information services” designation, however, could have the bizarre—and perhaps unintended— result of denying support to providers not for a failure to satisfy the relevant criteria, but simply due to the classification of the service as “information” rather than “telecommunications,” based on the technology used to provide the basic supported services. This is not the basis for sustainable regulatory policy.

As described in more detail below, GCI urges the Commission to retain both market power principles and competitively neutral policies as part of the regulatory regime applicable to

IP-enabled services.

-4-

II. CABLE TELEPHONY IS ONLY ONE OF THE DELIVERY MECHANISMS FOR

GCI’S COMPETITIVE LOCAL SERVICE OFFERINGS

Following the passage of the Telecommunications Act of 1996, GCI entered the local

exchange business in 1997 in Anchorage, which is the state’s largest urban center, and now

offers local service to approximately 45 percent of Anchorage residential and business customers

combined. In 1997, GCI also had requested interconnection services from the incumbent local

exchange carriers in Juneau (the state’s capital) and Fairbanks (the state’s second largest city),

but was stalled by a seemingly endless series of regulatory and legal proceedings related to the

termination of the incumbent’s rural exemptions under Section 251(f) of the Act. Following a

long and protracted legal battle culminating in a state commission decision to lift the rural

exemptions, GCI finally began providing competitive local exchange service to consumers in

Fairbanks in 2001 and to consumers in Juneau in 2002. Customers have responded positively to

GCI’s entry in these markets, as GCI now serves over 23 percent of the residential and business

customers in each of these markets.

To provide local service through each of these communities, GCI has used the full range

of entry tools under the 1996 Act to provide ubiquitous service.2 GCI has installed its own

switches and transport facilities in each of the communities it serves and provisions the majority

of its local residential and business customers using UNE loops in combination with its own switches and transport facilities. GCI, however, also must rely on wholesale and UNE-P services in those situations where it is unable to serve the customer via its own switch due to the

2 GCI is a designated eligible telecommunications carrier (“ETC”) and, as such, offers ubiquitous service to all consumers in Juneau and Fairbanks for which it receives universal service support consistent with the statutory requirements in 47 U.S.C. Sec. 214.

-5- ILEC network design.3 Additionally, in some situations, GCI currently provides local service to customers directly off of its own fiber loop eliminating any reliance upon ILEC facilities.

While GCI continues to depend on UNEs from the incumbent to provide local service to the majority of its customers, GCI presently is making substantial investments in its own loop facilities to become independent of the ILEC’s facilities to the extent possible. GCI is placing great emphasis on this next stage of facilities-based deployment, cable telephony deployment.

GCI’s engineers have designed an industry standard-compliant platform to connect GCI’s cable systems to GCI’s local telephone network, including its 5E circuit switch. Today, GCI is in the process of converting customers in Anchorage to its cable telephony network, and is striving to deliver service in this manner to between 8,000 and 12,000 customers this year.

Regardless of the technology used, whether GCI leases unbundled loops of UNE-P, purchases wholesale services from the incumbent, or serves customers directly off of its own fiber loop or through its cable systems, GCI’s local service provides a basic transmission path of voice signal connected to the public switched network. This is true even with GCI’s new cable telephony service, which, in part, utilizes Internet Protocol (“IP”) in the transmission of the call.

With GCI’s cable telephony service, the customer’s analog voice signal is converted to IP at the

NID (or in cable telephone terms, the BTI) located at the customer’s premises. The signal is then carried in packets over GCI’s hybrid fiber coax network to a Termination System

(“CMTS”), which serves as a router, and then delivered to a Voice Gateway, which converts the signal from IP to standard digital circuit signal and is then routed to GCI’s 5ESS Circuit Switch

3 For example, GCI cannot utilize its own switching facilities in those instances where the incumbent has deployed an integrated DLC or non-multi-hostable remote between the switch and the end user premises. See Triennial Review Order at ¶¶ 217, 253 (discussing ILEC obligation to ensure non-discriminatory access to the loop, including hybrid fiber-copper loops).

