Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 80.01.040, 80.04.160, section 1, chapter 337, Laws of 1998.

Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: The legislature has directed that the commission prepare for its approval and prepare to implement a proposed program, with an estimate of the costs, for the preservation and advancement of universal telecommunications service. The commission is using this mechanism to develop the program and estimate the costs, to provide for the maximum public and constituent involvement.

Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: The federal communications commission provides under federal law for implementation of analogous federal requirements.

Process for Developing New Rule: Agency study; and the commission will hold workshops and will invite written comments. The commission's goal will be to develop a consensus among involved interests that the commission will feel can responsibly adopt in the exercise of its rule-making discretion. In the absence of such a consensus, the commission will consider all proposals and agreements in reaching its conclusions. To assure that participants have the opportunity to test in a formal setting the development of costs to be used in the estimate of costs for the legislature, the commission will use Administrative Procedure Act adjudicative procedures under RCW 34.05.413(1).

In the matter of determining costs for Universal Service, Docket No. UT-980311(a), Notice of Prehearing Conference, May 15, 1998.

The Washington Utilities and Transportation Commission has undertaken a proceeding to revise and implement a program to define and provide universal telecommunications services to the people of the state of Washington. That proceeding is authorized by chapters 80.04 and 80.36 RCW, including RCW 80.01.040 and 80.04.160, and required by section 1, chapter 337, Laws of 1998, and the Federal Telecommunications Act of 1996, Public Law No. 104-104, 110 Stat. 56, codified at 47 U.S.C. § 151 et seq. (1996) ("the 1996 Act" or "the Telecom Act").

As part of that program, the commission finds it necessary to make determinations estimating the cost of providing telecommunications services in each area that may qualify as a high-cost location. The ultimate issue to be determined by the commission in this investigation is the reasonable and accurate cost of providing service in each such area. Any telecommunications company that believes it is serving customers in a high-cost location or that it may wish to serve such customers, and that wishes to obtain universal service support for such service is hereby put on notice that it should intervene and provide evidence in this proceeding, demonstrating the cost of its service. Determinations of cost made in this proceeding will be used to fulfill the requirements of ESSB 6622 (chapter 37, Laws of 1998) and may be used for other purposes, including possible interim explicit universal service rate elements.

To narrow the list of contested issues, a list of guidelines is presented herein, which companies must use in preparing and reporting their cost of serving customers in high-cost locations. Companies must provide cost estimates that are consistent with past commission decisions on forward-looking cost studies, such as the 15th Supplemental Order in Docket No. UT-950200 and the 8th Supplemental Order in Docket No. UT-960369, et al., when those orders are relevant. The commission reserves the authority, during this proceeding, upon notice to parties, to allow or require parties to present evidence on related information if the commission believes that the information should be received and findings made thereon in the adjudication.

These guidelines do not prescribe the exclusive means of establishing costs. Any party that believes a more reasonable or accurate estimate of cost requires a different assumption, model, or methodology may also submit alternative evidence consistent with its preferred assumption, model, or methodology along with a justification for doing so, but it must submit evidence consistent with the guidelines in this notice to the extent it has or can reasonably obtain that consistent evidence. note: Parties must also provide revenue information at the same level of granularity of the cost information that they provide. Parties must also state the relationship between cost and the national average revenue per subscriber.

1. Cost must be measured and reported at a geographic unit no greater than the wire center and exchange level. Companies may wish to supply cost data on smaller geographic units, such as census block groups or grids, in which case they must also calculate and present the data at the wire center and exchange level.

2. Cost must be determined separately for (a) a network that serves single and multi-line subscribers (where multi-line subscribers include nonswitched loops); (b) the cost of a network that serves only multi-line subscribers; and (c) the cost of a network that serves only single-line subscribers.

3. For companies other than rural companies, cost must be determined based on forward-looking, long-run economic costs. For rural companies, cost may be determined based on embedded cost. Rural companies that use embedded cost must nonetheless provide a disaggregation of costs (a) at the wire center and exchange level and (b) between first lines and additional lines.

4. Cost must be measured using: (a) Cost of money - each company's authorized rate of return; (b) depreciation - each company's prescribed depreciation lives and salvage values; and (c) fill factors used in the 8th Supplemental Order, Docket No. UT-960369, especially paragraphs 171-173.

5. Actual line counts for each wire center and each exchange must be used in cost calculations, and the submission must include average loop lengths, by wire center and exchange.

6. Cost must be measured assuming that all services identified by the FCC and by ESSB 6622 are supported.

7. Shared, overhead, or common costs, if included, must be separately stated, and the factual support for such costs must be provided.

8. Each party who presents a recommendation in the rule-making phase regarding administration of a universal service fund should in the adjudicative phase describe its proposal briefly and state in detail the expected costs of administration if its recommendation were adopted.

A tentative schedule has been developed in consultation with potential parties. The schedule will be addressed and a final schedule adopted at the prehearing conference. Parties are advised that the bench intends to propose that all parties who advocate the use of a particular cost model must present information regarding that model on the first filing date, tentatively set for June 15, 1998. Because of the parties' need for adequate opportunity to consider and respond to such models, the filing requirement should apply to parties who are not local exchange companies.

