RURAL COMPETITORS OFFER CONFLICTING WAYS TO FIX USF PROGRAM

Competitors recommended such measures as using auctions to award universal service support, a move opposed by rural ILECs. Rural ILECs urged regulators, among other things, to award different levels of support to ILECs and competitors, depending upon their individual costs, a move opposed by competitors who said it would be unfair. USTA suggested that if states wanted to keep adding to the number of competitors eligible for universal service support, the states should be required to help pay for it. CTIA urged the Joint Board “to oppose adoption of any prescriptive federal guidelines for the state ETC designation process.” Parties on both sides argued against limiting universal service payments to a single line to the home or business, although at least one commenter recommended considering it.

Western Wireless said “the competitive transformation of telecommunications requires fundamental rethinking of the universal service funding structure,” for example by considering a “forward-looking cost-based system to govern funding levels in rural ILEC areas.” The company said “an economically efficient, forward-looking cost model would provide the proper incentives for carriers operating in a competitive universal service market.” Another option would be the use of universal service auctions to enable multiple bidders to win and compete post-auction, Western Wireless said, adding that that concept presented “some difficulties that would have to be overcome.”

Western Wireless said the best long-term solution would be for the Joint Board establish a task force to address the complex issues related to universal service in rural areas. The company recommended against restricting support to a single primary line, saying it would raise “legal and public policy concerns.” Western Wireless said it was worth considering other alternatives such as: (1) Imposing a cap on the growth of total funding available in each study area. (2) Allocating funding among ETCs in each study area based on their respective market shares. (3) Allocating portable vouchers or phone stamps to consumers.

CTIA said it wasn’t fair to blame wireless competitors for the growth in the universal service fund because wireless ETCs “receive just a small slice of the overall high-cost fund distributions.” It said the FCC in 1997 decided competitive ETCs (CETCs) should receive the same level of support as rural LECs to foster competition, and now that competition was beginning, the rules “should not be changed for the sole purpose of supporting inefficient rural LECs.”

Alaska-based General Communications, a wireline telecom, cable and Internet competitor, complained that 7 years after the Telecom Act, the FCC’s universal service policies “remain a hodgepodge of mechanisms lacking a coherent, unifying framework.” The company urged the Commission and the Joint Board not to adopt proposals to provide different amounts of per-line high-cost support to ILECs and competitors. Instead, General Communications said, regulators seeking to keep universal service funding from escalating should: (1) Eliminate “duplicate high-cost support payments” to ILECs when a CETC served the end user. (2) Cap per-line support within a study area upon CETC entry. (3) Reduce per-line support “when a market can be served at a lower cost.” (4) Limit support to a single line to a home or business. (5) Consolidate study areas within a state for support purposes. (6) “Define the upper limit of ‘affordable’ and ‘reasonably comparable’ rates.”

OPASTCO urged the Joint Board “to promptly abandon” ideas such as the use of auctions to award high-cost support. Such proposals are “at odds with the high-cost program’s statutory purposes” because they wouldn’t give carriers “the proper incentives to invest in network infrastructure,” said OPASTCO, which represents traditional rural ILECs. Instead, it proposed several changes that wireless competitors probably wouldn’t like, such as giving support to wireless carriers based on their own costs, rather than the higher ILEC costs. OPASTCO said that type of methodology would require the FCC to develop cost-reporting requirements for wireless and other competitive CETCs. In the meantime, if CETCs purchased UNEs, the FCC could base universal service support on what they paid for the UNEs, OPASTCO said.

OPASTCO also opposed limiting support to one primary line per customer. “Before rural ILECs will invest in infrastructure, they must have a reasonable expectation that they will recover the costs of their networks,” it said. “If the Commission ultimately decides to limit support to primary lines, rural ILECs should have complete flexibility for unsupported second lines.”

The National Telecom Coop Assn. (NTCA), like OPASTCO, called for elimination of the “identical support rule” that allowed CETCs to get the same per-line support as the incumbent. NTCA said that practice enabled CETCs “to obtain support that has no relationship to their actual cost of providing service.” NTCA also called for the Joint Board to develop a “public interest test” to determine whether having additional CETCs in an area would have an adverse effect on service affordability: “The public interest should require a balancing test that weighs the benefits and burdens of introducing multiple CETCs in rural, high-cost and sparsely populated areas… Congress would not have required a stricter test for designating ETCs in rural areas if it wanted any and all applicants to qualify for support.”

USTA said “states continue to grant multiple carriers competitive ETC status without determining whether the benefits of multiple ETCs outweigh the costs and competitive ETCs claim universal service support in leaps and bounds, putting undue burden on universal support mechanisms.” USTA said states should be required to help fund the growing universal service support system: “It is difficult to see how the principles of Sec. 254 can endure without shifting some of the burden of universal service onto states.” It said the states shouldn’t use universal service funding as an incentive to encourage competition: “Although increasing competition may be a worthy goal [it isn’t] a goal to be achieved at the expense of investment in critical telecommunications infrastructure.”

BellSouth recommended that the FCC adopt “minimum requirements” that carriers seeking ETC status in rural and nonrural areas must satisfy. States would use those requirements as guidelines in evaluating whether to designate additional ETCs, the company said. BellSouth also recommended: (1) The agency should continue to calculate support based on ILEC costs because it was less “burdensome” than developing a cost-reporting system for competitors. (2) The FCC shouldn’t impose a cap on the fund. (3) It should modify support received by CLECs that used UNEs. (4) Wireless carriers seeking ETC status should “demonstrate that they are providing a signal to a customer’s billing address.”