-6- and carried to the public switched network. At the present time, the protocol processing that

takes place in connection with GCI’s cable telephony service involves only “internetworking”

conversions that are internal to GCI’s transmission of the call. As a result, consumers of GCI’s

service obtain only voice transmission with no net protocol conversion.4

As described herein, it is clear that the GCI offering via cable telephony results in no net

protocol conversion, and no access to computer databases or other information. The service

delivery mechanism—whether via UNEs, wholesale, fiber facilities, or cable telephony, and whether it is circuit-switched or packet-switched—is, for all practical purposes, “unbeknownst to end users.”5 Thus, the service delivered via GCI’s cable telephony plant should not be treated as

anything other than its other indisputable telecommunications service, with corresponding

entitlement to interconnection on nondiscriminatory and just and reasonable rates, terms, and

conditions, similar to any other technology utilizing comparable capacity, and with continuing

eligibility for universal service support under existing rules, indistinguishable from GCI’s services today.

4 Based on the same reasoning the Commission relied on to conclude that AT&T’s phone- to-phone Internet protocol telephony service is a “telecommunications service,” GCI’s cable telephony-delivered service likewise is a “telecommunications service.” See In the Matter of Petition For Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services are Exempt from Access Charges, FCC 04-97, WC Docket No. 02-361 (rel. Apr. 21, 2004) at ¶ 12. In addition, GCI’s cable-telephony delivered service has each of the four characteristics outlined by NCTA as its baseline for regulation: (1) it makes use of the North American Numbering Plan resources; (2) it receives calls from and terminates calls to the PSTN; (3) it is a replacement for POTS; and (4) it uses Internet Protocol transmission between the service provider and the end user customer. “Balancing Responsibilities and Rights: A Regulatory Model for Facilities-Based VoIP Competition,” NCTA (Feb. 2004) at 4. 5 See NPRM at ¶ 4.

-7- III. THE COMMISSION SHOULD NOT FORMULATE REGULATION FOR LIKE

SERVICES THAT DISTINGUISHES BASED ON TECHNOLOGY

In the NPRM, the Commission identifies distinctions between networks based on Internet

Protocol and the public-switched telephone network (“PSTN”), stating that IP networks are

“flat” and designed to meet “the short-burst digital data communications requirements of computing networks,” and the PSTN is hierarchical, designed for two-way conversations of analog communications.6 Distinctions between network design and topology are not sustainable over the long run as a lasting basis for regulation among comparable services. Differing regulatory treatment on this basis fails for two reasons: first, it arbitrarily preordains winners and losers without regard for efficiency or consumer preference; and second, it creates a regulatory structure based on current known technologies, not providing for flexibility in responding to or accommodating future, even unpredictable, technological developments. With these significant drawbacks in mind, the primary goals of a regulatory regime for IP-enabled services should be to limit the exercise of market power by incumbent facilities providers and to ensure competitively- neutral policies among providers, and not making arbitrary and unsustainable “distinctions” between services delivered via ever-changing technologies.

The first deficiency of regulation by technology is that it potentially favors one provider over another, without regard for any market power analysis. For example, an incumbent LEC using circuit-switched technology has no less ability to exercise market power than an incumbent

LEC using packet-based, IP technology over the same bottleneck facilities. But a policy that favored IP technology without regard for the incumbent carrier’s ability to exercise market power could result in the sacrificing of the benefits of competition for the sake of the selection of

6 NPRM at ¶ 4.

-8- a technology that ultimately may or may not prove to be superior to current or yet newer

technologies that are developed.

Moreover, with the loss of competition, so goes the incentive for incumbent carriers to

invest in the development and implementation of new technologies. A monopoly provider need

not develop new products, new service delivery mechanisms, or new combinations of products to

attract revenues if there is no competition for current or new customers.7 In an environment

without competition, there is no incentive for incumbent carriers to venture into innovative

products or service offerings, with guaranteed revenues (overall or in certain lines of services)

generated by captive customers. GCI knows this experience first hand. As is demonstrated by

the delivery of advanced telecommunications capabilities throughout Alaska, these services have been most widely innovated and deployed by competitive entrants where entry has been allowed.

As GCI’s experience illustrates, competition itself is responsible for increased penetration levels

of consumers reached by advanced services and the innovation in delivery mechanisms,

broadband applications, service tiers, and competitive packages and pricing. Thus, it would not

be rational to adopt technology-specific regulations to “promote” the development of IP-based

networks without adequately ensuring continued access to bottleneck facilities by competitive

providers, regardless of the technology they—or the incumbent—employ.

