1 Wireline Competition Bureau Competition and Universal Service in a in a Dynamic Marketplace

2 Strategic Goals Broadband Policy Broadband Policy Competition Policy and Universal Service Competition Policy and Universal Service Homeland Security Homeland Security Modernize the FCC Modernize the FCC

3 Broadband Initiatives Next Generation Networks Next Generation Networks Statutory Definition Statutory Definition Dominance/Non-Dominance Dominance/Non-Dominance Monitoring Performance: Monitoring Performance: The 2002 Section 706 Report

4 Competition Promoted Triennial Review Triennial Review Comprehensive review of rules governing unbundled network elements Resolution of questions about unbundling left open by years of litigation and industry conflict Performance Measures Performance Measures Clear special access and unbundled network element requirements mean clear standards for enforcement Virginia Arbitration Virginia Arbitration WCB role in state interconnection proceedings Numbering Reform Numbering Reform

5 Competition Promoted The Section 271 Process January 15, 2002: January 15, 2002: 9 states approved 9 states approved 28.5% of RBOC access lines 28.5% of RBOC access lines January 15, 2003: 35 states approved 35 states approved 75% of RBOC access lines 75% of RBOC access lines Markets are Opening, Competition is Increasing Markets are Opening, Competition is Increasing

6 Universal Service Advanced Revised Framework for Contribution Methodology Revised Framework for Contribution Methodology Developed interim measures to maintain the viability of universal service support in a dynamic market Increased consumer billing transparency for universal service contributions passed through by carriers contributions passed through by carriers A New Framework for Portability of Support A New Framework for Portability of Support Referred to Joint Board review of high-cost rules in order to Referred to Joint Board review of high-cost rules in order to ensure that universal service is advanced and competition is ensure that universal service is advanced and competition is promoted promoted Coordinated with Joint Board State Staff Coordinated with Joint Board State Staff

7 Universal Service Advanced Highest-Ever Level of Telephone Penetration in Households: 95.5% Highest-Ever Level of Telephone Penetration in Households: 95.5% Highest-Ever Level of Internet Access in Public Schools: 99% Highest-Ever Level of Internet Access in Public Schools: 99% Highest-Ever Level of Funding to Rural Hospitals: 72% Increase Highest-Ever Level of Funding to Rural Hospitals: 72% Increase

8 Partnering with the States Performance Measures Workshops: Dallas and Chicago Performance Measures Workshops: Dallas and Chicago Contribution Methodology En Banc Hearing Contribution Methodology En Banc Hearing Federal-State Joint Conference on Accounting Issues Federal-State Joint Conference on Accounting Issues Regular Consultation with States on Section 271 Proceedings Regular Consultation with States on Section 271 Proceedings Regular Universal Service and Separations Joint Board Coordination Regular Universal Service and Separations Joint Board Coordination Triennial Review Discussion of Facilities- Based Competition: Detroit Triennial Review Discussion of Facilities- Based Competition: Detroit

9 Homeland Security CALEA Activities CALEA Activities Participate in HSPC Participate in HSPC Coordination with NYC Restoration Planning Efforts Coordination with NYC Restoration Planning Efforts Service Continuity Service Continuity

10 Service Continuity Maintained Challenge from Economy 55 Transfers of Control; Challenge from Economy 55 Transfers of Control; 26 Due to Bankruptcies 83 Requests for Discontinuance; 32 Due to Bankruptcies Industry-Wide Guidance on Security Deposits Coordinated FCC/WCB Response Coordinated FCC/WCB Response Carriers Know Obligations End-Users Informed Customers Protected Customers Protected

11 Modernize the FCC: WCB 2002 Accomplishments Promoted Competition Promoted Competition Released 135 Orders & NPRMs Advanced Universal Service Advanced Universal Service Released 515 Orders & NPRMs Including 450 Schools Orders Protected Service Continuity Protected Service Continuity Processed 138 Section 214 Applications Monitored a Dynamic Market Monitored a Dynamic Market Released 15 Statistical Reports

12 Modernize the FCC: 2002 Caseload Improvement Resolved Payphone Compensation Issues Resolved Payphone Compensation Issues Reduced Pending E-Rate Appeals by 19% Reduced Pending E-Rate Appeals by 19% Reduced Pending E-Rate Waivers by 27% Reduced Pending E-Rate Waivers by 27%

13 Modernize the FCC: Doing More with Fewer Staff Decreased Staff Decreased 43 Fewer Attorneys, Economists, and Technical and Administrative Assistants (18% Decrease) 43 Fewer Attorneys, Economists, and Technical and Administrative Assistants (18% Decrease) Production Increased Production Increased 36% More Orders & NPRMs 14% More E-Rate Appeals 9% More Congressional Responses 75% More Section 214 Applications Processed 338 Orders & NPRMs 338 Orders & NPRMs 450 E-Rate Appeals 450 E-Rate Appeals 270 Congressional Letters 270 Congressional Letters 138 Section 214 Applications Processed 138 Section 214 Applications Processed 1634 Tariffs Filed 1634 Tariffs Filed 3 Study Area Waivers 3 Study Area Waivers 7 Agenda Items 7 Agenda Items 15 Statistical Reports 15 Statistical Reports 1 Report to Congress 1 Report to Congress

14 Critical Steps for Telecom Sector Recovery Protect Service Continuity Protect Service Continuity Root Out Corporate Fraud Root Out Corporate Fraud Restoring Financial Health-Clean up Balance Sheets Restoring Financial Health-Clean up Balance Sheets Prudent Industry Restructuring Prudent Industry Restructuring New Revenue Through New Services New Revenue Through New Services Reform Foundations Reform Foundations

15 Challenges and Opportunities for 2003 and Beyond Intercarrier Compensation Intercarrier Compensation TELRIC TELRIC Universal Service Support Portability Universal Service Support Portability VoIP VoIP