FCC ADOPTS INTERIM CHANGES IN UNIVERSAL SERVICE FUNDING

Changes included: (1) Increasing to 28.5% from 15% safe harbor for wireless carriers that couldn’t break out amount of interstate calling they carried. Wireless carriers have option of using their actual interstate revenue to calculate their contributions. (2) Basing universal service contributions on projected and collected revenue instead of historical, gross-billed revenue. That change aims to solve “lag” problem experienced by companies such as AT&T that have declining revenue. Lag refers to 6-month period between time when FCC assesses carrier contributions and when carriers make payments. (3) Barring carriers from including markup beyond their universal service contributions if they choose to pass costs on to customers through line items on phone bills.

Agency said changes were expected to fix immediate problems, but more significant changes might be necessary to adapt contributions system to market and technological changes. For example, FCC said, increased availability of bundled service packages makes it difficult to isolate interstate revenue and distinguish between telecom and nontelecom service offerings. Another factor effecting current USF contribution system is increased consumer substitution of wireless and Internet-based services, causing decline in assessable revenue base, Commission said. FCC said it would seek comment on additional modifications in current revenue-based system as well as 3 proposals to move to connections-based system: (1) Impose minimum contribution requirement on all interstate telecom carriers and flat charge for each end-user connection, depending on nature or capacity of connection. (2) Assess all connections based purely on capacity, with contribution obligation for each end-user connection shared between access and transport providers. (3) Assess providers of switched connections based on their working telephone numbers.

FCC’s interim order doesn’t address controversial issue of USF contributions by broadband providers, issue that arose last month as commissioners were reviewing proposed order and considering how they would vote. Agency said that issue was deferred for consideration in pending proceeding that looks at wireline broadband Internet access. Issue stems from fact that wireline DSL revenue is assessed for USF contributions but cable modem revenue isn’t. Comr. Adelstein didn’t participate in vote. He said earlier last week that he had been recused from issue because of financial conflict.

Telecom industry generally supported FCC’s move. USTA said interim plan is similar to one it proposed earlier this year and “will put into place a workable mechanism to stabilize the fund while the Commission addresses many other issues surrounding the future of universal service.” CTIA said it supported interim plan but warned that Congress and FCC also must examine long-term health of universal service. “A revenue-based collection system is both fair and equitable in the near term but the Commission must soon face the reality that it needs to rethink the current Universal Service system,” CTIA Pres. Thomas Wheeler said. AT&T said interim fix was “step forward” but it didn’t solve “the competitive disadvantages long distance companies such as AT&T face as we compete against wireless carriers and companies that can offer their customers all-distance bundled packages.” SBC said it was particularly “encouraged” by “the move toward parity between wireline and wireless providers.” It also urged FCC to act soon on broadband issue. “It makes no sense to require contributions from DSL providers, while enabling cable broadband companies to escape any such burdens,” SBC Senior Vp James Smith said.

However, WorldCom said it was disappointed that FCC didn’t put long-term fix into place after looking at issue for year. “What the industry really needs is for the FCC to promptly address a permanent solution,” spokeswoman said. Interim plan should be replaced quickly by permanent system, she said: “We believe such a permanent plan can be adopted and implemented by Jan. 1, 2004.”