7 In Re 2002 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 18 FCC Rcd 13,620 (¶ 57) (2002) (“We hereby affirm our longstanding commitment to promoting competition by ensuring procompetitive market structures. Consumers receive more choice, lower prices, and more innovative services in competitive markets than they do in markets where one or more firms exercise market power. These benefits of competition can be achieved when regulators accurately identify market structures that will permit vigorous competition.”); see also Bell Atlantic-Nynex Merger Order at ¶ 101 (finding that “the elimination of a market participant may increase the unilateral market power of the acquiring firm…including unilaterally reducing its level of service quality or innovation”). .

-9- The second deficiency of regulation by technology is that it is practically impossible to

predict how technology will develop, and thus, regulatory regimes that may work today will not work tomorrow. Even the current “flavors” of VoIP, IP-enabled, or even cable telephony may

vary from provider-to-provider, including those services that interface with the PSTN on every

call, some calls or no calls; those that ride the Internet; and those that utilize “Internet Protocol,”

but never touch the Internet in providing service. The intercarrier compensation regime provides

a prime example. IXCs typically pays access charges, while carriers typically do not for

what is essentially the same call. This technology-based distinction creates incentives for bypass

and arguably disadvantages IXCs for reasons other than comparative efficiency or superiority of

service.

The same could be said of current differences in place as a practical matter between

Vonage and a traditional wireline local service. The wireline provider that also offers long

distance service is required to pay access charges, while it appears that Vonage, offering an

arguably comparable service over the same wireline carrier’s DSL platform, typically does not.

Without even having to reach the question of the propriety of this differentiation, it is without

dispute that the difference has an impact on the relative flexibility between the providers to

create various pricing packages and offerings. In this regard, GCI agrees with the Commmission

that “any service provider that sends traffic to the PSTN should be subject to similar

compensation obligations, irrespective of whether the traffic originates on the PSTN, on an IP

network, or on a cable network. . . . [T]he cost of the PSTN should be borne equitably among

those that use it in similar way.”8

8 NPRM at ¶ 33. Of course, this assumes that the facilities comprising the “PSTN” are uniformly known and agreed upon.

-10- Moreover, it is without dispute that such difference based on technology has proven

unsustainable in the long run, as industry and the Commission continue to labor over access

charge reforms due to a shared interest in resolving uneconomic arbitrage caused by the different

rates for use of the same facilities depending on jurisdiction, “types” of traffic, and identity of the

provider. This lesson having been learned in that context, it should not be repeated here. Thus,

technology should not provide the basis for difference in regulation.

IV. THE COMMISSION SHOULD FOLLOW A COMPETITIVELY-NEUTRAL

REGULATORY FRAMEWORK AMONG PROVIDERS OF COMPARABLE

SERVICES

A. Preserving Non-Discriminatory Access to the Network

The Commission should take care not to raise barriers to competitive entry through an

overbroad classification of IP-enabled services. Incumbent LECs still maintain market power

over bottleneck facilities. It is without dispute that for the consumer to reap the benefits of any new technology, it must have access to the network, whether it be the PSTN, the Internet, or some other network as yet uninvented. For many consumers—particularly residential and small business customers, however, there may not be competitive alternatives among providers for the available “on-ramp” to the network. For this reason, it is essential that incumbent LECs not be permitted to deny access to bottleneck facilities by cloaking such facilities in IP, VoIP, or any other terminology that may be used to exercise monopoly control. Even more fundamentally, if a given technology provides for the delivery of a telecommunications service—or, in basic

terms, a phone call—it should be treated as such for regulatory purposes.

-11- In this regard, the Commission asks “whether there is a compelling rationale for applying

traditional economic regulation to providers of IP-enabled services.”9 The inquiry, however,

should not end there. Just like any other providers, if a provider of telecommunications facilities and/or services can exercise monopoly power, then economic regulation should apply. When competition prevents that result, then economic regulation is not needed. Thus, before the

Commission starts “fencing off IP platforms,”10 it must first determine whether the operator of

the IP platform is an incumbent LEC that, as the sole provider of ubiquitous connections to the network, remains capable of exercising market power.

