COMMENTERS SPLIT ON FCC UNIVERSAL SERVICE CONTRIBUTION SYSTEM

The Commission should keep an “economically efficient” revenue-based mechanism, the National Telecom Co-op Assn. (NTCA) said in its comments: “Assessments based on retail revenues are self-correcting and adjust instantaneously with changes in consumer spending.” It said the problems with the current mechanism were the result of regulatory arbitrage, such as the exemption of cable, wireless and satellite communications from the universal service obligations. AT&T called the revenue-based methodology “unsustainable” and said it wouldn’t satisfy growing universal service fund (USF) demands with declining interstate end user revenue. It said the FCC’s study understated the extent of growing demand by ignoring certain increases from ILEC revenue guarantees. It said the Commission also underestimated competitive eligible telecom carriers (CETC) entry policies and a declining revenue base by predicting “overly optimistic” long distance rates, ignoring the effects of bundling and assuming that wireless contributions would be higher than was likely.

AT&T said a number-based approach could accommodate anticipated fund growth with a 3% increase per number and special access/private connection rather than the 22% jump that would be required by the current mechanism. However, USTA argued that the number-based mechanism, which assesses only a flat fee per connection, would violate Sec. 254(d) of the Communications Act by relieving certain carriers of their obligation to contribute to the USF. SBC and BellSouth said a number-based system also would be “difficult to administer” and would require the Commission to implement an “entirely new information-sharing mechanism” to account for “assigned” numbers, as well as numbers provided to resellers, noncarriers and ported numbers.

Any number-based contribution methodology would fail to adequately assess contributions on Voice-over-IP (VoIP) services, which can’t use telephone numbers for which a universal service charge can be assessed, SBC and BellSouth said in a joint comment. However, the NCTA said “if properly structured,” such system could be a “reasonable and sustainable funding resource.” It suggested: (1) If and when some type of IP telephony is deemed subject to USF assessment, carriers will make the same contribution to the interstate USF as circuit switched telephony. (2) Business telephone numbers should be assessed twice the interstate USF charge as residential telephone numbers. (3) The interstate USF contribution charge should be borne equally by the interstate access and switched transport components. (4) The interstate USF contribution charge should be assessed on companies whose end-user customers actively were using the number.

A number-based system would benefit average single-line households, AT&T said. It said a study reported such households would pay $0.98 in monthly USF fees under AT&T’s proposal, compared with $1.32 per month under the current mechanism and $1.41 per month under the connection-based system proposed by SBC/BellSouth. However, SBC/BellSouth said the Commission should reject the number-based methodology proposed by Sprint, saying it would eliminate entirely the contributions assessed on special access and private lines, which “leaves residential customers holding the bag for the vast majority of the universal service obligation.” The companies said the FCC should adopt the connection-based contribution methodology, which assesses a flat-rated contribution on each end-user connection, meaning the agency wouldn’t be required to analyze services provided over the end-user connection.

The National Rural Telecom Assn. (NRTA) and OPASTCO said in a joint comment the Commission should focus on developing a 2nd connections-based methodology that would “equitably split contributions between all switched transport and access providers.” They said the 2 other methods would shift a “disproportionately large” amount of the contribution burden away from both long distance and wireless providers, which “collectively provide the lion’s share of true state-to-state telecommunications services.” That shift, they said, would place the bulk of contribution responsibility on LECs and their end-user customers, although exchange access services were “merely adjuncts to the interstate services provided” by long distance and wireless providers.

USTA said the Commission should adopt a hybrid connections-based mechanism, which it said would minimize the contribution required of each contributor, spread the responsibility to support universal service equitably and ensure that the mechanism would be both sustainable and sufficient in the future. USTA agreed with SBC and BellSouth that continuing to access contributions based on interstate revenue “cannot ensure sustainability” of the USF, as customers continue to migrate to bundled packages of local and long distance services that don’t contain a distinct charge for interstate service and broadband services that aren’t included in the contribution base. AT&T called the “hybrid” proposal “flawed” and said it would “artificially and unfairly” push high-volume long distance customers toward ILEC bundled offerings and away from standalone long distance providers.