MCCAIN CO-SPONSORS SMITH UNIVERSAL SERVICE REFORM BILL

In a Senate floor speech Wed., Smith said the bill would introduce a fairer system for distributing the funds. Critics of the proposal, including BellSouth (BS) and USTA, have said that while USF needs to be reformed, it should be done all at once, and not piecemeal. But Smith countered: “However, broadly reforming the Universal Service Program is complex and divisive. It may take years. And I do not believe the inequities of the program for larger carriers should be allowed to continue while Congress grapples with the broader issues. Millions of rural Americans are being disserved, and we can solve this one problem today.”

There are some differences between the 2 measures. Both would do away with the formula that uses a statewide average of costs, instead relying on a distribution system based on wire centers. Only 8 states get portions of the $235 million fund, a small sliver of the total USF fund, with Miss. getting more than half and 3 states receiving 80%. Rural states such as Ia., Ida., N.D., Kan., Neb., N.M., Okla., S.D. and Utah receive no funding at all under the program, Smith said.

Smith’s bill would allow the FCC to determine what benchmark should be used to determine which rate centers received funding, while Terry’s bill would specifically fund rate centers that cost 3.75% more than the national average. It also would allow states that would lose funding to keep at least $35 million, while Terry’s bill would allow them to retain just $11 million. Terry’s bill would give a maximum of 5% of the fund to any state, while Smith’s bill has no such limit.

Smith told the Senate that the FCC’s formula failed to take several factors into account. The formula “doesn’t fully account for the actual cost of providing service in rural areas with natural obstacles such as mountains, lakes and rivers.” Other bill co-sponsors include Sens. Bayh (D- Ind.), Crapo (R-Ida.), Hagel (R-Neb.), Coleman (R-Minn.), Bennett (R-Utah), Hatch (R-Utah), Enzi (R-Wyo.), Thomas (R- Wyo.).

BellSouth, which opposes the bill, said it doesn’t address the most pervasive problem of USF -- collections into the fund. “This fund was not created to support states,” a BS spokesman said: “It’s designed to help low income and rural telephone customers, and many would lose funding under this measure.” He said both Miss. and Ala. had a significant number of low-income residents, which is why more money from the fund is sent to those states.

Robert Stien, telecom aide to Terry, said that while concern had been expressed about HR-1582 as being too narrow, its introduction had spurred debate on USF issues. Stien made the comments on a panel at a Wireless Communications Assn. (WCA) conference Fri. “The bill is intended to be narrow, but it is moving discussion forward,” Stien said. Both he and House Commerce Committee spokesman Ken Johnson said there could be a USF hearing near Labor Day. Johnson said Tauzin didn’t plan to move the Terry bill at this point.

Sources said there could be a 2nd USF “summit” in the Senate in about 2 weeks. Senate Communications Subcommittee Chmn. Burns (R-Mont.) and Sen. Dorgan (D-N.D.) already have brought USF stakeholders together once this year for a discussion on USF issues. Stien said a USF hearing essentially would serve a similar purpose on the House side. Mark Rubin of Western Wireless said much of the discussion at the FCC and in the Senate had focused on the potential for telecom competition in rural areas. Rubin said Burns and others now recognized that USF could help create competition in rural areas.

Christopher McLean of E-Copernicus and a former Rural Utilities Service (RUS) official, said the RUS might consider liberalizing its definition of a Metropolitan Statistical Area (MSA), which determines which communities are eligible for RUS broadband loans. Rubin said RUS eventually could reconsider rules that prevent multiple carriers from receiving RUS broadband support for the same area.