An issue to be addressed at the prehearing conference is the extent to which the commission will allow protections of confidentiality for models, methodologies, and cost data that the parties present in this proceeding. In conjunction with that discussion, parties are referred to the FCC's May 8, 1997, order at paragraph 250 and to the UNE order at paragraphs 36, 83, 297, and, especially, 298.

notice is hereby given That a prehearing conference herein will be held at 9:30 a.m., May 15, 1998, in Room 108, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., Olympia, WA. The time and place for evidentiary hearings and other procedural stages will be set at the prehearing conference or by later written notice. The purpose of the prehearing conference is to consider formulating the issues in the proceeding and determining other matters to aid in its disposition, including schedule. The commission does not expect the parties to have available at that time copies of testimony or exhibits, and the parties need not have witnesses available as no oral testimony will be taken. However, the commission intends to propose to the parties that testimony will be required to be prefiled pursuant to the following schedule:

June 15, 1998 Proponents of cost studies file direct evidence

July 1, 1998 Others file direct evidence

August 3, 1998 All parties file responsive evidence

August 24, 1998 All parties file rebuttal evidence

The commission also intends to hold a subsequent prehearing conference on or about September 3, 1998, and contemplates beginning hearings on September 9, 1998. These filing and hearing dates will be discussed at the prehearing conference established herein and confirmed or revised by subsequent letter or notice to the parties.

All persons who wish to participate as parties to this adjudicative phase of the proceeding must file petitions to intervene in writing prior to this prehearing conference or appear at the conference and orally request such participation. The commission will develop its list of parties at the prehearing conference.

Please see the form attached to this notice, which should be filled out and returned if any party or witness needs an interpreter or other assistance.

NOTICE IS FURTHER GIVEN THAT ANY PARTY WHO FAILS TO ATTEND OR PARTICIPATE IN THE PREHEARING CONFERENCE SET HEREIN, OR OTHER STAGE OF THIS PROCEEDING, MAY BE HELD IN DEFAULT IN ACCORDANCE WITH THE TERMS OF RCW 34.05.440, AND MAY BE BOUND BY THE OUTCOME OF THIS PROCEEDING. THE PARTIES ARE FURTHER ADVISED THAT THE SANCTION PROVISIONS OF WAC 480-09-700(4) ARE SPECIFICALLY INVOKED.

An administrative law judge from the Washington Utilities and Transportation Commission, (360) 664-1140, will be designated to preside at the hearing.

The names and mailing addresses of all persons and companies which the commission anticipates to be parties and their known representatives are as follows:

The commission may at a later date designate special hearing sessions for the purpose of receiving the testimony of members of the public. The commission will provide at its offices in Olympia, Washington, current records of the proceeding for the use of persons who may wish to review them. Information about the proceeding will also be posted to the commission's Internet web site at <http://www.wutc.wa.gov>. The public counsel section of the Office of Attorney General has been designated by the Attorney General to represent the public. Persons who wish to inquire of or submit comments to public counsel, may do so in care of the commission's address and telephone number below, or may contact public counsel directly by writing or calling the public counsel address or telephone number below. Public counsel will be able to help members of the public to prepare their testimony if assistance is desired.

Inquiries should be addressed to: The Secretary, Washington Utilities and Transportation Commission, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., P.O. Box 47250, Olympia, WA 98504-7250, (360) 664-1160 or Public Counsel Section, Office of Attorney General, Suite 2000, 900 Fourth Avenue, TB-14, Seattle, WA 98164-1012, (206) 464-6253.

Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication. Interested persons may contact the Secretary, Washington Utilities and Transportation Commission, P.O. Box 47250, Olympia, WA, 98504-7250, (360) 664-1174, FAX (360) 586-1150. Such persons may submit comments, as specified below, or may ask to be included in the commission's list of interested persons for the proceeding.

Written Comments: Written comments in response to the CR-101 from persons interested in the subject matter of this proposed rule making may be filed with the commission secretary, referencing Docket No. UT-980311(r), not later than June 8, 1998. All commenters are asked to address questions posed by commission staff, available at the commission web site or by calling the commission. All parties are also asked, but not required, to file an original and ten copies of their written comments. Finally, the commission requests, but does not require, that comments be provided on a 3 1/2 inch IBM formatted high-density disk, in WordPerfect version 51. [5.1], 6.0 or 6.1, labeled with the docket number of this proceeding and the commenter's name and type of software used. The commission will offer additional opportunities to provide written comments. Interested persons may file additional written comments in response to any such invitation. Interested persons may also attend and participate in the workshop described below and in any other workshop that may be scheduled.

Notice of Workshop: A workshop will be held on July 21, 1998, beginning at 9:30 a.m., in Seattle, Washington, at a place to be announced. The commission's teleconference bridge line will be available for this workshop. A limited number of teleconference ports will be available and will be assigned one to an organization, first come first served. Persons wishing to attend via the teleconference bridge line must contact Shirley Burrell at (360) 664-1140 no later than 3:00 p.m., July 16, 1998. Questions may be addressed to Bob Shirley, (360) 664-1292, or <bobs@wutc.wa.gov.>. The commission will provide written notice of any additional preproposal workshops and any public meetings that the commission may schedule, to all commenters and to any other persons specifically asking to receive notice in this rule-making proceeding. Notice of such meetings or workshops will also be posted on the commission web site, <http://www.wutc.wa.gov>.

May 4, 1998

C. Robert Wallis

for Paul Curl

Acting Secretary