FCC AND STATE REGULATORS STRUGGLE WITH UNIVERSAL SERVICE REFORM
There appeared to be little agreement among regulators or witnesses Fri. at FCC en banc hearing on how to fix current universal service system, whether it needed major overhaul or tweaking and, for that matter, whether it needed fixing at all. FCC scheduled hearing and invited state members of Federal-State Joint Board on Universal Service as best way “to gain input in the shortest time on various views and proposals for reform,” FCC Comr. Abernathy said as she opened hearing. Asked by Comr. Copps if there really was sense of urgency, consultant Kathleen Wallman said that was one of “the first assessments” Joint Board would have to make. “I don’t know if there is a sense of urgency on the part of all parties,” she said. “Some participants may disagree.” Wash. State U. Prof. William Gillis said he didn’t think there was consensus on urgency of reforming universal service because some parties would benefit more from change than others.
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However, both Gillis and Wallman indicated support for some reform. “What I find most troubling and urgent are the competitive issues,” Gillis said. He said he also was concerned about assuring that sufficient money was available for rural needs and about growing consumer confusion about universal service charges on their bills. “The rising surcharge is not technologically neutral,” he said. “The regulatory challenge is to move to a more predictable and stable base. I don’t think this problem is going to go away.” He said biggest question regulators should ask was: “Can it be done simply.” Wallman urged regulators to base reform on “consensus” rather than “compromise,” which she said were very different. With compromise, parties offer solution they all can accept but it’s sometimes hard for agency to defend it if challenged. With consensus, agency takes upper hand by “telling parties what they have to give up,” which is “more difficult, grittier” process, she said. Too often, compromise ends up as “least common denominator,” she said. N.Y. regulator Thomas Dunleavy said he had doubts whether consensus as described by Wallman could be achieved. “It’s a tough issue and I don’t hold out a lot of hope of reaching consensus,” he said.
Comr. Martin said he wondered whether major reform should be done all at once or whether incremental approach would be better. Perhaps, he said, “the pressure could be relieved” with interim steps to relieve consumer confusion and address some competitive issues. Wallman said that’s “possible” but agency’s “best shot” might be to have more comprehensive change. Gillis and Wallman, both former regulators, spoke at hearing as expert witnesses. Gillis is former Wash. state regulator, Wallman was once chief of FCC Common Carrier Bureau.
Industry witnesses said there was huge urgency because industry changes had made current system outdated and unfair to carriers. They said such changes included lower interexchange revenue, difficulty in levying carrier contributions on bundled local-long distance packages, “substitution” calling such as use of wireless and Internet communications instead of phone. However, Christopher Day, attorney representing Consumers Union and CFA, said he didn’t think current Universal Service Fund (USF) was “beyond repair.” In fact, he said, it “can be fixed fairly easily.” While industry groups offered alternatives for restructuring fund, Day said all of those proposals would harm consumers, particularly those with low income or low phone usage.
Industry representatives pushed 3 proposals that had surfaced in last year: (1) Coalition for Sustainable Universal Service (CSUS), composed of AT&T, WorldCom, Level 3 and business users has proposed basing carrier contributions to USF on number of connections carriers complete rather than on revenue. (2) Sprint has proposed similar plan but with lower contributions for wireless carriers. (3) SBC and BellSouth have plan based on services that they say would be more equitable.
“The current system is broken and it can’t be fixed,” said attorney John Nakahata, representing CSUS. “There is no way [current] revenue-based system can handle bundling,” he said. BellSouth-SBC plan “looks competitively neutral but it would not be in its application.” SBC Senior Vp Judy Walsh said she agreed change had to be made because of shrinking revenue, changes in market and substitution of wireless for traditional wireline calling, and SBC-BellSouth plan represented most logical approach: “It broadens the contribution base… It is not regressive because customer contributions are based on the number of services the customer purchases… It is nondiscriminitory.” OPASTCO representative said organization was open to “exploring the flat fee” proposed by CSUS but above all changes had to be made, such as assuring all carriers contributed equitably, including cable modem providers. He said OPASTCO also would like to see “bifurcation” of 2 universal service programs -- e-rate and high-cost fund.