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with the flexibility to obtain services from competing vendors rather than require last-resort carriers to offer services at noncompensatory rates. Armed with the ability to select services from among several vendors, the needy will make choices that will reflect the efficiencies of the marketplace.

12. A recent example is PacTel's $150 million head-end and set-top box purchase agreement as part of an interactive video network. See Wall Street Journal. 1994. ''Scientific-Atlanta Inc.—Concern Is Awarded Contract to Equip PacTel's Network," April 24, p. B4. Yet even this appears modest by current standards; cf. Ameritech's $700 million in contract commitments to Scientific-Atlanta, note 8, supra. A great deal of publicity has surrounded announcements by regional Bell operating companies on the formation of programming consortia (Bell Atlanta, PacTel, and NYNEX; Ameritech, BellSouth, SBC Communications, and Walt Disney), as well as speculation with regard to US West's future intentions regarding its investment in Time Warner.

13. C&P Telephone Co. of Virginia et al. v. U.S. et al., 42 F.3d 181 (4th Cir. 1994); NYNEX v. U.S., 1994 WL 779761 (Me.); US West v. U.S., 48F.3d 1092 (9th Cir. 1994).

14. States where bills were introduced in 1995, and which currently appear to be under active consideration, include Colorado (HB 1335), Texas (HB 2128), and Tennessee (rival bills SB 891 and 827, HB 695 and 721). The Wyoming Telecommunications Act of 1995 (HB 176) was signed into law in March, and Georgia's Telecommunications and Competition Development Act of 1995 (SB 137) became law in April. In North Carolina, as of this writing, HB 161 awaits the governor's signature.

15. Telecommunications Reports. 1995. "Competitors and Allies: Cable TV Companies, Telcos, Broadcasters Jointly Will Create New Markets," 61(14), April 10, pp. 16–20.

16. S. 652, Report No. 104-23, Sec. 103(d), p. 40.

17. First in the market, especially in new technology, does not guarantee dominance, or even success (e.g., 8-track cassettes, Commodore computers, Atari and Magnavox video game systems, Bowmar calculators) even if the technology is superior (Betamax, digital audiotape). Commercial success is a reflection of market acceptance and manufacturing efficiency and yields a reduction in incremental risk per unit manufactured. If the public is required to subsidize the initial buildout of long-term infrastructure, there must be a high level of confidence that the access interfaces installed under subsidy will have a long useful life and that individuals who purchase equipment and later relocate or need to access nonlocal information sources will not find their investments rendered worthless.

18. Any proprietor is free not to participate in the proceeding so that there is no state taking of intellectual property.

19. It would be reasonable to expect that the rate would be in the top quartile of rates charged nationally, i.e., still affordable by definition, but not a windfall rate when compared to those paid by the majority of customers nationwide.

20. In calculating its bid, the applicant would, of course, factor in such items as the costs of meeting the service standards obligations, the Top Rate, current and projected levels of competitive deployment in the market, demographics, terrain, and so on. The development of competitive markets will provide vast historical data on costs, price elasticity of demand, and the like. Obviously, within that price-demand elasticity curve, the higher the Top Rate, the lower the Performance Payment necessary to attract the successful bidder.

21. The UAS could be required to post a performance bond at least 5 years prior to the target date. If it advises the FCC that it is abandoning its UAS status, qualified but previously unsuccessful bidders in the market may then rebid for the right to be the UAS. The Treasury would collect on the bond to the extent that the second bid series produced a result that was higher than the original UAS's bid plus a penalty and administrative premium.

22. In multistate markets, PSCs would designate members to sit on a panel that would serve as the sole intervenor.

23. See Weinhaus et al., supra, Getting from Here to There: Transitions for Restructuring Subsidies, 1994, for a review of the most commonly discussed alternatives. Although based on recent prices paid for PCS spectrum, an auction of unused UHF and VHF spectrum could well provide all of the funds necessary to finance advanced universal access; for the purposes of this paper, it is assumed that the funds must be raised from market participants.

24. This is particularly important if, by operation of the program, a UAS receives what could be considered a windfall profit: if the market develops more rapidly and efficiently than anticipated and the performance targets are met with little or no investment that is less than fully compensatory, the UAS would receive the Performance Payment merely for having been "on call."



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