For example, even in Anchorage, where GCI is deploying telephony over its existing cable plant, continuing upgrades and investments are necessary to modify the plant to accommodate voice-grade service. GCI cable plant, as it exists “in nature”—i.e., as deployed for the provision of cable services—is not capable of delivering two-way telephone services. A number of steps are required, on a community-by-community basis, for rendering the cable plant hospitable to a voice service of the quality required for basic telephone service. At the switch

center, installation of Media Voice Gateways and Cable Modem Termination Systems are

required, as well as Narrowcast Lasers to transport IP traffic to the local serving area fiber optic nodes. Cable plant modifications are also required, including installation of redundant switching equipment to provide a fiber ring to the Optical Transition Nodes that feed large sections of

town; addition of fiber optic cable and nodes from the OTN in order to limit the size of the

serving area; addition of power supplies to accommodate the powering of drops for the BTIs (the

cable telephony version of the NID); replacement or modification of current line amplifiers to

9 NPRM at ¶ 5. 10 See NPRM at ¶ 5.

-12- accommodate the added load of powering the drops; replacement of cable tap faceplates to allow

power extracting and drop protection; and replacement of power supply batteries to extend back-

up capacity. In the absence of these upgrades or modifications for the benefit of each customer

line, the service cannot be provided to a particular cable-plant-served premises. GCI has adopted

an aggressive schedule for converting its customers entirely to its own facilities in Anchorage,

but even under this schedule, deployment will take time.

Moreover, cable plant does not access every premise that requires telephone service.

This is particularly the case for business premises: GCI’s cable plant passes the great majority of

Anchorage’s residences, but only approximately half of its businesses. As a result, cable

telephony plant upgrades will have no effect on those areas where there is no cable plant in the

first place. For these reasons, GCI disagrees with the Commission’s statement that “[a]s

communications migrate from networks relying on incumbent providers enjoying monopoly

ownership of underlying transmission facilities to an environment relying on numerous

competing applications traversing competing platforms, power over the prices and terms of

service necessarily shifts from the provider to the end user.”11 It is simply premature to assume the existence of competing platforms that are fully equipped and ubiquitous, or at least sufficiently ubiquitous to be protected from ILEC exercise of market power. The IP-backbone networks under development simply do not extend as far as individual customer premises, and there is not sufficient competition in the provision of competitive “on-ramps” to warrant abandoning regulatory oversight and obligations to require existing access requirements to the incumbent facilities. Thus, it will still be necessary for the foreseeable future that such requirements for nondiscriminatory access to these network elements remain in place. Under

11 NPRM at ¶ 36.

-13- these circumstances, it is essential that applicable Title II requirements remain in place, including

nondiscriminatory interconnection and unbundling obligations under Section 251(c).

In this regard, the Commission should ensure that an incumbent carrier not be permitted

to shed such obligations by virtue of the type of technology it deploys over bottleneck facilities.

It should not matter whether a loop is used in a circuit-switched network or an IP-based network.

Either way, the loop serving that consumer may be the only connection to the network, and thus,

the applicable unbundling regime must remain in place to ensure continued development in the

facilities-based local competition market, not just for the applications that may be provided over the facility.

B. Access Charges

The access charge regime must be rationalized. Different payment mechanisms for different “types” of traffic—i.e., wireless and wireline, across different jurisdictions—i.e., local intrastate, and interstate, and by different entities—i.e., IXCs and ESPs, has raised incentives and

opportunity for bypass and arbitrage, and ultimately may incent the development of services and

network design that are not the most efficient, but attract the lowest amount of carrier

compensation payments. IP-telephony has brought this issue to a head. As the Commission

acknowledges, “Packets routed across a global network with multiple access points defy

jurisdictional boundaries,”12 and that IP telephony “threatens to erode access revenues for LECs

because it is exempt from the access charges that traditional long-distance carriers must pay.”13

As a result, the current intercarrier compensation regime is expected to be further eroded by IP-enabled services. It is plainly necessary, therefore, that any resulting intercarrier

12 NPRM at ¶ 4. 13 Intercarrier Compensation NPRM, 16 FCC Rcd 9610, 9657 ¶ 133 (2001).

-14- compensation reform must be uniformly applied to all providers, regardless of the technology

(including circuit- and packet-switched) used. GCI agrees that “any service provider that sends

traffic to the PSTN should be subject to similar compensation obligations, irrespective of

whether the traffic originates on the PSTN, on an IP network, or on a cable network.”14

C. Universal Service Eligibility

It is true, as the Commission suggests, that the classification of a replacement for eligible

telecommunications services as an information service could affect the eligibility of ETCs for

high cost support.15 Section 254(c) of the Act defines universal service as an “evolving level of

telecommunications services,” suggesting that a service defined as an information service would

not, on its face, qualify. This potential disqualification, however, is an irrational result and

reduces the competitive incentives that should operate to reduce demand on the high cost fund.

