Below is the chairman's opening statement:

"Good Morning.  Today's hearing will focus upon the principle of universal service.  That principle - along with diversity and localism - has been a hallmark of telecommunications policy for decades. 

"The Commission has a variety of tools to achieve universal service.  It can be achieved and promoted through competition policy, franchising policy, and wireless policy - through both auctions designed to spur competition or mandated build-out requirements.  And universal service can also be advanced through mechanisms developed under the law to support subsidies for various universal service funds. These funds are currently in 4 major baskets: for rural high cost, for the E-rate program for K-12 schools and libraries, for the Lifeline and Linkup programs for low income consumers, or for rural health care purposes.

"In analyzing the principle of universal service for the future, I believe it is important to take a step back and assess what objectives universal service should now encompass and analyze how existing programs achieve these objectives - or how they fail to meet them. 

"Rather than getting right into detailed debates about how to divvy up the existing subsidy pool, question who qualifies for so-called ‘ETC status' or tackle the pros and cons of the ‘identical support rule' or ‘reverse auctions,' policymakers should first discuss why we do any of this at all, and examine questions such as why, for whom, for what, by whom, and at what expense?

"Right now, the four universal service programs spend approximately $7 billion a year - and more than half of it, roughly $4 billion goes to rural high cost, followed by the E-rate program, which is currently capped at $2.25 billion per year. Consumers pay approximately an 11% surcharge on their interstate and international calls to fund all of this. This is more than double the percentage consumers paid a decade ago.

"Yet as we look at how to re-calibrate the funding mechanisms to more equitably garner funding among industry participants, it is vital that we provoke a conversation about what we believe universal service should be in the 21st Century.  This will allow us to effectively manage both the imposition of fees as well as justify the eligibility and purpose of disbursements.

"There are a host of questions to tackle in various areas. For example, what level of service should be supported for rural consumers?  Should the supported services include just plain old telephone service or broadband, wireline or wireless service too?  If competition fails to achieve affordability for a particular service in a rural community, should extremely wealthy rural consumers be subsidized or should the program be targeted to assure affordability for non-wealthy consumers in some way? 

"For low income consumers in non-rural areas, should their supported service or services be comparable to the level of service provided to rural consumers?  Today, for example, it is not.  A rural consumer in a high cost area can get multiple lines subsidized - including wireless service, but a low income consumer in Boston can only obtain one subsidized line. 

"How should Congress or the FCC adjust the program for rural health care?  This program has never worked well and its current statutory construct no longer makes sense. 

"And what about the future of the schools and libraries program, for which I coined the term ‘E-rate' to emphasize the ‘education rate,' or educational mission of the program?

"This is a vital program that George Lucas and I first discussed back in 1993. Our conversation directly led me to fight to include a provision for discounted rates for schools and libraries in the 1994 Telecommunications bill, which I successfully passed through the House, but which died in the Senate that year. The E-rate became law when Congress enacted it in the succeeding Congress as part of the 1996 Telecommunications Act. 

"Given the fact that requests for E-rate funding outpace the current cap, should the cap now be lifted?  Should the nature of supported services be upgraded to include truly high speed connectivity to schools?  Should certain supported services to schools become free of charge to ensure that all schools keep pace in preparing the next generation for the fiercely competitive global economy we now face?

"Today we face the challenge of how to achieve ‘universal broadband' for our nation.  Any overarching policy blueprint for universal broadband will, by necessity include universal service as a component.  We must look at this task, however, cognizant of the costs consumers are willing to bear, but also mindful of the costs of not acting to upgrade our national telecommunications infrastructure and bringing all Americans along.  These are costs to education, health care, job creation, and innovation if the United States fails to develop a plan for our digital, broadband future.

"I look forward to hearing from our excellent panelists today and thank them for their willingness to be here with us this morning."