INTERNET REDUCING RURAL TELECOM REVENUES, CONFERENCE IS TOLD
SAN FRANCISCO -- Internet not only is undercutting rural telcos’ regulatory-based revenue sources, but also is shifting their policy focus away from states, industry conference heard here Mon. As e-mail, instant messaging and Web-based services, along with cell calls, increasingly supplant wireline voice and fax communications, local incumbents’ access revenues plunge correspondingly, compounding regulatory reductions in access rates, Chmn. Robert Riordan told convention of OPASTCO.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Meanwhile, wireless carriers certified by state authorities as “eligible telecommunications carriers” collect Universal Service Fund (USF) payments at “windfall” rate equal to that received by wireline incumbents with much higher costs, and windfall is rising as incumbents lose business, Riordan said. “Our regulators don’t see the absurdity of the whole thing.” His message: “If you're a high-cost company, think of having a bull’s eye on your back” because regulators are prone to seeing rural telcos as having “to spend the money and provide the infrastructure but not get the reimbursement.”
Several speakers fretted over USF’s future. Contributions are based on reducing interstate call revenues, forcing USF rates ever upward, Rose said. He said that makes USF “politically vulnerable” to disgruntled customers. FCC has aggravated situation by shifting telco cost-recovery to USF from access charges, Rose said. Joel Lubin, AT&T federal policy and law vp, said at rate interstate revenues were dropping, he expected 7.3% assessment rate to hit about 9.5% in April. AT&T would have to charge customers 13% or more to compensate for continuing plunge in interstate business, Lubin said. “That is a political target.” He said complexity costs and lag could be wrung out by substituting monthly charges of $1 per residence, cell line and single- line business, and 25 cents per pager, leaving larger businesses to pick up deficit. But Bob Rowe, of Mont. Public Service Commission and Federal-State Joint Board on Universal Service, said a per-line formula might violate 1996 Telecom Act with too light burden on long distance carriers. He’s interested in possibility of basing USF charges on terminating min.
Business plans must be justified on customer revenues, not mandated payments, as often has been done traditionally, Riordan said. “Otherwise, government can cut off our profit lines with a snap of the finger,” he said, citing possibility that FCC would cut unbundled network element (UNE) discounts to point where they wouldn’t support profitable competitive local ventures. That raises financial risks against which great broadband opportunities must be weighed, even as cable broadband telephony cuts into telco customer revenues, Riordan said. “If we get into broadband, we have to find a way to do it economically.” He said that might require resorting to satellite, terrestrial wireless or slower-than- broadband technologies.
Broadband will reduce state commission power over rural telcos, OPASTCO Pres. John Rose said. He said that was signaled in FCC notion, backed by Chmn. Powell, to classify DSL provided through ILEC as “information service” and therefore deregulated to be on par with cable-modem service. He said even if that didn’t occur, FCC would have asserted regulatory authority over DSL to states’ exclusion, Rose said.