For example, GCI is a CETC in both urban (Anchorage) and rural (Fairbanks and Juneau) areas.

GCI’s initial service offerings were provided via a combination of its own facilities, UNEs, and, to a limited extent, resale. Since GCI was first designated as a CETC, it now includes cable telephony among the methods of delivering services via its own facilities. The service delivery method—i.e., fiber, UNEs, or cable telephony—is transparent to the consumer, because the consumer receives the same service regardless of the delivery method that is best suited for the consumer location.

Against this background, it would be an irrational outcome for GCI to be eligible for support for a customer served by UNEs, but not for a customer served by cable telephony.

Moreover, this result would be in direct contravention of the Commission’s rule requiring that

14 NPRM at ¶ 33. Of course, this assumes that the facilities comprising the “PSTN” are uniformly known and agreed upon. 15 See NPRM at ¶ 66.

-15- common carriers be designated as “eligible telecommunications carriers” “irrespective of the technology used by such carriers.16 However, absent revision of the Commission’s rules designating support for telecommunications services, or possibly the Communications Act, this is the potential outcome of an overbroad classification of all cable telephony as information services. The incentives of such a system would also be entirely backwards, providing support for leased facilities, but not for entirely self-deployed competitive facilities. Thus, the incentive would be against investment in competitive facilities, in contravention of the purpose of the

1996 Act and the Commission’s stated goals.

Moreover, by reducing or eliminating the incentive to invest in facilities, and thus more efficient technologies, then there will be little competitive pressure on incumbents to reduce demand on the high cost fund by implementing lower cost technologies themselves. With the presence of competition and portable high cost universal service support, both incumbents and competitors should have the incentive to reduce costs so that they can compete with lower prices.

As costs reductions are realized, these should be reflected in lower costs reported for universal service purposes, and thus, a lower per-line support amount should be issued to all eligible carriers in the market. Without the incentive from competition for incumbent investment and cost reduction, rural areas in particular will suffer, both because consumers in these areas will not benefit from new technologies, and continued support is placed further at risk as unchecked incumbent demands on the high cost fund grow. For these reasons, the Commission must ensure that policies adopted in this proceeding do not unsettle competitively neutral universal service distribution policies that have delivered proven benefits to urban and rural consumers.

16 47 C.F.R. Sec. 64.201(h).

-16- D. Regulations Designed to Protect the Public Safety

Finally, the application of security and public safety regulations—including CALEA,

access to E911, and access by persons with disabilities—to new services offered via Internet

protocol has not been controversial. It should be noted, however, that to the extent that these regulations are applicable to IP-enabled services “as replacements for traditional voice telephony”, then other regulations must be applied to similarly situated services in a competitively neutral manner for the same reason. For example, should GCI’s cable telephony service be deemed to be an IP-enabled service, then as a replacement for traditional voice telephony, it should likewise remain eligible for universal service support. By the same token, all such replacement service should be subject to (and benefit from) the same intercarrier compensation regime.

-17- V. CONCLUSION

For these reasons, GCI respectfully urges the Commission to adopt a competitively- and

technologically-neutral framework for regulation of IP-enabled services. Key features of such a

regulatory regime would be continued regulation to preserve competitive markets and prevent

the exercise of market power; uniform application of the intercarrier compensation regime to all

providers, regardless of technology or network design; and rational universal service support

distribution policies that ensures continued eligibility for comparable services, regardless of the

delivery mechanism. The absence of any of these features will facilitate a return to monopoly

control by incumbents over networks, stifling the innovation and investment that has produced

the types of new services that are now under consideration.

Respectfully submitted,

By: __/s/______Tina M. Pidgeon Lisa R. Youngers GENERAL COMMUNICATION, INC. Marty W. Weinstein 1130 17th Street, NW, Suite 410 Regulatory Attorney Washington, D.C. 20036 General Communications, Inc. Tele: (202) 457-8815 2550 Denali Street Fax: (202) 457-8816 10th Floor e-mail: [email protected] Anchorage, Alaska 99503 Its Attorneys

May 28, 2004

-18-